Health Care Current: September 20 2016 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current | September 20, 2016
MACRA: Changing the foundation of health care, one brick at a time
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
By Bill Copeland, Vice Chairman, US Life Sciences & Health Care Industry Leader, Deloitte LLP
“Rome wasn’t built in a day, but they were laying bricks every hour.” – John Heywood
I am sure at some point in your career you have heard an exasperated executive rationalize the lack of progress on an important initiative – mostly due to a lack of alignment or inability for the organization to change – and say some version of this quote. And, this is true: Rome, which started as a village in 745 BC, became the center of the world, and by the second century had a population of 1.6 million citizens. It was this way until imperial power was seized by Constantinople in 330 AD, at which point the city began a long decline. Of course, Rome’s history is a story filled with much more real life drama than 100 seasons of Game of Thrones, and it stands today as one of the most beautiful cities in the world.
The health care industry is on a journey of its own, as the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is causing transformative change to its foundation. At the same time, it appears to be creating some frustration around understanding what these changes mean for clinicians and the broader industry.
To get a feel for its impact across the broader industry landscape, the Deloitte Center for Health Solutions recently took a pulse on where health care industry stakeholders are in their progress toward preparing for MACRA. To gauge awareness, preparedness, and perceptions about MACRA, we performed a brief online survey of 61 executives who lead or are key decision-makers with value-based care initiatives at hospital/health systems (health systems heretofore), health plans, and life sciences companies. We found the following:
Many health system respondents understand that MACRA will fundamentally disrupt relationships and aspects of their business:
- Nearly half (45 percent) say that MACRA will be very disruptive to relationships between health systems and physicians.
- More than one-third believe that MACRA will be very disruptive to their organization’s financial model (41 percent) and technology systems (35 percent).
- 72 percent of the respondents expect MACRA to drive down their total margins.
- 38 percent expect total margin losses of greater than 3 percent.
Health plan executives are developing their plans to align with MACRA’s requirements, and some are speeding up value-based care efforts. Yet, many questions remain.
- One in three say that they will speed up their plans for value-based payment arrangements due to MACRA.
- Nearly half (44 percent) of those who have begun planning for MACRA have begun reviewing their contracts with providers to understand how their arrangements align to MACRA’s risk requirements for providers.
- But, fewer (39 percent) have identified strategic areas that their organization can support provider organizations as MACRA is implemented.
Today’s health system infrastructure is built on fee-for-service (FFS) principles and organized around specialty care. This has created silos, with very little data shared with the patients and other health care providers, limited options for patients to consult with their physician outside of the traditional face-to-face visit, and few if any incentives to control cost. And, it has resulted in no real accountability for outcomes.
While MACRA does still rely on FFS to provide payment, it also begins to reconcile accountability to cost and quality and creates the necessary processes to improve sharing information and clinical data. And, while several CMS programs use prepaid methodologies (e.g., capitation, bundles, etc.) to pay health care professionals, in my opinion, there is more to come to make these arrangements a greater share of total payments. Those payments can be more appropriate in paying for services not typically covered but needed to achieve the kind of results required.
Medicare payments to physicians under Part B are only $69.2 billion, representing 16 percent of total spending for Medicare.1 But, the idea that physicians will be scored and that their scores will be available for consumers, employers, and health plans to review should be more than enough to set in motion the rebuilding of a health care system long in need of a renaissance.
That renaissance may already be on its way. In this new phase of health care, the system would be driven more by accountability than financial incentives. It would also:
- Reward effective and efficient providers and emphasize continuous improvement in outcomes and measures.
- Have tools to manage care, engage patients, and track performance that do not exist today; these would become new cornerstones.
- Unlock data and information currently housed in electronic health records, which often are not accessible to providers or patients; this data would be shared, aggregated, and reported to help improve processes and decision making.
- Include a mandate to standardize the definition of data elements so that interoperability can be made possible; tracking patients and providers across health systems, geographies, and health plans would be as ordinary as it is today to use our Social Security number for identification.
- Emphasize virtual care to open access for patients with chronic diseases, who currently comprise 86 percent of the health care costs and where an estimated 28.6 percent of these costs are avoidable.2,3
Recently, the US Centers for Medicare and Medicaid Services (CMS) announced that it will allow clinicians flexibility around MACRA requirements in calendar year 2017. As long as clinicians submit data at some point next year, they will avoid a negative adjustment in 2019 (see the September 13, 2016 Health Care Current). I believe that CMS and many in the health care industry know that this is a fundamental change, and it may take a decade for the benefits to be fully realized. So, a few months delay in organizing a process to submit quality data probably isn’t going to change the course toward which we are headed.
Moreover, our modern health care system is at least a hundred years in the making. MACRA cannot possibly solve all of our challenges in building a more globally competitive and productive health care system. But, I don’t think we need to wait a thousand years.
1 Medicare Payment Advisory Committee (MedPAC), “Report to the Congress: Medicare Payment Policy,” March 2016, http://medpac.gov/docs/default-source/reports/chapter-4-physician-and-other-health-professional-services-march-2016-report-.pdf?sfvrsn=0
2 US Centers for Disease Prevention and Control, “Chronic Diseases: The Leading Causes of Death and Disability in the United States,” February 23, 2016, http://www.cdc.gov/chronicdisease/overview/
3 Francois de Brantes, Amita Rastogi, and Michael Painter, Health Services Research, “Reducing Potentially Avoidable Complications in Patients with Chronic Diseases: The Prometheus Payment Approach,” 2010
Implementation & Adoption
Shared savings contracts between insurers and physician practices can save costs
A recent study published in the American Journal of Managed Care found that Cigna’s Collaborative Accountable Care (CAC) initiative saved 5.7 percent in spending per patient on average after the second year of the program. Through the CAC initiative, Cigna gives practices an upfront care coordination fee in addition to normal FFS payments to pay for investments in infrastructure.
The researchers analyzed health care spending by looking at historical claims data before and after the program began and by comparing spending on patients in other practices in the same region. Spending did not change significantly between 2009 and 2010, but fell by $236.13 for patients in the CAC program per six-month period from 2009 to 2011. The average overall net savings per six-month period from 2010 to 2011 was $106.25 (or 5.7 percent).
The researchers did not look at changes in the quality of care after CAC implementation. However, the clinics received a payout from the initiative, which the researchers say indicates that they met the quality criteria in the contract. Other initiatives that partner between physician groups and large insurers, like the Blue Cross Blue Shield Alternative Quality Contract, have also found a reduction in costs and improved quality of care.
(Source: Ho et al. “Measuring the Cost Implications of the Collaborative Accountable Care Initiative in Texas,” American Journal of Managed Care, September 2016)
Medicare Advantage growth associated with slower FFS spending growth
Medicare Advantage (MA) enrollment growth may have contributed to slower spending growth in FFS Medicare, according to a recent report published in Health Affairs. Researchers used data from counties with the largest MA growth to test whether higher MA enrollment was associated with lower FFS spending.
Nearly three-quarters of US counties saw at least a five-percentage point increase in MA penetration (enrollment in MA as a percent of the total Medicare population) between 2007 and 2014. At the same time, cost growth for FFS beneficiaries fell. Researchers found that counties with the largest increase in MA penetration had a $154.20 decrease in annual Medicare FFS costs per capita.
The authors say that these findings suggest that MA health plans’ use of cost containment strategies, such as tailored provider networks and prior authorization, may spill over on Medicare FFS spending and contribute to overall savings in Medicare.
(Source: Johnson et al. “Recent Growth In Medicare Advantage Enrollment Associated With Decreased Fee-For-Service Spending In Certain US Counties,” Health Affairs, September 2016)
Report: The US needs a national caregiver strategy
The National Academies of Sciences, Engineering, and Medicine recently recommended policies and practices to support impact family caregivers. The report also said that the US needs a national strategy to reduce the financial burden on caregivers of assisting older family members. The rapidly aging US population is increasing the demand for caregivers, as many older adults have physical, cognitive, and other functional limitations.
One recommendation from the group was to use payment, coverage, and delivery reform to encourage providers to actively engage with caregivers. Many examples already exist: Some current programs encourage home-based care in an effort to improve the quality of life for seniors. CMS also requires as a condition of participation that hospitals involve family caregivers in the discharge planning process.
Related: Deloitte’s 2016 Survey of US Health Care Consumers found that former and current caregivers are more likely to be interested in using technology-enabled health care. Current and former caregivers are more likely to use telemedicine and remote monitoring technology than non-caregivers. However, caregivers reported a higher interest in using technology rather than the use of technology itself.
(Source: Schulz & Eden, “Families Caring for an Aging America,” National Academies of Sciences, Engineering and Medicine, 2016)
Individuals in consumer-driven health plans use fewer medical services
Enrollment in consumer-driven health plans (CDHPs) – high-deductible plans meant to reduce use of unnecessary care and spending – has steadily increased in recent years, growing from 15 percent in 2010 to 27 percent in 2014. This is according to a study by the Health Care Cost Institute, which compared spending and utilization between people in CDHPs and non-CDHPs. People with CDHPs have higher out-pocket-costs than non-CDHPs, and overall spending was lower. In 2014, overall per-capita spending for non-CDHPs was $659 on average higher than that for CDHPs ($5,140 vs. $4,481).
Consumers in CDHPs used 10 percent fewer medical services than people in non-CDHPs. Differences in prescription use, especially for brand-name prescriptions, were even greater. A larger percentage of people in non-CDHPs were non-utilizers – they did not file any claims – compared with people in CDHPs. In 2014, 28 percent of people in non-CDHPs were non-utilizers, compared with 25 percent of people with CDHPs. This difference was largest for young adults: In 2014, 38 percent of people age 19 to 25 in CDHPs did not file a claim, compared with 46 percent of people in the same age group who had non-CDHPs.
The study did not look at whether the lower use of services by people with CDHPs was for necessary or unnecessary services. It also did not control for differences in health status or insurance risk between the two groups.
(Source: Health Care Cost Institute, “Consumer Driven Health Plans: A Cost and Utilization Analysis,” September 2016)
Census: Young adults have had the greatest gains in health insurance coverage
The US Census Bureau released 2015 data from the American Community Survey, which found that the uninsured rate decreased 1.3 percentage points between 2014 and 2015. In 2015, the percentage of people without health insurance coverage was 9.1 percent, compared with 10.4 percent in 2014. Moreover, the uninsured rate of young adults declined by 2.6 percentage points, almost twice as much.
Over the past five years, coverage of young adults has increased dramatically. In 2010, young adults were the age group most likely to be uninsured. Roughly one-third did not have health insurance coverage that year. A main factor driving the sharp decline is the Affordable Care Act (ACA), which changed the law to allow people age 26 and younger to be covered under their parents’ health insurance.
(Source: 2015 American Community Survey, US Census Bureau, September 2016)
On the Hill & In the Courts
CCIIO: 2015 risk corridors contributions to go toward 2014 obligations
In early September, the CMS Center for Consumer Information and Insurance Oversight (CCIIO) announced that it will use all 2015 collections for the risk corridors program to pay the remaining balance due to health plans for the 2014 year. No funds will be available for risk corridor payments for the 2015 benefit year.
The risk corridors program, established as one of the three premium stabilization programs in the ACA, is a temporary program that expires after this year. It is intended to keep premium rates stable as health plans adjust to the new population in the public health insurance exchanges. It was modeled after a similar program in Medicare Part D. The US Department of Health and Human Services (HHS) collects charges from health plans if their premiums are above a certain level of their costs and makes payments to health plans if premiums fall short of their costs.
While the ACA did not require the program to be budget neutral, Congress has not approved additional funding to cover the outstanding payments. Health plans’ claims were $2.87 billion in 2014, but HHS collected only $352 million in contributions that year. Thus, HHS paid only 12.6 percent of program claims in 2014. Since there are still outstanding balances from 2014, HHS will give the funding it has to issuers for the 2014 claims amounts.
CMS also announced that as with last year, program charges will be collected in November and payments will be made in December. CCIIO added that it is obligated to make full payments to health plans under the program and remains committed to working with Congress to explore additional sources of funding to fulfill this obligation.
FDA proposes updates to third-party review organization applications and process
Last week, the US Food and Drug Administration (FDA) updated its draft guidance on premarket notifications through the 510(k) review program, known as third-party (TP) review process. The guidance will help align the TP review process with requirements under the Medical Device Single Audit Program (MDSAP) from the International Medical Device Regulators Forum (IMDRF). The IMDRF is a global pilot program that brings together medical device regulatory agencies from multiple countries to help accelerate interoperability and innovation in the medical device industry.
The FDA independently accredits TP organizations to review premarket notifications for low- to moderate-risk medical devices in premarket submission. The TP can then either recommend an initial classification of the device or submit it to the agency for a more substantive review. The FDA, after reviewing the TP organization’s materials, makes a final decision. The TP review program allows the agency to focus on higher-risk or more structurally complex devices. The new guidance updates the process and criteria by which an organization can be accredited as a TP reviewer in order to better align with IMDRF standards. The FDA outlines changes to the format in which potential TP review organizations should submit their applications.
The guidance also suggests an updated pathway for accredited TP review organizations to review 501(k) submissions. The FDA is seeking industry and stakeholder input on the proposed changes.
CBO: Hospitals margins will likely decline without increases in productivity and reduced costs
As described in a new working paper, analysis by the Congressional Budget Office (CBO) found that changes in payment rates established by the ACA combined with a larger population covered by insurance could cause more acute care hospitals to have negative profit margins by 2025.
CBO looked at the impact of various policies on hospital margins. One scenario projected the effects of the ACA and other policies that reduced hospital payments (e.g., payment cuts due to sequestration, penalties under the EHR program, changes required under MACRA). Under this scenario, CBO modeled how improvements in productivity could improve hospital margins:
CBO recommends that hospitals increase their productivity to keep up with the overall economy. However, historical annual productivity growth for acute care hospitals has been slow. The average increase in productivity has ranged from 0.3 percent to 0.6 percent between 1996 and 2005, compared with that of the general economy at 1.5 percent on average during the same period. To hold profit margins at 6.0 percent in 2025, CBO suggests that hospitals would have to increase revenue and reduce costs by 0.2 percent per year, while keeping productivity growth even with that of the overall economy.
CBO says that this analysis highlights that additional research is needed to understand hospital productivity, what factors contribute to productivity growth, and how hospitals respond to financial pressure. Further research is also needed on how hospital profit margins are measured. CBO said that the data used to conduct this research indicates that, even with negative profit margins, hospitals can remain operational for multiple years. Finally, CBO raises the questions of how the adoption of new payment models will impact hospitals.
(Source: Hayford, T., Nelson, L. “Projecting Hospitals’ Profit Margins Under Several Illustrative Scenarios: Working Paper 2016-04” Congressional Budget Office, September 8, 2016)
A new report from the Government Accountability Office (GAO) examined how satisfied public health exchange beneficiaries were with their health insurance coverage. Researchers looked at data from national surveys, including the Deloitte Center for Health Solutions’ 2015 and 2016 Surveys of US Health Care Consumers, as well as data from CMS, the Commonwealth Fund, PerryUndem, the Urban Institute, and the Kaiser Family Foundation. The GAO says that most surveys found enrollees are satisfied with their health plans overall. Specific findings include:
The GAO identified several areas for improvement, including focusing on enrollees’ concerns about high deductibles and plan terminology, which can be confusing and deter them from seeking care. GAO suggested that stakeholders should do a better job of keeping track of exchange enrollees after they enroll, possibly getting help from the existing work force of the navigators and assisters who facilitated their enrollment.
(Source: GAO, “Most Enrollees Reported Satisfaction with Their Health Plans, Although Some Concerns Exist,” September 12, 2016)
GAO report: Part D generic prices have decreased significantly since 2010
A new report from the GAO found that prices for generic drugs covered in Medicare Part D have decreased since 2010 overall, even as some drugs had large price increases. The 2,378 unique generic drugs in Part D between 2010 and 2015, including ones that came into or left the market, saw an aggregate price decrease of 59 percent. The established “basket” of 1,441 drugs – ones that were present for the entire five year period of analysis – had an overall price decrease of 14 percent.
315 established drugs had price increases of at least 100 percent from 2010-2015. Out of those 315 drugs, 63 increased in price by 500 percent or more. Nearly all (98 percent) of the drugs maintained that higher price for more than one year. However, the prices for most did not continue to rise steadily, but generally stabilized. GAO found that most of the generic drugs with large price increases were not among the 100 most common drugs in Medicare Part D.
The industry stakeholders interviewed by GAO, which included pharmaceutical manufacturers and pharmacy associations, said that competition is the single greatest factor influencing generic drug prices. According to the report, generic drug prices will continue to decrease as long as new manufacturers and life sciences industries continue to enter the market.
(Source: GAO, “Part D Generic Drug Prices Declined Overall, but Some Had Extraordinary Price Increases,” September 12, 2016)
Around the Country
Report: State Innovation Models leading to greater value-based payment adoption and improved health management, but results are early
A CMS evaluation of the State Innovation Model (SIM) found that Round 1 of the initiative may be improving care coordination and population health management and increasing use of value-based payment. The independent report by RTI International evaluates whether the SIM initiative in the Round 1 states – Arkansas, Massachusetts, Maine, Minnesota, Oregon, and Vermont – is accelerating adoption of value-based payment models.
The evaluation found:
- Arkansas: The state Medicaid program started sharing savings with patient-centered medical homes (PCMHs) that cover 5,000 or more Medicaid beneficiaries if they achieve cost savings and quality improvement. Two private health plans in the state plan to begin sharing savings with PCMHs beginning in 2016.
- Massachusetts: Researchers found a significant decrease in emergency department (ED) visits in the commercial population after implementation.
- Maine: The state made significant progress in developing and implementing delivery system and payment reform models. The state improved on several outcome measures, including care coordination, quality of care, health care utilization, and cost.
- Minnesota: The state expanded investment in health care homes, integrated health partnerships, and accountable communities for health. Early performance on care coordination, quality of care, health care utilization, and cost measures under the initiative is mixed, but some results suggest promise.
- Oregon: In the last year, Oregon extended its coordinated care model to include state employees and families who are covered by the Public Employees Benefit Board (PEBB). The state aims to extend CCM into the Oregon Educators Benefit Board (OEBB). Anecdotal evidence suggests the model has improved care coordination and access, but results on health care utilization, spending, and quality will come later.
- Vermont: The state used SIM funding to focus on developing supports for the Medicaid Accountable Care Organization Shared Savings Program. The early results so far are mixed.
The SIM Initiative, which began in 2013, is based on the assumption that better coordinated and more accountable care leads to smarter spending and healthier people. Through the program, CMS provides 38 states, territories and DC with grant funding to test ways to transform health care. The six states in the first round of the initiative used a wide range of strategies to experiment with new health care delivery and payment models.
It is too early to quantify how the SIM Initiative has impacted outcomes, cost, and quality. Despite evidence that states are making progress on outcome measures, such as decreases in ED visits and inpatient readmissions, some improvement efforts pre-date SIM funding, and future evaluations with quantitative analysis will be needed to assess the direct effect of the SIM Initiative.
(Source: RTI International, “State Innovation Models (SIM) Initiative evaluation: Model test year two annual report,” September 2016)
Hospitals in most states are cutting preventable hospital readmissions
In a recent blog post, CMS said that new data show 49 states and the District of Columbia have lower hospital readmission rates for Medicare enrollees than in 2010. The Hospital Readmissions Reduction Program (HRRP), established by the ACA, was partially responsible for the decline, according to the blog.
Avoidable hospital readmissions (returning to the hospital within 30 days of being discharged because of a related issue) are often used to measure poor quality care. Latest estimates indicate that roughly $17 billion in Medicare spending annually is due to preventable readmissions. The HRRP encourages better discharge practices and follow-up processes.
The recently released data indicates that the program is reducing readmissions: Between 2010 and 2015, readmission rates fell by 8 percent nationally. In nearly a dozen states, the rate dropped by more than 10 percent.
Public-private partnership is working to combat antimicrobial resistance
Antibiotic resistance has become one of our greatest public health threats. Antibiotics that were once effective have been used so widely and for so long that many of the pathogens have adapted, making the drugs less effective. The US Centers for Disease Control and Prevention (CDC) reports that at least 2 million people in the US become infected with antibiotic-resistant bacteria, and at least 23,000 people die each year as a direct result.
HHS is joining with partners in the UK and Boston to create one of the largest public-private partnerships focused on discovery and development of new antimicrobial products. The partnership – a cooperative agreement – aims to promote innovation and provide hundreds of millions of dollars over five years to increase the number of antibiotics in the drug-development pipeline. The Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, or CARB-X, has the potential to reduce the business risk of developing innovative new drugs, with the goal of spurring private sector investment.
The Biomedical Advanced Research and Development Authority (BARDA), which is part of HHS, and the National Institutes of Health’s National Institute of Allergy and Infectious Diseases (NIAID) also collaborate and provide funding. Massachusetts Biotechnology Council in Cambridge, Massachusetts (MassBio), and the California Life Sciences Institute (CLSI) of South San Francisco, California will support early-stage antibiotic development projects. CARB-X will provide funding for research and development and offer technical assistance for companies with innovative and promising solutions to antibiotic resistance. Beginning this month, CARB-X is accepting applications for funding support.
Related: In related news, scientists are discovering clues from the human immune system that may aid in antibiotic development. Earlier this summer, researchers in Germany discovered that a bacteria commonly found in our nasal passages, Staphylococcus lugdunensis, produces a chemical called lugdunin that kills other bacteria and is not prone to developing resistance. The team pointed out that this discovery is significant because few compounds are in development – and those that are come from existing antibiotics. While many of today’s antibiotics come from soil microbes, the human body hasn't fully been explored for its microbiota, which could protect against pathogens.
The partnership and new discovery is timely given that new antibiotic resistant bacteria are being discovered in the US every year. A lack of effective antibiotics could mean that common procedures considered low risk such as giving birth or routine surgery, could become vulnerable to life-threatening infections.
(Source: HHS, “HHS forges unprecedented partnership to combat antimicrobial resistance,” July 28, 2016)