Health Care Reform Memo:
June 25, 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: health reform 2.0, with or without the Supreme Court ruling

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

“I don’t know”—that’s what I said a lot this weekend. I played golf and my playing partners asked how the Supreme Court would rule. The barista asked, as did the front desk when I checked in for my flight back to DC.

The Supreme Court will be in the spotlight this week to answer this question: what’s the immediate future for the Affordable Care Act (ACA)? Does it stand as is, does it change, or is thrown out altogether?

Depending on your political persuasion, or your role in the U.S. health system, one of these outcomes is your preference. Seemingly, no one is lacking an opinion, and everyone’s watching. SCOTUSblog averages 16,000 readers for most rulings issued by the high court. Last Thursday, 70,000 were online as it issued its rulings. No doubt more will tune in this week.

Here’s what I know:

The ACA is a massive undertaking that impacts everyone. It’s not just about the 16 million who work in the industry, or its stakeholders—hospitals, doctors, post-acute providers, insurance companies, drug and device manufacturers, and suppliers—it’s about every individual and every employer. It’s about those with insurance and those without, companies that provide coverage and those that don’t. It’s about 17 percent of the gross domestic product (GDP), 23 percent of the federal budget, 26 percent of the average state’s budget, 19 percent of the average household budget, and the fastest-increasing expense in all three.

Lots of work has been done already: though most of its more substantive requirements start in 2014—health insurance exchanges (HIXs), individual mandate, employer pay or play penalty, and others—much has been done. Fifteen states and DC have announced plans to implement HIXs via legislative authority and work is in progress. Insurance companies are poised to send out checks averaging $151 on August 1 to 7.3 million enrollees who will receive rebates totaling $1.1 billion resulting from over-charges per the Medical Loss Ratio (MLR) requirements of ACA. And 3.1 million young adults under age 26 are now covered on their parent’s policy adding 0.9 percent of the family’s premium last year. The Center for Medicare and Medicaid Innovation (CMMI) has awarded 107 innovation grants to organizations seeking to find better ways to deliver high quality, cost effective care. Accountable care organizations (ACOs) are operating in 41 states, and lifetime limits on insurance coverage for 105 million Americans have been eliminated. And 5.1 million seniors got a rebate for their Part D prescription drug costs last year. In addition, 67,000 otherwise un-insurable individuals currently participate in state-run high risk pools authorized and funded through ACA. And 170,300 small businesses received tax credits for purchasing health insurance for their employees. Kaiser estimates $13 billion has been spent to date—1 percent of the ACA’s total funding: seems to have resulted in a fair amount of activity.

Regardless of the Court’s decisions, health reform 2.0 will start the same day. The Federal Reserve last week said the economic recovery would be slow with near-term GDP growth at 2.5 percent and unemployment possibly hitting 7.5 percent by year end 2013. The Congressional Budget Office (CBO) the week before said health costs would increase 5.7 percent per year for the next decade assuming ACA is implemented, and only slightly less if not. If the mandate is thrown out, as is anticipated by some, the economic underpinning of the law will be compromised. Four sectors made concessions based on the individual mandate’s potential to increase insurance coverage by 16 million: drug manufacturers $27 billion plus an agreement to close the donut hole for seniors in Medicare Part D; health insurance plans $32 billion in excise taxes plus concessions around the “Cadillac tax” in 2018 and limits of premium increases and risk abatement; medical device manufacturers an excise tax of 2.3 percent starting January 1, 2013 ($20 billion); and hospitals, ambulatory and post-acute providers payment reductions of $155 billion. If the mandate is set aside, reform 2.0 will feature a healthy debate about these taxes and cuts and likely efforts to revisit each. If the law stands, its experiments in clinical integration, evidence-based care, bundled payments, and changes in incentives from fee-for-service (FFS) to performance-based payments will need to produce results sooner rather than later. And regardless of the Court’s rulings, states will find themselves facing tough choices—how to stretch education, public health, general services, and homeland security resources thinner because Medicaid, Children’s Health Insurance Program (CHIP), and state employee and pensioner health costs are vexing problems.

I was in the House of Representatives late the evening of March 21, 2010 when ACA passed by a 219-212 margin. It was surreal: the magnitude of the legislation likened by pundits to the passage of Medicare in LBJs Great Society and FDR’s “new deal.”

I was a 10th grader in Chattanooga when Medicare passed: I was more concerned about my Corvair Monza’s exhaust fumes, problem zits, and Tyner Rams football. I didn’t care that seniors above 65 and the poor would benefit from programs intended to “insure domestic tranquility” and “promote the common welfare” per the Constitution’s preamble. Those were distant problems.

Today, I see it differently: regardless of the Court’s rulings, and notwithstanding the grandstanding about health reform that’s coincident in our political seasons, health reform circa ACA or without will be one of the defining issues of this era. And solutions require urgent attention among thoughtful citizens willing to set aside political agendas and special interests and act in the interest of America’s current class of 10th graders also likely distracted but no less impacted.

I don’t know what the Court will say this week. And for me, it matters less how it rules than how we behave as a society in addressing the health system’s fixes after its court rulings are known.

Paul Keckely

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

P.S.: a Special Edition Monday Memo will be out the day after the Court’s rulings. A national Dbrief webcast discussion about what the court’s ruling mean for organizations will follow. Interested parties may also download “Watchful preparation: Strategic considerations in anticipation of the Court’s rulings on the ACA.”

Implementation update

CMS to monitor consumer satisfaction with QHPs, HIXs

Thursday, the Centers for Medicare & Medicaid Services (CMS) issued a notice on its plans to develop a survey that will measure enrollee satisfaction with qualified health plans (QHPs) as well as the consumer experience interacting with HIXs. The agency is soliciting information on publicly-available domains, instruments, and measures for capturing the experience of the consumer. The notice specifically seeks items for which the people who received care are the best or only judge, and consumers and patients identify the information as important to them. Comments on the notice are sought from consumers, researchers, vendors, health plans, and other stakeholders by June 29, 2012.

Note: if the Supreme Court throws out the ACA entirely, the requirement that states operate HIXs will be set aside. Otherwise, states have until January 1, 2013, to make provisions to operate an exchange, or allow the federal government to operate the exchange on their behalf.

Catholics, student groups launch advocacy campaigns around contraception coverage

Thursday, the U.S. Conference of Catholic Bishops launched a two-week ad campaign—“Fortnight for Freedom”—protesting ACA contraception coverage rule. Advocates for Youth announced Friday it’s re-launching “Birth Control 4 Us” July 4. In support of the provision that requires access to contraception coverage without a co-payment per Section 2713 of ACA.

Note: the issue at hand is the requirement that contraception be covered by organizations with the exception of “religious organizations” that lawmakers have defined narrowly to include churches, but not religiously affiliated organizations like schools. The Catholic Bishops seek exclusion from the requirement for all Catholic-affiliated organizations.

CMS announces third round of ACO applications

Friday, CMS published terms for participation in ACOs (Section 3022 of ACA) for organizations seeking to begin operations January 1, 2013. “We are creating this new opportunity in response to requests from stakeholders and potential partners who requested additional opportunities to partner with CMS as Advance Payment ACOs. Information about the application process and deadlines for the Shared Savings Program is available at

Note: the number of ACOs increased 38 percent over the past six months: 221 ACOs are being structured in 45 states and the District of Columbia vs. 160 ACOs in 40 states in November 2011. (Source: “Growth and Dispersion of Accountable Care Organizations,” Leavitt Partners)

HHS awards funding to expand community health centers

Wednesday, the U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced $129 million to expand access to 219 community health centers in 41 states from the Community Health Centers and National Health Service Corps (NHSC) Fund authorized by Section 10503 of ACA. The fund provides $11 billion over fiscal years (FYs) 2011-2015 to community health centers.

Note: there are 1,100 community health centers across the U.S. serving 20 million low-income patients in areas deemed to be medically underserved. HHS has estimated new grants will add 5,600 new positions to serve an additional 1.25 million patients.

PCORI awards funding to study consumer engagement

The Patient-Centered Outcomes Research Institute (PCORI) awarded $30 million from its Pilot Projects Program to explore methods for engaging patients in the health research and dissemination process. The awards were given to research institutions in 24 states and the District of Columbia and will be funded over two years.

Note: per Section 6301 of ACA, PCORI is tasked with implementing the U.S. comparative effectiveness research program—a set of tools to equip prescribers, providers, and consumers to know which treatments and compounds work best, comparing the strength of evidence for each regardless of cost. In 2012, it will spend $122 million of its $160 million operating budget on research grants.

AHA expresses concerns over Hospital Readmissions Reduction Program proposed rules

Last week, AHA submitted comments to CMS urging the agency to exclude planned and unrelated patient readmissions from measures in the Hospital Readmissions Reduction Program per Section 3025 of ACA. The CMS Hospital Inpatient Prospective Payment Systems FY 2013 rule released April 24 proposes cutting inpatient pay by 1.9 percent to eliminate coding changes hospitals made that led to higher-than-anticipated Medicare payments. Additionally, it contains a 0.8 percent cut to offset coding changes between 2007 and 2010.

“We urge the agency to modify its requirement to ensure consistency with other existing regulations. First, CMS should require that an [sole community hospital] SCH report only if it becomes aware of one or more errors in its initial application that could have affected its initial classification. Second, we urge CMS to clarify that if a hospital is aware of, but does not report as required, the agency may cancel the hospital’s classification effective on the date the hospital became aware of the factors or information, not retroactive to when its SCH status was first granted. Finally, we urge CMS to clarify that hospitals must make a report within 30 days of becoming aware of any factor or information that could have affected the initial classification.”

Note: a lingering debate in health services research circles is the precise definition of what constitutes an “avoidable” readmission. In some cases, a readmission is advisable though not anticipated. Policymakers are wrestling with the methodology to resolve the issue.

Challenge to 12-year bio-similar protection initiated

In a citizen petition to the U.S. Food and Drug Association (FDA) filed in April challenging the Biologics Price Competition and Innovation Act per Section 7002 of ACA, Abbott Laboratories seeks to protect its intellectual property and trade secrets from the requirement that after 12 years are no longer protected by copyright law. The suit contends that no biologic approved before the passage of the ACA (March 23, 2010) should be considered able to be copied. Note: sales of biologics have increased faster than traditional medicines since 2007. Annual savings from biosimilars are forecasted at $14.5 billion (Sanford C. Bernstein analysis).

Legislative update

Illegal immigrant law signed by President

Last Friday’s announcement of the new White House policy to provide amnesty for young undocumented immigrants…The new policy applies to illegal immigrants who are under 30 years of age—those who entered the U.S. before their 16th birthday and have been in the U.S. for at least five years will not be deported. Instead, they will be part of a new program where they are granted a two-year, renewable work permit. The policy applies to 800,000 of the U.S. 11 million illegal immigrants. Note: 6.5 million of these people are under 34 years of age and constitute more than 20 percent of the U.S. uninsured population.

CMS reconsiders hospital governing board rules that require physician representation

CMS will reconsider its requirement that a hospital’s board must include a member of its medical staff per a memorandum issued last week to state survey agencies. The letter requests that surveyors not interpret the requirement on their own, or issue citations related to this provision. In addition, it instructs approved hospital accreditation programs not to revise standards or survey processes related to the requirement until CMS addressed the issue completely.

Note: last week, the American Hospital Association (AHA), the National Association of Public Hospitals and Health Systems (NAPH), and the Association of American Medical Colleges (AAMC) wrote letters to CMS requesting that the agency retract the inclusion of medical staff on governing board from the hospital and critical access hospital (CAH) Medicare & Medicaid Conditions of Participation final rule issued May 16, 2012 (see Deloitte Center for Health Solutions, Monday Memo, June 18, 2012).

Note: as hospitals and physician alignment accelerates to accommodate clinical integration and accountable care, the role physicians play in governance is a key issue. Historically, accrediting agencies and state overseers have discouraged substantial representation of physicians on hospital boards concluding their votes are predisposed toward the interest of the profession and their peers than the community’s interest. As physicians and hospitals align more closely, and as risk sharing arrangements with physicians are used more widely, the issue of governance will be under closer scrutiny.

ONC update: meaningful use EHR adoption

The Electronic Health Records (EHR) Incentive Programs, which began in March 2011, “provide incentive payments to eligible professionals, hospitals, and CAHs as they adopt, implement, upgrade, or meaningfully use certified EHR technology in ways that improve care. Eligible professionals include physicians, nurse practitioners, certified nurse midwives, and some physician assistants.” The program was established by the Health Information for Clinical and Economic Health Act of 2009 (HITECH) as part of the stimulus program (American Recovery and Reinvestment Act [ARRA], February 2009). Results as of May 2012:

  • More than 110,000 eligible professionals (19 percent) and over 2,400 eligible hospitals (48 percent) have been paid by the Medicare and Medicaid EHR Incentive Programs.
  • $5.7 billion in EHR Incentive Program payments have been made: $3 billion in Medicare EHR Incentive Program payments between May 2011 (when the first payments were released) and the end of May 2012 and $2.7 billion in Medicaid EHR Incentive Program payments between January 2011 (when the first states launched their programs) and the end of May 2012.

MedPAC report to Congress: limits on Medicare out-of-pocket payments, improved expansion of dual-eligible highlights

The Medicare Payment Advisory Commission (MedPAC) released its June 2012 report to Congress last week on the Medicare health care delivery system recommending…

Caps on Medicare beneficiary out-of-pocket costs: recommends reforms including a cap on beneficiary out-of-pocket spending, a deductible, and a schedule of copayments for services to Medicare’s benefit design to give beneficiaries better protection against high out-of-pocket spending and to create incentives for them to make better decisions about their use of discretionary care.

Care coordination in FFS in lieu of disease management programs that have not worked found demonstrations on care coordination and disease management models have not shown significant improvements in patient outcomes or reductions in Medicare spending, and recommends the development of methods to encourage care coordination within the current FFS system—explicit payments for related services to primary care clinicians.

Expansion of dual-eligibles program: recommends making the Program of All-Inclusive Care for the Elderly (PACE) accessible to more beneficiaries by improving the Medicare Part C (Medicare Advantage [MA]) risk-adjustment system to more accurately predict risk across all enrollees, making payments more appropriately reflect the costs of the population.

Issues for risk adjustment in MA: found systematic payment inaccuracies result in opportunities for favorable selection in the program, plans that focus on high-risk populations, may be adversely affected and will be at a financial disadvantage.

Adjustments to rural provider payments: found payments for rural hospitals to be as adequate as for urban hospitals, and recommends rural payment adjustments be designed to encourage cost control for providers and target hospitals with low patient volume and long distances from other providers.

Improvements for home infusion therapy: found difficulty creating payment systems with incentives for appropriate utilization as well as gaps in current coverage; recommends the creation of a demonstration project for beneficiaries who need infused antibiotics.

Note: MedPAC is an independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. The 17-member Commission’s statutory mandate is quite broad: advising the Congress on payments to private health plans participating in Medicare, analyzing access and quality of care, and others. Appointments to the Commission are staggered; the terms of five or six Commissioners expire each year. The Commission is supported by an executive director and a staff of analysts, who typically have backgrounds in economics, health policy, public health, or medicine.

GAO: HRSA management of health centers inadequate

Thursday, the Government Accountability Office (GAO) released two reports identifying inadequacies in the Health Resources and Services Administration’s (HRSA) management of the federal Health Center Program and grant funding to community health centers. The GAO reports found that HRSA’s timeframe for addressing grantee noncompliance was “overly generous, the process for identifying noncompliance insufficient, use of site visits to assess compliance unclear, and project officers did not consistently identify and document grantee noncompliance.” Following the release of the reports, Senators Tom Coburn (R-OK), Michael Enzi (R-WY), and Richard Burr (R-NC) sent a letter to HRSA Administrator Mary Wakefield requesting a management plan to address these concerns. In the letter the Senators stated, “Given the lack of strong internal controls and transparency, we are concerned that HRSA’s mismanagement of the program is likely wasting taxpayer dollars and potentially jeopardizing patients’ access to care.” (Source: GAO, “Health Center Program: Improved Oversight Needed to Ensure Grantee Compliance with Requirements, June 2012)

Note: HRSA provides grants to eligible health centers under Section 330 of the Public Health Service Act. In 2010, grants helped fund more than 1,100 health center grantees that provided services at more than 8,100 health care delivery sites and served nearly 19.5 million people. These grants made up over 20 percent of all health center grantees’ revenues in 2010.

House approves bipartisan FDA user fee bill

Wednesday, the House passed a revised Prescription Drug User Fee Act (PDUFA), S. 3187—the result of bipartisan negotiations between Senate and House conferees. Notably, the final bill removed amendments from the Senate version which would have moved all drugs that contain hydrocodone into Schedule II of the Controlled Substances Act, a more restrictive category, as well as an amendment which placed a delay on FDA guidance for mobile medical applications. The bill retained orders for the FDA to complete a multiagency report and provide a strategy for an appropriate regulatory framework regarding mobile applications and report to Congress, but allows the agency to release guidance prior to the report. The CBO projects the bill will decrease federal deficits by about $311 million over the next decade. The Senate is expected to vote on the user fee bill tonight and send it without further amendment to President Obama where it is expected to be signed into law.

Note: PDUFA was enacted in 1992, renewed in 1997 (PDUFA II), 2002 (PDUFA III), and 2007 (PDUFA IV). It authorizes FDA to collect fees from companies that produce certain human drug and biological products to partially offset its operating costs. The legislative authority for the PDUFA IV expires in September 2012. The reauthorization of PDUFA V will authorize FDA to collect user fees and use them for the process of the review of human drug applications for FYs 2013 through 2017.

Long-term care legislation introduced

Friday, Representative Joe Courtney (D-CT) announced a plan that would create a tax deduction for a growing share of long-term care premiums—reaching 100 percent in 2014. It would also establish an escalating credit for caregivers of those with long-term care needs, reaching $3,000 in 2016.

State update

Bill to increase Medicaid FMAP to 74 percent introduced

Representative Bill Cassidy (R-LA) introduced the Medicaid Accountability and Care Act of 2012 to set a uniform federal medical assistance percentage (FMAP) for states to the highest of any state during a given fiscal year—currently 74.18 percent. The bill would also adjust federal payments to state Medicaid programs based on risk-adjusted per capita calculations such as age, health, and disability, and would allow states to combine Medicaid and Medicare payments for dual-eligibles. The Cassidy proposal would disallow state use of provider taxes or intergovernmental transfers to increase their federal funding payments.

Note: FMAPs are used in determining the amount of federal matching funds for state expenditures for certain social services, and state medical and medical insurance expenditures. The Social Security Act (SSA) requires the Secretary of HHS to calculate and publish the FMAPs each year. For FY 2012, FMAPs range from 50 percent in 19 states to 74.18 in Mississippi.

ONC pilots prescription drug abuse programs in Ohio, Indiana

Thursday, the HHS Office of the National Coordinator (ONC) for Health Information Technology launched a new pilot program in Ohio and Indiana aimed at the reduction of prescription drug abuse by making prescription drug data available to providers and pharmacists that treat patients in ambulatory and emergency departments (EDs). The prescription drug monitoring programs (PDMPs) pilot in Indiana will examine how ED staff can receive a patient’s controlled substance prescription history directly through a care management system and the Ohio pilot will test the impact of having a drug risk indicator in the EHR and how that affects clinical decision making.

Note: the Centers for Disease Control and Prevention (CDC) describes prescription drug overdose deaths as an epidemic. Deaths from prescription drugs now outnumber deaths from heroin and cocaine combined. Over the past decade, prescription drug-induced deaths have approached motor vehicle deaths as the leading cause of all injury deaths. CDC reports 14,800 overdose deaths in 2008. The misuse and abuse of prescription painkillers was responsible for more than 475,000 ED visits in 2009, a number that nearly doubled in just five years. In 2010, 2 million people reported using prescription painkillers nonmedically for the first time within the last year.

State round-up: health exchanges

  • Vermont lawmakers say they will continue implementation of their single-payer health care system by 2017. This year, Vermont lawmakers designed a web-based HIX to be fully functional by 2014. If the ACA is overturned, officials say the state will lose between $200 and $300 million per year in tax credits to implement such services and new provisions.
  • Rhode Island Governor Lincoln Chafee (I) named former Massachusetts public health commissioner Christine Ferguson as the director of the state health benefit exchange on Thursday. The Governor also stated, “Rhode Island is going to move forward regardless of what the Supreme Court does.”
  • Thursday, Connecticut Governor Dannel P. Malloy (D) nominated Kevin J. Counihan, former chief marketing officer for the Massachusetts Health Insurance Connector Authority and president of Choice Administrators Exchange Solutions, as the chief executive officer to lead the Connecticut HIX.
  • New Hampshire Governor John Lynch (D), signed legislation that prohibits any state agency, department, or political subdivision from planning, creating, participating, or enabling a state-based HIX. The bill seeks to preserve the state’s status as the primary regulator of insurance within the state and establishes guidelines for interaction with federally-facilitated health exchange.

Personhood efforts update

The personhood effort seeks to grant personhood status to embryos which, in theory, would make abortions illegal. Efforts to get the issue on the November 2012 ballots in Nevada and California failed. In Oklahoma, the state’s Supreme Court ruled the amendment would be unconstitutional. In Ohio, proponents have collected 20,000 signatures but seem short of the 385,000 required in two weeks to secure a place on the ballot. And in the 2010 election cycle, efforts failed to pass in Mississippi and Colorado.

State round-up: Medicaid, CHIP

  • Last week, Oregon Governor John Kitzhaber (D), a former emergency medicine physician, announced the state will move its Medicaid overhaul forward, including creating new coordinated care organizations to begin service on August 1 of this year. The state will receive $1.9 billion over the next five years to help transition to the new payment delivery system. State officials stated that funding will not be affected should the U.S. Supreme Court overturn the ACA, since the legislation authorizing the payments predates ACA provisions.
  • Tuesday, North Carolina State Department of Health and Human Services Acting Secretary Al Delia announced the dismissal of Dr. Craigan Gray, Medicaid Director since 2009. The program is expected to cost the state more than $12 billion this year to provide services to its 1.3 million enrollees, and faces an expected $200 million deficit for FY 2012.
  • New Jersey's CHIP, Family Care, will be permitted to classify adults covered under the program as “newly eligible” Medicaid beneficiaries according to a letter issued last week by CMS. The distinction will allow the state to receive 100 percent FMAP for those beneficiaries during the first two years of ACA’s Medicaid expansion.
  • California legislators came to a budget agreement that will cut $1 billion from Medicaid and other state health programs to close a $15.7 billion budget deficit. The plan includes moving 880,000 lower-income children of uninsured parents from the Healthy Families program to the state Medicaid program, Medi-Cal, and moving 1.4 million low-income seniors and people with disabilities who receive benefits from both Medicare and Medi-Cal into managed care programs.

State round-up: employee insurance coverage

  • Study: Massachusetts tiered network: half of Massachusetts’ public employers and one-third of its private companies use plans that limit access to expensive physicians and hospitals. Nearly 45 percent of employers use plans with high deductibles and co-insurance to lower costs. (Source: MassINC survey 225 Massachusetts-based employers)

Industry news

Supreme Court rules pharma sales reps ineligible for overtime

Last week, the U.S. Supreme Court ruled 5:4 that pharmaceutical companies are not required to pay sales representatives overtime wages under the Fair Labor Standards Act (FLSA). Justice Samuel Alito delivered the majority opinion in the case, declaring pharmaceutical representatives are “outside salesmen” that are away from the office with minimal supervision and are compensated for their efforts based on sales. The dissenting opinion penned by Justice Stephen Breyer asserted that “detailers” are not authorized to sell products and therefore they are employees who would fall under FLSA jurisdiction (detailers were covered under FLSA up to 2009). The opinion concluded: “Petitioners—each of whom earned an average of more than $70,000 per year and received other benefits—are hardly the kind of employees that the FLSA was intended to protect.” Justice Stephen Breyer composed the dissenting opinion arguing that “pharmaceutical representatives are not ‘outside salesmen,’ primarily because they seek to bring about, not their own sales, but sales by others.”

Note: physician employment by hospitals, stronger pharmacy and therapeutics (P&T) committee activity by plans and health systems, and the emergent role of pharmacy benefit managers (PBMs) have made direct-to-physician access by drug detailers more problematic. Drug companies have reduced their detailer workforce by 20 percent in recent years and are testing alternative models (i.e., use of clinical specialists and others).

AMA House of Delegates

Last week, the American Medical Association (AMA) held its annual meeting in Chicago during which the House of Delegates approved these positions:

Need for additional evaluation of the ICD-11 as a new diagnostic coding system: conduct more research on ICD-11 as a possible alternative to replace ICD-9. The AMA will research this issue and will report back to the House of Delegates in 2013.

Taxes for beverages with added sweeteners: support taxes on beverages with added sweeteners to finance consumer education campaigns and other obesity-related programs.

Requirement that drug manufacturers notify the FDA about potential drug shortages: require manufacturers of FDA-approved drugs to give the agency at least six months’ notice, or as soon as is practicable, of anticipated voluntary or involuntary, permanent or temporary, discontinuance of the manufacture or marketing of such a product.

Expansion of prevention programs of fatal opioid overdose: support further implementation of community-based programs that offer naloxone and other opioid overdose prevention services.

Coverage for screening mammograms: adopted policy that starting at age 40, all women should be eligible for screening mammography, and supports insurance coverage for this screening.

Facilitate licensing for physicians to treat across state lines: support the development of state programs that allow out-of-state physicians to provide their professional services across state lines at free clinics and in underserved communities.

Preserve residents’ opportunity to moonlight: recommends graduate medical education programs to allow resident and fellow physicians who are in good standing with their programs the opportunity for external and internal moonlighting.

AMA: insurance company error rates down to 9.5 percent, denial rates up 69 percent

Last Monday, AMA released its National Health Insurer Health Card report, finding that private health insurer error rates on paid medical claims dropped from 19.3 percent in 2011 to 9.5 percent in 2012. The report also indicated an upward trend in denials across the board for the first time since 2008—with every insurer except one increasing the number of denials made in 2012. All of the rated insurers improved their accuracy from 2011, with one achieving a rating at 98.3 percent.

AMA calculates that the error rate improvement resulted in $8 billion in health savings due to decreased administrative work. However, one in ten medical claims are paid in the wrong amount, and $7 million could be saved if insurers began to consistently pay claims correctly.

Note: the findings are based on a random sample of 1.1 million electronic claims for 1.9 million services in February and March 2012.

FDA panel supports cancer treatment drug

An FDA panel voted unanimously (11-0) backing the approval of the experimental cancer treatment drug Carfilzomib developed by Onyx Pharmaceuticals Inc. The company is seeking approval to treat patients with multiple myeloma, a cancer affecting bone marrow. The vote came during controversy surrounding the accelerated approval process that allows drugs to be approved with less clinical data than is required for normal approval. Companies who are granted accelerated approval are required to continue research on the drug and seek full approval, and the FDA can revoke an accelerated approval if the future studies fail to show beneficial results. The main study submitted in support of the drug followed 266 patients and showed a 22 percent response rate. The FDA is expected to make a decision by July 27.

Study: more hospitals using LGBT nondiscrimination policies

An annual survey from the Human Rights Campaign (HRC) Foundation, found that 57 percent of the 407 hospitals represented in its annual Healthcare Equality Index (HEI) report were designated as “Leaders”—those who met the HEI four criteria for equitable and inclusive care—an increase of 40 percent over last year. Among findings:

  • 95 percent of the rated facilities include sexual orientation in their nondiscrimination policies
  • 80 percent include gender identity in their policies
  • 65 percent of inpatient hospitals have policies granting equal visitation rights to same-sex couples and parents
  • 67 percent provide training on lesbian, gay, bisexual, and transgender (LGBT) patient-centered care

The “Core Four” areas in which the index measures equity in health care services include patient non-discrimination policies, visitation policies, employment non-discrimination policies, and training in LGBT patient-centered care. (Source: HRC, “Healthcare Equality Index 2012: Promoting Equitable and Inclusive Care for Lesbian, Gay, Bisexual and Transgender Patients and Their Families,” 2012)

Study: ED visits grew 60 percent faster than population growth over eight years

Between 2001 and 2008, visits to EDs grew 60 percent faster than population growth, according to a new study. ED visits increased 1.9 percent per year over the eight years, while mean occupancy (crowding) increased 3.1 percent per year. Although some may be attributable to advanced imaging practices, the study found that patients receive more tests and procedures due to physicians practicing defensive medicine and patients demands for high-technology care such as CT scans or advanced testing. Suggestions for improving these rates include:

  • Placing a physician at triage or eliminating triage altogether when there are open rooms in the ED;
  • Allowing patients to wait in the ED while tests are being completed, rather than in the waiting room; and
  • Increasing public health measures to prevent patients from getting sick and/or allowing patients to get sick visits at their doctors’ offices.

(Source: Stephen Pitts, Annals of Emergency Medicine, “National Trends in Emergency Department Occupancy, 2001 to 2008: Effect of Inpatient Admissions Versus Emergency Department Practice Intensity,” 2012)

Study: demand for health care workers to outpace overall job growth for next decade

Georgetown researchers found:

  • Labor productivity in health care has declined since 1990 and productivity per worker is among the lowest in the U.S. economy.
  • Jobs in the industry will increase from 15.6 million to 19.8 million between 2010 and 2020.
  • The net effect of the new health care reform law on jobs is insignificant.
  • There are two labor markets in health care: high-skill, high wage professional and technical and low-skill, low-wage support jobs.
  • Health care professional and technical workers earn “extremely good” wages.
  • Overall, 28 percent of health care jobs need graduate degrees—the second highest proportion of all occupations.

(Source: Anthony Carnevale, Nicole Smith, Artem Gulish, & Bennett Beach, Georgetown University Center on Education and the Workforce, “Healthcare,” June 2012)

Study: child consumption of sweetened beverages no more at risk for obesity than others

The majority of children over two years of age who consume soft drinks and sweetened beverages (i.e., fruit punch, lemonade) are not at higher risk for obesity than their peers who drink healthy beverages. The study examined beverage intake patterns of Canadian children, finding a positive association only in males ages six to eleven. The authors found the main predictors of childhood obesity in Canadian children were household income, ethnicity, and household food security.

(Source: Danyliw et al, “Beverage patterns among Canadian children and relationship to overweight and obesity,” Applied Physiology, Nutrition, and Metabolism, 37(5))


“The U.S. economy is continuing to lose momentum just as global events that could derail the recovery gather steam. New data this week provided more evidence that the economic recovery is sputtering for the third year in a row. Layoffs are rising, factory output is falling, and consumers are cutting spending amid rising uncertainty….Most economists still expect the U.S. to avoid falling into a recession. But they expect lackluster growth of about 2 percent for the rest of the year.”

—Casselman and Izzo, “Recovery Slows as Global Risks Rise,” The Wall Street Journal, June 16, 2012

“States have under their constitution the right to require people to either go to school, or get auto insurance, or in this case to get health insurance.”

—Mitt Romney, Face the Nation, CBS, June 17, 2012

“We cannot say to the American people, `we’re going to throw you at the mercy of the insurance companies.’”

—Representative Nancy Pelosi (D-CA), Thursday, June 21 on the possibility the Supreme Court might throw out the individual mandate

“Even as consumer [information technology] IT—word-processing programs, search engines, social networks, e-mail systems, mobile phones and apps, music players, gaming platforms—has become deeply integrated into the fabric of modern life, physicians find themselves locked into pre–Internet-era EHRs that aspire to provide complete and specialized environments for diverse tasks. The federal push for health IT, spearheaded by the ONC, establishes an information backbone for accountable care, patient safety, and health care reform. But we now need to take the next step: fitting EHRs into a dynamic, state-of-the-art, rapidly evolving information infrastructure—rather than jamming all health care processes and workflows into constrained EHR operating environments.”

—Kenneth D. Mandl and Isaac S. Kohane, The New England Journal of Medicine, “Escaping the EHR Trap—The Future of Health IT,” June 14, 2012

“FDA reviewers are not oblivious to these human costs. But the culture in which they operate is not well suited to minimizing them. By implementing a few key structural reforms, both Congress and the FDA itself could change this counterproductive agency culture. In so doing, they would also dramatically improve the FDA’s ability to keep the American people both healthy and safe.”

—Scott Gottlieb, National Affairs, “Changing the FDA’s Culture,” 2012

Fact file

  • Pill mills: from 1999 to 2009, the number of deaths from narcotic pain pills nearly quadrupled to 15,597, more than combined mortality from heroin and cocaine. (Source: CDC)
  • Mortality rates: deaths per 100,000 from heart disease vary widely by state: lowest Minnesota (126.6) to highest Mississippi (260.2). The U.S. average is 186.5. (Source: National Center for Health Statistics, 2011)
  • Hospital selection: the importance of a physician’s referral to a specialized provider decreases with household income: 77 percent important for those with under $25K income vs. 59 percent for those above $100K. (Source: Thomson Reuters PULSE Survey)
  • Medicare utilization trends: between 2005 and 2009, outpatient use by Medicare increased 4 percent annually vs. annual decrease of 1 percent for inpatient care. (Source: MedPAC Report to Congress, March 2011)
  • Fraud: $68 billion (3 percent of total spending) is lost to fraud; 40 percent of hospital claims contain errors. (Source: National Health Care Anti-Fraud Association)
  • ACA advertising spending: $235 million in opposition advertising since March 2010 vs. $69 million supportive. (Source: Kantar Media Campaign Media Analysis Group)
  • Opinions about health care reform: 77 percent of Americans polled favor the President’s and Congress’ work on reforming the health care system, even if the Supreme Court strikes the law vs. 19 percent who want to retain the status quo. About one-third fully support the law, compared to 47 percent who oppose ACA. The numbers are almost evenly split between those who approve (48 percent) and disapprove (50 percent) of President Obama’s handling of the issue—numbers which have remained consistent throughout the three years the poll has been conducted. (Source: Associated Press, “The AP-GfK Poll,” June 2012)
  • Birth control: according to a new poll, slightly less than three-fourths of voters support women’s access to affordable prescription birth control, including 55 percent who indicated they strongly agree. (Source: National Women’s Law Center and Planned Parenthood)
  • Physician burnout: of participating physicians in a survey, 52.5 percent had experienced work-home conflicts in the last three weeks. Factors that increased risk include hours worked per week, having children, gender, and work location. Increased age and subspecialty field reduced the risk for physicians. (Source: Liselotte Dyrby, et al, Archives of Surgery, “Work-Home Conflicts Have a Substantial Impact on Career Decisions That Affect the Adequacy of the Surgical Workforce,” 2012)
  • Uninsured: in 2010, more than 26,000 people between the ages of 25 and 64 died prematurely due to lack of health care coverage, a study estimates. That number rose 28 percent from 20,000 between 2005 and 2010. These numbers vary according to states: 28 in Vermont and 3,164 in California (2010). The five highest ranking states in terms of premature death include California, Texas, Florida, New York, and Georgia. (Source: Families USA, “Dying for Coverage: The Deadly Consequences of Being Uninsured,” June 2012)
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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