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Health Care Reform Memo: January 9, 2012

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.

Implementation update

Briefs on ACA’s individual mandate and severability filed

Friday, the White House, industry groups, states, and lawmakers filed briefs to the U.S. Supreme Court on cases challenging ACA’s individual mandate and severability (whether the law can stand without the individual mandate). These are two of the four judicial challenges to be argued in March along with the usurpation of state laws resulting from the Medicaid mandate in ACA and the applicability of the Anti-Injunction Act to ACA.

The high court has scheduled five and a half hours of oral arguments in March with a ruling expected in June. Highlights of the briefs filed last week:

  • The White House brief affirms its support for the individual mandate (ACA Section 1501) arguing that “the minimum coverage provision is a valid exercise of Congress’ commerce power.”
  • Three briefs from the 26 states, the National Federation of Independent Businesses (NFIB), and 36 Republican Senators argue that the entire law should be struck down if the individual mandate is struck down.
  • Briefs from America’s Health Insurance Plans (AHIP) and another major health plan association argue that ACA’s insurance market reforms such as the guaranteed-issue provision should be struck down if the individual mandate is ruled unconstitutional.

Note: January 4, NFIB also asked the U.S. Supreme Court for permission to add two small business owners as plaintiffs to their case challenging the ACA. The request comes after the original plaintiff filed for bankruptcy in September 2011 on issues unrelated to insurance coverage, raising the issue over whether the plaintiff has standing to sue.

Administrative simplification rule released, plans required to implement in 2012 

Thursday, the U.S. Department of Health and Human Services (HHS) released an interim final rule titled “Adoption of Standards for Health Care Electronic Funds Transfers and Remittance Advice” with standards for electronic funds transfers, eligibility verification, and claims status inquiries as required by the ACA Section 1104. HHS estimates that implementation will reduce administrative costs for doctors, hospitals, private health plans, states, and others, by $4.5billion over ten years.

The rule dictates standards for the format and content of the transmission a health plan sends to its bank when it pays a claim to a provider electronically (via electronic funds transfer) and simultaneously issues a remittance advice notice to the provider.

Note: coupling the payment with remittance advice notice to providers using a trace number will reduce the cost associated with reconciliation between payments and receipts for providers. The regulation became effective January 1, 2012. All health plans covered under the Health Insurance Portability and Accountability Act (HIPAA) must comply by January 1, 2014.

HHS announced additional forthcoming administrative simplification provisions would include (1) a standard unique identifier for health plans; (2) a standard for claims attachments; and (3) requirements that health plans to certify compliance with all HIPAA standards and operating rules.

Note: an April 2010 Health Affairs study found that physicians spend 12 percent of every dollar they receive from patients to cover the costs of filling out forms and performing administrative tasks. The study found that simplifying these systems could save four hours per week of professional time per physician and five hours of support staff time every week, time that could be better spent on patient care. An earlier study by United Health estimated annual savings of $37 billion for full implementation of administrative simplification, calculating reduced overhead and improved efficiency as part of “admin simp” savings.

Innovation advisors announced by the Innovation Center

Last week, the Centers for Medicare & Medicaid Services (CMS) announced 73 individuals from 27 states and DC who will serve as the initial team of Innovation Advisors supporting the Center for Medicare and Medicaid Innovation (Innovation Center). Per ACA Section 3021, the Innovation Center is tasked to develop and test new models of care delivery for CHIP, Medicaid, and Medicare beneficiaries. Advisors begin a six-month orientation this month.

State update

MLR waiver denials: Kansas, Oklahoma

Wednesday, HHS denied medical loss ratio (MLR) waiver requests from Kansas and Oklahoma. Kansas had requested an MLR adjustment of 70 percent in 2011, 73 percent in 2012, and 76 percent in 2013. Oklahoma had requested 65 percent in 2011, 70 percent in 2012, and 75 percent in 2013. To date, HHS has approved MLR waivers for Georgia, Iowa, Kentucky, Maine, Nevada, and New Hampshire and denied requests from Delaware, Florida, Guam, Indiana, Kansas, Louisiana, Michigan, North Dakota, and Oklahoma. HHS is reviewing applications from North Carolina, Texas, and Wisconsin.

State round-up

Last week, the Massachusetts Supreme Judicial Court ruled that a 2009 law that cut legal immigrants from Commonwealth Care “violates their rights to equal protection under the Massachusetts Constitution.” The decision could affect up to 37,400 immigrants who have had legal status for less than five years and will cost the state $150 million. The state also certified the Retailers Association of Massachusetts and the Massachusetts Association of Chamber of Commerce Executives as its first group-purchasing cooperatives to purchase health insurance for small businesses.

Last week, Maryland’s Health Benefit Exchange Board sent its recommendation to the Governor and state legislature to implement the “producer interface model” for its Small Business Health Options Program (SHOP) Health Insurance Exchange (HIX) and the “market integration option” for its individual HIX. It also recommended that essential benefits should be settled by September 30, 2012, small group minimum participation threshold be set at $20 million in annual premium revenue, the individual threshold set at $10 million in annual premium revenue, and the individual and small group programs operated separately through 2016.

Texas announced it is closing its Consumer Health Assistance Program due to a loss of federal funding. Note: Texas is one of 35 states that received $30 million in funding under ACA Section 1002 for consumer assistance programs.

Premiums for employer health insurance plans in California increased 153.5 percent since 2002, a rate more than five times the increase in California's inflation rate. Over the past two years, state employers offering coverage to workers decreased to 63 percent from 73 percent. (Source: California HealthCare Foundation, California Employer Health Benefits Survey, December 2011)

Industry news

Health IT funding in 2011

CMS Report: through October 2011, $952 million in electronic health records (EHR) incentive money was given to 857 hospitals and $287 million to 14,500 office-based physicians and other eligible professionals. Eligible professionals received $18,000 under Medicare and $21,000 under Medicaid. Medicaid distributes $712 million in payments and Medicare distributes $528 million.

CMS publishes quality measures for Medicaid-eligible adults

Thursday, CMS published its initial core set of 26 quality measures for Medicaid-eligible adults per ACA Section 2701 to be voluntarily reported starting January 2013 by state Medicaid programs, providers, health insurers, and Medicaid managed care plans. Guidance for the capture and reporting on the Medicaid Adult Quality Measures Program will be available on or before January 1, 2013 and voluntary reporting will start December 2013.

Quality measures for Medicaid eligible adults
Measure name Programs which currently use the measure
Prevention & Health Promotion
Flu Shots for Adults Ages 50-64 Health Employer Data and Information Set (HEDIS®), National Committee for Quality Assurance (NCQA) Accreditation
Adult BMI Assessment HEDIS®, Health Homes Core
Breast Cancer Screening Meaningful Use Stage 1 of the Medicare & Medicaid Electronic Health Record Incentive Programs (MU1), HEDIS®, NCQA Accreditation, Physician Quality Reporting Program Group Practice Reporting Option (PQRS GPRO), accountable care organization (ACO) Medicare Shared Savings Program
Cervical Cancer Screening MU1, HEDIS®, NCQA Accreditation
Medical Assistance with Smoking and Tobacco MU1, HEDIS®, Medicare, NCQA Accreditation
Screening for Clinical Depression and Follow-
Up Plan
PQRS, CMS Quality Incentive Program (QIP), Health Homes Core, ACO Shared Savings Program
Plan All-Cause Readmission HEDIS®
PQI 01: Diabetes, Short-Term Complications
Admission Rate
PQI 05: Chronic Obstructive Pulmonary Disease (COPD) Admission Rate ACO Shared Savings Program
PQI 08: Congestive Heart Failure Admission Rate ACO Shared Savings Program
PQI 15: Adult Asthma Admission Rate  
Chlamydia Screening in Women Ages 21-24 MU1, HEDIS®, NCQA Accreditation, Children’s Health Insurance Program Reauthorization Act (CHIPRA) Initial Core Set
Management of Acute Conditions
Follow-Up After Hospitalization for Mental Illness HEDIS®, NCQA Accreditation, CHIPRA Core, Health Home Core
PC-01: Elective Delivery Hospital Inpatient Quality Data Reporting Program (HIP QDRP), The Joint Commission (TJC’s) ORYX Performance Measurement Program
PC-03 Antenatal Steroids TJC’s ORYX Performance Measurement Program
Management of Chronic Conditions
Controlling High Blood Pressure MU1, HEDIS®, NCQA Accreditation, PQRS GPRO, ACO Shared Savings Program
Comprehensive Diabetes Care: LDL-C Screening
MU1, HEDIS®, NCQA Accreditation, PQRS
Comprehensive Diabetes Care: Hemoglobin A1c Testing MU1, HEDIS®, NCQA Accreditation, PQRS
Antidepressant Medication Management MU1, HEDIS®, NCQA Accreditation
Adherence to Antipsychotics for Individuals with Schizophrenia Veterans Health Administration (VHA)
Annual Monitoring for Patients on Persistent
HEDIS®, NCQA Accreditation
Family Experience of Care
Consumer Assessment of Healthcare Providers and Systems (CAHPS) Health Plan Survey v 4.0 – Adult
Questionnaire with CAHPS Health Plan Survey v 4.0H – NCQA Supplemental
HEDIS®, NCQA Accreditation, ACO Shared Savings Program (NQF#0006)
Care Coordination
Care Transition – Transition Record
Transmitted to Health Care Professional
Health Homes Core
Initiation and Engagement of Alcohol and Other Drug Dependence Treatment MU1, HEDIS®, Health Homes Core
Prenatal and Postpartum Care: Postpartum Care Rate HEDIS®

Source: HHS, Final notice, “Medicaid Program: Initial Core Set of Health Care Quality  Measures for Medicaid-Eligible Adults”, January 4, 2012 available at

Note: the capture and reporting of “quality” measures is a central theme in “the new normal.” In most cases, acute and long term care providers, commercial health plans, and physician organizations will find the validity and reliability of the measures in sync with established oversight organizations (i.e. National Quality Forum, National Committee for Quality Assurance, etc.). Nonetheless, costs for the capture and reporting of additional measures and the implications of their accessibility to consumers and others are problematic in most organizations. More to come.

A Deloitte team recently published its take on quality measurement in hospital:

Study: hospital quality websites vary widely in content and impact

A recent study by HHS’s Agency for Health Care Research and Quality finds that “states, community quality collaboratives, and others are investing millions of dollars in the sponsorship and development of public reports on the quality of hospital care. The hope is that these reports will stimulate quality improvement, increase accountability, and improve consumer choices. Although the major method of distributing these reports is through websites, it is not known who visits these public reporting websites or how visitors use the data presented. This evidence gap leaves report sponsors with minimal guidance on how to construct and implement a report that will successfully engage consumers and providers.” Among findings:

  •  The "most common user" profile: more than 80 percent of consumer respondents are 45 years old or older, 90 percent are White, and 64 percent have at least a 4-year college degree. Conversely, websites appear to be little used by important vulnerable populations (i.e. Medicaid includes over 15 percent of all citizens in the U.S. but less than one-half of 1 percent of website users). Similar under-representation was found for individuals with less than a college education, and individuals from racial and ethnic minorities were also underrepresented.
  •  “Few visitors arrive at the participating websites through a search for a specific medical condition or a search for 'high quality hospitals' or 'hospital performance.' Many visitors arriving through search used the specific website names or specific hospital names in their search. In addition, there is limited competition for individual hospital names in search engines, compared to medical condition searches. Therefore, these may be good search terms on which to focus search engine optimization activities.”
  • While “high quality hospitals” or “hospital performance” were not commonly used as search terms among visitors to the participating sites, the majority of visitors came to the sites to look at quality information (choose or compare hospitals or confirm a choice already made). A substantial percentage of visitors are looking for other types of information (e.g., practical information such as a location and phone number) that is often not available. A strategic response for website hosts could be to add content that addresses these unmet needs.
  •  “Consumer visitors to the participating sites indicated they would like to see information more specific to their decision-making needs—specific conditions or surgeries (such as cancer or joint replacement surgery) and performance of individual doctors practicing at the hospital.”
  •  “Few sites use composite measures or interpretive labels (e.g., "better," "average," or "worse") to display provider performance. Only 1 of 16 uses a conceptual framework to help visitors understand the larger concept of quality. Nearly all sites used technical language (for example, including abbreviations such as ARB for angiotensin receptor blockers, which is not understood by most consumers). Many of the participating websites do not allow visitors to choose the hospitals of interest to them. Many have visual displays of information that are difficult to understand, and some do not allow side-by-side comparisons of hospitals.

(Source: “Users of Public Reports of Hospital Quality: Who, What, Why, and How?” AHRQ, December 23, 2011)

FDA: biosimilar, biologic pathways separate

Last month, the U.S. Food and Drug Administration (FDA) clarified that there will be a clear separation between biosimilar and biologic submissions, reducing angst among brand biologics makers that the agency might adopt an abbreviated biologics license application process alongside the biosimilar pathway. In its advisory, the FDA noted that that there will be a distinction between 351(a) filings for innovator biologics, and 351(k) filings for biosimilars.

New medication shortages: 267 drugs in 2011, 5th straight yearly increase

The number of new prescription drug shortages in 2011 increased 56 over 2010 to 267. By contrast, there were only 58 drug shortages reported in 2004. Per the FDA, major reasons for the shortages include manufacturing deficiencies leading to production shutdowns, companies ending production of unprofitable drugs, consolidation in the generic drug industry, and limited supplies of some ingredients. Besides disrupting patient care, the shortages have delayed clinical trials comparing experimental drugs to older ones and have led to unprecedented price gouging, with hospitals sometimes having to pay outrageous markups for scarce drugs. (Source: Linda A. Johnson, “2011 medication shortages set new record at 267”, AP, January 3, 2012 based on data from the University of Utah Drug Information Service)

AHRQ study questions value of medical homes, cites lack of evidence

“…the lack of significant findings from studies with too few practices does not necessarily indicate that the PCMH model does not work. These underpowered studies are unable to demonstrate statistical significance even when real effects are present. Findings from these studies may thus be ‘false negatives.’ Decision makers should avoid drawing conclusions about effectiveness, especially conclusions about lack of effectiveness, from studies with few practices. It is imperative that evaluators address these issues to design studies that can produce credible evidence regarding the PCMH and its effects on quality, cost, and experience of care.” (Source: “Building the Evidence Base for the Medical Home: What Sample and Sample Size Do Studies Need?” AHRQ, December 30, 2011)

HHS releases Global Health Strategy

Last week, HHS released its first Global Health Strategy: a 565 page plan focused on 2015 global health goals including:

  •  Enhance global health surveillance
  •  Prevent infectious diseases and other health threats
  • Prepare for and respond to public health emergencies
  • Increase the safety and integrity of global manufacturing and supply chains
  •  Strengthen international standards through multilateral engagement
  •  Catalyze health research globally
  •  Identify and exchange best practices to strengthen health systems
  •  Address the changing global patterns of death, illness and disability
  •  Support the Global Health Initiative (GHI)
  •  Advance health diplomacy

American College of Physicians releases new ethic guidelines for doctors

January 3, the American College of Physicians (ACP) released new ethics guidelines urging doctors to be “parsimonious” when making decisions about patient care, calling on them to consider the cost of treatment. ACP’s president Virginia Hood stated in an interview with National Public Radio (NPR) that “the cost of health care in the U.S. is twice that of any other industrialized country.” ACP represents 132,000 internists across the U.S. The guidelines were published in this past week's issue of the Annals of Internal Medicine.


“Among PCPs, opinions about open visit notes varied widely in terms of predicting the effect on their practices and benefits for patients. In contrast, patients expressed considerable enthusiasm and few fears, anticipating both improved understanding and more involvement in care. Sharing visit notes has broad implications for quality of care, privacy, and shared accountability”

Survey results of 173 primary care provider (PCP) practices and 37, 683 patients in three states: Walker et al “Inviting Patients to Read Their Doctors' Notes: Patients and Doctors Look Ahead: Patient and Physician Surveys,” Annals of Internal Medicine, December 20, 2011, vol. 155 no. 12 811-819

“I can’t quite remember when the term ‘provider’ slipped into the hospital lexicon. It was perhaps 10 years ago, when our hospital started hiring physician assistants and nurse practitioners to share the clinical load. In contrast to the regular staff nurses, who cared for the patients in conjunction with the doctors, physician assistants and nurse practitioners would see patients independently, the way the rest of the doctors did. So there needed to be a term that would include all three groups – physician assistants, nurse practitioners and doctors — who could have primary responsibility for patients.

‘Health care provider’ came into vogue as the catchall phrase and was quickly truncated to just ‘provider.’ The term does have its upside, helping to minimize hierarchy. History has shown us that medical hierarchy usually serves more to stomp on underlings than to provide leadership. In fact, physician assistants, nurse practitioners and doctors have more similarities than differences in their day-to-day interactions with patients, even as they come from unique backgrounds and bring different strengths to the table.

Still, the term ‘provider’ has never stopped irritating me. Every time I hear it — and it comes only from administrators, never patients — I cringe. To me it always elicits a vision of the hospital staff as working at Burger King, all of us wearing those paper hats as someone barks: ‘Two burgers, three Cokes, two statins and a colonoscopy on the side.’

But the most profound unease created by generic terms like ‘provider,’ … is the sense that medicine is turning into a corporate entity. Buzzwords like ‘provider,’ ‘consumer,’ ‘quality,’ ‘productivity,’ ‘synergy’ — all are just that, buzzwords. They come from the corporate world and carry a plastic blandness with them, even if the concepts they embody do have some validity for medicine.

—Tara Parker Pope, “The Provider Will See You Now,” New York Times, December 29, 2011

Fact file

  • The unemployment rate decreased to 8.5 percent, the lowest since February 2009; 200,000 were added to workforce in December 2011. In 2011, the economy added 1.6 million jobs vs. 940,000 in 2010. The unemployment rate averaged 8.9 percent last year, down from 9.6 percent the previous year. (Source: U.S. Department of Labor, January 5, 2011)
  • Federal health IT (information technology) spending is projected to increase from $4.5 billion in 2011 to $6.5 billion in 2016, a compound annual growth rate of 7.5 percent. (Source: Deltek, Federal Health IT Market, 2011-2016, December 2011)
  •  Hospital admissions: avoidable readmissions cost Medicare an estimated $12 billion annually. Epstein analysis: hospital readmission rates range from 11 percent – 32 percent for congestive heart failure, and 8 percent – 27 percent for pneumonia. Greater severity of coexisting conditions was associated with higher regional readmission rates. Kocial analysis: heart attack patients in the U.S. had a 68 percent increased chance of being readmitted to the hospital compared to individuals outside the U.S. An elevated heart rate increased the chance of being readmitted to the hospital by 9 percent. (Sources: MedPAC; Arnold M. Epstein et al., “Special Article the Relationship Between Hospital Admission Rates and Rehospitalizations,” New England Journal of Medicine, December 15, 2011, based on Medicare data from the first six months of 2008; Robb D. Kociol et al., “International Variation in and Factors Associated With Hospital Readmission After Myocardial Infarction,” Journal of the American Medical Association, January 4, 2012)
  • The Dow Jones U.S. Health Care Providers Total Stock Market increased 10.52 percent in 2011. Health care provider and supplier stocks showed a return of 5.53 percent, the Dow Jones U.S. Medical Equipment Total Stock Market Index decreased 1.17 percent in 2011, and the Dow Jones U.S. Medical Supplies Total Stock Market Index decreased 3.95 percent. (Source: Modern Healthcare, “Healthcare stocks saw mixed results in 2011,” January 2, 2012)
  • From 2004 to 2008, overall cancer incidence rates declined by 0.6 percent annually for men and were stable in women. Cancer death rates decreased by 1.9 percent annually for men and 1.6 percent annually for women. (Source: American Cancer Society, Cancer Facts & Figures, 2012)
  •  Hospital employees report one out of seven errors, accidents, and other adverse events. (Source: Robert Pear, “Report Finds Most Errors at Hospitals Go Unreported,” New York Times, January 6, 2012, based off of a report from HHS’s Office of the Inspector General)
  •  In 2011, 2.2 million patients used using home monitoring equipment with integrated connectivity or systems that use monitoring hubs with integrated cellular or fixed-line modems (excludes those using monitoring devices connected to a PC or mobile phone). Home monitoring systems with integrated communication capabilities will grow at a compound annual growth rate of 18 percent between 2010 and 2016 reaching 4.9 million connections globally by the end of the forecast period. (Source: Berg Insight, December 23, 2011)
National health reform: What now?




National health reform: What now?

National health reform is here. The health reform bills (HR3590 and HR4872) are now law and will trigger sweeping changes and disruptions – some rather quickly and some over many years. The industry is asking, “What now?” At Deloitte, we continue to explore and debate the key questions facing the industry, and we look forward to helping our clients find and implement the right answers for their organizations. To learn more, visit today.

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