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Health Care Current: November 25, 2014
How will your organization activate innovation?
This weekly series explores breaking news and developments in the U.S. 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
From linear to exponential thinking: How will your organization activate innovation?
Digital manufacturing and nanotechnology…Synthetic biology…Artificial intelligence and advanced robotics…Crowd-sourcing…Incentive competitions…Health and medicine are not immune from the rapid change of technology. Moore’s Law is at work with exponential improvements in performance and a corresponding drop in cost, making innovations possible like never before. The question is, “What impact will these exponential changes have on organizations’ businesses and ecosystems? And, what new business models will the technologies create?”
Earlier this month, Deloitte Consulting LLP’s Life Sciences and Health Care practice worked with the Deloitte Consulting Innovation (DCI) team on a unique collaboration with one of our newest strategic partners – Singularity University – to host Exponential Medicine 2014. Exponential Medicine is a global workshop of more than 400 thinkers, innovators, entrepreneurs, scientists and executives across health care and medicine. These experts are dedicated to helping leaders understand and explore the profound impact of a wide array of rapidly evolving next generation technologies on the future of the industry.
Afterward, Deloitte invited event participants to join in a reflective discussion around the conference and, more importantly, to wrestle with questions like, what do they do next? The conference and discussion highlighted several key issues which health care organizations and stakeholders should consider:
Developing depth and mastery in exponential technologies, and creating and living with exponential organizations
Health care organizations should consider developing a fluency and working understanding of the major areas of exponential technology that are playing out across all of society and business. Examples include:
- Advances in information technology related to abundant bandwidth and ubiquitous connectivity that are enabling mass dissemination of data and pervasive communications globally.
- The world of robotics and how it is impacting areas from surgery to behavioral health.
- Digital manufacturing whereby the reality of 3D printing is making possible the printing of implants and someday even organs.
- Advances in biotechnology that are rapidly occurring and making it possible to target disease and re-write human genes.
- Big data applications and use cases that are improving exponentially, with innovations in database design and analysis tools that make gleaning insights from massive data sets possible; eventually this could lead to transformation in research/development, prevention, personal empowerment and treatment dimensions of health.
Mastering exponential technologies and embracing their transformational impact also means creating new competencies. These include increasing organizational agility, strengthening organizational learning capabilities and evolving into learning networks, embracing open talent networks, leveraging prize-based competition and gamification, rethinking traditional organizational metrics and building new “muscles” in ecosystem development.
Planning for living within ecosystems
Exponential Medicine 2014 underscored the fact that innovating in an exponential world requires that organizations do not go it alone. In fact, the world of exponential change might require that organizations get comfortable with finding and developing new types of partnerships and collaborations. New relationships could be instrumental not only to build depth and exposure to the exponential technologies themselves but also to innovate and execute at the required pace. More broadly, the conference demonstrated that the future solutions and innovations are cross-functional and cross-disciplinary in nature – answers to the big challenges could come from broad industry collaborations.
An example of this new ecosystem thinking was highlighted in the industry-wide discussion with Dr. Craig Venter and Dr. Peter Diamandis and their most recent venture. Participants in this dynamic discussion identified industry-wide opportunities to leverage advances in genetic and microbiome sequencing.
Understanding the importance of platforms versus apps
Is Uber a car service app or, is it a platform for urban logistics? Uber recently piloted an offering to connect nurses to consumers that need flu shots. What makes an app company a platform?
There is a proliferation of apps in health and medicine (over 10,000); these are both analytical in nature and focused on the consumer or mobile world. Yet, advances in exponential technologies present new opportunities and imperatives to leverage emerging and highly scalable platforms. These platforms, made possible by cheaper storage, more powerful algorithms and ubiquitous connectivity, could enable the integration of disparate data sets and broad-based collaboration across industry boundaries. Instead of silos of applications, emerging platforms could support patient engagement, clinical insight development and population health.
Creating a game plan for activating innovation
Exponential technologies are powerful tools, but how do they become even more impactful enablers of innovation? This challenge of activating innovation is faced by organizations across health and medicine. Organizations need a framework and vocabulary for how an organization can discuss innovation and its portfolio of initiatives; ‘core,’ ‘adjacent’ and ‘transformational’ innovations can impact a range of markets and customers as well as a range of existing to new products and assets. A powerful first step in making the shift from linear to exponential thinking is to have a framework and nomenclature that an organization can leverage to become aligned and focused on its innovation priorities.
Exponential Medicine 2014 presented a window into the future – not only for health and medicine, but for society. The rapid changes in technology could foster new solutions to today’s problems and allow for greater innovation and the creation of new business models. But embracing exponential thinking and the power of these emerging technologies may not come naturally to everyone or all organizations. The inertia of our day-in-day-out linear world is powerful. Nevertheless, industry leaders should consider the question, “Is your organization willing to embrace the exponential wave of change and be in position to leverage its transformational impact for the better?” Activating innovation starts with taking that first step.
By Jason Girzadas, Principal, National Managing Director, Life Sciences & Health Care, Deloitte Consulting LLP
2015 marketplace open enrollment begins; CMS updates enrollment numbers; 2015 FFM rates released
On Sunday, November 16, U.S. Department of Health and Human Services (HHS) Secretary Sylvia Matthews Burwell reported that an estimated 100,000 individuals had submitted applications to purchase health plans on HealthCare.gov, the federally-facilitated health insurance marketplace (FFM) that opened the day before. Another one million individuals had visited the website as of last Thursday. The initial results coming out of this round of open enrollment demonstrate improvements made to the website since the 2014 open enrollment. Last week, the Centers for Medicare & Medicaid Services (CMS) provided an updated enrollment figure of 6.7 million for the estimated number of individuals who chose health plans as of October 15. According to the administration, the original reported figure of 7.1 million had been “erroneously counted,” and 400,000 of the original number were individuals who obtained dental plans through the FFM. It is unclear whether the update will change the recent forecast of 9.0-9.9 million individuals that HHS expected to enroll by the end of the second open enrollment period.
On November 14, a day before open enrollment started, CMS released data on insurance plans available in the 34 FFM states in 2015. The data included information on participating health plans, premiums and cost-sharing to give prospective consumers and those seeking to re-enroll transparency on the choices available through the FFM. According to CMS, the number of carriers has increased by 25 percent for the 2015 benefit year, giving up to 90 percent of consumers the choice to purchase health plans from among three or more insurance companies. Plan options, however, vary by county within each state. A quick overview of the average premiums for all 2015 silver plans being sold in the FFM in six states with some of the largest number of enrollees shows the following:
The average premium cost is before tax subsidies, so the premiums some people actually need to pay will likely be lower than the amounts shown on the chart if these individuals qualify for the subsidies. Older adults seeking to purchase silver plans under the FFM will see higher premiums than younger adults; a 50-year-old individual in one of these seven states will see average premiums that are 1.5 to 3 times more than the average for a 30 year old. The average medical deductibles for individual silver plans also vary widely by state; the highest average deductible is 2.5 times more than the lowest deductible.
(Source: CMS, “CMS releases new data demonstrating increased choice, competition in the health insurance marketplace in 2015,” November 14, 2014; HHS, “State by State Health Insurance Marketplace Facts,” last reviewed September 2014)
Implementation and Adoption
HHS issues proposed rule on benefit and payment parameters for 2016
Late last Friday, HHS published a proposed rule that outlines changes and additional implementation of major provisions of the Affordable Care Act (ACA). The proposed rule covers a broad set of topics, and proposes the following:
Drug coupons: pro or con?
In a recent Health Affairs blog article, its authors discussed the pros and cons of using coupons for purchasing drugs and specialty drugs. Research published in an October article in Health Affairs found that half of the patients who were prescribed specialty drugs decreased the amount of cost sharing they owed by using these drug coupons to fill coverage gaps. Coupons can be found on manufacturers’ websites and can be especially important to individuals who take specialty drugs, which can cost patients and insurers an average of $3,500 a month. The article discussed several short-term and long-term pros and cons that drug coupons present:
Many government payers have outlawed the use of drug coupons for beneficiaries, including Medicare and Medicaid. However, HHS has found that despite this, the safeguards that pharmaceutical manufacturers, health plans and individual pharmacies have implemented are not sufficient to prevent their use in these programs.
Related: A recent Deloitte Center for Health Solutions brief, “Dig deep: Impacts and implications of rising out-of-pocket health care costs and the hidden costs of health care,” analyzed the National Health Expenditure Accounts to find approximately $672 billion in hidden costs that health care consumers could be bearing in out-of-pocket spending. This includes spending on supervisory care, nutritional supplements and complementary and alternative medicine. These hidden costs of health care are estimated to account for almost one-fifth (19 percent) of total health care spending and bring the actual total annual health care expenditures to $3,446 billion – up from $2,793 billion. In light of these costs, health care stakeholders should consider strategies to reduce the cost burden on both consumers and industry. For pharmaceutical manufacturers, this could include combining drugs with disease management and other programs to improve patient adherence and outcomes.
(Source: Lara Maggs and Aaron Kesselheim, Health Affairs, “The Short-Term And Long-Term Outlook Of Drug Coupons,” November 12, 2014)
CBO updates SGR repeal score; decreases long-term cost projections of freeze
Earlier this month, the Congressional Budget Office (CBO) published updated projections for the estimated cost of implementing alternative policies to the physician pay formula for the Medicare fee-for-service program, also known as the sustainable growth rate (SGR). This perennial payment issue in Medicare is likely to be a focus of the “lame-duck” Congress, but if the current Congress doesn’t act, the new Congress may have to tackle the issue. Many expect the current Congress will not be able to pass a deal before the new year. The current legislation only extends the “patch” that prevents large cuts to physician payment through March 2015. In its estimates, CBO projects that policy options for replacing the current law calling for cuts could have the following budgetary implications for fiscal years 2015 through 2024:
*MEI = Medicare Economic Index
Notably, the estimate for freezing the current pay rates is lower than the CBO’s last score, dropping from an estimated $124 billion in April 2014 to $118.9 billion in this most recent score. Earlier this year, lawmakers from the Senate Finance and House Ways and Means and Energy and Commerce committees came to an agreement on a replacement for the current pay formula, but were unable to agree on how to pay for it. The CBO scores are lawmakers’ resource for determining the cost for repealing and replacing the SGR formula.
Related: According to a recent blog post written by Sarah Thomas, Research Director for the Deloitte Center for Health Solutions, Deloitte Services LP, last year, Congress tried to enact major reform to this payment system, but in the end was unable to find the funding to support the policy changes. Even so, the legislation that enacted the patch became a veritable Christmas tree of policy, as it was one of the few pieces of health legislation to be enacted. Especially salient to many stakeholders was the delay in implementation of ICD-10 that was included in that legislation. Last week, a group of 15 organizations sent a letter to congressional leaders requesting they prohibit any further delays in the implementation of ICD-10. They cited a survey that found that nearly three-quarters of provider organizations were ready to implement the transition to ICD-10.
Report: Hospitals recognized as top performers based on quality measures increased by 11 percent
The latest annual report from The Joint Commission found that about 36.9 percent (1,224) of Joint Commission-accredited hospitals gained recognition as a Top Performer on Key Quality Measures for meeting or exceeding three performance criteria on specified measures. The results are based on data reported by 3,300 hospitals on a total of 44 accountability measures from 10 composite sets, including care for heart attack, heart failure, pneumonia, surgery, children’s asthma, inpatient psychiatric services, venous thromboembolism, stroke, immunization and perinatal issues. According to the report, hospitals have improved in their delivery of evidence-based care over time; the number of top performer hospitals in 2013 represented an 11 percent increase from the previous year:
Rural, urban, for-profit, non-profit, teaching and non-teaching hospitals all improved their performance. 718 accredited hospitals (21 percent) fell short on meeting one accountability measure, but the Commission said they are “on track” to receive recognition over the next year given their improved performance. To encourage higher performance, The Joint Commission added additional accountability measures in 2014 and is providing resources for hospitals to exchange information with one another.
(Source: The Joint Commission, “America’s Hospitals: Improving Quality and Safety- The Joint Commission’s Annual Report 2014, November 13, 2014)
Providers offer recommendations for NAIC’s new network adequacy standards
Last week, a group of more than 115 provider organizations sent a letter to the chair and vice chair of the Health Insurance and Managed Care (B) Committee at the National Association of Insurance Commissioners (NAIC) to provide recommended standards for network adequacy. Since April 2014, an NAIC committee has been reviewing and considering revisions to the 1996 Managed Care Plan Network Adequacy Act (Model Act #74). The changes under consideration are intended to account for changes made to the health care landscape by the ACA. The provider organizations suggested NAIC consider:
- Requiring provider networks to include primary, specialty and subspecialty providers for both children and adults so that patients can receive a full range of coverage
- Requiring regulators to use appropriate quantitative and measurable standards to review and monitor provider networks
- Outlining a fair, timely and transparent appeals process
- Regulating the use of tiered provider networks and formularies
- Requiring health plans to be transparent in their provider selection standards
- Insisting that provider directories be accurate, accessible and updated
The NAIC committee continues to hold meetings to discuss revisions to the model, which were originally expected to be completed by November or December 2014.
Congress considers changes to FDA’s priority review voucher program, including adding Ebola to the eligible list
The U.S. Food and Drug Administration (FDA) priority review voucher program was created in 2007 though the FDA Amendments Act and exists to encourage manufacturers to bring to market quickly treatments that help prevent or cure certain tropical diseases. The priority review program allows manufacturers access to a shorter FDA review and approval process. On average, this process lasts 10 months, and the priority program shortens it to 6 months. The manufacturers also receive a voucher (which can be used by that manufacturer or sold to another one) for priority review of a second product as an incentive to bring the tropical disease product to market. Earlier this month, lawmakers in the House and Senate introduced companion bills into each chamber that address the Ebola outbreak and ways to speed up FDA approval of treatments for the disease. The original law contains a list of diseases that can be eligible for the program; filoviruses, including Ebola, were not included on that original list. If passed, the legislation would:
- Add filoviruses, including Ebola and a related virus, Marburg, to the list of approved diseases for the voucher program
- Change the FDA’s process so that adding diseases to the eligible list would only require an administrative order, rather than the current agency rulemaking process that is required
- Allow manufacturers to sell or transfer their priority review vouchers from the program multiple times
- Decrease the time required for manufacturers to give advance notice that they will use the voucher from 365 days to 90 days
Last Wednesday, the Senate version of the bill cleared the Senate Health, Education, Labor and Pensions (HELP) Committee.
On the Hill and In the Courts
Review of Halbig v. Burwell suspended until Supreme Court rules on King v. Burwell; KFF finds 13.4 million could lose subsidies in 2016
Earlier this month, the U.S. Court of Appeals for the District of Columbia Circuit announced it would suspend Halbig v. Burwell, a case that argues that tax subsidies should not be available to individuals in the FFM, only to those who obtain insurance through the state-based marketplace (SBM). The case was scheduled to be heard on December 17 “en banc” (by all 11 judges in the full court) after the court ruled in favor of the plaintiffs earlier this year. The Court of Appeals decided to delay the court proceedings on this case until after the U.S. Supreme Court rules on King v. Burwell, a different case that makes the same argument. The Supreme Court announced earlier this month that it would take up the case, though that announcement did not mention a specific date that the arguments will be held on the case (for more information see the November 11, 2014 Health Care Current).
Currently millions of individuals receive subsidies through the FFM; a ruling that disallows this could reduce affordability of coverage for individuals, potentially resulting in a drop in enrollment. Shortly after the announcement, Kaiser Family Foundation (KFF) published an analysis on how many individuals in the U.S. would be affected if the Supreme Court rules for the King plaintiffs. Using CBO’s 2016 enrollment forecasts (2016 is the year that a ruling against the subsidies would likely go into effect), KFF estimated that more than 13.4 million enrollees could lose their financial assistance and see higher premiums as a result. This would include more than 2.5 million Florida residents and 1.7 million Texas residents, which make up nearly one-third of the enrollees in the FFM.
Report: Tennessee’s uninsured rate drops by 23 percent in 2014 due to rise in access to coverage
Last week, the University of Tennessee’s Centers for Business & Economic Research (CBER) released survey results that found that the uninsured rate in Tennessee had dropped to 7.2 percent, leaving 472,008 uninsured individuals in 2014. This is significantly lower than the uninsured rate for 2013 of 9.6 percent. The annual survey, which has been conducted since 1993, interviewed 5,000 households to obtain trends in health insurance status and consumer experience with TennCare, the state’s Medicaid managed care program. According to researchers, the drop in the uninsured rate from 2013 to 2014 coincided with the health insurance marketplace opening. The rate is also the lowest it has been in the state in decades:
The study found that those who remained uninsured reported affordability (86 percent) and the perception that they did not need coverage (12 percent) as major reasons for why they did not purchase health insurance. Notably, 94 percent of household respondents that reported affordability as a barrier to obtaining coverage earned less than $10,000 a year. Respondents also rated the quality of the care they received: 78 percent of all households and 70 percent of households with TennCare rated their care as “excellent” or “good.” While TennCare enrollees went to hospitals (8 percent) first for their care more than all households with health insurance (2 percent), the rate at which they did so remained stable from the previous year.
(Source: Thacker, Angela and Luna, LeAnn. University of Tennessee Centers for Business & Economic Research, “The Impact of TennCare: A Survey of Recipients, 2014,” September 2014)
Around the Country
CMS approves one-year extension of Indiana’s HIP demonstration; state’s HIP 2.0 Medicaid expansion plan still pending
On November 14, for the third consecutive year, CMS granted Indiana a one-year extension of the Healthy Indiana Plan (HIP). HIP provides Medicaid benefits to approximately 60,000 adults who earn up to 100 percent of the federal poverty level (FPL) and do not otherwise qualify for the Medicaid program. According to the letter, CMS allowed the extension to avoid disrupting care to current enrollees while the state and the administration continue to negotiate HIP 2.0, Indiana’s Medicaid expansion demonstration plan under the ACA that was submitted in late August (see the September 9, 2014 Health Care Current for details). The extension creates a new expiration date of December 31, 2015 for HIP, but CMS said that the agreement may be terminated earlier if HIP 2.0 is approved. Similar to other states that have expanded Medicaid using a “private option,” HIP 2.0 would use federal funds to offer eligible enrollees financial assistance to purchase private plans sold in the state’s marketplace. 350,000 uninsured Hoosiers are estimated to gain coverage through HIP 2.0 if it is approved.
Related: On September 21, advocacy groups sent a letter to CMS to express concerns over various components of HIP 2.0, noting that approving a plan with tough requirements and that requires low-income residents to pay premiums could impact beneficiary access to coverage. See the October 7, 2014 Health Care Current for a summary of the letter.
VA expands, innovates telehealth program
The U.S. Department of Veterans Affairs (VA) recently gave a demonstration of the agency’s emerging telehealth system and clinical video telehealth scheduling software to some of the nation’s leading veterans’ service organizations. The emerging systems are aiming to improve access to VA health services for veterans.
In the past, veterans seeking health care traveled to VA hospitals or medical centers. The VA has more than 700 hundred community-based outpatient clinics; however, the nearby clinics may not have all of the specialty services and staff found at the regional medical centers. If specialty care is needed from a cardiologist, neurologist, surgeon for follow-up after surgery or psychiatrist for mental health care, the clinic provider may need to refer the veteran to the VA medical center. This travel can be inconvenient and difficult for many. The VA is now recognized as a leader in the rapidly emerging field of telehealth – its telehealth programs remain among the largest and most comprehensive in the nation, with more than 690,000 veterans participating in more than 2 million virtual appointments in the last year. For many veterans who live far from VA health care facilities, these services are critical to accessing timely, convenient health care.
The VA received a $23 million increase in funding for fiscal year 2015. The agency’s total investment in telehealth is $567 million for the year. In the near future, the VA plans to use the technology for an expanded range of services, including counseling services for post-traumatic stress disorder and other behavioral health issues. The VA is using funds from the VA reform bill signed earlier this year to build additional clinics, many of which are set up for the new telehealth services.
Radiology, dermatology and checking for the effects of diabetes on the retina in the back of the eye are three areas of health care where telehealth is becoming commonplace in the VA. The telehealth program includes:
- Store-and-forward technology, which involves the acquisition and storing of clinical information (e.g., data, image, sound, video) that is then forwarded to (or retrieved by) another site for clinical evaluation
- Clinical Video Telehealth, which uses the telehealth technology to make diagnoses, manage care, perform check-ups and provide care.
Home telehealth can connect a patient to a VA hospital from home using regular telephone lines, making it possible to check on symptoms and measure vital signs in the home. The VA’s telehealth program also includes software that can help make the scheduling of telehealth appointments more convenient.
Analysis: Telehealth is one of the many modes of connected health initiatives (secure messaging, personal health records, etc.) the VA is using to improve continuity of care and allow the primary care physicians to work to the top of their licenses. The store-and-forward technology allows the specialist to aggregate cases and be highly efficient in reviewing the data submitted and guiding actions for other diagnostic lab or x-rays that reduce the need for repetitive appointments. Teleradiology shortens the time for reports to get into the hands of the treating physician. Dynamic workload allocation can allow best use of radiologists across the nation by equalizing workload and decreasing time to get completed reports. Because the federal system does not bill by individual encounters, the VA has been able to expand and innovate in telehealth adoption as doing so does not reduce revenue.