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Health Care Reform Memo: February 18, 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.

My take: Embracing information technologies in health care

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

I write fewer than five checks per month. I use credit cards for most purchases, automatic payment for monthly bills, and when in need of cash, I use the ATM. Online is mainstream in the U.S. today: it’s the way we buy tickets, automobiles, appliances, clothes, and travel just for starters.

Retail merchants, banks, airlines, auto dealers, and a host of other industry groups made a transition to information technology (IT)-enabled commerce successfully. The advent of the internet and plethora of mobile device apps opened a world of opportunity in these industries increasing their markets while giving their customers expanded options with more useful information about differentiated features and benefits. And social media punctuated the centrality of tools providing incentive for sellers to constantly improve their value proposition, monitor customer feedback, or face extinction.

You can see where this is going: the health care industry is woefully behind in embracing IT to improve the customer experience. There are two reasons:

  1. We think we’re different. We think our “customers” are patients or members inept or incapable of making decisions about their medications, treatments or health risk without our help. We have built into our industry’s cost structure brokers, health coaches, and a plethora of unlicensed trades to help us figure out what we need, who can deliver it, and where to get it. And without a clue as to what it will cost or what the outcomes might be. And we are currently rewarded for playing a custodial role with our customers: fee for service (FFS) health care encourages suppliers to control demand and maintain their dependence on “us”.
  2. We think the value proposition of IT applied in health care is limited. Complaints from physicians about meaningful use are palpable. Hospitals and plans are scrambling to implement ICD-10 while seeing margins shrink and regulatory constraints increase. New legislative requirements promoting transparency about drug efficacy and effectiveness, disclosures from failed clinical trials, conflicts of interest between manufacturers and providers, physician self-referrals and more are viewed as intrusive and counterproductive. After all, they require investments in IT that capture and report data to consumers, our most important customers. In our industry, using technologies that reduce operational costs are embraced, but those that improve the value to end users—consumers—don’t make the budget cut in some sectors because we think their value is suspect. At the top of that list of protagonists may be physicians who fear their patients might get too much information or act independently outside their custodial control.

According to Gartner, total spending for IT in health care was $167,035,000 in 2012—more than spending in retail ($106 billion), but far less than banking and securities ($446 billion), manufacturing ($427 billion), and transportation ($254 billion).1 Arguably, health IT investments in health care are at least as essential to the wellbeing of our society as those made in the financial system and manufacturing industries, but for the reasons cited above, among others, we’re behind. Simply put, we have under-invested, and as a result, we’re now playing catch up. And most of these investments in health care have been in operational, clinical, and financial infrastructure; investments in the “customer experience” have been modest by comparison.

Is it changing?

The Deloitte Center for Health Solutions’ survey of physicians suggests most recognize the value of health IT that support improved customer experiences2:

Advantages and disadvantages of HIT

  % Responding strongly/somewhat agree
  Total Solo 2-8 FTEs 10+ FTEs
Most patients believe EHR use by physicians can improve quality of care they receive 84% 80% 85% 94%
EHR use of patient care is important to future of managing patient care 79%  78% 84% 76%
Use of personal health records (PHR) to facilitate interaction with patients is important to future of managing patient care 77% 76% 81% 76%
EHR in my specialty has not proven to improve accuracy of diagnosis or appropriateness of treatment planning 65% 67% 63% 59%
HIT use that connects patients and physicians is too risky from a liability standpoint 43% 48% 45% 22%

Source: DCHS, “Issue Brief: Physician perspectives about health information technology,” 2012

But regrettably, this has not translated to adoption and use by physicians for even the simplest applications—sharing of information with patients. Consider:

  • Only 29 percent of physicians refer patients to a “trusted” site for additional information.2
  • Only 24 percent use secure messaging with patients to communicate.2
  • Only 20 percent use an online mechanism to schedule lab tests or appointments.2
  • And 6 percent use social networking with patients and 5 percent post prices for routine services online for patients online.2

Will consumers be tolerant as the system transitions to a new normal that’s intrinsically linked by technologies that support their experiences? Time will tell. The Deloitte Center for Health Solutions’ 2012 Survey of Health Care Consumers in the United States suggests Millennials and Gen X consumers are increasingly receptive to apps that support their personal navigation of the system3:

Source: DCHS, “INFOBrief: Information technology, social media and online resources for health care – a slow climb,” 2012

And caught in the middle: Chief Information Officers (CIOs) in hospitals, health plans, device and bio-pharma manufacturing where budgets for IT compete with ongoing resource requirements for staffing, technologies and facilities, and reporting requirements to regulators. “CIOs are realistic: they are not delusional about the urgent issues they face or the politics of asking for more when asked to do with less. They are, however, concerned about their organization’s lack of preparedness to make the transition to an information-driven health system – the ‘new normal.’”4 See Health System Chief Information Officers: Juggling responsibilities, managing expectations, building the future

Last week, I organized my records to get ready for 2012 income tax filing. My thickest file: “medical records”. I try to use a credit card for everything to create a paper trail but I ended up with cash  receipts for more than  25 purchases and  a one inch thick stack of  EOBs (explanation of benefits) that I need to match to  what I actually paid. As a result of my knee surgery and post-operative clotting, I was in four hospitals and had blood drawn in different labs in nine states. All of the hospitals asked for feedback, none of the medical practices nor lab providers bothered to ask. My insurance plan asked for feedback about the providers but not about their own services. And I suspect I spent a lot of money and time on what could have been a more customer friendly, medically appropriate, and cost effective journey.

I can buy a suit, car, or college education online with ample tools to optimize the value of my purchases. Starting next year, a similar effort will be launched to help previously un-insured purchase health insurance via health insurance exchanges (HIXs) in every state: notably, the purchase experience is central to the success of the exchanges and a key feature in their regulation.

It’s high time the health care industry embraced technologies that improve our journey through the U.S. health system. It’s regrettable we’re behind. And there are no excuses.

Paul Keckely

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

P.S. Health System Chief Information Officers: Juggling responsibilities, managing expectations, building the future is now available. The report details the views of 12 hospital CIOs about navigating the new normal and their plans for short and long term investments in health IT.

  1. Garnter, “Forecast: Enterprise IT Spending by Vertical Industry Market, Worldwide, 2010-2016, 4Q12 Update,” January 2013
  2. Physician perspectives about health care reform and the future of the medical profession, Deloitte Center for Health Solutions, December 2011
  3.  2012 Survey of Health Care Consumers in the United States, Deloitte Center for Health Solutions, June 2012
  4.  Health System Chief Information Officers: Juggling responsibilities, managing expectations, building the future, Deloitte Center for Health Solutions, February 2013

Implementation update

HIX readiness focus of Congressional hearing

Thursday, the Senate Finance Committee held a hearing on the progress of HIX preparedness at the state and federal levels and U.S. Health and Human Services’ (HHS) readiness to operate federally-facilitated exchanges by October 2013. Director of the Center for Consumer Information and Insurance Oversight (CCIIO) Gary Cohen offered assurance that HHS will be ready for open enrollment and Committee Chairman Senator Max Baucus (D-MT) requested a detailed work plan outlining the next eight months citing concern about the health information systems that must be in place for successful implementation (eligibility, enrollment, etc).

Key dates: insurers can submit applications to provide products on a federally-facilitated exchange between March 28 and April 30, 2013. States interested in participating in a state-partnership exchange had until last Friday, February 15, to notify HHS.

Final rule on EHB actuarial calculations expected soon

As of last week, the U.S. Office of Management and Budget is reviewing a final rule from HHS that provides guidance about “essential health benefits” (EHB), actuarial value and accreditation, as well as a rule on benefit and payment parameters.

Background: per the Affordable Care Act (ACA), certain health insurance plans offered on and off HIXs must cover ten essential health benefits (ten categories of coverage specified such as ambulatory patient services, hospitalization, maternity and newborn care, etc.) To date, each state has selected an EHB base benchmark plan; however, final guidance about calculating their actuarial values (i.e., the percentage of the total average costs that a plan will cover) and accreditation has not been issued by HHS. Health insurance issuers must be ready by October 2013 for open enrollment.

CMS issues guidance on MA, Part D MLR requirements

Friday, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule on the Medical Loss Ratio (MLR) requirements for Medicare Advantage (MA) and the Medicare Part D programs per Section 1103 of the ACA. Under its proposed rule, MA organizations and Part D sponsors will be required to maintain a MLR of 85 percent beginning in 2014, and will be subject to penalties for failing to comply (i.e., contract termination or monetary fines). Comments will be accepted until April 23, 2013.

Background: MLR is the ratio a health insurer must spend on paying for direct services vs. administrative and overhead costs. In 2011, Section 2718 of the ACA was enacted, which requires large group health plans to have an MLR of 85 percent and small group and issuers in the individual market to have an MLR of 80 percent.

Website launched to connect government databases

Last week, the Obama administration launched a new website—— to facilitate public access health care data from HHS, U.S. Centers for Disease Control and Prevention (CDC), National Institutes of Health, and other federal programs.

Part D drug benefit guidance provided

Last week, CMS issued guidance about Part D payment parameters for seniors:

  • In 2014, beneficiaries in the “donut hole” will get discounts of 52.5 percent on brand name drugs and 28 percent on covered generic drugs.
  • CMS proposes that pharmacies must receive consent prior to home deliveries to avoid “unnecessary and unwanted prescriptions because of ‘auto-ship’ services”

New 2014 updates for the Part D prescription drug benefit:

Part D Benefit Parameters 2013 2014
Defined Standard Benefit    
Deductible $325 $310
Initial Coverage Limit (Total drug costs after deductible before hitting coverage gap) $2,970 $2,850
Out-of-Pocket (OOP)Threshold  (Total amount beneficiary pays before hitting catastrophic phase) $4,750 $4,550
Minimum Cost-sharing for Generic/Preferred Multi-Source Drugs in the Catastrophic Phase $2.65 $2.55
Minimum Cost-sharing for Other Drugs in the Catastrophic Phase $6.60 $6.35
Retiree Drug Subsidy (RDS)    
Cost Threshold (Amount RDS sponsor must spend before claiming the RDS subsidy) $325 $310
Cost Limit (Amount after which RDS sponsor claims no RDS subsidy) $6,600 $6,350

Source: CMS

SOTU: President supportive of “modest reforms” to Medicare

Last Tuesday, in his State of the Union, President Obama addressed Medicare reform, stating support for changes consistent with the Simpson-Bowles commission.

“On Medicare, I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission. Already, the Affordable Care Act is helping to slow the growth of health care costs. The reforms I’m proposing go even further.”— President Obama, State of the Union Address, February 12, 2013

Key elements of Medicare reform in Simpson-Bowles:

Medicare cost containment proposal Policy recommendations Estimated cost savings

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 federal deficit by $4 trillion through 2020

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

Source: Report of the National Commission on Fiscal Responsibility and Reform, December 2010

DOD: health care benefits not extended to same sex partners

Last week, the U.S. Department of Defense (DOD) extended certain benefits to spouses of service members in same-sex relationships (i.e., access to child care services, military ID cards, movie theaters, and gyms), but benefits are not to include health care services. The decision may change pending a Supreme Court decision on the Defense of Marriage Act (DOMA).

Background: DOMA is the federal law enacted in 1996 that defines marriage as the union between a man and a woman and excludes government workers in same-sex marriages from certain benefits that are available to heterosexual couples, such as health insurance benefits for spouses.

Fraud pursuits net 8 to 1 return: DOJ, HHS

Monday, U.S. Attorney General Eric Holder and HHS Secretary Kathleen Sebelius reported that for every dollar spent on health care-related fraud and abuse investigations in the last three years, the government recovered $7.90— the highest three-year average return on investment (ROI) in the 16-year history of the Health Care Fraud and Abuse (HCFAC) Program.

The government recovered $4.2 billion in Fiscal Year (FY) 2012, up from nearly $4.1 billion in FY 2011. Over the last four years, total recoveries are $14.9 billion, up from $6.7 billion over the prior four-year period. Since 1997, the HCFAC Program has returned more than $23 billion to the Medicare Trust Funds.

(Source: HHS, DOJ, “Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2012,” 2012)

Legislative/regulatory update

Sequester approaching: HHS, Senate scramble to come up with alternatives

Thursday, Senate Democrats announced they will introduce legislation during the last week of February to avoid sequestration proposing cuts of $27.5 billion to defense spending, $27.5 billion from farm programs, and $57 billion in savings as a result of tax reforms. It would authorize an additional ten months for Congress to devise bigger solutions to reduce spending.

Also Thursday, HHS Secretary Kathleen Sebelius sent a letter to Senate Chairwoman Barbara Mikulski (D-MD) outlining the consequences of sequestration on key health care agencies and programs: 

  • Medicare providers, health plans, and drug plans will see a 2 percent reduction in payments.
  • U.S. Food and Drug Administration (FDA) would conduct 2,100 fewer domestic and foreign facility inspections of food manufacturers.
  • 70,000 children will lose access to Head Start and Early Head Start services resulting in 14,000 layoffs of educators.
  • 373,000 individuals with serious mental illnesses (SMI) will lose access to mental health services.
  • 8,900 homeless persons with SMI will lose social service supports.
  • Addiction treatment services impacting 91,000 individuals will be cut.

Background: the Budget Control Act of 2011 was passed by Congress August 2, 2011 to avoid the U.S. default on its sovereign debt August 3, 2011. It included mechanisms to reduce long term U.S. debt by $1.2 trillion over ten years including automatic budget sequestration and immediate expansion of the debt ceiling by $400 billion with additional expansion of $500 billion subject to Congressional approval of cuts in federal spending of $1.2 trillion. The agreement specified that if Congress failed to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress could grant a $1.2 trillion increase in the debt ceiling along with a trigger of across-the-board cuts (sequestration) as of January 2, 2013 that apply to mandatory and discretionary spending 2013 to 2021 equal to the difference between $1.2 trillion and the amount of deficit reduction enacted from the joint deficit reduction committee. Exemptions from sequestration: Social Security, Medicaid, civil and military employee pay, or veterans benefits, and only a 2 percent cap on Medicare cuts would be allowed. Sequestration was delayed by Congress and as a result, on March 1, unless offset by at least the same government spending cuts, most federal agencies face an 8 percent to 10 percent cut in their operating budgets for the balance of 2013.

E&C Committee asks for clarification on HIPAA rules, mental health

Thursday, the House Committee on Energy and Commerce asked HHS for clarification on Health Insurance Portability and Accountability Act (HIPAA) of 1996 guidelines for sharing personal mental health information with the National Instant Criminal Background Check System (NICS). The Committee’s concern: individuals that have been involuntarily committed to a mental health facility are prohibited from purchasing firearms, but states are reporting that they do not provide mental health information to the NICS because they believe it would be in violation of HIPAA. Clarification from HHS is requested by February 22, 2013.

Background: NICS is the system used to conduct criminal background checks prior to the sale of a firearm.

GOP congressional leaders seek details of 340B audits, recertification process

Last Monday, several GOP Congressional leaders asked the Health Resources and Services Administration (HRSA) to detail its audits of hospitals covered by the Medicaid 340B drug discount program and its 2012 certification process.

Background: Congress established the 340B program in 1992 to assist hospitals that serve a disproportionate number of low-income and uninsured or underinsured patients allowing certain federally qualified health centers and outpatient clinics to get the same drug discounts mandated by the state Medicaid program. The Government Accountability Office reported that, prior to 2012 HRSA had never audited the program and failed to engage in a recertification program, according to Senator Chuck Grassley's (R-IA) office.

The lawmakers, referring to a Pink Sheet, article, noted that the 2012 recertification process resulted in the decertification of “about 250” 340B covered entities and on-site audits of 51 sites, including six targeted and 45 other sites.

Health legislation introduced last week

  • Representative Mac Thornberry (R-TX) introduced legislation (H.R. 607)  to delay implementation of certain provisions in the ACA from calendar year (CY) 2014 to CY 2016 or to delay sequestration until 2014 and delay implementation of CY 2014 ACA provisions until 2015.
  • Senator Dick Durbin (D-IL) introduced the “Comprehensive Immunosuppressive Drug Coverage for Kidney Transplant Act” (S. 323) to provide extended coverage of kidney transplant drugs by Medicare.
  • Representative Grace Napolitano (D-CA) introduced the “Mental Health in Schools Act” (H.R. 628) to expand community based comprehensive mental health services in schools. Senator Al Franken (D-MN) is supporting similar legislation in the Senate.
  • Representative Steve Pearce (R-NM) introduced legislation (H.R. 635) to require the U.S. Department of Veterans Affairs to contract with community health providers in rural areas.
  • Representative Nick Rahall (D-WV) introduced legislation (H.R. 672) to address opioid abuse and deaths.
  • Representative Jan Schakowsky (D-IL) introduced legislation (H.R. 675) to expand protections to part-time workers in areas such as employer-sponsored health insurance.

State update

Poll: majority favor Medicaid expansion

52 percent think their state should expand its Medicaid program vs. 42 percent opposed to the expansion (67 percent of Republicans opposed vs. 25 percent of Democrats).

(Source: Kaiser Family Foundation, the Robert Wood Johnson Foundation and Harvard School of Public Health’ telephone survey of 1,347 US adults 18 and older conducted January 3 through January 9, 2013)  

State round-up: HIX

Friday, February 15, was the deadline for states to notify HHS of their intent to participate in a state-partnership exchange or default to a federally-facilitated exchange. Based on Friday’s announcements, six states will operate a state-partnership exchange. To date, Arkansas, Delaware, and Illinois have received conditional approval from HHS to move forward with implementation.  

17 states—12 led by  Democratic Governors, four led by Republicans and one Independent—and the Democratic mayor of D.C. have announced plans to operate state-based exchanges.

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

Sources: Kaiser Family Foundation, HHS, updated February 13, 2013, and state websites.
Note: subject to change pending announcements from HHS on applications received February 15, 2013.

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

State operates all exchange activities; however, state may use federal government services for the following activities:

  • Premium tax credit and cost
  • sharing reduction
  • Exemptions
  • Risk adjustment program

Reinsurance program

State operates activities for:

  • Plan management
  • Consumer assistance
  • Both

Federal operational activities:  

  • Enrollment

Establishment and maintenance of HIX website, and call center  

HHS operates; however, state
may elect to perform or can use
federal government services for
the following activities:

  • Reinsurance program

Medicaid and CHIP eligibility assessment or determination

Source: NCSL, “American Health Benefit Exchanges,” updated February 4, 2013

Medicaid expansion update

Twenty-two states and D.C. have said they will expand their Medicaid programs; 17 states have indicated they are highly unlikely to expand their program:

Announced or Governor in support of expansion Not participating or highly unlikely to participate Undecided or undeclared  

Source: Politico Pro, Medicaid Watch, February 15, 2013; Advisory Board, “Where the states stand,” January 14, 2013

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 publicly available information (as of February 17, 2013) and is subject to change.

State round-up

  • Nebraska submitted a request to the 8th Circuit Court of Appeals to postpone proceeding with its constitutional challenge against the contraceptive coverage requirement in the ACA until final guidance is issued by HHS. Earlier this month, HHS issued a proposed rule on the contraceptive coverage requirement, and will issue a final rule sometime this year.
  • Kansas Senator Michael O’Donnell (R) introduced legislation to prohibit county health departments from gaining national accreditation. Currently, 12 of Kansas’ 99 health departments are seeking accreditation. Senator O’Donnell has yet to comment on the reasons for the bill. The Senate referred the bill to the Committee of Public Health and Welfare, but no hearing has been scheduled.
  • Georgia’s House of Representatives unanimously passed a bill that would ban the ownership of pain clinics for non-physicians last week. Georgia is experiencing an epidemic in “pill mills”; the Wall Street Journal reports 125 pain clinics in the state today vs. fewer than ten clinics in 2010. A similar bill did not pass last year In Georgia’s General Assembly.
  • Arizona’s law to exclude Planned Parenthood from receiving state Medicaid funds on the basis that its clinics provide abortion services was overturned last week. The federal court judge stated that the law would obstruct an individual’s right to access “any willing provider.”
  • California is requiring that all health insurance insurers offering qualified health plans on the state HIX must set standard co-pays and deductibles. Gold and platinum coverage: no annual deductible, office visits $25. Silver plans: $2,000 annual deductible, primary care $45 and emergency room visits $250. Bronze plans: $5,000 deductibles, $70 office visits.

Industry update

Study: 1 in 3 health plans will fail ACA standards

One out of three individual/family health plans would not meet ACA OOP spending limit requirements beginning in 2014. Key findings:

  • 38 percent of the plans did not include the plan’s deductible within their OOP limit, concealing the full amount a beneficiary could pay annually.
  • 4 percent had no limits on how much a consumer could pay annually in OOP spending.
  • 4 percent had no limits on how much a consumer could pay annually in OOP spending. State averages varied from $3,192 to $10,013 with 15 states failing to meet the ACA limits.

Background: health insurance plans are required to cap the maximum OOP costs for enrollees (OOP costs are the portion of health care expenses paid by the consumer in the form of deductibles, co-payments, or co-insurance fees) at the dollar amount allowed under a Health Savings Accounts (HSAs) beginning in 2014— this year OOP limits are set at about $6,250 for HSAs. OOP spending will be limited on an annual basis. Note: plans from the Medicare, Medicaid, and employer-based health insurance markets were not included within this study.

(Source: Health Pocket Inc’ January 31, 2013 analysis of 9,752 health insurance plans for individuals and families under the age of 65-- Medicare, Medicaid, and employer-based health insurance plans were excluded.  Data was obtained from public insurance records from HHS.)

Report: few health IT security breaches, providers should prepare for new challenges

Redspin Inc. conducted an analysis of 538 breaches of protected health information (PHI) involving 21.4 million patient records reported to HHS since 2009. Highlights:

  • 21.5 percent increase in the number of large breaches in 2012 compared to 2011, however there was a 77 percent decrease in the number of patient records impacted
  • 67 percent of all breaches have been the result of theft or loss
  • 57 percent of all patient records breached involved a business associate
  • Breaches at business associates have impacted 5 times as many patient records as those at a covered entity
  • 38 percent of incidents were as a result of an unencrypted laptop or other portable electronic device

Background: Subtitle D of the Health Information Technology for Economic and Clinical Health (HITECH) Act addresses the privacy and security concerns associated with the electronic transmission of health information, through several provisions that strengthen the civil and criminal enforcement of the HIPAA rules. Section 13410 of the HITECH Act established categories of violations that reflect increasing levels of culpability; corresponding tiers of penalty amounts that significantly increase the minimum penalty amount for each violation; and a maximum penalty amount of $1.5 million for all violations of an identical provision. In January 2013, HHS released its final Omnibus Rule  which implemented the increased HIPAA privacy and security provisions, compliance for both covered entities and business associates is required by September 23, 2013 The three provisions of the Omnibus Rule that are most relevant to this paper are the expansions of the privacy and security rules with regard to business associates, the increase in penalties for non-compliance, a new standard for determining whether there has been a breach of PHI.

BPC offers framework for health IT patient safety

The Bipartisan Policy Center (BPC) released a set of principles and recommendations for federal government oversight framework for assuring patient safety in health IT. Key Elements:

  • Agreement on and adherence to recognized standards and guidelines for assuring patient safety in the development, implementation, and use of health IT.
  • Support for the implementation of standards and guidelines as well as development and dissemination of best practices through education, training, and technical assistance.
  • Developer, implementer, and user participation in patient safety activities, including reporting, analysis, and response, while leveraging patient safety organizations.
  • Creation of a learning environment through the aggregation and analysis of data to identify and monitor trends, mitigate future risk, and facilitate learning and improvement.

Background: in December 2012, HHS released the Health IT Patient Safety Action and Surveillance Plan for Public Comment, the agency’s proposed approach for addressing safety in health IT. The FDA Safety and Innovation Act of 2012 calls for the HHS secretary to develop—within 18 months—a proposed strategy and recommendations on risk-based regulatory framework pertaining to health IT that promotes innovation,protects patient safety, and avoids regulatory duplication.

(Source: BPC, “An Oversight Framework for Assuring Patient Safety in Health Information Technology,” February 2013)

National nurses union partners with teachers union

Last week, the National Federation of Nurses (NFN) and American Federation of Teachers (AFT) announced their affiliation agreement adding 34,000 nurses to AFT’s 1.5 million membership, which includes 50,000 nurses and other health care professionals.

Research snapshots

Industry and peer-reviewed studies of note to health system transformers…

Bundled pricing transparency problematic for hospitals, consumers

Citation: Jaime A. Rosenthal; Xin Lu, MS; Peter Cram, MD, MBA “Availability of Consumer Prices From US Hospitals for a Common Surgical Procedure,” JAMA Intern Med. 2013;.2013.460

Objective: “to examine whether pricing data for a common elective surgical procedure, total hip arthroplasty (THA) is readily accessible to consumers.”

Methodology:  “we randomly selected 2 hospitals from each state (plus Washington, DC) that perform THA, as well as the 20 top-ranked orthopedic hospitals according to US News and World Report rankings. We contacted each hospital by telephone between May 2011 and July 2012. Using a standardized script, we requested from each hospital the lowest complete “bundled price” (hospital plus physician fees) for an elective THA that was required by one of the author's 62-year-old grandmother. In our scenario, the grandmother did not have insurance but had the means to pay out of pocket. We explained that we were seeking the lowest complete price for the procedure. When we encountered hospitals that could provide the hospital fee only, we contacted a random hospital affiliated orthopedic surgery practice to obtain the physician fee. Each hospital was contacted up to 5 times in efforts to obtain pricing information. The main outcome measures were (1) the percentage of hospitals able to provide a complete price estimate for THA (physician and hospital fee) for top-ranked and non–top-ranked hospitals and (2) the range of prices quoted by each group.”

Key findings: “9 top-ranked hospitals (45 percent) and 10 non–top-ranked hospitals (10 percent) were able to provide a complete bundled price. We were able to obtain a complete price estimate from an additional 3 top-ranked hospitals (15 percent) and 54 non–top-ranked hospitals (53 percent) by contacting the hospital and physician separately. The range of complete prices was wide for both top-ranked ($12,500-$105,000) and non–top-ranked hospitals ($11,100-$125,798).”

My take: the researchers concluded: “We found it difficult to obtain price information for THA and observed wide variation in the prices that were quoted. Many health care providers cannot provide reasonable price estimates. Patients seeking elective THA may find considerable price savings through comparison shopping.” That says it all. Consumer demand for transparency about outcomes, safety, and costs is strong and increasing. The ACA reinforces it. Transparency might be the most challenging element of health reform to industry stakeholders.

HIEs lack standard quality and return on investment metrics

Citation: Perspective in Health Information Management, “Health Information Exchange: Metrics to Address Quality of Care and Return on Investment,” April 2012

Objective: to define what metrics health information exchanges (HIEs) use to gauge quality and financial results.

Methodology: “a web-based survey to a list of 149 functioning HIEs in stages 5 to 7 of HIE development.” Stage 5: “fully operational health information organization; transmitting data that is being used by healthcare stakeholders.” Stages 6 and 7: “operational HIEs having a sustainable business model and demonstrating expansion of the coalition from the initial operation model, respectively. “Started with a list of 149 potential participants that had a website or contact information… valid responses were received from 18 HIEs.”

Key Findings: “this study suggests that there are no standard metrics used by HIEs to evaluate their impact. The HIE community needs to take the lead in developing metrics to evaluate the benefits of information exchange. Ten respondents (56 percent) said that based on the performance of their own HIE, they believed that HIEs show positive ROI, while eight respondents (44 percent) felt more evidence was needed to make such a determination. Two respondents who believed HIEs show positive ROI stated that they have not used metrics to calculate ROI but are in the process of developing ROI metrics. Seventeen respondents (94 percent) believed that HIEs improve quality of care. Reduction of duplicative testing, quality improvement efforts, care coordination, and improved readmission rates were cited as having the greatest potential to show ROI.. Efficiency from reductions in the length of stay and duplicative testing was cited by 56 percent of respondents. Reduced errors and medication reconciliation were listed as examples of safety improvements that improve quality.”

My take: in a different study of 200 HIEs (AHIMA, HIMSS “Trends in Health Information Exchange Organizational Staffing”, December 2012) only 35 participated. So my issue is this: the promise of HIE must be backed up by a solid fact base that’s seemingly hard to make if not supported by valid and reliable studies. The low response rates and variable approaches used to define “the health information exchange” population points to the group’s most pressing problem: to be a legitimate part of the new normal, HIEs must use a standard scheme for defining capabilities and gauging value created. To date, the sector has failed to do both consistently.

CDC: hospitals report fewer health care-associated infections

Citation: CDC, “2011 National and State Healthcare-associated Infections Standardized Infection Ratio Report,” January 2013

Objectives: “to assess the prevalence of health care associated infections (HAI) pursuant to the prevention goals established in the HHS.”

Methods: “acute hospital reports to NHSN [National Healthcare Safety Network] as of September 4, 2012 for a 9-month period to allow for complete reporting of infection events and denominator data through December 2011 for central line-associated bloodstream infections (CLABSI) and catheter-associated urinary tract infections (CAUTI).”

Key findings: “there has been a large reduction (41 percent) in CLABSIs among reporting hospitals compared to predictions, with more modest reductions seen for CAUTI (7 percent) and SSI (17 percent). The data included in this report indicate that steady progress is occurring towards the goal of a 50 percent reduction in CLABSI over the course of 5 years (a 41 percent reduction from baseline in the third year) and the 25 percent reduction goal for SSI (we report a 17 percent reduction from baseline in the third year). Progress towards the 25 percent reduction goal for CAUTI is moving more slowly, with a 7 percent reduction from baseline in 2011 (this is the second year of measurement with a baseline year of 2009), but with sustained prevention efforts, the 2013 goal remains attainable.”

My take: there are two key lessons to be learned from this monograph: when a valid and reliable measure of safety like health care associated infections is the focus of regulatory oversight and financial penalties, the industry responds. Financial penalties work. But a second is not referenced: the correlation between suboptimal results on safety and consumer, health plan and employer use of these providers. It would be good to know how hospitals with the highest safety scores fare in contracting with third parties and in opinion polls about their brand positioning.


“Yes, the biggest driver of our long-term debt is the rising cost of health care for an aging population. And those of us who care deeply about programs like Medicare must embrace the need for modest reforms – otherwise, our retirement programs will crowd out the investments we need for our children, and jeopardize the promise of a secure retirement for future generations.
But we can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and most powerful. We won’t grow the middle class simply by shifting the cost of health care or college onto families that are already struggling, or by forcing communities to lay off more teachers, cops, and firefighters…
On Medicare, I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission. Already, the Affordable Care Act is helping to slow the growth of health care costs. The reforms I’m proposing go even further. We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors. We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our seniors receive. And I am open to additional reforms from both parties, so long as they don’t violate the guarantee of a secure retirement. Our government shouldn’t make promises we cannot keep – but we must keep the promises we’ve already made.”

President Obama State of the Union Address February 12, 2013

“And because many government programs that claim to help the middle class, often end up hurting them instead. For example, Obamacare was supposed to help middle class Americans afford health insurance. But now, some people are losing the health insurance they were happy with. And because Obamacare created expensive requirements for companies with more than 50 employees, now many of these businesses aren’t hiring. Not only that; they’re being forced to lay people off and switch from full-time employees to part-time workers.”

Senator Marco Rubio (R-FL), Official GOP Response to the State of the Union Address, February 12, 2013

“Investigators continue to publish studies attempting to show (or refute) the value of health IT.  However, these typically focus on some narrow aspect connected to return on investment (ROI).  Do electronic health records (EHRs) shorten or lengthen a patient visit? Is e-prescribing faster than hand-written scripts?  Does health IT facilitate or reduce fraud?  While these are important questions to ask and can identify best-practices in implementation, they often raise the question as to whether information in health care should be collected, maintained, and shared electronically at all based upon a myopic view of ROI. This industry cannot lower costs, improve quality and become a data-driven, evidence-based learning system without addressing the antiquated information systems holding it back.”

Harry Greenspun, MD, Special Advisor, Health Care Transformation & Technology, Deloitte Center for Health Solutions, Washington DC

Fact file

  • Meaningful use: as of December 2012, 335,068 eligible professionals are participating in the meaningful use program including 190,107 who’ve received $10.7 billion (Source: CMS, “December 2012 EHR Incentive Program,” 2012)
  • 2012 health costs vs. 2011: prescription drugs +3.6 percent, physician services +1.2 percent, non-prescription drugs .7 percent, lab tests 0 percent, and medical instruments 0 percent— vs. overall inflation +1.7 percent. (Source: Bureau of Economic Analysis)
  • Clinical decision making: artificial intelligence (AI) clinical decision making cost per unit of charge (CPUC): $189 vs. $497 for current treatment-as-usual. (Source: Artificial Intelligence in Medicine, “Artificial intelligence framework for simulating clinical decision making: A Markov decision process approach,” January 2, 2013)
  • ACA drug savings for seniors: prescription drug savings increased from $2.3 billion in 2011 to $2.5 billion in 2012. Since the ACA was enacted in 2010, 6.1 million Americans under Medicare Part D saved over $5.7 billion on prescription drugs. (CMS, “The Affordable Care Act – A Stronger Medicare Program in 2012,” February 7, 2013)
  • Readmissions:  rehospitalizations cost $17 billion per year in avoidable Medicare bills; of seniors hospitalized for nonsurgical reasons: 15.9 percent were readmitted within a month in 2010 vs. 16.2 percent in 2008. Surgery readmissions: 12.4 percent in 2010 vs.12.7 percent in 2008. (Source: Dartmouth Atlas analysis of Medicare records for 2008 to 2010)
  • Consolidation: last year: deals up 15.9 percent to 12,194 paying 5.04 percent borrowing costs—down 20 percent from 2011 and 72 percent from 2008. Four biggest airline carriers fly 87 percent of miles—industry de-regulated in 1978—all 11 publicly traded airline companies will be profitable in 2012 earning $6.8 billion—most profitable since 1997. More than $100 billion in technology deals. (Source: Airline Weekly and Venture Wire)
  • Military benefits: the average enlisted man/woman earns $20,000 more than a person of similar qualifications in the private sector; “over the past 12 years, the annual budget for compensation divided by the number of active duty service members increased to roughly $100,000 from $70,000.” (Source: Wall Street Journal, “From SEAL Team Six to Retiring Without Health Insurance,” February 13, 2013)
  • Federal debt forecast: $12.2 trillion in 2013, $12.9 trillion in 2014, $13.5 trillion in 2015, $14 trillion in 2016 (Source: U.S. Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2013 to 2013,” 2013)
  • Defensive medicine: 68 percent of physicians in the five highest med mal coverage states report ordering tests routinely for defensive purposes vs. 64 percent in the lowest med mal premium states (Source: Chandra “Degensive Medicine may be costlier than it seems” Wall Street Journal, February 8, 2013)
  • Individuals with mental illnesses: 10 percent of homicides, 20 percent of jail and prison inmates, 30 percent of the homeless; Medicare and Medicaid contribute ~ $60 billion to treat individuals with serious mental illnesses (2005). (Sources: Treatment Advocacy Center and The Heritage Foundation)
  • Government role: under 30 voters are the only age group in which a majority (59 percent) said the government should do more to fix problems. (Source: Pew Research Center 2012)
  • Working students: 17 percent of full-time undergraduates work 20-34 hours per week; 6 percent work more than 35 hours. (Source: National Center for Education Statistics)

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