In the future of health, risk is inevitable…and we should harness it

My Take

In the future of health, risk is inevitable…and we should harness it

By Amry Junaideen, Risk & Financial Advisory Life Sciences and Health Care leader, Deloitte & Touche LLP

Imagine what our health system might look like two decades from now. Artificial intelligence (AI), machine learning, open platforms, and radically interoperable data could open doors to previously inaccessible knowledge. The ability to tap into massive data sets might make it possible for pharmaceutical companies to conduct clinical trials—without patients—by modeling key traits. It could allow consumers to identify and treat illnesses at home—long before symptoms surface.

Now imagine that same technology being used by cybercriminals for nefarious purposes. Digital tools, for example, might help them evade security systems and launch sophisticated AI-enabled cyberattacks. In response, life sciences and health care organizations should do what they can to make their systems resilient. At the same time, they should determine how to take advantage of the inevitable risk that comes with advancing technologies. In our increasingly digitally connected ecosystems, the ability to meet risk head-on could create a competitive edge.

Our new report, Harnessing opportunities and managing risk in the future of health, explores these opportunities.

Risk should be a part of long-term planning, but often isn’t

Risk should be a part of the conversation any time long-term business strategies are discussed. I’ve found this often isn’t the case. The return on investment (ROI) for managing risk can be difficult to quantify. Organization leaders should be able to articulate the value of any decision, whether it is a strategic decision, or a decision related to risk. Consider a physician practice that is thinking about launching a line of business around telehealth. While this new business could attract new patients, improve the customer experience, and create a new revenue stream, it also could open the practice up to new risks unless proper cybersecurity and data privacy controls are implemented.

Before moving into a new line of business, stakeholders should compare the risk potential to the expected ROI. Organizations that can build an integrated cybersecurity approach will likely be better positioned to effectively harness valuable health care data, thwart potential security threats, and digitally enhance the patient experience. The ability to manage risk could become a competitive advantage by enhancing customer and market perceptions.

Six strategies for harnessing the future of risk

With vast amounts of digital data being generated by and about consumers—through always-on sensors, apps, and connected medical devices—cybersecurity risks are certain to increase. Organizations that implement strong data quality and security strategies are more likely to gain the trust of patients, regulators, and ecosystem partners. Here are six strategies that could help life sciences and health organizations harness some of the opportunities generated by risk:

1. Establish partnerships with other stakeholders: Close collaboration with ecosystem partners could make it possible to develop robust, end-to-end cybersecurity programs that get smarter over time. This could create more confidence among all participating ecosystem partners.
2. Incorporate security features as early as possible: Features that can protect data and circumvent risk should be included across the lifecycle of a product or service—from design to implementation. Such features should be tested before the new devices and technologies are added to existing infrastructure.
3. Determine who is responsible for ensuring data security: Organizations should ensure all employees are aware of potential vulnerabilities. Roles and accountability related to cybersecurity should be clearly defined. This should include extended enterprises, where driving cybersecurity is especially critical.
4. Counter risks associated with newly interoperable systems: In a more collaborative ecosystem, an understanding of dependencies and connected software and systems could help reduce attack surfaces and create a more resilient network.
5. Invest in smarter access-management systems: This might include behavioral tools that can monitor and model actions of employees and business partners and escalate risky behaviors.
6. Track infrastructure vulnerabilities: Organization leaders should establish real-time monitoring mechanisms, and they should participate in cybersecurity consortiums to stay up to date with vulnerabilities in technology infrastructures.

AI-enhanced decisions are not without risk

Cyberattacks are only one type of risk health stakeholders might face as we move toward the future of health. There are also risks tied to sophisticated algorithms that we expect will become more common. AI and intelligent automation could help health care stakeholders analyze massive data sets to improve diagnostics, care and delivery processes, and drug discovery. Rather than making decisions based on a gut feeling, predictive and prescriptive data analytics and machine learning can generate science-backed decisions. However, the black-box nature of self-learning algorithms can be difficult to understand and manage. They are not yet foolproof and can be prone to human biases and faulty assumptions. Incorrect or inadequate training data, unsuitable modeling techniques, and incorrect interpretation of algorithmic outputs can increase the risks in using them effectively.

For example, an organization could face financial losses, or a damaged reputation, if analytical models rely on inaccurate or unreliable data. Inaccurate data could threaten patient safety if it leads to incorrect diagnoses. Moreover, inaccurate models might also mean time and money needs to be spent scrubbing and reconciling disparate data. These risks could erode trust in AI algorithms and hinder the adoption of cutting-edge technologies.

We expect that AI and intelligent automation in health will likely lead to enhanced decision-making and new efficiencies. But as we travel down the road toward this future of health, stakeholders will likely reach the inevitable intersection of risk. Stakeholders that build an integrated cybersecurity approach might be better positioned to harness health data, digitally enhance the patient experience, and use risk as a competitive differentiator. Rather than just learning to manage risk, the most successful stakeholders will likely be those that can convert risk into opportunity.

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In the news

House committee holds first ‘Medicare for All’ hearing

On April 30, the House Rules Committee held the first Capitol Hill hearing to discuss House bill H.R. 1384, known as “Medicare for All.” The bill, which was introduced by Reps. Pramila Jayapal (D-Wash.) and Debbie Dingell (D-Mich.), has more than 100 Democratic co-sponsors (see the March 5, 2019 Health Care Current). If enacted, the legislation would replace private insurance in two years with a government-run, single-payer health system that would cover all medical, vision, dental, and long-term care expenses without cost-sharing.

During the hearing, lawmakers discussed the potential costs and benefits of transitioning to a single-payer system. According to Committee Chair James McGovern (D-Mass.), Medicare for All could help the 29 million uninsured Americans and the 44 million others who are underinsured. Rep. Robert Woodall (R-Ga.) said Medicare for All would require a large tax increase and suggested that a single-payer system might not sufficiently allocate resources toward the nation’s sickest and most needy individuals.

An economist with the Center for Economic and Policy Research (CEPR) recommended gradually transitioning to Medicare for All by lowering the Medicare age or allowing a buy-in option. Former US Department of Health and Human Services (HHS) Secretary, Rep. Donna Shalala (D-Fla.) indicated her support for universal health care and said she sees Medicare for All as one of several avenues for expanding health coverage. Several other lawmakers—and some witnesses—expressed concern that many Americans could lose existing health coverage under the proposal, and some noted that the bill does not address the costs associated with such an expansion. A witness from the Mercatus Center, a free-market think tank at George Mason University, estimated that the 2017 Medicare for All bill, which did not include long-term care coverage, would cost $32 trillion over 10 years (including potential cost-savings) or $40 trillion without cost-savings—about $10,000 per person.

Related: On May 1, the Congressional Budget Office (CBO) released a report analyzing proposals to implement a single-payer health system. While this report does not include formal CBO scores for the Medicare for All bill or other legislation, it does examine policy issues such as covered benefits, associated costs, and taxation. The report, which was requested by House Budget Chairman John Yarmuth (D-Ky.), warns that the transition to a single-payer system “could be complicated, challenging, and potentially disruptive.”

(Source: CBO, Key Design Components and Considerations for Establishing a Single-Payer Health Care System, May 2019)

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Removing drug rebates could mean higher Medicare, Medicaid spending

Removing safe-harbor protections that allow drug manufacturers to offer rebates would lead to higher spending in Medicare and Medicaid, according to a new analysis from CBO. Early this year, the US Department of Health and Human Services (HHS) proposed eliminating safe-harbor protections for the rebates drug manufacturers pay to pharmacy benefit managers (PBMs), Medicare Part D plans, and Medicaid managed care organizations. Instead, pharmacy discounts would be made available to consumers at the point of sale.

According to CBO, the rule as proposed would cause Medicare spending to increase by $170 billion over the next decade, and Medicaid spending would grow by $7 billion. If the existing drug rebates are eliminated, CBO says drug manufacturers would likely negotiate smaller discounts with PBMs to reduce list prices. If finalized, the proposed rule would go into effect on January 1, 2020. It would not affect commercial health plans.

(Source: CBO, Incorporating the Effects of the Proposed Rule on Safe Harbors for Pharmaceutical Rebates in CBO’s Budget Projections—Supplemental Material for Updated Budget Projections: 2019 to 2029, May 2019)

Related: Large rebates for some prescription drugs can create a financial incentive for Medicare Part D plans to place high-cost, high-rebate drugs on formularies even when lower-cost alternatives are available, according to the Medicare Payment Advisory Commission (MedPAC). At an April 30 hearing before the House Committee on Energy & Commerce’s Health Subcommittee, MedPAC Executive Director James Mathews outlined some of his organization’s concerns about high drug prices—particularly specialty drugs. In 2007, specialty drugs accounted for just 6 percent of part D spending. By 2017, that percentage had climbed to 25 percent, according to MedPAC. In written testimony, Mathews said his organization is concerned that high prices for certain drugs make it increasingly difficult for Medicare beneficiaries to access medications.

(Source: MedPAC, James Mathews House committee testimony, April 30.)

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Reversing rules for short-term, limited-duration plans could save $8.9B, CBO says

The federal government could save nearly $8.9 billion over 10 years by reversing the administration’s rules around short-term, limited-duration (STLD) health plans, according to a new report from CBO. Last August, the administration finalized a rule allowing health insurers to sell STLD coverage that lasts up to 12 months and can be renewed or extended up to 36 months. Previously, STLD plans were limited to no more than three months and were not renewable (see the August 7, 2018 Health Care Current). On April 29, the House Energy & Commerce Health Subcommittee approved H.R. 1010, which would prevent the final rule from going into effect. According to CBO, enacting the House bill might keep nearly 1.5 million individuals from purchasing STLD plans each year. While an estimated 500,000 individuals would become uninsured as a result, another 500,000 would likely purchase more comprehensive individual coverage through an insurance exchange, CBO predicts. Premiums for coverage sold in the individual market would decrease by nearly 1 percent, according to the report.

(Source: CBO, H.R. 1010, To provide that the rule entitled "Short-Term, Limited Duration Insurance" shall have no force or effect, April 25, 2019)

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Congressional Budget Office releases analyses for drug-pricing bills

On April 25 and 26, CBO released several analyses of recent bills that address prescription drug costs:

• The Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act: The bipartisan bill targets drug manufacturers that misuse safety guidelines or refuse to provide samples of their products to generic drug makers, which could hinder their ability to develop less-costly alternative therapies (see the April 9, 2019 Health Care Current). According to CBO, this bill would allow generic drugs and biosimilars to enter the market earlier than allowed under existing law. CBO estimates that early market entry of lower-priced generic drugs would reduce federal spending on prescription drugs and subsidies for health insurance, resulting in a $3.9 billion deficit decrease over 10 years. This amount includes a $3.3 billion reduction in direct spending and a revenue increase of $600 million. CBO also estimates this legislation would decrease spending subject to appropriation by $118 million over the next five years as lower estimated drug prices result in lower costs for discretionary health programs.
• The Protecting Consumer Access to Generic Drugs Act: The legislation would prevent brand-name drug manufacturers from paying generic drug makers to keep their generic equivalents out of the market, a practice known as “pay-for-delay” (see the April 9, 2019 Health Care Current). CBO expects this bill would accelerate the availability of generic drugs and biosimilars, which could decrease the deficit by $613 million over the next 10 years. The bill also could reduce spending subject to appropriation by $24 million over the next five years.
• The Bringing Low-cost Options and Competition while Keeping Incentives for New Generics Act: This bill seeks to discourage generic first-filers from “parking” applications and delaying the start of their 180-day generic exclusivity (see the March 19, 2019 Health Care Current). CBO estimates the bill’s provisions would help decrease the deficit by $442 million over the next 10 years and would reduce spending subject to appropriation by $17 million over the next five years.

(Source: Congressional Budget Office)

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CMMI releases 2018 Report to Congress

On April 26, the Center for Medicare and Medicaid Innovation (CMMI), part of the US Centers for Medicare and Medicaid Services (CMS), released its 2018 Report to Congress. This report focuses on activities that took place between October 1, 2016 and September 30, 2018. During the period, CMMI:

• Announced or tested 36 payment and delivery models and initiatives
• Conducted eight congressionally authorized or mandated demonstration projects
• Played a central role in implementing the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

The report also shared CMS’s estimate that more than 26 million Medicare and Medicaid beneficiaries—and individuals with private insurance in multi-payer model tests—have either been impacted by, received care from, or will soon receive care from the nearly 1 million providers that participate in CMMI payment or delivery models. Recently, CMMI Director Adam Boehler announced the agency is considering a bundled-payment model for post-acute care services (see the April 16, 2019 Health Care Current).

(Source: CMS, CMMI, 2018 REPORT TO CONGRESS, April 26, 2019)

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Breaking Boundaries

Employer clinics are evolving and innovating to get (and keep) employees healthy

As health care costs continue to rise, many employers are looking for ways to improve the health of their employees and get more value from the health care system. While worksite clinics have been around since the end of World War II, many startups and innovative companies are incorporating high-tech solutions and options to take these clinics to the next level. These companies have noted the frustration many employers have experienced when it comes to cost and quality variations in local health care markets. Some employers are allowing these clinics to serve as primary care providers, and the clinics (or third-party companies that manage them) are paid through a per-member per-service model. This means clinicians can spend more time treating patients and focusing on prevention, instead of just dealing with acute medical needs.

Employers say their workers like the convenience of an onsite clinic, which allows them to manage some of their chronic conditions and receive preventive services at work. These features, along with the wellness programs and health-coaching components that might be included, can help attract and retain employees in competitive markets.

Premise Health, which has existed since the 1960s and operates hundreds of worksite clinics across the country, says its programs can reduce employer health care costs by 15 to 25 percent. Initial savings come from reductions in unnecessary specialty care and emergency room (ER) use. However, it could take years to realize the value of chronic-disease prevention. Premise, along with some other companies, offer virtual services to help reach remote workers. Crossover Health, for example, acquired a telehealth startup to help expand its reach. The company also offers a suite of services, including primary care, optometry, behavioral health services, and acupuncture.

Many worksite-clinic companies are focused on benefit design to make sure that incentives are aligned so that employees can access the services. To address concerns that an employer is too much of a gatekeeper, some clinics waive copayments and deductibles for first-time visits. The clinics also try to create a positive experience to encourage patient retention. Other perks, such as annual wellness exams and employee premium reductions, can also serve as incentives.

Some champions of the model say that worksite clinics might be a precursor to a larger shift toward direct contracting between employers and health systems. Some companies are looking to expand their clinics by adding imaging and diagnostic services and establishing bundled-payment contracts with dental and vision providers. Some skeptics say some employers won’t want to bother with the nuances and challenges of creating, managing, and evaluating networks, and will prefer that health plans to continue to manage these aspects.

As detailed in a recent Deloitte My Take on employers’ strategies to control health care costs, employers are trying many options to reduce cost-shifting to employees. Employers will likely continue to watch each other and evaluate their own successes (and missteps) to further innovate their strategies.

(Source: Kevin Truong, Are worksite clinics an old-school solution to employer’s current cost problems? Medcity News, April 2, 2019)

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