Health Care Current: September 10, 2013
This weekly series will continue to explore breaking news and developments in the U.S. health care industry, examine key issues facing life sciences and health care companies and provide updates and insights on policy, regulatory and legislative changes.
An introductory note and My Take: Innovation through convergence - the lesson of color TVs and the Wizard of Oz
From William Copeland, Jr., Vice Chairman, U.S. Life Sciences and Health Care Leader, U.S. Health Plans Leader, Deloitte LLP
Today, I’d like to thank Dr. Paul Keckley for his contributions and leadership over the last seven years. Since 2006, Paul directed the Deloitte Center for Health Solutions through what he aptly referred to as Health Reform 1.0 by providing in-depth analysis and navigation through the complexities of health care reform and the rapid changes of the health care industry. Always with a personal side, Paul showed his passion to make a positive impact on health care and the commitment to see his passion passed onto you...his friends, clients, colleagues and policy makers. Paul will be sorely missed here at Deloitte but I think it’s fair to say his impact on health care will continue.
After more than 240 publications under Paul’s direction, we now introduce to you the Health Care Current. This publication, which succeeds the Health Care Reform Memo series, will be distributed each Tuesday.
The name “Health Care Current” reflects the series’ new, dual focus on what’s happening in the health care industry right now and where it is headed. It’s no longer about “reform” but rather about how our industry operates. Each issue will now include the following sections:
- My Take: insights from Deloitte leaders on key issues industry executives and stakeholder groups face.
- Implementation & Adoption: a focus on implementation of the ACA and other significant health care policies and changes.
- On the Hill & In the Courts: recent, present and pending health care-related legislation, major rules/guidance and court rulings of importance to the industry.
- Around the Country: updates on state-level health care issues, policies and programs.
- Breaking Boundaries: breakthroughs and new technologies that are driving momentum and change.
As we begin this new series, we will continue to provide to you updates and news from across the health care ecosystem—life sciences, health care providers and health plans—and federal and state governments.
I encourage you to send feedback and comments on the new format and content, as our continued aim is to provide timely and serviceable insights on today’s most pressing issues to the health care industry.
My Take: Innovation through convergence - the lesson of color TVs and the Wizard of Oz
It seems clear to me and every health care executive I talk to, that today’s operating models, which have been used successfully for the last five decades, may no longer be up to the task of financing and delivering effective and efficient health care as required by health care reform. Today’s health care system is structured with the wrong incentives for today’s operating environment and there are few connections to the patient or trading partners who are using closed proprietary systems that create lots of data but hardly any information. Even though each of our health care sectors (health care providers, life sciences and health plans) has a unique value proposition, each sector is limited in its ability to provide a holistic solution that addresses the needs of patients, employers and the government. This silo-based health care and financing model may be changing as the sectors converge.
Given the market needs and disruption taking place with reform, the level of mergers and acquisitions, affiliations, alliances and joint ventures continues to escalate. In 2012 alone, 1,063 health care consolidation deals were completed, a 5.9 percent increase from 2011 and the second-highest in the new millennium.1 Many of these transactions are done not just to build scale or grow market share, but rather to find new technologies, new solutions and new approaches to our problems. When these combinations are outside of the buyer’s core business, we call that convergence and it is my belief that we are only just beginning to see a wave of new activity. Market leaders are investing in new ideas, technologies and capabilities not just to solve today’s problems, but also to bring new ways to change the fundamental rules of the health care system.
Why? Because these combinations bring new insights, competencies, competitive market positions and customer intimacy the buyer simply doesn’t enjoy today. Convergence isn’t new; one of my favorite examples began 70 years ago. Radio Corporation of America, better known as RCA, leveraged its ownership in the National Broadcasting Corporation (NBC) to sell consumer electronics. It was April 30, 1939 during the World’s Fair when RCA introduced the first electronic television, replacing the vacuum tubes and, in front of RCA cameras, captured the first live interview of an American president, Franklin D. Roosevelt. When RCA began manufacturing color televisions, consumer demand was disappointing, mainly because there was little content to broadcast in color. So in the 1950s and 60s, RCA began to broadcast almost all their content in color including a live production of Peter Pan, the movie Wizard of Oz, Walt Disney’s television series and the first color college football game, the 1962 Rose Bowl. If you are a boomer like me how could you forget those flying monkeys in the Wizard of Oz? RCA not only spurred the sales of their televisions but NBC became a market leader in television programming.
As the power, reach and capabilities of our health information technology capabilities grow, so too does the possibility that diagnostic tests, treatment and care of patients will move to the internet, creating access to a virtual 24-hour 7-day a week health care system at a fraction of the cost. For me, the biggest question is not when but who is going to be the “RCA” of health care and see the possibilities of innovation through convergence that changes the paradigm of what we see as possible.
1 HealthLeaders InterStudy, “Executive Briefing,” Winter 2013, http://decisionresourcesgroup.com/Global-Data/White-Papers/HLI_MA_HCConsolidation_EB_0213_V5
The Centers for Medicare and Medicaid Services (CMS) is expected to release a proposed rule in the next few weeks regarding the cost of preferred pharmacy networks to the Medicare Part D program. A report released by CMS in July confirmed that when both mail and retail pharmacy costs are included, some sponsors’ preferred network pharmacies offered higher negotiated prices than their non-preferred network pharmacies. It is anticipated that CMS’s proposed rule will prohibit or clarify that plan sponsors participating in the Medicare program may not have preferred network formularies that have any drugs priced higher than at non-preferred network pharmacies.
In March 2012, 11 percent of Medicare beneficiaries in standalone Part D plans were enrolled in plans that had higher preferred than non-preferred network prices; however according to CMS analysis, those enrolled in preferred network plans has doubled over the past year. This trend could result in CMS spending more on Part D drugs, instead of receiving cost-savings from preferred networks. The rule may cause prescription drug plans and pharmacy benefit managers to reconsider current formularies and strategies for selecting preferred pharmacies for their network. It could also set the stage for an increase in the number of small and independently owned pharmacies participating in plan networks.
Last week, the U.S. Internal Revenue Service released two proposed rules regarding the employer reporting requirements included in the Affordable Care Act (ACA)—click here and here. The penalty associated with non-compliance with the employer mandate for employers with more than 50 employees to provide affordable health insurance was delayed by the IRS earlier this year until 2015.
“There has been a lot of discussion about the postponement of the ‘employer shared responsibility’ penalties included in the Affordable Care Act, but little about the fact that while the potential ‘shared responsibility’ penalties have been deferred for a year, the reporting requirements were not deferred. Employers should pay particular attention to these new regulations as they will be responsible for reporting to the government the name, social security number, number of hours worked, eligibility and coverage status for each employee. Furthermore, the employer is required to report the lowest (employee only) cost for the least expensive complying health care plan available to the employee, not the plan that the employee is actually enrolled in.”―Richard M. Wald, National Practice Leader for Employer Health Care Consulting, Deloitte Consulting LLP
For insights surrounding employer health benefit programs and employers’ overall view of the health care system, see 2012 Deloitte Survey of U.S. Employers: Opinions about the U.S. Health Care System and Plans for Employee Health Benefits.
U.S. Department of Health and Human Services (HHS) issued a final rule implementing various program integrity provisions included in the ACA. The final rule is relevant to qualified health plan (QHP) issuers operating on the federally-facilitated and state-based exchanges, state government, small employers and consumers. HHS will play a role in overseeing QHPs and will work with states to ensure that privacy and security requirements are being met. CMS finalized the requirement that QHPs must accept multiple forms of payment, as well as the various appeals processes available to individuals and employers on state-based and federally-facilitated exchanges. The rule remains relatively unchanged from the proposed rule issued earlier this summer.
Expect to see the final rule on Medicaid Disproportionate Share Hospital (DSH) payment reductions released soon. This major rule would implement the ACA provision that requires state Medicaid DSH allotment reductions beginning October 1, 2013. In the proposed rule issued earlier this summer, HHS suggested implementing annual reductions for fiscal years (FY) 2014 and 2015 only using a DSH health reform methodology, which would generate state-specific DSH allotment reductions. Cuts for 2016 and beyond would be addressed in future rule-makings.
The RAND Corporation released a report analyzing the effects of ACA on health insurance enrollment and premiums for ten states (Florida, Kansas, Louisiana, Minnesota, New Mexico, North Dakota, Ohio, Pennsylvania, South Carolina and Texas) and for the nation. The analysis, sponsored by the Center for Consumer Information and Insurance Oversight (CCIIO), HHS and Assistant Secretary for Planning and Evaluation (ASPE), concluded that, overall, the law will lead to an increase in insurance coverage and higher enrollment in the non-group market; but cautioned that it is difficult to make generalizations about its effect on premiums due to complexities that will differ depending on each individual. Highlights:
- Non-group market premiums: five of the 10 states examined (Florida, Kansas, Pennsylvania, South Carolina and Texas) and for the United States overall, the law causes no change in premiums; in three of the remaining states (Minnesota, North Dakota and Ohio) premiums could increase up to 43 percent.
- Non-group market enrollment: with the ACA, enrollment increases from 4.3 percent of the non-elderly population to 9.5 percent of the population.
- Uninsured individuals: the nationwide 2016 uninsurance rate is projected to be 19.6 percent without the ACA, compared to 8.2 percent with the law (assuming that all states expand Medicaid); for three states (Texas, Louisiana and Florida) not participating in Medicaid expansion, newly eligible individuals could cause premiums standardized for age, actuarial value and tobacco use on the non-group market premiums to increase between 8 -10 percent, compared to states that expand Medicaid eligibility.
- Small-group market: minimal difference in small group premiums in scenarios with or without the ACA, enrollment will increase, from less than 1 percent to 5 percent.
(Source: Christine Eibner, Amado Cordova, Sarah Nowak, Carter Price, Evan Saltzman, Dulani Woods “The Affordable Care Act and Health Insurance Market: Simulating the Effects of Regulation”, RAND Corporation, August 2013.)
“Microsimulation can be an effective way to assess exchange impacts and RAND was comprehensive in accessing available data sources. However, microsimulation is dependent on difficult to predict assumptions and even current data such as individual premium rates are not easy to access. RAND indicates a 22 percent increase on average at the national level by 2016 before adjusting for demographics and richer plan designs on average. RAND appropriately caveats that the findings are “complicated and must be interpreted carefully,” and indicates a reduction in premiums of 12 percent in 2016 after adjusting for demographics and plan design. Their expectation is that the worsening risk pool is offset by other variables. It’s difficult to compare directly because of differences between studies in how the impact on premiums should be measured, but this may be more towards the optimistic end of the spectrum relative to other studies. There are a number of variables that impact the results beyond exchanges explicitly. For instance, in the RAND study there are some states where the minimum loss ratio aspect of the law is a driver vs. the exchanges themselves. The report indicates a wide variation by state in the impact of ACA, due to state-specific differences in populations, markets, laws and relates to premiums before subsidies. This is generally consistent with other analysts’ conclusions; although the study’s geographic variations appear relatively large.”—James Whisler, National Leader, Health Actuarial Practice, Deloitte Consulting LLP
The U.S. Food and Drug Administration (FDA) released guidance on its expedited drug development programs this past June, but did not include rare diseases as part of the processes, requirements, or definitions. Stakeholders for rare diseases responded to the FDA contending that Congress intended for the expedited approval process to apply more broadly to rare diseases as provisions in the FDA Safety and Innovation Act mandate that rarity should be a determination factor in whether or not a drug should be expedited for approval. Rare disease stakeholders submitting comments to the FDA include 39 patient advocate groups, 29 lawmakers and the Biotechnology Industry Organization. Stakeholders also commented on the need for clarity and consistency within review divisions regarding rare disease drugs and consistency across various International Conference on Harmonisation regions. The FDA argues that most rare disease treatments within the past several years were fully approved and based on an immediate or surrogate clinical endpoint.
- Deloitte Center for Health Solutions analysis: preliminary number of health insurance carriers offering health plans in the individual HIX market by state.
- Preliminary health insurance carrier plan rates by state.
- Status of Medicaid expansion decisions by state.
Medicaid shared savings guidance: CMS will only partner with states that can improve patient outcomes and reduce costs
Last Tuesday, CMS released a letter to State Medicaid Directors providing guidance on reimbursement methodologies pertaining to Integrated Care Models (ICMs). The goal: to guide states in drafting their own shared-savings proposals for submission to CMS. CMS made clear that they will only partner with states that not only achieve cost savings, but also improve patient outcomes. This letter is the third in a series providing guidance to states.
Last week, New York and CMS released a memorandum of understanding outlining a demonstration project involving an integrated appeals system for coordination of Medicare and Medicaid dual eligibles. Approximately 170,000 people from July 1, 2014 to December 31, 2017 who use long-term community-based and nursing home services will be included in the project. The state is projecting savings of 1 percent during the first year, 1.5 percent in the second year and 3 percent by the third year, all from care coordination improvements.
On Tuesday, CMS agreed to a one year extension of Indiana’s Healthy Indiana Plan (HIP), a 5-year-old state-sponsored health insurance program for Indianans aged 19-64 that enrolled in HIP via a Medicaid waiver. The agreement between CMS and Governor Mike Pence (R-IN) allows Indianans earning up to the Federal Poverty Line (FPL) to remain on HIP and those making 100-200 percent of FPL to obtain insurance through the federally-facilitated exchange (FFE). The agreement terminates an “enhanced services plan,” which serves as a high-risk pre-existing condition pool for the state and eliminates a 6-month waiting period for HIP enrollees. A similar agreement is being reached with Oklahoma—CMS is allowing a one year extension of the state’s Medicaid waiver, Insure Oklahoma.
The Michigan House of Representatives voted to expand Medicaid eligibility last Tuesday, leaving Governor Rick Snyder (R), who has supported Medicaid expansion, to sign the bill. Michigan will receive $1.7 billion in federal subsidies for FY2014 to cover the expected 400,000 new Medicaid enrollees, according to the Michigan Senate Fiscal Agency.
On Friday, Minnesota released its rates for the HIX individual market. The state’s Commerce Commissioner Mike Rotham stated MNsure, Minnesota’s state-based exchange, has the lowest rates among all the states that have announced to date. The cheapest plan available on MNsure will be $90.59 per month; this rate is based on a 25 year old non-smoker living in Minneapolis-Saint Paul.
Last week, Arkansas HIX director Cindy Crone acknowledged the state is considering moving from a state-partnership exchange to a state-based exchange by 2016. In 2014, Arkansas is aiming to enroll 435,000 in health insurance coverage through the state-partnership exchange.
NYC Macroscope, a pilot program in development, will be the first U.S. based program to use aggregate electronic health record (EHR) data collected from primary care practices to help city officials make real-time decisions about public health. The program will utilize EHR structures already in place and collect data on various health indicators including diabetes, depression, blood pressure, smoking status and blood sugar. This information will then be compared to health data collected via the New York City Health and Nutrition Examination Survey, which randomly surveys roughly 2,000 adult New Yorkers every year. The goal is to use the data to improve clinical care, according to Carolyn Greene, MD, Deputy Commissioner of the NYC Department of Health and Mental Hygiene’s Division of Epidemiology. NYC Macroscope was established by a partnership between the New York City Department of Health and the City University of New York (CUNY) School of Public Health, with additional support from the Robert Wood Johnson Foundation’s Pioneer Portfolio, the Beaumont Foundation, Robin Hood and the New York State Health Foundation.
According to a study published in the Computers, Informatics, Nursing Journal, electronically monitored hand washing systems can increase hygiene among workers in health care settings. The system, created by the Toronto Rehabilitation Institute prompts signals for hand washing and tracked individual and group hand hygiene. During the first stage, nurses washed their hands 2.97 times per hour, instead of the recommended 8.9 times per hour. Hand washing compliance increased to 6.6 hand washings per hour once the system reminder prompts were turned on. The study monitored 14 nurses given wearable electronic monitors and tracked their activity through 17 patient rooms, 93 alcohol gel and soap dispensers and 1 utility room which were equipped with electronic monitors, all within a complex continuous care unit. The study consisted of three phases: the first consisting of recording hand washing without prompts, the second included hand hygiene status indicators and the third included both hand washing prompting signals and hand hygiene status indicators. The third phase proved to be the most successful in increasing hand washing. The institute will incorporate the increases in hand washing into the nurses’ performance reviews.
(Source: Levenchko, A. et al. "“The Effect of Automated Monitoring and Real-Time Prompting on Nurses' Hand Hygiene Performance”, CIN: Computers, Informatics, Nursing, August 2013)
Four research projects at Brigham and Women's Hospital, Boston Children's Hospital, Children's Mercy Hospital in Kansas City, Missouri, the University of California, San Francisco and another university will be the recipients of $25 million from the National Institutes of Health to expand research pertaining to the genomic sequencing of newborns. The five-year research study will begin in the first quarter of 2014 and will analyze the risks and benefits of genome sequencing and how providers can utilize newborn genomic information to improve the health of infants. Currently, all states screen newborns for at least 28 diseases, conditions and genetic markers.