Health Care Current: October 14, 2014

Imagine health care without technology

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.

Imagine health care without technology

Try to imagine not being able to read. Howard Wainer, an American statistician, poses this challenge to his statistics students when he teaches his introductory course. To him, the idea of statistics to those who learn it is similar to learning how to read or swim. He goes on to explain that, while it is difficult to learn these skills, once you do, you cannot imagine a time that you were unable to read or swim.1

Try to imagine health care without technology. No MRIs, X-rays or even stethoscopes. For me, it’s difficult to imagine—technology has brought the health care industry a long way. However, despite the massive investments many organizations have made on information technology (IT), it is not doing all the things we want it to do—systems do not talk to each other, and use of these systems for new analytic insights is just beginning. 

Stakeholders across the health care system are working to correct this disparity. While there may be frustrations around Meaningful Use and challenges with adopting electronic health records, the support behind health IT continues to grow. Even with this support, however, challenges still remain.

My colleague Sarah Thomas and I recently had an opportunity to address some of the most pressing IT challenges facing the health care system. In June Senators Ron Wyden and Charles Grassley, who represent the Senate Committee on Finance, sent a letter to stakeholders from across the health care continuum asking for comments and feedback on the state of data transparency in the health care system. 

Their request was backed by some eye-opening statistics:

  • The amount of information that is stored digitally has grown from 25 percent to 98 percent worldwide since 2000
  • Five quintillion bytes of digital data existed in 2003—as much is generated every two days now2

We responded to this request from Senators Wyden and Grassley by discussing two questions that are critical to the health care system: 

How can the federal government encourage a "culture of interoperability?"

Interoperability is a patient safety issue. Some estimate that anywhere from 8-14 percent of medical records have information attributed to the wrong patient.3 In order for the health care system to move toward greater interoperability, advancements in technology are not enough—even with the unprecedented rate of progress that has taken place in the last decade. The federal government could inspire this culture of interoperability by: 

  • Offering incentives to providers and other stakeholders to agree upon and implement standards that are flexible enough to meet the broad scope of needs of individual stakeholders in the system
  • Encouraging vendors (e.g., electronic medical records) to expose their data model and agree to use the same standards (both existing and future) for use in collaborations, roadmaps and coalitions related to interoperability 
  • Identifying and promoting the use of best practices to build interoperability into a system early in development 
  • Broadening Medicare and Medicaid incentives for health IT from technology adoption and use alone to include successful interoperability
How can the government encourage consumer engagement in health care?

Patients want their doctors to use health IT, but more can be done to advance patient engagement. Deloitte’s 2013 Survey of Health Care Consumers found that seven in 10 consumers say they would prefer a physician who uses health IT over a physician who does not.4 Mobile apps, telehealth and other nontraditional care delivery models are enhancing overall consumer engagement in health care, but more can be done to advance the consumer engagement movement in health care and capitalize on consumer interest. The federal government could lead the way toward greater consumer engagement by: 

  • Advancing more pilot testing in the area of telehealth to help ensure this evolving model of care does not introduce new sources of error into clinical processes
  • Creating demonstration projects that reduce regulatory barriers to telehealth technologies and guide stakeholders on how to develop and refine telehealth programs to improve health outcomes and reduce costs by making care more efficient and convenient
  • Driving reimbursement reforms to achieve quality outcomes against evidence-based standards through its role as both a payor and a provider
  • Further incentivizing and setting the example for the use of value-based insurance design as a way to create incentives for consumers in Medicare Advantage and the private health insurance marketplaces to make health care decisions that are cost-conscious 

The Deloitte Center for Health Solutions’ surveys have found system-wide discontent with health care. Consumers do not believe the system is providing value, nor is it meeting their needs.5 Employers are also looking for more: 52 percent want greater transparency around prices, and 46 percent want clear, accessible information about care provided by doctors.6 These findings suggest that there is great potential for new product ideas at the intersection of information technology and consumer demand for transparency. 

My youngest daughter was born at the turn of the century, and incredible to me, cannot imagine life without computers or the Internet. The U.S. health care system could one day move to one in which my grandchildren can only picture the system as one where systems connect with each other and consumers use tools that help them find the highest value services, plans and providers. 

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1SAS Institute Inc., “Analytically Speaking – Interview with Howard Wainer,” 
2Senators Ron Wyden & Charles Grassley, Letter to Stakeholders on June 12, 2014, 
3ONC, “Patient Identification and Matching Final Report” February 2014. 
4Deloitte Center for Health Solutions, “Survey of U.S. Health Care Consumers,” 2013
5Deloitte Center for Health Solutions, “Survey of U.S. Health Care Consumers,” 2013
6Deloitte Center for Health Solutions, “Survey of U.S. Employers,” 2013

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My Take

By Bill Copeland, Vice Chairman, U.S. Life Sciences & Health Care Leader, Deloitte LLP


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Study: Later marketplace enrollees are healthier than those who enrolled earlier on

Last week Express Scripts published findings from its latest Exchange Pulse Report™ that found that individuals enrolled in the health insurance marketplace are using more specialty medications than those in traditional health plans. Specialty drugs account for approximately 1.3 percent of pharmacy claims for marketplace enrollees, but are 38 percent of total pharmacy spending in the marketplace plans. On average spending on specialty pharmacy in traditional commercial health plans reaches only 28 percent of total pharmacy spending. The survey also found that individuals who enrolled on or after March 1 were on average younger by four years and had fewer serious conditions than early enrollees:

The study found that marketplace enrollees access and use their pharmacy benefits as much as people in traditional commercial health plans do, but use more generics (87 percent) than those in traditional plans (82 percent). These findings are similar to what Express Scripts found earlier this year in marketplace enrollees. Using claims data from January 1 through February 28, the earlier report found that marketplace enrollees used more pain, anti-seizure and anti-depressant medications than is the case for people in traditional commercial plans. For more information, see the April 15, 2014 Health Care Current.

Related: The latest issue of Health Affairs focused on specialty pharmaceuticals and the growing popularity and cost implications that they may have on the health care system. The U.S. market for specialty drugs was $87 billion in 2012 and is expected to grow at 8.8 percent each year. By 2019 these drugs could account for approximately 50 percent of spending on pharmaceuticals. Researchers from Duke University focused their analysis on the effect of specialty drugs on total spending and related policy and benefit design developments that also may affect spending. The researchers concluded:

  • Cost sharing: New methods of cost sharing could begin to require patients using specialty pharmaceuticals to pay more for their treatment regimens. Out-of-pocket spending is already high, with estimates showing that individuals with cancer declare bankruptcy at twice the rate than those without it. One-in-four patients with cancer do not fill prescriptions. Other studies have shown that individuals who face life-threatening choices regarding specialty pharmaceuticals tend to be price inelastic – choosing to receive treatment despite high out-of-pocket costs. 
  • 340B program: After the passage of the Medicaid Drug Rebate Program, Congress created the 340B program to provide a new way for pharmaceuticals to give discounts to safety net hospitals. The program has led to a change in business models – increasing the number of hospitals that have acquired practices with high use of specialty pharmaceuticals and have shifted services to more expensive facilities. The 340B program is expected to account for $12 billion in spending by 2016, and new regulations are expected this year. 
  • Biosimilars and price competition: The availability and use of off-patent drugs and generics can reduce spending for small molecule drugs, but lower off-brand biologics (biosimilars) are not yet available because the biosimilar approval pathway is not yet finalized. Even when it is, the authors explain that biosimilars will still be costly to produce (estimates say anywhere from $100 to $200 million vs. the standard $1 to $5 million for generic small molecule drugs). This costly process means that experts expect biosimilars to only be 20 to 40 percent cheaper than the brand-name biologic; by comparison, the average generic small molecule drug is 80 to 85 percent cheaper than the brand-name equivalent. 

(Sources: July Huppert, Express Scripts, “New Analysis: Health Exchange Medication Trends,” October 7, 2014; Bradford R. Hirsch, Suresh Balu and Kevin A. Schulman, The Impact Of Specialty Pharmaceuticals As Drivers Of Health Care Costs, Health Affairs, 33, no.10 (2014):1714-1720)

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                Implementation and Adoption


CMS releases Pioneer ACO quality and financial results

CMS published results for the first and second years of the Pioneer Accountable Care Organizations (ACO) program, finding mixed financial results. Several ACOs slowed their spending in the second year (one ACO saved 7 percent off of its benchmark), while others had financial losses as high as 5 percent. Several organizations earned more than $10 million in shared-savings payments, and those who had losses in year two owed around $2 million. Three ACOs have deferred reconciliation until next year. The report documents the nine ACOs that left the program since its start, eight of which increased spending in the first year. CMS also published quality data on the 33 performance measures that ACOs report for the program. The quality performance measures cover patient and caregiver experience, care coordination and patient safety, preventive health and care for people with certain chronic conditions (e.g., diabetes, hypertension). ACOs’ financial payouts depend on how well they score on quality measures and control spending. This news comes shortly after three additional organizations of the original 32 announced they were leaving the Pioneer program in September, leaving 19 ACOs in the program. For more information about the Medicare ACO program and organizations’ performance in the Pioneer and Medicare Shared Savings programs, see the September 23, 2014 Health Care Current.

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Study: Geisinger telemonitoring program for heart-failure patients reduces admissions, readmissions, costs

Geisinger Health Plan published a study in Population Health Management that found that a multi-year telemonitoring intervention for heart-failure patients led to reductions in readmissions and cost. Geisinger monitored 541 heart-failure patients who were enrolled in its Medicare Advantage plan from January 1, 2007, to October 31, 2012. All of the study participants were 65 years of age and older, had a confirmed heart-failure diagnosis, had high prevalence of co-morbidities and maintained GHP membership for the entire study period. The researchers found that the odds of a patient being admitted to the hospital during any given month was 23 percent lower for those in the telemonitoring program, and patients enrolled in the program had lower odds of being readmitted at 30 days (44 percent) and 90 days (38 percent). Geisinger found that the overall return on investment for every $1 was $3.30 for an overall per member per month (PMPM) savings of $216:

The telemonitoring intervention was a component of Geisinger’s larger case management program. Researchers attributed the success of the program to timely and appropriate follow up. Case managers received real-life data on biometric readings and used an interactive voice-response system that asked members questions to learn about changes in their conditions.

(Source: Maeng, Daniel D., Starr, Alison E., Tomcavage, Janet F., Sciandra, Joann, Salek, Doreen, and Griffith, David. Geisinger Health System. Population Health Management, “Can Telemonitoring Reduce Hospitalization and Cost of Care? A Health Plan’s Experience in Managing Patients with Heart Failure,” 2014)

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CMS asks stakeholders for input on innovation in Medicare and Medicaid

CMS recently announced it was seeking information and input from health care stakeholders, including beneficiaries, health plans, states, employers and providers, on how the agency can test innovation in plan design, care delivery, incentives (for providers and beneficiaries) and network design in health plans. CMS has authority to test innovative payment and service delivery models through the Center for Medicare and Medicaid Innovation, created through the Affordable Care Act (ACA). The goals of these programs are to reduce expenditures in Medicare, Medicaid and the Children’s Health Insurance Program (CHIP) while increasing quality. Specifically, CMS requested comments on the following Medicare and Medicaid products:

  • Stand-alone Medicare Prescription Drug plans (PDP): While PDP sponsors have some flexibility to structure benefits under current law, CMS requests comments on how PDP plans might test new ways to control costs and improve quality if they were given additional flexibility. Specifically, CMS would like to learn whether changes to medication therapy management programs might result in better coordinated care, lower costs and/or better outcomes.
  • Medigap and Retiree Supplemental Health plans: Medigap programs are supplemental insurance plans that help enrollees cover out-of-pocket costs (e.g., coinsurance, deductibles). Medicare is the primary payer for these beneficiaries and sets all the rules for access and payment, so Medigap plans do not have strong incentives to innovate around controlling costs and increasing quality. CMS seeks comment on initiatives that would help CMS and Medigap and Retiree Supplemental plans coordinate care of beneficiaries with high costs and complex conditions. This could include services such as case management and care coordination. 
  • Medicare Advantage (MA) and MA Prescription Drug plans: Approximately 30 percent of Medicare beneficiaries are in MA managed care plans. CMS is considering new models for this program, including using value-based insurance design to encourage beneficiaries to consider quality and cost in their care decisions, increasing the use of remote access technologies in care delivery and allowing individuals to receive curative and hospice benefits concurrently. 
  • Medicaid managed care plans: More than half of the Medicaid population is enrolled in a managed care plan. CMS is seeking comments on new ideas to test in Medicaid managed care. CMS will consider regulatory and other structural barriers that are impeding innovation.

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HHS seeks to relax fraud and abuse rules to spur innovation

Last week the U.S. Department of Health and Human Services (HHS) issued a proposed rule that would amend federal fraud and abuse statutes to allow for new safe harbors under the anti-kickback statute and would establish new rules regarding beneficiary inducement and gain-sharing. The anti-kickback statute was established to penalize “individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under federal health care programs.” This covers kickbacks, bribes and rebates whether in cash or in kind. The proposed rule would add to the safe harbor provisions protection for cost-sharing waivers, including pharmacy services for financially needy Medicare Part D beneficiaries, emergency ambulance services, remuneration between MA organizations and federally qualified health centers and certain free or discounted transportation services. The proposed rule also would add exceptions to the definition of remuneration, including copay reductions for outpatient services at hospitals, coupons and rebates, remuneration made to financially needy individuals, and copay waivers for first fill of generic drugs. In the proposed rule, HHS explained that certain efforts that the health care industry has expressed interest in offering (e.g., bundled payments, care coordination) could be hindered by fraud and abuse laws. 

Analysis: The government is not changing its views on fraud and abuse and is not signaling that there will be fewer enforcement actions by CMS, HHS Office of Inspector General (OIG) and/or the Department of Justice. That said, the federal government is saying that accountable care organizations and the new models of value-based care emphasize beneficiaries’ access to preventive care. The proposed rule may be in response to industry’s concern that it would like to reward physicians for economical and effective services to patients and give patients incentives for taking charge of their health without running into issues with the anti-kickback statute. The new regulations could help to spur further innovation in new patient care and payment models.

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On the Hill and In the Courts


FDA releases four-year strategic priorities; will use health IT to improve oversight and regulation

The U.S. Food and Drug Administration (FDA) recently released its 2014-2018 strategic priorities. The priorities will be implemented through a tiered-planning framework and will be integrated in its annual budget process. Key metrics and program performance will be reviewed through the FDA-TRACK initiative. Over the next four years, the FDA will focus on the following strategic priorities:

Critical to FDA’s strategic plan is the use of health information technology to ensure the safety and efficacy of FDA-regulated products. To strengthen information sharing, the FDA will continue to build partnerships to improve compliance and training collaborations globally while also using real-time data sharing systems that regulators can access. Once products are in the market, the FDA plans to continue to require the use of unique device identifiers to detect problems with devices and quickly track-and-trace such products. Finally, the FDA plans to shift from passive to active surveillance systems using proactive strategies like the Sentinel Initiative and the National Medical Device Postmarket Surveillance Plan. The Sentinel Initiative system tracks reported adverse events by pulling queries from electronic health records (EHRs) and other claims databases. 

(Source: FDA, “FDA Strategic Priorities: 2014-2018,” October, 2014)

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CMS to make quality measurement improvements in post-acute care settings

Last Monday CMS announced two initiatives that are aimed at improving care quality in post-acute settings, such as nursing home facilities and home health agencies. CMS will expand and improve the Five Star Quality Rating System for nursing home facilities in 2015 and proposed new participation requirements for home health agencies in Medicare. Specifically, CMS announced it would:

  • Conduct nationwide surveys on a sample of nursing home facilities to verify information for the Five Star Quality Rating System
  • Implement an electronic reporting system to verify information on staffing at nursing home facilities to measure turnover, retention and types of staffing
  • Increase the number and type of quality measures for the Five Star Quality Rating System; in 2015 CMS will add a measure on the use of antipsychotic medication in nursing home facilities
  • Strengthen data requirements around inspections to make sure states have a user-friendly and up-to-date website for displaying information
  • Improve the scoring methodology for quality measure ratings for nursing home facilities
  • Create new conditions of participation for home health agencies to enhance patient rights and improve patient well-being communication

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Senate lawmakers ask Speaker to block payments for risk corridors program

Last week a group of Republican Senators sent a letter to Speaker John Boehner requesting that Congress “prohibit the Obama Administration from dispersing unlawful risk corridor payments.” The lawmakers wrote that the Administration does not have appropriations or authorization to dispense funds through the risk corridor program, which is expected to make payments to health plans in fiscal year (FY) 2015. This letter comes shortly after the Government Accountability Office (GAO) published an analysis of the program.

GAO explained that the FY2014 appropriation said that CMS had appropriations to carry out “other responsibilities of CMS” and “sums as may be collected from authorized user fees.” The term “user fees” is defined by the Office of Management and Budget to mean a program or activity that “provides business stability or contributes to public confidence in the business activity of the beneficiary.” GAO interprets the purpose of the risk corridors program as such – providing stability and balancing risks among qualified health plans. GAO found that Congress would need to include similar language in its FY2015 appropriation for CMS in order for the agency to make payments for the risk corridors program.

In contrast to GAO, the lawmakers who signed the letter found that HHS has interpreted the term “user fees” incorrectly, as the risk corridors program – according to them – is a payment adjustment system. Congress passed a Continuing Resolution (CR) in mid-September to fund the government at current levels through December 11. When the CR expires, Congress will need to pass another appropriations bill to continue government spending, and if that is done, the bill could be likely to extend into 2015 when the payments for the risk corridor program are finalized.

Background: The risk corridor program is one of three programs that were designed to support competition and create premium stability in the new marketplaces by addressing concerns by health plans that they might attract enrollees with higher than average spending. The risk corridors program, along with the reinsurance program, is temporary and will expire after 2016; the risk adjustment program is permanent. The primary goal of the risk corridors program is to limit losses plans may experience if they inaccurately predict the cost of their newly insured population. Qualified health plans inside the marketplaces are able to receive payments from HHS if their allowable costs (i.e., claims and quality improvement activities) exceed 103 percent of their target amount. However, if an insurer's allowable costs are 97 percent or below the target amount, they must pay HHS a percentage of the difference.

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CMS reopens meaningful use hardship exemption for eligible providers and hospitals

Last Tuesday CMS announced its intention to reopen the hardship exemption application for providers and hospitals for the Meaningful Use program. Eligible professionals and hospitals who apply by the November 30, 2014, deadline may receive a one-year exemption from the Meaningful Use penalties that are scheduled to begin in 2015. Providers must be able to show that they faced hardship in adopting the 2014 edition software for electronic health records due to vendor certification issues and delays. The application must be accompanied by documentation of the hardship.

Reaction: The American Medical Association (AMA) said in a press release that it was pleased CMS has allowed additional time for providers to apply for the hardship exemption. Calling the penalties scheduled to begin in 2015 unfair, the group said that this will allow providers additional time to comply with other reporting mandates they face.

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New York State recovers $879 million from overpayments in Medicaid spending

Last Thursday New York State’s Office of the Medicaid Inspector General (OMIG) reported that in 2013 OMIG recovered $879 million in overpayments in Medicaid spending and saved state taxpayers more than $2 billion. Over the last three years OMIG has begun several initiatives to save the state’s Medicaid program from unnecessary costs through using pre-payment reviews and corporate integrity agreement (CIA) monitoring. CIAs are contracts made between the state and providers with a history of program integrity issues and are an alternative to their exclusion from participating in the Medicaid program. This three-year initiative saved the state an estimated $7.06 billion in Medicaid spending. Some providers were barred from participating in the Medicaid program; 702 providers can no longer submit claims for Medicaid services or work in a business or organization that is health care-oriented and receives Medicaid funding. OMIG also worked with the New York State Attorney General Medicaid Fraud Control Unit (MFCU) to suspend $46 million in provider payments.

Background: MFCUs operate in 49 states and the District of Columbia and are certified by HHS OIG. They investigate and prosecute fraud in the Medicaid program and combat patient abuse and neglect that occurs in facilities. The HHS OIG assesses the performance of MFCUs using 12 performance standards and makes recommendations when improvements are needed. The MFCUs are assessed on a number of criteria, including how well they cooperate with federal authorities on fraud cases, maintain adequate referrals, have an appropriate balance of cases and execute fiscal control over resources.

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Around the Country


Most current Louisiana marketplace enrollees will see rate increases greater than 10 percent

The Louisiana health insurance marketplace will see rate increases for insurers that participated in 2014. Only one insurer proposed a rate increase below 10 percent; all the others will increase premiums by anywhere from 11 percent to more than 19 percent. The ACA requires the Secretary of HHS to review any request for premium rate increases over 10 percent (or greater if a state sets the threshold higher). CMS or the state reviews rates to determine whether a substantial increase is unreasonable, excessive, unjustified, or unfairly discriminatory. Several insurers in Louisiana were denied their initial requests. One originally requested a 24 percent increase, and in its defense of this rate increase, the insurer said that this it was needed because the price of services and utilization have increased, new fees for insurers are required by the ACA, reinsurance payments were decreased and individuals continue to come off of grandfathered plans and enroll in marketplace coverage. In 2014 Louisiana enrolled more than 101,000 individuals in its marketplace that was run by the federal government.

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Building a better breast pump

Last month 150 parents, engineers, designers and health care stakeholders gathered in Boston to improve the breast pump during the "Make the Breast Pump Not Suck" Hackathon. The event, hosted by MIT Media Lab, had several teams competing to make the prototype of the next-generation breast pump.

While the breast pump technology is simple, the logistics of pumping for many working moms are often complex as pumping means stopping all activity and (ideally) heading to a secluded room for up to half an hour, multiple times per day. The competing teams worked to come up with solutions to these common problems.

The winning team created the Mighty Mom utility belt, which turns the breast pump into a hands-free portable device that can be worn under clothes and work while the wearer works. It also automatically logs and analyzes the wearer’s personal data, which may be helpful for moms who want to track how much milk they are pumping and identify supply issues. Other winning teams worked on breastfeeding apps and accessories that make pumping seem more natural and comfortable. The event was supported by breast pump manufacturers, health care organizations and companies that help entrepreneurs finance their ideas.

Analysis: Many employers recognize that allowing working moms to pump breast milk has positive health outcomes for both moms and babies; however, loss of productivity may be a concern for employers and employees, and pumping at work can be challenging for women in certain industries such as retail. Widespread use of a product like the Mighty Mom utility belt and the other winning ideas from the hackathon may offer some solutions and ultimately help increase breastfeeding rates.

Hackathons have become a popular strategy in recent years to generate many innovative ideas to help solve complex problems, using limited resources. While the format was made popular by software developers, other industries such as health care have adopted hackathons as a way to spur innovation.

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Breaking Boundaries


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