Health Care Current: September 29, 2015

Collaboration and innovation: Ending the 17-year “valley of death” in getting treatments to patients

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.

Collaboration and innovation: Ending the 17-year “valley of death” in getting treatments to patients

Today, it typically takes 17 or more years to get from the basic science stage to commercializing and introducing a new clinical product into the market.1 Innovation can be complex, but for many patients and families, this is just too long.

Many stakeholders are trying to get out of this 17-year “valley of death” – federal agencies charged with protecting and improving public health, private industry facing multiple challenges in research and development (R&D) productivity, nonprofit advocacy organizations who represent patients, and many others in the research and academic community.

There are many hurdles keeping these stakeholders from speeding the process of “bench-to-bedside.” These include finding strategies to do more effective evaluation of the science, more effectively disseminate research and train the workforce, improving stakeholder connectedness and partnerships, and using “big data” to generate evidence and inform decision-making.

What will it take to overcome these hurdles and climb out of the 17-year valley of death? How can we speed translational medicine (the process of taking an observation in the laboratory to the commercialization of a product that can improve the health of individuals and the public)? Organizations are using four key accelerator areas to achieve milestones and success stories:

One example of an organization that is working with partners to move the needle is the Crohn’s and Colitis Foundation of America (CCFA). CCFA has a goal to overcome the research problem that information about patients with inflammatory bowel disease (IBD) is stored in disparate locations, which limits the ability to access information across study cohorts. To address this issue and to accelerate discoveries and improve patient care, CCFA aims to develop a large IBD Research Database that will create an interconnected collection of patient information, biosamples, and derived multi-omic data (genomic, proteomic, metabolomic) to advance the understanding of IBD. With funding from the Helmsley Charitable Trust to launch the initiative, CCFA and Deloitte are designing, building, and implementing a patient registry. Key stakeholders interviewed academic researchers, clinicians, industry, and patient stakeholders to understand the needs of the respective communities and define user requirements and the technical design of the registry. CCFA now has a roadmap that will help provide investigators with access to resources needed to support their research, enable sharing of knowledge rapidly, promote collaboration among academia and industry, and serve as an educational venue for clinicians, researchers, and patients with IBD.

In another example, the National Heart, Lung, and Blood Institute (NHLBI) is working to accelerate the commercialization of biomedical technologies. NHLBI seeks to foster public and private relationships by allocating funds to technology development programs housed in academic consortiums across the US. The NHLBI established the National Centers for Accelerated Innovations (NCAI) program, among similar initiatives, which consists of three academic consortia “Centers” to facilitate the translation of early-stage biomedical technologies.

NHLBI has created grants that enable innovators to form relationships with industry and strategic partners and perform additional R&D activities in order to take the product they have developed to market. Innovators are linked with resources to enable commercialization, including expertise from government agencies to avoid regulatory complications and get help in filing for intellectual property rights. The NCAI program also connects innovators with industry representatives and venture capitalists to assist them in preparing a strong business and marketing plan and raising additional rounds of capital. NHLBI is connecting the many facets of this complex process through the translational medicine ecosystem.

I am confident that there is a way out of the 17-year valley of death. The 21st Century Cures Act, which passed in the House this spring and may be up for vote in the Senate this fall, and the President’s Precision Medicine initiative announced at the start of the year, offer encouraging signs that there will be mechanisms in place to enable industry to capitalize on these accelerators.

The President has included $215 million in the proposed FY2016 budget for the Precision Medicine initiative. Long-term objectives of that initiative are focused on building a large research cohort for longitudinal studies, and ensuring regulations are appropriate to facilitate sharing of patient data (especially genomic data) across institutions and agencies. Ultimately, the goal is to get more targeted treatments for a variety of diseases to patients faster. While few details have been decided on at this early stage, collaboration among government, academic, and commercial entities – players in the translational medicine ecosystem – will be essential to its success.

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PS – Translational medicine was the topic of a recent Deloitte State & Federal Government Dbriefs. You can view the archive of “Translational medicine: Using data and discovery to improve patient delivery and enhance outcomes” on our website.

1 Duke Translational Medicine Institute, Translational Medicine at Duke:

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My Take

By Terri Cooper, PhD, Principal, Federal Health Sector Leader, Deloitte Consulting LLP


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HHS: 10.5 million uninsured qualify for exchange coverage

Last week, US Department of Health and Human Services (HHS) Secretary Sylvia Burwell said that the agency aims to enroll the approximately 10.5 million uninsured individuals who are eligible for health insurance exchange (HIX) coverage in 2016. This announcement comes approximately one month before the 2016 open enrollment period, which runs from November 1, 2015 through January 31, 2016.

Approximately 17.6 million individuals have gained coverage through the Affordable Care Act (ACA) as of mid-August. This includes new Medicaid enrollees, young adults who can remain on their parents’ insurance until age 26, and individuals who enrolled in HIX plans. The 10.5 million uninsured are a hard-to-reach population. In general, they are young – nearly half are between age 18 and 34 – and have low incomes (40 percent have incomes between 139 and 250 percent of the federal poverty level). More than one-third of the group falls into a minority group. This year, HHS will target five areas with high uninsured rates: Dallas, Houston, northern New Jersey, Chicago, and Miami.

Findings from the Deloitte Center for Health Solutions 2015 Survey of US Health Care Consumers highlight some differences between the HIX population and individuals with other types of coverage. Compared to individuals with employer, Medicaid, or Medicare coverage, HIX enrollees are more cost-conscious, price sensitive, and focused on finding a plan that offers good value and fit. Understanding these differences is key to knowing how to engage and equip this new group of health care consumers, especially as states and exchanges strive to retain HIX customers and prepare for subsequent waves of enrollees.

Related: The Commonwealth Fund recently reviewed how four states are operating their HIX in partnership with the federal government. Idaho, Nevada, New Mexico, and Oregon have all established state-based exchanges and operate them with eligibility and enrollment support from These federally supported state-based exchanges have different financial, governance, and outreach models. These states have been able to avoid the most complex aspect of operating their own exchange by using the federal eligibility and enrollment system. It has kept their organizations lean and allowed them to focus on other priorities. The partnership model also allows those states to maintain authority over policy decisions and management affecting participating health plans. Going forward, partnership states are likely to request more flexible technology options. Customer enrollment experience, Medicaid system integration, and timely access to data are core issues facing these states.

(Source: HHS, “Secretary Burwell previews third Open Enrollment,” September 22, 2015; Justin Giovannelli and Kevin Lucia, Commonwealth Fund, “The Experiences of State-Run Marketplaces That Use,” September 17, 2015)

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Implementation & Adoption

CMS: Medicare Advantage premiums to decrease in 2016

Last week, the US Centers for Medicare and Medicaid Services (CMS) announced that Medicare Advantage premiums will decrease from $32.91 this year to $32.50 on average across the US. About 59 percent of enrollees will see no increase in their premiums. As a result, the agency expects enrollment in the MA program to continue increasing. This announcement came shortly after CMS said that MA enrollment grew 7 percent over last year, reaching an all-time high of 17.7 million (see the September 22, 2015 Health Care Current). CMS highlighted some accomplishments of the MA program since the ACA passed in 2010.

CMS has had several priorities for improving the MA program. Enrollment growth and cost containment within the MA program are part of a greater effort by CMS to provide more transparency, higher value, and better quality care to Medicare beneficiaries. CMS emphasized that MA plans must provide enrollees with updated information on networks and provider directories, which will help beneficiaries access care when they need it. CMS aims to ensure that beneficiaries can access high quality plans by strengthening the accuracy and evaluation of plans’ performance. Finally, the CMS Innovation Center recently announced a program that will evaluate value-based payment models within MA to determine whether these models improve health outcomes and lower expenditures (see the September 15, 2015 Health Care Current).

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KFF: Employer-sponsored insurance sees rising out-of-pocket costs

Last week, the Kaiser Family Foundation (KFF) and Health Research & Educational Trust (HRET) published findings from the 2015 Employer Health Benefits Survey. It found that average premiums for employer-sponsored insurance (ESI) have increased 4 percent over the last year. For individuals, the average premium is $6,251, and the average premium for family coverage reached $17,545.

The average deductible for individuals covered by a plan with a deductible is $1,318, but that average differs by plan type. Individuals in high-deductible health plans (defined as a plan that has a deductible of $1,000 or that qualifies individuals for health savings accounts) have average deductibles of $2,099, and HMO plan deductibles reached an average of $1,025 in 2015. Individuals with preferred provider organization (PPO) plans have the lowest average at $958. The survey highlighted several trends in ESI coverage.

Analysis: Last week, Sarah Thomas, Research Director of the Deloitte Center for Health Solutions, highlighted that findings from the Deloitte Center for Health Solutions 2015 Survey of US Employers suggest that many employers are reconsidering their health benefit strategies. One way they are doing this is through private exchanges (PIX)—online marketplaces that allow employers to shift health insurance coverage away from a defined benefit to a defined contribution. PIXs present employees with a range of benefit packages (and sometimes plan sponsors). Employers make a fixed contribution, so employees spend less of their own money if they choose a plan with a lower premium and more if they choose a plan with a higher premium.

While most employers began using private exchanges for their retired population, many are considering expanding private exchanges to their active employees. One finding from the KFF/HRET survey may help explain this trend. In 1999, employers contributed an average $1,878 toward the cost of coverage for an individual. Employer contributions have nearly tripled since, growing to an average of $5,179 per worker in 2015. Still, employees have shouldered much of the cost growth, with average premium contributions growing from $318 per year in 1999 to $1,071 in 2015.

(Source: Kaiser Family Foundation & Health Research & Educational Trust, “2015 Employer Health Benefits Survey,” September 22, 2015)

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ONC: Nearly three-quarters of office-based physicians have adopted certified EHR technology

Earlier this month, the Office of the National Coordinator for Health Information Technology (ONC) released a data brief that found that 74 percent of office-based physicians had adopted a certified electronic health record (EHR) system by 2014. Overall, more than eight in 10 physicians have adopted any EHR.

The data came from the National Electronic Health Record Survey (NEHRS), which assesses whether office-based physicians have adopted a certified EHR, Basic EHR, or any EHR. Certified EHRs must meet the criteria for the Meaningful Use program. Basic EHRs must have certain functions, such as computerized prescription order entry and onscreen display of laboratory or imaging results.

The survey indicated that most physicians use certified EHR technology regardless of their participation in the Medicare and Medicaid EHR Incentive Programs. Forty-seven percent of physicians who said they do not plan on participating in the incentive programs use certified EHR technology. However, EHR adoption varies based on specialty. Primary care physicians (PCPs) report the largest adoption rate of certified EHR technology (79 percent) and roughly 56 percent of PCPs use all functions of Basic EHRs. However, less than half of medical and surgical specialists indicated they used all of their EHR functions. The difference in EHR utilization by specialty may indicate that some EHR functions work better for certain physicians and may not apply to the broader physician community.

Office setting also impacts EHR adoption rates. The majority (98 percent) of physicians in community health centers had adopted any EHR in 2014. Physicians in physician- or group-owned practices had the lowest adoption rate at 79 percent.

(Source: Office of the National Coordinator for Health Information Technology, “Any, Certified, and Basic: Quantifying Physician EHR Adoption through 2014,” September 2015)

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Study: US stakeholders have been slow to adopt risk-sharing agreements

A study published in the American Journal of Managed Care examines trends in risk-sharing agreements (RSAs) between US health plans and drug manufacturers. RSAs link coverage and payment to a medical product’s performance or consumers’ utilization of a product.

In their review of the University of Washington’s Performance-Based Risk-Sharing (PBRS) Database, the researchers found that out of 148 RSAs in the last 20 years, 18 were based in the US. A majority (11) of those RSAs were based in the public sector (mostly Medicare through coverage with evidence development arrangements), and only seven were in the private sector.

Researchers interviewed 14 individuals representing drug manufacturers, health plans, and industry experts to understand how RSAs are used and what barriers and challenges to their greater adoption exist. Key findings are outlined below.

Background: RSAs take two forms: outcomes-based and financial-based. Outcomes-based RSAs are contingent on clinical target outcomes while financial-based RSAs are tied to utilization or total sales. RSAs are more common outside the US, where the government is the primary payer for health care services.

(Source: Louis Garrison, et al., American Journal of Managed Care, “Private Sector Risk-Sharing Agreements in the United States: Trends, Barriers, and Prospects,” September 2015)

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Federal judge rules that CMS should revisit two-midnight rule

Last Monday, Judge Randolph Moss with the US District Court for the District of Columbia ruled in favor of the plaintiff in Shands Jacksonville Medical Center v. Burwell and said that the HHS Secretary needs to provide more sufficient justification for the two-midnight rule and its cuts to inpatient payments to hospitals. Judge Moss also ruled that HHS must re-open the public comment period for that part of the rule.

The two-midnight rule has been controversial since CMS issued the rule in 2013. CMS originally established the rule to create a standard for hospitals to use when deciding whether a patient should be treated as an inpatient or outpatient. When CMS established the rule, it estimated that 40,000 encounters would go from outpatient to inpatient status, resulting in $220 million additional Medicare spending. CMS reduced payments to hospitals for inpatient services at the same time. The rule has yet to take effect because it has been delayed several times, most recently in August (see August 18, 2015 Health Care Current). But the American Hospital Association and several of its member hospitals sued the federal government because they believe they were not granted sufficient time to comment on the rule, that the HHS does not have authority to reduce payments, and because they believe the rule is “arbitrary and capricious.”

While the judge ruled that HHS has the authority to reduce payments to hospitals, he also agreed with the plaintiffs that the rule is arbitrary and capricious. He gave HHS until October 1, 2015 to confer with hospitals and agree on a timeline to re-issue the rule.

Background: Hospitals are paid differently based on the setting in which they provide care. Inpatient stays are reimbursed through Medicare Part A, and Medicare Part B pays for outpatient care. CMS developed the two-midnight policy to reduce inappropriate inpatient stays. The type of stay also affects patient cost sharing; if a patient goes from outpatient observation status into a skilled nursing facility, Medicare may not pay for those services.

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On the Hill & In the Courts

CMS gives health plans an additional month to send MLR rebates

CMS is allowing health plans extra time to send medical loss ratio (MLR) rebates to consumers. Earlier this month, CMS extended the deadline from September 30 to October 30, 2015. The main reason for this decision is that CMS is delaying publishing estimates for the risk corridors program. CMS originally said it would publish this information on August 14, but there were “significant” discrepancies in the data that organizations submitted (see the August 18, 2015 Health Care Current).

The ACA requires health plans to spend at least 80 percent (85 percent for the large group market) of premiums collected on health care. The other 15 to 20 percent may go to administrative costs, such as salaries and marketing. If a health plan does not meet this requirement, it must refund the part of the premium to consumers. In 2013, more than 6.8 million health care consumers received refunds under the MLR requirement. Health plans paid out a total of $332,152,474 in that year alone. As a result, the average family received $80 back from their health plan.

Health plans filed their risk corridor and MLR information on July 31, 2015. But, CMS asked many health plans to resubmit their MLR forms and also requested many validate their risk corridor calculations. CMS will not penalize health plans that wait until the end of October to send any MLR rebates they owe to their members.

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FDA establishes a patient engagement advisory committee

The US Food and Drug Administration (FDA) announced last week that it is establishing a patient advocate committee to review medical devices. The committee will represent the patient perspective on a number of issues, including agency guidance and policies, clinical trial or registry design, benefit-risk assessments, device labeling, unmet clinical needs, and device-related quality of life. The FDA establishing this committee reflects the increasingly large influence that patients now have on health care decisions and the FDA’s continued efforts to transition to patient-centered medicine.

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Study: Increasing the Medicare age could result in higher costs for states

A recent report from the Urban Institute concluded that increasing the Medicare eligibility age could increase the financial burden to states for what is now the dual eligible population, covered both by Medicare and Medicaid. The report evaluated the number of individuals who would lose Medicare coverage in each state if there was an increase in eligibility age, and how this would shift current Medicare spending to state programs.

Lawmakers have suggested increasing the Medicare eligibility age could reduce federal spending on health care. However, it could also shift some of the spending onto states. Roughly 2 percent of Medicaid beneficiaries are between the ages of 65 and 69. When compared with the average Medicaid beneficiary, these older beneficiaries have high expenditures, and Medicare pays a larger share of their costs. If the Medicare eligibility age were to change, states would have to cover the costs through Medicaid for those eligible for the program but not yet eligible for Medicare. Changing the eligibility age would not affect disabled beneficiaries, but only those eligible by age and income for Medicare and Medicaid, respectively.

The analysis suggests that many current dual eligibles would lose that status:

  • Raising the eligibility age for Medicare to 67 would convert 277,000 dual eligibles to Medicaid-only beneficiaries. 
  • Increasing the eligibility age to 70 would make 915,000 individuals, roughly 62 percent of all beneficiaries in the age group, Medicaid-only beneficiaries. 
  • States would face a $369 million increase in spending per year if the Medicare eligibility age was increased to 67 and $1.9 billion per year if the eligibility age was increased to 70. 
  • Each state’s costs would depend on the size of their dual eligible population, the Federal Medical Assistance Percentage (FMAP) agreement it has with the federal government, and whether or not it had expanded the program under the ACA.

Methodology: The researchers used data from the Medicaid Statistical Information System, the Medicare Master Beneficiary Summary File, and the Medicaid Financial Management Reports to complete their analysis. They estimated the current level of Medicare and Medicaid spending by state for individuals that are 65 to 69 years old, nondisabled, and dually eligible for both programs. They also calculated the Medicare Part B premiums paid by state Medicaid programs for eligible beneficiaries. Medicare covers inpatient and outpatient hospital care, physician services, post-acute institutional and community-based care, and durable medical equipment. States pay for the deductibles and coinsurance on Medicare-covered services and the full amount on any service covered by Medicaid but not Medicare (e.g., long-term care).

(Source: Timothy Waidmann and Emily Lawton, “The Effect on States of Increasing the Medicare Eligibility Age,” Urban Institute, September 2015)

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Around the Country

BCBS: Wide price variation for angioplasties exists across markets

The Blue Cross Blue Shield Association and Blue Health Intelligence evaluated three years of BCBS claims data across 86 of the 100 largest metropolitan areas for patients getting elective angioplasties and found wide price variations. Controlling for the cost of living in different regions, the analysis found price variations of more than 500 percent between hospitals in the same market and nearly 300 percent across markets. It also found that care quality was not correlated with higher costs.

The median typical price for a non-emergent angioplasty procedure is $27,144. But it varies widely: the same procedure costs $15,494 in Birmingham, Alabama and $61,231 in Sacramento, California. Out of pocket costs – deductibles and co-pays – have increased in recent years, so patients bear much of the variation. Excluding plan deductibles, in BCBS plans, patients are typically responsible for 20 percent of overall costs. As an example, if a procedure is $22,000 at one hospital, typical out-of-pocket costs would be around $4,000. But if the procedure costs $44,000 at a different hospital, a patient would owe roughly $6,000 for the same procedure.

The top five markets with the highest variation have between six and 33 facilities performing angioplasty procedures and the high price facilities (the median episode spending was at least 20 percent above the median within each market) delivers a significant portion of the procedures, even though each of these markets had lower price, high quality alternative options.

Analysis: Though higher price facilities do not necessarily offer better quality, some patients still choose more expensive places for elective procedures. There are many possible reasons for price variation, including the hospital’s operating costs, the insurance mix, and reimbursement agreements between insurers and providers. The researchers note that the findings highlight the importance of both price and quality information transparency to allow health care consumers to make informed care decisions that encourage competition between facilities.

(Source: Blue Cross Blue Shield Association and Blue Health Intelligence, “A Study of Cost Variation for Percutaneous Coronary Interventions (Angioplasties) in the US,” July 2015)

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New health app has potential to diagnose serious condition in infants early

Infants cannot tell their caregivers or physicians what is wrong, but they can communicate in other ways (crying and pooping, to name a few). Developers have created a health app, PoopMD, which combines a smartphone’s camera and color recognition software to analyze the stool of an infant and determine if the infant may be at risk of having biliary atresia (BA), the leading cause of pediatric end-stage liver disease in the US.

BA is a perinatal disease that causes cirrhosis and is universally fatal without intervention. Early diagnosis and subsequent surgical intervention is associated with an increase in overall survival and decrease in needing a liver transplant. The best outcomes occur in infants who are diagnosed and undergo a procedure called hepatoportoenterostomy to assist with bile drainage within 60 days of being born. In the US, BA diagnosis is typically delayed to 70 days, often because jaundice of the newborn is extremely common and can mimic the most common sign of BA. It is also a rare disease, affecting about one in 13,000 infants in the US per year. One potential clue to help distinguish BA from jaundice is that babies with BA often have pale (acholic) stool.

Traditional approaches to educate parents of newborns have relied on stool cards depicting acholic and normal stool. Mobile apps may provide another opportunity to help new parents detect acholic stool. A recent Johns Hopkins’ pilot study tested the accuracy of the PoopMD app in differentiating photographs of acholic and normal stool.

Given how rare BA is, most parents of newborns will find the app reassures them that their newborn’s stool color is normal. But, for the parents of the 400 babies born each year in the US with BA, using the free app can alert them that urgent medical care is needed. For the pilot study, the research team gathered medical opinions of a small sample of expert pediatricians who looked at 34 photographs of pale-colored stool. Most of the pictures were normal, while seven signaled high risk of BA. For the next phase of the study, one expert and three study participants were asked to use the app on their smartphones to analyze the same pictures under a variety of lighting conditions and using different smartphone models.

They were asked to take a picture of the stool and determine if the app identifies the photo as normal or pale. The app correctly identified all of the abnormal stool samples and correctly identified 24 of the 27 normal stool. There were no false positives. Parents or caregivers can download the app onto their smartphone, and take a picture of the baby’s stool so the app can immediately identify whether the stool color matches those associated with gastrointestinal illnesses or problems with the liver, including BA.

Analysis: This pilot study is an early assessment of how a mobile app could potentially be used to screen for a disease by combining results from a biosensor with a clinically meaningful sign and physical exam finding. Though new mHealth apps are coming onto the market rapidly, only a small amount of these apps have been systematically evaluated and validated. There is great potential for these apps to improve health of individuals and communities, but it is important that their use be driven by data and demonstrated evidence of their safety and efficacy. Given this app is for parents of newborns, who may be hyper vigilant about monitoring their infant’s health, it will be important to ensure these types of apps and tools are efficacious and accurate. It will also be important to continue monitoring the progress of this app as a tool to identify acholic stool.

(Source: Amy Franciscovich et al, “PoopMD, a mobile health application, accurately identifies infant acholic stools,” PLOS, July 29, 2015)

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Breaking Boundaries

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