Guest post Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
One of the Affordable Care Act’s overarching goals is to lower cost, and one way it intended to accomplish this was by providing Medicaid coverage to more low-income adults, giving them greater access to and ability to pay for sources of care outside the emergency department (ED), resulting, in theory, in reduced ED use.
ED use is a significant driver of cost, accounting for 5 percent to 6 percent of U.S. health expenditures. Medicaid alone spends $23 billion to $47 billion each year on ED care.
There have been a number of different studies on the impact of providing Medicaid coverage to previously uninsured adults.
Some high-level research suggests that Medicaid coverage does not affect ED use. Pines, et al. analyzed ED use in 36 states—some of which were Medicaid expansion states and some were nonexpansion—for 2014, the first year of expanded Medicaid eligibility. The researchers concluded that there were no significant differences in overall ED use between expansion and nonexpansion states, though Medicaid-paid ED visits rose by 27.1 percent in the expansion states, while uninsured visits dropped by 31.4 percent and privately insured visits fell by 6.7 percent.
Most importantly, the researchers admitted, “…we do not know which visits were by patients who obtained new health insurance (Medicaid) in 2014, as opposed to those who were continuously enrolled, were uninsured, or may have switched insurance type” (Pines, et al., “Medicaid Expansion In 2014 Did Not Increase Emergency Department Use Bud Did Change Insurance Payer Mix,” Health Affairs, Aug. 2016).
In contrast, a randomized, controlled study by Finkelstein, et al. in involving 24,646 lottery-selected uninsured individuals in Oregon who were granted Medicaid coverage in 2008 showed that they increased their ED visits by 40 percent in the first 15 months after receiving coverage. Many observers speculated that the rise in ED use was due to pent-up demand and would therefore dissipate over time as the newly insured found and used other sites of care or as their health needs were met and their health improved. However, the researchers were unable to find any evidence that the increase in ED use due to Medicaid coverage is driven by pent-up demand that decreases over time; in fact, they found that the effect on ED use appears to persist over the first two years of coverage.
In addition, the study determined that Medicaid coverage increased the joint probability of a person’s having both an ED visit and an office visit by 13.2 percentage points, indicating that expanded coverage will not necessarily drive material substitution of office visits for ED use (Finkelstein, et al., “Effect of Medicaid Coverage on ED Use—Further Evidence from Oregon’s Experiment,” New England Journal of Medicine, Oct. 20, 2016).
As the randomized, controlled trial is the gold standard of research, Oregon’s study and its conclusions get the nod in the debate about the impact of Medicaid coverage on ED use.
Guest post Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
On October 14, the Centers for Medicare & Medicaid Services (CMS) released a 2,171-page final rule for the implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). CMS had issued a proposed rule on April 27 and in the intervening period, more than 100,000 physicians and other stakeholders attended outreach sessions and CMS received more than 4,000 public comments on the proposed rule, with many of the expressed concerns pertaining to the start date for MACRA’s first performance period.
MACRA’s Quality Payment Program replaces the unpopular sustainable growth rate formula and defines how physicians in physician practices—not hospitals—will be reimbursed by Medicare. It features two alternative, interrelated pathways: the Merit-based Incentive Payment System (MIPS) and advanced alternative payment models (APMs). MIPS is designed for providers in traditional fee-for-service Medicare, while the advanced APMs are for providers who are participating in specific value-based care models, such as accountable care organizations (ACOs).
Small physician practices with less than $30,000 in Medicare charges or that see fewer than 100 Medicare patients per year are exempt from MIPS. According to an analysis by the American Medical Association, 30 percent of physicians are below one or both of these thresholds. In addition, providers new to Medicare in 2017 are also exempt (though just for the first year).
The proposed rule specified Jan. 1, 2017, as the start date for the first performance period under MIPS, which would drive calendar year 2019 payment based on performance in 2017 across the four MIPS categories: Quality, Advancing Care Information, Clinical Practice Improvement Activities, and Cost/Resource Use. The final rule allows providers to start collecting performance data anytime between Jan. 1 and Oct. 2, 2017, with data due to CMS by Mar. 31, 2018.
Under MIPS, physicians can earn in 2019 a payment adjustment that is neutral, up to 4 percent positive, or up to 4 percent negative, depending on their level of participation, the amount of data submitted, and the length of the performance period reported. The adjustment increases to plus or minus 5 percent in 2020, plus or minus 7 percent in 2021, and plus or minus 9 percent in 2022. CMS projects that 592,000 to 642,000 clinicians will submit data for MIPS during the first performance year.
Guest post Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
A recent poll conducted by Monmouth University concluded that “fully 70 percent of American voters say that this year’s presidential campaign has brought out the worst in people.”
Undoubtedly and sadly, in this era in which fact-checking of candidate statements is essential, a majority of Americans believe that all politicians lie or at least that they lie often.
That prevailing sentiment is what made former President Bill Clinton’s candid riff about the Affordable Care Act at an Oct. 3 Democratic rally in Flint, Mich. so extraordinary. He stated, “…the current system works fine if you’re eligible for Medicaid, if you’re a lower-income working person, if you’re already on Medicare, or if you get enough subsidies on a modest income that you can afford your healthcare. But the people who are getting killed in this deal are small business people and who make just a little bit too much to get any of these subsidies. Why? Because they’re not organized. They don’t have any bargaining power with insurance companies. And they’re getting whacked. So you’ve got this crazy system where all of a sudden 25 million more people have healthcare, and then the people out there bustin’ it sometimes 60 hours a week end up with their premiums doubled and their coverage cut in half. It’s the craziest thing in the world.”
Unlike the ACA’s expansion of Medicaid, which has been blocked by 19 states that have declined to go along with the law, the health insurance exchanges have been operational for a number of years in all fifty states and the District of Columbia.
So how are the health insurance exchanges of this “crazy system” really doing and, to Clinton’s point, what’s happening to people who don’t qualify for subsidies?
Clinton was generous in saying that the “system works fine” for those who get subsidies. State regulators have used terms such as “near collapse,” “emergency situation,” “meltdown,” and “financial death spiral” to describe the condition of their exchanges. In total, the health insurance exchanges are way over budget, serve fewer people, and show signs of being unsustainable, which pushes health plans to cost shift by raising premiums for non-exchange insurance policies, especially employer-sponsored health insurance. The population paying for those policies include the people Clinton described as “bustin’ it sometimes 60 hours a week.”
Originally, the federal government was supposed to spend $136 billion from 2015-2019 on health insurance exchange subsidies. However, as more states than expected opted to have the federal government run their exchanges and because of the higher-risk pool of individuals participating in the exchanges—which led to premium hikes—the Congressional Budget Office (CBO) in August projected $278 billion in federal outlays for health insurance exchange subsidies for that period, leading to an overspending or budget deficit just for the subsidies of $142 billion for 2015-2019, a staggering amount, considering that it would basically cancel out the projected 10-year budget surplus for the entire health reform law. With even greater average premium hikes expected for 2017—24 percent for the non-group market—the CBO’s projection is clearly conservative and will certainly be revised upward.
Many states are reporting individual market rate hikes in 2017 well above the aforementioned national average. Minnesota’s approved increases range from 50 to 67 percent. Blue Cross Blue Shield of Tennessee will raise its rates by 62 percent. Golden Rule Insurance Co. in Kentucky received approval for a 47.2 percent rate increase, while Wellmark in Iowa will raise its rates by 42.6 percent. In Delaware, Highmark Blue Cross Blue Shield received approval for a 32.5 percent average rate increase, and Utah’s individual exchange health plans will rise on average 30 percent.
Guest post by Ken Perez, VP of healthcare policy, Omnicell, Inc.
Ken Perez
Quality expert W. Edwards Deming was famous for many concepts, including the Deming Wheel or Deming Cycle, more formally known as the PDSA (Plan-Do-Study-Act) Cycle. It is a systematic series of steps for gaining valuable learning and knowledge for the continual improvement of a product or process.
The Centers for Medicare and Medicaid Services’ August 25 release of 2015 quality and financial performance results for Medicare accountable care organizations (ACOs) reflected the application of the PDSA Cycle by the participating organizations as well as CMS in its continued development and refining of its ACO programs.
At a high level, in 2015, the 404 reporting ACOs—392 in the Medicare Shared Savings Program (MSSP) and 12 in the Pioneer ACO Model—achieved $466 million in savings. A bit more than half of the ACOs (210 or 52 percent) held costs below their benchmark, and slightly less than a third (125 or 31 percent) generated savings above a minimum savings rate (MSR) and met quality performance standards, thus meriting shared savings.
As is common with most statistics and especially any material news coming out of Washington, D.C. nowadays, there were widely divergent interpretations of these results.
On the cheery side, CMS chief medical officer Patrick Conway, M.D., rhapsodized, “Accountable Care Organization initiatives in Medicare continue to grow and achieve positive results in providing better care and health outcomes while spending taxpayer dollars more wisely.”
In contrast, Clif Gaus, CEO of the National Association of ACOs, in an email message to FierceHealthcare, struck a negative tone in his appraisal of the results, sharing that his organization “was disappointed not to find stronger financial results that reflect the extensive financial and personal contributions invested by ACOs” and he also said that CMS and Congress must “take swift and decisive action to solidify the foundation of the Medicare ACO program.”
Despite these obviously divergent views, certainly neither Conway nor Gaus would disagree with the idea that the ability to learn is a critical success factor in ACO performance.
A deeper analysis of the data bears this out. As noted by CMS, more-experienced ACOs were more likely to generate savings above their MSR. In performance year 2015, 42 percent of ACOs that started in 2012 generated savings above their MSR. This compares with 37 percent for ACOs starting in 2013, 22 percent for 2014 starters, and 21 percent for 2015 starters.
The value of learning from experience was also reflected in the quality results. MSSP ACOs that reported quality measures in both 2014 and 2015 improved on 84 percent of the measures common to both years.
Guest post Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
On May 3, BMJ (formerly the British Medical Journal) published an analysis of prior research on medical errors by a team led by Dr. Martin Makary, a professor of surgery at Johns Hopkins University School of Medicine. Startlingly, the analysis concluded that more than 250,000 Americans die annually and nearly 700 perish daily from medical errors. Based on the Centers for Disease Control and Prevention’s (CDC’s) official list of the top causes of death, that figure would place medical errors as the third leading cause of death, behind only heart disease and cancer, which each took about 600,000 lives in 2014, and ahead of respiratory disease, which caused over 147,000 deaths.
The kind of medical mistakes that can be fatal range from surgical complications that go unrecognized to errors regarding the doses or types of medications administered to patients.
The Johns Hopkins analysis received widespread media coverage, with the New York Times, NBC News, NPR, Time, U.S. News & World Report and the Washington Post, among others, all reporting the study’s findings.
This is certainly not the first time that medical errors have attracted the attention of the mainstream media.
The Institute of Medicine’s landmark report, To Err is Human: Building a Safer Health System, released in November 1999, concluded that 44,000 to 98,000 Americans died each year because of preventable mistakes in hospitals. Moreover, the report estimated the annual costs of medical errors at $17 billion to $29 billion.
It was estimated that more than 100 million Americans were aware of the general conclusions of the IOM report, thanks to ample media coverage, which conveyed the idea that medical errors were more prevalent and costly than previously thought. Despite all the publicity about medical errors as a result of the IOM report, it would appear that the U.S. healthcare system is not any safer more than 16 years later.
No one knows the precise toll of medical errors, largely because the coding system used by CDC to record death certificate data does not capture items such as communication breakdowns, diagnostic errors, and poor judgment, all of which can cost lives.
In terms of the economic cost of medical errors, a study sponsored by the Society for Actuaries and conducted by Milliman in 2010 concluded that medical errors in 2008 cost the United States $19.5 billion—$17 billion (87 percent) of which was directly associated with added medical costs (inpatient care, ancillary services, prescription drug services, and outpatient care). The remainder was due to increased mortality rates and days of lost productivity from missed work, based on short-term disability claims.
Adjusting for the increase in the U.S. population from 2008 to 2016, the current year’s cost of medical errors is estimated at $20.8 billion. Continue Reading
Guest post by Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
At two recent healthcare conferences run primarily for provider organizations, speakers spent a considerable amount of time highlighting the sharply increased U.S. spending on prescription drugs in 2014 (+12.5 percent versus 2013) and 2015 (+7.8 percent versus 2014)—about double overall healthcare cost inflation for those two years. In 2015, prescription drugs accounted for one-sixth of all the money spent on personal healthcare services. While drug spending growth is expected to moderate in the coming years, the attendees at the conferences were left with the lingering impression that pharmaceutical companies may have gotten away with inappropriate levels of profiteering in recent years.
Of course, that impression was made—and some would say cemented—last year when Martin Shkreli, former CEO of Turing Pharmaceuticals, famously hiked the price of Daraprim, a 62-year-old treatment for parasitic infections, by 5,455 percent overnight from $13.50 a tablet to $750. Similarly, Michael Pearson, outgoing CEO of Valeant Pharmaceuticals, raised by 1,800 percent the prices of two drugs used to treat cancer-related skin conditions: Targretin gel, a topical treatment for cutaneous T-cell lymphoma, and Carac cream, used to treat precancerous skin lesions called actinic keratosis. A 2012 report by Ipsos Public Affairs concluded that the U.S. pharmaceutical sector had a “net negative” favorability score with consumers, and the much-publicized actions of Shkreli and Pearson three years later obviously did not improve the public’s view of pharma.
As expected, the aforementioned price hikes by Turing and Valeant were denounced by numerous presidential candidates, and drug prices became a popular political football. Both former Secretary of State Hillary Clinton and Vermont Senator Bernie Sanders have made lowering prescription drug costs significant planks of their respective policy platforms. They both advocate allowing Medicare to negotiate drug prices with pharmaceutical companies. Sanders goes even further—to the brink of outright drug price controls—pledging to require pharmaceutical companies to publicly disclose information regarding drug pricing and research and development costs—with the obvious implication that there should be some reasonable relationship between the two.
Guest post Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
Soon after passage of the Affordable Care Act (ACA), the Congressional Budget Office, the Obama Administration and private research firms, such as Health Policy Alternatives, concluded that the health reform law would generate budget surpluses over the 10-year period of 2010-2019 of $124 billion to as much as $150 billion.
However, according to the CBO’s report, “The Budget and Economic Outlook: 2016 to 2026,” released in January of this year, the divergence between past rhetoric and current reality has widened, at least in terms of the coverage expansion initiative of health insurance exchange subsidies.
According to an April 22, 2010, memorandum from Richard S. Foster, chief actuary for the Centers for Medicare and Medicaid Services (CMS), the ACA’s health insurance exchange subsidies were projected to total $153 billion from 2014-2019. However, arguably because of the higher-risk pool of individuals participating in the exchanges, the recent CBO report projects $347 billion in federal outlays for health insurance exchange subsidies for 2014-2019, leading to a deficit just for the subsidies of $194 billion for that period, outweighing the previously projected budget surplus.
Even worse, the higher health insurance exchange subsidies aid a significantly smaller exchange enrollment population, down about 40 percent from 21 million to 13 million individuals for 2016, per the CBO. Moreover, the CBO projects exchange enrollment to peak at 16 million in the next decade, a third less than the 24 million it predicted in March 2015.
Guest post by Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Ken Perez
The Patient Protection and Affordable Care Act (ACA) mandated five major healthcare delivery reforms that collectively aim to improve care quality and slow the growth of healthcare spending. In the five years since passage of the ACA, each of these delivery reforms has been implemented, revised and broadened.
What is the outlook for these changes? Clearly, the long-term strategic intent of the Obama administration is to shift Medicare payments from fee for service to fee for value. On Jan. 26, 2015, Health and Human Services Secretary Sylvia Burwell set forth quantified goals and an aggressive timeline for directing an increasing share of Medicare payments through alternative payment models (APMs) such as accountable care organizations (ACOs) and bundled payments, from 20 percent in 2014 to 50 percent in 2018. Let’s consider each of the major healthcare delivery reforms.
Accountable Care Organizations
On January 11, the Centers for Medicare & Medicaid Services (CMS) announced that 477 organizations are participating in one of Medicare’s four accountable care programs.
With 434 current participants, the Medicare Shared Savings Program (MSSP) accounts for the vast majority (91 percent) of the total. Although the total number of MSSP ACOs has grown steadily each year since the program’s inception in 2012, cumulatively about 100 ACOs (19 percent) have dropped out of the program.
Medicare’s first ACO program, the higher-risk, higher-reward Pioneer ACO Model, suffered numerous departures during the second half of 2015, as the number of Pioneers has dropped from 32 original participants announced in December 2011 to a current total of nine, a 72 percent decline. However, some of the departing Pioneers have transferred to the MSSP or the even higher-risk, higher-reward Next Generation ACO Model, which was launched in March 2015.
CMS also disclosed that 21 organizations are participating in the Next Generation ACO Model, including five former Pioneers. The remaining 13 of the 477 ACOs are the initial participants in the first disease-specific Medicare ACO program, the Comprehensive ESRD Care Model, which was announced in October 2015.
Despite these seemingly impressive numbers, to achieve the aforementioned goal of flowing half of Medicare payments through APMs by 2018, CMS needs even more growth in the number of Medicare ACOs coming onboard in the next couple of years, perhaps 150-200 net new ACOs per year in 2017 and 2018.
Bundled Payments
In 2013, CMS launched the Bundled Payments for Care Improvement Initiative (BPCI), a voluntary program which offers providers four episode-based payment models. In three of the models, implementation is divided into two phases. During Phase 1, “the preparation period,” CMS shares data and helps the participating providers learn in preparation for Phase 2, “risk-bearing implementation,” in which the providers begin bearing financial risk with CMS for some or all of their episodes. CMS required all participants to transition at least one episode (e.g., Acute Myocardial Infarction) into Phase 2 by July 1, 2015, to continue participating in the BPCI.
