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Health Care Reform Memo:
May 13, 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: Health IT: a necessary transition to improve patient care 

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

The Affordable Care Act (ACA) of 2010 is the law most notably associated with health reform, but arguably the most significant reform in the health care system may be the required implementation of electronic health records (EHRs) by 2016. The journey from a paper based system of health care to the digital age, almost 20 years in the making, is the result of three laws:

  • The Health Insurance Portability and Accountability Act (HIPAA) passed in 1996 established rules for access, authentications, storage and auditing, and transmittal of electronic medical records. It also provided a framework for understanding potential unintended consequences for the misuse of personal health information (PHI)—breach by employees or hackers, loss if PHI as a result of a natural disaster like an earthquake or fire, and technological failures like system crashing.
  • The Health Information Technology for Economic and Clinical Health Act (HITECH) passed as part of the 2009 stimulus package and set meaningful use (MU) of interoperable EHR adoption as a critical national goal via $27 billion in incentive payments over six years for eligible Medicaid providers and five consecutive years for eligible Medicare providers beginning in 2011. “Eligible professionals can receive up to $44,000 through the Medicare EHR Incentive Program and up to $63,750 through the Medicaid EHR Incentive Program.”1 Medicare providers who are eligible, but do not achieve MU, will be penalized with a 1 percent reduction in Medicare reimbursements in 2015, increasing gradually to 5 percent in 2019. Note: as of March 2013, 259,630 eligible providers have received $13.7 billion from these funds1.
  • The ACA presumes MU of EHRs as a means to participation in certain programs such as the Medicare Shared Savings Program (i.e. Accountable Care Organizations [ACOs]), patient-centered medical homes, and the Physician Quality Reporting Initiative. MU is an enabling strategy central to changes in the delivery system that reward value over volume and align coverage with evidence.

There’s widespread consensus across the health system that leveraging information technologies to better coordinate care and reduce error is both necessary and appropriate. The government’s web site states it simply:

As medical practices and technologies have advanced, the delivery of sophisticated, high-quality medical care has come to require teams of health care providers—primary care physicians, specialists, nurses, technicians, and other clinicians. Each member of the team tends to have specific, limited interactions with the patient and, depending on the team member's area of expertise, a somewhat different view of the patient. In effect, the health care team's view of the patient can become fragmented into disconnected facts and clusters of symptoms. Health care providers need less fragmented views of patients.”

But skeptics can lay claim to facts that support their reluctance:

  • It costs more to implement an EHR in a practice and across a community of providers than the incentives fund2.
  • There’s risk of privacy and security breaches: in the period from 2005-2013, there were 900 security breaches involving over 24 million PHI records3.
  •  The solutions marketplace is confusing. Vendors vary widely in their approaches and some may not measure up: there are 378 certified vendors: 25 serve 80.3 percent of eligible professionals4.

And as the journey proceeds, it will only get more complicated as the U.S. Food and Drug Administration (FDA), Office of the National Coordinator (ONC) for Health Information Technology (IT), and the U.S. Federal Trade Commission (FTC) tackle the role of mobile health technologies, smart bio monitoring, and implantable devices that collect and transmit information; as the role of social media in sharing information heretofore controlled by providers; and as current discussions about fixing the Sustainable Growth Rate formula for physician pay includes the possibility that physician performance will be the basis for annual payment increases allowing public disclosure about individual physician performance – outcomes, errors, and patient experiences.

Here’s my take: the train to information driven health care and MU has left the station. Physicians and hospitals not aboard jeopardize their long-term viability while in the short term protecting their bottom line.

Hospital boards and affiliated physicians must embrace the case for MU around quality and safety, not about a suitable ROI. Non-adopter physicians should not be allowed to participate with hospitals, health plans and employers in risk sharing arrangements like ACOs, bundled payments, and other models that require optimal clinical coordination. It’s potentially harmful to patients, and certainly suboptimal for the group of committed physicians and their business partners. And consumers should not use a physician or health professional not on the track to MU.

A lot is said in this industry about outcomes, quality and safety, errors and patient experiences. How can some in this industry passionately lay claim to ownership of the patient’s best interest and at the same time disavow use of tools demonstrated to improve the quality of care they promise to deliver?

MU of EHRs is not about getting a positive ROI; it’s about delivering optimal care in the patient’s best interest. The train has left the station.

Paul Keckely

P. S. Today, we’re releasing "Physician Opinions about Health IT: Implications for Medical Practice Leaders and Business Partners". It points to an alarming gap between adopters and non-adopters, and the implications for policymakers and business partners. To download the report, click here.

1CMS EHR Incentive Program

2U.S. Congressional Budget Office

3Privacy Rights Clearinghouse

4Modern Healthcare, “DOC EHR remains competitive,” March 26, 2013.

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Three stages for the adoption of MU over five years 

Overall goal: improve clinical outcomes, patient health, transparency, and efficiency

Stage 1: 2011-2012 data capture and sharing
  • Increase implementation and adoption of EHRs
  • Capture structured data

Stage 2: 2014  advance clinical processes)
  •  Increase exchange of health information
  • Demonstrate care coordination
  • Empower patients with health information

Stage 3: 2016  improved outcomes
  • Drive use of real-time data at the point of care
  • Use outcomes-focused clinical quality measures
  • Utilize clinical decision support for prevention, disease management and safety


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Clinical effectiveness researchers receive $86.6 million in federal funding 

The Patient Centered Outcomes Research Institute (PCORI) announced Cycle II funding awards for clinical effectiveness research (CER): 51 new research grants to 21 states totaling $88.6 million. The funding cycle is three years and will support research on kidney disease, cancer, obesity, asthma, etc. In December 2012, PCORI announced it first round of funding grants: $40.7 million to 25 organizations.

Background: PCORI began operation in the fall of 2011 and was established and appropriated funding through 2019 by Section 6301 of the Affordable Care Act (ACA) to conduct CER.

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HHS releases funding to support health insurance enrollment in 2014 

U.S. Health and Human Services (HHS) announced $150 million will go to 1,200 community health centers to support health insurance enrollment efforts. Community health centers will use the additional funding to hire new staff, train existing staff, and conduct community outreach to educate consumers on new health insurance options made available by the ACA (i.e. Medicaid expansion and health insurance exchanges [HIX]).

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GOP rejects IPAB  

Last week, House Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY) notified the White House they will not appoint members to the Independent Payment Advisory Board (IPAB). The letter states: “we believe Congress should repeal the IPAB, just as we believe we ought to repeal the entire health care law.” The Administration has solicited board member appointment recommendations from Congress, but as of May 2013 no appointments have been made.

Background: per Section 3403 of the ACA, the IPAB is a 15-member advisory commission appointed by the White House with Congressional approval empowered to set Medicare reimbursement rates in order to control costs.

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FDA proposes reclassification of tanning beds 

The FDA has decided to reclassify sunlamp products (i.e. tanning beds) from class I, a low-risk device, to Class II, a moderate-risk device. Comments on this proposed rule will be accepted until August 7, 2013. Per ACA Section 10907, there is currently a 10 percent tax on tanning services.

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Legislative update 

Medicare hospital pricing data released 

Wednesday, Centers for Medicare and Medicaid Services (CMS) released prices for major services in 3,300 U.S. hospitals, garnering widespread media attention for the disparities noted. Example:

States Heart failure Major lower joint replacement COPD Kidney and urinary tract infection
California $70,964 $88,235 $56,013 $36,085
Florida $46,182 $82,032 $39,029 $25,556
Texas $48,268 $80,609 $35,680 $22,516
Pennsylvania $40,884 $51,130 $35,943 $23,484
Ohio $30,968 $43,178 $23,244 $14,580
Alaska $49,620 $83,290 $34,448 $19,253
Wyoming $27,453 $49,155 $23,123 $15,499
Vermont $21,035 $33,633 $16,404 $10,329
Rhode Island $32,785 $33,838 $16,404 $10,329
North Dakota $16,247 $33,347 $13,047 $9,244

Source: CMS, Medicare Provider Charge Data, May 2013; Washington Post, “Disparity in Medical Billing,” May 8, 2013

Reaction: “The complex and bewildering interplay among ‘charges,’ ‘rates,’ ‘bills’ and ‘payments’ across dozens of payers, public and private, does not serve any stakeholder well, including hospital…This is especially true when what is most important to a patient is knowing what his or her financial responsibility will be.”—AHA President and CEO Rich Umbdenstock

My take: the wide disparity in hospital charges makes for interesting reading, but the data can be misleading for three reasons: 1-hospital charges often bear no relationship to hospital costs or what hospitals are paid by health plans based on negotiated agreements, 2-they may bear no relationship to quality—actual outcomes and hospital charges are unrelated, and 3-many consumers don’t care (unless they have a high deductible insurance plan in which they might be asked to pay retail rates but it’s highly unlikely). What’s more, only 2 percent of consumers pay close attention to prices: after all, if someone has health insurance, they’re probably paying less than 20-25 percent of the cost via co-pays and deductibles, and most consumers use hospitals recommended by their physician or in-network with their insurance.

The larger story is this: transparency! Data about hospital charges, outcomes, safety and patient experiences is widely available. And in the near future, every sector of health care will be required to provide data accessible to consumers in an understandable format, including data about physician performance. In the new normal, there will be few secrets in health care. And as consumers shoulder greater responsibility for their choices, more will pay attention!

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Mobile device legislation proposed; increased scrutiny of regulators 

Use of mobile devices by health care providers and consumers are accelerating at a rapid pace. To date, regulatory oversight has focused on two agencies:

FDA: is a mobile device used to manage patient care and extract data from patients a medical device that should be regulated? If so, how? Christy Foreman, Director of the Office of Device Evaluation at the FDA stated recently that this final guidance is expected in 2013. “The agency will not label all smartphones or tablets that could possibly run a medical app as medical devices, nor does the FDA have any wish to limit innovation by imposing undue burdens. FDA believes it is important to adopt a balanced, approach to mobile medical apps that supports continued innovation, assuring appropriate patient protections.” (Source: EHR Intelligence, “FDA to Establish Final Guidance about mHealth Apps in 2013,” March 22, 2013)

ONC: how do mobile devices used by clinicians interface with MU? What certification requirements might be necessary? In March of this year “applications closed for a new ONC FACA (federal advisory committee) specifically focused on the [FDA Safety and Innovation Act] Section 618 mandate for a report on a new risk-based regulatory framework for health information technology and mobile medical apps. The FDA and FCC helped promote the new ONC group, but it’s clearly being convened by ONC.” (Source: Mobihealthnews, “Republicans, EHR vendors want ONC to take over medical app regulation,” March 14, 2013)

In addition, a number of legislative proposals about mobile health have been in the past year:

  • Last week, Representative Hank Johnson (D-GA) introduced legislation (H.R. 1913) to provide for greater transparency in and user control over treatment of data collected by mobile applications and to enhance the security of such data.
  • The Mobile Device Privacy Act (MDPA), introduced by Representative Edward Markey (D-MA), aimed to "require disclosures to consumers regarding the capability of software to monitor mobile telephone usage, to require the express consent of the consumer prior to monitoring, and for other purposes."
  • The Application Privacy, Protection and Security (APPS) Act of 2013, introduced by Representative Hank Johnson (D-GA), is intended to regulate how the developers of mobile applications, including mHealth apps, collect consumer information.
  • The Location Privacy Protection Act – introduced by Senator Al Franken (D-MN) and passed by the Senate Judiciary Committee on December 14, 2012 – aims to force app developers to receive user consent before collecting mobile location information.
  • The Wireless Device Independence Act of 2013, introduced by Senator Ron Wyden (D-OR), is intended "to allow consumers to unlock mobile wireless devices for interoperability purposes.”

Reaction: “The FDA’s announcement that the final guidance on mobile medical applications can be expected by the end of the fiscal year (FY) highlights an important tension. The mHealth community, fueled by rapidly evolving technology and innovation, finds itself wading into the slow, methodical processes that regulate this industry. In the two years that have passed since the FDA’s draft guidance, mHealth has grown exponentially. However, with the uncertainty around final guidance, developers have been prone to hold back awaiting clarity. The sooner the industry gains clarity, the faster its value proposition can be realized.”—Harry Greenspun, M.D. Senior Advisor, Health Care Transformation and Technology, Deloitte Center for Health Solutions

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Acting Director of CMS likely to be confirmed this week 

Last week, Chairman of the Senate Health, Education, Labor and Pensions Committee Tom Harkin (D-IA) announced his support of Marilyn Tavenner to be re-appointed as Acting Administrator of CMS. Senator Harkin placed a hold on Tavenner’s confirmation hearing in protest of CMS’ decision to remove $332 million from the Prevention and Public Health Fund to support other ACA activities. While Senator Harkin agreed to remove the hold, he remains adamant that the money be returned to the Fund this year.

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Appropriations bills expected in the House among controversy over spending cap 

Spending bills are expected to be taken up in the House in June, with House Appropriation Chairman Harold Rogers (R-KY) leading with a discretionary spending cap proposal at $967 billion. Democrats in the House and Senate are pushing for a FY2014 cap of$1.058 billion.

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Senate to hold hearing on NIH FY2014 budget request 

This Wednesday a Senate hearing will be held on the National Institutes of Health budget request for FY2014 of $31.31 million, an increase of $471,000 from FY2012. NIH is proposing to invest over half of its budget ($16.9 billion) in competitive, peer-reviewed, investigator initiated research grant projects>

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Capitol Hill briefing: patient centered medical home effectiveness not yet known 

Last week, during a Capitol Hill briefing experts testified that more time is needed to determine whether patient centered medical health homes achieve cost-savings and/or better outcomes.

Background: medical homes consist of teams of health care providers who collaborate to coordinate care and contact patients instead of waiting for patients to come to them. Section 2703 of the ACA provides states the financial flexibility to promote medical health homes for Medicaid enrollees with chronic conditions. Close to 25 states have shown interest in adopting Section 2703 and as of June 2012 six states had been approved by CMS to move forward with implementation (OR, IA, MO, NY, RI, NC). As of April 23, 43 states are advancing the medical health home model.

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GOP senators working to reinforce restrictions to accessing federal health programs for immigrants 

Last week, over 300 amendments were proposed as add-ons to the immigration legislation advancing in Congress, including amendments to ensure immigrants remain excluded from enrolling in federally funded health care programs (i.e. Medicaid, Children’s Health Insurance Program, and certain ACA programs).

Background: among the low-income, uninsured population targeted for Medicaid expansion in states, 17 percent are illegal or recently arrived immigrants. The ACA’s Medicaid expansion provision excludes non-citizens, which will have various implications for providers and states that may still be faced with uncompensated care costs in 2014. The impact varies significantly by state, with illegal or new immigrants representing 24 percent of low-income, uninsured non-elderly adults in Nevada vs. 3 percent in Kentucky. (Source: RWJF, “State Estimates of the Low-Income Uninsured Not Eligible for the ACA Medicaid Expansion,” March 2013)

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Recently introduced health care legislation 

  • Representative Peter Welch (D-VT) introduced legislation (H.R. 1841) proposing to move up the start date for innovation waivers enacted by the ACA. A similar bill (S 858) was introduced by Senator Bernie Sanders (I-VT).
  • Representative Steve Strivers (R-OH) introduced legislation (H.R. 1838) proposing to apply the Medicaid primary care payment rate to additional providers of primary care services.
  • Representative Shelley Moore Capito (R-WV) introduced legislation (H.R. 1830) proposing to establish a commission on breast cancer. A similar bill (S 865) was introduced by Senator Sheldon Whitehouse (D-RI).Representative Joe Courtney (D-CT) introduced legislation (H.R. 1827) proposing to extend health care work force loan repayments through FY2018.
  • Senator Mark Pryor (D-AR) introduced legislation (S 867) proposing to establish basic audit standards for pharmacies, further transparency of payment methodology to pharmacies, and provide recoupment returns to Medicare.
  • Senator Kelly Ayotte (R-NH) introduced legislation (S 862) proposing to provide an additional religious exemption to the individual mandate for health insurance coverage effective January 1, 2014.
  • Senator Dick Durbin (D-IL) introduced legislation (S 857) proposing to permit leave to care for a same-sex spouse, domestic partner, parent-in-law, adult child, sibling, grandchild, or grandparent who has a serious health condition.
  • Representative Bill Cassidy (R-LA) introduced legislation (H.R. 1853) proposing to reform Medicaid payments to states.
  • Senator Kirsten Gillibrant (D-NY) introduced legislation (S 881) proposing to provide an income tax credit for the cost of certain infertility treatments.
  • Senator Robert Casey (D-PA) introduced legislation (S 875) to require the reporting of cases of infectious diseases at facilities of the Veterans Health Administration.

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Report: combining Medicare hospital, physician and prescription drug programs proposed 

Last week, the Commonwealth Fund issued a report supporting a new Medicare insurance alternative, “Medicare Essential,” that is projected to cut health spending by $180 billion over ten years. The plan combines Medicare hospital, physician, and prescription coverage into a single benefit with a yearly out-of-pocket expense limit. The savings would result from lower costs of administration and utilization of pharmaceutical benefit managers. Medicare beneficiaries spend approximately $427 per month on Medicare parts B and D premiums; Medicare Essential would have a monthly premium of $354 for the same services.

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Report: federal government could generate $264 billion by capping employer tax exemption 

Last week, the Urban Institute released its analysis concluding the federal government could generate $264 billion in revenue through 2023 by placing a 75th percentile tax cap on employer sponsored health insurance premiums and medical benefits, which would preserve 93 percent of the tax subsidies currently in place. Employer sponsored health insurance premiums and medical benefits have traditionally been tax exempt. If the current tax exemption remains in place, Urban researchers project that it will amount to $271.5 billion in “lost revenue” in 2014. Note: the ACA includes a 40 percent excise tax on high-cost health plans that is projected by CBO to generate $111 billion in revenue between 2018 and 2022.

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State update 

State round-up: HIX 

Seventeen 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. Seven states—five led by Democratic governors and two led by Republicans—will participate in state-partnership exchanges. The remaining 26 states will default to a federally-facilitated exchange.

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

Democratic Governor Republican Governor  ■ Independent Governor

Source: HHS

  • Last week in a letter to Utah, Director of the Center for Consumer Information and Insurance Oversight Gary Cohen indicated that the agency will amend existing regulations to allow Utah to run its state-based Small Business Health Insurance Program (SHOP) for small employers, while the Federal government will facilitate the individual HIX market. Cohen said other states would be able to pursue this option if the amendment is approved. As it stands, Utah is conditionally approved by CMS to operate a state-based exchange.
  • Oregon posted the proposed health insurance rates of 16 insurers as well as two CO-OPs for 2014. The proposed bronze standard plan rates range from $169 to $450. The bronze plans offered on the HIXs must cover 60 percent of a plan participant’s covered health care costs. Public hearings will be held at the end of May, with a final ruling on the rates to come in July.

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Medicaid expansion update 

Medicaid expansion is projected to cost the federal government $952 billion between 2013 and 2022 and states $76 billion. To date, 26 states and D.C. have said they will or are in support of expanding their Medicaid programs; 19 states have indicated they are highly unlikely to expand their programs:

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

Democratic Governor  Republican Governor  ■ Independent Governor

Source: JAMA, “Medicaid expansion under the Affordable Care Act,” March 27, 2012; Kaiser Family Foundation; PoliticoPro, Statereforum  

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 May 13, 2013) and is subject to change.

Recent Medicaid announcements:

  • The 2013 Florida legislative session ended on Friday, May 3 without a vote to expand the state’s Medicaid program.
  • A study of Oregon’s Medicaid program determined that residents who obtained Medicaid through a lottery in 2008 had more doctors’ visits and prescriptions than residents who did not receive coverage.  The study did not find differences between the two groups in terms of hypertension, high cholesterol, or key diabetes measures, although researchers did find that depression rates decreased for those who won coverage in the lottery.
  • Last week, Kentucky Governor Steve Beshear (D-KY) stated he will formally back Medicaid expansion that is expected to assist 300,000 uninsured Kentucky residents.

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State round-up 

  • Last week, the Georgia state legislature passed House Bill 499, “State Physician Shield Act”, preventing doctors from being sued for negligent care over “payment guidelines” in the health reform law. The law prohibits plaintiffs from suing Georgia physicians over standards of care using evidence of the physician's readmissions rate, complication rates or other issues that deal primarily with reimbursement and payment. At issue: “never events” for which Medicare and Medicaid are not obligated to pay: example—a urinary tract infections acquired from catheters during hospitalization. The new law makes clear that “never events” are not standards of care over which patients can sue providers.
  • The Supreme Court of California ruled that medical marijuana dispensaries may be outlawed by local governments. Currently, 18 states as well as the District of Columbia allow medical marijuana, however the federal government still classifies cannabis as an illegal narcotic. 
  • North Carolina House Bill 693 would require individuals under age 18 to have parental approval for mental health, substance abuses and reproductive health services prior to receiving treatment. This bill was advanced through the General Assembly in North Carolina last week, and, if passed, will be the first of its kind in the U.S.

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Industry news 

Study: gap between MU adopters, non-adopters widening 

In the “Physician adoption of health information technology: Implications for medical practices and business partners” based on the DCHS’ 2013 Survey of U.S. Physicians, the notable finding is the widening gap between practices of EHR adopters and non-adopters. Highlights:

  • Sixty-six percent of physicians say they use EHRs that meet MU stage one requirements. Most (87 percent) have been using between 0-5 years.
  • Sixty-three percent of physicians are satisfied with their EHR system associating use with: faster and more accurate billing for services (74 percent), time saving through e-prescribing (67 percent), and improvement of care co-ordination capabilities (67 percent).
  • Forty-five percent of non-adopters do not intend to implement MU citing upfront financial investment (72 percent), operational burden (70 percent), and anticipated costs of maintenance costs (56 percent) as primary concerns.
  • Thirty-one percent of EHR adopters use application for patient interaction, i.e. making lab results accessible online, allowing online scheduling of visits, etc.  Early adopters are three times more likely to use health IT for patient interactions than non-adopters.

Reaction: “While the debate over the return on investment of EHRs and other forms of health IT continues, adoption is accelerating. Mixed results in productivity, cost overruns, and other issues normal for new technology deployment does not appear to have slowed momentum. While some have used these issues as justification for not moving forward, others are reaping broader benefits-- improved quality, safety, and evidenced-based care--leveraging analytics and robust information exchange to become data-driven enterprises.  Notably, our survey depicts a widening gap between adopters and non-adopters in key areas of consumer engagement, a critical battleground for providers, payers, and life sciences as the industry moves into value-based reimbursement.  For those on the fence, it may be time to rethink how ROI is measured.”— Harry Greenspun, M.D. Senior Advisor, Health Care Transformation and Technology, Deloitte Center for Health Solutions.

Click here to download the survey.

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Study: slowdown in health costs might be long term trend 

The Harvard Medical School research team analyzed utilization and costs for 10 million enrollees with health coverage from large employers for the period of 2007-2011 seeking to correlate overall spending decreases in the period to factors that might be shorter term vs. longer term impact. “During and immediately after the recent recession, national health expenditures grew exceptionally slowly. During 2009–11 per capita national health spending grew about 3 percent annually, compared to an average of 5.9 percent annually during the previous ten years. Policy experts disagree about whether the slower health spending growth was temporary or represented a long-term shift. This study examined two factors that might account for the slowdown: job loss and benefit changes that shifted more costs to insured people. Based on an examination of data covering more than ten million enrollees with health care coverage from large firms in 2007–11, we found that these enrollees’ out-of-pocket costs increased as the benefit design of their employer-provided coverage became less generous in this period. We conclude that such benefit design changes accounted for about one-fifth of the observed decrease in the rate of growth. However, we also observed a slowdown in spending growth even when we held benefit generosity constant, which suggests that other factors, such as a reduction in the rate of introduction of new technology, were also at work. Our findings suggest cautious optimism that the slowdown in the growth of health spending may persist—a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country.”

(Source: Ryu, Gibson, McKeller, & Chernow “The Slowdown In Health Care Spending In 2009–11 Reflected Factors Other Than The Weak Economy And Thus May Persist” Health Affairs, May 2013 vol. 32 no. 5 835-840)

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Drug spending down 3.5 percent last year 

  • Total spending on prescription drugs declined 3.5 percent last year as a result of increased use of generics, lower utilization, higher deductibles and lower prices:
    Total spending fell to $325.8 billion in 2012, down 1 percent compared with $329.2 billion in 2011.
  • Average annual spending per capita declined $33 to $898—the first decline in 58 years to tracking.
  • 84 percent of dispensed prescription drugs are now generics.
  • Seven of the 35 new drugs approved by the FDA in FY2012 cost $9,000 or more per month.
  • Oncology drugs were the highest spending per drug class at $25.9 billion in 2012—up 7.8 percent increase.
  • Seventy-two percent of retail prescriptions had a co-pay of $10 or less, while 3 percent of prescription drugs had a co-pay that cost more than $70.

(Source: IMS, “IMS Health Study Points to a Declining Cost Curve for U.S. Medicines in 2012, May 9, 2013)

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Home care industry rebasing harmful to sector 

An industry report released last Thursday concluded the home care industry will lose money on Medicare beneficiaries by 2017. “The ACA authorizes CMS to rebase home health pay between 2014 and 2017, but unlike other sectors, the law does not require rebasing for home health. Rather, it gives CMS the authority to rebase.” At issue: the sector sees the methodology CMS is using as flawed. Medicare accounts for more than 80 percent of home health revenues; the remaining 20 percent pays less than Medicare rates. Per analysis by economics consulting firm Dobson | DaVanzo, if CMS does not rebase pay, home health agencies in nine states will have margins that fall below 0.5 percent and ten states will have negative margins.

(Source: Inside Health Policy, “ Home Care Industry Projects Negative Margins, Even Without Rebasing,” May 9, 2013)

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HHS to partner with Archimedes in open source clinical analytics partnership 

Last Thursday, HHS announced a joint venture with San Francisco-based healthcare data analytics company Archimedes to facilitate access to CMS’ claims data for software developers. Archimedes will use its ARCHeS Population Explorer software to analyze the Medicare Data Entrepreneurs’ Synthetic Public Use File, DE-SynPUF dataset. Archimedes will facilitate access to data so developers can assess variability in outcomes for specific Medicare populations stratified by age, medication use, and other variables.

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Restaurant, retail trade groups challenge auto enrollment requirement 

Per Section 1511 of the ACA, companies with 200 or more employees must automatically enroll their workers for health coverage. Thursday, the Retail Industry Leaders Association, the National Restaurant Association and the Food Marketing Institute sent a letter to Congress on behalf of their members supporting repeal of the provision calling it an ”unnecessary hardship if they find themselves automatically enrolled in a plan in which they do not wish to participate.”  

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Prostate diagnostic test promising 

Genomic Health released a study of its diagnostic screening test that will enable differentiating between prostate cancer requiring aggressive treatment vs. “watchful waiting” and less aggressive strategies. The new test, Oncotype DX Prostate Cancer Test, is among several soon to be marketed for use in diagnosing 240 new cases that are diagnosed annually. The screener uses genotypic sequencing of 17 genes in the biopsy sample to compute a risk score. The study of 412 patients was presented Wednesday at the American Urological Association meeting in San Diego.

(Source: New York Times, “New Test Improves Assessment of Prostate Cancer Risk, Study Says,” May 8, 2013)

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Mesothelioma lawsuits gets media attention 

“Only a handful of doctors in the U.S. specialize in treating mesothelioma patients and studying the disease. Nearly all have benefited from money plaintiffs’ attorneys or plaintiff attorney-backed organizations’ that goes toward their research or the institution where they practice.” The national Cancer Institute spent $6 million on mesothelioma research in 2011—0.1 percent of its budget for condition that impacts 3,000 yearly.

(Source: Analysis of non-profit tax filings “Mesothelioma Doctors, Lawyers Join Hung for Valuable Asbestos Cases,” Wall Street Journal May 8, 2013)

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Research file 

ROI for EHR use is primarily driven by increased physician income, reduction in transcription costs 

Objective: to assess the return on investment (ROI) for use of EHRs in medical practices.

Methodology: survey data from 49 community practices in an EHR pilot, the Massachusetts eHealth Collaborative funded by Blue Cross and Blue Shield of Massachusetts that ran from 2006-2007 to project five-year returns on investment.

Key findings: “We found that the average physician would lose $43,743 over five years; just 27 percent of practices would have achieved a positive return on investment; and only an additional 14 percent of practices would have come out ahead had they received the $44,000 federal meaningful-use incentive. The largest difference between practices with a positive return on investment and those with a negative return was the extent to which they used their EHRs to increase revenue, primarily by seeing more patients per day or by improved billing that resulted in fewer rejected claims and more accurate coding. Almost half of the practices did not realize savings in paper medical records because they continued to keep records on paper.” Primary care practices fared better than specialty practices, and larger practices (those with six or more doctors) did better than smaller practices. The major differential between positive and negative returns: on average, positive ROI practices increased revenue by $114,613 per physician over five years—12 times the average for those with a negative ROI.

(Source: Julia Adler-Milstein, Carol E. Green, and David W. Bates, “A Survey Analysis Suggests That Electronic Health Records Will Yield Revenue Gains For Some Practices And Losses For Many,” Health Affairs, March 2013)

My take: the cost effectiveness (ROI) for the MU of EHRs in medical practices is certainly a worthwhile discussion, but the medical profession should justify its use primarily on the basis of improved outcomes: improvements in the accuracy of diagnoses and appropriateness of treatment plans based on more and better information about a patient’s signs, symptoms, risk factors, and co-morbidities combined with clinical decision support tools to augment the clinician’s judgment. In a market increasingly demanding transparency about safety, outcomes, conflicts of interest, prices and service delivery, it would seem a reasonable physician would see value in optimizing their clinical performance using a certified EHR as a competitive reality. It’s not about the ROI; it’s about professionals using tools to better equip them to deliver value to their customers, the patients. (Originally published in Monday Memo March 18, 2013.)

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“Data being released for the first time by the government on Wednesday shows that hospitals charge Medicare wildly differing amounts—sometimes 10 to 20 times what Medicare typically reimburses—for the same procedure, raising questions about how hospitals determine prices and why they differ so widely. The data for 3,300 hospitals released by the federal [CMS] shows wide variations not only regionally but among hospitals in the same area or city.”— New York Times, Hospital Billing Varies Widely, U.S. Data Shows, Page 1, May 8, 2013

"Mobile health apps are flooding the market at a record rate, becoming increasingly popular with consumers who value the convenience of accessing medical information with the swipe of a finger. But with one quarter of Americans trusting these apps as much as a trained medical professional and making important health decisions based on the information of a 99-cent download, it’s no wonder that the FDA is trying to step in to provide regulation for the booming sector.”— Jennifer Bresnick, “FDA to establish final guidance about mHealth apps in 2013,” EHR Intelligence, March 22, 2013

“The current design of insurance, including the large portion covered by both government and employers, encourages us and our doctors to bargain over what everyone else will pay. At a zero price at the margin for services that have value, individual demand and business incentives for supply are each potentially infinite. That’s the original sin that must be absolved before any long-term solution to health care costs can be found, a finding highly, though not perfectly, correlated with the oft-stated notion that fee-for-service medicine is not sustainable. This original sin creates an irresistible force for higher costs as long as it remains an important component of most health insurance design.”— Gene Steuerle, Richard B. Fisher Chair at the Urban Institute, “A Slower Rate of Health Cost Growth? What Happens When An Irresistible Force Meets an Increasingly Immovable Object?” Altarum Health Policy Institute, May 10, 2013

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Fact file 

  • Consumer attitudes about physicians’ use of EHRs: 35 percent say they are concerned with the privacy and security of electronic health records – Boomers more (39 percent), Millennials less (30 percent); 43 percent who have access to their physician via health IT say it’s valuable and 59 percent of those who do not have access say they would be likely to use health IT if they were given access. (Source: Deloitte Center for Health Solutions, “2012 Consumer Health Care Survey: Chartbook Slides 60 and 68, June 13, 2012)
  • Mobile apps: “there are 17,288 health and fitness apps and 14,558 medical apps on the market in 2012; number of smartphone apps increased 120 percent during the past year; 27 million mobile phone users worldwide downloaded a health app in 2012.” (Source: Health Leaders Media, “4 Top Mobile App Types for Healthcare Providers,” February 27, 2013)
  • MU attestation*:
Provider type 2011 2012 2013 Grand Total
EP 63,301 159,356   222,657





















Total 647,99 164,158 175 229,132

*In order to receive incentive payments, providers must attest to their meaningful use of EHR technology. Source: Office of the National Coordinator, Health IT (data through April 2, 2013)

  • EHR incentive payments through March 2013:
  Amount Paid   2011 Program Year Amount Paid   2012 Program Year Amount Paid   2013 Program Year Amount Paid Program-to-Date
Medicare Eligible Professionals $980,523,294 $2,203,572,000 $ - $3,184,095,294
Medicaid Eligible Professionals $1,056,158,151 $796,630,057 $16,374,549 $1,869,162,757
Eligible Hospitals $3,150,312,337 $5,043,542,140 $273,853,204 $8,467,707,681
Medicare Advantage Organizations For Eligible Professionals $189,436,486 $ - $ - $189,436,486
Total $5,376,430,269 $8,043,744,197 $290,227,753 $13,710,402,219

Source: EHR Incentive Program, “March 2013: EHR Incentive Program,” March 2013

  •  The April jobs report: hourly wages up 4 cents to $23.87—annualized increase of 2 percent; adjusting for inflation, workers earning $49,650 at the end of 2009 is making $545 less. (Source: Bureau of Labor Statistics)
  • Teen suicide: third leading cause of death among teens. (Source: CDC)
  • Observation stays in hospitals: Medicare utilization increased 69 percent in 5 years, to 1.6 million in 2011 Medicare requires that enrollees expected to be in the hospital for two days or fewer to be admitted as “observation stays” and admitted if 3-plus days anticipated. (Source: Kaiser Health News, “Medicare Seeks to Limit Number of Seniors Placed in Hospital Observation Care,” May 3, 2013)
  • Gun-related injuries (2010): 31,076 Americans die in homicides, suicides and unintentional shootings per year; 73,505 Americans with non-fatal gunshot wounds were treated in hospitals in 2010 (Source: Law Center to Prevent Gun Violence, “Statistics on Gun Deaths & Injuries,” November 16, 2012)
  • Federal exchange funding to date: as of March 31, CMS has close to $394 million on the federal exchange and data hub—$284 million in 2012. In the President’s FY2014 budget, $1.5 billion is requested and the federal government will receive $450 million in user fees. (Source: 113 page response to confirmation questions in the Senate Finance Committee submitted by Acting CMS Administrator Marilyn Tavenner submitted April 23)
  • Per capita health cost trends: From 2000 to 2010, in 2010 dollars, growth in per capita GDP was $2,613 while growth in per capita health costs was $2,275. (Source: CMS Office of the Actuary)
  • Millennials’ debt: two thirds of Millennials (ages 18-34) have excess cash at the end of the month, and 18 percent use it to pay down debt. Fifty-percent have credit card debt averaging $5,448, followed by student loan debt (49 percent with average loan of $37,100), car loans (34 percent) and mortgage debt (33 percent). Forty-one percent save for vacations primarily vs. 31 percent who save for retirement. (Source: Lab42 Survey of 500 Millennials, ING Retirement Research Institute)
  • Social Security Chained CPI impact: workers will receive 3.7 percent less if they retire at 65 today using chained CPI  vs. traditional;  6.5 percent less after 20 years, 9.2 percent less after 30 years; for seniors with incomes in lowest quintile-$12,5000—Social Security is 84 percent of household income vs. 17 percent of income for those in highest quintile— above $57,960. (Source: Social Security Administration and New York Times, “Budget Negotiating Chip Has Big Downside for Old and Poor,” April 19, 2013)
  • School physical education: 31 percent of high school students have a physical education class daily vs. 42 percent in 1991. (Source: CDC)

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