Health Care Current: February 18, 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 Jeremy Perisho, Partner & National Industry Leader for Life Sciences & Health Care, Deloitte Financial Advisory Services LLP
At lunch with a friend the other day, she told me about the anti-bullying campaign her daughter had come home from school talking about. The charge her school had given her: if you see a child bullying someone else, speak up and tell a teacher. This campaign has sprouted up in schools across the country as a way to empower children to prevent bullying in their schools and communities. Applied to health care, the campaign can also provide an important call to action for industry stakeholders: if you encounter fraud and abuse in the system, report it.
In the U.S., researchers estimate that seven percent of the national health expenditure is wasted due to fraud and abuse.1 Globally, it’s harder to measure, but recent estimations pin a loss of more than seven percent (USD 415 billion) of global health care spending to fraud and error.2
To ward off fraudulent activities – regardless of whether they are caused by intentional acts or inadvertent practices – many governments are stepping up their regulatory and enforcement actions. The Affordable Care Act (ACA) strengthened anti-fraud measures through an increased focus on prevention, expanded penalties and a focus on high-risk areas through predictive analytics.
The U.S. continues to investigate whistleblower complaints and, just a few weeks ago, the U.S. Department of Justice (DOJ) announced that its Medicare Fraud Strike Force (MFSF) had set a new record for prosecution of crimes against government health care programs during FY2013. Since 2007, the MFSF has helped recover over $5.5 billion.3 While countries typically develop and enforce their own regulations, globalization of the health care industry further complicates matters with many governments “reaching across borders” to strengthen regulatory oversight. For example, a number of emerging markets are passing legislation, including laws targeted at preventing pharmaceutical company illegal or anti-competitive business practices.4
As a result of this increased attention to fraudulent practices, the health care industry is being forced to react: plans tend to have a heightened awareness of over payments, many life sciences manufacturers are restructuring their compliance programs and greater responsibility now rests with providers to address compliance issues across their practices.
Many officials are approaching the industry directly with this top of mind issue: how do we identify ways to collaborate to jointly combat fraud and abuse? To start, here are two potential ways:
- Embrace enforcement: organizations can start by assessing and understanding potential risks, both domestically and globally; reworking processes that might accidently trigger a violation (e.g., pre-populated EHR fields tied to specific billing codes, ambiguous marketing messages, non-compliant vendors, etc.); and establishing a vibrant monitoring program that proactively checks activity consistently. Predictive analytics could help identify potential red flags.
- Build a vibrant, collaborative culture of compliance: fraud and abuse are enterprise-wide challenges — to help prevent it, an organization should ensure that compliance obligations apply to everyone from the front-line employees up to the board of directors. Organizations should give employees the tools and training they need, reward good behaviors and support the whistleblowers that call out issues. Also, executives should be prepared to conduct an investigation when it is warranted and self-disclose any identified problems to the government.
Many schools across the country are relying on their biggest asset—children—to help fight bullying in schools. Through campaigns and collaboration, they are seeking to ignite change in their communities. Similarly, in health care, working together as a team in combatting fraud is critical. Stakeholders who understand the importance of creating a culture of compliance across the enterprise could see a more alert and collaborative team.
P.S. – Read more about the Medicare Fraud Strike Force in the February 4 Health Care Current.
1 U.S. DOJ, “Medicare Fraud Strike Force Set Record Numbers for Health Care Fraud Prosecutions,” January 27, 2014, http://www.justice.gov/opa/pr/2014/January/14-crm-082.html
2 World Health Organization, “Prevention not cure in tackling health-care fraud,” 2011, http://www.who.int/bulletin/volumes/89/12/11-021211/en/
3 DOJ, op. cit.
4 2013 Global life sciences outlook: Optimism tempered by reality in a “new normal,” Deloitte Touche Tohmatsu Limited, 2012
Poll results from February 11 Health Care Current:
Last Monday, the Internal Revenue Service (IRS) released final shared responsibility regulations, popularly known as the ‘employer mandate.’ Of note is the delay for companies employing 50-99 workers until January 1, 2016, of the key provision to provide health insurance or face a penalty. This update gives mid-size employers an additional year to comply with the requirement. Penalties for employers not providing health insurance were originally scheduled to take place at the beginning of 2014. However, in July 2013, the IRS deferred compliance with this provision until 2015. Companies with 100 or more full-time employees are still required to comply by January 1, 2015. Additional provisions in the update applied to employers with 50 or more employees include:
- Employer penalties: employers offering health insurance coverage to 70 percent of their full-time employees (working an average of 30 hours per week) will not face a penalty, but they must expand coverage to 96 percent of their employees by 2016
- Volunteer employees: volunteers for government or tax-exempt organizations (e.g., volunteer firefighters, emergency responders) will not be considered full-time employees; any hours that they work will not be counted toward the hours of service used to determine the obligation to provide health insurance
- Educational employees: teachers and other educational employees will not be considered part-time employees based solely on the fact that their school closes or operates on a limited schedule during the summer; adjunct faculty members of colleges will be credited with 2.25 work hours per week for each hour spent teaching, which means a 15-hour (equating to approximately 33.75 hours) teaching week would be considered full-time and a 12-hour (27 hours) teaching week would not
Note: the ACA included a provision to require employers with 50 or more full-time employees during the prior year to offer health insurance that is affordable and provides minimum value and impose a penalty on those who do not meet the requirement. The employer mandate does not apply to small businesses with fewer than 50 employees. For more information on the employer mandate see the Health Care Reform Memo from July 15, 2013.
The U.S. Department of Health and Human Services (HHS) has released its latest enrollment report for health insurance exchanges (HIXs). As of February 1, more than 3.3 million individuals had enrolled in a HIX and selected a plan. According to the report, 45 percent of those who applied and were determined eligible have chosen a HIX plan, as compared to 28 percent at the end of December. Report highlights:
- More than 1.1 million of the total enrollees signed up during the month of January, a 53 percent increase in plan selections
- 82 percent of total enrollees qualified to receive financial assistance for a health plan
- The proportion of young adults that signed up grew quickly in January, compared with the previous three months; approximately 27 percent of individuals who signed up in January 2014 are between 18 and 34 years old, a 3 percent increase over the cumulative total for October-December
Related: the Congressional Budget Office (CBO) recently lowered its projections of the number of anticipated HIX enrollees from 7 million to 6 million in 2014. To meet these estimates, another 2.7 million individuals will need to enroll in coverage by March 31, the end of open enrollment.
State breakdown of HIX enrollment as of February 1:
Click here for a larger view of the map.
Source: HHS, “Health Insurance Marketplace: February Enrollment Report,” February 12, 2014, http://aspe.hhs.gov/health/reports/2014/MarketPlaceEnrollment/Feb2014/ib_2014feb_enrollment.pdf
The Centers for Medicare and Medicaid Services (CMS) recently released a bulletin that indicates consumers who have already purchased insurance but are unhappy with their HIX health plan will be permitted to switch under certain circumstances before the end of open enrollment on March 31, 2014. Previously, consumers were not permitted to switch either plan type or issuer once they enrolled and paid the first monthly premium without undergoing another enrollment period.
The policy change comes after complaints that many issuers selling plans on the HIX market are providing narrower provider networks than consumers had anticipated and that inflexible policies or enrollment processes did not allow for changes in life circumstances. An individual who has paid his/her first month’s premium and whose coverage is already in effect can make plan changes if all of the following criteria are met:
- The switch must be made to another plan from the same insurance company that is offered at the same metal level (i.e. bronze, silver and gold) and cost-sharing level
- The switch must be made in order to move to a plan with a more inclusive provider network or for other isolated circumstances determined by CMS
- Individuals must switch within the initial open enrollment period
If a consumer decides to switch, the health plan will determine the effective date of the new policy but must ensure no break in coverage. Consumers whose reasons to switch fall outside the specified criteria, for example seeking to switch to another issuer or to a plan at another metal level, will have to wait for a valid special enrollment period (SEP) or until the 2015 annual open enrollment period, scheduled to begin on November 15, 2014. Eligibility to switch within SEPs includes enrollment errors, a delay in benefits by the insurance company, marriage, divorce, birth or adoption of a child and loss of coverage.
Life science manufacturers and group purchasing organizations (GPOs) will begin disclosing payments or other transfers of value (e.g. gifts, consulting fees and research activities) made to physicians or teaching hospitals, physician ownership and investment interests to CMS on February 18. This reporting is required under the Open Payments Program, begun through the Physician Payments Sunshine Act, which aims to increase transparency in health care by requiring drug and device manufacturers, GPOs and certain health care providers to submit annual reports detailing their financial relationships with health care providers. Previously, CMS released a final rule requiring reporting data from 2013 to be submitted by March 31, 2014 and for manufacturers and GPOs to begin reporting on this date. However, the latest guidance splits the timeline for reporting into two phases:
- Phase 1: starting February 18, 2014, manufacturers and GPOs can begin to register for “Phase 1” of reporting, which will run through March 31, 2014. All applicable manufacturers and GPOs are required to submit their corporate profile information and aggregate 2013 payment data through the CMS Enterprise Portal during the open window.
- Phase 2: manufacturers and GPOs are required to enter “Phase 2” of the registration and reporting cycle beginning in May 2014. This phase is expected to run for no less than 30 days. During this phase, companies will submit detailed 2013 payment data and legally attest that the data they submitted is accurate.
CMS will complete both phases by August 1 and at that time, manufacturers and GPOs will have the opportunity to review the reported data and make final edits before it is made public on the CMS Enterprise Portal website on September 30. CMS also announced that it will not enforce penalties for reporting until after Phase 2 is completed but did not specify if these penalties will apply for failing to report data during Phase 1 or if there will be penalties for discrepancies between Phase 1 and Phase 2 data.
Members of the House Energy and Commerce and Senate Health, Education, Labor and Pensions committees wrote a letter to the U.S. Office of Management and Budget (OMB) urging the office to formally release a final rule from the U.S. Food and Drug Administration (FDA) requiring electronic drug labeling in place of paper labels. According to the letter, the rule has been on the FDA’s regulatory agenda multiple times, but the agency has yet to provide any updates on when it plans to release the final rule. The legislators argue that evolution in the pharmaceutical industry has made electronic data interchange more common for commercial and regulatory interactions, and expediting the release of the rule would give stakeholders enough time to provide input on the implementation of electronic labeling. The final rule was submitted to OMB and has been under its review since August 2013. According to OMB’s summary, the rule would require electronic package inserts in lieu of paper ones for human drug and biological prescription products (with limited exceptions). The inserts would contain prescribing information intended for health care practitioners.
Related: the Biotechnology Industry Organization (BIO) has been advocating for the release of the rule, stating that it believes FDA has authority to enact paperless labeling because Congress has not suggested a specific method for changing the statute. BIO is encouraging the OMB to help FDA meet their regulatory agenda of issuing a final rule. Referencing previous efforts to mandate e-labeling that have not succeeded, the American Forest and Paper Association and the Pharmaceutical Printed Literature Association have asked OMB to stop the rule from moving forward, asserting that legally, the FDA does not have the authority to require complete replacement of paper labeling for electronic labeling.
Last Saturday, President Barack Obama signed legislation that lifts the debt-ceiling limit until March 2015. Before the House (326-90) and Senate (55-43) passed the bill, legislators in the House debated including a provision that restored military pension cuts and a measure to partially offset future costs associated with Medicare physician pay reforms. This was removed from the final bill to raise the debt limit before the vote was held and pulled into a separate bill. This separate bill:
- Restores cuts to the cost-of-living adjustment for military retirees by extending Medicare sequester cuts established by the Budget Control Act of 2011 through 2014. Congress agreed to cut federal spending by $1.2 trillion over 10 years starting with cuts of $109 billion beginning January 1, 2013.
- Creates a $2.3 billion fund to offset costs of future Medicare sustainable growth rate (SGR) physician pay reforms. Extending Medicare sequestration will result in an $8.3 billion reduction in spending, but this reduction will allow Congress to repurpose those funds to pay for the SGR reform. The Senate Finance, House Ways and Means and House Energy and Commerce committees recently reached an agreement on the deal and introduced bills into both chambers. Neither the House nor the Senate has voted to approve the final SGR bill to date.
Reaction: the American Hospital Association, Association of American Medical Colleges and several other hospital associations wrote to the Senate. In their letter they stated, “America’s hospitals strongly oppose a proposal to cut funding for seniors’ Medicare to pay for the repeal of the reduction in the cost-of living adjustment for military retirees. While we do not oppose the repeal of the reduction in the cost-of living adjustment for military retirees, we do oppose using Medicare reductions to pay for non-Medicare related spending.”
Last Monday, the U.S. Government Accountability Office (GAO) released a report finding that drug shortages remain high. While new drug shortages declined from 255 in 2011 to 195 in 2012, the total number of ongoing shortages year after year has continued to rise, growing from 40 cases in 2007 to 261 by 2012. GAO’s analysis shows that some drug shortages can be traced to manufacturers halting or slowing production to address quality issues. These changes in production can often trigger a disruption in supply. Recent steps taken by the FDA (e.g., FDA Safety and Innovation Act) have prevented more shortages in the past two years and the FDA continues to implement new initiatives to improve shortage response. However, the report outlined shortcomings in FDA’s internal control standards related to its drug shortage database. In the report, GAO recommends that the FDA conduct periodic analyses using the existing drug shortages database to better predict drug shortages and identify risk factors earlier. Drug shortages impact the health care system at the patient care, operations and cost level; taking additional steps to improve the system and oversight could help reduce new and ongoing drug shortages.
In an attempt to manage budgets and decrease spending in their Medicaid programs, many states are requiring older adults and individuals with disabilities who receive long-term care through the program to enroll in managed care plans. Nationally, this population accounts for an estimated 48 percent of the program’s spending, despite comprising only 6 percent of enrollees. States that require beneficiaries to enroll in managed care plans typically do so through managed care organizations (MCOs), limited benefit plans or primary care case managers. The goal of managed care plans is to expand home and community-based services for patients needing long-term care and do so at a lower cost. Currently, seven states have mandated managed care plans for Medicaid beneficiaries seeking long-term care: Kansas, Delaware, Minnesota, Tennessee, Hawaii, New Mexico and Arizona. As of last August, Florida also began shifting an estimated 45,000 nursing home residents and 40,000 enrollees who receive long-term care services at assisted living facilities into managed care plans. New Jersey, Ohio, California and Virginia are reportedly considering shifting to mandated managed care plans later this year; several other states have plans to expand the approach to additional counties.
Reaction: consumer advocate organizations and operators of assisted living and nursing facilities have raised concerns that the large number of consumers expected to transition to managed care may cause difficulties with ensuring timely billing payments, resolving patient care issues or having the necessary resources for oversight for the states’ Medicaid programs. Furthermore, operators of assisted living and nursing facilities are concerned that the proposed shift will result in fewer residents and will negatively impact their business. Florida’s legislature has guaranteed not to pass any payment reimbursement cuts during the first year and has made it optional for nursing homes to be included in the managed care plan networks. The effects of managed care in terms of cost and quality of care on long-term care residents is still inconclusive and researchers say further research may need to be conducted.
Last Thursday, New York Governor Andrew Cuomo (D) announced that the state has reached an agreement with HHS to use $8 billion in federal savings for primary and alternative care programs to reduce avoidable hospitalizations. The Medicaid Redesign Team (MRT) helped the state identify $34 billion in savings to the state’s Medicaid system despite adding an additional 500,000 beneficiaries to the program. The waiver will allow the state to use the funds generated by MRT to transform health care in communities across the state. Governor Cuomo originally sought permission to use $10 billion of the programs savings in a waiver submitted in 2012.
Note: for more information, see “Final negotiation talks needed to expedite approval of NY’s $10 billion Medicaid waiver” in the February 4th Health Care Current.
NASA’s technology transfer program has licensed patents that could provide a foundation for new medical devices to treat pain and automate drug testing in labs. NASA originally developed the bone and muscle regeneration technology to treat osteopenia, or loss of bone mass, as many astronauts are susceptible to developing this condition during space flight. GRoK Technologies LLC of Houston, Texas licensed the patents from NASA and will use them to develop two potentially groundbreaking technologies for medical applications:
- The first platform technology for 3D human tissue models would allow for better testing of drugs for safety, toxicity and efficacy; this innovative technology could provide a cost-effective and accelerated alternative to animal testing models
- The second platform, Scionic, would enable noninvasive medical devices to treat musculoskeletal pain and inflammation without the use of pharmaceuticals
NASA’s technology transfer program exists to ensure that technologies used by the agency can be readapted for other uses. Other examples of technological innovations arising from this program include sharper technology for testing human eyes for Lasik surgery and technology for testing and transmitting information to farmers about plant health.
This March, the Institute for Systems Biology (ISB) in Seattle will launch a quantified self-study—the Hundred Person Wellness Project. As opposed to traditional trial design that utilizes blinded and randomized subjects, the pilot will intensively monitor its subjects and will encourage them to respond to results as they go live. The study is based on the concept of continuous management of health and leverages whole-genome sequencing and biomarkers to correct disease before it becomes symptomatic. During the nine-month pilot, researchers will collect data daily and at three-month intervals as participants will be asked to wear digital devices to continuously record their physical activity, heart rate and sleep patterns. Subjects will periodically upload their data to the institute’s database and will have unlimited access to their data via the cloud. Lastly, the program will provide the results to wellness coaches and physicians so they may suggest changes in diet and/or behavior to individuals.
Leroy Hood, the president of ISB believes that a study of this kind has the potential to disrupt the conventional practice of medicine. Atul Butte, head of systems medicine at Stanford University School of Medicine in California, suggests that in this type of study “they may not end up proving that all these individuals benefit from the study in one particular way, but they may end up showing that all these individuals benefit from the study in their own individual ways.” The study leverages the concept of P4 medicine—predictive, preventive, personalized and participatory health care. If the new observatory design works as expected, it will be extended to 100,000 subjects who will be monitored over 25 years.