In an era of exponentials, health care is on the cusp of a potential major transformation

Health Care Current | October 3, 2017

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

In an era of exponentials, health care is on the cusp of a potential major transformation

By Sarah Thomas, managing director, Center for Health Solutions, Deloitte Services LP

Today kicks off National Health IT week, where organizations across the health care ecosystem come together to discuss the importance of health IT from a policy, clinical, and patient-centered perspective. As we look to move the ball forward with health IT, we’re closely watching exponential technologies and their potential power to transform the industry.

Exponential technologies have the potential to render the health care sector unrecognizable in a relatively short amount of time. Artificial intelligence (AI), robotics, 3D printing, and synthetic biology all have the ability to potentially dramatically disrupt the systems and processes that have historically defined the health care industry. Along with preparing for the industry’s imminent changes, stakeholders should consider getting on a path that allows them to take advantage of exponentials.

The idea of exponential growth goes back to 1965 when Intel co-founder Gordon Moore noted that the number of transistors per square inch on integrated circuits had doubled about every year since their invention.1 He predicted the trend would continue, and it has. This is now known as Moore’s Law. And as technology advances, costs plummet – which follows the Law of Accelerating Returns, a term coined by futurist Ray Kurzweil.2

How does this translate to health care? Consider this: Beginning in 1999, scientists spent five months and approximately $300 million to generate the first initial “draft” of a human genome sequence. The cost to generate a human genome sequence is now less than $1,000, according to National Institutes of Health’s National Human Genome Research Institute.3 It could eventually drop to less than $1.

Convergence of exponentials could accelerate change
Exponentials have already transformed many other industries, changing the way consumers interact with the world. Some industries have been long resistant to change. This gives us some insight into how exponentials might impact health care.

Video streaming services, for example, quickly and fundamentally altered the way we consume television and movies. Not long ago, our viewing options were limited to programs broadcast by three national television networks. The networks determined what we could watch and when. That experience can now be highly personalized. The use of basic algorithms allow us to view the content we want, when we want it, and how we want it. We might watch a show at home while sitting on the couch, or through a smartphone while crammed into the middle seat on an airplane. Similarly, ride-sharing services took on the world of taxis and reinvented ground transportation by making it much more convenient.

A high level of personalization is now expected for all types of goods and services…including health care. Moreover, as individual exponentials combine with others, the convergences push technology ahead even more quickly. Competitors might not be hindered by established systems and may be able to detect and capitalize on technology-driven disruptors more quickly than incumbents.

During a recent Deloitte Dbriefs webcast, we asked our 1,677 participants which technologies – synthetic biology and nanotechnology, additive manufacturing, genomics and proteomics, or a convergence of multiple technologies – presented the biggest opportunity for life sciences. About 30 percent of participants predicted it would be a combination of these technologies.

Stakeholders should prepare for a changing world and new competitors
Many disruptions in other industries have altered consumer expectations and have helped give oxygen to new entrants and to competitors from different industries. Many entrepreneurs and health care consumers are asking fundamental questions about why the patient experience isn’t more personalized, and why the system isn’t more convenient. Why do patients have to go a centralized location to see a doctor? Why can’t the health plan, the hospital, and the doctors all agree to prices and a payment model before the patient gets involved?

These are questions that stakeholders should consider addressing if they hope to preserve and grow their existing customer relationships. In industries where disruptive transitions or transformations have occurred, incumbent companies have tended to over value their existing customer relationships with customers. They typically also consider themselves to be better prepared than they actually are.

At the same time, start-ups, entrepreneurs, and other new entrants to a market often underestimate how difficult it is to acquire a customer. However, if these new entrants are able to create a better customer experience, or convince people to try something new, they can grow quickly.

Here are three areas where exponentials already are beginning to help reshape our industry:

  • Synthetic biology: Synthetic biology and the ability to create DNA, genomics, and proteomics are advancing rapidly. Applications for life sciences companies are phenomenal, particularly when you consider how these technologies could be combined with others such as cognitive computing and artificial intelligence.
  • 3D printing and nanotechnology: Once you understand DNA sequencing at a detailed level, you reach a point where you can print actual tissue. There are people walking around today who have at least one ear that was printed. Through nanotechnology, innovators could develop a customized white blood cell that is specifically designed to hunt down and attack cancer cells at a molecular level.
  • Genetics: Based on our understanding of genomes, we know that some drugs are more effective for some populations than others. When we sub-segment those populations even further, we eventually get to a market where you know exactly how to treat an illness. We could get to a point where we can predict and prevent future illnesses. Genomic testing is quickly becoming another point-of-care tool.

There is no doubt that change is coming to health care – and exponentials are helping drive it. The ability to innovate is important for all health care stakeholders. As exponentials advance, they will likely either collide or come together to create disruptive opportunities for both incumbent players and newcomers.

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In the news

Most HSA have balances to roll over at year end

According to new research from the Employee Benefit Research Institute (EBRI), 90 percent of health savings accounts (HSAs) had funds from either employees or employers that could roll over at the end of 2016.

Based on an analysis of 5.5 million HSAs – with collective assets of $11.3 billion as of December 31, 2016 – EBRI found that HSAs are a significant part of employment-based health benefit programs, perhaps due to the growing use of high-deductible health plans (HDHPs). At the end of 2016, the average HSA balance was $2,532, up from $1,604 at the beginning of the year.

Related: The Deloitte Center of Health Solutions recently looked at the state of HSAs in the employer, Medicaid, and individual markets. Our research, which focused on the “young invincible population” concluded that a 27-year-old with an HDHP would need to have an HSA balance of between $3,617 and $6,572 to cover the cost of the average outpatient hospital visit in the five markets examined. However, the average 25- to 34-year-old HSA holder in the group market had a balance of only $1,414.

(Source: Paul Fronstin, “Health Savings Account Balances, Contributions, Distributions, and Other Vital Statistics, 2016: Statistics from the EBRI HSA Database,” Employee Benefit Research Institute September 2017)

Senate passes CHRONIC bill

The Senate unanimously passed the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act of 2017. The bill would extended the Medicare Independence at Home demonstration, permanently authorize Medicare Advantage (MA) special needs plans (SNPs), and expand the use of telehealth services and accountable care organizations (see the May 22, 2017 A view from the Center blog).

The bill aims to make Medicare more efficient. More than 90 percent of each Medicare dollar goes toward caring for seniors who have two or more chronic conditions, Sen. Ron Wyden (D-Oregon) said in a statement prior to the vote.

The bill now heads to the House for review.

Federal funding for CHIP expires without renewal

Funding for the Children’s Health Insurance Program (CHIP), the block grant program that provides health insurance to nearly 9 million children, expired on September 30 (see the September 19, 2017 Health Care Current).

Most states have funds to keep their CHIP programs operating for a few months. The Medicaid and CHIP Payment and Access Commission projected that Arizona, Minnesota, North Carolina, and the District of Columbia will likely run out of CHIP funding by the end of 2017. Twenty-seven states are expected to do the same by March 2018. Only one state – Wyoming – may have enough funds to operate the program through next September.

Closing a program – which might happen without federal funding – could lead states to incur additional costs – for instance, expenses related to notifying families of benefit changes and complying with state laws (see the August 15, 2017 Health Care Current). If they have to close programs, some states could run out of funding earlier than projected.

The national uninsured rate among children in 2016 was 5 percent, according to data released in September by the Kaiser Family Foundation. However, that percentage could rise without CHIP funding.

On September 18, a bipartisan group of senators released a bill to extend funding for CHIP for five years. The House Energy and Commerce Committee announced that it will hold a hearing on the CHIP bill on Wednesday, October 4, 2017.

(Sources: Kaiser Family Foundation, “Key Facts about the Uninsured Population,” September 2017; MACPAC, “Federal CHIP Funding: When Will States Exhaust Allotments?” July 2017)

CMS’s third annual SIM evaluation shows states making progress with Medicaid APMs

Last month, the Center for Medicare and Medicaid Innovation (CMMI) released the third of five planned annual evaluations of its State Innovation Models (SIM) “model test” awardees: Arkansas, Maine, Massachusetts, Minnesota, Oregon, and Vermont. These six states have used SIM funding to augment their own state-led value-based care transformation efforts.

Key findings include:

Background: In February 2013, CMMI awarded nearly $300 million to 25 states to design or test health care payment and service delivery models with the goal of improving care and reducing costs for Medicare, Medicaid, and CHIP beneficiaries and promoting multi-payer alignment. In December 2014, CMMI awarded a second round of funding, totaling more than $660 million, to 32 states (see Deloitte Center for Health Solutions analysis on what states are doing around Medicaid APMs and how those activities align with MACRA).

(Sources: CMS SIM Round 1 and Round 2 Press Releases; CHCS Medicaid ACO Fact Sheet, June 2017; KFF 50-state Medicaid Budget Survey for FY16 and FY17; CMS List of Approved Medicaid Health Home SPAs, December 2016)

FDA announces companies participating in pilot program to speed software as a medical device (SaMD) approval

On September 26, the US Food and Drug Administration (FDA) announced the names of companies participating in the Pre-Cert for Software Pilot Program to help speed approval of medical software. The pilot program, dubbed “Pre-Cert,” launched in July and involves nine tech companies, including Apple Inc. and Fitbit Inc.

The program will pre-certify software developers, rather than certifying each individual product. The FDA will review software design, validation, and maintenance to ensure that companies meet quality requirements.

To participate in the Pre-Cert Pilot Program, companies must:

  1. Plan to develop, or be developing, software that qualifies as a medical device
  2. Have a history of developing software products that meet quality standards
  3. Collect real-world post market data and provide it to the FDA 
  4. Agree to on-site and other meetings with the FDA
  5. Provide information about the firm’s quality management system

The Pre-Cert Pilot Program includes developers with high- and low-risk medical software products. An intracranial device is an example of a high-risk device, while a low-risk device might be a hammer for measuring reflexes. Medical device companies are also participating in the pilot.

The Pre-Cert Pilot Program started as part of the FDA’s Digital Health Innovation Action Plan. The FDA will seek feedback on the program from the selected companies, as well as from other stakeholders and the public. The agency is considering whether to include a pre-market review for products as a part of the program.

ONC changes EHR certification requirements

The Office of the National Coordinator for Health Information Technology (ONC) will loosen certain requirements for electronic health record (EHR) certification, according to a September 21 announcement.

ONC certifies EHR products for use in federal programs such as Medicare and Medicaid. In order for ONC to certify them, EHR vendors must meet certain functional standards.

ONC announced it would:

  • Allow for self-declaration for more than half of the 50 certification criteria that support the Medicare Quality Payment Program (QPP) measures in place of ONC testing and verification
  • No longer require certification bodies to conduct random surveillance of the health IT products they certify

ONC said the changes will allow developers and certification bodies to dedicate more resources to improving interoperability, or information exchange, and meet the broad interoperability requirements of the 21st Century Cures Act. However, some EHR users have expressed concern that vendors will be less accountable after the changes.

OIG: Medicare improperly paid $56 million to hospitals

The Department of Health and Human Services’ Office of Inspector General (OIG) recently announced that Medicare had made improper payments to hospitals for outpatient services, and will require the facilities to repay the funds. The payments totaled $56 million from January 2013 to August 2016.

The improper payments were for Medicare beneficiaries that were inpatients at other types of hospitals. Specifically, the patients were inpatients at long-term care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, and critical access hospitals. According to the OIG, CMS should only make payments to the inpatient facility when beneficiaries have inpatient status and the inpatient facility can pay an outpatient facility if needed. Beneficiaries were also required to pay unnecessary coinsurance and deductibles for their outpatient care, the OIG found.

The OIG found that system edits, programming to catch errors, in Medicare’s Common Working File were not working properly. The OIG recommended CMS:

CMS agreed with the comments and has given contractors information and instructions on preventing this type of incorrect payment. CMS also instructed contractors to educate facilities on when to bill outpatient services to Medicare.

Precision Medicine Initiative includes outreach to overlooked populations

In an effort to collect health data from 1 million Americans, the National Institutes of Health (NIH) has been reaching out to populations that often are left out of medical research. The goal of the “All of Us” research program, part of the Precision Medicine Initiative, is to enable personalized medicine. The NIH hopes the data will allow for increasingly precise diagnostic tests.

A “mobile engagement unit” truck is traveling across the country to reach underserved communities, enroll people, and share their data with the federal government. In September alone, the truck visited Massachusetts, Ohio, and Illinois. The beta phase of the program, which launched in June and includes partnerships with major health care systems, enrolled 2,500 individuals as of early September.

To reach its goal of 1 million enrollees, the NIH has partnered with affiliate centers and health provider organizations. One strategy, for example, is to ask people waiting at a San Diego blood bank if they want to enroll in the NIH study. This model would likely be most effective if participants have some understanding of precision medicine and genomic sequencing.

Background: The All of Us Research Program aims to collect information on lifestyle, the environment, and biometric data from 1 million Americans (see the June 13, 2017 Health Care Current). The program’s goal is to advance understanding of the underlying factors that influence health, and ultimately improve health outcomes.

Online toolkit provides resources to integrate genomics into patient care

The National Human Genome Research Institute launched an online toolkit with more than 100 resources to help nurses and other health professionals integrate genomics into patient care. The goal of the Method for Introducing a New Competency into Nursing Practice (MINC) is to develop, implement, and evaluate one-year of genomic education to help nurses integrate genetics and genomics into practice. The Toolkit reflects nurses’ attitudes, knowledge, and experiences with genomics over the course of that year.

Structured in a question-and-answer format, the Toolkit suggests resources based on the provider’s clinical setting and interests. The interactive website allows nurses to find resources based on their responsibilities, and quickly filter based on type, cost, and audience. Resources include slides, flyers, booklets, PDFs, posters, and online sites. Video testimonials from health providers give examples of how to overcome barriers in implementing personalized care through genomics knowledge.

Breaking Boundaries

For patients with diabetes, innovations in specialty care can help them avoid the ED

At this summer’s annual American Diabetes Association conference, researchers from Brigham and Women’s Hospital and Harvard Medical School reported that diabetes specialty centers work to reduce emergency department (ED) visits from patients with diabetes. Patients with diabetes frequently visit the ED for acute health care services. The Emergency Department Diabetes Rapid-referral Program (EDRP) identifies patients in the ED with acute diabetes needs – but no other reason for hospitalization – and schedules them to see a diabetes specialist within one business day.

In the US, patients with diabetes collectively make 15 million ED visits a year, resulting in costs of approximately $14 billion per year. Hospitalization often follows ED visits, driving the cost of care even higher.

Many patients with diabetes also have depression and other mental health challenges that can be major barriers to self-management, a critical element of successfully managing a chronic condition such as diabetes. Managing the disease requires a daily medical regimen and close attention to diet and other lifestyle factors. Deloitte research found clinical innovation, patient engagement, and financial incentive alignment can improve diabetes care.

The Brigham and Women’s Hospital and Harvard Medical School study included 420 patients who visited their ED for diabetes-related concerns and were not hospitalized. These patients were referred to, and scheduled to follow up with, a diabetes specialty center within the next weekday. The control group consisted of 791 patients who were not referred to the specialty centers. In the year after the index ED visit, 41 percent of patients in the EDRP group had zero revisits to the ED, compared to 25 percent of the control group. Mental disorders accounted for many of the revisits among the patients who returned to the ED most often. After the intervention was in place, high-frequency return patients had fewer admissions to the hospital compared to the control group.

The researchers plan to replicate the findings in other settings. This study was conducted at a large academic medical center with primarily African American patients who had government-assisted health insurance. The researchers would like to see if similar results can be found in community hospitals and among different patient populations.

Analysis: The prevalence of diabetes continues to increase in the US, and is a significant financial burden for patients, employers, and the health care system. Emerging technologies are helping patients track and manage the condition. Innovators, for example, are working on sensors that can measure blood glucose levels through sweat, which would allow patients to forego the invasive finger stick. In the future, a patch or tiny wearable might monitor levels and release the appropriate level of medication. These technologies may be able to send information to the smartphone, allowing seamless data flow on the condition to the patient and clinician. And while treatment innovations are critical, preventing diabetes through improved education campaigns and online programs are also continuing to evolve.

In the meantime, almost one quarter of hospitalized patients have diabetes. A recent study featured in the journal Clinical Diabetes and Endocrinology shows that patients with diabetes have higher early readmission rates (admissions in the first several days after getting out of the hospital) compared to the general population. In both ambulatory and inpatient settings, strategies to improve care delivery and outcomes are needed. Findings like the ones presented at the conference that show specialty centers are working to improve outcomes could help further advance ambulatory care that focuses on patients with diabetes and their needs, helps prevent unnecessary hospitalization, reduces health care expenses, and improves health outcomes for patients.

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