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Health Care Current: November 19, 2013
Weekly insights to keep you informed and ahead

#CHSCurrent

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.

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My Take: Translating between finance and benefits: becoming an employer of choice

Implementation & Adoption

On the Hill & In the Courts

Around the Country

Breaking Boundaries

My Take: Translating between finance and benefits: becoming an employer of choice 

by Rick Wald, National Practice Leader, Employer Health Care Community, Deloitte Consulting LLP

I once heard former president Bill Clinton speak about his thoughts on the key differences between the role of the “commander in chief” and those who hold seats in Congress. He stated that it is important to understand that Congress is focused on the short-term—what’s in the budget this year, what bills to bring to the floor—while the president is focused on the long-term strategy and goals for the country.

I often see a similar relationship between chief financial officers (CFOs) and human resources (HR) executives. CFOs are generally known for their ability to understand their company’s strategic vision and marry that vision with its long-term financial plan. However, as it relates to health care, as soon as the word “benefits” enters the conversation, many CFOs shift decision making over to HR. Meanwhile, due to the more tactical nature of benefits strategies, their HR colleagues often focus on the short-term, aiming to execute on plans built for the next one to two years.

Findings from Deloitte’s 2013 Survey of U.S. Employers highlight some of the key similarities and differences between CFOs and HR executives:

  • Both place hospital costs (81 percent and 70 percent, respectively) at the top of their list for why the health care system is expensive…

    …but they disagree from there: CFOs pin the blame on waste/inefficiency (69 percent) and HR executives on government regulation (60 percent) as the second most impactful driver of health care costs.1

  • Both agree that increased transparency around health care costs could improve the performance of the system (58 percent and 52 percent, respectively)…

    …but HR executives place more faith in the possibility that increased use of health information technology could help improve the performance of the overall health care system (49 percent vs. 36 percent, CFOs).2

  • CFOs and their HR counterparts present different views on their company’s preparedness for health care reform: 40 percent of HR executives believe their HR department is completely prepared to navigate the changing health care environment for their company, while only 28 percent of CFOs feel the same way.

This divergence of perspectives raises the question of what might happen if CFOs and HR executives worked together to understand what a healthier, more engaged workforce could look like in 2025 and to create a future vision for their organization.

A strategic partnership between the CFO and HR executive could help companies take a more forward-looking view. If a consensus on a shared vision can be reached across the C-suite, it will be up to the CFO and HR executive to work together to set milestones that work backwards from their ultimate goal: 2025, 2020, 2017, 2015…eventually defining next year’s objectives and a tactical implementation plan.

Once the organization’s shared vision is identified, it will be critical for the CFO and HR executives to identify the tools they will need to successfully implement their strategy. There are three key market opportunities for companies to consider:

  • Public health insurance exchanges (HIX): while the first open enrollment season continues into next year, employers will need to monitor HIX enrollment and develop a strategy that recognizes that some employees may be eligible for a subsidy. CFOs and HR executives will need to understand the options that they might pursue to take advantage of these opportunities for some portion of their population.
  • Private health insurance exchanges: many questions surround the private exchanges, as employers continue to work to understand what those exchanges are and what the pros and cons for participation might be. In this case, slow and steady may win the race and CFOs and HR executives should research the options and select a strategy that offers the best fit with both the company’s and employees’ needs.
  • Wellness and disease management programs: to the extent that employers wish to continue providing insurance to an increasingly older employee population, more attention will and should be given to wellness, disease management, care management and disease initiatives to improve the health of entire workforce populations.

For CFOs, the increasing cost of health care will make designing effective benefit and wellness strategies a vital component of a strong financial plan. And, HR executives will need to align benefits strategies with the long-term financial goals of the company in a way that helps to establish a healthier and more productive workforce. Moreover, an attractive benefits proposition can help to position a company in competition for talent retention, build a strong company culture and bill the organization as an “employer of choice.”

Companies who place value in translating across the two worlds of finance and benefits are likely to see a more cohesive vision for the future and a heightened level of employee satisfaction, performance and productivity.

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Notes:
1The total costs of the health care system have increased by about 4 percent annually in the last few years. Many factors drive those costs. In your view, how much influence do each of the following have on overall health care system costs? Percent of those answering “Major influence” is shown.
2Please rate the likely impact of each feature shown below on improving the overall performance of the U.S. health care system. Percent of those answering “High impact” is shown.

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Poll results from November 12 Health Care Current:

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Implementation & Adoption 

Administration announces plan to delay health insurance policy cancellations 

In a nationally televised webcast, President Barack Obama announced that insurance companies will not be required to upgrade existing individual plans to meet the requirements of the Affordable Care Act (ACA) through 2014. Despite the announcement, the Administration will only be able to proceed with this proposed plan if state insurance commissioners and insurance companies agree. This change in policy would only apply to current policyholders in the individual and small group market who have received cancellation letters from their insurers indicating that their existing policies would be cancelled as of January 1 for not meeting the ACA’s comprehensive essential health benefit (EHB) standards. If accepted, the plan would:

  • Require insurers to provide consumers with a written explanation of what benefits they would be forfeiting by not enrolling in a new plan that meets the EHB standards;
  • Require insurers to explain new coverage options available through health insurance exchanges that offer more comprehensive coverage and to tell consumers that, depending on their income,  they might qualify for tax credits through the marketplaces or be eligible for Medicaid; and
  • Adjust the temporary risk corridor program (which is designed to stabilize premiums as exchanges are implemented) to protect against the potential impacts this change could have on premiums.  

The proposal drew some concern from America’s Health Insurance Plans (AHIP) which stated: “Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers…If now fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers. Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers.” - Karen Ignagni, President, AHIP

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HHS gives first HIX updates, 106,185 people enrolled in first month 

Last Wednesday, after much pressure from health care stakeholders and media outlets, the U.S. Department of Health and Human Services (HHS) released the first of its monthly updates on health insurance exchange (HIX) enrollment. In a series of hearings on the Hill, HHS officials cited technical difficulty and glitches with the HIX website, Healthcare.gov, as the source of the delay in providing data to several lawmakers who had requested and filed subpoenas for enrollment data. Highlights of the report include:

Number of individuals who have selected a health insurance exchange plan per state and breakdown of state-based, state-partnership and federally-facilitated exchanges as of November 2, 2013:

Click here for a larger view of the map.

Source: The Assistant Secretary for Planning and Evaluation, “Health Insurance Marketplace: November Enrollment Report”, November 13, 2013

Individuals with processed eligibility determinations (n = 1,477,853):

Source: The Assistant Secretary for Planning and Evaluation, “Health Insurance Marketplace: November Enrollment Report”, November 13, 2013

Individuals with processed eligibility determinations found eligible to enroll in a marketplace plan (n = 1,081,592)

Source: The Assistant Secretary for Planning and Evaluation, “Health Insurance Marketplace: November Enrollment Report”, November 13, 2013

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Study identifies highlights in health care trends over the past three decades 

A paper released in the Journal of the American Medical Association (JAMA) last week analyzed publicly available data from 1980 to 2011 to identify trends in health care over the past 30 years. The biggest factors driving change were health care consolidation, information technology and the patient as the consumer. Highlights:

  • In 2011, the health care industry made up 15.7 percent of the U.S. workforce.
  • The cost of health care has doubled from 1980 to 2011 (reaching 17.9 percent of GDP in 2011).
  • The growth of health care, at roughly 3 percent per year, exceeds that of any other industry.
  • The share of health care spending funded by the government rose from 31.1 percent in 1980 to 42.3 percent in 2011.
  • Despite the resources devoted to the U.S. health care system, rates of life expectancy at birth and disease survival in the U.S. trail many other industrialized nations.
  • Ninety-one percent of the increases in health care costs since 2000 stem from hospital charges, administrative costs, professional services and drugs and devices and not demand for services or the aging of the U.S. population.
  • Chronic illness accounts for 84 percent of health care costs.

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The Administration announces final rule on mental health/substance abuse parity 

HHS recently issued a final rule on mental health and substance abuse disorder parity. The rule ensures that health plans’ co-pays, deductibles and visit limits for mental health and substance abuse disorder mirror medical and surgical benefits for other medical issues in individual health plans. The ACA established mental health and substance abuse disorder services as one of the 10 essential health benefits (EHBs) that are required to be covered by health plans in the individual and small group market starting in 2014. The rule establishes additional consumer protections, including:

  • Equivalent intermediate levels of care received in intensive outpatient settings or residential treatment
  • Clarifying the amount of transparency required by health plans
  • Clarifying that parity must apply to all plan standards
  • Removing a provision that enabled insurance companies to make an exception to parity requirements

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On the Hill & In the Courts 

CBO suggests five policy changes to reduce health care spending 

Last week, the Congressional Budget Office (CBO) released its report on options to reduce the federal deficit, outlining 103 options for decreasing federal spending over the next 10 years. Health care was a major focus in the report, as CBO stated that reducing the cost of health care is key to reducing the deficit. Highlights:

  • Mandatory health care programs, plus health care subsidies cost the federal government over $1 trillion in fiscal year (FY) 2013
  • Medicare and Medicaid cost an estimated $760 billion, which was roughly 25 percent of all federal spending in FY2013
  • The federal government also funds several health programs that are paid for via annual discretionary appropriations, including health and health care research initiatives, veteran’s health care programs, public health programs and various other health-related activities, totaling around $115 billion

To mitigate the increase in health care spending and help lower the deficit, CBO made five policy reform suggestions specifically related to health care:

  • Impose caps on federal spending for Medicaid;
  • Convert Medicare to a premium support system;
  • Change the cost-sharing rules for Medicare and restrict Medigap insurance;
  • Bundle Medicare’s payments to health care providers; and
  • Reduce tax preferences for employment-based health insurance.

Note: CBO highlighted that repealing the Medicaid expansion provision and the federal subsidy provision providing people with assistance in purchasing private health insurance on the marketplaces would not reduce Medicare spending and that repealing the entire ACA would increase the deficit.

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MedPAC looking into payment per Medicare patient to reimburse primary care 

The Medicare Payment Advisory Commission (MedPAC) is evaluating a potential change to the reimbursement payment system for primary care doctors or practices. The aim would be to create a payment system that would attract physicians into primary care, a field facing an estimated provider shortage of 45,000 by 2020 due to increased health insurance access and an aging baby boomer population. The commission is weighing the option of combining a new, recurring per-beneficiary payment with the current fee-for-service (FFS) reimbursement. Under this approach, primary-care doctors would receive 20 percent of their typical Medicare payment for each beneficiary through this flat payment, with the remaining 80 percent of payments made on a fee-for-service (FFS) basis. This proposal will be discussed further to assess whether it might not only provide the monetary incentive for physicians to practice primary care, but also foster a more efficient practice of medicine. MedPAC Chairman Glenn Hackbarth stated that “paying on a per-patient basis has the potential to create innovative ways to provide care more efficiently by allowing non-physician providers with a greater role in primary care”. Some are concerned, however, that this new payment system would not provide any incentive for quality care and would be seen simply as extra money if no risk-sharing components were added.

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FDA announces proposed generic drug parity rule 

Last Friday, the U.S. Food and Drug Administration (FDA) proposed a rule that would allow generic drug manufacturers to pursue product label changes to reflect new information about the drug in advance of FDA approval. In addition, the proposed rule would create parity among abbreviated new drug applications (ANDAs) and the reference listed drugs (RLDs) so ANDA manufacturers would be able to distribute new labels even if the drug information was different from the RLDs. This amends previous rules that mandated generic drug labels be the same as the RLD (branded drug). Mixed reactions accompanied FDA’s proposed rule announcement, as some lawmakers and consumer advocates praised the change, while stakeholders in the generic drug industry voiced concerns that multiple versions of drug labels and safety information could cause confusion among health care professionals and consumers. FDA will create a webpage for generic drug companies to submit their proposed changes for FDA approval. FDA intends to use the webpage to address concerns about conflicting safety information. The comment period for the proposed rule lasts 60 days after it was entered into the Federal Register.

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Around the Country 

Maryland SHOP launch delayed again 

Maryland’s Small Business Health Options Program (SHOP) will delay its launch until April 2014 to allow additional time for contractors to test the online system. This marks the second delay for the state, as the initial launch was supposed to take place October 1, but was rescheduled for January 2014. An April 2014 launch would allow insurance coverage to start in June or July 2014. The state exchange board, which approved the launch delay, is also pushing to make the application process available in Spanish and is also addressing problems with the provider directory.

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California union files two ballot initiatives designed to regulate not-for-profit hospitals 

Last Friday, the Service Employees International Union-United Healthcare Workers West (SEIU-UHW) filed two initiatives proposed for the November 2014 ballet. The first initiative would restrict non-profit hospital executives’ salaries, prohibiting income of more than $450,000 per year. SEIU-UHW reports that the average yearly salary for the top 10 highest paid not-for-profit hospital executives was $2.6 million in 2011, with one executive earning over $7.8 million. The second initiative would forbid hospitals from charging over 25 percent above the cost of delivering patient care, as SEIU-UHW argues hospitals charge an average of 320 percent more than the cost of providing care. SEIU-UHW argues that if the initiatives pass, California hospital costs would be reduced by at least $2.5 billion annually. Not-for-profit hospital stakeholders were displeased that the initiatives were filed. Sean Wherley, spokesperson for SEIU-UHW, said the initiatives target not-for-profit hospitals because they are exempt from paying taxes and yet act “with little regard for the communities they're supposed to serve.” Private not-for-profit hospitals in California are required to submit a report every three years detailing how they are supporting their community’s needs. Last year, roughly 7 percent of those hospitals failed to submit a report.

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Michigan to share patient information with federal agencies and six states through national HIE network 

Michigan’s health information exchange network (HIE) is in the process of expanding after a recent agreement was signed between Michigan Health Information Network Shared Services, a company based in East Lansing and Healtheway, a company based in McLean, VA. Under the agreement, the two companies will share patient-care information with federal agencies and six other states through a secure national eHealth Exchange network. All six of the current health information exchange companies in Michigan are expected to participate in the national network, including Michigan Health Connect and Great Lakes Health Information Exchange, which represent more than 3,000 physician offices and 82 percent of the state’s hospitals. The expanded network seeks to make patient information more accessible to providers, which has the potential to make coordinating care easier, reduce cost, expedite payment reimbursement and improve quality of care.

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Breaking Boundaries 

CMS announces new research tool 

Last Tuesday, the U.S. Centers for Medicare and Medicaid Services (CMS) unveiled its Virtual Research Data Center (VRDC), a tool designed to assist researchers in obtaining and analyzing the most up-to-date CMS data sets. Researchers will be able to use VRDC to access data that is:

  • Regularly refreshed (this had previously been unavailable).
  • More affordable: the cost of one year of access to data sets consisting of Medicare Parts A, B and D, will be lowered from over $100,000 to $40,000 for a single researcher. Additional researchers can be added to a contract for $15,000 each.
  • Designed to be more secure: VRDC requires any sensitive, individually identifiable information about beneficiaries stay in the CMS data environment.
  • Hosted virtually: Data is accessible via a secure virtual desktop, as opposed to requiring users to create or maintain their own secure data infrastructure.

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Time Warner Cable Business Class starting first “Virtual Visit” telemedicine trial 

Time Warner Cable Business Class (TWCBC) is starting its first “Virtual Visit” Telemedicine Trial in the Cleveland Clinic. “Virtual Visits,” which is part of its Home Health Monitoring strategy, will allow health care professionals to provide services remotely through a television equipped with video conference technology. Patients will be able to interact with their provider in the comfort of their home. The goal of implementing two-way video services is not only to maximize patient satisfaction, but also to make it easy for providers to comply with the ACA’s regulations and mandates and to contain cost. The bundled service includes connectivity, installation, on-site equipment and technical support for patients in their homes.

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Physicians improve lesion detection skills after taking online training course 

According to a national study from Henry Ford Hospital in Detroit, taking an online training course about skin cancer detection enhanced physicians’ skills in diagnosing and managing malignant lesions. The study looked at 54 physicians who took the course and found that, when comparing pre-test and post-test scores:

  • Scores for diagnosing and managing all skin cancer lesions increased by 10 percent
  • Scores for diagnosing benign lesions increased by 14 percent
  • Patient referrals to dermatology specialists declined

The results indicate that if provided with specific education, primary care providers (PCPs) could significantly improve their skills. Skin cancer, specifically melanoma, has increased in the last 30 years and is estimated to kill 8,790 people in the U.S. annually. By 2015, it is estimated that melanoma will affect one in every 50 Americans. Less than 30 percent of primary care residents are trained to perform skin examinations. The study indicated that before taking the online training, PCPs had a hard time distinguishing benign and malignant lesions. Improving skin examinations skills could lead to early detection and improved patient care.

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