Deloitte Center for Health Solutions

July 29, 2013

Monday memo

Health reform update

This week’s headlines: My take: comparing the dual aims of reform: “reducing costs” and “covering

everyone”

Implementation update - GAO: individual premiums vary widely - Home health industry wants employer mandate exemption - Poll: public opinion about the ACA mixed: changes in system desirable, but

complete repeal not favored - Report: 90% of CO-OPs are on track to reach their goals - Treasury officials, Tavenner testify on ACA implementation this week - Congressional leaders request insurance premium information for federally

facilitated HIXs

Legislative update

- Update on SGR repeal - Legislative attention to “pay-for-delay” agreements - FDA to tighten restrictions on menthol cigarettes - IOM challenges regional variability premise

State update

- HIX update

- Medicaid expansion update

- State round-up

Industry news - Truven report identifies drivers of employer health costs - Georgia not-for-profit hospitals pool resources to create population health

management alliance - AMA, AHA request delay of Stage 2 meaningful use for one year - Physician disciplinary report suspended for public release - Debates continue over employer access to genetic test results

Research snapshots

- Physicians are concerned about costs, but blame others - Parents with insurance and a pediatric physician relationship use retail clinics

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My take: comparing the dual aims of reform: “reducing costs” and

“covering everyone” From Paul Keckley, Executive Director, Deloitte Center for Health Solutions

In 64 days, the health insurance exchanges (HIXs) are to open for business in every

state, enrolling up to 7 million next year who currently have no health insurance. Per the

Congressional Budget Office (CBO), as the HIXs become fully functional, up to 24 million

individuals will access coverage through these exchanges by 2016, and 9 to 16 million

others will qualify for Medicaid depending on what the states allow.

When passed in 2010, increasing access to affordable insurance coverage was one of the

two primary aims of the Affordable Care Act (ACA), along with reducing costs. The CBO

estimated it would reduce the ranks of the uninsured to 25 million by the end of the

decade—down from 48 million without coverage when the law passed. But the two stated

aims are addressed in the ACA in very different ways:

“Reducing costs” was to be achieved through changes in the delivery system—replacing

its fee-for-service (FFS) payments with performance-based incentives, eliminating

unnecessary care that’s not evidence-based, requiring use of electronic medical records

to facilitate coordination of care and lower administrative costs, promoting primary care as

the front door to the system, and mandating the bright light of transparency on the

system’s performance. The law incorporated a number of pilots to test ways to achieve

this purpose, and for good measure, created the Patient-Centered Outcomes Research

Institute (PCORI) as a non-government entity to steward standardization of care using

evidence-based care—a goal that might have been impossible without such organization.

In the ACA, these changes phase in from 2012 through 2018: some as three-year pilots,

some demonstrations, and some as laws that are applicable after 2015. The changes are

predicated on changing how the delivery system operates by incorporating programs

Medicare and the private sector have already implemented in prior years with some

success (e.g., medical homes, bundled payments, et al). While not a surprise for most

providers, these changes are no less profound in their impact, especially in the context of

lower reimbursement from Medicare, higher bad debt, and the looming sequester. The

underlying rationale for “reducing costs” espoused by its proponents was this: the delivery

system is fragmented, wasteful, and inefficient. It can operate better: improving care and

reducing costs can be achieved simultaneously with the right incentives and tools. And

the public will support these changes so long as they have access to their providers.

“Covering everyone” was treated differently. Simply put, it involved a set of laws—many

“effective on enactment” and most to be fully implemented before 2014. The responsibility

fell largely on private insurers: 1,300 companies were required to change their

underwriting models dramatically while also preparing for the new online marketplaces in

2014. The rationale for its inclusion was this: the insurance industry profits by taking

premiums from those that pay, denying coverage, and limiting expenditures for medical

care. It is not trusted, and the public will support changes.

Thus, in 2009, the President used the term “to keep them honest” referencing the health

insurance industry. He encouraged passage of the ACA that “finally holds the insurance

companies accountable.” And since, it has been a recurring theme…

On the event of the third anniversary of its passage last March, U.S. Department of Health

and Human Services (HHS) Secretary Sebelius posted this: “Enacted three years ago, the

health care law is making the insurance market work better for you by prohibiting some of

the worst insurance industry practices that have kept affordable health coverage out of

reach for millions of Americans. As a former state insurance commissioner, I know that for

too long, too many hard-working Americans paid the price for policies that handed free

rein to health insurance companies. For more than a decade before the [ACA], premiums

rose rapidly, straining the budgets of American families and businesses. And insurers often raised premiums without any explanation.” (Source: Secretary Sebelius,

WhiteHouse.gov, March 19, 2013)

And 11 days ago, as the President called attention to lower than expected HIX premium

filings in New York and California, he told a White House gathering: “We're going to keep

on working to make sure many people around this country who are already paying

premiums are getting cheaper prices, that the money is being actually spent on their

health care, that you're not having to worry about the fine print, and that if you don't have

health insurance, you finally are in a position to get some at an affordable price—to give you and your family the kind of security you deserve.” (Source: President Obama, White

House, July 19, 2013)

The public’s predisposition to challenge the health insurance industry’s integrity is

understandable: surveys show the sector does not enjoy the level of public trust conveyed

to others in the health system (see Fact file). So unlike the delivery system, the insurance

industry’s posture in the “new normal” remains problematic, at least from the perspective

of the watchful public.

Thus the backdrop for the dual aims: their underlying strategies and timing could not be

more dissimilar:

“Reduce costs” “Cover everyone”

How Eliminate FFS incentives and replace with value and performance-based

payments

Standardize care based on evidence

Transparency: prices, outcomes,

waste, fraud, costs

Strengthen primary care

Change the insurance industry’s business practices and create an online

marketplace for purchasing “affordable”

insurance that’s competitive

Allow states to compete via Consumer Operated and Oriented Plans (CO-OPs)

Subsidize coverage for individuals and

smaller companies with low-wage

employees

Standardize and simplify product

offerings

Accept community rating; reduce risk-based premium setting

When Gradually over 5-7 years (2012-2018) Front-end loaded in first 3 years (2010-

2013)

Who has the

responsibility

to adapt

Hospitals, doctors, allied health professionals, and long-term care

providers

Private insurance companies and, in some cases, employers

(Source: Deloitte Center for Health Solutions’ comparison of two stated aims of ACA)

So as the clock ticks for the HIXs, the health insurance industry is likely to be in the media

spotlight.

Its antagonists will point to the stellar earnings its investor-owned operators have reported

in recent quarters and play to its lingering reputation gap with consumers.

Its defenders will point to its role as protagonist for price transparency and cost controls in

the health care industry that’s problematic to every employer and every household.

The delivery system’s metamorphosis will get less attention because it’s not playing to a

new script. Its changes were inevitable but remain virtually unknown in the general public

and most employers.

Somewhere between the two aims—reducing costs and covering everyone—a discussion

about the future of the health insurance sector will ensue: many betting against it, and

some seeing beyond its present threats.

I believe the health insurance industry will thrive in the U.S., but not in its traditional role.

Despite regulatory uncertainty and a vexing new excise tax (estimated $8 billion in 2014,

increasing to $14.3 billion annually in 20181), the fact remains that insurance against

health costs is a permanent fixture in the U.S. health care ecosystem. Some insurance

companies will shift their focus from employers to individuals and government purchasers,

some will globalize and diversify, some will monetize their claims data around costs and

clinical transactions, and some will be absorbed by the sector’s consolidation binge. But

the sector’s not going away.

“Covering everyone” is a noble aim. No one knows for sure how well the ACA will deliver

on that aim, or for that matter, the ultimate role HIXs might play toward that end. What is

certain is this: insurance against health costs that can wipe out households and

companies is here to stay. And “covering everyone” and “reducing costs” will be persistent

themes regardless of what happens with the HIXs.

PS – Check out this recent article—“The future of health care insurance: What’s

ahead?” (Deloitte Review, Issue 13, July 24, 2013)—which discusses the major changes

affecting the U.S. health insurance industry and implications for products and services,

costs, and the role of trust in the system.

1 CBO, Joint Committee on Taxation, “Estimated Revenue Effects Of The Amendment In The

Nature Of A Substitute To H.R. 4872, The “Reconciliation Act of 2010.” As Amended, In

Combination With The Revenue Effects of H.R. 3590, The “Patient Protection And Affordable Care

Act ('PPACA'),” As Passed By The Senate, And Scheduled For Consideration By The House

Committee On Rules On March 20, 2010”

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Implementation update

GAO: individual premiums vary widely Wednesday, the Government Accountability Office (GAO) released its analysis of

insurance premiums currently offered in each of the 50 states to the 14 million who

currently purchase individual coverage. It separates premiums into the lowest, median

and highest premium for each state across six categories based on age and gender and

family size. Highlights:

Premiums range widely: for instance, the least expensive plan offered to a family of

four in California is $2,832 a year. The median-priced plan for that family is $8,841,

and the most expensive is $43,632.

Some premiums are low: $673 a year for the lowest cost plan available to a 30-

year-old non-smoking man in Colorado after a $10,000 deductible and 50% co-

payment thereafter, up to a maximum of $17,500. The median priced plan for that

same age man would cost $2,424 a year, while the most expensive clocks in at

$11,439.

A third of individual plans exceed the ACA cap: the ACA limits out-of-pocket

maximums consumers must pay in deductibles and co-payments for medical care—

to $6,350 for individuals or $12,700 for family coverage.

(Source: GAO, “Private Health Insurance: The Range of Base Premiums in the Individual

Market by State in January 2013,” July 2013)

Background: the report was initiated in response to Senator Orrin Hatch’s (R-UT) request

for data on current health insurance costs. The data will help create a baseline from which

the impact of the ACA can be measured. Almost 20% of insurers are not included

because their plan data is not posted.

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Home health industry wants employer mandate exemption The National Association of Home Care & Hospice (NAHC) is pushing for an exemption

from the ACA employer mandate citing concern that the mandate will cause the sector to

decrease its workforce and shift more workers to part-time positions. A recent NAHC

survey of home health providers found that 62% do not provide minimum essential

coverage for workers, and therefore, face the ACA penalty starting in 2015. In addition,

38% of the three million home health workers in the U.S. were uninsured in 2010. And the

part-time status of many home health workers also decreases the likelihood of employer-

provided insurance. Many home health workers might become eligible for Medicaid under

state expansion programs.

In addition to the employer mandate exemption for the home health industry, other NAHC

requests include:

Automatic Medicaid eligibility for income-qualified home health workers;

Federal funds to subsidize home health agency vouchers given to workers earning

less than 400% of the federal poverty level (FPL). The vouchers will allow workers

to buy coverage through the HIX;

Tax credits for home health agencies with fewer than 25 full-time employees totaling

$2,000-$3,000 per employee.

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Poll: public opinion about the ACA mixed: changes in system desirable, but

complete repeal not favored Highlights from the United Technologies/National Journal Congressional Connection Poll:

The majority (51%) is convinced that the law’s implementation is going poorly based

on the recent delay of the employer mandate.

Approximately one-third (38%) say putting off the employer mandate requirement

shows the President wants to make sure implementation goes smoothly.

(Source: National Journal, “Poll: Most Americans Don’t Want Congress to Repeal

Obamacare,” July 22, 2013)

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Report: 90% of CO-OPs are on track to reach their goals Thursday, the HHS Office of Inspector General (OIG) released new data about the status

of CO-OPs:

Issuers have achieved 90% of their implementation goals.

Primary care, electronic health data, and outsourcing were the main mechanisms

used for achieving integrated care at lower costs while improving quality.

Many factors, such as competition in HIXs and the health status of enrollees, will

determine whether CO-OPs will be beneficial for plan participants.

Background: under the ACA, a loan program was introduced to establish nonprofit,

consumer-governed health insurance issuers—called CO-OPs—that will offer qualified

health plans in the individual and small group markets. Goals of the CO-OP program

include promoting integrated care, quality, and efficiency. As of January 2, 2013, the

Centers for Medicare & Medicaid Services (CMS) awarded loans totaling $1.98 billion to

24 CO-OPs.

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Treasury officials, Tavenner testify on ACA implementation this week This Wednesday, Emily McMahon, Treasury Deputy Assistant Secretary for Tax Policy,

will testify before the House Committee on Oversight and Government Reform on the

administration’s position that it can offer tax credits through the federal exchanges.

Oklahoma Attorney General Scott Pruitt, whose state is suing the administration over that

decision, is also scheduled to testify. Critics say the law only authorizes subsidies in the

state exchanges. Oversight Chairman Darrell Issa (R-CA) and Ways and Means

Committee Chairman Dave Camp (R-MI), along with other top Republicans on their

committees, also sent a letter to Treasury Secretary Jack Lew asking for more information

about the decision on the tax credits—and complaining that the administration hasn’t

provided information they have sought in previous requests.

Thursday, CMS Administrator Marilyn Tavenner will testify before the House Energy and

Commerce Committee. She will be testifying about the status of implementation of the

health law, including the employer mandate delay and the verification process for

individuals applying for subsidies on the exchange.

Related: in testimony before the House Oversight and Government Reform Subcommittee

on Energy Policy, Health Care, and Entitlements and the House Homeland Security

Subcommittee on Cybersecurity, Infrastructure Protection, and Security Technologies July

17, Tavenner along with Internal Revenue Service (IRS) Principle Deputy Commissioner

Daniel Werfel testified the eligibility and enrollment platform to be used in the federal hub

will be ready by October 1, unless Congressional budgetary constraints shortcut

implementation, citing the 24% sequestration cuts as problematic.

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Congressional leaders request insurance premium information for federally

facilitated HIXs Last Monday, a group of Congressional Republicans asked HHS to release information on

what the insurance premiums will be for the federally facilitated HIXs in 34 states. A letter

from seven Republican leaders of the Senate Health, Education, Labor, and Pensions

(HELP) Committee and the House Energy and Commerce Committee to HHS Secretary

Kathleen Sebelius said it is essential that the pricing information be made public “as soon

as possible for the millions of Americans who will be impacted by this law.”

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Legislative update

Update on SGR repeal Last Tuesday, the House Energy and Commerce Subcommittee on Health approved

legislation that repeals the current Medicare physician payment system, replacing it with a

five-year phase-in of compensation based on quality of care measures and participation in

new care models. Physicians would receive a 0.5% annual increase per year for the first

five years of the new payment system, and in 2019 they would be eligible for an additional

1% update based on their performance against quality measures. Lawmakers have yet to

identify ways to pay for the legislation. The CBO has said that freezing physicians’

Medicare reimbursement and preventing Sustainable Growth Rate (SGR)-related cuts for

ten years would cost $139 billion.

Next steps: the bill will be voted on by the House Energy and Commerce Committee

Wednesday before the August recess. The outstanding issue: how to pay for the $139

billion cost of repeal in the fiscal year (FY) 2014 budget process.

Reactions: Thursday, the American Academy of Family Physicians, the American College

of Physicians, and seven other medical societies sent a letter to Congress voicing

opposition against the 1% update.

The Center for American Progress says it opposes the bill, arguing that the legislation

doesn’t establish “a clear transition to new payment models.” In a letter to House Energy

and Commerce leaders last week, the think tank said the current bill establishes two

duplicative programs and suggested that Medicare require bundling arrangements or start

reducing FFS payments by 2017 or 2018.

My take: the shift from FFS payments to performance-based compensation for physicians

by Medicare, as conceived in this House bill, will phase in slowly over five years.

Historically, changes in reimbursement by Medicare have prompted physicians to alter

their ways of treating the commercially insured: when Medicare cut a fee for a certain

service, physicians most directly impacted would do additional procedures or mark-up

their rates for others. My hunch is this: the market—commercial health plans, individual

policy holders, employers—will be less inclined to permit such “workarounds.” The shift to

value-based purchasing in the commercial market will impact more physicians faster than

the five-year phase-in proposed, and hospitals will increasingly bear the brunt of the

pressure since half of the doctors are their employees, per the Medical Group

Management Association. So the SGR fix for Medicare might accelerate market forces to

make the change in how physicians are paid since it delays implementation for a longer

period than many in the market might think reasonable.

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Legislative attention to “pay-for-delay” agreements Last Tuesday, the Senate Judiciary Subcommittee on Antitrust, Competition Policy and

Consumer Rights held a hearing about pay-for-delay agreements, and the need for

Congressional response. Earlier this year, Senator Amy Klobuchar (D-MN), the Chair of

the Subcommittee, introduced the Preserve Access to Affordable Generics Act (S.214),

along with Senator Chuck Grassley (R-IA), to make these settlements illegal. According to

the Federal Trade Commission (FTC), consumers lose nearly $3.5 billion annually

because of pay-for-delay policies. The CBO estimated that S.214 would reduce direct

spending by $1.1 billion from 2012 to 2016 and reduce budget deficits by nearly $4.8

billion from 2012 to 2021.

Background: in June, the Supreme Court ruled in a 5-3 vote that pay-for-delay policies are

legal, but are subject to antitrust laws. Pay-for-delay agreements represent the process by

which brand-name pharmaceutical companies pay generic manufacturers not to sell the

products in order to decrease market competition.

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FDA to tighten restrictions on menthol cigarettes Last week, the U.S. Food and Drug Administration (FDA) issued an advanced notice of

proposed rule asking for increased restrictions on the sales of menthol cigarettes. The

FDA has restricted the sale of other flavored tobacco products, but menthol cigarettes got

an exemption under a 2009 tobacco law while the agency conducted a scientific review of

the evidence. In 2011, its Tobacco Products Scientific Advisory Committee concluded that

menthol cigarettes pose a special public health risk because they appeal to younger

smokers and are more addictive, but tobacco companies have challenged in court

whether FDA can rely on the Committee's findings. It also conducted a second

independent review of the evidence that confirmed the Committee's findings. The agency

gave 60 days for public comment.

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IOM challenges regional variability premise Largely based on data from the Dartmouth Atlas, the link between intensity of care and

geography has been widely covered in recent years. Its studies showed widespread

variation in the numbers and types of services provided to Medicare enrollees, and

concluded that “more care is not better care” when intensity of services was correlated to

local outcomes.

Last week, the Institute of Medicine (IOM) took issue with the premise discouraging

Congress from linking Medicare payments (the “value index”) to doctors and hospitals in

regions that provide high-quality care at low cost based on its three-year study.

The IOM’s 19-member panel said such an index would be unfair because it would “reward

low-value providers in high-value regions and punish high-value providers in low-value

regions.” It noted that a regional value index did not make sense because spending for

doctors and hospitals in a one region often varied as much as spending for providers in

different regions. For example: the ten local areas with the lowest Medicare spending per

beneficiary—after adjusting for local wages and prices and the health of patients—were

all in New York, California, and Oregon. The areas included: Rochester, NY; Sacramento,

CA; Buffalo, NY; and the Bronx, NY. And the ten areas with the highest Medicare

spending per beneficiary were all in Florida, Texas, and Louisiana. They included: Miami,

FL; McAllen, TX; Houston, TX; Baton Rouge, LA; and Fort Lauderdale, FL.

It concluded that Medicare and commercial insurance spending are not closely correlated

with total health spending, which includes payments for Medicaid beneficiaries and the

uninsured. Joseph P. Newhouse, a Harvard University professor and the chairman of the

panel concluded, “we did not find any relation between the quality of care and spending,

in either Medicare or the commercial insurance sector.”

(Source: IOM, “Variation in Health Care Spending: Target Decision Making, Not

Geography,” July 24, 2013)

My take: the long-standing debate about the significance of costs comparing communities

(i.e. “geographic variation”) is part of a larger discussion about the standard of care

deemed “appropriate” in diagnosing and treating patients. In my opinion, the baseline for

the comparison of geographic variation should be utilization—the volume of tests,

procedures, and visits for populations of patients with the same signs, symptoms, risk

factors, and co-morbidities—so as to determine how much is done in each of the U.S.’s

300-plus local markets. After adjusting for severity in each community, the volumes for

patient care could be compared as the starting point to asking the tougher questions—“Is

more care better care? (“Are better outcomes correlated with higher utilization?”) and “Are

costs and prices correlated with higher utilization, intrinsic operating costs, or something

else?” Volume and unit price combine to create costs: understanding the volume is

necessary to understanding costs that are avoidable or defensible.

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State update

HIX update Sixteen states—12 led by Democratic governors, three led by Republicans, and one

Independent—and the Democratic mayor of DC 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 27 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, 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,

UT*, VA, WI, WY

■ Democratic governor ■ Republican governor ■ Independent governor

*UT: individual market will be a federally-facilitated exchange; small business health

options program (SHOP) will be a state-based.

**NM & ID: federal government will help run the individual market. States will continue to

maintain plan management and consumer assistance functions; HHS will operate the IT

system. SHOP will be state-based.

(Source: HHS)

Friday, Maryland released 2014 premium rates for individual health insurance plans

to be sold on the state-based exchange. “After careful review of the proposed rates

and plan designs submitted by insurance companies, along with all public

comments received, Commissioner Goldsmith approved premiums at levels as

much as 33% below what had been requested. For a 21-year-old non-smoker, for

example, options start as low as $93 a month.” (Source: Maryland Insurance

Administration, “Commissioner Approves Premium Rates for Maryland Health

Connection,” July 26, 2013)

Mississippi Health Insurance Commissioner Mike Chaney (R) is proposing that the

feds operate the individual exchange market, and that the state take control of the

small group market for small employers (i.e., the SHOP). As it stands today,

Mississippi defaulted to a federally-facilitated exchange. (Source: PoliticoPro,

“Chaney tries Mississippi exchange again,” July 26, 2013)

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Medicaid expansion update To date, 23 states and DC have said they will or are likely to expand their Medicaid

programs; 24 states have indicated they will not expand their programs in 2014:

Expected to expand Medicaid Will not expand at this time Maybe

AR, AZ, CA, CO, CT, DC,

DE, HI, IA, IL, KY, MA, MD,

MN, ND, NJ, NM, NY, NV,

OR, RI, VT, WA, WV

AL, AK, FL, GA, ID, IN, KS,

LA, ME, MI, MO, MS, MT,

NC, NE, OK, SC, SD, TN,

TX, UT, VA, WI, WY

NH, OH, PA

■ Democratic governor ■ Republican governor ■ Independent governor

(Sources: NASHP and Kaiser Family Foundation. Updated as of July 1, 2013)

On Monday, July 22, Illinois became the latest state to expand Medicaid.

Governor Pat Quinn (D) signed the state legislation into law, which will allow an

estimated 342,000 Illinois residents to enroll by 2017 and cover up to 138% of

the FPL. Last summer, the Supreme Court decision made it optional for states

to implement the legislation; more than half of Republican-led states opted out.

The expansion of the state-administered Medicaid program is one of the central

components of the ACA. The program will be financed fully by the Federal

government for the first three years, then gradually decline to 90% by 2020.

Illinois is one of 23 states plus DC to expand Medicaid, aimed at extending

coverage to 17 million Americans starting in 2014.

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State round-up In Georgia, 23 hospitals announced last Tuesday the establishment of an alliance

to coordinate population health management throughout the state. The alliance will be administered by the CEOs from each affiliated medical center. This alliance represents a new trend in the health care industry where hospital systems form coalitions—rather than formal mergers and acquisitions—to take advantage of scale benefits without losing autonomy. Initially, Georgia’s Stratus Healthcare will develop primary, specialty care, hospitalist, and emergency medicine networks that will enable information sharing through telemedicine based on guidelines established by the alliance members.

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Industry news

Truven report identifies drivers of employer health costs Twenty “medical episodes” account for 41% of overall growth in employer health care

spending per Truven Health Analytics. The study examined medical claims data for 8

million commercially insured individuals under the age of 65 from 2006 to 2011, including

those covered by large employers who are self-insured. Highlights:

Employer health care costs increased an average of 4.3% per year due to spending on preventive health services; osteoarthritis (except spine); multiple sclerosis; childbirth (Cesarean section); and complications of surgical and medical care.

The majority of spending growth was primarily the result of increases in the cost per case (primarily medical and surgical procedures) and secondarily by increased costs of specialty drugs and obesity as a risk factor in treatment.

Spending growth is driven mainly by outpatient medical services (inpatient services, while expensive, affect fewer people).

Musculoskeletal conditions are the costliest and most rapidly growing group of diseases.

Complications of surgical and medical care are occurring more frequently, in part due to the growing use of surgery to treat orthopedic conditions.

(Source: Truven Health Analytics, “What Are the Leading Drivers of Employer Healthcare

Spending Growth?,” April 2013)

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Georgia not-for-profit hospitals pool resources to create population health

management alliance Last week, a group of 23 hospitals in central and south Georgia announced the formation

of an alliance to pool resources to manage population health in the region. Stratus

Healthcare, which will operate as a not-for-profit limited-liability corporation, grew out of

the April 2012 partnership between Central Georgia Health System in Macon, and Tift

Regional Health System in Tifton.

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AMA, AHA request delay of Stage 2 meaningful use for one year

Last week, the AMA and the American Hospital Association asked HHS to delay the

transition to Stage 2 in the “meaningful use” electronic health record (EHR) program,

making it voluntary in FY2014. They also asked that providers get two to three years to

complete Stages 2 and 3.

“Our members, and the vendors they work with, report growing concerns that the rapidly

approaching start date for Stage 2 is on a trajectory that will not provide enough time or

adequate flexibility for a safe and orderly transition unless certain changes are made,” the

letter to HHS Secretary Sebelius stated.

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Physician disciplinary report suspended for public release Friday, the Federation of State Medical Boards (FSMB), which represents 70 licensing

boards in the 50 states, announced suspension of its Annual Summary of Board Actions

report that provided a statistical analysis of doctor suspensions at the state level. The

Federation, which has published the report since 1985, promises that a new and improved

report—which will not necessarily include statistics on each state medical board’s

disciplinary actions—should be out in the fall.

The result is that reports from advocacy groups like Public Citizen and others, which are

based on state medical boards’ disciplinary activity, will no longer be available because

they relied on the FSMB data.

My take: so much for transparency!

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Debates continue over employer access to genetic test results In May, two new major employer discrimination lawsuits for the illegal receipt of medical

information were filed with the Equal Employment Opportunity Commission (EEOC). The

Genetic Information Nondiscrimination Act (GINA) of 2008 prohibits companies from

inquiring about or gaining access to information on the medical history or genetic testing

results of their employees. Employers are also forbidden from asking for the information

and using any obtained information to hire, fire, or promote employees. The law was

created as a way to promote genetic testing. Since the GINA was put into effect, the

enforcing agent of the law—the EEOC—has seen a steady rise in claims. Since

November 2012 there have been 762 claims, although many were dismissed.

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Research snapshots New industry and peer-reviewed studies of note to health system transformers…

Physicians are concerned about costs, but blame others Methodology: a cross-sectional survey mailed in 2012 to 3,897 U.S. physicians randomly

selected from the AMA Masterfile that measured opinions about 17 cost-containment

strategies and overall cost consciousness with a 65% response rate (2,556 participants).

Key findings:

The majority of physicians believe that trial lawyers (60%), health insurance companies (59%), hospitals and health systems (56%), pharmaceutical and device manufacturers (56%), and patients (52%) have a “major responsibility” for reducing health care costs vs. 36% report practicing physicians have “major responsibility.”

The majority are supportive of “promoting continuity of care” (75%), “expanding access to quality and safety data” (51%), and “limiting access to expensive treatments with little net benefit” (51%) as a means of reducing health care costs.

Few are enthusiastic about “eliminating FFS payment models” (7%).

Most say they are “aware of the costs of the tests/treatments [they] recommend” (76%), agreed they should adhere to clinical guidelines that discourage the use of marginally beneficial care (79%), agreed that they “should be solely devoted to individual patients’ best interests, even if that is expensive” (78%), and that “doctors need to take a more prominent role in limiting use of unnecessary tests” (89%).

Most (85%) disagreed that they “should sometimes deny beneficial but costly services to certain patients because resources should go to other patients that need them more.” In multivariable logistic regression models testing associations with enthusiasm for key cost-containment strategies, having a salary plus bonus or salary-only compensation type was independently associated with enthusiasm for “eliminating FFS.”

Physicians in a group or government practice setting and those with a salary plus bonus compensation type were more likely to be cost-conscious.

(Source: Tilburt, J.C., et al, “Views of U.S. Physicians About Controlling Health Care

Costs,” Journal of the American Medical Association [JAMA], July 2013; 310(4):380-388.)

My take: the findings are not surprising: that most U.S. physicians feel some sense of

responsibility to address health care costs but regard it more important to others—plans,

lawyers, hospitals, et al—is the result of the decades-old model of physician training that

encourages exclusive attention to “patient care” and disregard for costs. Until training

programs make cost, waste, efficiency, and consumer engagement part of the curriculum,

licensing agencies incorporate these competencies into their credentialing, and

consumers and employers demand physician engagement, it’s not likely to change. Being

cost conscious does not negate quality of care; it enhances it. To consider the financial

constraints of a patient when determining the appropriate course of care is to assist

consumers in adhering to their treatments, which is directly linked to improved outcomes.

And where patient resources are at odds with the most cost effective and evidence-based

recommendations, the system of care should build in mechanisms to secure funds. For

physicians to maintain their esteem as the most trusted advisor to their patients, they

must take on responsibility for advising about quality and costs, and utilize tools in their

practices that allow instant access to needed information (tools) supportive of both.

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Parents with insurance and a pediatric physician relationship use retail

clinics for convenience Methodology: self-administered survey of 1,484 parents in 19 pediatric practices in a

Midwestern practice-based research network.

Key findings:

23.2% of parents who used a retail clinic for pediatric care were also more likely to use it for themselves, have more than one child, and be older.

74% first considered going to the pediatrician, but used the retail clinic instead because it had more convenient hours (36.6%), no office appointment was available (25.2%), they did not want to bother the pediatrician after hours (15.4%), or they thought the problem was not serious enough (13%).

47% of retail clinic visits occurred between 8 a.m. and 4 p.m. on weekdays or 8 a.m. and noon on the weekend.

Most common reasons for visits: acute upper respiratory tract illnesses (sore throat, 34.3%; ear infection, 26.2%; and colds or flu, 19.2%) and for physicals (13.1%).

7.3% recalled the retail clinic saying it would inform their pediatrician of the visit, and

only 41.8% informed the pediatrician themselves.

(Source: Garbutt, J.M., et al, “Parents’ Experiences With Pediatric Care at Retail Clinics,”

JAMA Pediatrics, July 2013)

My take: convenience is important to consumers, including parents with existing pediatric

relationships. The health system must adjust its operating models, and physicians their

attitudes about consumerism in health care. It is not a fad; it is a sustainable trend.

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Fact file Long term trends in insurance coverage: the percentage of the population

covered by employer sponsored insurance (ESI) has gradually declined over the

past 15 years, lending to an increase in enrollment in government-sponsored plans

(Medicare, Medicaid), individual purchases, and increased numbers who go

without (uninsured). Some of the loss of ESI is attributable to workers who retire

and enter the Medicare program; some is due to employers dropping coverage due

to costs. In 2000, 70% of all employers offered coverage; in 2012, only 56%. And

increasingly, “coverage” for those providing ESI is in the form of a defined

contribution plan with a high deductible, thus exposing workers to higher out-of-

pocket costs.

Insurance premium costs: health insurance coverage is substantially more

expensive than other forms of insurance for households that pay a premium.

(Source: “Table 1202. Income before taxes: Annual expenditure means, shares,

standard errors, and coefficient of variation, Consumer Expenditure Survey, 3rd

quarter 2011 through 2nd

quarter 2012,” Bureau of Labor Statistics, Consumer

Expenditure Survey, September 25, 2012)

Relationship between premiums and wages for workers: for a dozen years, the

gap between annual wage increases for workers, and their costs for insurance

coverage, has widened annually.

(Source: “Survey of Employer-Sponsored Health Benefits, 1999-2012,” Kaiser

Family Foundation, September 2012)

Employer sponsored insurance: percentages in each demographic group who

have health coverage through their employer:

% Coverage

Demographics 2008 2009 2010 2011 2012

Change,

2012 vs. 2008

$90,000 + per year 72% 72.1% 71.2% 70.4% 69.2% -2.8%

$36,000-$89,999 per year 65.6% 63.9% 61.1% 58.7% 56.7% -8.9%

Aged 26-64 61.6% 59% 58.1% 56.7% 56.3% -5.3%

White 50.7% 48.5% 47.3% 45.9% 45.8% -4.9%

Male 50.7% 48.5% 47.3% 45.9% 45.8% -4.9%

Total 49.2% 46.8% 45.8% 44.6% 44.5% -4.7%

Female 47.8% 45.2% 44.4% 43.4% 43.3% -4.5%

Black 44.5% 39.9% 38.8% 38.1% 37.3% -7.2%

Aged 18-25 33.3% 31.9% 31.1% 31.1% 32.4% -0.9%

Hispanic 34.1% 31% 31% 28.3% 29% -5.1%

Less than $36,000 per year 26.8% 25.9% 24.7% 23.7% 22.7% -5.9%

Aged 65+ 12.4% 11.4% 11.8% 11.9% 11.8% -0.6%

(Source: Gallup, “Fewer Americans Getting Health Insurance From Employer,”

February 22, 2013)

Public confidence/trust in insurance companies:

Harris Poll (2010): comparison by industry

o "When asked which of a list of 17 industries are generally honest and

trustworthy, almost half (48%) of all adults say ‘none of these’—the highest

number giving this negative response since we first asked this question in

2003.”

o The industries that are trusted by the most people are supermarkets (29%,

down 11% from 2003), hospitals (29%, down 5% from 2003), banks (20%,

down 15% since 2003), and electric and gas utilities (19%, up 5% since 2005).

The industries that are trusted by the fewest people are tobacco (2%, down 1%

since 2003), oil (4%, unchanged since 2003), telecommunications (7%, down

5% since 2003), managed care companies (7%, up 3% since 2003); and

health insurance companies (8%, up 1% since 2003).

o The industries that the largest numbers of people believe should be more

regulated are oil (47%), pharmaceuticals (46%), health insurance (42%),

tobacco (38%), banks (34%), and managed care (34%).

o Majority of the public say that they have at least some trust in industries that

handle personally identifiable information to do so in a confidential and secure

manner, including banks (70%), hospitals (69%), life insurance (57%), health

insurance (55%), online retailers (55%), software companies (54%), and

pharmaceutical companies (53%). However, less than a quarter of all adults

have a “great deal of trust” in any industry.

(Source: Harris Poll of 2,151 adults surveyed online between November 8 and 15,

2010)

Gallup Poll (2012): perceptions of occupational honesty and ethics for 22

occupations:

o Top five: nurses (85%), pharmacists (75%), medical doctors (70%), engineers

(70%), and dentists (62%).

o Bottom five: car sales people (8%), members of Congress (10%), advertising

practitioners (11%), stockbrokers (11%), and health maintenance organization

(HMO) managers (12%). Note: “insurance sales people” was next at 15%.

(Source: Gallup Poll, November 26-29, 2012)

GfK Custom Research North America (2011): analysis of public views of

industries comparing overall views vs. views of "influential" Americans:

o "Interestingly, insurers fared poorly against other industries when it comes to

public trust. For example, while 71% of respondents expressed trust in the

retail sector and 65% expressed trust in packaged food manufacturers, only

39% expressed trust in insurance companies. Indeed, only financial services

companies (35%) and the federal government (31%) tallied a lower degree of

trust among respondents.”

o One bright note for insurers is that they fared better among “Influential

Americans,” a leading-indicator segment identified by GfK that it says

represents “the 10% of Americans most involved in creating change in society.”

The Influential Americans stand out for being less critical than the average

American surveyed, with 44% indicating that they trusted the insurance

industry. “Trust is one of the most important factors that American corporations

need to focus on if they are going to engage and retain their most loyal and

influential customers.”

(Source: GfK Custom Research North America survey, released July 15, 2011)

Public view of “who is to blame for high health costs”: the public blames

hospital costs along with a myriad of other causes for health costs—insurance

administrative costs are considered a factor, but “insufficient competition in the

health insurance market” is by comparison not considered a major contributor to

health costs.

Health exchange premium estimates: based on the lowest cost silver plan in

each market, the range for individuals will be between $226/month in New Mexico

to $400/month in Vermont in 2014. Some individuals will be eligible for a subsidy.

Costs of chronic care: the costs for seven of the most common chronic illnesses,

in costs and lost productivity, is expected to hit $4.2 trillion in 2023, up from $1.3

trillion in 2003. (Source: Milken Institute)

Life expectancy: there was no significant change in life expectancy for women in

more than 1,400 counties in the U.S. over the last quarter century. In 154 counties:

the highest life expectancy for men increased from 75.5 years in 1985 to 81.7

years in 2010, and the lowest life expectancy remained under 65, which ranks

below Indonesia. The highest life expectancy for women increased from 81.1 years

to 85 years during that time, and the lowest life expectancy remained at about 73

years, lower than Botswana. Women in Marin County, CA live the longest, at an

average of 85 years, which is longer than women in Spain and France. Women in

Perry County, KY have the shortest average life expectancy at 72.7 years, which

puts them behind women in Russia and Vietnam, according to the study, which

was published online. (Source: Population Health Metrics, July 10, 2013)

May health care costs: health care prices grew 1.0% in May 2013 vs. May 2012;

the 12-month moving average, at 1.7%, is the lowest since September 1998.

National health expenditures, combining prices and utilization, grew 4.2% in May,

and revised data for the first quarter of 2013 put spending growth at 3.8%, below

the record low levels seen annually since 2009. (Source: Altarum Institute analysis)

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Deloitte Center for Health Solutions research To learn more about recent Deloitte thought leadership, please visit Deloitte University

Press at www.DUPress.com.

Currently available: Hospital Consolidation: Analysis of Acute Sector M&A Activity—May 2013. Available

online at www.deloitte.com/us/2013hospitalconsolidation

Physician adoption of health information technology: Implications for medical

practice leaders and business partners—May 2013. Available online at

www.deloitte.com/us/2013physiciansurveyHIT

Breaking Constraints: Can incentives change consumer health choices?—March

2013. Available online at http://dupress.com/articles/breaking-constraints/?coll=3024

2013 Survey of U.S. Physicians: Physician perspectives about health care reform

and the future of the medical profession—March 2013. Available online at

www.deloitte.com/us/2013physiciansurvey

Health System Chief Information Officers: Juggling responsibilities, managing

expectations, building the future—February 2013. Available online at

www.deloitte.com/us/2013CIOstudy

Unlocking value in health plan M&A: Sometimes the deals don’t deliver—January

2013. Available online at www.deloitte.com/us/2013planconsolidation return to top

Read the blog

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Deloitte contacts

Paul H. Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions

(pkeckley@deloitte.com)

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(jblume@deloitte.com)

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(bcopeland@deloitte.com)

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Consulting LLP (jgirzadas@deloitte.com)

Harry Greenspun, M.D., Senior Advisor, Health Care Transformation and Technology,

Deloitte Center for Health Solutions (hgreenspun@deloitte.com)

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LLP (mitchmorris@deloitte.com)

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Strategies, Deloitte & Touche LLP (gserafin@deloitte.com)

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