The decision to shutter a proton beam therapy center in Indiana is shining light on the precarious financing of the costly facilities used to treat some cancers.
The planned closure of the Indiana University Health Proton Therapy Center early next year is unlikely to derail investments in the costly cancer-fighting technology across the country, according to officials at the university and the National Association for Proton Therapy.
IU officials announced the decision to close the Bloomington facility for financial reasons last month based on the recommendation of an independent review panel.
The IU Health Proton Therapy Center, which is the third-oldest proton beam facility for tumor treatment in the country, has been spilling red ink on the university's balance sheet since it opened in 2004. IU has already lost $20 million on the facility and could lose as much as $15 million more, university officials said in the prepared statement announcing the closure decision.
Earlier this week, a university official said the IU Health Proton Therapy Center faces insurmountable financial pressure.
"This center was one of the first of its kind in the United States, but the competition has increased significantly in the last several years, which has affected patient volumes," said Mark Land, associate VP of public affairs and government relations at IU.
"The facility, which is a bit unusual in that it is not located in a hospital, but rather is a free-standing facility that was created to make additional use of the proton beam at the IU Cyclotron, has operated at a financial loss for most of its existence. It would take a significant investment to make the facility cost competitive with new centers with no reasonable hope that such an investment would ever be recouped," he said.
Land describes the circumstances involved in the development and operation of the IU Health Proton Therapy Center that placed the facility at a competitive disadvantage. "As I understand it, proton therapy centers today are being constructed primarily within hospitals and for specific purposes. In our case, we had an existing proton beam and used that as an opportunity to provide patient care. While that allowed us to get into the field, it's not the way you'd build it today."
Construction costs for PBT centers range as high as $200 million for facilities with multiple treatment rooms from about $30 million for "compact machines" with a single treatment room, says Leonard Arzt, executive director of the National Association for Proton Therapy in Silver Spring, MD.
He contends that the impending closure of the IU Health facility is not a bad omen for PBT in the United States.
"The Indiana proton center faced financial challenges from the beginning when it opened about a decade ago. It started with a very old cyclotron in a physics research facility that eventually needed costly upgrading and maintenance," Arzt said.
"The closure will have minimal to no impact on the proton community outside of Indiana. There are currently 14 operating centers across the United States, with a dozen more currently in development. … We are confident proton facilities are here to stay for the long-term treatment and benefit of cancer patients worldwide."
Not Aging Gracefully
Whether or not the closure of the IU Health Proton Therapy Center is the beginning of a negative trend, the findings of the review panel that examined the facility's viability tell a cautionary tale.
The panel found that the oldest U.S. proton beam therapy facilities face financial and technological challenges. "This facility is outdated and requires significant investment to continue to operate. Because of both the expense of these investments and the high operating costs of an aging facility, it does not appear that IUHPTC can ever achieve a positive margin," the review panel members wrote in their report.
The panel asserted that the IU Health Proton Therapy Center is at a significant disadvantage compared to newer facilities. "Although the replacement of the cyclotron would permit the facility to continue to function, it would not permit the development of state-of-the-art technology, which would require multiple other components," the review panel members wrote.
The oldest proton therapy center for cancer treatment opened in California at Loma Linda University Medical Center in 1991. Massachusetts General Hospital has the nation's second-oldest proton therapy center, with its facility opening in 2000.
A Proton 'Bubble?'
In terms of technology, the review panel found PBT is facing stiff competition from refinement of older technologies and from development of new radiation therapies.
The panel noted that historically standard radiation therapy based on photon physics "has closed the gap with proton beam to an unanticipated degree." The panel also noted the development of potentially superior technologies such as carbon ion beam facilities.
Based in part on these finding, the panel drew a disturbing conclusion about the country's oldest and most debt-ridden proton therapy centers. "It is, therefore, quite possible that we are on the verge of a 'proton bubble' with the more indebted centers or those without a strong patient supply line closing. Those with less or no debt, or those built around academic institutions, will likely survive," the report says.
The Cost-effectiveness Debate
The IU Health Proton Therapy Center review panel noted that cost-effectiveness and efficacy remains an open question and high-risk proposition for proton beam cancer treatment.
"The fact that any proton facility costs 10 to 100 times as much as the next most expensive medical device has placed it in the center of the debate about value-based medicine and some insurers are starting to balk at the cost and to decline coverage."
PBT advocates say it should be the standard of care for isolated tumors, particularly in children, because proton beams can be focused on cancerous tissue while sparing adjacent healthy tissue.
There are no U.S. randomized clinical studies demonstrating "proof in principle" that proton beam therapy is superior to other forms of cancer treatment, the panel concluded.
PBT advocates believe randomized studies currently underway in the U.S. will show the technology is cost-effective.
A study published in May in the International Journal of Radiation Oncologysuggests that for head and neck tumors, "early clinical outcomes are encouraging and warrant further investigation of proton therapy in prospective clinical trials."
Medicare Advantage health plans are slated for a modest premium hike next year, but uncertainty remains over the long-term prospects of the value-based insurance program.
Federal officials released data last week forecasting an average 4% increase in Medicare Advantage health plan premiums in 2015.
Marilyn Tavenner
Marilyn Tavenner, administrator of the U.S. Centers for Medicare & Medicaid Services, said in a prepared statement that the Medicare Advantage program has been thriving since the adoption of the Patient Protection and Affordable Care Act in 2010.
"Since the Affordable Care Act was enacted, enrollment in Medicare Advantage plans is now at an all-time high, and premiums have fallen," Tavenner said.
Between 2010 and 2015, enrollment in MA health plans is forecast to increase 42%, with premiums declining 6%, CMS reported last week. This year, the average monthly premium for an MA health plan is $30.96, according to CMS.
Quality Improvements
The federal agency also reported quality improvement in MA health plans. CMS ranks MA health plan quality on a scale of one to five stars. About 40% of MA health plan contracts are set to receive quality rankings of at least four stars in 2015, an increase of approximately 6% from this year, according to CMS.
MA health plan quality has steadily increased since 2012, the federal agency reported: "About 60 % of MA enrollees are currently enrolled in plans with four or more stars for 2015, an increase of approximately 31% compared to the percentage in four or five star plans based on 2012 ratings."
America's Health Insurance Plans, the Washington, DC-based organization that represents commercial health insurance carriers, reacted cautiously to the CMS announcement.
14 Medicare Advantage Plans Earned 5 Stars in 2013
"The growing number of seniors choosing to enroll in Medicare Advantage is a testament to the value the program provides for beneficiaries," Brendan Buck, AHIP's VP of communications, said in a prepared statement.
"At the same time, the data show that certain areas are feeling the impact of payment cuts to the program. With the majority of cuts still looming, there is potential for further disruption to beneficiaries in the future. That's why the 1.6 million seniors who make up the Coalition for Medicare Choices and more than 270 members of Congress recently came together to protect this program and the millions who rely on it."
On Friday, Sunnyvale, CA-based HealthPocket released an analysis of the 2015 CMS data on the Medicare Advantage program. The company ranks and compares health plans across the country.
HealthPocket is pegging the average MA health plan premium increase for 2015 at less than 2%, rising from $61.69 monthly to $62.69. Company officials stated that their figures for monthly health plan premiums are nearly twice as high as the CMS figures because "the government weighted their average by projected plan enrollment rather than averaging premiums across all options available in the market."
While HealthPocket is painting a rosier picture for the percentage increase in MA health plan premiums next year, the company reported the number of $0 MA health plan premiums in 2015 is set to decline 19%.
Kevin Coleman, head of research and data at HealthPocket, says the modest average MA premium increase forecast for next year has to be balanced against the decline in the number of MA health plans with zero-cost premiums.
"The importance of stable Medicare Advantage premiums to the plans that offer them is that premium increases that are perceived as too high are among the two biggest risks for member attrition. The other being poor customer service experiences," he said. "A 2% premium increase is clearly stable. However, this must also be viewed in light of the decline in availability of $0 premium plans."
Coleman says the MA health plan data CMS released last week is unlikely to calm the shrill political debate over the future of Medicare Advantage.
"The jury is still out regarding the long-term prospects of the Medicare Advantage program because there are outstanding questions regarding the funding cuts Medicare Advantage will experience. For example, cuts were scheduled for 2015 and then reversed," he said.
The development and dispersion of cost-effective medical technologies that promise to boost wellness, prevention, and precision care are pivotal to the transformation of healthcare, experts say.
A tsunami of healthcare innovation is sweeping the globe, according to three dozen experts who gathered this week in Boston for a forum organized by The Economist.
"We are in an amazing time. The transformation that is going on in the United States and around the world is unprecedented," Walter Capone, president of the Multiple Myeloma Research Foundation, told forum attendees.
Several of speakers said the biggest global change in healthcare is a growing realization in both developed and developing countries that boosting wellness, prevention, palliative care, and outpatient services are essential elements of establishing sustainable healthcare systems.
"[Developing countries] simply can't replicate the kind of health system we see in the United States," said Peter Berman, DPH, a professor at the Harvard School of Public Health in Boston. "They will not be able to afford in the near-term treating heart disease and cancer the way we have in the West… It really will be more about creating a health system with emphasis on outpatient care and prevention."
Bruce Broussard, president and CEO of the Louisville, KY-based payer, Humana, cited Medicare Advantage as a prime example of an insurance business line that places a premium on prevention. "If we can eliminate the need for care in the first place, we can cut costs," he said.
Humana has deployed about 8,000 nurses who visit health plan members' homes on a daily basis to help them stay healthy, Broussard said. "We help people move furniture, build ramps," he said. "Those little steps have a big impact."
To promote wellness at an early age, Humana has helped build 50 playgrounds across the country. "We've set the goal of improving the health of the communities we serve… and to do that we have to partner with communities," Broussard said. "We're actually improving the community overall."
R. Sean Morrison, MD, professor of geriatrics and palliative medicine at the Icahn School of Medicine at Mount Sinai in New York, advocated for palliative care as part of the solution to treating the world's aging population.
"One of the greatest challenges we face as a country and globally is the [population] growth of older adults," Morrison said. He believes palliative care improves quality, lowers healthcare costs, and increases patient survival rates when combined with interventional treatments such as surgery.
Morrison, in an interview after the event, elaborated on that message, describing palliative care as one of the best examples of a patient-centered approach to medicine.
"In palliative care, we meet with patients and families. We discuss and outline their goals for medical care, and we match our treatments to those goals," he said.
"When goals are unrealistic, for example living for an additional five years with advanced pancreatic cancer, we work with patients and families over time to help them establish more realistic goals while always preserving hope."
Anita Goel, MD, PhD
Chairman and CEO of Nanobiosym
Technology to the Rescue
Beyond the bedside, the development and dispersion of cost-effective technology is playing a key role in transforming healthcare, several forum speakers said.
Anita Goel, MD, PhD, chairman and CEO of Cambridge, MA-based Nanobiosym, spoke about the convergence of several technological developments including the Internet, mobile devices, and emerging communications platforms having the potential to revolutionize healthcare on a global scale.
"I see this whole new generation of infrastructure that's going to usher in a whole new era of healthcare, not just in the developed world, but also in the developing world," she said.
Technology, she says, has become a driving force for decentralization and personalization in the medical field. "Anyone, anywhere, any time can have access to information about their healthcare."
Albert Bourla, group president of vaccines, oncology, and consumer healthcare at the pharmaceutical giant, Pfizer Inc., told attendees of the forum that the biopharmaceutical industry is in the vanguard of technology-driven change in healthcare.
"Cancer is the area where science will develop the most meaningful treatments in the years to come," he said.
The Pfizer executive said biopharma is a leader in precision medicine. "We are developing products that are relevant to a small part of the population, but the effects will be profound," Bourla said. Worldwide, there are about 2,000 cancer drugs currently in development.
"We can't wait ten years for medication; we need it today," said Capone. His organization, the Multiple Myeloma Research Foundation, is working with biopharma companies, regulators, academic centers and other top stakeholders involved in producing medications to shorten development time lines and reduce costs.
Seeing the Light
Transparency was another hot topic at the event.
"The idea that we're going to push data out and make it available to people is revolutionary," said Mitch Rothschild, CEO of Lyndhurst, NJ-based Vitals. "A few years from now, it will be viewed as madness not to know how much a doctor is going to cost before we go."
Harold Miller, president and CEO of the Pittsburgh-based Center for Healthcare Quality and Payment Reform, said it is critically important to boost transparency in a meaningful and methodical manner. "Price transparency is a critical element to improving healthcare," he said. But, he cautioned, "price transparency alone could actually be a bad thing."
Miller said price transparency will help drive beneficial change in healthcare as long as it is crafted alongside payment reform efforts.
In addition to publicizing healthcare prices, he said it is necessary for transparency efforts to be paired with paying for healthcare in a different way than has been done in the past.
"Today, it's very difficult for people to know what the total cost will be," Miller said of patient billing. "We pay for healthcare in a fragmented way. We pay for everything separately… Typically, patients don't pay anything near the total cost of care."
The key to making price transparency an effective agent of change in healthcare is getting patients to be "price-sensitive," he said. Miller cited the California Public Employees' Retirement System (CALPERS) requiring patients to pay out-of-pocket for the difference between a low-cost hip replacement physician and higher-cost doctors.
The result? "The expensive healthcare providers changed their costs," he said.
Catholic Health Initiatives is ramping up to offer health insurance products in 18 states by 2016. The nonprofit is determined to avoid pitfalls that have bedeviled other providers hoping to gain entry into the health plans business.
As they seek to boost their bottom lines and population health management capabilities, some healthcare providers are launching their own health plans.
"Some health systems imagine they will be able to get the rates they've always wanted from the Blue plans but couldn't," Juan Serrano, senior VP of payer strategy and operations at Englewood, CO-based Catholic Health Initiatives, told me last week.
Building a health plan from scratch is not as easy or as profitable as it may appear.
Serrano says "getting the math right" is among a host of challenges providers face when they open an insurance business line: "That has been the downfall of many a health plan."
CHI is taking a "methodical approach" in its quest to establish health plans in all 18 states where it operates, he says. "It can take three, four, five years for a health plan to get large enough to break even on its capital development expense. We've given ourselves two or three years… to get to a scale where we are breaking even."
CHI officials believe they have the ability to "shorten that cycle" because the health system has acquired a pair of health plans over the past two years: Soundpath Health in Washington State and QualChoice in Arkansas. "We looked to acquire some of the infrastructure rather than to build it all ourselves," Serrano said.
Juan Serrano
Senior VP of Payer Strategy and Operations,
Catholic Health Initiatives
The acquisitions have allowed CHI to establish toe-holds in two lines of health insurance: Soundpath has experience marketing Medicare Advantage policies and QualChoice has a track record offering commercial health insurance policies.
Acquisitions and consultants are helpful when a health system decides to go into the insurance business, but there is no substitute for having a capable health plan team internally, according to Serrano.
CHI has launched a wholly owned subsidiary, Prominence Health, to build out a portfolio of health insurance products. Fully staffing Prominence has been a top priority, beginning with a skeleton crew of a couple dozen workers in 2012 and employing about 300 people this year.
"We didn't only hire people to start a health plan," Serrano says. Prominence employees include not only underwriters and actuaries, but also experts in population health management and data analytics.
"These types of skills are essential, and all too often people try to outsource these skills to consultants," he says. "Having people within the health plan who understand the risks deeply enough is essential. Ultimately, somebody within the organization has to make business decisions… The consultants are going to stop short of giving a recommendation. They will only give guidance."
In addition to establishing a health plan infrastructure, one of the initial strategic goals for CHI was deciding which health insurance products to offer. The Medicare Advantage program was determined to be an attractive starting point because value-based plans provide an opportunity "to establish deep alignment" between a health system and its new insurance business line, Serrano said.
CHI is choosing its Medicare Advantage markets carefully with a county-by-county analysis in the states where the health system operates. "The first scan is a financial scan of the market," he said. Another key step is conducting actuarial assessments to make sure competitive premiums can be established to cover claims in a way that is stable over time. "The second part of the discernment process is determining the readiness of our hospital or health system from a network perspective. In all cases, we have to round out the network to provide all the services required."
The final steps in assessing a Medicare Advantage market involve answering some tricky questions, Serrano says. "How saturated is the market with competitors? What percentage of the market is Medicare Advantage versus fee-for-service Medicare? How attractive is the market? It starts to get a little more complicated," he says.
"It circles back to having the right team in place. We're careful to counsel folks; some markets are tougher than others, and it's important to understand that."
Based on CHI's experience, building a health plan business from the ground up is not for the financially faint of heart. "It takes a fair amount of capital expense and a long-range view of when that investment will realize a return," Serrano says. "There's a fairly large economic hurdle to doing this and doing it right."
Health plan startup expenses include assembling an infrastructure through acquisitions or internal investments, hiring staff to operate the plan, legal service fees for licensure, and obtaining reinsurance coverage to protect against large unexpected expenses.
Assuming those startup costs are handled properly, Serrano says another set of expenses is needed to operationalize a new health plan. One of them is carrying enough reserves for unexpected claims as well as "run-out costs" in case a health plan is forced to close and claims keep coming in.
"Parking that cash in reserve has to be clearly understood," says. There are also high marketing costs associated with launching a health plan. "Winning the business from employers requires a sizeable outlay of dollars in marketing."
CHI has set an ambitious trajectory for its health plan expansion. With help from its partners at Soundpath and QualChoice, CHI is offering health plans this year in the Pacific Northwest and Arkansas. Next year it plans to offer Medicare Advantage plans in four more states as well as offering more commercial plans. In 2016, the expectation is to have "Medicare Advantage or commercial or exchange plans in virtually all of our markets."
CHI officials have a high degree of confidence in their methodical approach to building health plans, Serrano says. "We think our strategy is a strategy that strengthens the probability of success for our health plans. There are different ways of being in this space," he says. "We think this is a strong model for us."
At least 15 states are considering a revised draft of the Interstate Medical Licensure Compact, which has the support of the AMA.
An effort to provide physicians a streamlined path to obtaining medical licensure in multiple states appears to be gaining traction.
Humayun Chaudhry, DO
President and CEO of the FSMB
"There's momentum," Humayun Chaudhry, DO, president and CEO of the Federation of State Medical Boards, said this week. "We're seeing many stakeholders across the spectrum expressing support."
The FSMB finalized the draft version of its proposed Interstate Medical Licensure Compact earlier this month and Chaudhry says 15 state medical boards are already considering endorsements of the final version. Many boards "have been awaiting the final version," he said. "State legislators ultimately have to approve the language of the document."
The American Medical Association has endorsed the effort.
"The American Medical Association has long supported reform of the state licensure process to reduce costs and expedite applications while protecting patient safety and promoting quality care," Robert Wah, MD, president of the AMA, said in a media statement.
"We applaud the FSMB for developing the interstate compact and other reforms designed to simplify and improve the licensure process for physicians practicing across state lines as well as providing telemedicine services in multiple states."
Chaudhry says the FSMB hopes that the Interstate Medical Licensure Compact will help address three acute challenges in U.S. medicine: the advancement of telemedicine, the growing physician shortage, and an increased demand for medical services that has resulted from implementation of the Patient Protection and Affordable Care Act.
In August and early this month, the FSMB made a handful of revisions to the draft version of the proposed Interstate Medical Licensure Compact. The revisions include:
A requirement that physicians seeking licensure in multiple states through the Compact would have to pass licensing tests such as the U.S. Medical Licensing Examination within three attempts.
The adoption of a streamlined process for license renewal through the Compact.
A provision allowing members of the general public who serve on state medical boards to also serve on the commission that will govern the Compact.
With the revisions in place, about 80 percent of the country's physicians would be eligible to obtain medical licensure in multiple states through the Compact, Chaudhry estimates.
He emphasizes that the Compact is a state-based effort, "not a national license."
"What is issued at the end of the day is not any document from the Compact," he said. "Physicians are still getting a state license. If the physician meets the requirements of the Compact, the state board is required to issue a license immediately."
Compact Approval Process
The FSMB is now working on the next step to get the Compact up and running: garnering endorsements from state medical boards and legislative approval from statehouses across the country.
"We've finished the deliberations on the final version on schedule. Now we're doing the visits to the state boards," said Chaudhry, who is scheduled to meet with officials at the Michigan Board of Medicine this week.
Based on advice from the Lexington, KY-based Council of State Governments, the FSMB is seeking legislative approval for the Compact in at least seven states before forming the commission that will operationalize the interstate licensing effort.
Crady deGolian, director of the CSG's National Center for Interstate Compacts, says that setting the number of states required to form a compact "isn't an exact science."
"The only hard and fast rule is you must have two states because of the contractual nature of compacts. Beyond that, it typically is left to the discretion of the drafters," deGolian said. "In this case, we felt that seven was large enough to give the organization some political clout, but not so large that it would take years to achieve success."
The CSG official says keeping lawmakers in different states on the same page will be the biggest hurdle for the Interstate Medical Licensure Compact. "The most significant challenge any compact faces is the fact that each state must adopt essentially the same language," he said.
"Compacts are contracts between states and thus require each state to accept the terms of the agreement as drafted and without amendment. That often times presents significant hurdles in terms of achieving wide-scale adoption."
The Compact also faces a more fundamental obstacle, he said.
"The other challenge you see with any compact is they require a degree of trust between the member states," deGolian said. "Whether it is medical licensing, as we're talking about in this instance, or the movement of probationers and parolees across state lines that several compacts address, for a compact to prove successful, states must trust and communicate with one another."
Chaudhry says it may take two or three years to get the vast majority of states to join the Interstate Medical Licensure Compact.
"We're being methodical. The first goal is to get seven states, but our ultimate goal is to get as many states to sign up as possible," he said. "We'll see how many we can get in the first year. All the legislatures meet in 2015."
Research on Massachusetts government workers finds no evidence that narrow network enrollment is associated with a shift towards lower quality hospitals.
A pair of Massachusetts economists has conducted research that casts narrow healthcare provider networks in a favorable light.
"In our study, the evidence suggested that narrow network plans reduced costs by both reducing the prices paid per visit and reducing the quantity of certain services, notably emergency room visits and specialist visits," Robin McKnight, an associate professor of economics at Wellesley College, said last week.
"Interestingly, enrollment in a narrow network plan led to an increase in primary care visits. So part of the way that the narrow network plans reduced costs was by shifting the site of care towards primary care, and away from more expensive settings. We examined several measures of hospital quality and found no evidence that narrow network enrollment was associated with a shift towards lower quality hospitals."
McKnight conducted the research with Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology, an architect of Massachusetts' healthcare reform effort, and a technical advisor to the Obama administration on the Patient Protection and Affordable Care Act.
The study was funded in part by the National Institute on Aging and the National Bureau of Economic Research.
Gruber and McKnight examined the impact of the narrow network used by the Massachusetts Group Insurance Commission, which provides healthcare coverage for nearly 200,000 state workers and their dependents as well as more than 30,000 municipal employees and their dependents.
In 2012, the GIC provided a golden opportunity for the research duo when the agency gave state workers a financial incentive to join its narrow network. The incentives to switch to the narrow network were not offered to municipal employees, which created a control group for the study.
"We find that enrollees are very price sensitive in their decision to enroll in limited network plans, with the state's three-month 'premium holiday' for limited network plans leading 10 percent of eligible employees to switch to such plans. We find that those who switched spent considerably less on medical care," the economists write in "Controlling Health Care Costs Through Limited Network Insurance Plans: Evidence from Massachusetts State Employees."
After the GIC offered state workers the incentive to switch to a narrow network, Gruber and McKnight found that the level of GIC spending dropped 4.2 percent, "implying that the marginal person induced to switch plans by this incentive spent 36 percent less."
Given that Massachusetts has a relatively high density of medical facilities and a relatively high level of accessibility to quality healthcare, McKnight says more research will be necessary to gauge the impact of narrow networks across the country.
"But," she said, "I think the important point is that, in contrast to a lot of the recent rhetoric on this topic, our research suggests that narrow network plans do have the potential to generate savings without any apparent reduction in quality of care."
'Pay Less and Still Get High Quality'
Trade associations for the insurance industry and large employers say the Massachusetts research is a significant contribution to the simmering debate over the costs and benefits of narrow networks.
Brendan Buck, VP of communications for America's Health Insurance Plans, says the Massachusetts study is not the first research indicating narrow networks achieve significant healthcare cost reductions. In July, a report from the Seattle-based actuarial firm Milliman also indicates narrow networks are cost-effective, he said. "It found that [narrow networks] provide coverage options with 5% to 20% lower premiums compared to broader network plans, while placing an emphasis on quality care."
Steve Wojcik, VP of public policy at the National Business Group on Health in Washington, DC, says the Massachusetts study "is good research to show the impact of narrow networks… It's good because in healthcare, people think the more you pay, the better quality you get; but this study shows you can pay less and still get high quality."
Wojcik says the level of narrow network cost savings demonstrated in the research Gruber and McKnight conducted may be hard to achieve in other parts of the country.
In addition to Massachusetts' relatively high density of high-quality healthcare facilities, "the healthcare services are pretty expensive, too," he said.
"It's low-hanging fruit to decrease costs in a high-cost setting. You may not see the same level of cost savings in a state where healthcare costs are lower. But even in those places, when you can use more effective contracting… you are going to reduce costs and keep quality at a high level."
In a survey released last month by the NBGH, 26% of nearly 150 large employers reported offering health plans with narrow provider networks.
Federal officials are urging hospitals to accept a settlement for thousands of Medicare claims denied because of patients' admission status.
In a conference call Monday with hospital executives from across the country, officials from the Centers for Medicare & Medicaid Services highlighted a claims appeals settlement deal that offers 68 cents on the dollar.
Gerald Walters, senior adviser to the CFO at CMS's Office of Financial Management, said the settlement offer is both necessary and worthy of consideration. "There's been an unprecedented growth of claims appeals," he told hospital executives, adding that the federal agency's appellate apparatus faces an overwhelming caseload.
In a memorandum dated December 2013, Chief Administrative Law Judge Nancy Griswold described the caseload: "From 2010 to 2013, [Office of Medicare Hearings and Appeals] claims and entitlement workload grew by 184% while the resources to adjudicate the appeals remained relatively constant."
"To settle these claims appeals, CMS had to make an offer… Take every opportunity that is available to you," Walters implored.
The so-called two-midnight rule that went into effect in October 2013 is expected to reduce confusion over the distinction between outpatient and inpatient status, reducing the number of future appeals, Walters said.
But admission status presents major Medicare payment consequences for healthcare providers: payment rates for inpatient care under Medicare Part A are considerably higher than payment rates for outpatient care under Medicare Part B.
The CMS settlement offer is limited to acute care hospitals and critical access hospitals and they have until October 31, 2014 to submit their signed agreements.
"When we look at these claims, we believe the preponderance of the denials were from acute care hospitals and critical access hospitals, so we chose to focus on those areas," Walters said, noting that CMS has no plans to offer a similar settlement deal to other healthcare providers such as children's hospitals.
Contrary to what some hospitals may believe, organizations with multiple pending appeals will not be allowed to cherry pick from their caseload: "It's all or nothing," he said. "You may not choose to pick some claims [for settlement] and leave others out."
Walters urged hospital leaders to take CMS up on the offer. "Sixty-eight percent: Consider the net present value. It's a good solution," he said.
Key Settlement Rules
Melanie Combs-Dyer, director of CMS's Provider Compliance Group, identified four requirements for a Medicare claim appeal to be eligible for the settlement deal:
Claims have to be pending appeal
Patient admissions status has to be the main reason claims were denied
Date of hospital admission has to be prior to enactment of the two-midnight rule on Oct. 1, 2013
Claims must not have been withdrawn and resubmitted for Medicare Part B reimbursement
Combs-Dyer said one of the most crucial steps in the settlement process is when hospitals email a signed administrative agreement and caseload spreadsheet to CMS. As long as the hospital's caseload spreadsheet matches CMS's records, settlement payments should go out to hospitals within 60 days, she said: "We want to resolve these appeals as quickly as possible."
Settlement payments could take longer than 60 days if hospital and CMS records do not match. Since Medicare Administrative Contractors will be processing settlement deal payments, "The MAC and the hospital will have a discussion to try to resolve any discrepancies," Combs-Dyer said.
"I do not agree that the 68 cents on the dollar is fair," said Mark Bogen, CFO and senior VP of finance at South Nassau Communities Hospitalin Oceanside, NY, when reached for comment. He did not attend the hearing.
With the open enrollment period approaching in November, HIX supporters and detractors are assessing access to the federal health insurance exchange as well as its performance and prospects.
Implementation of the federal Patient Protection and Affordable Care Act is back in the spotlight this week in Washington, DC, and on Wall Street.
In Washington, a pair of top federal officials endured a PPACA grilling Wednesday during a hearing before the health panel of the House Committee on Ways and Means. Republican lawmakers sought assurances that flaws in the rollout of the PPACA insurance exchanges for this year would not be repeated in 2015. The GOP legislators also asked whether the Internal Revenue Service is on track to administer the impacts of the PPACA on taxpayers.
On Tuesday, Moody's Investors Service released a HIX "special comment" report, "The Affordable Care Act Exchanges: Mid-Year Summary and Assessment." Its key findings include the observation that uncertainty over health insurance policies sold through the exchanges is expected to continue for years, but that risk is not expected to affect the credit ratings of insurers operating on exchanges because HIX activity represents a small portion of their business.
Contentious House Hearing
Members of the Ways and Means health subcommittee are deeply divided over the PPACA along partisan lines. During the Wednesday hearing, that chasm was on full display.
In his opening comments, panel Chairman Kevin Brady, (R-TX) noted several flaws such as the "disastrous rollout of healthcare.gov" during last fall's open enrollment season on the exchanges. "The ACA has helped some Americans, no doubt, but hurt many more," he said.
The ranking Democrat on the health subcommittee, U.S. Rep. Jim McDermott, (D-WA), was equally strident in his opening remarks. "Despite the Republicans' best efforts at sabotage, the ACA is working," he asserted.
After the preface of political posturing, the health subcommittee members heard testimony from IRS Commissioner John Koskinen and Andy Slavitt, the recently installed deputy principal administrator of the Centers for Medicare & Medicaid Services, the federal agency with primary responsibility for implementing the PPACA.
Koskinen reported that the IRS is "on track" to administer the tax impact of the PPACA on millions of Americans. He stressed that the law's impact on most taxpayers will be limited to checking a single box on their tax forms indicating they have health insurance and received no government subsidy for coverage in 2014.
"The vast majority of Americans will have to do nothing related to healthcare other than check a box," he testified.
For taxpayers who have received federal subsidies for health insurance in 2014 through the new exchanges, the coming spring's tax filing season will be more complicated. Those taxpayers will be issued a new IRS form—1095A— from the exchange where they obtained health insurance to confirm their actual 2014 income as opposed to the estimated income they submitted on paperwork during HIX open enrollment.
"It will help us make sure that only the people who qualify for the premium subsidy will receive it," Koskinen testified.
Republican members of the health subcommittee pressed the IRS commissioner hard on the agency's readiness to administer the "reconciliation" process on the exchanges. "In my view, the American people have lost trust in the IRS for a lot of reasons, including healthcare," Brady told Koskinen. "Problems obviously remain with this and will continue next year. How do you regain the people's trust?"
Koskinen not only defended his agency and said it takes compliance "very seriously." But he went on the offensive over funding for the IRS. "We understand there are going to be challenges in the first filing season."
The IRS commissioner said Congress had shortchanged his agency by $440 million this year and $450 million next year, which has prompted scrambling to make sure the nation's tax collector can live up to all of its responsibilities.
U.S. Rep. Bill Pascrell Jr., (D-NJ), said the underfunding of the IRS is an example of how Republicans in Congress have sought to systematically undermine the PPACA. "If you can't shoot the dog, starve it," the New Jersey Democrat said. "There are great things going on in the ACA, and the detractors won't admit it."
In his testimony, Slavitt indicated the PPACA has achieved significant healthcare reform goals, and said federal officials expect a smoother ride in the second year operating the exchanges.
"There's growing evidence the Affordable Care Act is working," he testified, noting major gains in access to healthcare through the exchanges, expansion of Medicaid in half of the states and beneficial PPACA provisions such as mandating insurers to cover individuals with pre-existing medical conditions. "In addition, we are seeing overall lower growth in healthcare spending."
U.S. Healthcare Spending Growth to Resume
Slavitt said CMS has taken several steps to help ensure there is no repeat of last fall's weak performance of healthcare.gov. Those steps involve adding new features to the site and increasing the amount of time devoted to testing its functionality.
The CMS official also addressed Republican lawmakers' concerns over a lack of trust among some Americans about the federally driven effort to reform the healthcare industry, saying transparency, accountability and straight talk are crucial factors.
U.S. Rep. Mike Thompson (D-CA), asked Slavitt whether he was confident that the problems with healthcare.govlast fall will not arise again when open enrollment for the exchanges starts in November.
"We are in a more favorable position with a website that's up and running," Slavitt said, adding "we have built a lot more time in for testing."
View from Wall Street
Risks associated with ongoing uncertainties for insurance carriers operating on the PPACA-spawned exchanges dominate the "special comment" report released by Moody's on Tuesday.
"Last year as we approached the first open enrollment period under the Affordable Care Act, health insurers were faced with many unknowns and uncertainties regarding competition, enrollment, and profitability. Almost one year after the federal and state exchanges opened for enrollment, many of these uncertainties still exist," the report says.
The uncertainties facing insurers operating on the exchanges include an incomplete set of claims data for 2014, uncertainty about consumer behavior in 2015, and an unsettled regulatory and legal framework for the exchanges.
"Insurers are faced with making pricing decisions for 2015 with very limited claims data in 2014 in a competitive marketplace ripe for irrational pricing amid an evolving regulatory environment – a credit negative to the sector," the Moody's report says.
Even though there are substantial risks associated with the new exchanges, insurers are not running away from potential HIX riches, according to the Moody's researchers. "Despite all the uncertainties and poor projected financial results for these products in 2014, insurers are planning on continuing their participation on the exchanges in 2015," the report says.
Soaring prices for some life-saving and life-altering drugs are pitting drug makers against payers, providers, and patients.
Something has to give.
This year's marketing of the hepatitis C drug Sovaldi at $1,000 per pill and last week's announcement that the FDA has approved pembrolizumab, a new kind of cancer drug said to cost $150,000 per year for treatment of melanoma, raise a vexing question in the healthcare industry and broader American society: Can the country craft a more affordable way to continue development of life-saving and life-altering drugs?
Lowell Schnipper, MD
Lowell Schnipper, MD, a practicing oncologist and leader of a task force at the American Society of Clinical Oncologyseeking to boost value in cancer care, told me this week that healthcare providers have no choice but to face the daunting drug-cost dilemma.
"It's not OK for doctors to just sweep [drug price concerns] under the rug. It comes down to finding responsible ways to maintain quality of care," he said.
"This is a real issue. We are in no way trying to damage companies that are doing research. What we're trying to do is to find a way to measure new treatments against the standard of care."
Schnipper says the rising prices of new drugs that either cure a common disease or provide life-sustaining treatment are at odds with efforts to contain costs in U.S. medicine. "We are getting to a tipping point, and we have to come to a consensus with the stakeholders. It's a collective discussion," he said.
In an email sent to me last week, Brendan Buck, vice president of communications for America's Health Insurance Plans, offered a more biting critique of the volume-based pricing model that Gilead Sciences followed with Sovaldi.
"Many of these specialty drugs are tremendous breakthroughs, and we want to find a way to provide access to them. But access is threatened by the pricing. We also cannot have affordable healthcare in America without affordable pricing. There's long been a balance kept between affordability and rewarding innovation. This pricing has brought that balance tumbling down," the health insurance industry spokesman said.
Government Solution?
Chris Wing, president CEO of Long Beach, CA-based SCAN Health Plan, tells me that the healthcare industry and regulators need to intensify efforts aimed at blunting the economic impact new specialty drugs.
"In many cases, these drugs are very expensive and cost becomes either a barrier to access or a hardship upon those expected to pay, as there are no lower-cost generics to turn to. The challenge for government and the healthcare community is to find a way to afford these miracle drugs without financially undermining the rest of the health system," he said.
What About Value-Based Pricing?
In cancer care, where patients often face out-of-pocket expenses for medication totaling thousands of dollars, Schnipper says value-based pricing has to be part of the solution.
"We're working toward the development of a formula or algorithm," factoring in drug toxicity, the cost of administering it, and its clinical benefits. "We're getting feedback. We've spoken with representatives of the pharma industry as well as specific companies. We're also going to meet with payers."
The oncologist said one way to increase value in cancer medication is to avoid "me-too drugs" that provide marginal clinical gains over existing drugs. "Those are drugs that shouldn't be highly valued like a drug that provides four times the value," he told me. "From a societal perspective, we shouldn't give them a high price designation."
While pricing is crucial, garnering the highest possible value from cancer drugs involves more than pricing models, Schnipper says. "Cancer therapy usually means drugs, but the problem needs to be seen as broader than just drugs." That's because the significant costs of treating cancer don't stop at drug costs—they include hospital services and an approach to end-of-life care that underutilizes hospice services. "It's really complex."
VBP Seen to Have Limited Impact
Drug companies are familiar with trying to maximize the value of their products, and are actively looking for new opportunities to boost the value of medications, says Matthew Hudes, a principal and bio-pharma practice leader at Deloitte Consulting. He cites drug companies' longstanding advocacy for medication compliance as a way to reduce unnecessary hospitalizations and readmissions. "There's an ability for the industry to get out in front of this," he says.
Deloitte was one of the first consultancies to publish detailed research on value-based drug pricing, but Hudes says pharma companies are exploring several other value avenues. "Pricing is a valuable component, and, if done correctly, it can have some impact. But I wouldn't hang my hat only on value-based pricing."
Hudes says pharma is moving toward "digital media mode," embracing wearable technology such as sensors that can help chronic disease patients to get the most benefit from their medications. "[Drug manufacturers] are all very much focused on this area of digital health," he said. And utilization of data analytics has the potential to boost development of more effective medications and to examine the impact of drugs on the "actual patient experience."
Vendors are already deploying technology to help connect healthcare providers with the most inexpensive medications available, says Peter Kaufman, MD, chief medical officer of DrFirst. "We make it very easy for providers using our program to enter brand name drugs and then switch to generic, to help save money if applicable. We also offer formulary information. If a patient is covered for a medication, providers will see messages suggesting less-expensive alternatives within the same class. This gives providers more insight into how much a particular drug therapy costs."
Price vs. Value
Jennifer Wall, senior director of communications for PhRMA, the industry group representing "the pharmaceutical research and manufacturers of America" says the pharmaceutical industry is ready, willing, and able to debate the value of the medications it creates. "Bio-pharma leads the world in research and development. No one spends more on R&D than us," she told me. "The return is great because patients are getting incredible medicines that do incredible things."
Wall says any efforts to establish standards of value for drugs must take the views of patients into account. "Who's talking with patients? Who's asking patients what 'value' means to them? Value means something different to everybody. A patient who lives three months, two years, or a decade longer than expected can get huge benefits from that, including more time with their family."
Echoing Warren Buffett's quotable line about stocks, "Price is what you pay. Value is what you get," Wall turns the question around and asks: "Are we willing as a society to accept the fact that many medicines, while not necessarily inexpensive, provide a great return on value because a child's life has been saved or a parent suffering from a life-threatening disease has been cured?"
Adding to its growing number of commercial accountable care collaborations with a deal in Texas, Aetna has also posted a $5 million ACO collaboration gain with Phoenix-based Banner Health Network.
Aetna has taken a pair of ACO strides.
Charles Kennedy, MD
Chief Executive of Accountable Care Solutions for Aetna
The Hartford, CT-based commercial payer has sealed an accountable care collaboration deal with Baylor, Scott and White Quality Alliance in North Texas. Last month, Aetna and Banner Health Network reported a $5 million gain-sharing bounty last year from their ACO collaboration in Arizona.
Both of the collaborations feature the Aetna Whole Health accountable care health insurance plan.
Aetna's ACO collaboration with Baylor, Scott and White Quality Alliance, which is affiliated with Waxahachie, TX-based Baylor Health Care System, will give Aetna Whole Health plan members access to more than 900 primary care physicians, 27 hospitals, 2,800 specialists and six urgent care facilities in the Dallas/Fort Worth area, officials at the companies say in a prepared statement released last week.
An Aetna spokesperson says the ACO collaboration with Baylor has two key objectives: to achieve measurable advancements in patient care and satisfaction while controlling costs for its customers and members in the Dallas/Fort Worth Metroplex.
Officials at both organizations say Aetna Whole Health members will reap cost savings for in-network care and the ACO collaboration rewards Baylor along several performance measures. The provider network will garner gain-sharing by hitting preventive care and screening targets, demonstrating improved management of patients with chronic conditions such as diabetes, reducing hospital readmissions, and curbing emergency room visits.
Aetna's ACO collaboration with Baylor will be effective for self-insured customers starting Oct. 1, and it is slated to be marketed for fully insured customers early next year.
Aetna, Banner Report $5M ACO Gain
Aetna has 47 commercial ACO pacts with healthcare providers nationwide, according to the insurer's Aug. 27 announcement of a $5 million ACO collaboration gain-sharing bonanza with BannerHealth Network in 2013.
Aetna and BHN officials prepared joint and individual responses to a series of questions:
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HL: What are the highlights of your ACO collaboration?
Aetna/BHN: Aetna and Banner Health Network began their accountable care collaboration in 2011, and the tools and learning from this relationship supported BHN's Medicare Pioneer Accountable Care Organization model in 2012. Aetna and BHN offer the Aetna Whole Health plans—ACO-centered health plan products—to employers and individuals in the Phoenix area.
The products are also available to individuals on the public exchange. In addition, Aetna care management and technologies support BHN in delivering patient-centered, accountable care to its Pioneer Medicare beneficiaries as well as Banner Health employees in seven states.
The relationship leverages the Banner Health Network, [which is] model of care focused on wellness and improving patient care outcomes through better coordination and access to patient information.
HL: Are there key aspects of the ACO collaboration that helped achieve the $5 million in cost savings?
Aetna/BHN: The cost-savings result from collaboration between Aetna and BHN to share claim and clinical information about patients and look for opportunities to improve care. Aetna supports BHN's staff with data that helps them understand patient health as well as compliance with care plans.
At Banner, a unique case management model helps to ensure that all patients have a seamless care experience. By reducing duplications, handoffs and variations in care, this model helps to simplify care processes and promotes efficiencies. Since the approach has been in place, Banner reduced its average length of stay to 3.81 days— representing an overall 7.52 percent improvement across the system of Arizona hospitals.
Significant results seen during the second full year of the accountable care collaboration between Aetna and BHN include:
Improvements in cancer screening rates, including cervical and colorectal cancer screening
Reductions in the percent of diabetic members with poorly controlled blood sugar levels
Reductions in radiology services of approximately 9%
Increases in generic prescribing rate by almost 4%
Reductions in avoidable admissions by approximately 9%
"The primary reason for the success of the relationship is the shared accountability to improve the quality while driving down the overall cost of care," said Charles Kennedy, MD, Aetna chief executive of accountable care solutions.
Chuck Lehn
CEO of Banner Health Network
HL: From the perspective of partnership, what are the key elements of making the Aetna-Banner ACO collaboration work? What factors make Aetna and Banner good partners?
Kennedy: We share a common vision and commitment with Banner when it comes to improving population health and making an impact on clinical outcomes.
Chuck Lehn, CEO, BHN: There has been true collaboration in our work with Aetna, it's not just an exchange of data. Our two organizations work hand-in-hand to deliver the services we offer today, and imagine what is possible tomorrow.
HL: What is the forecast for your ACO collaboration? Are higher cost savings possible?
Kennedy: We believe that we can continue to generate these types of results as more people choose the ACO-based products. In fact, we saw savings and improved medical cost trend on other Aetna members in the ACO outside the Aetna Whole Health product.
Lehn: We believe additional success is possible over time as we engage members in their wellness journey through personalized care plans, telehealth visits and other proactive, patient-centered services.
