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Health Care Reform Memo: January 7, 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.

Download the Infographic.

My take: Five themes of health care in 2013

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

2013 will be the most important year in the U.S. health care industry in modern history thus far. Our nation’s fiscal challenges and our industry’s bulk are on a collision course. The story line about health care in 2013 will center on five themes: Clarity, Costs, Compliance, Consolidation, and Consumers.


Last summer, the Supreme Court upheld the Affordable Care Act (ACA). In November, the election affirmed it is here to stay albeit certain to change. This year, we’ll know whether states expand their Medicaid programs or not, and how they’ll navigate their health insurance exchange (HIX) requirements either with or without federal help.

We’ll learn the success of the first wave of medical homes and accountable care organizations (ACOs) created by providers and plans to assume risk and share in savings; and we’ll get guidance about essential health benefits (EHBs) in each state, how the U.S. Internal Revenue Service (IRS) will enforce the individual mandate, how actuarial values and guaranteed issue will be regulated, and how the federal government will implement its federal HIX hub. By May 1, we’ll know how health costs fared last year and whether the Independent Payment Advisory Board (IPAB) is prompted to jumpstart spending constraints by the Chief Actuary. And October 1, 2013, we’ll see how the states open their HIX enrollments and how employers assess their strategy to pay or play.

And all this while the 113th Congress readies itself for the next election cycle while tackling the sequestration cuts on or before February 28, the continuing resolution to fund federal government operations by March 27, and the federal debt ceiling on or before March 31, 2013. Clarity anticipated; messiness assured!

Election Type 2014 Federal Elections 113th Congress Composition 112th Congress
White House No election ---- ----
U.S. Senate
  • 20 Democrat seats to be contested
  • 13 Republican seats to be contested
  • 53 Democrats (net 2 seats, 8 new members)
  • 45 Republicans (net -2 seats, 3 new members)
  • 2 Independent (net 0 seats, 1 new member)
  • 51 Democrats
  • 47 Republicans
  • 2 Independents
U.S. House of Representatives
  • All 435 seats contested
  • 234 Republicans (net -6 seats, 35 new members)
  • 201 Democrats (net 12 seats, 49 new members)
  • 0 Independents
  • 242 Republicans
  • 193 Democrats
  • 0 Independents

Admittedly, other legal challenges are likely. The individual responsibility requirement (aka “individual mandate”) has been challenged in nearly 30 cases to-date and over 40 cases have been filed around the ACA’s requirement that contraception be a covered benefit offered by employers, including Liberty University’s challenge that Congress did not have the power to impose the individual responsibility or the employer shared responsibility provisions, and other issues raised surrounding the First Amendment Free Exercise Clause, the Religious Freedom Restoration Act, and the Fourteenth Amendment Equal Protection Clause. So while legal proceedings continue, for the most part, the ACA—with the rules and regulations, requirements, and funding mechanisms it creates—will be the basis for the industry’s turn toward “the new normal.”


Health costs will be the primary concern of stakeholders in the system this year:

Per the Congressional Budget Office (CBO), for 2011-2021, “national health spending is projected to grow at an average rate of 5.7 percent annually, which would be 0.9 percentage point faster than the expected annual increase in gross domestic product (GDP) during this period. As a result, the health share of GDP is projected to rise from 17.9 percent in 2010 to 19.6 percent by 2021. During this period, the ACA is projected to reduce the number of uninsured people by 30 million; to add approximately 0.1 percentage point to average health spending growth; and to add $478 billion in cumulative health spending.” (Source: Keehan et al, “National Health Expenditure Projections: Modest Annual Growth Until Coverage Expands and Economic Growth Accelerates,” Health Affairs, June 12, 2012)

The gap between health spending and the GDP is problematic: it is not sustainable long term, notwithstanding the benefits of employment growth and innovation it produces as an industry. Health costs will be the focus in 2013 because consumers, employers, and policymakers believe it necessary to reduce costs and possible to do so without compromising quality and safety. In response, in 2013…

…for small- and mid-sized employers, double-digit premium increases might encourage them to curtail insurance benefits altogether even after paying the penalty per the ACA. Note: between 2000 and 2010, 10 percent of employers—mostly smaller and mid-sized, dropped coverage. Deloitte’s 2012 Survey of U.S. Employers concluded that another 9 percent might drop this decade due to cost.

…for larger employers, their calculated journey from defined benefits to defined contribution plans—so employees have more skin the game—is expected to accelerate as they keep an eye on the success of the HIXs as a long-term alternative channel for coverage.

Hospitals and facility operators will watch labor and supply chain costs closer than ever: tighter margins and shrinking revenues mean tough negotiations and lean operations. Effective efficiency gains of the past three years are table stakes: radical cost reduction is no longer optional.

Medical device and drug manufacturers are expected to continue to be caught in the cross fire: hospitals, doctors, and other providers requiring better deals, health plans that want steeper discounts, and increased government scrutiny to assure safety and outcomes accompanied by higher industry fees. Some might find shelter in promising global markets or non-regulated industry sectors, but most are expected to race to avoid being commodities via value-based pricing and deal-making. The drug companies will be watching to see how states manage their Medicaid expansion and what rebates they’ll be required to pay. And increased regulatory scrutiny of Group Purchasing Organizations (GPOs) and Pharmacy Benefits Managers (PBMs) will require device, durables, therapeutics, and disposable manufacturers to maneuver strategically through a period of uncertainty.

The states will feel pressure from four sides: 1) state employee health benefits that are historically richer and more costly than private sector counterparts, 2) Medicaid and Children’s Health Insurance Program (CHIP) enrollment expansion (7 million new enrollees since 2008) and utilization increases, 3) new costs for managing health exchanges and oversight of their health insurance markets, and 4) prison health—7 million adults in this country are incarcerated and long-term health is the system’s fasting increasing cost. All this at a time when 30 states and DC face budgetary shortfalls averaging 9.5 percent (per the National Association of State Budget Officers [NASBO]).

And consumers: they bear almost 30 percent ($2,898 per capita) of total health cost already through co-pays, deductibles, premiums, and over-the-counter (OTC) health purchases. (Source: Deloitte Center for Health Solutions, “The hidden costs of U.S. health care: Consumer discretionary health care spending,” 2012) They’re reacting with their feet: 17 percent fewer visits from 2009 to 2011 (Source: Kaiser Family Foundation, “The Economy and Medical Care,” November 2011) and voluntary use of cheaper options, like the 1,340 retail clinics and OTC substitutes for prescription drugs.

Seemingly, the answers to lowering costs across the continuum are straightforward. But reducing costs in a system where incentives reward doing more, and where each sector’s expense is another’s revenue, means likely skirmishes wherein each asserts their costs are appropriate and the others excessive.

Estimates of waste in U.S. health care spending in 2011, by category
  Cost to Medicare & Medicaid (in billions) Total cost to U.S. health care (in billions)
  Low Midpoint High Low Midpoint High
Failures of care delivery $26 $36  $45 $102 $128 $154
Failures of care coordination $21 $30 $39 $25  $35 $45
Overtreatment $67  $77 $87 $158 $192  $226
Administrative complexity $16 $36 $56 $107  $248 $389
Pricing failures $36 $56 $77 $84 $131  $178
Subtotal (excluding fraud & abuse) $166 $235 $304  $476 $734  $992
% of total health care spending 6%  9% 11% 18% 27% 37%
Fraud & abuse $30  $64 $98 $82 $177  $272
Total (including fraud & abuse) $197 $300 $402 $558 $910  $1,263
% of total health care spending       21% 34% 47%

Source: Health Affairs, “Reducing Waste in Health Care,” December 13, 2012

In 2013, the entire industry will feel pressure to justify its costs and make adjustments that are uncomfortable.


Hardly a week goes by that the government doesn’t report its success in weeding out fraud in the U.S. system. The federal government invested $102 million in the last four years to improve its capabilities in Medicaid fraud detection (per the Centers for Medicare & Medicaid Services [CMS]) and is two years into its Medicare initiative to replace “pay and chase” methods with powerful predictive models that identify the bad actors and intercept before payments are made. The government (the U.S. Department of Health and Human Services [HHS]) estimates savings of between $82 and $272 billion annually if fraud was effectively weeded out of the system.

Physician self-referral is likely to be in the spotlight: the ACA and Congressional oversight committees are likely to step up efforts to limit physician self-referral. While ownership of physician-owned hospitals was curtailed in the ACA, physician ownership of imaging and surgical facilities is a likely target.

Health plan compliance will be intense: administrative simplification vis-à-vis Section 1104 of the ACA set in motion key changes to the core operations of health plans (i.e., Eligibility and Claim Status specifications released in January of 2012, procedures for Electronic Funds Transfer (EFT), and Remittance Advice Transactions in August 2012, along with Health Plan Identifier and National Provider Identification). And states will embark on health exchanges and oversight of health plan compliance with EHBs, medical loss ratio (MLR) thresholds, and premium increases just for starters.

And compliance challenges for drug and device manufacturers will be no less intense in 2013 beyond their new excise taxes and rebates—new data capture and reporting requirements that start this month, required changes to Medicaid Average Manufacturer Price (AMP) definition and calculations, expansion of drug classes subject to the Medicaid rebates, pricing changes for 340B entities along with new integrity obligations around overcharges, the new Branded Prescription Drug Fee that’s now applied to revenues from government contracts, and more. Device and drug manufacturers’ compliance efforts will amp up exponentially at the same time their companies face intense pricing pressure from their customers and increased scientific evidence from regulators.

And perhaps the issue with incendiary potential: necessary care. Policymakers and regulators will investigate waste due to clinically unnecessary procedures and tests. Care that did not show a proven health benefit, and where a less costly alternative was not used, cost $158-$226 billion in 2011. (Source: Berwick, et al, “Eliminating Waste in U.S. Health Care,” The Journal of the American Medical Association [JAMA], April 11, 2012) As incentives change from volume to value, as financial risk is shifted to doctors and hospitals for quality and cost, and as report cards provide scores for necessary care in each community, the issue of adherence to evidence-based care will be widely discussed. And in all likelihood, this issue will become the centerpiece for regulatory oversight and compliance in coming years.

The U.S. health care system is highly regulated already. There’s no end in sight. Compliance is a big deal and will continue to be a moving target.


The health care industry is in a fierce race to deliver more value to its customers while lowering its operating costs. It is an industry unlike any other—labor intense, capital intense, highly regulated, complex, and non-transparent for the most part. To achieve that aim, its stakeholders are exploring new relationships that cross traditional boundaries and test infrastructure requirements, alignment of incentives and the willingness of leaders to compromise. The pace of consolidation is mind boggling…physicians and health plans, physicians and hospitals, hospitals and hospitals, hospitals and long-term care providers, biotech and pharmaceutical manufacturers, retail pharmacies and disease management companies, food manufacturers and alternative health providers, and so on. Consider…

Between January 1, 2007 and June 30, 2012, the numbers of hospital acquisitions or mergers has increased annually since a low of 50 in 2009 and is expected to be close to 100 in 2012 when the final numbers are released.

The numbers of deals involving medical groups increased 60 percent in the last year, with hospital and health plan acquisitions of larger groups and networks making headlines.

Drug manufacturers, facing patent expirations, stepped up acquisition efforts reporting $40 billion in deal value annually for the past three years. Many of these involve deals with biotech companies allowing the small molecule companies access to promising small molecules that portend the promise of personalized medicine.

And the medical device industry is on track to complete almost 185 deals in 2012—a frenetic pace maintained since 2009 in an industry most notably composed of more than 4,000 small manufacturers seeking market access.

What’s driving the flurry of deals and consolidation: reality—for most to survive, it’s a choice to go big or get out. Access to capital to be competitive, attract talent, invest in infrastructure, and grow requires scale. Most of the sectors in health care are smaller when contrast to other industries. There are 4,000 biotech companies but only 25 are a scale to operate as a public company. Likewise in other sectors where there are many smaller players and a few bigger: medical devices—approximately 6,000 companies; community hospitals—4,985 with 40 percent in multi-hospital or obligated ownership models; 400 health insurance plan operators with more than 80 percent of total enrollment in 46; and so on.

The health care industry in the U.S. will consolidate at a pace in 2013 that’s unprecedented. Our studies suggest consolidation often disappoints, failing to deliver long-term sustainability or growth anticipated when the deals were crafted. So the story in 2013 will be consolidation to deliver measurable value—a standard that might be tougher to meet than most anticipate.


The U.S. health system has traditionally paid lip service to the notion of “consumers” because it deems every element of our system too complex for comprehension by the general public. Diagnosis and treatment is complex—choosing between treatment options based on signs, symptoms, risk factors, and co-morbidities requires medical training most believe. And the structural features of the system are complex: regulations at the state and federal levels, Medicare, Medicaid, CHIP, and other government programs. And the plethora of innovations—drugs, devices, alternative methods, and many more discourage a grasp of how things work and what they mean for most. It’s the basic reason doctors, hospitals, drug companies, and device makers prefer to call them patients: it supports a confident sense of control over consumers and dispels notions that individuals might not require the care and feeding of their provider.

This notion is changing. And in 2013, the transition from a patient orientation to consumerism in health care will come full circle. The reason: consumers are demanding more value from the system due to its ever-increasing costs and poor service. Example: 52 percent gave the system a report card grade of “A” or “B” for meeting their health care needs and those of their families in 2012 vs. 14 percent who grade it “D” or “F.” (Source: Deloitte Center for Health Solutions, “2012 Survey of U.S. Health Care Consumers,” 2012) And 42 percent believe the ACA will bring about no change in quality vs. 38 percent believe quality will decrease (Source: Truven Health Analytics, Health Leaders, October 2012) and 62 percent say that at least half the money spent on health care is wasted, according to the 2012 Survey of U.S. Health Care Consumers.”

The trifecta driving the change is simple: 1) technology: mobile applications will enable comparison of treatment options, costs, and the list of providers who adhere to best practices; 2) coverage: high-deductible plans and a growing individual insurance market is expected to drive price and quality sensitivity, and 3) transparency: regulators will require increased access to performance data from health plans, hospitals, drug manufacturers, long-term care providers, and physicians.

While it’s still more comfortable to think of “patients,” it is the consumer movement in health care that will be its most disruptive theme. The industry’s incumbents might not be prepared; those from outside the industry see it as a huge opportunity.

Five themes in 2013—

Clarity…the ACA is the law; its implementation requires every stakeholder’s attention.

Costs…radical cost reduction across the system is necessary to survival requiring new ways of managing people, processes, and technologies.

Compliance…the rules are complex, forthcoming, and massive. Proceed with caution.

Consolidation…go big or get out.

Consumers…how they define value, act as purchasers and voters, and behave as users will set the stage for the new normal. They’re neither patient nor patients, they are consumers.

Happy New Year.

Paul Keckely

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

Implementation update

ONC seeks public comment on HIT Patient Safety Plan

Late last month, the Office of the National Coordinator (ONC) for Health Information Technology (HIT) released its 39-page Patient Safety Action & Surveillance Plan for public comment outlining standard practices to enhance coordination between providers and industry stakeholders. Specifically, the plan outlines how to increase quantity and quality of data and knowledge about HIT safety, target resources, and corrective actions to improve HIT safety and patient safety, and promote a culture of safety related to HIT. Public comments will be accepted until February 4, 2013.

Background: ONC was created by Executive Order in 2004 and funded through the Health Information Technology for Economic Clinical Health (HITECH) Act. The objective was to establish a federal entity to serve as a resource to the entire health system to support the adoption of HIT and to reduce medical errors through enhancing medical technology. The HITECH Act also provided an avenue for providers to engage in meaningful use of HIT through the Electronic Health Record (EHR) Incentive Program. Since January 2011, 120,000 eligible health care professionals and 3,300 hospitals have qualified to participate in the program and received incentive payments. The deadline to meet the requirements for Stage 2 meaningful use is in 2014. For more information on Stage 2 meaningful use, read Deloitte’s recent whitepaper: “Shaping the future: from Meaningful Use to meaningful user

Related: CMS released a notice last week requesting information from hospitals, EHR vendors, and other interested parties regarding hospital readiness to electronically report certain patient-level data under the Hospital Inpatient Quality Reporting (IQR) program beginning calendar year 2014, a quality measurement and reporting program used to populate the hospital compare website, so that consumers can compare hospitals based quality factors. CMS is exploring whether hospitals would be able to use the same certified electronic health record technology (CEHRT) that is required for the EHR Incentive Program so that clinical quality measures and CEHRT data collection could be streamlined. CMS is seeking comment on whether stakeholders foresee challenges with this proposed process. Comments will be accepted until January 22, 2013.

My take: with or without pressures to constrain costs in health care, the adoption and use of EHRs across the continuum of care is widely seen as a necessary improvement in the health system—not as end in itself, but as a means of improving safety and quality, and reducing costs associated with error and redundant testing and unnecessary care. Stage 3 meaningful use, the implementation of ICD-10 and clinical integration via medical homes, accountable care, and bundled payments all presume the system has made a successful, albeit difficult and costly, transition to clinical and administrative decision support tools and systems, and incentives geared toward their required use. It’s the engine driving the new normal.

CCIIO: guidance on state-partnership exchange model, new deadline for declaration of intent to transition from partnership to state-based model

Thursday, the Center for Consumer Information and Insurance Oversight (CCIIO) released guidance on the state-partnership exchange model for which applications are due February 15, 2013. States that wish to transition from a partnership exchange to a state-based exchange for plan year 2015 now have until November 18, 2013 to notify HHS. In its guidance, CCIIO also delineated the role of the federal government from the states’ role based on whether a state opts to establish a “state plan management partnership exchange” or whether the state opts to play the role of consumer assistance and outreach coordinator. Per the ACA, a state can assume primary responsibility for carrying out activities through a state plan management partnership exchange or the state can play the role of consumer assistance and outreach coordinator. If state officials desire, they can take on both roles. CCIIOO is seeking comments from states on the logistics of the hybrid approach.

IRS provides guidance on employer shared responsibility

On December 28, 2012, the IRS released a 144-page proposed rule on the shared responsibility requirement: large employers (those with more than 50 full-time employees). Comments will be accepted until March 18, 2013, and a hearing will be held on April 23, 2013 to review the proposed rule. Highlights:

  • Coverage must be provided to employees and their dependents. Dependents are defined as an employee’s child who is under 26 years of age and does not include any individual other than children, such as an employee’s spouse.
  • If a large employer is comprised of a parent corporation and wholly owned subsidiary corporations, each of the corporations, regardless of the number of employees, is an applicable large employer member.
  • The term “hours of service” has been adopted in place of the term “hours worked” when determining full-time employee status and includes hours when work is performed and hours for which an employee is paid or entitled to payment even when no work is performed.

Background: per Section 4980H, a “large employer” (employers with more than 50 full-time employees) is subject to a penalty of $2,000/full-time employee if “minimum essential benefits in an affordable insurance plan are not accessible to employees” (less than 60 percent actuarial value) or no coverage is provided beginning in 2014. This penalty applies if at least one full-time employee who is entitled to a premium tax credit or cost sharing reduction has applied for coverage via an exchange plan. The first 30 employees are exempted from the penalty, and the calculation for “full-time employee” has been clarified to allow a look-back period of three to twelve months to assess eligibility of seasonal employees who might not average 30 hours or more per week.

Update: court challenges—Hobby Lobby will not cover contraception services

After the Supreme Court’s decision to deny Hobby Lobby’s appeal to review the 10th Circuit District Court decision last week, the retailer announced it will not cover contraceptive services for employees. The 10th Circuit District Court denied Hobby Lobby’s request for an injunction to prevent the company from having to comply with the ACA requirement that certain employers must provide contraceptive services as part of their health coverage.

Related: last month Korte & Luitjohan Contractors Inc. was denied a preliminary injunction regarding the contraception requirement in the ACA, but the appeal was reversed by the 7th Circuit Court of Appeals and an emergency injunction has been granted. And Liberty University’s challenge to ACA is on the docket for the 4th Circuit this spring. Stay tuned.

Key agencies with ACA implementation responsibility in 2013

Agencies under HHS:

  • CMS…watch for how it handles Medicaid expansion and continuation/expansion of demonstrations and pilot programs (i.e. Patient Centered Medical Homes, bundled payments, et al)
  • CCIIO…watch for its handling of state HIXs and its rules about state EHBs and regulation of health insurance plans
  • ONCHIT…watch for its monitoring of Stage 2 meaningful use and guidance on Stage 3

Others to watch:

  • Patient-Centered Outcomes Research Institute (PCORI)…watch for directives about its research agenda and plans for comparative effectiveness roll-out
  • Employee Benefits Security Administration (Department of Labor)…watch for guidance about self-insured employer coverage as exchanges come online
  • IRS…watch for its rules and procedures for regulating the individual mandate and dispensing of subsidies for eligible individuals purchasing coverage through state HIXs; regulations and enforcement of employer taxes, if they do not provide coverage; regulation and enforcement of excise taxes on medical devices (effective January 1, 2013) and health insurance industries (effective January 1, 2014); guidance about how certain individuals may be exempted from minimum essential coverage; and others
  • Office of Personnel Management (OPM)…watch for its role in setting up the federal “hub” allowing for contracting with at least two private multi-state insurance plans accessible in all state and federal exchanges

CMS: cancer, kidney specialists might run their own ACOs

December 20, Principal Deputy Administrator Jonathan Blum said CMS is considering allowing nephrologists and oncologists to form ACOs as demonstrations. Per Section 3022 of the ACA, specialists may participate in ACOs, but the Medicare Shared Savings Program must be led by primary care physicians. CMS has the power to test other types of ACOs as demonstrations, and the agency’s innovation center already is testing an alternative for advanced provider systems, called the Pioneer ACO Model, but those ACOs also are rooted in primary care. (Source: HealthPolicyNewstand, “Inside CMS,” January 6, 2013)

Legislative update

Congress passes American Taxpayer Relief Act to avoid fiscal cliff: sequestration, debt ceiling ahead

Last week Congress passed and the President signed into law the “American Taxpayer Relief Act of 2012” (ATRA) averting the “fiscal cliff.” The deal postpones the start of sequestration for two months, but does not address the need to raise the debt ceiling or longer-term fiscal issues, thus requiring the new 113th Congress to resolve these by late February or early March 2013. ATRA highlights:

  • Personal income taxes: income tax rates will not go up for individuals with taxable income of $400,000 or less and families with taxable income of $450,000 or less, but certain deduction limitations will apply to individuals with adjusted gross income (AGI) above $250,000 and families with AGI above $300,000.
  • Unemployment benefits: the unemployment benefits for 2.1 million will be extended through December 31, 2013.
  • Alternative minimum tax (AMT): the AMT patch is renewed for 2012 and the exemption will be permanently indexed for inflation in the future.
  • The “doc fix”—a planned 27 percent reduction in Medicare pay rates to doctors was set aside for one year (at a cost of $25.2 billion, per the CBO) largely paid for by 10-year projected savings from cuts to hospitals and other providers (i.e., reductions in the Medicare Severity Diagnosis Related Groups, or MS-DRGs) ($10.5 billion); re-pricing of end stage renal disease (ESRD) payments ($4.9 billion), re-basing Medicaid Disproportionate Share Hospital (DSH) payments ($4.2 billion), and applying a competitive bidding program to diabetes test strips bought at retail pharmacies ($600 million).
  • Long-term care: ATRA repealed the Community Living Assistance Services and Support (CLASS) Act (Sections 8001 and 8002 of the ACA) and the reclaimed unspent loans from $2.3 billion set aside for the Consumer Operated and Oriented Plan (CO-OP) program (Section 1322 of the ACA). To-date, 24 plans have received funding, and 26 had submitted proposals to HHS but will not receive funding. Note: ATRA replaced the CLASS Act with a new 15-member Commission on Long-Term Care tasked to create a national plan to Congress and the President to address long-term care services in the U.S. Within 30 days of the passage of the Act, three Commissioners will be appointed by President Obama, and the remaining 12 will be appointed by the House and Senate (50/50 Republican/Democrat appointees). Ideally, Congress will vote on the recommendations as early as fall 2013.

Title VI of ATRA includes 29 provisions relevant to health care covered in 46 pages of the 157 total in the new law. Pertinent health care industry related items from ATRA:

ATRA Title VI Key policy changes Projected cost (2013-2022)
Subtitle A—Medicare extensions (Sections 601-610)
  • The 27% reduction in physician payments is offset by other health spending reductions; the update to the conversion factor for 2013 is 0%. (Section 601)
$25.2 billion
  • Physicians participating in a qualified clinical data registry beginning in 2014 for a full year will meet the Medicare quality measures data reporting requirements per Section 3004 of the Affordable Care Act (ACA); the requirements for an entity to be considered a qualified clinical data registry are forthcoming and will be determined by the Secretary of HHS. The U.S. Government Accountability Office (GAO) will study and report to Congress on incorporating registry data into the Medicare program in order to improve quality and efficiency by November 15, 2013. (Section 601)
$.1 billion
  • The work geographic index floor of 1.0 is extended from January 1, 2013 to January 1, 2014. This means that if the geographic index is less than 1.0 in a certain area, a provider will not be penalized. For example, if the geographic index is 0.8, meaning it costs 20% less to operate in a certain geographic area than the national average, the provider will be reimbursed at the national average rate versus the lower rate. (Section 602)
$.5 billion
  • Eligible Medicare beneficiaries may request an exception for the uniform dollar limitation for outpatient therapy services if deemed medically necessary until December 31, 2013. A process was put in place in 2006 and was set to expire in December 2012. (Section 603)
$1 billion
  • Ground ambulance and super rural ambulance add-on payments extended until January 1, 2014; air ambulance add-on payments extended until June 30, 2013; study on ambulance costs to be conducted by HHS. (Section 604)
$.1 billion
  • Medicare payments to low-volume hospitals for inpatient services are extended until FY2014. (Section 605)
$.3 billion
  • The Medicare-dependent hospital (MDH) program is extended until October 1, 2013. (Section 606)
$.1 billion
  • Eligible specialized Medicare Advantage (MA) plans may restrict plan enrollment to individuals who are within one or more classes of special needs individuals for periods before January 1, 2015 – extended from January 1, 2014. (Section 607)
$.3 billion
  • MA cost contracts are extended until January 1, 2014. MA cost contracts provide the full Medicare benefit package and do not restrict beneficiaries to an HMO. (Section 608)
  • Within one year the Secretary of HHS must develop a strategy to provide data for performance improvement in a timely manner to applicable providers – including utilization data and feedback on quality data. The GAO will also conduct a study on private sector information sharing activities within eight months. (Section 609)
  • Funding for low-income programs for outreach and assistance programs increased. (Section 610)
Subtitle B—Other Health Extensions
  • Extension of the qualifying individual program (Section 621)
$.8 billion
  • Extension of Transitional Medical Assistance (Section 622)
$.6 billion
  • Extension of Medicaid and CHIP Express Lane option (Section 623)
  • Extension of family-to-family information centers (Section 624)
  • Extension of Special Diabetes Programs for Type I diabetes and for Indians (Section 625)
$.3 billion
Subtitle C—Other Health Provisions
  • The Medicare reimbursement system used to pay hospitals will be adjusted: Inpatient Prospective Payment System (IPPS) documentation and coding adjustment for implementation of Medicare Severity Diagnostic Related Groups (MS-DRGs) (Section 631)
-$10.5 billion
  • Revisions to the Medicare end-stage renal disease (ESRD) bundled payment system to reflect findings in a recent GAO report (Section 632)
-$4.9 billion
  • Treatment of multiple service payment policies for therapy services (Section 633)
-$1.8 billion
  • Payment for certain radiology services furnished under the Medicare hospital outpatient department prospective payment system. (Section 634)
-$.4 billion
  • Adjustment of equipment utilization rate for advanced imaging services. (Section 635)
-$.8 billion
  • Medicare payment of competitive prices for diabetic supplies and elimination of overpayment for diabetic supplies. (Section 636)
-$.6 billion
  • Medicare payment adjustment for non-emergency ambulance transports for ESRD beneficiaries. (Section 637)
-$.4 billion
  • Removing obstacles to collection of overpayments. (Section 638). Prior to the passage of this Act, Medicare Recovery Audit Contractors (RACs) – a program created by the Medicare Modernization Act of 2003 to identify improper payments to Medicare health care providers – were given a three year look-back period to collect overpayments; now, RACs will have five years to collect overpayments.
$.5 billion
  • MA coding intensity adjustment. (Section 639)
-$2.5 billion
  • Elimination of funding for the Medicare Improvement Fund. (Section 640)
-$1.7 billion
  • Rebasing of State disproportionate share hospital (DSH) allotments. Per the ACA, DSH payments are set to be reduced beginning in 2014 to coincide with the expansion of Medicaid. The provision in H.R. 8 further reduces payments beginning in 2022. (Section 641)
-$4.2 billion
  • Repeal of CLASS program. (Section 642)
  • Commission on Long-Term Care established. (Section 643).
  • Funding that has not been already allocated for the CO-OP Program has been rescinded. (Section 644) Note: rescinding funding from the CO-OP program is only projected to save only $0.2 billion because, according to CBO, most of the budget authority would have lapsed under current law. The CO-OP program was designed as a compromise for lawmakers who favored a public option allowing the creation of non-profit health plans to operate on health insurance exchanges (HIX).
-$.2 billion

*Between -$50 and $50 million

Source: CBO, “Detail on Estimated Budgetary Effects of Title VI of H.R. 8, the American Taxpayer Relief Act of 2012,” as passed by the Senate on January 1, 2013, January 2013

My take: it’s ironic that hospitals were hit by cuts to accommodate the physician pay fix. At a time when hospitals and physicians are being pushed to become clinically integrated and take risk in contracts with Medicare, employers, and health plans, and as acute margins are shrinking, hospital operators are necessarily thinking “go big or get out.” Physicians and hospitals are increasingly co-dependent per the law’s requirements for clinical integration, and regulators are systematically reducing acute margins by setting Medicare fee schedules for ambulatory services at rates the same for hospital-based and physician office services. The trend toward physician-hospital consolidation is accelerating: regulators and payers (employers, health plans) are hopeful that clinical integration results in lower costs and improved outcomes from improved coordination of care and concerned that these efforts not result in higher costs or increased leverage over payers.

Medicare in the spotlight in 113th Congress

Congressional leaders on both sides and the White House agree that entitlement reforms—Medicare, Medicaid, and Social Security—are necessarily part of a long-term deficit reduction and economic growth plan. They are not in agreement on how changes should be made or when.

Per the U.S. Bureau of Economic Analysis, entitlement programs cost $24 billion in 1960 vs. $2.2 trillion in 2010—100 times higher in 2010 (+727 percent inflation adjusted) or $7,200 for every person in U.S. The big three: $518.4 billion for Medicare covering 49.4 million, $405 billion for Medicaid covering 62.7 million, and $690 billion for Social Security. In the current $941 billion fiscal year (FY) 2013 budget of the HHS, outlays for Medicare (56 percent) and Medicaid (30 percent) dwarf other categories.

My take: Medicare is arguably the most problematic since its funding is 100 percent federal. Every day, 8,000 people become eligible for Medicare as Baby Boomers age into the program, swelling its enrollment to 81 million by 2030. The costs of the benefits these receive from the program is expected to exceed what enrollees paid in through withholding taxes by 3 to 1. The math is perplexing: medical inflation costs plus increased enrollment plus sicker enrollees who live longer plus a program that’s wildly popular with seniors equals the policymakers dilemma.

Several proposals for Medicare reform will be revisited in the 113th Congress. No doubt, means testing, increasing the age of eligibility, restrictions on first-dollar coverage via MediGap policies, premium support, Medicare Advantage (MA) expansion, and other changes will be on the table. The bottom line is this: Medicare in its current form is not sustainable. The reality that major changes are necessary is politically risky. It leads to rhetoric about death panels, government takeover of health care. and more. It’s nonetheless a necessary national discussion we will have this year.

Major Medicare reform proposals likely to be reconsidered in 2013:

Medicare cost containment proposal Policy recommendations Estimated cost savings

Enhanced competition: on the basis of quality and price between traditional fee-for-service Medicare and MA plans, use buying power to reduce prescription drug costs

Federal contribution: based on the cost of the second-least expensive plan or traditional Medicare (whichever is less expensive), growth of per-beneficiary federal support capped at GDP+1%

Employer tax exclusion: slowly phase out the tax exclusion for employer-provided benefits

Benefit structure: uniform cost-sharing, out-of-pocket maximum to protect seniors against catastrophic costs

Premium changes: end first-dollar supplemental coverage, increase Part B premiums from 25% to 35% over five years

Produces total savings of $10.3 billion from 2013-2042 in the Medicare program

Reduces debt as percent of gross domestic product (GDP) from 155% in the baseline projection for 2042 to 58%

The Senior Protection Plan2

Enhanced competition: use competitive bidding for all health care products (e.g., nondurable medical products, durable medical equipment nationwide, clinical laboratory services)

Price and quality transparency: require private insurers to make prices transparent, price transparency for medical devices, publicly release claims data

Reform health care delivery: accelerate the use of alternatives to the fee-for-service model for payment, better coordination of care for dual eligibles

Sustainable growth rate (SGR): repeal the SGR in its entirety

Produces total savings of $385 billion over 10 years

Generates up to $100 billion over ten years as a result of tax policies related to health care

House GOP3

No changes: for those currently in the Medicare program or near retirement

For younger adults: creates a Medicare Exchange where seniors are given a choice of different private plans that compete alongside the traditional fee-for-service option

Risk-adjusted plans: insuring those with greater health needs are protected against high premiums, adverse selection

Means-testing: those with greater income would pay an increased share of their premiums

Enhanced competition: premium support and competitive bidding to ensure guaranteed affordability for seniors

Repeals: the IPAB

Cuts spending by $5 trillion relative to the fiscal year (FY) 2013 budget plan from the President

Increases by 0.5% to 19% total revenues as percent of GDP by 2040 as compared to Congressional Budget Office (CBO) Alternative Fiscal Scenario

Decreases by 15.25% to 18.75% total spending as percent of GDP by 2040 as compared to CBO Alternative Fiscal Scenario

The Heritage Foundation4

Eligibility age: raised gradually from 65 to 68 and then be indexed to life expectancy

Premiums: gradually increase the premiums for Parts B and D and index to income, within five years transition to a defined-contribution or premium support model adjusted by income

Enhanced competition: expand competition in the program to encourage greater innovation, restrain spending, and slow costs

Reduces debt as a percent of GDP from 79% in 2013 to 28% in 2037

Reduces spending as a percent of GDP from estimated 2037 level of 35.7% to 18.3%; revenue remains the same at estimated 2037 level of 18.5%


SGR: reforms the SGR and requires the fix to be offset, recommends that the Centers for Medicare & Medicaid (CMS) develop an improved payment formula

Medicare fraud: increases statutory authority and funding to CMS to reduce Medicare fraud

Reforms cost-sharing rules: establishes a single combined annual deductible of $550 for Parts and B, instates a 20% uniform coinsurance on health spending above the deductible

Prescription drug rebates: extends the Medicaid drug rebate to dual eligibles participating in Medicare Part D

Reduces deficit by $4 trillion through 2020

Reduces debt as a percent of GDP to 60% by 2023, 40% by 2035

Mandate on manufacturers to pay minimum rebate6

A proposal to require manufacturers to pay a minimum rebate on drugs covered by Medicare Part D for beneficiaries who receive the Low-Income Subsidy contains the following components:

  • The rebate is set as the greater of a minimum rebate (currently at 23.1% of the average manufacturer price [AMP]) or the difference between the AMP and the best price (defined as the lowest manufacturer price paid for a drug by any private purchaser)
  • If a drug’s AMP rises faster than inflation, the minimum rebate is increased based on the change in the AMP compared to the consumer price index (CPI)
CBO scored the current proposal as achieving savings of $137 billion over ten years (2013-2022) or approximately $15 billion in its first full year of implementation

Bipartisan Policy Center, “Domenici-Rivlin Debt Reduction Task Force Plan 2.0,” December 2012 
2 The Center for American Progress, “The Senior Protection Plan,” November 2012
3 House Budget Committee, “Fiscal Year 2013 Budget Resolution,” March 2012
4 The Heritage Foundation, “Saving the American Dream: The Fiscal Cliff and Beyond,” December 2012
5 Report of the National Commission on Fiscal Responsibility and Reform, December 2010
6 Health Affairs, “The Medicare Part D Drug Rebate Proposal: Rebutting An Unpersuasive Critique,” December 28, 2012

Congress responds to Newtown, final rule on MHPAEA requested

In the aftermath of the Sandy Hook Elementary School deaths of 26 children and adults, 32 members of Congress sent a letter to HHS Secretary Kathleen Sebelius, U.S. Department of Labor (DOL) Secretary Hilda Solis, and U.S. Department of Treasury (DOT) Secretary Timothy Geithner last week urging the agencies to issue a final rule on the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). MHPAEA requires medical and mental health benefits to be provided at parity―requiring an insurance plan cover physical and mental health benefits both benefits at the same level. The authors of the letter state: “a recent GAO report found that insurance plans have actually increased the number of exclusions for mental health and addiction treatment since the passage of MHPAEA.”

Note: mental health and substance abuse services are one of the ten EHBs required to be covered by health plans offered in the individual and small-group markets, both inside and outside the HIXs, per the ACA. These benefits must be offered at parity.

Study: Medicare, Medicaid should incorporate physician payment incentives used by private plans

The Middle Class Tax Relief and Job Creation Act of 2012 required that GAO examine private-sector initiatives that base or adjust physician payment rates on quality and efficiency, and the initiatives’ applicability to the Medicare program. Based on its analysis of nine plans, the 43-page report concluded…

  • Private plans generally measure performance and make incentive payments at the physician-group level rather than at the individual-physician level. Physician organizations favor this approach.
  • Private plans use nationally endorsed performance metrics and noted the need for a standardized set of metrics across all payers. Physician organizations concur that a standardized set of metrics would be less administratively complex.
  • Most private plans provide financial incentives tied to meeting absolute benchmarks—fixed performance targets—or a combination of absolute benchmarks and performance improvement. Physician organizations prefer incentives tied to absolute benchmarks over those based on how physicians perform relative to their peers. Physician organizations also favored incentives that reward improvement because baseline levels of performance vary.
  • While private plan incentive payments vary in size and in method, private entities typically provide such payments within seven months of the end of the performance measurement period. Physician organizations stated that financial incentives should be distributed soon.

Source: “Medicare Physician Payment Private-Sector Initiatives Can Help Inform CMS Quality and Efficiency Incentive Efforts,” CMS, December 26, 2012

State update

CMS releases guidance on conversion to MAGI calculations for Medicaid expansion eligibility

Last week, CMS released guidance to states regarding the modified adjusted gross income (MAGI) thresholds for the Medicaid program and CHIP detailing how states that opt to expand Medicaid eligibility to 133 percent of the federal poverty level (FPL) should convert their current net income eligibility thresholds to MAGI thresholds per Section 2002 of the ACA. States that expand Medicaid to 133 percent FPL must use the MAGI threshold to determine eligibility for the newly-eligible population. Currently, state Medicaid programs use several other factors to determine eligibility, such as gender, disability, and health status; the MAGI will only take income into account.

Abortion legislation

According to the Guttmacher Institute, 19 states passed a total of 43 provisions in 2012 that restrict access to abortion services vs. 92 abortion restrictions enacted in 2011. More than half of the new restrictions were passed in six states: Arizona (7), Kansas (3), Louisiana (3), Oklahoma (3), South Dakota (3), and Wisconsin (3). Most state legislative activity is related to limits on later-term abortions, coverage in HIXs established under the ACA, and medication abortions.

Study: states spend 2 percent of tobacco settlement funds on smoking cessation

In 2012, states will collect $25.7 billion in revenue from the 1998 tobacco settlement and tobacco taxes and spend $459.5 million on smoking cessation programs targeting kids and adults. (Source: Campaign for Tobacco-Free Kids) Note: 46.6 million of America’s 196.4 million adults smoke, accounting for $97 billion in direct and indirect costs and 423,000 deaths annually.

State round-up: health insurance exchanges

Thursday, Arkansas received conditional approval from HHS to move forward with a state-partnership exchange. Note: Delaware was the first state to receive conditional approval for a state-partnership in mid-December.

Also last week, HHS announced that it has approved the following state-based exchange proposals: Utah, California, Hawaii, Idaho, Nevada, New Mexico, and Vermont. To date, 17 states (CA, CO, CT, HI, ID, KY, MA, MD, MN, NM, NY, NV, OR, RI, UT, VT, WA) and the District of Columbia have received conditional approval of their blueprints for state-based exchanges.

Per the table below, 18 states and the District of Columbia will operate a state-based exchange. According to the Kaiser Family Foundation, seven states are planning for a state-partnership exchange and the remaining states will default to a federally-facilitated exchange.

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

Note: updated as of January 4, 2012

Sources: Kaiser Family Foundation, National Association of State Health Policy: State Reform, and Politico Pro.

HIX announcements:

  • Connecticut's HIX has begun soliciting health insurance issuers and stand-alone dental plans to provide qualified health plans (QHPs) through its HIX. Insurance providers must respond to the solicitation by March 29, 2013 and open enrollment will begin on October 1, 2013 for a January 1, 2014 effective date.
  • Mila Kofman has been named the executive director of the District of Columbia's health insurance exchange. Formerly Maine's Superintendent of Insurance, Ms. Kofman was elected unanimously by the exchange’s board of directors. She began her duties last Wednesday.
  • HHS has not yet made a decision on Mississippi's application for a state-based exchange, citing the unresolved dispute between the state’s Insurance Commissioner Mike Chaney (R), and Governor Phil Bryant (R). Chaney submitted the state’s exchange proposal in mid-November without the support of the Governor. In a December 28 letter, Governor Bryant asked HHS Secretary Kathleen Sebelius to block the state’s application, arguing that Chaney does not have the authority to act on the state’s behalf.
  • State HIX timeline:
    Date Upcoming timeline for states that have elected a state-partnership exchange model and who are interested in a plan management role
    Early 2013
    • Begin to identify the entity performing the plan management functions and governance structure
    •  Begin to submit evidence of legal authority to perform plan management functions
    • Begin to:
      • develop procedures for day-to-day oversight and monitoring of QHP;
      • develop a plan for supporting QHP issuers and providing technical assistance;
      • develop approach for QHP issuer recertification, decertification, and appeal of decertification recommendations.
    February 15, 2013
    • Last date to submit a declaration letter indicating that the state plans to pursue a state partnership exchange and the blueprint application.
    April 2013
    •  Suggested start to the QHP certification submission process.
    May-June 2013
    •  Participate in consultations with HHS to ensure successful operation of the QHP certification process.
    July 31, 2013
    • Complete the QHP certification process and send final recommendations and QHP data to HHS.
    August 2013
    • Plan-preview period to address any QHP issuer data errors

    (Source: “Affordable Insurance Exchanges Guidance: Guidance on the State Partnership Exchange,” CCIIO, January 3, 2012)

State round-up: Medicaid expansion

As of January 4, 2013, 15 states and the District of Columbia will expand and 23 states are undecided/undeclared.

Participating Not participating or highly likely not to participate Undecided or undeclared

Note: states do not have a deadline to make a decision on Medicaid expansion and may opt in or out of participation at any time. This chart was compiled using publically available information (as of January 4) and is subject to change.

Other recent announcements:

  • Texas health care providers submitted proposals to the state outlining how they plan to modify the provision of care for their poor and uninsured. Lawmakers are seeking federal approval to begin grant incentives to health care providers who implement experimental programs that improve care while reducing costs. The waiver could provide Texas’ health care providers with $29 billion over the next five years.  
  • Last Thursday, Colorado Governor John Hickenlooper (D) announced that his state will exercise its option to expand Medicaid coverage. The expansion is expected to provide eligibility to more than 160,000 additional individuals and will be accompanied by cost-control measures estimated to save $280 million over the next decade.
  • State Senator Michael Lamoureux (R) of Arkansas seeks compromise on an agreement to expand Medicaid. Governor Mike Beebe (D) supports the expansion but acknowledged passing the proposal would require a three-fourths majority in both the state’s GOP-controlled legislative bodies.

Industry news

Value-based purchasing: year one results for hospitals

Last Thursday, Medicare announced bonuses and penalties for nearly 3,000 hospitals as it ties almost $1 billion in payments to the quality of care provided to patients that take effect this week. The program compared hospitals on how they followed evidence-based standards of care and how patients rated their experiences. In many regions, the hospitals with the highest ratings were not the best known or most widely seen as “best hospitals.” Notably, hospitals in Maine, Nebraska, South Dakota, Utah, and South Carolina fared best, while hospitals in the District of Columbia, Connecticut, New York, Wyoming, and Delaware worst per the CMS data.

In addition, 1,557 hospitals will be rewarded with up to a 1 percent increase in their Medicare rate and 1,427 will see a 1 percent decrease in their rate in 2013—the first year the Hospital Value-based Purchasing (HVBP) initiative impacts payments to hospitals.

Background: the HVBP program is one of several Medicare pilots seeking to shift responsibility for outcomes to providers. In October 2012, Medicare reduced payments to 2,217 hospitals because due to avoidable readmissions. In 2015, the ACA requires the government to begin a quality payment program for physician groups of 100 professionals or more to be expanded to all doctors by 2017.

The HVBP program is based on a hospital’s scoring: 70 percent based on how frequently hospitals followed 12 basic clinical standards of care, such as controlling heart surgery patients’ blood sugar levels and giving them beta blockers to lower their blood pressure; and 30 percent for hospital satisfaction survey ratings of former patients (i.e., the communication and responsiveness of doctors and nurses and the cleanliness and quietness of their environment).

Meaningful use update: majority of hospitals, one-third of medical practices registered

According to the CMS’ November report on the Medicare and Medicaid EHR incentive payment programs, $9.3 billion was spent in 2011: $6.1 billion to 3,393 of 4,193 eligible hospitals, and $3.1 billion going to 162,051 of 335,879 eligible physicians and eligible professionals, mostly working in ambulatory care; and $189 million to 11,117 eligible professionals in a few MA programs.

Note: December 31 was the deadline for physicians and other eligible professionals to report and attest to meaningful use in calendar year 2012. Providers must meet federal requirements for meaningful use by completing their 90- or 365-day reporting period and attest to meaningful use by February 28, 2013.

HHS: first HIPAA breach involving fewer than 500 records

Hospice of North Idaho will pay HHS a settlement in the amount of $50,000 because of a security breach involving the fewest number of individuals (less than 500) impacted by a security breach to-date. The Hospice reported to the HHS Office for Civil Rights (OCR) in 2010 that an unencrypted laptop computer with electronic health information of 441 patients had been stolen. OCR began its investigation seeking violations of the Health Insurance Portability and Accountability Act (HIPAA) and found that the Hospice lacked the policies and procedures required by HIPAA to address mobile device security. OCR Director Leon Rodriguez is using this case as an example to show that HHS will hold those in the health care industry accountable for their actions, no matter their size.

Background: although the hospice was not required to report the breach within 60 days of its discovery since it involved a small number of records, the HITECH Breach Notification Rule requires that breaches of protected health information (PHI) of less than 500 individuals be reported to the Secretary of HHS on an annual basis. OCR and the HHS ONC have launched an educational initiative, “Mobile Devices: Know the RISKS. Take the STEPS. PROTECT and SECURE Health Information,” to offer health care providers and organizations tips on how to protect patient health information used on mobile devices.

Study: MA use rates lower than FFS

Medicare Advantage (MA) plans use rates for emergency and ambulatory surgery were 20-30 percent lower than Medicare fee-for-service (FFS). Note: enrollment in MA plans increased from 4.6 million in 2003 to 12.8 million in 2012 and accounts for 27 percent of total Medicare enrollment. (Source: Landan et al, “Analysis of Medicare Advantage HMOs Compared with Traditional Medicare Shows Lower Use of Many Services during 2003-2009,” Health Affairs, December 2012)

Note: data suggest MA plans have attracted younger/healthier enrollees thus accounting for some of the difference. In the Landan study, cohort samples were compared by self-reported health status and then adjusted to, in part, reduce bias. However, the authors acknowledged that they did not have access to diagnosis-specific data which would have allowed for more precise measurement of differences based on medical risk/health status.

Study: hospice operator survey

Of 775 hospice operators surveyed, 78 percent indicated they had protocols for disallowing individuals with potentially high cost medical needs (i.e., chemotherapy) from enrolling due to financial risk imposed by Medicare. Note: there are 3,500 hospice programs in the U.S.—a 53 percent increase since 2000. Medicare spent $13 billion for hospice care for 1.1 million beneficiaries in 2010. (Sources: Carlson et al, “Hospice Enrollment Policies Contribute to Underuse of Hospice Care in the U.S.,” Health Affairs, December 2012; Carlson et al, “Geographic Access to Hospice Care in the U.S.,” Journal of Palliative Medicine, 2010: 13)

Study: pill coloring linked to medication non-adherence

Researchers found that inconsistency in the shapes and colors of bioequivalent drugs can change how patients use their medication. Focusing on individuals prescribed antiepileptic drugs, the study found that patients whose pills changed color were 53 percent more likely to discontinue using their medication as directed. (Source: Kesselheim, et. al, JAMA, “Variations in Pill Appearance of Antiepileptic Drugs and the Risk of Nonadherence,” December 31, 2012)

Study: access to psychiatric patient records in hospitals

A study of 18 hospitals found that 44 percent of hospitals maintain electronic psychiatric records, 28 percent make psychiatric records accessible to non-psychiatric physicians, and 22 percent do both. In addition, the 7-, 14-, and 30-day readmission rates were found to be lower in hospitals that both stored their records electronically and made them accessible to non-psychiatric physicians, 4 percent vs. 6.6 percent, 5.8 percent vs. 9.1 percent, 8.9 percent vs. 13 percent, respectively. (Source: Kozubal, et. al, International Journal of Medical Informatics, “Separate may not be equal: A preliminary investigation of clinical correlates of electronic psychiatric record accessibility in academic medical centers,” December 20, 2012)

Note: mental health conditions (i.e., substance abuse, mood and stress disorders, etc.) are considered risk factors and therefore relevant to diagnosing and treating other medical problems. However, in some communities, mental health providers are reluctant to share records and/or patients are fearful their records might violate their confidentiality.


“Some of the biggest ideas for cutting health care spending got pushed to the side when President Barack Obama and Congress turned their attention to cutting a smaller fiscal cliff deal. But now, Republicans say they’ll insist on real spending cuts in the debt limit—sequestration fight. And if Obama continues to resist big entitlement changes, the health care industry could be in for another round of cuts.”

“A health care guide to the debt limit fight,” Politico, January 4, 2013

“(Post election), the politics of health reform will move from the front burner of presidential politics to a series of smaller and more distinct arenas. In most of these, supporters of the law will have the upper hand—and most issues will be fought out on the less visible terrain of administrative decision-making in Washington and the dispersed, discrete, and varied decisions of states.”

— Lawrence Jacobs, Joel Ario, “Post Election, The Affordable Care Act leaves the Intensive Care Unit for Good,” Health Affairs, December 2012, p 2603

“Although there are unresolved methodologic issues related to the measurement and interpretation of patient experiences—regarding survey content, risk adjustment, and the mode and timing of survey administration—we believe that both theory and the available evidence suggest that such measures are robust, distinctive indicators of health care quality. Therefore, debate should center not on whether patients can provide meaningful quality measures but on how to improve patient experiences by focusing on activities (such as care coordination and patient engagement) found to be associated with both satisfaction and outcomes, evaluate the effects of new care-delivery models on patients' experiences and outcomes, develop robust measurement approaches that provide timely and actionable information to facilitate organizational change, and improve data-collection methods and procedures to provide fair and accurate assessments of individual providers.”

— Manary et al, “The Patient Experience and Health Outcomes,” New England Journal of Medicine [NEJM], December 26, 2012

“A continued focus on operating efficiency, stable reimbursement levels, modest managed care rate increases, and a higher than expected 2013 Medicare market basket increase all contribute to a stable landscape. However, Fitch believes there is increased uncertainty beyond 2013 as opportunities for further cost cutting wane and a wave of expected reimbursement reductions are realized under the full implementation of the Patient Protection and Affordable Care Act (PPACA) beginning in 2014.”

—Jim Lebuhn, Senior Director, “Fitch Ratings 2013,” December 24, 2012

Fact file

  • Drug approvals by FDA in 2012: 39 new drugs in 2012 vs. 30 in 2011 and 21 in 2010; ten had fast track status, eight approved in December—highest since 1996 when 53 approved. (Source: U.S. Food and Drug Administration [FDA])
  • ACA costs: ACA will reduce deficit $109 billion from 2013-2022. (Source: CBO)
  • CO-OPs: to-date, 23 state-run, member-governed CO-OPs have been approved and HHS has loaned $2 billion toward start-up costs. (Source: HHS) Note: ACA provides for up to $3.4 billion for start-up costs.
  • Community health center funding: $13 billion into clinics via the American Recovery and Reinvestment Act of 2009 (ARRA) and ACA to expand access to 36 million by 2019 from 17.1 million served in 2008. (Source: HHS)
  • Online consumers: through December 21, e-commerce sales reached $38.7 billion—up 16 percent from the same period in 2011. “One final observation worth making is that the number of visitors an e-commerce site has does not appear to be related to its customer service rating. Companies appear to hold their own fates based on their retail practices and not their visitor count.” (Sources: ComScore, Research company ForeSee “E-Retail Satisfaction Index (U.S. Holiday Edition),” assessment of 100 online shopping sites by 24,000 consumers)
  • Managed Medicaid: represents $60 billion in new premiums through 2014 and $230 billion through 2020. (Source: Forbes, July 11, 2012)
  • December jobs report: the U.S. economy added 155,000 jobs in December leaving unemployment at 7.8 percent; health care industry added 45,000 jobs led by ambulatory services (+23,000), hospitals (+12,000), and nursing and residential care facilities (+10,000). For 2012, health care employment increased 338,000. (Source: U.S. Bureau of Labor Statistics)
  • EHR cut and paste: a study of 2,068 electronic patient progress reports in the intensive care unit of a Cleveland hospital found that 82 percent of residents’ notes and 74 percent of attending physicians’ notes were at least 20 percent made up of material “cut and paste” from patients’ prior records. (Source: Thornton, et. al, Critical Care Medicine, “Prevalence of Copied Information by Attendings and Residents in Critical Care Progress Notes,” December 2012)
  • CT scans radiation risk and consumer awareness: in a survey of 235 patients receiving CT scans, 34 percent were unaware that the scan would expose their body to radiation. Among those aware, 85 percent underestimated the amount of radiation and only 5 percent believed it would increase their lifetime risk of cancer. (Source: Busey, et. al, Archives of Internal Medicine, “Patient Knowledge and Understanding of Radiation From Diagnostic Imaging,” December 2012)
National health reform: What now?

National health reform: What now?

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