Health Care Current: April 22, 2014
This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.
By Sarah Thomas, Research Director, Deloitte Center for Health Solutions, Deloitte Services LP
The Centers for Medicare & Medicaid Services (CMS) has released data on Medicare reimbursements to physicians for the first time in decades – representing $77 billion in reimbursement, 880,000 providers and including 9.2 million lines of data. The health services researcher in me is thinking about what we could do with the data. I understand that we need to be careful not to jump to conclusions about the outliers. For example, some early analysis of high utilizers have shown that what looks like a doctor with an extraordinary patient load is actually many doctors using the same identification number for billing. But still, these data have the potential to be a gold mine of information and could lead to new insights about practice patterns and create new opportunities for better value.
One of the first analyses of the data showed a dramatic variation in reimbursement for certain drugs across the country. To me, this finding reinforced what John Wennberg has been showing since 1967 when he received $350,000 from President Lyndon B. Johnson to analyze Medicare data for hospital and physician performance: There are differences in practice patterns across the country, leading to real differences in spending without apparent differences in outcomes.
I am sure that physicians believe they are providing high-quality care to their patients. But to me, the variation in reimbursement points out that health care could benefit from an independent and rigorous analysis of which drugs work best and for which patients, and which treatments offer the best value (both in cost and efficacy). This was the promise with a comparative effectiveness agenda and the creation of the Patient-Centered Outcomes Research Institute (PCORI) in the Affordable Care Act (ACA).
In addition to PCORI and the ACA, one of the promises of big data and analytics is that they should be able to provide us with information about cost and outcomes of different treatment choices using evidence drawn from patient care. Wouldn’t it be great to get to good scientific findings without having to wait for the results from clinical trials? Clinical trials have important roles in establishing the safety and efficacy of therapies, but have tended to be limited to particular patients carefully selected for the trial. Also, they can take a long time to generate results.
But just knowing whether a particular treatment is more effective may not go far enough to change medical practice. It is helpful but might not be sufficient. Now the challenge lies in how to disseminate this information to doctors who are busy with patient care every day and get them to act on it.
As we move to value-based care and change the incentives in the payment system to reward value over volume, we could see health care providers and clinicians begin to look for information on comparative effectiveness and then actually use it. All other things equal, a physician who has incentives to get better outcomes – lower total cost of care and patients who get better – could be more likely to act on robust information about which treatments are most effective and offer most value.
Health information technology has the potential to support clinical decision-making by connecting information on patient characteristics, comorbidities and risk factors with scientifically valid information about what therapies lead to better outcomes and presenting this information at the point of care.
Going back to the variations in Medicare payments, the health care industry should remember that there is a consumer angle too. Of course, many patients do what their doctor recommends, and most patients in Medicare have supplemental coverage that helps to shield them from the 20 percent of the bill that they are responsible for. But these costs show up in Medigap and Medicare Advantage premiums; all other things equal, beneficiaries could pay more in places with higher spending. Spending on services that do not necessarily result in better outcomes seems to me to be the definition of “waste.”
I am a great supporter of tools that help patients with a given condition understand the tradeoffs between different therapies, including not getting treatment. Some research has found that patients tend to choose more conservative approaches when they have more complete information about the tradeoffs. While we still have not figured out how to get these tools into patient care at the right time, providers and physicians working under value-based incentives may have a greater motivation to work these types of tools into patient care.
As discussed in last week’s Health Care Current, I agree that we have to be careful in using the data that CMS has released and not jump to conclusions about what it means for individual physicians.1 But I hope that the data will be a step toward getting researchers to develop and providers to use more evidence to achieve value-based care.
Poll results from the April 15 Health Care Current:
Note: answers have been rounded to the nearest whole number
Last Thursday, April 17, President Barack Obama announced that 8 million individuals enrolled in coverage through the HIXs. Of the individuals enrolled through the federally-facilitated HIX, 28 percent are age 18 to 34 and 35 percent are younger than 35. The Administration provided statistics on coverage outside the HIXs, as well:
- 3 million have remained insured under their parents policies due to the ACA
- 3 million have enrolled in Medicaid and the Children’s Health Insurance Program
- 5 million have enrolled in plans outside of the HIXs that meet ACA standards
- 5.7 million will remain uninsured due to states that have not expanded Medicaid
The U.S. Department of Health and Human Services (HHS) did not release additional enrollment figures on plan selection, financial assistance, gender or additional age breakdowns. The special enrollment period for most state-based and all federally-facilitated HIXs ended on April 15. Several states are continuing to allow enrollment beyond this date. In addition, Gallup conducted a poll during March 4 - April 14 that found that 4 percent of the U.S. population is newly insured, half (2.1 percent) of which came through the HIXs. When asked about their health status, three-fourths of the respondents indicated they are in good, very good or excellent health, on par with the general U.S. population. Some experts have indicated that, while youth enrollment will be a critical component for HIX success, the overall health of the risk pool is equally as important.
Related: The same day, California announced that more than 3 million residents have signed up for health insurance coverage via the state Medicaid program, Medi-Cal, and Covered California, the HIX, through April 15. During the special enrollment period for the state-based HIX (April 1 through April 15), more than 200,000 residents completed applications, bringing the state’s total to nearly 1.4 million enrollees. Eighty-eight percent of the HIX enrollees are eligible for financial subsidies, 28 percent of enrollees are Latino and 29 percent are age 18-34 despite comprising a quarter of the state’s population. In addition, the state highlighted how individuals enrolled in coverage:
- 41 percent self-enrolled for coverage through the Covered California website
- 39 percent used Certified Insurance Agents
- Approximately 9 percent received help from Covered California Certified Enrollment Counselors
- Approximately 9 percent received help from Service Center Representatives
Survey: 59 percent of health care professionals report an expected loss of momentum due to ICD-10 delay
According to a survey of 1,250 health care professionals during the “What’s next for ICD-10?” Live from the Center webinar, 59 percent of respondents expect to either lose momentum or get off track as a result of the ICD-10 delay; only 11 percent expect to see no impact on their business. Additional highlights include:
- 58 percent expressed disappointment about the delay, and 11 percent are pleased to have time to focus on other priorities
- Nearly half (49 percent) of respondents said the optimal new deadline would be October 2015, while 30 percent wanted to find a way to restore the 2014 deadline
- More than half (58 percent) expect resources and funding to be impacted the most; systems and technology (14 percent), business and clinical processes (12 percent) and external coordination (8 percent) are all potential areas of impact
CMS has yet to release guidance about how organizations should proceed now that the October 2014 deadline to implement ICD-10 was delayed until at least October 2015. Last week, the agency updated the ICD-10 website to include the provision of the Protecting Access to Medicare Act of 2014 that delays ICD-10 implementation. According to the website, CMS “is examining the implications of the ICD-10 provision and will provide guidance to providers and stakeholders soon.”
For more information on the results of the survey, view the “ICD-10 Delay: How is the industry reacting?” infographic and the My Take from the April 1, 2014 Health Care Current, “ICD-10: Dealing with uncertainty when the stakes are high.”
Related: On April 11, nine groups, including the Advanced Medical Technology Association, America’s Health Insurance Plans, American Medical Informatics Association and the College of Healthcare Information Management Executives, sent a letter to Acting Administrator of CMS Marilyn Tavenner to request that CMS and HHS not delay ICD-10 implementation beyond October 1, 2015. Citing disruptive and costly effects any further delay could have, the groups urged the agencies to announce as soon as possible that October 1, 2015 would be the final date.
(Source: Deloitte Center for Health Solutions, “Infographic: ICD-10 Delay: How is the industry reacting?” March 14, 2014)
According to a new report released by the IMS Institute for Healthcare Informatics last Tuesday, spending on medications in the U.S. was $329.2 billion in 2013, reflecting an increase of 3.2 percent (not adjusted for inflation). Health care utilization, including physician office visits, hospital admissions, and prescription fills, also increased for the first time in three years. Primary drivers of the spending also included patent expiries, pricing increases and greater spending on new and innovative medicines. Other highlights include:
- Medication spending: Most spending was concentrated in small-molecule pills (i.e., traditional pharmaceutical products), but biologics and specialty drugs saw higher growth through retail and mail-order pharmacies.
- Prescription fills: Patients filled an average of 12 retail prescriptions (2 percent increase from previous year), but prescription fills among adults age 65 and older decreased from 2012 (down to 28 prescriptions per year). Approximately 86 percent of prescriptions were for generic drugs and more than half of the prescriptions cost patients less than $5, on average. The study looked at the concentration of out-of-pocket spending for drugs among consumers and found that 2.3 percent of prescriptions accounted for 30 percent of total out-of-pocket liability.
- New treatments: 36 New Molecular Entities were introduced into the market in 2013, including 10 new treatments for cancer. Other areas of innovation were in new treatments for hepatitis C, multiple sclerosis, diabetes, stroke, and acute coronary syndrome. Seventeen orphan drugs were launched, which is the most in one year since the Orphan Drug Act of 1983 passed.
(Source: IMS Institute for Healthcare Informatics, “Medicine Use and Shifting Costs of Healthcare: A review of the Use of Medicines in the U.S. in 2013,” April, 2014)
The Medical Group Management Association (MGMA) found that the ratio of full-time equivalent (FTE) non-physician providers (NPP) to physicians has increased 11 percent since 2008. The report provides insights into the role of NPPs and their ability to take on responsibility and allow physicians to focus their practice. NPPs have been used to extend the therapeutic reach of physicians, increase patient satisfaction and add clinical revenue to the bottom line. However, while the role of NPPs is increasing, and many (88 percent) are focused on primary care practice, many are not practicing in rural areas―the areas that have the greatest need.
The American Action Forum analyzed recent changes to the Medicare Advantage (MA) program and projected that payments will be reduced an average of $1,538 (13.32 percent) in 2015. Furthermore, the group projected that MA payments will be reduced by an average of 3.07 percent ($317) in 2014. The expected payment reductions from 2014 to 2015 varied from state to state, ranging from as low as 0.61 percent (North Dakota) to as high as 6.73 percent (District of Columbia). In addition, compared to the pre-ACA baseline, two states will see cuts greater than 20 percent (as much as $2,800) and MA rates will see an average cut post-ACA of more than 13 percent. The reductions will occur primarily due to changes in the benchmark payment formula and the ending of bonuses for plans with star ratings of 3 and 3.5.
Background: In addition to changes to MA payments the ACA made, on April 7 CMS also announced additional cuts to some components of MA plans beginning in 2015. The final call letter also included increases in other components. For more information about MA payment changes issued by CMS, see the April 15 Health Care Current.
(Source: Robert Book. American Action Forum, “Medicare Advantage Cuts in the Affordable Care Act: April 2014 Update,” April 17, 2014)
Last week, the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) released updated budgetary estimates regarding provisions of the ACA that impact health insurance coverage. The new analysis projects that the federal government will see net cost decreasing to $36 billion ($5 billion less than the previous projection) for 2014 due primarily to decreased spending on health insurance subsidies. Spending for the period from 2014 to 2024 is expected to be $1,383 billion—$104 billion less than the previous projection. While gross costs of HIX, Medicaid and Children’s Health Insurance Program spending and tax credits for small employers are expected to reach $1,839 billion during this period, penalty payments will result in a partial offset of $456 billion. Similar to previous projections, the subsidies available through the HIXs and increased Medicaid spending are the primary cost drivers of projected spending. These budgetary changes do not include other ACA provisions.
The analysis also included updated summaries of projected insurance coverage for the U.S. The number of individuals who have health insurance is estimated to increase by approximately 13 million in 2014, 20 million in 2015 and 25 million each year until 2024. While the source of coverage changed slightly from previous projections, the total uninsured population projected for 2024 did not change from 31 million, of which:
- 30 percent are expected to be unauthorized immigrants
- 20 percent will choose not to enroll in Medicaid despite being eligible
- 5 percent will not be eligible for Medicaid due to state decisions on expansion
- The remainder, 45 percent, will choose not to purchase insurance plans available to them through employer, HIX or direct coverage
(Source: Congressional Budget Office, “Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act,” April 2014)
Related: Last week, the New York Times highlighted changes in the Current Population Survey, a key tool used by the Census Bureau to assess health insurance coverage status in the U.S. population. These changes were announced in September 2013 in a notice from the Department of Commerce. Citing measurement error, the notice highlighted challenges with identifying current insurance status. Previous analyses have indicated that individuals answering questions related to insurance status were more likely to consider their current status rather than the calendar year. In addition, the notice indicated that other updates were made to include questions referencing insurance coverage via the exchanges. Last week, Senators Lamar Alexander (TN), John Thune (SD) and Orrin Hatch (UT) wrote a letter to the Census Bureau Director, John Thompson, requesting that the questions specifically related to health insurance be kept in for an additional two years while phasing in the new set of questions.
Last week, CBO also released updated budget projections for the U.S. from 2014 to 2024. The deficit in 2014 will be $492 billion—almost one-third less than the $680 billion that was projected earlier in the year. However, the trend in smaller deficits is expected to end soon, with the budget shortfall expected to reach approximately $1 trillion by 2024. This is due primarily to the aging of the population, increased prices for health care, expanding federal subsidies for health insurance and rising interest payments on federal debt. Debt as a share of gross domestic product (GDP) is expected to surpass the 3 percent average the U.S. saw over the last 40 years, rising to 4 percent by 2024. Should current law remain intact, CBO predicts that:
- Spending for the Medicare program will remain stable over a majority of the 10-year period, but will rise to 3.2 percent of GDP by 2024 (compared to 3 percent in 2013).
- Medicaid outlays will grow from 1.7 to 2.1 percent of GDP by 2024, mostly due the expectation that additional states will expand Medicaid and more eligible individuals will enroll in the program.
- Spending on health insurance subsidies will increase from 0.1 to 0.4 percent over the 10-year period.
CBO also indicated that when Congress passed the Protecting Access to Medicare Act of 2014, patching the sustainable growth rate for Medicare physician payments another year and making additional changes, it increased federal outlays for 2014 by $6 billion.
The HHS Office of the Inspector General (OIG) surveyed 56 Medicaid agencies (including District of Columbia and U.S. territories) and found that 15 have specific state regulations that address administrative function outsourcing; 11 allow outsourcing of these functions and four prohibit it. Nine agencies have “very few” limitations to their outsourcing agreements, and some indicated that they offshore administrative functions, which include enrolling individuals, determining eligibility and payments, processing claims and reporting information to CMS on a case-by-case basis. Federal law requires states to administer their own Medicaid program, but does not bar them from outsourcing their administrative functions offshore. The Health Insurance Portability and Accountability Act (HIPAA) requires covered entities to have business associate agreements (BAAs) with contractors to help ensure patient personal health information (PHI) is protected. Seven of the 11 Medicaid agencies that allow outsourcing used offshore contractors, but did not indicate sharing PHI with contractors. The report observed that offshore outsourcing of administrative functions that involve PHI could create system vulnerabilities. Enforcing BAAs that intend to safeguard PHI is more difficult to do offshore given variations in privacy protection laws enforced in other countries.
(Source: Office of Inspector General, U.S. Department of Health & Human Services, “Memorandum report: Offshore Outsourcing of Administrative Functions by State Medicaid Agencies, OEI-09-12-00530,” April 11, 2014)
The California Healthcare Foundation and Robert Wood Johnson Foundation released a report in April 2014 detailing New Hampshire’s efforts to provide health care price transparency to consumers and how a group of health care stakeholders believe it has influenced health care markets across the state. In 2007, New Hampshire launched HealthCost, a publically available website where consumers can access provider- and insurer-specific median amounts paid for services. The report, based on interviews with health care stakeholders, highlights that consumer use of HealthCost is modest, and it has yet to fulfill its initial goal of directly influencing consumer price-shopping. However, the interviewees attribute the following to New Hampshire’s use of HealthCost:
- Narrower provider price variation
- Changes in benefit designs, including increased high-deductible health plans, cost-sharing differentials in laboratory and ambulatory care services and incentives for utilizing price-shopping tools to compare elective outpatient procedures
- Increased competitive responses by hospitals such as opening alternative care settings (e.g., urgent care clinics), lower contract rates negotiations for certain services through specific insurers and greater price transparency
(Source: California Healthcare Foundation and Robert Wood Johnson Foundation, “Moving Markets: Lessons from New Hampshire’s Health Care Price Transparency Experiment,” April 2014)
According to the Centers for Disease Control and Prevention’s analysis from 1990 to 2010, the rate of diabetes among U.S. adults tripled over this period, increasing from 6.5 million to 20.7 million cases. However, during this same time period, rates of complications from the disease decreased:
- High-blood sugar deaths and cardiovascular episodes decreased by greater than 60 percent
- Amputations in the lower extremities (upper/lower leg, ankle, toe, foot) and stroke rates declined by about half
- End-stage renal failure decreased by approximately 30 percent
The authors attribute the decline in complications to increased preventive care among adults with diabetes, but also note the large burden the disease imposes on the health care system due to increasing prevalence. Today, almost 26 million Americans have diabetes, and complications from the disease cost $176 billion each year.
(Source: Centers for Disease Control and Prevention, “New CDC Data Show Declines in Some Diabetes-related Complications among U.S. Adults,” April 16, 2014)
Earlier this month, the National Institutes of Health released initial findings from the BrainSpan Atlas of the Developing Human Brain. The first report details a comprehensive, three-dimensional map of the developing human brain that integrates gene activity with anatomical reference atlases. The Allen Institute for Brain Science in Seattle conducted analysis on the region of the brain where genes are activated during pregnancy, allowing researchers to investigate disorders related to brain development (e.g., autism and schizophrenia). The study allows researchers to fully understand the basic mechanisms of a human brain and provides a highly detailed map to analyze all genes. In turn, this allows for analysis to understand the molecular level of the human cortical development. Key findings have illuminated unexpected differences and similarities between animal and human brains not previously known prior to this research.
Scientists and drug makers are developing a new process for cancer drug clinical trials. According to British researchers, this new process will cut both time and cost by studying multiple drugs at one time, rather than the traditional process of focusing on one drug at a given time. The main change in the new clinical trial process is the move away from using randomization, which is regarded as the gold standard of clinical drug trials. The objective of the research is to study combinations of drugs for treatment of cancer, specifically advanced lung cancer, rather than focusing on just one drug. The Cancer Research UK is investing approximately $42 million in trials with two drug companies to test these new clinical trials. Using the genetic profile of patients, trials such as the National Lung Matrix are leveraging the growing trend to fine tuning medical treatments to the patient. Because cancer is often caused by multiple gene mutations, developing a process that enables scientists to study and test multiple drugs could expedite the process for pin-pointing treatments that might be most beneficial to specific patients.