Health Care Reform Memo:
April 23, 2012

Deloitte Center for Health Solutions publication

The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the administration and implications for the C-suite and various stakeholder groups.

My take: the health care workforce: central to the health industry, but dramatic redesign is needed

From Paul Keckley, Executive Director, Deloitte Center for Health Solutions

As a college kid in the late 60’s, I made a weekly trip to Third National Bank in Green Hills to withdraw $20 bucks for the weekend—enough to cover laundry, off campus food, and maybe a movie or date. I’d wait in line, avoiding Friday’s normal congestion, write my check, and ask the teller to make sure I had enough money in my account to cover it.

Third National is now part of SunTrust. Tellers are fewer and check writing is almost an artifact of a bygone era. Like many industries that are labor intense, technology changed workflows and competition rewarded leaner operating costs on a larger scale. Legislation and regulatory change broke down some of the barriers established by Glass-Steagall, blurring lines between brokerage houses and banks and thrifts.

The U.S. health care industry is labor intense, capital dependent for technologies and facilities, and highly regulated at the state and federal levels. As a result, our labor challenge is perhaps unique. Most of the attention to the system’s 16.3 million workforce is on its skilled professionals—physicians, nurses, technicians, researchers, and informaticians. But the 4.2 million new jobs the industry will add in the next decade will primarily be in its lower paid, semi-skilled, and unskilled categories—home health aides, nurse assistants, customer service representatives, administrative clerks, and data input staffers. Their average income will be below $30,000 annually—slightly above the 2012 federal poverty level for a family of four but low enough to qualify for Medicaid ($31,089) per the Affordable Care Act’s (ACA) eligibility threshold. And these jobs represent one in nine of total employment growth for the next decade—higher than any other industry.

ACA’s Title five requires the U.S. health system to retrain its workforce, especially around its use of information technologies to coordinate care and improve effectiveness in the design and provision of primary care services. It calls for the expansion of medical residency programs in primary care to accommodate the growing prevalence of chronic disease and provides funds for the expansion of community-based clinics that serve the underserved.

Notably, its five major delivery system structural reforms—accountable care organizations, bundled payments, value-based purchasing, patient centered medical homes, and avoidable readmissions—require better coordination of patient care by “clinically integrated” teams of providers. To avoid penalties, these teams need evidence that safety, outcomes, cost efficiency, and patient satisfaction is not compromised. The effectiveness of these efforts is largely dependent on the infrastructure that allows shared information, and the “bank tellers” who keep the things moving seamlessly.

Somewhere lost in the shuffle are the health care industry’s tellers. In most organizations, they’re faceless. In hospitals, medical practices and testing facilities, they’re usually paid hourly, and turnover is managed by a constant front door of new hires to balance traffic through the back door. In bio-pharma and medical device industries, they’re the assistants who follow protocols for the mundane tasks. In health plans, they’re the clerks and customer service representatives who work from cubicles and take scheduled breaks with permission.

I don’t write many checks these days and visit a bank branch rarely. No need. Technology changed the workflow of the bank, and its business strategy gently guided me to accept that its “new normal” offered me more value.

The health care industry needs to take a fresh look at its people strategy—not just how doctors and nurses behave but the entire workforce. It’s no longer good enough to think of headcount based on yesterday’s operating models. Offshoring, outsourcing, and innovative approaches to job sharing must be considered. Compensation and recognition that reward competence and performance over longevity need attention. And the new structures and partnerships in our industry that redraw lines between payers and providers, acute and sub-acute, ambulatory and home based, require a refreshed view of the entire workforce, not just those at the top of the pyramid in each sector.

The fiscal year (FY) 2013 budget battle has begun. At the federal level, it seeks two widely desired goals perhaps at odds: reducing the deficit to get our sovereign debt to 70 percent or less of our gross domestic product (GDP), and economic recovery that restores consumer confidence as reflected in consumer spending and employer hiring.

Health care is part of the solution for both if our workforce strategies get a fresh look. It requires:

Industry leaders to radically redesign workforce strategies: leveraging technology to reduce unnecessary visits, tests, and procedures; changing operating models to team-based solutions; aligning compensation with new goals; recruiting and keeping a workforce that’s nimble and responsive to change; and engaging consumers as active care participants, not patients. It doesn’t require more people; it requires a fresh approach to thinking about who does what based on need and competence, and incentives that reward results, not volume. And at the local level, nurturing a culture that recognizes and rewards the entire workforce—not just its doctors, nurses, and allied health professionals.

Policymakers to step up: liability reforms to reward right behavior of skilled care teams; upgrading of clinical training in skilled professions to competency-based team models that reward lifelong learning by its skilled workers; expanded scope of practice that recognizes the leveraging of clinical decision support technologies in diagnosing and treating; and funding career education and training for the non-clinical workforce that lead to improved productivity and lower costs of operation.

My current bank is in Tennessee, and it operates in DC as well, but most of my interaction is online anyway. I don’t know a teller, but I know the teller workforce is key to the value I ascribe to its services and the relationship I have maintained with the same bank since 1967. Lest it be missed, it was not a loan officer or bank executive that cashed my checks in those days, it was a teller. The entire health care workforce matters. And the transformation of the system will not be achieved unless the entire workforce is thoughtfully reengineered.

Paul Keckely

Paul Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions

P.S. The Deloitte Center for Health Solutions’ “Chief Teller” is Karen Phillips. Behind her desk is a plaque: “Queen of First Impressions”—a title she earned by being capable, responsible, and accessible no matter the challenge. Our tellers in health care deserve recognition and appreciation. Recently, the Deloitte Center for Health Solutions completed a study The new health care workforce: Looking around the corner to future talent management with the Bipartisan Policy Center that calls for a fresh look at the health care workforce.

Implementation update

IRS announces proposed regulations to assess fees on health insurance plans to fund PCORI

Tuesday, per Section 6301 of the ACA, the U.S. Internal Revenue Service (IRS) released a notice of proposed rulemaking with regulations instituting fees on issuers of commercial health insurance plans and sponsors of self-insured health plans to partially fund the Patient-Centered Outcomes Research Institute (PCORI). The fee is $2 (or $1 for plans ending before October 1, 2013) multiplied by the average number of covered lives in the plan. The rule proposes amendments to the definition of “specified health insurance policies,” time for returns, and establishes rules for calculating the fees. The IRS will collect comments on the proposed regulations until July 16, 2012. The IRS will also hold a public meeting on the regulations August 8, 2012. Requests to speak and proposed topics to be discussed at the meeting will be collected until July 30, 2012.

Note: Fees are imposed for policies in which the policy year ends between October 1, 2012 through October 1, 2019. The fees will be treated as taxes. PCORI will support the development, synthesis, and dissemination of comparative clinical effectiveness research findings intended to improve health care decision making.

GOP report: ACA will raise taxes by $4 trillion

A report released Tuesday by the Joint Economic Committee Republicans, authored by Senator Jim DeMint (R-SC), estimates that ACA will raise taxes by $4 trillion by 2035 based on its analysis of long-term CBO projections. (Source:

CMS: DME competitive bidding program successful in reducing costs

Wednesday, the Centers for Medicare & Medicaid Services (CMS) announced that $202.1 million had been saved in the first year of the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program based on results in nine markets tested in the initial phase of the program. Medicare fee-for-service spending decreased over 42 percent in the nine markets where CMS was implementing the program. This program will be extended to 91 more metropolitan areas per the ACA and previous law and include a national mail order program for diabetic testing supplies in 2013. The CMS Office of the Actuary estimates the program, if rolled out nationally, will save $25.7 billion in the Medicare Part B Trust Fund from 2013 – 2022. Plus save $17.1 billion for Medicare beneficiaries themselves.

Physician, hospital coalition protests overpayment rule

Last week, a coalition of physician and hospital associations sent a letter to CMS protesting its proposed rule (Medicare Reporting and Returning of Overpayments rule in Section 6402 of ACA) that requires providers and suppliers to return excess payments within 60 days after the overpayments are identified. In a letter to CMS, the Alliance wrote that under the proposed ten year "look-back period," fee-for-service providers would have to retain documents for four years longer than Medicare currently requires proposing the overpayment-liability period be reduced to three years. CMS set the period because it is the outer limit of the federal False Claims Act.

Coalition members include: American Hospital Association, Federation of American Hospitals American Academy of Facial Plastic and Reconstructive Surgery, American Association of Neurological Surgeons, American Gastroenterological Association,  American Society of Cataract and Refractive Surgery, American Society of Plastic Surgeons, American Urological Association, Coalition of State Rheumatology Organizations, Congress of Neurological Surgeons, Heart Rhythm Society, North American Spine Society, and Society for Cardiovascular Angiography and Interventions.

CCIIO cites “excessive premium increases”

Monday, the U.S. Department of Health and Human Services (HHS) Center for Consumer Information and Insurance Oversight (CCIIO) announced “excessive premium rate increases” for two health insurers (Time Insurance and United Security) impacting 60,000 covered lives in Arizona, Louisiana, Missouri, Montana, Nebraska, and Wyoming.

Note: ACA Section 1001 requires insurance companies to publicly justify premium increases over 10 percent. However, the government does not have authority to rescind rates found excessive or unreasonable.

Legislative update

Committees, Congress tackle FY 2013 budget; health care cuts targeted

Last week, the U.S. House of Representatives passed a one year small business tax cut bill that would apply to companies with fewer than 500 employees by a vote of 253 – 173. The 20 percent tax cut would apply to their domestic business income and no more than half of wages paid. The measure, which would cut federal taxes by $46 billion, is unlikely to pass in the Senate. The House had earlier rejected a bill to implement the Buffet Rule, voting 234-179 along party lines. The Buffet rule would have increased tax revenues $47 billion over 10 years via increased income tax paid by the richest 1 percent of tax filers. However, the major activity on the hill relative to FY 2013 budgeting was in key committees:

Spending and appropriations

House and Senate Appropriations Committees: Wednesday, the House Appropriations Committee released and marked-up FY 2013 appropriation bills that would provide $51.1 billion in funding for U.S. Departments of Commerce and Justice, the National Aeronautics and Space Administration (NASA), the National Science Foundation (NSF), and other agencies—3 percent below the current FY 2012 appropriation and 1.4 percent below the President’s FY 2013 budget request. Thursday, the Senate Appropriations Committee approved legislation (27-2) that sets spending for FY 2013 at levels established under last summer’s bipartisan deficit plan.

Note: the House and Senate plans propose different spending levels: the Senate plan follows the discretionary spending limit set at $1.047 trillion under the Budget Control Act of 2011 (BCA) while the House sets spending at $1.028 trillion—$19 billion less than BCA, and $15 billion under what was appropriated in FY 2012.

Senate Budget: Wednesday, Senate Budget Committee Chairman Kent Conrad (D-ND) released a budget plan, based on the Fiscal Commission Budget Plan (Simpson-Bowles deficit reduction proposal). Separately, Senator Pat Toomey (R-PA) introduced a budget plan that lowers spending to 18.3 percent of GDP, prevents payment cuts under the Medicare sustainable growth rate (SGR) payment formula, uses block grants for Medicaid, implements medical malpractice reform, expands means testing for Medicare Parts B (physician services) and D (prescription drugs), and repeals the ACA.

Note: the House voted 382 – 38 in March 2011 against the White House appointed National Commission on Fiscal Responsibility and Reform plan led by Erskine Bowles and Senator Alan Simpson (R-WY) that would have cut spending by $5.9 trillion. In November 2011, Congress’ Joint Select Committee on Deficit Reduction (Super Committee) failed to reach an agreement on the budget, setting in place automatic cuts (sequestration) of $1.2 trillion starting in 2013. Senate has not passed a budget since April 29, 2009. At issue: tax increases. The Simpson Bowles plan allowed for a 3:1 relationship between spending cuts and “revenue enhancements,” but GOP legislators did not support tax increases in its formula.

U.S. Food and Drug Administration (FDA) and User Fees

House Energy & Commerce Committee and Senate Committee on Health, Education, Labor, & Pensions (HELP): Wednesday the House Energy and Commerce Health Subcommittee and Senate HELP Committee released separate drafts of user fee legislation for branded drugs, generics, devices, and biosimilars (i.e. generic biologics). Each includes amendments to address drug supply chain integrity, prescription drug shortages, incentives for new antibiotic development, and new methods to improve the drug review process. Next week the committees will mark up bills on industry user fees.

Background: Congress established the drug user fee program ten years ago to collect fees from life science companies to fund the FDA’s drug and device approval process. Some of the FDA’s funding is through the annual appropriations process and is therefore subject to annual cuts. As a result, the FDA is expected to increase industry user fees, forcing increased costs for device and drug manufacturers that are passed through in supply chain costs to providers and consumers. In January, the FDA sent user fee packages for three user fee programs: the Prescription Drug User Fee Act (PDUFA) set to expire September 30, 2012 and two new user fee laws—the Generic Drug User Fee Amendments of 2012 (GDUFA) and the Biosimilars User Fee Act of 2012 (BSUFA). In February 2012, the industry and the FDA reached an agreement with the pharmaceutical industry to collect $595 million in prescription drug user fees over five years, plus adjustments for inflation.

Note: Thursday, the Senate Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies heard testimony from the FDA Commissioner Margaret Hamburg regarding the FDA’s FY 2013 $4.5 billion budget request, a 17 percent increase from FY 2012; user fees account for 98 percent of the requested increase in funding.

Also Thursday, Senators Richard Burr (R-NC) and Tom Coburn (R-OK) introduced a bill titled the Promoting Accountability, Transparency, Innovation, Efficiency, and Timeliness at FDA (PATIENTS’ FDA) Act that according the Senators “complement the proposed agreements negotiated between the FDA and the drug and device industries by ensuring appropriate transparency and accountability in the FDA’s review and decision processes.” The bill was not included in the HELP’s draft released Wednesday.

Repayments of overpayments of exchange subsidies

House Ways and Means: Wednesday, the committee approved a bill that would recoup health insurance exchange subsidy (per ACA Section 1401) overpayments. It requires families to repay subsidies if individuals’/families’ incomes increase resulting in them not qualifying for as much of the subsidy based on their previous earnings. It also requires guardians to provide Social Security numbers for child care tax credits. (Estimated savings for the federal government is $44 billion for recuperating overpayments with additional savings coming from changes to HHS’s Administration for Children & Families Social Services Block Grant program).

Note: Joint Committee on Taxation (JCT) Chief of Staff Thomas Barthold estimates that the bill would lead to 350,000 fewer people receiving health insurance coverage.

Background: Congress has already used funding from the subsidies twice before: (1) lawmakers used the funding to avert reductions in Medicare physician payments in 2010 and (2) to offset the repeal of the 1099 tax reporting requirements (per ACA Section 6401). However, the previous plans only required individuals to pay a part of the overpayment of subsidies; the current proposed bill requires individuals to repay the entire amount of the overpayment. The Main Street Alliance small business network, Health Care for America Now, Families USA, and the National Women's Law Center expressed concern over the bill.

Medical malpractice reform

House Judiciary: Tuesday, the committee marked up a medical liability (tort) reform bill that would cap non-economic damages (e.g. pain, suffering, and quality of life damages) at $250,000. The draft legislation is modeled after the Protecting Access to Healthcare (PATH) Act, which also would repeal the Independent Payment Advisory Board (IPAB). This provision will affect lawsuits involving physicians, nursing homes, medical devices, and pharmaceutical treatments. Estimated savings is $39.7 billion over ten years.

Note: the PATCH Act was originally titled the originally dubbed the HEALTH (Help Efficient, Accessible, Low Cost, Timely Healthcare) Act. The House has passed this legislation twice, but the legislation has not passed the entire Congress. The House Judiciary Committee on Wednesday recessed its markup of the PATCH Act. They did not set a date when they will take up the bill next.

Supreme Court ruling: generics can challenge description of brand-name patents

Monday, in a unanimous decision, the U.S. Supreme Court ruled that generic drug makers can challenge drug manufacturers regarding their explanation of a branded drug’s intended use included in the patent. The Court’s opinion, written by Justice Elena Kagan states, “the statutory counterclaim we have considered enables courts to resolve patent disputes so that the FDA can fulfill its statutory duty to approve generic drugs that do not infringe patent rights…a generic company can employ the counterclaim to challenge a brand’s overbroad use code.”

Note: In response to the 2011Supreme Court ruling on generic label liability, seven Senate Democrats introduced legislation that would allow generic drug makers to be held liable under state tort law for not updating drug warning labels with known dangers. The legislation follows a Supreme Court ruling (5-4) from June 2011, which decided that generic drug manufacturers could not be held liable, since they are required by federal law to use the same label as their brand-name equivalents. At issue: if a generic manufacturer’s science is based on the on-label certification by the branded equivalent, should the generic manufacturer face additional liability for drug efficacy and effectiveness and for labeling consistent with the branded manufacturer’s requirement?

VA: funding for additional mental health staffing available released

Thursday, the U.S. Veteran’s Administration (VA) announced an immediate release of funds to increase mental health staffing 10 percent across the board, adding 1,900 therapists and other support personnel. The agency serves 1.3 million veterans with mental health problems including 400,000 who served in the Middle East and 40,000 newly diagnosed with post-traumatic stress disorder annually.

Note: since 2009, the VA has increased its mental health budget 39 percent and hired 3,500 additional staff.

HHS combines aging, disability administration

Monday, HHS announced the creation of the Administration for Community Living (ACL), which combines HHS’s Administration on Aging, the Office on Disability, and the Administration on Developmental Disabilities into a single agency. The ACL was created to promote consistency in community living policy across federal programs, support the needs of both the aging and disability populations, and enhance access to quality health care and long-term services and supports.

Senators introduce drug labeling and testing bill for pediatric medical devices

Tuesday, Senators Jack Reed (D-RI), Lamar Alexander (R-TN), Patty Murray (D-WA), and Pat Roberts (R-KS) introduced the Better Pharmaceuticals and Devices for Children Act of 2012. The bill would reauthorize and develop initiatives in three laws to mandate stricter drug labeling and testing for children, and encourage pediatric medical devices development. This bill also includes the FDA user fee legislation, which must be passed this year.

Note: the American Academy of Pediatrics (AAP) and Elizabeth Glaser Pediatrics AIDS Foundation support this legislation.

State update

Study: block grants would have cost states $555 billion

Friday, the Center on Budget and Policy Priorities (CBPP) released a study concluding that House Budget Committee Chairman Senator Paul Ryan’s (R-WI) budget, if implemented in 2001, would have reduced federal spending for many states by more than 35 percent by 2010 (Arkansas, Colorado, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, and Wisconsin) and by more than 50 percent for some (Alaska, Delaware, Idaho, Nevada, and New Mexico).

The study compared actual federal funding received during 2001 – 2010 to how much states would have received under block grants. Under this scenario, CBPP found that states would have seen reduced funding up to $555 billion, or a 31 percent reduction over this period.

If passed, the Ryan budget is estimated to decrease Medicaid funding by $810 billion (22 percent), and by 2022, federal funding for the program would equal $163 billion—34 percent of what states would have originally received.

State round-up

  • Last week, HHS approved the Arizona Children’s Health Insurance Program (CHIP) plan to expand insurance to 22,000 children in the state whose family income is over Medicaid eligibility but below 175 percent of the federal poverty level.
    Note: this expansion will cover a share of children and adults that remain on Arizona’s waiting list (approximately 100,000 children and 150,000 adults) after the state implemented Medicaid cuts and froze CHIP enrollment in 2010.
  • 157,000 Florida residents who purchased coverage outside of the employer market are expected to receive rebates between $143 and $949 per ACA Section 1001. ACA Section 1001 requires large companies to spend 85 percent and small and individual market plans to spend 80 percent of premium revenue on clinical services. An estimated $65 million in health insurance rebates will be provided to workers in 352,000 small businesses. Individuals employed in companies with 50 or more employees are not expected to receive a rebate.
  • Maine Governor, Paul LePage (R), recently signed legislation that takes steps toward creating a navigator program for the state. LePage and the advisory committee he created originally supported implementing an exchange last summer.
  • Tuesday, Texas Health and Human Services Commission (HHSC) submitted a plan to CMS asking to extend the timeline for when the state would have to fully fund its Women’s Health Program. HHS previously proposed phasing out funding for the state by September after Texas passed legislation which banned groups affiliated with abortion providers from participating in the Women’s Health Program, violating federal law which guarantees women the right to choose their health care providers. The ban becomes effective September 1, but the plan would extend the timeline to fully transition to state funding until November 1, 2012.
    Note: Texas State Attorney General Greg Abbott has sued the federal government to have funding restored. Planned Parenthood, one of the clinics affected by the rule, has sued the state in a case is currently pending in Federal District Court.
  • Iowa House of Representatives passed a $1.6 billion bill Wednesday to provide funding for state health care programs and social services. The state’s Medicaid program will receive $950 million of the funding, with social programs, public health, veterans affairs, and aging departments receiving the rest.
  • Six Massachusetts health care organizations, led by the Massachusetts Medical Society announced a joint initiative to improve the medical liability system in the state. The Roadmap to Reform Alliance is intended to improve patient safety, increase transparency, reduce litigation, and cut costs to the health care system.
  • Wednesday, New York state officials announced the finding of $42 million in faulty Medicaid payments through audits. Data problems and information delays in the state’s Medicaid claims processing system were identified as the source of $36 million in improper payments and $6.3 million in overpayments. Insurance premiums for dual-eligible (those eligible for Medicare and Medicaid) were also examined and unnecessary payments were made on behalf of 45,000 of those enrollees.

Industry news

ONC: $4.5 billion outlays for EHR systems through March 2012

Per CMS last week:
Physicians:  225,765 physicians are actively enrolled in the Medicare and Medicaid electronic health record (EHR) incentive programs created under the American Recovery and Reinvestment Act (ARRA) of 2009 as amended by the Health Information Technology for Economic and Clinical Health (HITECH) Act. There are 222,282 eligible professionals enrolled, and 73,945 have been paid. Medicare payments to 44,014 eligible professionals have totaled $792 million, while various state Medicaid programs have paid 29,931 eligible professionals $628 million. Registrations for eligible professionals rose by 49,310 (29 percent) during the quarter to 222,282. Medicaid program enrollments of eligible professionals increased 51 percent.

Hospitals: there have been 2,667 payments made to hospitals under the Medicare or Medicaid technology programs, or both, totaling nearly $3.1 billion. Active registrations by hospitals increased by 406, or 13 percent, in the first quarter of this year to 3,483 participating hospitals, according to the CMS.

Note: hospitals can receive payments under both the Medicare and the Medicaid programs, and most do, but physicians and other professionals can participate only in one program or the other.

Health regulations top concern for small business owners

Monday, the U.S. Chamber of Commerce released a study ranking small business owners’ concerns: health costs topped its list. Of those interviewed, 73 percent of the small businesses perceived the ACA as an obstacle. (Source: Harris Interactive Inc. “United States Chamber of Commerce Q1 Small Business Outlook,” April 16, 2012)

GAO report: military health system cost effectiveness improving

Last week, the Government Accountability Office (GAO) released a report finding that the U.S. Department of Defense (DOD) made progress toward slowing its health care cost increases and implementing its patient-centered medical home model (expected to save $39.3 million).

Among DOD goals for its health programs:

  • Improving outcomes and enhancing value by implementing psychological health programs
  • Encouraging adherence to medical standards based on evidence to increase patient satisfaction, improve care, and reduce costs by implementing incentives
  • Rewarding value in services by implementing alternative payment mechanisms
  • Offering a wider variety of options for care delivery from private sector providers by revising the DOD’s future purchased care contracts
  • Focusing more on prevention, intervention, and wellness to improve measurement and management of the DOD’s population
  • Improving quality and reducing costs in pharmacy practices
  • Meeting individual service members medical readiness goals by implementing policies, procedures, and partnerships that coincide with these goals
  • Coordinating efforts between DOD and VA to create a strategic plan for mental health services
  • Improving outcomes and enhancing interoperability by modernizing and making electronic health records
  • Achieving better performance in multiservice medical markets by improving governance

Note: the DOD health care budget has grown significantly over the last decade, increasing from $19 billion in 2001 to $48.7 billion in 2013 (almost 7 percent of the defense budget). Costs are expected to reach $92 billion by 2030. (Source: GAO, “Defense Health Care: Applying Key Management Practices Should Help Achieve Efficiencies within the Military Health System,” April 2012)

GAO analysis: antitrust laws and collaboration among doctors, hospitals and allied providers

Last week, the GAO released a report focused on the application of antitrust laws for collaborative agreements among providers of health care services. This report was requested by Senate Finance Committee Chairman Max Baucus (D-MT) and seven other Senators. Three major findings in the report:

  • The benefits of collaboration vary and are unclear: the clearness of guidance on clinical integration (a way for collaborative arrangements to prove potential positive results such as improved quality, reduced costs) is varied among stakeholders. Five out of six experts and one out of four industry groups agreed that guidance was unclear and needed clarification. However, one expert and two industry groups indicated they felt the guidance was sufficient.
  • Increased oversight to reduce collaboration is not necessary at this time: opinions were divided as to whether the Federal Trade Commission (FTC) and the U.S. Justice Department (DOJ) should give greater leniency to collaborative arrangements. While it cited that exclusive arrangements have the potential to reduce competition, four of the experts interviewed were of the opinion that regulations should remain the same.
  • Safety zone definition should be revisited: perspectives on agreements within the safety zone—those exempt from antitrust analysis and presumed to be lawful—differed between stakeholders. The size and scope of these zones were determined in 1996 Statements, and while some experts and industry groups agreed the parameters were adequate, several expressed that safety zones should be expanded to include a wider range of arrangements.

Source: GAO, “Federal Antitrust Policy: Stakeholders’ Perspectives Differed on the Adequacy of Guidance for Collaboration among Health Care Providers,” March 2012.

FDA receives comments on draft guidance for biosimilars

The period to submit comments to the FDA on draft guidance for biosimilars ended last Monday. The draft guidance, released in early February in three documents, related to scientific considerations in demonstrating a biosimilarity to reference products and protein products, as well as questions and answers on implementation of the Biologics Price Competition and Innovation Act of 2009 that was included in the ACA Section 7001.

Note: the Biotechnology Industry Organization (BIO) submitted comments in support of “the FDA's ongoing implementation of a science-based pathway for the review and approval of biosimilars that protects patient safety and promotes continued innovation.”

HHS seeks comments on National Action Plan to reduce infections

Thursday, HHS posted and seeks comments on its updated National Action Plan that addresses health care associated infections:

Goal Goal measure
Reduce bloodstream infections 50%
Adhere to central line insertion practices 100%
Reduce Clostridium difficile infections 30%
Reduce Clostridium difficile hospitalizations 30%
Reduce urinary tract infections 25%
Reduce MRSA invasive infections (in the general population) 50%
Reduce MRSA bacteremia 25%
Reduce surgical site infections 25%
Adhere to surgical SCIP measures 95%

Source: HHS, “HHS seeks comment on National Action Plan to eliminate healthcare-associated infections,” April 2012.

The U.S. Centers for Disease Control and Prevention (CDC) has also released a new state-by-state breakdown of health care associated infection rates in each state. The CDC’s National Healthcare Safety Network reports that certain measures have already decreased:

  • Central line-associated bloodstream infections by 33 percent
  • Surgical site infections (SSIs) by 10 percent
  • Catheter-associated urinary tract infections by 7 percent

Note: health care associated infections affect one out of every 20 hospitalized patients.

CMS provides comparison tool for home health

Last week, CMS introduced an online tool now available to patients, families, and caregivers that allows individuals to compare the patient experience of Medicare-certified home health agencies. Home Health Compare will use data from the Home Health Care Consumer Assessment of Healthcare Providers and Systems (HHCAHPS) Survey and will be updated every four months with new data. The survey asks patients about care they have received from home health agencies on topics such as overall care, communication skills of providers, courteousness and respectfulness of the workers, and whether the agency workers discussed with them their medicines, pain, and home safety.

Note: home care services are provided to 1.4 million patients daily. A majority of individuals using home health care are over age 65 and have multiple chronic care conditions. These services allow them to remain in the community by receiving care at home. By 2020, annual federal and state spending on long-term care is expected to reach up to $140 billion, with state Medicaid programs funding 63 percent of the costs. (Sources: Christine Caffrey, et al, CDC, “Home Health Care and Discharged Hospice Care Patients: United States, 2000 and 2007,” 2011; Holly Felix, et al, Health Affairs, “Medicaid Savings Resulted When Community Health Workers Matched Those With Needs To Home And Community Care,” 2011)

Tool to monitor drug shortage introduced

The Generic Pharmaceutical Association (GPhA) announced its Accelerated Recovery Initiative to determine current and future supply shortages, especially products expected to have shortages of over 90 days. The service will be provided through an independent third party and will give the FDA a more timely and comprehensive perspective of current and future drug shortages.

Note: in 2010, 178 drugs were in shortage, a majority of which (74 percent) were sterile injectable drugs. (Source: Sanjay Bansu, The Health Care Blog, “The Drug Shortage Wars,” April 2012)

Groups seek to fortify corn masa to prevent birth defects

Last week, the March of Dimes along with other groups petitioned the FDA to require fortification of corn masa (used to make corn tortillas and tamales) with folic acid to help reduce spina bifida and other birth defects of the brain and spine. The groups’ noted that Hispanic women are 20 percent more likely to have a baby with a neural tube defect than non-Hispanic white woman partially due to a lower consumption of folic-acid fortified pasta and bread.

Survey: one fourth of adults under 65 lacked insurance in 2011

A Commonwealth Fund survey released last week found that 50 million adults lacked insurance for some portion of 2011. Highlights:

  • About a quarter of the U.S. adult population ages 19 – 64 had a gap in health insurance coverage in 2011. Almost seven out of ten (69 percent) of these individuals did not have coverage for a year or more.
  • Of those uninsured or who had experienced a gap, 41 percent previously had employer-based coverage, 18 percent had been enrolled in Medicaid, 6 percent had coverage in the individual market, 7 percent had been insured through other sources, and 27 percent never had health insurance. Among those who had employer-sponsored coverage prior to their gap in coverage, two-thirds (67 percent) had a loss or change of a job as the main reason; nearly six of 10 (58 percent) were uninsured for at least a year.
  • 74 percent of insured women ages 40 to 64 with health insurance had undergone a mammogram during the previous two years; only 28 percent of women in that age group who had been without insurance for a year or more received a mammogram.
  • Significant gaps occurred by age, race and ethnicity, and income levels, with adults 19 to 29, Hispanics, and those making less than $40,000 much more likely to be uninsured.

Source: online survey of 2,134 adults 19 – 64 years of age conducted June 25 – July 11, 2011 by the Commonwealth Fund; Sara Collins et. al., “Gaps in Health Insurance: Why So Many Americans Experience Breaks in Coverage and How the Affordable Care Act Will Help,” April 2012.


“There is a light recovery blowing in the spring wind, but dark clouds on the horizon.”

—Christine Lagarde, managing Director, International Monetary Fund Thursday, April 19, 2012

“What I’m seeing while all the debate about the health care bill is still lively and under way is amazing transformation in health care systems across this country. The process of improving care is always incremental.”

 —HHS Secretary Kathleen Sebelius, The Atlantic Health Care Forum, April 19, 2012

“The uninsured are in the market in the sense that they are creating a risk that the market must account for…the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries”

 —Justice Anthony Kennedy, March 27, 2012 Supreme Court Oral Argument about ACA’s individual mandate

Fact file

2008 National Employment Matrix Title (BLS 2010) Employment Number Numeric Change Percent Change
2008 2018 2008 - 2018 2008 - 2018


58,700 9,600


Dentists (general and all other specialties) 127,100 146,500 19,400 15.3%
Home Health Aides 921,700 1,382,600 460,900  50.0%
Licensed Practical & Licensed Vocational Nurses 753,600 909,200 155,600 20.7%
Nursing Aides, Orderlies, & Attendants 1,469,800 1,745,800 276,000 18.8%
Personal & Home Care Aides 817,200 1,193,000 375,800 46.0%
Pharmacists 269,900 315,800 45,900  17%
Physical Therapists 185,500 241,700 56,200 30.3%
Physician Assistants 74,800 103,900 29,200 39.0%
Physicians and Surgeons 661,400 805,500 144,100 21.8%
Psychologists (Clinical, Counseling & School) 152,000 168,800 16,800 11.1%
Registered Nurses 2,618,700 3,200,200 581,500 22.2%
  • In 2011, U.S. spending on prescription drugs increased 2.7 percent vs. 3.6 percent in 2010, lowest annual increase in 18 years. Traditional drugs decreased by 0.1 percent, while specialty drugs increased by 17.1 percent (taken by 1 percent of prescription drug users). Diabetes drug spending increased by 7 percent in 2011, making it the U.S. largest drug expenditure. (Source: Express Scripts, “Annual Drug Trend Report,” April 2012)
  • In 2011, 97.6 percent of anesthesiologists reported drug shortages in anesthesia support: 96 percent used an alternative to their preferred drug, 50 percent have changed a procedure, 7 percent postponed procedures, and 4 percent have cancelled procedures due to these shortages. As a result of certain drug shortages, 66 percent of patients have had poor outcomes after operations such as nausea and vomiting—up from 49.2 percent in 2011. (Source: American Society of Anesthesiologists, “Survey Reveals More Than 97 percent of Anesthesiologists Experiencing Drug Shortages,” April 17, 2012)
  • Unintentional injury death rates for children under age 19 decreased almost 30 percent from 2000 to 2009. (Source: CDC, “Vital Signs Child Injury,” April 2012)
  • Current Medicaid insurance subsidy eligibility thresholds based on family of four income: Medicaid at 138 percent of federal poverty level (FPL): $31,089; subsidies up to 400 percent of FPL: $92,200 (Source: HHS)
  • Community health clinics: 1,200 in U.S. that serve as primary care “home” to 20 million U.S. consumers. (Source: Kaiser)
  • Teen birth rate in U.S. lowest since 1946: 34.9 per 1,000 women 15 – 19 years of age. (Source: CDC)
  • Hospital utilization flat for last ten years: 1,284 admissions per 10,000 population; average length of stay flat at 4.6 days; average costs up 3.9 percent annually. (Source: American Hospital Association)
  • Drug shortages: 54 shortages in 2004 vs. 267 in 2011. (Source: University of Utah Drug Information Service)
  • Life expectancy change 1989 – 2009: men gained 4.6 years to 76.2 and women gained 2.7 years to 81.3. Wide variation by county: for men, range from 66.1 to 81.6 and for women 73.5 to 86. (Source: University of Washington Institute for Health Metrics and Evaluation)
  • Women in workforce: 66 percent of women 18 – 34 see high paying career as a priority vs. 59 percent of men; up from 58 percent in 1997. Note: women are 46.7 percent of workforce. (Source: Pew Research Center)
National health reform: What now?




National health reform: What now?

National health reform is here. The health reform bills (HR3590 and HR4872) are now law and will trigger sweeping changes and disruptions – some rather quickly and some over many years. The industry is asking, “What now?” At Deloitte, we continue to explore and debate the key questions facing the industry, and we look forward to helping our clients find and implement the right answers for their organizations. To learn more, visit today.

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