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Deloitte Center for Health Solutions
April 22, 2013
Monday memo
Health reform update
This week’s headlines: My take
Implementation update - Study: 25.7 million eligible for Affordable Care Act insurance subsidies - ACA Prevention and Public Health Fund targeted to support HIX enrollment - Analysis: 3.1 million newly covered under ACA adult-dependent mandate,
0.2% cost increase for employers - CMS issued a notice on Early Retiree Reinsurance Program - Major ACA provisions impacting acute hospitals
Legislative update
- Senators propose national drug tracking program - BPC proposes plan for $560 billion health spending cost-containment - Final mental health parity regulations to be released in 2013 - GOP senators challenge health IT implementation efforts - Health IT workgroup to recommend innovation and regulatory efficiency
improvements - Highlights: new health care legislation introduced last week
State update
- State round-up: HIX
- Medicaid expansion update
Industry news - Diagnostics and therapeutics - Health plans and coverage - Delivery system (hospitals, post-acute, physicians, ancillaries, retail health) - Public health and disease surveillance
Research file
- Costs or profitability of hospital complications vary by payer
- Outcomes improve when physicians understand patient perspective
- Tests ordered in hospitals less when costs known to clinician
Quotable
Fact file
Subscribe to the Health Care Reform Memo
Deloitte Center for Health Solutions research
Read the blog
Upcoming life sciences and health care Dbriefs webcasts
Deloitte contacts
My take
From Paul Keckley, Executive Director, Deloitte Center for Health Solutions
Last Monday, the Boston marathon was rattled at 2:50pm by two explosions 12 seconds
apart that sent approximately 170 people to ten area hospitals, killed three, and caused
several people to lose limbs.
Wednesday at 7:50pm in West, Texas, a tiny town was rocked by a fertilizer plant
explosion that sent 200 to six area hospitals killing 14, mostly first responders.
I had intended to focus my comments this week on last week’s Supreme Court arguments
about ownership of genes. That can wait, though incredibly important to our developing
journey toward personalized medicine.
There are 4,973 community hospitals in the U.S: 1,984 are rural, and 3,007 are affiliated
with a multi-hospital system, either investor owned, private or otherwise.1
Unlike any other sector in the health system, the majority of hospitals are required to treat
patients without regard to their ability to pay. It’s fundamental to understanding this sector,
and why Moody’s, among others, has issued five consecutive negative outlooks for not-
for-profit hospitals, noting the combination of sequestration and declining reimbursement
will result in an $11 billion cut to the industry in 2013.
“Hospital” traces its origin to the Latin word “hospes” meaning “stranger, foreigner, or
guest”. It shares the same root with “host, hotel, hospice, hospitality” –an irony in that
most are not inclined to think of themselves as “guests” in today’s hospitals.
They’ve been around since the Middle Ages, first appearing in the Americas in Santo
Domingo (1503), then Mexico (1639), and William Penn’s hospital in Philadelphia (1713).
In those days, and for the next 100 years in the U.S., the hospital was a dispensary, often
associated with care for the poor (almshouses) for those unable to afford care at home.
Today, hospitals are a big business in the U.S.: more than $800 billion of the U.S. $2.7
trillion health spend is in hospitals.2 The acute sector is, by far, the industry’s most capital
intense, labor intense, and regulated, further complicated by fast-changing clinical
innovations requiring new approaches to diagnosis and treatment, and the shift away from
fee-for-service (FFS) to value-based incentives requiring risk sharing with physicians,
post-acute, and ancillary business partners. And utilization rates are soaring as numbers
of seniors grow, especially in areas where utilization rates are highest (Louisiana, West
Virginia and others), forcing investments in added capacity.3
The combination of higher operating costs, lower reimbursement from Medicare and
Medicaid, increased numbers of older, sicker patients, and increased state and federal
regulation is a perfect storm: nonetheless, it’s the sector in health care that’s expected, in
spite of these, to be ready for anything…like West, Texas and Boston!
There’s no doubt hospitals need to become more efficient, operating at Medicare rates or
better. And there’s no question transparency about pricing, outcomes and safety need
attention. In all likelihood, one in four will not survive the sector’s shakeout, and business
pressures will mount.
But last week, the unsung heroes were the doctors, nurses, administrators, emergency
services professionals, fire rescue, clerks, patient transport, grief counselors, home aides,
social workers, clergy, pharmacists, IT staff, and teams of caregivers who stopped
everything to take care of their almost 400 unexpected guests. And no one was denied
care based on income, or color, nation of origin, or circumstance.
Sources:
1American Hospital Association, Fast Facts on U.S. Hospitals, 2011
2“U.S. Not-for-Profit Healthcare Outlook Remains Negative for 2013," Moody’s Investor Services
3The Dartmouth Atlas of Health Care, “Inpatient Days per Medicare Enrollees, by Gender and Type
of Admission,” 2013
return to top
Implementation update
Study: 25.7 million eligible for Affordable Care Act insurance subsidies Per a Families USA report released last week, 25,722,200 people who have incomes
between 0% and 400% of the federal poverty level (FPL) will be eligible for a premium tax
credit to lower the cost of health insurance coverage purchased on a public health
insurance exchange (HIX) beginning in 2014. Forty-four percent of individuals between
0% and 199% will be eligible for premium tax credits and 56% of individuals between
200% and 399% FPL. Note: premium tax credits are projected to cost $350 billion 2014-
2019 per the U.S. Congressional Budget Office.
(Source: Families USA, “Help is at Hand: New health insurance tax credits for
Americans,” April 2013).
return to top
ACA Prevention and Public Health Fund targeted to support HIX enrollment
and PCIPs According to Congressional Quarterly, the U.S. Department of Health and Human
Services (HHS) may transfer $454 million from the Prevention and Public Health Fund to
help support HIX enrollment efforts scheduled to start in October 2013. This will directly
impact the U.S. Centers for Disease Control and Prevention (CDC) and the Substance
Abuse and Mental Health Services Administration fiscal year (FY) 2013 prevention and
public health programs. HHS will use its “transfer authority” to make these changes to the
FY 2013 budget.
Related: last week, Joseph Pitts (R-PA) introduced H.R. 1549 that would transfer $4
billion from the Prevention and Public Health Fund to the Pre-existing Conditions
Insurance Plans (PCIP) to help ensure its solvency and allow the program to re-open
enrollment through January 2014. Federally-run and state-based PCIPs suspended
enrollment earlier this year citing high costs associated with the program. A vote is
scheduled in the House this Wednesday.
Background: the Prevention and Public Health Fund was allocated $1 billion per Section
4001 of the Affordable Care Act (ACA). The Fund was subject to sequestration,
decreasing amount to $949 million. PCIPs were enacted by Section 1001 of the ACA as a
temporary high-risk insurance program scheduled to run through January 2014, after
which health insurance market reforms preventing discrimination on the basis of pre-
existing conditions will go into effect. $5 billion was allocated to PCIP per the ACA in
2010. Over 100,000 individuals are currently enrolled in PCIPs.
return to top
Analysis: 3.1 million newly covered under ACA adult-dependent mandate,
0.2% cost increase for employers
The ACA (Section 1001) requires employers to extend insurance coverage for eligible
dependents of employees up to the age of 26. The Employee Benefit Research Institute
report found:
3.1 million gained insurance coverage as a result of the provision
31% of employers enrolled adult dependent children with larger employers being
more likely to do so when compared to smaller employers
Health care spending increased by $2 million (0.2%) for large employers
Average spending among the young adult dependents was $2,866 (15%) higher
than in the comparison group
Young adult dependents were more inclined to pursue care related to mental
health, substance abuse and pregnancy; they also preferred retail pharmacies
versus mail-order; there was no significant difference in prescriptions by
therapeutic class
(Source: Employee Benefit Research Institute, “Mental Health, Substance Abuse, and
Pregnancy: Health Spending Following the PPACA Adult-Dependent Mandate,” April
2013)
return to top
CMS issued a notice on Early Retiree Reinsurance Program Last week, CMS issued a notice about the termination dates for the Early Retiree
Reinsurance Program (ERRP). Per Section 1102 of the ACA, the ERRP was enacted
June 21, 2010 to subsidize the cost for employers providing early retirees and their
dependents health care insurance coverage until January 1, 2014.
Background: $5 billion was allocated to ERRP per the ACA; sponsors are reimbursed for
claims between $15,000 and $90,000. As of February 2012, 19.1 million individuals were
enrolled in ERRP.
return to top
Major ACA provisions impacting acute hospitals Section Provision Implementation status
Additional requirements for
charitable hospitals
(Section 9007)
Establishes new requirements
including periodic community needs
assessments and financial
assistance policies -- $50,000 per year penalty for failure to meet
requirements.
Requirement is applied to taxable
year in March 2012
CMS issued a final rule in May
2012
Payment adjustment for health care- acquired
conditions
(Section 1201)
Prohibits Medicaid reimbursement for certain hospital-acquired
infections
Program was applied to payments for discharge occurring after
October 2012
Counting resident time in
non-provider settings
(Section 5504)
Modifies when hospitals can
receive indirect medical education
(IME) and direct graduate medical
education (DGME) funding for
residents who train in non-provider
settings.
Implemented July 2011
August 2012, CMS issued a final
rule determining a hospital’s full-
time equivalent resident cap for the
purpose of DGME and IME
payments
Accountable Care
Organizations (ACOs)
(Section 3022 and 3021)
Rewards Medicare ACOs that
improve quality of care while
containing costs.
Medicare Shared Savings Program:
One-sided risk model: sharing beginning at savings of 2%
Two-Sided Risk Model: sharing
from first dollar
Pioneer Model: tests a shared
savings and shared losses payment
arrangement with higher levels of
reward and risk than in the Shared
Savings Program
Established January 2012
CMS defined 33 core quality
measures based on five domains:
the patient/caregiver experience,
care coordination/patient safety, preventive health measures, and
the delivery of services to at-risk
populations
Over 250 ACOs participating in the
Medicare Shared Savings Program
serving 4 million beneficiaries: 32
Pioneer ACOs serving 860,000
beneficiaries
Hospital readmissions
reduction program
(Section 3025)
Adjusts payments for hospitals paid
under the inpatient prospective
payment system, based on the
dollar value of the hospital’s
percentage of potentially preventable conditions
Implemented FY2012
August 2012, CMS published a final
rule on the methodology: the
readmissions adjustment factor for
FY 2013 is the higher of the ratio (payments for excess
readmissions/payments for all
discharges) or a 1% reduction
As of December 2012, 2,217
hospitals were penalized; of those
hospitals, 307 will receive the
maximum penalty of a 1% reduction
in Medicare’s regular payments
Temporary improvements
to the Medicare inpatient
hospital payment
adjustment for low-volume
hospitals
(Section 3125)
Expands the program providing an
adjustment to inpatient hospital
payments for certain low volume
hospitals
Expanded the program for certain
hospitals through FY 2012
Protection for frontier
States
(Section 10324)
Established hospital wage index
and geographic practice expense floors for hospitals in frontier states
Implemented FY2011
Revision of certain market
basket updates and incorporation of
productivity improvements
into market basket updates
(Section 3401)
Incorporates a productivity
adjustment into the market basket update for hospitals and
implements additional market
basket reductions for certain
providers
Implemented for inpatient hospitals,
rehabilitation facilities, psychiatric hospitals and outpatient hospitals in
2012 and 2013
Implemented for long- term
hospitals in 2011, 2012 and
2013;home health providers in
2013,hospice providers in 2013
through 2019
Extension of the Medicare-
dependent hospital (MDH)
program
(Section 3124)
Extends the MDH hospital program
by ones year
Extended the program by one year
through October 2012
Hospital value- based
purchasing program
(Section 3001)
Establishes a Medicare hospital
value-based purchasing program;
hospitals reimbursed on set of core
quality measures; maximum
amount +/- 1% in Medicare payments.
.
CMS issued a final rule on the
value based incentive payments in
June 2011
Implemented FY2013; payments
are based on processes of care (70% on 12 measures ex: heart
failure patients given discharge
instructions and patient experience
(30%)
The maximum amount a hospital
could gain or lose was 1 percent of
its regular Medicare payments.
Penalty increases to +/- 2% in October 2013
As of December 2012 1,557 were
rewarded and 1,427 others saw a
reduction in payment
National pilot program on
payment bundling
(Section 3023)
Develops a national voluntary
program encouraging hospitals,
doctors and post-acute care
providers to improve patient care
and achieve Medicare program
savings
The Secretary of HHS released a
national pilot program in January
2013
Implemented 2013 through 2016
By January 2016, the Secretary of
HHS must submit a plan to
Congress to expand the pilot
program if doing so will improve
patient care and reduce spending
Transparency reports and
reporting of physician
ownership or investment interest
(Section 6002)
Requires drug, device, biological
and medical supply manufactures
to report transfers of value made to a physician, medical practice, and
hospital
Effective April 9, 2013
Organizations must begin to collect
required data on August 1, 2013
Drug, device, biological and medical
supply manufactures that provide
payment to hospitals must disclose
any relevant material to the
Secretary of HHS on March 31,
2014 and every subsequent year
following
Limitation on Medicare
exception to the prohibition
on certain physician
referrals for hospitals
(Section 6001)
Prohibits physician-owned hospitals
that do not have a provider
agreement prior to December 31,
2010.
Effective December 2010
Disproportionate share
hospital (DSH) payments
(Section 2551)
Reduces payments based on the
percent of the population uninsured
and the amount of uncompensated
care provided
Medicaid DSH payments reduced
quarterly beginning in FY 2014
President Obama recommended in
his FY 2014 budget proposal to delay payment reductions until
2015.
Payment adjustment for
conditions acquired in hospitals
(Section 3008)
Penalties for hospital inquired
infections – Medicare reimbursement reduced by 1%
Begins FY2015 for hospitals in the
top 25th percentile of rates of
hospital acquired conditions
January 2012, the Secretary of HHS
submitted a report to Congress on
the appropriateness of establishing
a health care acquitted condition
policy
return to top
Legislative update
Senators propose national drug tracking program Friday, Senators Tom Harkin (D-IA), Lamar Alexander (R-TN), the leaders of the Health,
Education, Labor and Pensions (HELP) Committee, and Senators Michael Bennett (D-
CO) and Richard Burr (R-NC) released proposed legislation “that would set up a tracking
system that requires manufacturers, wholesale distributors, and others in the drug supply
chain to supply transaction information when there is a change in ownership and require
the [U.S. Food and Drug Administration (FDA)] to keep a public database of wholesale
distributors.”
(Source: Politico Pro, “Key Senators outline drug tracking plan,” April 19, 2013).
return to top
BPC proposes plan for $560 billion health spending cost-containment Thursday, the Bipartisan Policy Center (BPC) released its plan to save $560 billion in
health care spending through 2022, including $300 billion from Medicare and a
sustainable growth rate (SGR) fix that would freeze physician FFS payments for ten
years.
Key recommendations in the plan:
Improve and enhance Medicare to incent quality and care coordination including
limitations on MediGap coverage, creation of a Medicare Network program
(improved ACO framework), expansion of the bundled payment and durable
medical equipment competitive bidding programs, reduction of waste and fraud in
traditional Medicare FFS, and reductions and repurposing of indirect medical education payments. Note: BPC recommends an annual per capita cap on
Medicare payments at gross domestic product (GDP) plus 0.5% beginning in
2020 and by 2016 a structure applicable to 17% of enrollees whose premiums
would be tied directly to their income.
Reform tax policy and clarify consolidation rules to encourage greater efficiency
and competition by placing a limit on the employer tax exemption (replacing the
“Cadillac” tax), elimination of the fully insured health plan tax with a paid claims
tax, and regulatory changes that encourage development of integrated delivery
systems by reducing federal anti-trust barriers.
Prioritize quality, prevention, and wellness including improvements to the quality
reporting system.
Incentivize and empower states to improve care and constrain costs through
delivery, payment, workforce, and liability reform.
(Source: BPC, “A Bipartisan Rx for Patient-Centered Care and System-Wide Cost
Containment”, April 2013)
My take: the BPC’s recommendations are a bold move toward structural reforms of
Medicare. Missing are similarly bold recommendations about Medicaid, the role of
consumers in becoming more accountable for their own health and health costs, and
provider adherence to evidence-based practices that account for 20% of avoidable costs
per the Institute of Medicine (IOM) and Dartmouth Atlas. Policymakers are keen to reform
Medicare—that’s understandable and appropriate, but the rest of health care market and
its financial pressures require consideration beyond changes to structural changes to
employer-sponsored coverage.
return to top
Final mental health parity regulations to be released in 2013 Last week in testimony before the U.S. House Energy and Commerce health
subcommittee, HHS Secretary Sebelius said the final mental health parity regulations
would be released before the end of 2013.
Background: Mental Health Parity and Addiction Equity Act of 2008 requires medical and
mental health benefits to be provided at parity―requiring insurance plans to cover
physical and mental health benefits at the same level. To date, HHS has not issued a final
regulation, but has issued interim guidance to support implementation.
return to top
GOP senators challenge health IT implementation efforts Last week, GOP senators released a 27-page white paper citing concerns with the
Administration’s implementation of health information technologies (IT) stating “while
promoting the use of health IT is a laudable goal, a growing body of objective analysis and
empirical data suggests the program needs to be recalibrated to be effective. Congress
and the administration need to work together to ‘reboot’ the program to accomplish the
aims of meaningful use and interoperability and ensure appropriate stewardship of
taxpayer dollars in the process.” Key areas of concern noted in the paper:
No clear guidelines toward interoperability
Health IT increasing health care costs and not helping to control costs
No program oversight
Patient privacy and security risks
Concerns about cost in the long run, specifically federally incentivized health care
technology
return to top
Health IT workgroup to recommend innovation and regulatory efficiency
improvements Last week, HHS and the Federal Communications Commission (FCC) announced their
appointees to a new workgroup that will focus on innovation in health IT, including mobile
medical applications. The workgroup’s first meeting is April 29 and its recommendations
to the Health IT Policy Committee, which advises the Office of the National Coordinator for Health IT (ONC), are expected this summer.
return to top
Highlights: new health care legislation introduced last week:
Senator Charles Schumer (D-NY) introduced legislation (S.728) to extend
employer-sponsored health insurance tax benefits applicable to employees’
spouses and dependents to other eligible beneficiaries of employees.
Senator Tom Coburn (R-OK) introduced a resolution (S. Res 97) stating that the
FDA should encourage the use of abuse-deterrent formulations of drugs.
Representative Bill Huizenga (R-MI) introduced H.R. 1552 to allow the transfer of
required minimum distributions from a retirement plan to a health savings
account.
Representative Chris Collins (R-NY) introduced H.R. 1558 to lower health
premiums and increase choice for small businesses.
Representative Henry Waxman (D-CA) introduced H.R. 1588 to require drug
manufacturers to provide drug rebates for drugs dispensed to low-income
individuals under the Medicare prescription drug benefit program.
Senator Jay Rockefeller (D-WV) introduced the Medicare Drugs Savings Act (S
740).
Senator Barbara Boxer (D-CA) introduced S. 739 to establish direct care
registered nurse-to-patient staffing ratio requirements in hospitals.
Senator Kirsten Gillibrand (D-NY) introduced S.723 to revise the medical and
evaluation criteria for determining disability in a person diagnosed with
Huntington's disease and to waive the 24-month waiting period for Medicare
eligibility for individuals disabled by the disease.
return to top
State update
State round-up: HIX Seventeen states—13 led by Democratic Governors, three 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
CA, CO, CT, DC, HI, ID, KY, MA,
MD, MN, NM, NV, NY, OR, RI,
UT, VT, WA
AR, DE, IA, IL, NH, MI, WV AK, AL, AZ, FL, GA, IN, LA, KS,
ME, MO, MS, MT, NC, ND, NE,
NJ, OH, OK, PA, SC, SD, TN, TX,
VA, WI, WY
■ Democratic governor ■ Republican governor ■ Independent governor
Source: HHS
Recent HIX announcements:
To date, CMS has spent $393.7 million on federally-facilitated exchange
establishment and the federal data services hub. In FY 2010: $4.2 million; FY 2011:
$112.7 million; FY 2012: $248.4 million; and FY 2013: $28.4 million.
Maryland will delay the Small Business Health Options Program (SHOP) – the small
group market for small employers on the HIX – open enrollment from October 1,
2013 to January 1, 2014.
return to top
Medicaid expansion update Medicaid expansion is projected to cost the federal government $952 billion between
2013 and 2022 and states $76 billion. (Source: JAMA, “Medicaid expansion under the
Affordable Care Act,” March 27, 2012). To date, 26 states and D.C. have said they will or
are in support of expanding their Medicaid programs; 17 states have indicated they are
highly unlikely to expand their programs:
Announced expansion or
likely to expand
Not participating or unlikely to
participate
Undecided or undeclared
AR, AZ, CA, CO, CT, DE,
DC, HI, IL, MD, MA, MI, MN,
MO, MT, NY, NM, ND,NJ,
NV, OH, OR, RI, TN, VT, WA
AL, FL, GA, ID, IN, IA, LA,
ME, MS, NE, NC, OK, SC,
TX, UT, VA, WI
AK, KS, KY, PA, NH, SD, WV,
WY
■ Democratic governor ■ Republican governor ■ Independent governor
Source: 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 April 21, 2013) and is subject to change.
Recent Medicaid announcements:
A Florida House panel approved a Medicaid expansion plan that would cost $237
million annually to provide health insurance coverage to 115,700 low-income
residents. Parents, caretakers, and disabled adults below 100% of FPL would
receive $2,000 per year to purchase health insurance coverage and would be
required to pay a $25 per month deductible.
A Louisiana House bill (532) that would allow hospitals to deposit money into a
"stabilization fund" to increase the state’s federal Medicaid matching funds without
using tax dollars advanced last week. The fund is expected to provide $170 million
in additional Medicaid dollars for participating hospitals. The bill will need a two-
thirds vote by the legislature, followed by a majority during the general election on
November 4, 2014 before it can be enacted. Thirty-nine other states have similar
funding programs.
Legislators in Arkansas have approved the Medicaid expansion alternative plan,
which intends to utilize federal funding to purchase private insurance for low-income
residents. Governor Mike Beebe (D-AR) and Republicans who are in control of the
Legislature provided support for the plans. Final approval will need to be obtained
from the White House in order to move forward. If the plan is approved, Arkansas
would be given the funds for Medicaid expansion; the state would use the money to
purchase private insurance for 250,000 low-income residents earning less than
$15,415 per year.
Last week, legislation was introduced in the Nebraska legislature to expand
Medicaid. The proposed legislation includes a sunset provision that would allow
lawmakers to reevaluate expansion when the federal match decreases to 90% --
this amendment was approved (30-12). It’s still unclear as to whether the state will
expand.
return to top
Industry news
Diagnostics and therapeutics:
FDA to take closer look at compounders In a hearing before the U.S. House Energy and Commerce Committee last
Tuesday, FDA Commissioner Margaret Hamburg said the agency had been
constrained in its oversight of compounding pharmacies fearing litigation and asked
for stronger legal authority to intensify its efforts. She testified there are 28,000
compounders in the U.S. including 3,000 that produce injectables—the source of
the tainted injections that killed 50 people and infected 680 with spinal meningitis.
return to top
Health plans and coverage:
OIG: pre-paying Part D drug plans costs Medicare $111 million
annually Last week, the HHS Office of Inspector General (OIG) released a report analyzing
52 Medicare Part D plans and 706 Medicare Advantage (MA) plans in calendar year
2009. Key findings:
Medicare loses $111 million a year by pre-paying Part D and MA health plans and
could have saved an $5.3 million by requiring Part D plans to reduce their revenue
requirements in their bid proposals to account for anticipated investment income
that the plans earned over the same 20 days.
OIG recommendations: CMS should pursue legislation to adjust the timing of
Medicare’s prepayments to Part D plans to account for the time that these plans
invest Medicare funds before paying pharmacy claims, or adopt regulations
requiring Part D plans to reduce their revenue requirements in their bid proposals to
consider anticipated investment income.
Background: under the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, CMS makes advance capitated payments
(prepayments) to Part D plans for each enrollee at the beginning of each month.
Part D plans may invest these Medicare funds in interest-accumulating ways until
the funds are needed to pay for drug costs and administrative services. Currently,
no law prohibits the plans from keeping the additional revenue from the interest
earned on Federal funds. Part D plans are required to submit bid proposals annually
containing their anticipated revenue requirements for providing drug coverage under
each of their plans for the upcoming year.
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Delivery system (hospitals, post-acute, physicians, ancillaries, retail health):
Hospital groups to discuss coding using EHRs with ONC On May 3, CMS and the ONC for Health Information Technology will hold a meeting
with the American Hospital Association, National Association of Public Hospitals
and Health Systems, Federation of American Hospitals, and the American Medical
Association to discuss appropriate coding when using electronic health records
(EHRs).
Background: in September 2012, HHS Secretary Kathleen Sebelius and U.S.
Attorney General Eric Holder issued a letter to major hospital associations, calling
attention to the use of electronic systems to duplicate records in order to increase
payments. The letter warned that early reports have indicated that providers may be
committing fraud by “upcoding” the severity of patients’ conditions for their own
profit.
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Study: health status in assisted living population A new report from the National Center for Health Statistics found 733,000 people
currently reside in assisted living facilities. 82% of these have one or more of three
conditions: dementia, heart disease or elevated blood pressure, and 9% have all
three.
(Source: The New York Times, “For the Elderly, Diseases that Overlap,” April 15,
2013)
return to top
Physician-owned hospitals performing well under ACA quality
programs 122 of 161 (76%) physician-owned hospitals are receiving Medicare reimbursement
bonuses, while 74% of non-physician-owned hospitals are paying fines due to
quality requirements established by the ACA (e.g., the value based purchasing
program). Physician-owned hospitals will receive 0.21% more per Medicare patient
through September 2013; non-physician-owned hospitals will lose 0.3% per
Medicare patient on average. Furthermore, 90% of the hospitals receiving the
largest bonuses are physician-owned. Note: Section 6001 of the ACA prohibits new
physician owned hospitals from being constructed or expanded unless extenuating
circumstances apply.
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HITRUST outlines priorities in fight against cyber threats The HITRUST Cybersecurity Working Group security alliance released a five page
proposed guidance outlining the 50 highest cyber security priorities for protecting
the health care industry from cyber-attacks. Top priorities include: access control
policies, cryptography, isolating sensitive material, and developing a reporting
system for breaches.
Background: HITRUST’s Cybersecurity Working Group was established after an
Executive Order issued by President Obama in February 2013 outlined a framework
to increase national efforts fighting cyber threats. Public comments will be accepted
until May 15, and final guidelines will be discussed at the HITRUST annual meeting
on May 22.
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340B challenge issued to Georgia hospital Last Thursday, Senate Judiciary Ranking Member Chuck Grassley (R-IA) and
Representative Bill Cassidy (R-LA) asked Columbus Regional Healthcare System
for information about its use of the 340B federal discount prescription drug program.
The issue: are hospitals obtaining drugs under the discount program to reduce their
drug supply chain costs?
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@Regulatory update: preparing for 340B drug discount audits Note: @Regulatory is a feature in the Monday Memo, providing the latest
regulatory developments affecting life sciences and health care organizations. To
access the @Regulatory newsletter, visit the website here.
The 340B Drug Discount Program has experienced significant growth and
increased usage by both hospitals and contract pharmacies. Following the
Government Accountability Office’s (GAO) first report on 340B, issued in September
2011 and mandated by the ACA, the Health Resources and Services Administration
(HRSA) has taken a more active oversight role in determining program integrity.
This issue of @Regulatory presents important considerations and next steps for
compliance with 340B program requirements.
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Public health and disease surveillance:
CDC: contaminated food infections increasing The CDC concluded that bacterial infections from contaminated food increased 3%
in 2012 including 25% increase in Vibrio bacteria found in raw oysters and
undercooked shellfish. Forty-eight million people get sick from contaminated food annually.
(Source: The Wall Street Journal, “Food linked infections rose last year,” April 18,
2013)
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Pandemic detection In 1996, early detection took 167 days; in 2009, 23 days. (Source: CNN, “Ending
pandemics: how close are we?” April 2013)
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Research file
Costs or profitability of hospital complications vary by payer Citation: “Relationship Between Occurrence of Surgical Complications and Hospital
Finances” Sunil Eappen, MD; Bennett H. Lane, MS; Barry Rosenberg, MD, MBA; Stuart
A. Lipsitz, ScD; David Sadoff, BA; Dave Matheson, JD, MBA; William R. Berry, MD, MPA,
MPH; Mark Lester, MD, MBA; Atul A. Gawande, MD, MPH JAMA. 2013;309(15):1599-
1606. doi:10.1001/jama.2013.2773.
Objective: “to determine the relationship between major surgical complications and per-
encounter hospital costs and revenues by payer type.”
Methodology: “retrospective analysis of administrative data for all inpatient surgical
discharges during 2010 from Texas Health Resources (THR) (12-hospital system)
categorized by principal procedure and occurrence of one or more postsurgical complications, using International Classification of Diseases, Ninth Revision, diagnosis
and procedure codes. Nine common surgical procedures and ten major complications
across four payer types were analyzed. Hospital costs and revenue at discharge were
obtained from hospital accounting systems and classified by payer type. Hospital costs,
revenues, and contribution margin were compared for patients with and without surgical
complications according to payer type.”
Results: “of 34,256 surgical discharges, 1,820 patients experienced one or more
postsurgical complications. Compared with absence of complications, complications were
associated with a $39,017 higher contribution margin per patient with private insurance
($55,953 vs. $16,936) and a $1,749 higher contribution margin per patient with Medicare
($3,629 vs. $1,880). For this hospital system in which private insurers covered 40% of
patients (13,544), Medicare covered 45% (15,406), Medicaid covered 4% (1,336), and
self-payment covered 6% (2,202), occurrence of complications was associated with an
$8,084 higher contribution margin per patient ($15,726 vs. $7,642) and with a $7,435
lower per-patient total margin ($1,013 vs. −$6,422).”
My take: first, kudos to THR leaders for participating in this study. It’s exactly the right
thing to do for this industry. That the occurrence of postsurgical complications was
associated with a hospital contribution margin for Medicare and commercially insured and
lower for Medicaid and who self-paid is not a surprise… Depending on payer mix, many
hospitals have the potential for adverse near-term financial consequences for decreasing
postsurgical complications. And every hospital recovers higher reimbursement from
commercially insured patients to offset lower, below cost reimbursement from Medicaid
and the uninsured.
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Outcomes improve when physicians understand patient perspective Citation: “Patient-Centered Decision Making and Health Care Outcomes: An
Observational Study” Saul J. Weiner, MD; Alan Schwartz, PhD; Gunjan Sharma, PhD;
Amy Binns-Calvey, BA; Naomi Ashley, BA; Brendan Kelly, BA; Amit Dayal, MD; Sonal Patel, MD; Frances M. Weaver, PhD; and Ilene Harris, PhD Ann Intern Med. 16 April
2013;158(8):573-579
Objective: patient-centered decision making (PCDM) involves a clinician’s purposeful
capture of clinically relevant information about a patient’s circumstances as a basis for
formulating a contextually appropriate care plan. This study sought to measure whether
“encounters in which PCDM occurs are followed by improved health care outcomes
compared with encounters where there is inattention to patient context.”
Methodology: “774 patient encounters with 139 residents” in “internal medicine clinics
and two Veterans Affairs facilities” were recorded, then “medical records of these
encounters screened for “contextual red flags,” such as deteriorating self-management of
a chronic condition, that could reflect such underlying contextual factors as competing
responsibilities or loss of social support. When a contextual factor was identified, either as
a result of physician questioning or because a patient volunteered information, physicians
were scored on the basis of whether they adapted the care plan to it."
Results: “among 548 contextual red flags, 208 contextual factors were confirmed, either
when physicians probed or patients volunteered information. Physician attention to
contextual factors (both probing for them and addressing them in care plans) varied
according to the presenting contextual red flags. Outcome data were available for 157
contextual factors, of which PCDM was found to address 96. Of these, health care
outcomes improved in 68 (71%), compared with 28 (46%) of the 61 that were not
addressed by PCDM.”
Conclusion: attention to patient needs and circumstances when planning care is
associated with improved health care outcomes.
My take: physicians will say they lack the time to adequately listen to patients, but that’s
no excuse. Purposeful efforts by care teams, including physicians, to capture the most
salient dimensions of a person’s (not “patient”) circumstance using communication
techniques and online tools in advance or and after visits is necessary to more accuracy
in diagnosis, appropriateness in treatment plans, outcomes and safety. As individuals
become more directly responsible for their care and its costs, they will seek providers who
use these tools and techniques.
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Tests ordered in hospitals less when costs known to clinician Citation: “Impact of Providing Fee Data on Laboratory Test Ordering A Controlled Clinical
Trial”, Leonard S. Feldman, MD; Hasan M. Shihab, MBChB, MPH; David Thiemann, MD;
Hsin-Chieh Yeh, PhD; Margaret Ardolino, RN, MS; Steven Mandell, MS; Daniel J.
Brotman, MD; JAMA Intern Med. 2013;():1-6.
Objective: to determine whether making a clinician aware of the cost of a diagnostic test
before ordering might change ordering patterns.
Methodology: a controlled clinical trial using the “computerized provider order entry
system at The Johns Hopkins Hospital... 61 diagnostic laboratory tests were randomly
assigned to an “active” arm (fee displayed) or to a control arm (fee not displayed). Metrics
analyzed were changes in the total number of orders placed, the frequency of ordered
tests (per patient-day), and total charges associated with the orders according to the time
period (baseline vs. intervention period) and by study group (active test vs. control).”
Results: “rates of test ordering were reduced from 3.72 tests per patient-day in the
baseline period to 3.40 tests per patient-day in the intervention period (8.59% decrease).
For control arm tests, ordering increased from 1.15 to 1.22 tests per patient-day from the baseline period to the intervention period… Presenting fee data to providers at the time of
order entry resulted in a modest decrease in test ordering. Adoption of this intervention
may reduce the number of inappropriately ordered diagnostic tests.”
My take: to reduce costs without compromising outcomes and safety, it is necessary that
clinicians have access to information about costs that their patients will bear in following
recommended treatments. Heretofore, clinicians have been trained to think only of clinical
implications; they must now include costs in their professional role.
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Quotable “If the administration implements it correctly, millions more Americans will gain access to
health care next year as a result of the law…I am concerned that not every state,
including Montana, will have an insurance marketplace established in time. I want to hear
how the money requested in the budget would be used to ensure these marketplaces will be ready to go on day one.”—Senator Max Baucus (D-MT), Senate Finance Committee
Hearing, April 17, 2013
“WSJ Question: How much do doctors still rely on paper?
Jonathan Bush: It’s 2013 and the average doctor is getting 1100 faxes a month.”— “Updating Doctors’ Offices via Cloud Services” Wall Street Journal Interview with
Jonathan Bush, CEO, AthenaHealth April 17, 2013
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Fact file Medicare per capita inpatient utilization: 1.58 admissions per capita U.S.
average; 0.85 (Hawaii) to 2.07 (West Virginia)
(Source: The Dartmouth Atlas of Health Care, “Inpatient Days per Medicare
Enrollees, by Gender and Type of Admission,” 2013)
Medicare utilization: days per 1,000 enrollees: U.S. average: 315.9 days,
lowest: 135.4 (Hawaii) vs. highest 400.8 (Kentucky)
(Source: The Dartmouth Atlas of Health Care, “Inpatient Days per Medicare
Enrollees, by Gender and Type of Admission,” 2013)
Consumer views of hospitals by generation (Deloitte Center for Health
Solutions’ 2012 Survey of US Health Consumers)
Operating costs for community hospitals: 1980 2000 2011
Private insurance 41.8% 38.7% 34.6%
Medicare 34.6% 38.3% 39.3%
Medicaid 9.6% 12.8% 16.3%
Other government 6.1% 1.4% 1.8%
Uncompensated care 5.1% 6.0% 5.9%
Non patient care costs 2.7% 2.8% 2.1%
(Source: Avalere analysis for American Hospital Association Annual Survey data
2011, for community hospitals, Chart 4.5)
Leading Top 100 Hospital Report Cards Top 100 Hospital
Source
Methodology # of
Hospitals
Truven Health
Analytics
Note: Solucient
used to put out
the 100 top
hospitals list –
this is now done by Truven,
formerly the
Healthcare
Business of
Thompson
Reuters
Utilizes the 100 Top Hospitals National Balanced Scorecard:
consists of 10 measures, distributed across four domains — quality, efficiency, finance, and consumer assessment of
care — and uses only publicly available data
Hospitals are measured against peers of similar size and
teaching status
A database of short-term, acute-care, nonfederal U.S. hospitals that treat a broad spectrum of patients. The
primary data sources are the Medicare Provider Analysis
and Review (MedPAR) dataset and the Medicare Cost
Report. We use the five most recent years of data available
— for this year’s studies, federal fiscal years 2006–2010.
Database
study group
of nearly
3,000
hospitals
U.S. News Best
Hospitals U.S News ranks the top hospitals in 16 different specialties
from Cancer to Urology. For 12 of the 16 specialties, the
rankings are based on an extensive analysis that combines
measures of performance in three primary dimensions of
health care: structure, process, and outcomes. Rankings in
the other four specialties are based on hospital reputation as
determined by a physician survey
All community hospitals included in the AHA universe are automatically considered for ranking
Outcomes performance relies mostly on survival, i.e. risk-adjusted mortality. These data come from the Medicare
Provider Analysis and Review (MedPAR) database
maintained by CMS
To be eligible initially, hospitals must meet at least one of
the following requirements: to be a teaching hospital, to be affiliated with a medical school, to have at least 200 beds, or
to have at least 100 beds plus four or more of eight key
medical technologies
4,793
hospitals
that ranked
in at least
one of 16
specialties
Becker's Hospital
Review
To develop this list, the Becker's Hospital Review editorial
team accepted nominations, conducted research and
considered other reputable hospital ranking sources such as U.S. News & World Report, Thomson Reuters 100 Top
Hospitals, HealthGrades, Magnet Recognition by the
American Nurses Credentialing Center and Malcolm
Baldrige National Quality Award recipients
Not listed
HealthGrades Using 12 years of Medicare data and 150 million patient
hospitalization records, for 26 different diagnoses and
procedures, HealthGrades has identified America’s 50 and 100 Best Hospitals based on their consistent clinical
1,478
outcomes over time.
Quality measures were based on risk‐adjusted mortality and inhospital complications across 26 of the most common
diagnoses and procedures in the Medicare population
America’s 50 and 100 Best Hospitals are located in 88 cities in 25 states. The majority of America’s 50 and 100 Best
Hospitals are non‐profit (87%), 7% are for profit, and 6% are
government owned. America’s 50 and 100 Best Hospitals
range from 100 beds to more than 500, with 45% having less than 350 beds and 55% having more than 350 beds.
Uncompensated care: increased by 82% ($21.6 to $39.3 billion) from 2000 to
2010. (Source: AHA, “Prepared to care “Annual Survey, 1990-2010 data for
community hospitals)
Emergency room visits: 43% urgent (should be seen in 15-20 minutes); 32%
semi-urgent (should be seen in 61-120 minutes); 10% emergent (should be seen
less than 15 minutes); 7% non-urgent (should be seen in 121 minutes to 24 hours); 5.6% no triage/unknown; 1% immediate. (Source: The Centers for Disease Control
and Prevention, “National Hospital Ambulatory Medicare Care Survey: 2010
Emergency Department Summary”)
Teaching hospitals: admissions increased 50% in twenty years (1990 to 2010);
doctors in training increased by 10% over the same time period. (Source: The New
York Times, “The impossible workload for doctors in training,” April 18, 2013)
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