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Health Care Reform Memo:
June 24, 2013

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 new health care normal: increased transparency and public scrutiny 

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

June usually means down time in some industries, but in health care, this year is a notable exception. Just in the past week, we learned…

  • The Supreme Court will allow legal challenges to a longstanding drug makers’ business practice called “pay-to-delay” in which branded and generic manufacturers enter into contracts about the timing for generic market entry…
  • The Government Accountability Office (GAO) released two reports concluding the state and federally-supported health insurance exchanges (HIXs) might not be ready this October…
  • And the American Medical Association’s (AMA) House of Delegates passed a number of resolutions that evidenced the group’s anxieties about key elements of the Affordable Care Act (ACA) and concern about implementation of the new ICD-10 system of coding…

And that’s just last week!

Stepping back, there are a few clear takeaways for everyone involved in this industry—providers of health services, suppliers of technologies and therapeutic interventions and those that finance the system as investors or fiscal intermediaries:

  1. The business practices of our industry are increasingly an open book. Deals between parties will be scrutinized and likely made public. We are a high profile industry whether we like it or not.
  2. The public’s opinion will matter more. Health care is complicated: we learned that in the debate about health reform and confusion about the ACA. Going forward, educating consumers will be a vital consideration in our business practices. Perception and fact sometimes align, but often they don’t. We need to understand and respond to both.
  3. With health care consuming a fourth of federal and state budgets, elected officials and policymakers will, of necessity, pay closer attention: not just about expenditures, about everything!

Stay tuned. It’s the new normal.

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

Note: details about each of the news items mentioned above can be found in this issue of the Monday Memo.

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HIX enrollment push starts 

Last Tuesday, Enroll America (EA) started an ad campaign in 18 states to encourage low income adults to enroll in coverage through the HIXs in October. EA data showed 78 percent of the uninsured do not know about HIXs or their eligibility for coverage.

Separately, the administration announced an $8 million project with PR firm Weber Shandwick to set up a website to support enrollment, estimating 2.7 million “young invincibles” will sign up in the first year. Other organizations announced parallel efforts, including Planned Parenthood, Young Invincibles and Organizing for Action.

(Source: Sandhya Somashhekhar, The Washington Post, “Push is on to promote health law,” June 19, 2013)

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GAO: HIXs might not be ready 

Wednesday, the GAO sounded a warning that the HIXs might not be ready to accept enrollees and verify their eligibility for subsidies on October 1, per the ACA: “Whether [the government’s] contingency planning will assure the timely and smooth implementation of the exchanges by October 2013 cannot yet be determined.”

It issued two reports: one for the federal government’s status, since it will support 34 state HIXs and the second for the 16 states and District of Columbia HIXs. The Congressional Budget Office (CBO) estimates 2 million will be covered through the small business HIXs and 7 million in the individual HIXs

(Source: GAO, “Status of CMS Efforts to Establish Federally Facilitated Health Insurance Exchanges,” June 2013)

Related: Thursday, Senate Finance Ranking Member Orrin Hatch (R-UT) and eight other Senators sent a letter to U.S. Department of Health and Human Services (HHS) Secretary Sebelius requesting details on the HIX Navigator Program, saying the program lacks appropriate safeguards to protect the privacy of consumers.

Related: a Robert Wood Johnson Foundation analysis of federally-facilitated exchanges (FFEs) in Michigan, Virginia and Alabama concluded operational models will be unique in each state. The two major conclusions of the analysis:

  • There will be considerable variation in preparedness and effort across the FFE states.
  • Consumer assistance functions (navigation, enrollment, et al) represent a bigger challenge than oversight of plans.

Background: 33 states are expected to have federal involvement in establishing and operating HIXs—19 as formal FFEs, seven partnership FFEs and seven FFEs with states responsible for plan management. In Michigan, the state will be responsible for plan management and some aspects of consumer assistance; in Virginia, the state will take on plan management responsibilities; and in Alabama, the feds will be responsible for all plan management and consumer assistance duties. Plan management duties for an HIX include: establishing standards for the issuers selling plans in the HIXs and communicating standards to insurers; receiving and reviewing data from insurers’ to ensure compliance with standards; ongoing monitoring of insurer compliance; and conducting appropriate review and analysis of market data on prices and products both inside and outside of HIXs to prevent adverse selection.

Reaction: Bill Copeland, U.S. Life Sciences and Health Care National Industry Leader, Deloitte LLP: the uncertainty about the HIXs coupled with requirements of the law to comply with guaranteed issue, minimum medical loss ratio (MLR) requirements and the new excise tax that starts next year are problematic to health insurance plans. Their costs of compliance have risen sharply as a result, prompting premium increases and pushback from smaller employers and, in some states, legislators. The impact on smaller plans may be even more significant. While all are adapting, some will find it more difficult and seek strategic partnerships, while others will diversify their product offerings and gain strength as the U.S. insurance market continues to consolidate. Innovation and growth to achieve sustainability is table stakes for all plans, especially challenging in the uncharted waters of health reform. Nonetheless, their prospect for the future is bright: managing care that’s coordinated well and affordable is the core business of insurance plans. Though the ways it’s done are likely to change, demand for affordable, well-coordinated care will continue to increase.

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Senators introduce bill to raise full-time employment threshold  

In the ACA, employers with 50 or more full-time employees—defined as those averaging 30 or more hours weekly—must provide affordable health insurance coverage to employees or pay a penalty. Wednesday, Senators Susan Collins (R-ME) and Joe Donnelly (D-IN) introduced a bill to raise the full-time work threshold to 40 hours a week. Their bill also asks President Barack Obama to delay the employer penalty for failing to offer affordable health coverage beyond January 1, when it’s scheduled to take effect.

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HHS: consumers saved $3.9 billion on insurance premiums in 2012  

Thursday, HHS announced that 77.8 million consumers saved $3.4 billion up-front on their premiums and received $500 million in rebates—8.5 million enrollees are due to receive an average rebate of around $100 per family. In 2011, premium savings and rebates totaled $1.9 billion.

Per the ACA, insurance companies that do not meet the minimum MLR standards must notify members about the new rule and how much the rebate might be.

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Oversight committee subpoenas HHS over CO-OP documents  

After receiving no response to requests from HHS to provide documents regarding the ACA Consumer Oriented and Operated Plan (CO-OP) program, the House Committee on Oversight and Government Reform issued a subpoena last week requiring HHS to turn over documents. Committee Republicans are requesting the release of documents about each CO-OP applicant’s sustainability and any communication among HHS employees, contractors and Obama administration employees about the applicant’s viability. For more information regarding concerns about sustainability of CO-OPs, see the June 17, 2013 Monday Memo.

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Hospitals want DSH cuts delayed  

Friday, the four major hospital trade groups—American Hospital Association, the Association of American Medical Colleges, the Catholic Health Association of the United States and the Federation of American Hospitals—sent a letter to Capitol Hill supporting a delay in scheduled reductions in the Medicare and Medicaid Disproportionate Share Hospital (DSH) programs. Their rationale: “The Supreme Court’s decision on Medicaid expansion and subsequent uncertainty regarding the uptake in insurance coverage have reduced the estimate of those who will receive health care coverage to 25 million individuals, rather than the initial projection of 32 million covered lives. As a result, hospitals treating disproportionate shares of these patients will see their payments reduced in ways unintended by policymakers.”

Background: DSH payment cuts are scheduled to reduce Medicaid payments by $18.1 million in fiscal year (FY) 2014 and Medicare payments by a total of $22 billion over ten years. Initially the Centers for Medicare & Medicaid Services (CMS) will reduce Medicare DSH payments by 75 percent in FY2014 and increase payments based on the percent of the population uninsured and the amount of uncompensated care. For Medicaid, states with a lower percentage of their population uninsured will receive a 50 percent reduction and states with a larger percentage of uninsured will receive a 25 percent reduction.

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CMS extends Pioneer deadline (again)  

Last week, CMS announced it was extending the deadline to July 15 for decisions by Pioneer accountable care organization (ACO) participants to stay in the program. The original deadline was April 30, then May 31. The issue: Pioneer participants believe the measures used to assess first-year performance results—savings, patient experiences, quality—are flawed and cost too much to collect and report.

Background: the 32 Pioneer ACO participants include physician-led organizations and health systems, urban and rural organizations that serve 860,000 beneficiaries in 18 states. Most already had risk-based contracting experience, either through their own plans or in partnerships with Medicare or private payers. The basic premise of all ACO programs is the same: if an ACO achieves savings while hitting quality targets, it receives higher reimbursement from Medicare; if it does not meet the targets, it is held “accountable” through reduced reimbursement. For more information on Pioneer ACOs, see the June 17, 2013 Monday Memo.

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Legislative update 

Supreme Court rules “pay-to-delay” case can proceed  

In a 5-3 decision Monday, the Supreme Court ruled that the 11th Circuit Court was wrong in refusing to hear a case (FTC v. Actavis) brought by the Federal Trade Commission (FTC) against pharmaceutical manufacturers alleging the industry practice of paying generic manufacturers to delay introducing competing drugs violated antitrust laws.(sometimes called “pay-to-delay”). Justice Stephen Breyer, who wrote the majority opinion, said: “Payment for staying out of the market keeps prices at patentee-set levels and divides the benefit between the patentee and challenger, while the consumer loses.”

The FTC says pay-to-delay costs consumers $3.5 billion annually. In its statement, FTC Chairman Edith Ramirez noted: “The Supreme Court’s decision is a significant victory for American consumers, American taxpayers and free markets. The court has made it clear that pay-for-delay agreements between brand and generic drug companies are subject to antitrust scrutiny and it has rejected the attempt by branded and generic companies to effectively immunize these agreements from antitrust laws.” The Supreme Court rejected the pharmaceutical industry’s main defense—that as long as settlements brought generics to market before the brand drug’s patent expires, generic and brand name drugs should be free to negotiate deals. But the court’s decision leaves it up to lower courts to decide whether each deal violates antitrust law.

My take: the Supreme Court’s decision in policy circles is being described as a win for the FTC, which had encountered challenges in bringing legal proceedings against some “pay-to-delay” deals. Understandably, brand name drug makers and generics, otherwise natural rivals, are disappointed with the result since it leaves in jeopardy their current agreements. What’s clear is this: business arrangements in health care—between drug and device manufacturers and plans or providers, even contractual relationships between manufacturers and pharmacy benefit managers (PBMs) and group purchasing organizations (GPOs) or relationships with clinical investigators—are fair game for regulators in our increasingly transparency-driven industry. The health care industry’s “standard operating procedures” and “core strategies” are now subject to a level of scrutiny that is unprecedented. Growth strategies for innovators are certain to be tempered by calculation of the risk-return algebra in this regulatory climate.

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Committee seeks information about IRS access, handling of personal health information  

On June 11, the House Committee on Energy and Commerce Panel requested information about a San Diego lawsuit against the Internal Revenue Service (IRS) alleging that it improperly obtained access to 60 million personal medical records. Republican members of the Committee want more detail on how the IRS will handle confidential medical information.

Background: the IRS’ tasks relative to the ACA include collecting information from employers and insurers, determining who qualifies for Medicaid subsidies and enforcing penalties for individuals who do not purchase insurance and employers who do not provide affordable options. (Source: CNN Money, “IRS Role in Obamacare,” May 28, 2013)

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Immigration legislation would increase health spending $100 billion  

Last Tuesday, the CBO released its analysis of the Border Security, Economic Opportunity and Immigration Modernization Act (S. 744) estimating, between 2014 and 2023, federal HIX subsidies will increase $82.3 billion, Medicaid and Children’s Health Insurance Program (CHIP) spending by $29.3 billion and Medicare spending by $.8 billion by increasing the number of people who would be eligible to receive Medicaid or CHIP benefits for emergency conditions.

Background: S. 744 was introduced by Senator Chuck Schumer (D-NY) April 16, 2013, containing provisions that would increase the number of lawful permanent residents (LPRs—“ foreign born individuals who have received permission to live and work in the U.S permanently”), nonimmigrants and authorized residents. S. 744 permits access to federal HIX subsidies for certain groups of nonimmigrants and LPRs. Noncitizens that are lawfully present in the U.S. are currently eligible for HIX subsidies. Also, currently, states may “provide full Medicaid and CHIP benefits to certain groups of LPRs and other legal residents…By increasing the number of LPRs and other legal residents, S.744 would increase the number of people who would be eligible to receive either full Medicaid or CHIP benefits or Medicaid coverage for treatment of emergency conditions.”

(Source: CBO, “Cost Estimate: The Border Security, Economic Opportunity and Immigration Modernization Act (S. 744),” June 18, 2013).

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Compounding pharmacy legislation introduced in the House 

June 14, Representative Morgan Griffith (R-VA) released draft legislation to address instances in which a compounded drug can be administered or produced and the type of oversight necessary to prevent public health outbreaks caused by contaminated compounded drugs. Highlights:

  • Pharmacists would be permitted to compound drugs for an individual as long as the individual presented a prescription from a licensed provider or the pharmacist had a long-standing relationship with the prescribing physician and the individual or patient.
  • Drugs may be compounded for a non-patient specific purchase order, but a prescription must be filed within one week of a provider administering the drug in a physician’s office.
  • While the U.S. Food and Drug Administration (FDA) would not be given unique authority over certain compounding manufacturers, as proposed by the Senate Committee on Health, Education, Labor & Pensions (HELP), the role of state and federal regulators would be clarified.

Note: for more information on the compounding drug legislation passed by the Senate HELP Committee earlier this year, see the May 28, 2013 Monday Memo.

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MACPAC report to Congress  

Last week, the Medicaid and CHIP Payment and Access Commission (MACPAC) issued a report to Congress, providing analysis and data on issues related to Medicaid and CHIP. Highlights of the report:

  • In July 2011, 50 percent of all Medicaid enrollees were covered by comprehensive risk-based plans and an additional 16 percent were covered by primary care case management (PCCM) programs.
  • Participation in comprehensive risk-based managed care plans was lowest among the aged (12 percent) and the disabled (29 percent) and highest among non-disabled adults (47 percent) and children (62 percent).
  • Of individuals dually enrolled in Medicaid and Medicare, 12 percent were enrolled in a Medicaid comprehensive risk-based managed care plan in FY2010.

(Source: MACPAC, “June 2013 Report to the Congress on Medicaid and CHIP,” June 14, 2013)

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HHS proposal: including medical records in gun background checks faces opposition from physicians 

The amendment to the federal privacy rule proposed by HHS last week would allow state mental health officials to transmit medical records of anyone declared mentally unfit by a court to the National Instant Criminal Background Check System run by the Federal Bureau of Investigation (FBI). In opposition, the National Association of State Mental Health Program Directors believes the change would not solve the problem and physician groups oppose it based on the potential it might erode confidence in the physician-patient relationship.

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SGR fix update: Congressional committees look to offsets in post-acute care sectors 

Senate Finance and House Ways & Means Committee staff have asked trade groups representing the post-acute sectors to recommend mechanisms wherein they can help offset the cost of fixing the sustainable growth rate (SGR). The letter asked: “Please provide information and ideas on the types of long-term PAC [post-acute care] reforms that will help advance the goal of improving patient quality of care and improving care transitions, while rationalizing payment systems and improving program efficiency.”

Background: the Medicare Payment Advisory Commission reported that, since 2000, post-acute spending has more than doubled and per-person spending has risen 90 percent. Recent policy proposals have focused on site-neutral pay and policies to reduce readmissions as near-term solutions.

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Transparency of Medicare payments sought in bill 

Tuesday, Senators Ron Wyden (D-OR) and Chuck Grassley (R-IA) reintroduced the Medicare Data Access for Transparency and Accountability Act, which would create a public, searchable Medicare payment database.

Since the 1970s, Medicare claims data has been off limits to the public, but a federal judge in Florida recently ruled in favor of Dow Jones to allow public access to claims data through a Freedom of Information Act request. Senators Wyden and Grassley want the data to be available at no charge on an easily accessible website.

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@Regulatory update: CMS Medicare Advantage Annual Notice and RADV Audit Notification 

Note: @Regulatory is a feature in the Monday Memo, providing the latest regulatory, legislative and other public policy developments affecting life sciences and health care organizations. To access the @Regulatory newsletter, visit the website here.

Two Health Plan Management System (HPMS) memos released by CMS inform Medicare Advantage (MA) and Medicare Prescription Drug (Part D) Plans about upcoming financial challenges in the MA and Part D programs. In this issue of @Regulatory, summaries of the memos are provided and potential financial impacts are discussed.

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State update 

State round-up: Medicaid 

To date, 27 states and DC have said they will or are in support of expanding their Medicaid programs; 20 states have indicated they are unlikely to expand their programs in 2014:

Announced or Governor in support of expansion Not participating or highly unlikely to participate Undecided or undeclared

Democratic Governor Republican Governor Independent Governor

Sources: NASHP, PoliticoPro, Kaiser Family Foundation. Updated May 27, 2013.

  • Last Monday, Maine Governor Paul LePage (R) vetoed a bill to expand the Medicaid program for the second time expressing concern that the state will end up bearing the financial costs of expansion that would insure 70,000 additional enrollees.
  • The Michigan Senate formally adjourned Friday for the summer without voting on the House bill accepting Medicaid expansion, which Governor Rick Snyder (R) supports.
  • Mississippi’s Attorney General Jim Hood stated that Governor Phil Bryant (R) does not have the authority to use an executive order to run the Medicaid program, unless authorized by the state’s legislature. The issue: although Hood’s opinion is nonbinding, the state legislature must renew the Medicaid program before it expires on June 30, 2013 in order for the program to continue. Some lawmakers want the legislature to agree on Medicaid expansion before reauthorizing the program, while others refuse to call a vote until after the program has been renewed.

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State round-up: HIX 

Seventeen states—12 led by Democratic governors, 4 led by Republicans and one Independent—and the Democratic mayor of DC have announced plans to operate state-based exchanges. Seven states—five led by Democratic governors and two led by Republicans—will participate in state-partnership exchanges. The remaining 26 states will default to a federally-facilitated exchange.

State-based exchange State- partnership exchange Federally- facilitated exchange

Democratic Governor Republican Governor Independent Governor

*Utah’s individual market will be a FFE; the Small Business Health Options Program (SHOP) will be a state-based.

(Source: HHS)

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Deloitte Center for Health Solutions analysis: number of health insurance carriers per state: HIX individual market 


  • Unless otherwise noted, data represents number of applicants based on qualified health plan (QHP) or rate filing submissions. These are subject to changes and approval by federal or state regulators.

  • For unlisted states, filing deadlines have not passed or data is not public.

  • MN, NE are based on number of carriers on individual and small group combined, split not public / unclear.

  • AK, NE are based on number of carriers on individual as of June 7, 2013, filing deadlines not yet passed.

Source: Deloitte Analysis of publicly available HIX letter of intent to apply for qualified health plan (QHP) certification data as of June 7, 2013

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State round-up 

  • Wednesday, CMS voided 30 durable medical equipment (DME) competitive bidding contracts involving 98 contractors in Tennessee, concluding the suppliers were not properly licensed in the state and did not have a physical location in Tennessee. Tennessee and Maryland were the only states where complications with state licenses were found.
  • Mental health related emergency department (ED) visits in North Carolina are double the national average, per a study by the University of North Carolina School of Medicine. In 2010, 9.3 percent of all ED visitors reported a mental health problem as a top complaint (compared to 5 percent nationally) and were more than twice as likely to be admitted to the hospital. Of those patients reporting mental health issues in the ED, 61 percent complained of stress, anxiety, or depression. According to the report, higher mental health complaints in North Carolina’s EDs may be attributed to the lack of community-based services and continuity of care. Many mental health organizations have gone out of business in the state, leaving EDs as one of the only options for mental health care.
    (Source: Centers for Disease Control and Prevention [CDC], “Emergency Department Visits by Patients with Mental Health Disorders—North Carolina, 2008-2010,” MMWR 62(23);469-472)
  • Last Tuesday, New York authorities reached a $1 million settlement with a Brooklyn home health agency accused of using unqualified health aides. The agency hired workers with false training certificates to care for elderly and disabled clients and submitted false claims to Medicaid from 2005 to 2007. New York’s Medicaid program requires state-licensed training for all home health aides.
  • In Oregon, legislation (HB 3160) is being considered in the state Senate, which allows citizens to sue insurance companies for not paying claims promptly, refusing authorization of medical procedures and denying coverage for losses or medical bills. The House passed the bill in April, but it is unlikely to pass in the state Senate due to an unpopular provision allowing third-party defendants to sue an insurance company, even if they are not the policyholder. A similar Senate bill (SB 414) passed on Wednesday, June 19, which would allow the Insurance Division of the Department of Consumer and Business Services director to seek restitution for consumers. Currently, the division can only revoke the business license of an insurance company but cannot order it to pay restitution to a consumer. Oregon insurance companies are currently exempt from the state’s Unlawful Trade Practices Act of 1971.
  • June 14, Texas Governor Rick Perry (R) signed into law legislation (SB 1106) that provides transparency in generic drug maximum allowable costs (MACs) for Medicaid plans by requiring PBMs to use drugs rated “A” or “B” by the FDA for their list of reimbursable drugs and to provide pharmacists information about the sources that were used to determine the ingredient costs for drugs. The bill, which will take effect September 1, requires PBMs to update these lists once a week; pharmacists will now have the ability to challenge drug prices, with a mandatory response by the PBM within 15 days.
    The issue: managed care organizations contract with PBMs to determine which pharmacy benefits will be covered, as well as the reimbursement levels for pharmacies, but this data is not made available to the pharmacy. PBMs also determine drug payments based on ingredients and dispensing costs. In March 2012, Texas expanded managed care statewide. Subsequently the average dispensing fee for Medicaid prescriptions dropped from $7.13 to $1.53 and pharmacists received $12.7 million less in the first month after the switch.
  • Some states are encouraging seniors to purchase or use their life insurance to pay for long-term care as a means to decreasing the cost of Medicaid for the state. Texas Governor Rick Perry (R) signed a bill last Friday giving state Medicaid officials the authority to tell beneficiaries that they have the option to sell their life-insurance policies to a third-party administrator, who would then use the policy to pay for health care of their choice. According to The Wall Street Journal, similar legislation is pending in New York, California, Florida, Kentucky, Louisiana, Maine and New Jersey, with most of the bills requiring that the funds be set aside into a separate account to be used only for the beneficiaries’ long-term care.
    (Source: Greene, Kelly, The Wall Street Journal, “States Ease Use of Life Policies for Elder Care,” June 16, 2013)
  • State-sponsored price transparency websites: researchers at the University of Michigan found the number of state-sponsored websites increased from ten in 2002 to 62 as of early 2012. Highlights:
    • 73 percent of sites reported inpatient care prices for medical conditions and 71 percent reported surgery pricing
    • Outpatient care: 37 percent reported diagnostic and screening procedures, 23 percent radiologic studies, 15 percent prescription drugs and 10 percent laboratory tests
    • 47 percent of sites were set up by the state; 39 percent by hospitals
      (Source: Kullgren, Jeffrey, et al., Journal of the American Medical Association, “A Census of State Health Care Price Transparency Websites,” June 2013)

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Industry news 

Meeting highlights: AMA House of Delegates in Chicago last week  

ACA and SGR: a resolution to develop a policy statement on health care reform was approved, including statements on repealing and replacing the Medicare SGR physician payment formula; repealing and replacing the Independent Payment Advisory Board (IPAB); supporting medical savings accounts (MSAs) and Medicare “private contracting” (in which a patient could contract with a doctor to pay above Medicare’s set fee with the patient responsible for costs above Medicare reimbursement); and a provision to “immediately direct sufficient funds toward a multi-pronged campaign to accomplish these goals.” A clause in the resolution calling for the AMA to publicly withdraw its support of the ACA if the federal government fails to act on these issues was not approved.

Obesity as a disease: the AMA House of Delegates officially recognized obesity as a disease, to encourage physicians to pay more attention to the condition and insurers to pay for treatments. Two new obesity drugs have entered the market in the last year.

Background: 28.9 percent of U.S. adults and 16 percent of adolescents were obese in 2012, per the CDC vs. 28.7 percent in 2011 and 19.4 percent in 1997. Recognition of obesity as a disease has long been debated. The Obesity Society issued its support for classifying obesity as a disease in 2008. The IRS said that obesity treatments qualify for tax deductions. In 2004, Medicare removed language from its coverage manual saying obesity was not a disease. But Medicare Part D, the prescription drug benefit, disallows weight loss drugs along with drugs for hair growth and erectile dysfunction. The AMA vote went against the recommendations of the Council on Science and Public Health, which said obesity should not be considered a disease because the measure usually used to define obesity (body mass index) is flawed.

Related: Wednesday, a bipartisan group of House and Senate lawmakers introduced a bill requiring Medicare to cover weight loss drugs. The VA and 20 state Medicaid programs already cover FDA-approved weight loss drugs.

Compounding, energy drinks, hydrocodone, biosimilar policies: the AMA House of Delegates voted to support increased FDA oversight of drug compounding, back a ban on the marketing of energy drinks to children, advocate for hydrocodone combination products not to be rescheduled and re-examine emerging biosimilar issues. With regard to drug compounding, the delegates adopted a new policy recommending that traditional compounding pharmacies be subject to state board of pharmacy oversight and encouraging all state boards of pharmacy to reference sterile compounding quality standards, including, but not limited to, those in the U.S. Pharmacopeia, as the standard for sterile compounding in their state—a policy being pushed by the National Association of Boards of Pharmacy.

Maintenance of certification: the AMA House of Delegates voted 275-192 against a proposal backed by the American Board of Medical Specialties that recommends physician competence be ascertained via a continuous maintenance of certification (MOC) process, replacing current requirements that physicians be certified every six to ten years. Delegates approved the hiring an independent third party to assess the effects of MOC on the physician workforce, physicians’ practice costs, patient outcomes, patient safety and patient access and consider alternate MOC efforts. The Federation of State Medical Boards proposed an additional recertification program, maintenance of licensure, as well as the American Osteopathic Association’s Continuous Certification process.

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Pfizer, Takeda case signals alert for at-risk generic launches  

At issue in last week’s $2.15 billion verdict award to Pfizer and Takeda from Teva and Sun Pharmaceuticals is a practice called “at risk” generics, whereby a generic manufacturer releases a drug before patent protection challenges by the branded owner have been exhausted. At risk launches are legal if a generic company gets permission from the FDA after a 30-month delay.

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MGMA survey: 55 percent of medical practices not ready for ICD-10 rollout  

A survey of 1,200 office-based practitioners released last week by the Medical Group Management Association (MGMA) found widespread concern about the rollout of ICD-10 by October 1, 2014. Key findings:

  • 70 percent were “very concerned” about expected loss of clinician productivity and 67 percent were very concerned about loss of coder productivity.
  • 71 percent responded that, to accommodate ICD-10, their electronic health record (EHR) systems either were upgraded or still need to be upgraded, will need to be replaced, or they are unsure.
  • 60 percent said their systems will need to be upgraded (MGMA puts costs at $10,000/physician).
  • 0.6 percent said testing was complete with EHRs for ICD-10 compliance and 42 percent responded that they didn't know when they might test their systems.

(Source: MGMA, “Legislative and Executive Advocacy Response Network (LEARN), ICD-10 Implementation Study,” June 2013)

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Moody’s: hospitals seeing volume declines, increased focus on value  

Monday at the Healthcare Financial Management Association (HFMA) National Institute, Lisa Goldstein, associate managing director for Moody’s Investor Service, told health care finance professionals that hospitals are seeing 5-12 percent volume declines. She encouraged the largely provider audience to focus on four goals in their pursuit of value:

  • Achieve breakeven performance with Medicare rates.
  • Build scale through nontraditional methods.
  • Improve the patient experience.
  • Cultivate informed leadership.

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NCQA updates medical home certification requirements  

The National Committee for Quality Assurance (NCQA) is seeking comments on proposed revisions to its patient-centered medical home recognition program standards, raising the number of elements that apply to pediatric practices, integrating behavioral health care into primary care and increasing alignment with Stage 2 Meaningful Use health information technology (HIT) requirements. Examples: increasing access through “nontraditional types of clinical encounters,” such as structured e-visits, group visits and scheduled telephone encounters; having more than 5 percent of patients view their electronic health information, with the ability to download or transmit it to a third party; and having more than 20 percent of patients record their family medical history into a structured and searchable electronic record system.

Background: the NCQA has recognized 5,730 practices as medical homes since 2008 and will take public comments through July 22.

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Study: $105 billion potential savings from medical adherence improvement  

The IMS Institute for Healthcare Informatics analysis released last week found medication non-adherence comprised the largest avoidable cost category, with an estimated cost of $105 billion in 2012. The study reported that cost was a primary driver of non-adherence, with patient’s lack of information about long-term effects of certain diseases and fear of a drug's side effects also contributing.

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Public hospital association gets new name  

Thursday, the National Association of Public Hospitals and Health Systems announced its new name: America’s Essential Hospitals. The group has more than 200 members, predominantly safety net hospitals.

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Research snapshots 

New industry and peer-reviewed studies of note to health system transformers…

Unauthorized immigrants account for 1.4 percent of U.S. medical spending

Nebraska researchers concluded unauthorized immigrants have lower health care expenditures compared to legal residents, naturalized citizens and U.S. natives. For the 2000-2009 period: U.S. natives accounted for $1 trillion in average annual health care spending. Costs for immigrants averaged $96.7 billion and $15.4 billion of that total (or 15.9 percent) was for unauthorized immigrants. Key findings:

  • 7.9 percent of unauthorized immigrants had health care spending from public sources, averaging $140 per person per year vs. 30.1 percent of U.S. natives had health care spending from public sources, with an average of $1,385 per person per year. Average ED expenditures for unauthorized immigrants were $54 per year, compared to $138 per year for U.S. natives.
  • 5.9 percent of unauthorized immigrants received care that providers are not reimbursed for compared to 2.8 percent of U.S. natives in the same category. Researchers suggested this is due to fewer unauthorized immigrants who have insurance

(Source: Health Affairs Blog, “Unauthorized Immigrants Account for Only 1.4 Percent Of U.S. Medical Spending,” June 12, 2013)

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“Tens of thousands of times each year, patients are wheeled into the nation’s operating rooms for surgery that isn’t necessary…Some fall victim to predators who enrich themselves by bilking insurers for operations that are not medically justified. Even more turn to doctors who simply lack the competence or training to recognize when a surgical procedure can be avoided, either because the medical facts don’t warrant it or because there are non-surgical treatments that would better serve the patient.
The scope and the toll of the problem are enormous, yet it remains largely hidden. Public attention has been limited to a few sensational cases, typically involving doctors who put cardiac stents in patients who didn’t need them.
In fact, unnecessary surgeries might account for 10-20 percent of all operations in some specialties, including a wide range of cardiac procedures—not only stents, but also angioplasty and pacemaker implants—as well as many spinal surgeries. Knee replacements, hysterectomies and cesarean sections are among the other surgical procedures performed more often than needed, according to a review of in-depth studies and data generated by both government and academic sources..”

—Peter Eisler and Barbara Hansen, USA Today, “Under the knife for nothing,” June 20, 2013

“[There] is the urgent need to reform and modernize our entitlement programs—primarily Social Security, Medicare and Medicaid. These are safety net programs that we have enacted as a compassionate society to care for the elderly in retirement, for people with disabilities and for those who cannot afford health insurance on their own….
Without federal spending reform—driven primarily by entitlement costs—interest payments on our national debt will reach almost $1 trillion per year by 2023 and explode well beyond that—not if, but when, interest rates get back to normal levels…. 
We must have a vigorous debate on how to fix these programs, but before we can do that, Americans must first recognize that there is a problem.
The evidence clearly shows that the programs as we know them today cannot survive without reform and modernization. Yet according to public opinion polls, most Americans are not yet prepared to accept this reality.”

—address by R. Bruce Josten, Executive Vice President of Government Affairs, U.S. Chamber of Commerce, “10 Truths About America’s Entitlement Programs,” June 19, 2013

“Medicare is portrayed as getting the best deal from the system because Medicare pays less per service. But remember how the system works. Who’s to say Medicare doesn’t pay less per procedure because it’s being billed for many more procedures, because that’s how providers are allowed to maximize their revenues from the payer known as Medicare?
In fact, plenty of evidence suggests this is exactly how Medicare operates. And Congress understands as much, hence the 25 percent cut in physician reimbursement it keeps threatening to impose is informed partly by expectations that physicians could maintain their incomes by charging for more services.”

—Editorial: Holman Jenkins, The Wall Street Journal, “The Young Won’t Buy ObamaCare,” June 19, 2013

“There are popular and valuable aspects to the workplace-wellness mania, such as on-site gyms, corporate sports teams, healthy cafeteria food and free nicotine patches. But take out those components that don’t need or benefit from government incentives or regulation and here’s what’s left: employers paying workers to fill out anonymous forms about their health, facilitated by human resources departments reliant on vendors and brokers to concoct math to justify these programs…all in the name of preventing medical events that vendors don’t track.”

—Editorial: Al Lewis and Vik Khanna, The Wall Street Journal, “Here Comes ObamaCare’s `Workplace Wellness’,” June 21, 2013

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Fact file 

  • College education: 33 percent of adults ages 25-29 had a bachelor’s degree in 2012 vs. 25 percent in 1995 and 22 percent in 1975. (Source: Digest of Education Statistics, National Center for Education Statistics, “2012 Digest Tables, Chapter 1: Table 9,” 2012)
  • Ratio of active workers to Medicare beneficiaries: 4.5:1 (1965), 3.3:1 (2011) 2.3:1 (2030). (Sources: Heritage Foundation, “The number of workers per Medicare beneficiary is falling,” May 2012; CMS, “Medicare Trustees Report,” June 2012)
  • Medicare and Medicaid spending forecast: Medicare spending is forecasted to increase from $592 billion in 2013 to $1.0 trillion in 2023; Medicaid spending increased from $72 billion in 1990 to $400 billion in 2010, of which $40 billion and $271 billion, respectively, were federal dollars. (Sources: CBO, “The Budget and Economic Outlook: Fiscal Years 2013 to 2023,” February 2013; American Hospital Association, “Ensuring A Healthier Tomorrow,” March 12, 2013)
  • Premiums versus payments: the average couple will receive $387,000 in lifetime Medicare benefits yet they pay $122,000 in Medicare taxes. (Source: American Hospital Association, “Ensuring A Healthier Tomorrow,” March 12, 2013)
  • Medicare beneficiaries, costs and chronic conditions:
    Number of chronic conditions Percentage of beneficiaries Percentage of total Medicare spending
    0-1 32% 7%
    2-3 32% 19%
    4-5 23% 28%
    6+ 14% 46%
    (Source: CMS, “Chronic Conditions Among Medicare Beneficiaries, Chartbook: 2012”)
  • Hospital falls: between 700,000 to 1 million hospital falls occur annually or 0.562 per 1,000 discharges; 30-51 percent result in an injury; 22 percent are age 74 and older; some are serious adding 6.72 days to average length of stay and $13,000 to costs. (Sources: CMS Hospital Compare, AHRQ, JCAHO)
  • Premium increases: individual policies for adults ages 21-29 may increase up to 42 percent and adults ages 30-39 may see a 31 percent increase. (Source: Karlson, C. and Giesa, K., Contingencies, “Age Band Compression Under Health Reform,” January 2013)
  • Health care compliance risk: health care compliance was rated an important issue by 45 percent of corporate chief counsel; settlements with the health care industry were $7.2 billion; health care companies spent $5.72 billion on legal advice for health care regulatory matters. (Source: Association of Corporate Counsel, “Chief Legal Officers 2013 Survey,” January 2013)
  • Medical marijuana: 18 states and DC have legalized medical marijuana as of June 13. (Source: National Conference of State Legislatures, “State Medical Marijuana Laws,” May 2013)
  • Physician employment by a hospital: 26 percent in 2013 vs. 20 percent in 2012. (Source: Jackson Healthcare survey of 3456 physicians polled between March 7 and April 1, 2013)
  • Mobile health: one-third of U.S. adults who are online are “very” or “extremely” interested in using smartphones or tablets to ask their doctors questions, make appointments, or get medical test results; 47 percent are “somewhat confident” exchanges of personal health information is secure vs. 40 percent who are “not very” or “not at all” confident. (Source: Harris Interactive online survey of 2,050 Americans ages 18 and older, conducted May 22-24, 2013)
  • Opinions about ACA: terminology matters: according to a telephone poll of 1,505 people in the U.S. ages 18 and older: 73 percent of Democrats said they have a favorable opinion of “Obamacare” vs. 58 percent of Democrats said they have a favorable opinion of the “health reform law.” Republicans had an 86 percent unfavorable opinion of “Obamacare” vs. a 76 percent unfavorable opinion of the “health reform law.” Overall, 25 percent of those surveyed said they had “no opinion” on the “health reform law,” and just 11 percent felt the same about “Obamacare.” (Source: Kaiser Health Tracking Poll, June 2013, conducted June 4-9, 2013)
  • Primary care distribution: the U.S. has 80 primary care physicians per 100,000 people ranging from an average of 68 in rural areas to 84 in urban areas. To provide a primary care physician for every 2,000 Americans—a commonly used threshold—the U.S. needs an additional 2,670 rural physicians and an additional 3,970 urban physicians. (Source: Robert Graham Center for Policy Studies in Family Medicine and Primary Care) Note: the analysis does not consider primary care provided by nurse practitioners or retail clinics in its analysis.
  • Physician interaction with pharmaceutical companies: in 2011, $15.7 billion was spent by drug makers on face-to-face sales and promotional activities targeting physicians. (Source: PhRMA) Note: starting August 1, drug makers must report every gift/transaction with physicians with a value of $10 or more and it will eventually become public record. Physicians will have the opportunity to review what is reported about them in the second quarter of next year and the reports will be made public on September 30, 2014.

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