Health Care Current: April 1, 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 Mitch Morris, MD, Vice Chairman and National Healthcare Provider Lead, Deloitte LLP
As a physician I often gave my patients news they expected. But sometimes I delivered things they did not expect to hear. Yesterday, Congress passed (64-35) a short-term, one-year solution to override the scheduled 24 percent cuts to the Medicare sustainable growth rate (SGR) by passing the Protecting Access to Medicare Act of 2014. Under the short-term fix, physician pay in the Medicare program will increase 0.5 percent for the remainder of the year. This came mostly as expected news to many in the health care industry.
But, tucked away in the 120-page bill was a provision that delays the transition to ICD-10 by at least one year to no earlier than October 1, 2015:
“The Secretary of Health and Human Services may not, prior to October 1, 2015, adopt ICD–10 code sets as the standard for code sets under section 1173(c) of the Social Security Act (42 U.S.C. 1320d–2(c)) and section 162.1002 of title 45, Code of Federal Regulations.”1
To many in the health care industry, this delay falls into the category of unexpected news; after two previous delays, many were operating under “full steam ahead” plans. Now, and over the next several months, industry stakeholders will begin to move through various stages in accepting this news. Some will quickly move straight through to acceptance, while others may still deny this has happened. Many, especially those who were ready to convert, are likely to be frustrated about putting other priorities on hold, only to have this last minute surprise.
For those moving forward, the question now becomes how to deal with uncertainty when the stakes are high. So what is next?
Health care providers: provider organizations should consider developing a plan that addresses how the new timeline will impact budgeted resources, technology updates and testing, collaboration timing, training plans and overall connection to organization-wide initiatives. Those who are further along in the transition should consider whether it is possible to continue technology testing in light of potential future system changes as well as vendor readiness. This updated timeline could also allow for additional testing waves for system upgrades, integration testing and an end-to-end evaluation including payer collaboration. Additionally, an evaluation of other initiatives originally placed on hold, such as a new revenue cycle system implementation or computer-assisted coding tools, may now be a possibility with the delayed date.
Provider organizations could also use this extended period for additional training and practice using the new code set. Until now, timelines for these elements have typically been compressed for many organizations. Entities that have completed early code adoption have encountered challenges with code selection quality and have experienced initial productivity impacts of up to 70 percent. To stay nimble in light of this change, organizations should consider developing a plan to capitalize on the additional time for further training and practice. Providers should consider keeping the training plan on target to increase user experience with the new code set. This may help reduce the need for so many external coding resources through increased productivity. Additionally, organizations could repurpose resources on clinical documentation efforts that are focused on both ICD-9 and ICD-10 to improve documentation and incorporate such elements into the electronic health record.
Health plans: many in the health insurance industry have grown familiar to sudden change and re-planning efforts; the reaction to this delay is not expected to be much different. Health plans should consider updating their ICD-10 remediation strategy and supporting plans and making calculated decisions on how to proceed. New plans could include an evaluation of development and testing efforts that should be completed and deployed versus those that may be slowed to free up funding and resources for initiatives. Those who are in the process of finalizing business and deployment readiness plans may now need to evaluate if these efforts should proceed considering the need to maintain a core set of resources or mobilize new resources at a specified date. Health plans could use the time to expand their provider collaboration testing and modeling the impacts to Medicare and commercial risk adjustment―two areas that many plans have just started. This delay also presents an opportunity to review corporate funding priorities and determine if new initiatives, such as retail/consumer-focused initiatives, should be started now instead of waiting for ICD-10 to be complete.
State Medicaid plans: states should consider how this delay impacts state budgets as well as requests for federal matching funds. Similar to providers and health plans, the delay could impact contracts with vendors (e.g., fiscal agents, care/utilization management companies, managed care organizations). States working to procure new Medicaid Management Information Systems (MMIS) could assess whether to discontinue efforts to update legacy systems and implement ICD-10 in their new MMIS solutions. Lastly, states that are updating their MMIS in multiple releases may need to reassess release strategies – especially if ICD-10 updates are intertwined with other updates.
As in many other areas of life, when we get news that is unexpected, we often lean on others. We rely on their strengths and weaknesses to come through whole on the other side. With this delay there could be an opportunity for health plans and providers to support each other. This is something they couldn’t do so easily given the previous timeline, which required many organizations to drive full-speed ahead independently toward the transition. Both stakeholders should consider extending collaboration and testing opportunities to exchange sample claims that will enable additional coding practice and data analysis and further refine claim accuracy.
I gave news many times throughout my career in medicine. Often times, as soon as a patient hears a diagnosis, his or her mind starts whirling and they miss everything else—including the next steps.
I offer the same advice in this situation: slow down, take a breath, get all of the facts and start planning.
P.S. For more information about the ICD-10 delay and what it might mean for your organization:
- Contact Christine Armstrong, Melinda Reno, Kim Beckendorff and Vickie Monteith
- Register for the Live from the Center webcast: What's next for ICD-10? on Wednesday, April 2, 2014, 12:30 p.m. – 1:30 p.m. ET
Poll results from the March 25 Health Care Current:
Note: answers have been rounded to the nearest whole number
Yesterday, Congress voted (64-35) to pass a short-term, one-year solution to override the scheduled 24 percent cuts to physician payments in the Medicare program by passing the Protecting Access to Medicare Act of 2014. Under the short-term fix, physician pay in the Medicare program will increase 0.5 percent for the remainder of the year. In addition to including Medicare “extenders” (provisions of the law that were scheduled to expire and thus needed to be extended) similar to previous SGR bills, the patch contained several new policies, including two provisions of special interest:
ICD-10: delays the conversion to ICD-10 by at least one year until after October 1, 2015. Importantly, the language does not require implementation to occur on October 1, 2015, but rather requires that CMS not implement the transition until at least that date.
“Two-midnight” rule: delays until March 31, 2015, what is referred to as the “two-midnight” payment rule. The rule allows Medicare to deny hospitals reimbursement for inpatient services provided to patients whose stay is shorter than two midnights. This is the third time this rule has been delayed. For more information, see the February 4, 2014 Health Care Current.
Last week, the Congressional Budget Office released cost estimates for the bill, estimating that total spending would increase $17.7 billion during the five-year window from 2014 to 2019, but would net a decrease in spending over the 10-year window of $1.2 billion. Specifically, the following provisions would present the bulk of cost-savings from the bill:
|Skilled-Nursing Facility Value-Based Purchasing Program||$2 billion||Requires the U.S. Department of Health and Human Services (HHS) to establish a program to begin in fiscal year (FY) 2019 to pay skilled-nursing facilities value-based incentive payments. Under this program, HHS will develop a methodology for assessing “total performance” of facilities. Those that rank highest will receive the highest incentive payments. Performance scores will be made public on the Nursing Home Compare Medicare website.|
|Improving Medicare Policies for Clinical Diagnostic Laboratory Tests||$2.5 billion||For clinical diagnostic laboratory tests completed on or after January 1, 2017, payment would be determined using commercial payment rates. Individual codes would be capped at 10 percent from 2017-2019 and 15 percent from 2020-2022.|
|Revisions Under the Medicare ESRD Prospective Payment System||$1.8 billion||Delays until 2024 including oral drugs in payment bundles for dialysis. Also requires CMS to reduce market basket rates by 1.25 percent in 2016 and 2017 and by 1 percent in 2018.|
|Quality Incentives for Computed Tomography (CT) Diagnostic Imaging and Promoting Evidence-Based Care||$0.2 billion||Reduces payments for radiology services completed on or after January 1, 2016, in physician offices or outpatient centers by 5 percent and for subsequent years by 15 percent.|
|Using Funding from Transitional Fund for SGR Reform||$2.3 billion||Earlier this year, Congress included funding to pay for the SGR by creating a Transitional Fund for SGR Reform when it restored military pensions through S. 25.|
|Realignment of the Medicare Sequester for Fiscal Year 2024||$4.9 billion||Realigns Medicare sequester amounts to the first half of FY2024, making the first six months at 4 percent and the second at 0 percent.|
|Medicaid Disproportionate Share Hospital (DSH)||$4.4 billion||Delays until 2017 the reductions in DSH payments that were previously set to begin in 2016 and extends them through 2024.|
(Source: Congressional Budget Office, “Cost Estimate for the Protecting Access to Medicare Act of 2014,” March 26, 2014)
Last Wednesday, the Administration announced it would allow a special enrollment period for individuals who have faced difficulties signing up for coverage through the federal health insurance exchange (HIX) using HealthCare.gov. As of late last evening, news sources were reporting that enrollment had surpassed the 6 million mark and could be closing in on 7 million. In two guidance documents, the Center for Consumer Information and Insurance Oversight (CCIIO) outlined the situations that will allow people to use the special enrollment period:
- Exceptional circumstances: natural disaster, medical emergency, or system outage
- Misinformation, misrepresentation or inaction: cases in which entities or individuals giving enrollment assistance to potential enrollees (e.g., navigator, insurance company) are guilty of misconduct
- Errors in enrollment or immigration status: cases in which individuals were enrolled and the insurance company did not receive their information or erroneous application processing resulted in immigrants receiving an incorrect eligibility assignment
- Error messages or displays: cases in which individuals see erroneous information after selecting a qualified health plan (e.g., cost-sharing information) or are unable to complete the process due to error messages
- Medicaid/CHIP-HIX transfer: cases in which individuals were found to be ineligible for federal health programs, but the application information was not transferred in enough time for the individual to enroll in a HIX plan during open enrollment
- Unresolved casework: cases in which an individual is working with a caseworker to resolve an enrollment issue, and this process is not completed by March 31
CMS indicated in the guidance that, as long as those “in line” pay their first month’s premium by the deadline given by their insurer, enrollments will be in effect May 1. The agency will process paper applications received by April 7. Consumers will be allowed to select a plan through April 30.
Related: the same day CMS released further guidance on the special enrollment period for the federally-facilitated HIX, several states running their own exchanges announced special enrollment periods:
- The DC Health Benefit Exchange Authority announced that individuals who need in-person or telephone assistance with enrollment on DC Health Link will be allowed to enroll through April 15, while those who have an online account with the HIX but have yet to select a plan will also have through April 15 to make a selection. The DC Health Link is averaging 1,200 calls per day, twice as many when compared to March call volume.
- Covered California announced that individuals who begin an application online before the end of March 31 will be allowed to continue the application process through April 15. An individual’s application will be considered through this deadline only if he or she created an account on the website, filled out the “Apply for Benefits” page, continued to the “Consent Verification” page and saved the application before exiting. The agency also reminded consumers to pay their first premium by the insurer’s due date to avoid the tax penalty.
- Oregon will allow residents until April 30 to enroll in a plan through Cover Oregon. This extension applies to any individual who wants to purchase coverage in the 2014 plan year, including those who purchase directly from an insurance company (outside of the state’s HIX). April 30 is the deadline to apply; the agency will continue processing applications through May.
- Minnesota will allow individuals to continue the enrollment process for MNSure if they attempt to complete the process by the end of March 31 and fill out a form prior to the end of the official enrollment period. The form must include the date that the individual first attempted to enroll through the HIX. Individuals who began the process prior to March 15 may be eligible for retroactive coverage.
A recent issue brief released by the Commonwealth Fund regarding state action on implementing the Small Business Health Options Program (SHOP) exchanges found that all 17 states and the District of Columbia (D.C.) operating their own SHOP exchanges have successfully standardized eligibility and participation requirements for enrollees. In addition, the analysis found that most will include competitive choices for employers to offer their employees a greater choice of plans. The researchers examined state success in the following areas:
- Setting standardized participation requirements: In the first year of operation, all states limited their SHOP exchanges to employers with 50 or fewer employees. In addition, 13 states also have a requirement for a majority of the employers’ employees to participate in the SHOP. Most states require at least 70 percent of an organization’s employees to participate, but several states require 100 percent for the smallest of employers (fewer than five employees).
- Offering a competitive range of insurers and plans: All but one of the state-based SHOP exchanges offer a choice of insurance plans, allowing different coverage options in nearly every county. The number of insurers participating in the states ranged from one in Washington to 10 in New York, while the number of plans offered ranged from 12 in Connecticut to 267 in D.C.
- Giving employees the incentive to shop for coverage based on price: The SHOP exchanges offer employers the opportunity to use a reference pricing policy. This policy has the employer set a fixed financial contribution based on the least expensive plan available; employees then receive this amount regardless of what plan they choose. If they choose a more expensive plan, they need to make up the difference. This first year, 14 states and D.C. allow employers to use this approach.
- Providing a convenient shopping experience: Many of the state-based SHOP exchanges offer online enrollment as of January 1, 2014, and at least 12 states and D.C. allow employers to explore options without having to submit tax information. Other features include: a tool to calculate tax credits for small businesses (11 states), a tool to calculate how many full-time equivalent employees an organization has in order to determine eligibility for SHOP (two states) and portals for agents and brokers to assist employers on the SHOP exchanges (11 states).
The authors note that many states that faced challenges with operating their state-based HIXs for individuals have prioritized addressing these challenges before addressing any encountered by the SHOP exchanges.
Related: Earlier this month, CMS issued a proposed rule that would allow SHOP exchanges to limit choice of plans if that choice “would result in significant adverse selection in the state’s small group market resulting in market disruptions that could not be addressed by the premium stabilization programs or single risk pool, or if there would be insufficient issuers of qualified health plans or qualified stand-alone dental plans to allow for meaningful choice among plans.”
(Source: Dash, Sarah J., Lucia, Kevin W., and Thomas, Amy. The Commonwealth Fund, “Realizing Health Reform’s Potential- Implementing the Affordable Care Act: State Action to Establish SHOP Marketplaces,” March, 2014)
Study: drug utilization management controls stronger in HIX-based plans than in employer-sponsored plans
Last week, Avalere Health released findings that suggest health care consumers covered by HIX plans are more likely to face greater utilization controls (e.g., prior authorization and step therapy) to fill prescriptions than are those covered through employer-sponsored insurance plans. The report analyzed formularies in 84 bronze- and silver-level plans from 15 states that account for the highest HIX enrollment. Drug classes included in the analysis: mental health, oncology, HIV/AIDS, diabetes, rheumatoid arthritis, hepatitis, multiple sclerosis and asthma. Among the findings:
- Mental health: 50 percent of these drugs in employer-based plans’ formularies were covered with no utilization controls; 15 percent of these drugs did not include utilization controls in HIX plans
- Oncology: 27 percent of oncology drugs under employer-based plans had no utilization controls compared to 16 percent of drugs covered through HIX plans
- HIV/AIDS: 60 percent of these drugs were covered with no utilization controls under HIX plans, which is lower than employer-sponsored plans
The analysis noted that, although utilization management is used to reduce health care costs for both insurers and consumers, use of such measures could lead to adverse health outcomes. In addition, Avalere Health’s Executive Vice President, Matt Eyles, stated that because these types of controls are not commonly used in commercial insurance programs, health care industry stakeholders should be monitoring the effects of these policies on consumers and providers.
(Source: Avalere Health, “Avalere Analysis: Consumers Face More Hurdles to Accessing Drugs in Exchange Plans Compared to Employer Coverage,” March 24, 2014)
Report: gaps in health rankings across U.S. counties exist, but positive trends noted in specific measures
Last Wednesday, the Robert Wood Johnson Foundation and the University of Wisconsin Population Institute released the fifth-annual County Health Rankings & Roadmaps report. The findings suggest that, while Americans are living longer and healthier lives, there remains a large gap between the least and most healthy places. The report ranks the health of nearly every county based on 29 factors, and of those, five measures are strongly linked to good health. Among the findings:
- Children in poverty: According to the report, 23 percent of children 18 years of age and younger lived in poverty in 2012. Poverty rates are two times higher for children living in the least healthy counties compared to those in healthy counties. Poverty among children increased from 17 to 23 percent from 2002 to 2012, and this varies widely by county.
- College attendance: Nationally, post-high school education rates are 1.4 times higher in healthy counties than unhealthy counties. College education increased from 59 percent to 64 percent from 2005 to 2012.
- Smoking: 18 percent of adults in the U.S. are smokers. The number of smokers across U.S. counties ranges from 3 to 51 percent, and smoking rates dropped from 21 percent to 18 percent from 2005 to 2012.
- Physical inactivity: 30 percent of adults were physically inactive in 2012. While national physical inactivity rates declined between 2002 and 2012, rates varied from 10 to 45 percent by county.
- Preventable hospital stays: 65 hospital stays for every 1,000 Medicare enrollees are preventable; preventable hospital stays decreased by 20 percent from 2003 to 2011 nationally.
(Source: Catlin, Bridget, Jovaag, Amanda, Remington, Patrick, Willems Van Dijk, Julie. Robert Wood Johnson Foundation and the University of Wisconsin Population Health Institute. “2014 Ranking Key Findings Report,” March 26, 2014.)
Last week, arguments were heard on court cases regarding two provisions of the ACA that have presented conflicting results in lower courts: the availability of subsidies for individuals who are covered through the federally-facilitated HIX and the contraception mandate. Arguments centered on the following:
Insurance subsidies: last week, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments for Jacqueline Halbig v. Kathleen Sebelius, in which subsidies through the federally-facilitated HIX were ruled lawful by a D.C. federal judge back in January. The case challenges the ACA tax subsidies offered through the federally-facilitated HIX, arguing that the Act intended to offer credits only to state-run HIXs. Should the Court accept the lawsuit and issue an injunction on premium tax credits, HHS will no longer be able to offer individuals financial assistance to purchase insurance coverage through the federally-facilitated HIX. The arguments centered on the following issues:
- Is the government engaging in taxation without representation and misappropriating taxpayer dollars?
- By including the provision, did Congress intend to encourage states to run their own HIXs by withholding subsidies for those who elect the federal government to run their exchange?
Contraceptive mandate: consolidating two cases, Sebelius v. Hobby Lobby Stores and Conestoga Wood Specialties Corporation v. Sebelius, the U.S. Supreme Court heard oral arguments on the legality of the ACA’s requirement for employers who provide group health insurance plans to provide coverage for contraceptives. This ruling will determine whether a private, for-profit, secular corporation can claim constitutional protection from the mandate based on religious beliefs under the Religious Freedom Restoration Act. The oral arguments centered on the following:
- Is the claim centered on and limited to “sensitive materials like contraceptives” or does it allow for employers to seek exemptions to benefits for coverage of items such as blood transfusions or vaccines?
- How does a corporation exercise religion? How is it determined that a corporation has a specific belief – i.e., does it require a majority of stakeholders or corporate officers to practice that belief? And how much of the business has to be dedicated to religion?
- Would allowing exemptions to the mandate endanger the “operational integrity of the whole act?” And if so, why have exemptions been made to date?
Last Tuesday, the U.S. Food and Drug Administration (FDA) issued a proposed rule to update the medical device classification system. Among other changes, the rule identifies five categories of devices within class III:
- Devices that present known risks that cannot be controlled
- Devices for which the risk-benefit profile is unknown or unfavorable
- Devices for which a full review of manufacturing information is necessary
- Devices for which a premarket review of any change affecting safety or effectiveness is necessary
- Combination products
The assignment of class III to a medical device is intended only for those which are used to support or sustain life, to prevent health impairment or that come with the potential risk of illness or injury. According to Bradley Merrill Thompson of the mHealth Regulatory Coalition, this new classification regulation could allow the agency to better regulate and react to new technology developments, as the previous classification system did not expressly include mobile health applications or technologies. The FDA will receive comments until June 23, 2014.
(Source: iHealthBeat, “FDA Issues Proposed Rule That Could Benefit Mobile Health,” March 26, 2014)
Last Tuesday, the state House of Representatives for New Hampshire voted (202-132) to expand Medicaid, and late last week, Governor Maggie Hassan signed the bill into law, making New Hampshire the 26th state to expand the program under the ACA. The bill develops a “health protection” program that will provide insurance coverage to individuals with incomes up to 133 percent of the federal poverty level. While the state must now submit and receive approval from CMS for a Section 1115 demonstration waiver, the bill includes provisions that establish a voluntary bridge program for those who wish to obtain coverage before the expansion program is approved. This temporary program allows eligible individuals to receive coverage through the federally-facilitated HIX or through a plan offered by one of the Medicaid managed care organizations approved by the state. The temporary program will terminate on March 31, 2015, the date by which New Hampshire expects to receive approval from CMS on its waiver application.
The Catalyst for Payment Reform and Health Care Incentives Improvement Institute recently released their 2nd annual report on state price transparency laws. The analysis grades how well each of the 50 states are enabling consumers to access price information through state-based transparency laws. The researchers looked at state laws on price transparency and all-payer claims databases. According to the analysis, in 2013 many states showed progress by passing laws and regulations to provide greater health care price transparency. However, many consumers still face limited access to health care prices. The researchers found many websites to be nonfunctioning or included outdated information. Overall, 45 states have failing grades, three are graded as a “C” and only two states made a “B” grade.
(Source: Catalyst for Payment Report and Healthcare Incentives Improvement Institute, “2014 Report Card on State Price Transparency Laws,” March 25, 2014)
Researchers at the University of Cambridge have created a new mobile app that provides colorimetric testing on saliva, urine or other bodily fluids. The app uses the smartphone’s camera to take a picture of the test strip, translates it into a numerical concentration figure, and displays it on the smartphone’s screen. With real-time results, the user can then save the data and send it to medical and health care professionals for diagnosis and treatment of conditions such as diabetes, kidney disease and urinary tract infections. The app has produced accurate readings of glucose, protein and pH concentrations from urine test strips. The app is significantly less expensive than using a laboratory procedure that can cost up to $3,000. It does not require a network connection to analyze and store results and is easily transported between locations. This app joins the ranks of similar apps that test for albumin proteins and glucose, created by University of California, Los Angeles (UCLA) and Brown University, respectively. This technology allows medical data to be transferred quickly from remote locations to centralized laboratories, which could be especially valuable in communities without lab facilities.
Health departments expected to see an increase in notifiable disease reporting volumes due to Meaningful Use program
According to a new study published on the Online Journal of Public Health Informatics, Stage 2 Meaningful Use (MU) requirements for automated electronic laboratory reporting (ELR) of notifiable diseases, which begin in 2015, may double reporting volumes for public health departments. The researchers analyzed two years of ELR reporting data from 15 metropolitan hospitals and laboratories derived from the Indiana Network for Patient Care. The researchers contend that the findings will help departments prepare for future workload increases in order to better monitor and contain disease transmission.
(Source: Dixon, Brian E., Gibson, P. Joseph, Grannis, Shaun J. Online Journal of Public Health Informatics, “Estimating Increased Electronic Laboratory Reporting Volumes for Meaningful Use: Implications for the Public Health Workforce,” March 13, 2014)