Health Care Current: November 24 2015 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: November 24, 2015
Breaking constraints through provider-sponsored plans
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
Breaking constraints through provider-sponsored plans
Health care is the largest industry in our economy. It consumes 17.4 percent of the US gross domestic product (GDP) and is projected to increase to 18.5 percent in the next five years.1,2 We need to innovate to break that trend. And, the optimist in me believes that five years is just enough time to create the innovations we need in health care—not only to lower the trend, but even reduce our overall costs.
When I think of innovation, I see it as breaking the constraints of what is possible to get more value for less cost. You might think that the hardest part of innovation is the “breaking the constraints” part. But, after working with very successful health care organizations and leaders for 34 years, I sometimes see that just because an organization needs to change, doesn’t mean it will change—even if it really wants to change. Some organizations may simply lack the ability to change.
There is a fantastic Randy Glasbergen cartoon from 2004 that says it perfectly: A boss gleefully says to an exasperated worker who has both hands shoved in his pockets, “I want you to find a bold and innovative way to do everything exactly the same way it’s been done for 25 years.”
I wrote in the March 31, 2015 Health Care Current that provider-sponsored health plans (PSPs) are an example of how organizations can break constraints by using health care financing as the catalyst to innovate the clinical model in ways that produce better outcomes and lower costs. I warned back then that health plan market leaders might be unseated from their throne by upstarts who serve a niche market largely ignored by the market leaders and build an operating model that finds ways to break the existing constraints to do more with less. And, as the challengers perfect their models, they may move into the market leaders’ most profitable customer segments with a new and more innovative approach that better meets the customer’s unmet needs and ultimately wins the leadership position.
In Provider-sponsored health plans: Positioned to win the health insurance market shift, we wanted to know what characteristics are found in financially successful PSPs. Deloitte researchers looked at financial, market, and operational metrics for PSPs using publically available information to evaluate their performance.
At last count, there are 213 PSPs in the US and 171 plans not owned or affiliated with a health care provider. Despite this, PSPs only enroll 9 percent of the US market today.3
I believe there are many reasons why this is the case. Inherent conflicts in respective business models, balancing the demand for capital, attracting the talent required to operate a successful health plan, lack of a network outside their service area to compete for multi-site employers, and strong competition from the existing Blues and national players may all be inhibiting these health plans from growing their market share.
But, growth in the individual market through the federal exchanges, Medicaid expansion in 29 states, growth in Medicare Advantage enrollment, and strong employer interest in smaller networks in exchange for lower rates has given PSPs a renewed purpose, role, and set of potential competitive advantages to exploit.
We looked at 86 PSPs that represent 90 percent of the enrolled membership in all PSPs across the country. We narrowed the list to the 25 most successful health plans to understand their performance from 2012 to 2014. We found that:
- These PSPs outperformed their competitors in the market by growing profitably, with margins that were better than their competitors on average.
- These PSPs had strong performance in serving the most challenging patients in Medicaid and Medicare. They also held smaller amounts of capital on their balance sheets relative to their size than their competitors (measured by their risk-based capital percentage).
- Tenure and scale are strongly correlated to success. Older PSPs and those that had at least 100,000 lives had higher profitability.
I can’t tell you how they accomplished this level of performance. But, I can tell you that every successful PSP that I have had personal experience has had a pervasive culture of doing the right thing for the patient, at the right time, in the appropriate setting, without regard to the perverse incentives or constraints of fee-for-service.
I’m not sure where culture fits into the science of innovation, but my guess is that it is fundamental to the ability of an organization and its leaders to make the change by breaking the constraints and seizing the new opportunities.
PS. Read more in the Deloitte Center for Health Solutions latest report, “Provider-sponsored health plans: Positioned to win the health insurance market shift.”
3 Deloitte analysis of HealthLeaders and AIS Health data
By Bill Copeland, Vice Chairman, US Life Sciences & Health Care Leader, Deloitte LLP
CMS proposes 2017 benefit and payment parameters for the HIXs
Last Friday, the US Centers for Medicare and Medicaid Services (CMS) published the annual draft Notice of Benefit and Payment Parameters for 2017. This year’s proposed rule includes new standards for health plans participating in the health insurance exchanges (HIXs), including a proposal to make states that use the federal platform establish network adequacy standards. This comes shortly after the National Association of Insurance Commissioners (NAIC) released its updated model law for network adequacy in states (see the November 17, 2015 Health Care Current). CMS also proposed new continuity of care and cost-sharing network requirements. It asked stakeholders to comment on whether a network strength designation, which would indicate how many providers are available within certain time and distance standards, would help make consumers more informed about plans before they enroll. Open enrollment for 2017 would be from November 1, 2016 through January 31, 2017. Additional provisions:
Implementation & Adoption
HHS holds drug pricing forum
Last Friday, the US Department of Health and Human Services (HHS) held a forum on pharmaceutical innovation, access, and affordability. Stakeholders from across the health care industry were represented, from patient advocates to pharmaceutical companies to health plans and employers. HHS Secretary Sylvia Burwell started the event by noting that US spending on specialty drugs is expected to reach $400 billion by 2020, reaching an estimated 9 percent of national health expenditures. Most of the panelists agreed that innovative treatments and technologies have allowed patients to live longer, healthier lives than ever before, and strategies to curb growing drug prices must keep this in mind.
Much of the conversation centered on four topics: paying for value, pricing transparency, how to get new products to the market faster, and hurdles and roadblocks to achieving these goals. Most of the panelists agreed that the definition of value depends on the stakeholder. For patients, value depends on their individual treatment priorities, goals, and financial standing. For health plans, value can mean how many patients benefit from or are cured by a specific treatment. And for pharmaceutical companies, value often means that they can price products in a way that ensures patients have access to treatments when they need them and companies can continue to invest in new research and development and bring innovative products to the market.
Many health plans and employers are actively seeking ways to pay for drugs using new arrangements. One of the speakers said that benefit strategies and pricing mechanisms have not kept up with innovation and technology in the pharmaceutical sector. Many hurdles are slowing the growth of new payment models, such as policies around best prices and strict guidelines for use of clinical trial endpoints. Many of the speakers recognized that new policies and regulations may need to address some of these hurdles. That said, many stakeholders are trying new models to ensure that patients have access to and can afford drugs when they need them. Value-based contracts, for example, are intended to help health plans and pharmaceutical companies tackle some of these issues as collaborators, rather than as adversaries. Patient advocates continue to emphasize that these new payment models should not burden patients, as high-deductible and high cost-sharing plans become the norm in health care.
2016 HIX enrollment passes 1 million
Enrollment in the federally facilitated HIXs passed one million individuals in its second week, according to a CMS announcement last week. Almost 1.1 million individuals selected an insurance plan on the exchanges between November 1 and November 14. To date, more than 2 million individuals have submitted applications through the HealthCare.gov website, and 34 percent are new to the federal site. The remaining 66 percent were renewing a plan.
Related: The Kaiser Family Foundation recently analyzed premium information for plans on the federal exchanges and concluded that individuals looking to renew coverage could benefit from actively shopping around and evaluating the cost and coverage options. The analysis, which was at the county level, also found that the silver plan with the lowest premium in 2015 was no longer the lowest in 2016 in 73 percent of counties. For consumers, comparing premiums across similar plans is a helpful first step, but is not the only factor to consider when choosing a plan. Individuals seeking coverage should also consider their personal health needs and look at plans’ cost-sharing structures, provider networks, and drug coverage.
Fewer consumers receive MLR rebates for 2014
The Center for Consumer Information and Insurance Oversight (CCIIO) at CMS announced recently that health plans will pay out $470 million in medical loss ratio (MLR) rebates to 3.7 million families for 2014. Families will receive $139 in the individual market and $134 in the small group market, on average. In 2014, 85.9 percent of all individuals in the individual market were enrolled in health plans that met or exceeded MLR standards in the state, so those plans did not have to pay rebates.
The ACA set minimum MLRs for health plans operating in the individual and small-group (80 percent) and large-group markets (85 percent). Spending in excess of the MLR limit is returned to consumers in the form of rebate checks. This comes shortly after researchers at the Urban Institute reviewed MLR data from 2010 to 2014 to find that average MLRs in the individual market rose during that period (see the October 27, 2015 Health Care Current).
CMS will test bundled payments in 67 geographic areas in 2016
CMS recently finalized the Comprehensive Care for Joint Replacement (CCJR) Payment Model, which it will test in 67 parts of the country starting in April 2016. Participating hospitals will be held accountable for cost and quality of care for hip and knee replacements (also known as lower extremity joint replacements). For these procedures, providers will need to coordinate care among hospitals, physicians, and post-acute care providers.
CMS estimates this program will save Medicare $343 million over five years. Hip and knee replacements are the most common services received by Medicare beneficiaries; more than 400,000 people had one of these procedures done in 2014, costing Medicare $7 billion just for the associated hospitalizations. CMS has also found wide variation in quality. Complications have been up to three times higher for some hospitals. The average payment for these services ranges from $16,500 to $33,000. The Center for Medicare and Medicaid Innovation will implement the CCJR model with the earlier Bundled Payments for Care Improvement (BPCI) initiative. Hospitals may choose to participate in the BPCI initiative, where hospitals in the 67 geographies must participate in the CCJR Payment Model.
Analysis: CMS and private health plans are testing bundled payments across the industry. Instead of paying separately for hospital, physician, and other services, many health plans are testing bundled payments for services that are linked to a particular condition, reason for hospital stay, and period of time. In these arrangements, providers often keep the money they save through reduced spending on some component(s) of care included in the bundle. As payers begin implementing payment arrangements that put greater emphasis on outcomes and value, providers may need to evaluate their care strategies, including their ability to reduce spending while maintaining quality and access.
The bundling initiative also may put pressure on ancillary providers, such as home health and skilled-nursing facilities, to help identify savings and improved quality opportunities. Hospitals and health systems may start looking for partners and suppliers that can offer lower prices, reduce spending, and contribute to better quality scores and outcome measures. Post-acute care organizations demonstrating care management techniques that result in lower hospital readmissions may be viewed as preferred partners relative to ancillary providers that operate under “business as usual.”
Verizon: 90 percent of industries have had a breach of protected health information
Verizon Enterprise Solutions’ Protected Health Information (PHI) Data Breach Report finds that 90 percent of industries have had a data breach of personal health information (PHI). Verizon presented the findings at the Connected Health Summit in Washington, DC after analyzing more than 390 million records from more than 1,900 PHI data breaches that occurred in 25 countries.
PHI refers to an individual’s personally identifiable health information that is covered by one of the state, federal, or international data breach disclosure laws. Many of the sectors affected by the breaches had been unaware of the sensitive data they stored. Cybercriminals target PHI from medical record data to commit financial fraud, which can undermine patients’ safety and well-being in many ways. One example is when malicious actors use PHI to commit fraud. This can confuse patients when they receive bills for drugs or medical care they never received, which may cause them to stop or delay current treatments. Verizon found that hackers target sources by the type of data that they hold, where that data is kept, and how it is processed.
This report comes shortly after members of the Senate Health, Education, Labor, and Pensions (HELP) and Finance Committees sent a letter to Acting Administrator of CMS, Andy Slavitt, and Director of the Office for Civil Rights (OCR) at HHS, Jocelyn Samuels, to request information about how CMS and HHS are working to prevent, track, and correct medical identity theft that occurs as a result of data breaches (see the November 17, 2015 Health Care Current). Data breaches have had a growing impact on US health care organizations. Health information is often much more valuable than other personal information such as credit card numbers and there are fewer consumer protections and methods for recovering losses after personal health information has been compromised.
(Source: Janet Brumfield, “Initial Findings from Verizon Protected Health Information Data Breach Report Suggest Securing Patient Data is an Expansive Undertaking,” November 10, 2015)
Study: Three-quarters of US hospitals have basic EHR systems
A study in Health Affairs found that more than 75 percent of US hospitals have adopted at least a basic electronic health record (EHR) system as of 2014. The study analyzed results from the American Hospital Association’s Annual Survey of Hospitals to find:
- Between 2013 and 2014, basic EHR adoption rates increased from 33.4 percent to 41.1 percent, and comprehensive EHR adoption rates rose from 25.5 percent to 34.1 percent
- Comprehensive EHR systems were more common at large, not-for-profit, or urban hospitals
- One quarter (25 percent) of hospitals without a basic EHR system were close to adopting one, but lacked key functions, including the ability to view discharge summaries, diagnostic test results, and physician notes
- 40 percent of hospitals had EHR systems that met all 16 core objectives for Meaningful Use Stage 2, an increase from 6 percent in 2013
The Meaningful Use program encourages hospitals to adopt EHR systems using incentive payments and penalties. The program has contributed to the rise in EHR adoption rates. Basic EHRs can perform at least one of ten computerized functions (e.g., patient demographics, physician notes, patient medication lists, diagnostic test results) in at least one clinical unit in the hospital. Comprehensive EHR systems have basic functions, but also have a set of 14 additional functions and are fully implemented in all clinical units in the hospital.
Related: A recent study found that the clinical quality measures (CQMs) used by the Meaningful Use program should be modified to spur greater improvements in quality and population health. The study, published in the American Journal of Managed Care, was based on focus groups of lead physicians at 23 top-performing hospitals participating in the Meaningful Use program.
Most of the physicians that participated said that CQMs should be measures that are relevant, have been proven to be effective, remain in the physicians’ control, and have an impact on morbidity and mortality rates. Other findings from the focus groups include:
- Outcomes-based CQMs should be tied to measures that support population health management and allow physicians to improve patient outcomes without increasing their workload
- CQMs should incorporate patient-generated data
- CQMs should take into account regional health issues and help drive innovation within the health IT industry
Finally, some of the participants said that CQMs should include a core group of measures for all providers, regardless of specialty, while others believe that they should be customized for primary care physicians and specialists.
(Source: Julia Adler-Milstein, et al. “Electronic Health Record Adoption In US Hospitals: Progress Continues, But Challenges Persist,” Health Affairs, November 2015; Cara B. Litvin, et al. ““Meaningful” Clinical Quality Measures for Primary Care Physicians,” November 13, 2015)
AMA and other provider groups send CMS feedback on MACRA
A group of providers, including the American Medical Association and dozens of specialty provider groups, sent Acting Administrator of CMS, Andy Slavitt, a response to the CMS request for information (RFI) on the Medicare Access and CHIP Reauthorization Act (MACRA). The letter laid out 10 principles that the group believes are critical to keep providers engaged in delivery and payment system reform initiatives:
Background: CMS released the RFI on MACRA in early October (see the October 6, 2015 Health Care Current). MACRA passed earlier this year and fundamentally changes how Medicare will set provider payments in the future. In the RFI, CMS asked for feedback on MIPS and alternative payment models (APMs) for the new payment system. For MIPS, CMS is asking for input on measuring the quality of care provided by participating professionals, how it should measure meaningful use of EHRs and clinical practice improvement, and how frequently it should provide feedback to providers on their performance. The questions related to APMs were largely focused on a central issue: What should be considered an eligible APM?
Over the next year, the Administration is likely to increase regulatory activity related to MACRA, and groups such as these professional associations will be commenting on the law’s implementation.
On the Hill & In the Courts
VA proposes new plan for veterans who need care in the community
Last week, Deputy Secretary of the US Department of Veteran’s Affairs (VA), Sloan Gibson, presented the VA’s plan to improve care in the community to members of the House Committee on Veteran’s Affairs. The New Veterans Choice Program will build from the Veterans Choice Program and aims to give veterans more choice and better access to health care.
The main components of the proposal are:
The plan will cost an estimated $1.5-2.5 billion in the first year and would need to be approved by Congress. This comes shortly after Senate lawmakers introduced a bill that mirrors one in the House and would allow VA professionals to practice across state lines for telehealth services that are delivered in the home. Currently, the VA allows telemedicine services to be delivered across state lines if the patient and physician are both at a VA facility. The VA provided care through telehealth programs to 690,000 veterans in 2014, approximately 12 percent of the overall Veteran population, and accounting for more than two million visits. Half of these individuals live in remote areas.
MedPAC identifies telehealth barriers
The Medicare Payment Advisory Commission (MedPAC) found mixed evidence of the efficacy of telehealth after reviewing study findings from across the industry. It found that telehealth has improved access and convenience; it has also expanded the reach of health systems in rural areas and can provide access for isolated chronically ill and disabled patients. However, it is less clear whether telehealth can improve quality and reduce costs.
One study the Commission reviewed found evidence that telemonitoring can improve mortality rates for patients with congestive heart failure (CHF). Another found that telemonitoring led to higher mortality rates among older patients with multiple health conditions. Telehealth services also had a varied impact on reducing costs. While one study found spending reductions between 8 and 13 percent, multiple other studies found no evidence that telehealth reduced hospital admissions and days in the hospital, so costs remained the same.
Analysis: A number of policy, technical, and infrastructure issues have limited use of telehealth services. For example, state-level medical licensure policies require clinicians to be licensed in every state they intend to practice. Telehealth often requires complex technology and data management capabilities, which can pose significant financial and training challenges. Finally, rural communities, which might significantly benefit from such services, are more likely to lack the high-speed internet required for telehealth.
Many health care organizations are making services more accessible and potentially less expensive while enabling “anytime and anywhere” patient-provider connectivity through connected health (cHealth). The Deloitte Center for Health Solutions’ recent report, “Accelerating the adoption of connected health,” found that well-planned cHealth strategies that use remote monitoring and telehealth for targeted, high-cost patient populations have the potential to increase health care cost-effectiveness under value-based payment models such as accountable care organizations (ACOs) or global capitation. For example, organizations that use cHealth strategies such as remote patient monitoring or telehealth for a patient with CHF could save between $1,054 and $1,956 per patient per year.
CMS proposes new star ratings for dual demo plans
CMS announced it is creating a star-rating system to rate plans that enroll dual eligibles – individuals who qualify for Medicare and Medicaid – through the Financial Alignment Initiative. The agency developed the star ratings program to remove barriers that hinder care coordination for dual eligibles.
The Financial Alignment Initiative is a pilot demonstration designed to align financial incentives between Medicare and Medicaid. Twelve states are participating in either the capitated or managed fee-for-service model. CMS will implement the rating system only if the test sites are able to improve quality and reduce costs for this population and CMS expands the demonstration program nationally.
In its proposal, CMS laid out elements of the ratings program. Health plans would be expected to improve care quality, measure quality across the full spectrum of services, focus on individual goals of dual-eligible members, and address measurement goals identified by stakeholders. CMS expects quality measures to span six overarching domains:
- Community integration and long-term services and supports
- Chronic condition management
- Care safety
- Member experiences with health plan and care providers
- Plan performance on administrative measures
Maryland’s global budget experiment slowed cost growth and saved Medicare $116 million
Maryland’s global budget experiment – where private health plans and Medicare paid hospitals the same fixed annual amount – helped the state slow cost growth and save Medicare approximately $116 million during the first year. The report, recently published in the New England Journal of Medicine, also found that the global budget system is rewarding hospitals that keep patients healthy and manage population health and is helping providers move away from fee-for-service.
The Centers for Medicare and Medicaid Innovation agreed to allow Maryland to use the All-Payer Model to pay hospitals a global budget for the whole year, regardless of how many patients they treat or if the care was delivered in an inpatient or outpatient setting. This is separate from Maryland’s Health Services Cost Review Commission, which has been in effect since 1971 and sets rates that insurers, including Medicare, pay for acute care services at the state level.
Maryland has already surpassed the original targets it set for the program in January 2014. By July 1, 2014, 90 percent of the state's hospital revenue was in global budgets, which is earlier than the model required. Maryland also slowed cost growth to 1.47 percent in the first year – 2.11 percentage points lower than its target of 3.58 percent. Finally, hospitals also improved on many quality measures and decreased preventable conditions 26.3 percent.
Analysis: Questions surrounding how a global payment system can address systemic, ongoing increases in health care costs remain. Maryland has a unique health care environment, so these results may not be replicable in other geographies. While hospitals were able to improve on many quality metrics and reduce hospital admissions, Maryland continues to perform worse than the national average in terms of Medicare all-cause readmission rates and costs per beneficiary, which are among the highest in the country.
The agreement between Maryland and CMS said that the state would transition to a model that would reduce costs and improve quality over the full spectrum of care – not just for hospital services – by 2019. Maryland aims to save Medicare $330 million by 2019. Though the state’s hospitals have embraced the change, doctors may need stronger incentives to transition away from fee-for-service payments.
(Source: Ankit Patel, J.D., et al, “Maryland's Global Hospital Budgets – Preliminary Results from an All-Payer Model,” New England Journal of Medicine, November 2015)
Around the Country
State actions seek to reduce consumers’ out-of-pocket costs for prescription drugs
As the national discourse around prescription drug costs continues, some states are taking legislative action to reduce consumers’ exposure to high costs. The Commonwealth Fund found that at least seven states have passed legislation to lower cost sharing for high-price prescription drugs. The Commonwealth Fund outlined some of the ways states are limiting out-of-pocket costs for prescription drugs:
States have used other strategies to limit consumers’ exposure to drug costs. Montana requires health plans to offer at least one plan that uses copayments instead of coinsurance for drug cost sharing. In addition to these states, seven state-based marketplaces have standardized benefit designs that limit prescription drug cost-sharing.
(Source: Sabrina Corlette et al, “State efforts to reduce consumers’ cost-sharing for prescription drugs,” Commonwealth Fund Blog, November 2015)
Next generation cancer detection
The defense industry is using a technology that may have additional uses for the health care industry. Researchers from Stanford University are studying how a technology used to detect buried plastic explosives may detect cancer at very early stages. It is rooted in the principle that all materials expand and contract when stimulated with electromagnetic energy, such as light or microwaves. This expansion and contraction produces ultrasound waves that travel to the surface and can be detected.
The Defense Advanced Research Projects Agency (DARPA) challenged researchers to develop a system that could detect explosives that metal detectors cannot detect without touching the surface of the explosive because it would trigger an explosion. The Stanford team developed a detector with ultrasonic transducers that can discern weaker ultrasound signals that travel through the air to the detector. This problem-solving tactic triggered an idea. Researchers wanted to test the touchless ultrasound device for health purposes to see if a device could perform ultrasounds in people without touching their skin. The team used the brief microwave pulses to heat a flesh-like material implanted with a sample target. They held the device one foot away from the material and heated it. Heating the material slightly, well within safety limits, caused the material to expand and contract and resulted in ultrasound waves that could be detected.
The implications for cancer detection could be profound. Research has shown that tumors grow additional blood vessels to nurture their growth. Blood vessels absorb heat differently than other tissue, so tumors could present as ultrasound hotspots. The team knows that practical use of a handheld device that could detect cancer non-intrusively is many years away, but their proof of concept work is exciting to many. The ultrasound detection system could be more portable and less expensive than other medical imaging devices that is safer than X-rays.
Analysis: The Deloitte Center for Health Solutions’ recent report, “Next generation “smart” medtech devices: Preparing for an increasingly intelligent future,” gives readers a glimpse of a future where anyone can use a portable, high-tech device to diagnose, monitor, and treat disease. The paper discusses how sensor-enabled devices are getting faster, smaller, and cheaper and increasingly being embedded into daily activities. This “smart medtech” has the potential to arm individuals with more insights, which could simplify and improve medical care by reducing the need for specialized facilities and providers. Across the-spectrum of care – from preventive to acute to chronic – health care systems and purchasers are looking for solutions to help them achieve better results. Likewise, medtech developers are pursuing opportunities to demonstrate value through next generation medtech devices.
(Source: Tom Abate, "New ‘tricorder’ technology might be able to ‘hear’ cancer growing," Stanford Report, November 9, 2015)