How will Proposed Changes to CMS Telehealth Reimbursement Affect Adoption?
On Friday, October 26, the Centers for Medicare and Medicaid Services (CMS) announced several rule changes that affect how telehealth services will be covered under Medicare Advantage (MA) and the Medicare prescription drug program (Part D). These changes are in direct response to the Bipartisan Budget Act of 2018, which eliminated historical restrictions on telehealth reimbursement, and are intended to “improve quality of care and provide more plan choices for MA and Part D enrollees.”
Also included in the proposed rule changes are adjustments to methodologies and processes that should improve access to care, as well as recover funds from payments improperly applied to insurance companies. We view this as a positive development, especially as it relates to current and projected physician shortages. Greater reimbursement should allow for providing some basic services through telehealth applications, it is going to equip providers with the ability to “do more with less.”
Our recent report, Telehealth Beyond the Hospital, provides a detailed analysis of the telehealth market as a whole, but we felt it prudent to prepare a supplemental post to give a brief examination of how these rule changes could potentially impact the provision of healthcare services.
Telehealth services have previously seen limited implementation by MA plans because they have been traditionally classified as services covered by “supplementary medical insurance.” These new rule changes shift the classification of telehealth services to the “basic benefits” category. We have witnessed lagging adoption rates of telehealth technologies over the last several years, and view the inclusion of these services into the basic benefits category as a necessary step to increase their rate of use.
CMS expects that the inclusion of telehealth services in the basic benefits category will spur more MA plans to offer these benefits beginning in 2020, and increase their support of these services in subsequent years. This isn’t happening in a vacuum, and is in line with the broader push to promote telehealth services as viable alternatives and supplements to traditional care options. The move towards parity between physical visits and telehealth services has shown to increase reliance on telehealth services before: Michigan has seen a “77.5% increase in Telemedicine encounters after supporting service parity in telemedicine.”
This isn’t happening in a vacuum and is in line with the broader push to promote telehealth services as viable alternatives and supplements to traditional care options.
Recent surveys have shown that patients are growing more and more amenable to remote care options, especially if it reduces their out-of-pocket costs. The opportunity cost of non-reimbursed care is one of the primary barriers to provider adoption of telehealth services, and by removing this barrier we will hopefully see further alignment between providers and patients on this issue.
We see this alignment as a part of the greater industry shift towards value-based care (VBC). As we noted in our Patient Relationship Management (PRM) Market Scan Report, engagement was one of the areas where adoption of these new technologies for VBC was exceeding expectations. Increased reimbursement for telehealth should continue this positive trend and hopefully allow for the realization of some PRM benefits.
We predict that the CMS rule changes will encourage diversified managed care organizations (MCOs) to expand their current commercial telehealth contracts to their MA business and also potentially drive the adoption of telehealth offerings among that trend.
These new rule changes have a large potential upside for all players in the telehealth market, but it is important to note that telehealth adoption has been incremental over the last several years and there is no reason to predict a stark diversion from that trend.
We predict that the CMS rule changes will encourage diversified managed care organizations (MCOs) to expand their current commercial telehealth contracts to their MA business and also potentially drive the adoption of telehealth offerings among that trend.
Vendors looking to capitalize on this incremental market growth are going to have to navigate the differing needs of commercial and Medicare providers. For commercial providers, telehealth is seen primarily as a cost-savings and efficiency tool. For Medicare providers, they are looking most closely at telehealth as a way to promote post-acute care management and patient engagement. To effectively sell to Medicare providers, vendors are going to have to tailor their tools and pitches to hit on the appropriate pain points.
As the costs of chronic condition management skyrocket, looking for innovative telehealth solutions is of paramount importance. Reclassification as basic services and simplification of the reimbursement process will certainly help vendors supplying these solutions overcome potential buyer uncertainty on the ROI of their products.
The most important takeaway from these rule changes from an HCO perspective is that the future of value-based care is arriving quickly. HCOs need to prepare for this future by refreshing their care delivery strategies, especially as it relates to primary care. The primary care environment is changing, and HCOs need to closely examine what they need to provide in terms of physical locations, providers, and services for their patient populations. They then need to craft strategies to meet these evolving requirements.
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Humana-Walgreens Partnership: Primary Care Focused on Medicare Advantage
Medicare Advantage (MA) continues to show the most robust growth of any line of business for health insurers. Overall MA growth was 7.8% year over year in July 2018, reaching 21.4 million, while Part D enrollment grew to 25.5 million. To better serve these members, health insurers are considering several strategies – one of which is operating primary care clinics that exclusively focus on Medicare patients.
On June 19, Humana (NYSE: HUM) and Walgreens (NASDAQ: WBA) jointly announced a partnership under which Humana will initially operate two senior-focused primary care clinics inside Walgreens retail stores in the Kansas City, Missouri area. The clinics will open under Humana’s Partners in Primary Care banner; they will join four existing Kansas City area clinics, opened in 2017, which share the same name. The two co-located clinics are slated to open in the fall and occupy ~2,500 square feet (~25% of an average Walgreens store).
These clinics will have their own separate entrance, with an exit into the Walgreen’s pharmacy. While the companies are not sharing details on the nature or economics of the partnerships, Humana did note that it will operate the clinics and staff the doctors and accept a variety of Medicare coverage, including fee-for-service, MA, and Medicare Supplement plans. The clinics will serve seniors exclusively; Humana expects they could take 3-4 years to reach capacity. The companies noted that the collaboration could expand into other markets over time.
This partnership shows how both Humana and Walgreens are focusing more heavily on their longer-term clinical strategy and responding to other competitors “front door to care” strategies.
For Humana, this pilot is a logical extension of the company’s longstanding commitment to an integrated care model that more closely aligns primary care, pharmacy, in-person health plan support, and other services for Humana’s MA and Part D members. It also follows recently acquired minority/joint venture stakes in home health and hospice providers Kindred and Curo.
Humana believes the convenience of the retail pharmacy model should help make primary care more accessible to seniors. In addition to the co-located Partners in Primary Care clinics, Humana representatives will work in select other Walgreens stores to provide general assistance on health-related services to Humana Medicare members and other customers. These in-store “health navigation” services will be available at no cost to members inside the Walgreens pharmacy store (as opposed to the co-located clinic).
The Partners in Primary Care model offers integrated services that “go beyond addressing acute and immediate health issues, and [focus] on developing long-term relationships with patients living with chronic conditions.” In addition to the four wholly owned, standalone clinics that opened in Kansas City in 2017, Humana operates two clinics under the Partners in Primary Care banner in Greenville, SC and another in Gastonia, NC.
All of these providers are risk-bearing for Humana, as will be the locations co-located with Walgreens; the latter may or may not bear risk with other payers, depending on the contracts struck with third parties. Importantly, the collaboration with Walgreens does not preclude Humana from striking any other potential arrangements with other retailers. Humana will also continue to work with Walmart on a partnership that encompasses a value-oriented, co-branded Medicare Part D plan as well as other in-store consultative efforts.
Walgreens has recognized the need to make changes to its store format and is exploring various partnerships that will add new services. This announcement with Humana appears consistent with a strategy of incremental, capital-light partnerships with other healthcare services providers to convert its stores away from retail toward a more comprehensive healthcare offering.
Others within the healthcare continuum have received more attention for their efforts to provide a more convenient location to access healthcare services – namely CVS Health with its acquisition of Aetna. But Walgreens has been actively growing its suite of healthcare services that can be offered both inside and outside the retail pharmacy: Partners in Primary Care with Humana, MedExpress with UnitedHealthcare, LabCorp PSCs, Walgreens Hearing, Walgreens Optical, and its new Find Care Now telehealth service.
In addition, Walgreens is piloting a set of differentiated service offerings in the Gainesville, FL market. These include Walgreens Plus (a subscription-based, in-store savings program with an option for free same-day prescription delivery) as well as an in-store partnership with Sprint for phone purchase and activation.
It appears that any new store concept is very much a work in progress, and Walgreens expects to update investors on its store strategy in about a year. We expect Walgreens to test the “Partners in Primary Care” concept in these two test stores before making a decision to roll it out more broadly, as with its other pilots.
We see four key questions about the Humana-Walgreens partnership.
Humana has stated that it could take 3 to 4 years for the two new clinics to reach capacity. Humana did not provide details on how it will advertise these new clinics to new or existing Humana MA beneficiaries, what types of MA beneficiaries are likely to enroll in these clinics, and how it might convince MA beneficiaries to switch from the long-term relationships they have with their PCPs. These clinics might be a good fit for certain Humana MA beneficiaries (e.g. patients within walking distance of a Walgreens or patients without a regular PCP) – but it would not be surprising to see these clinics struggle to reach capacity unless they hire an existing PCP or two who can bring a large patient panel of MA beneficiaries.
Assuming a patient panel of 500 to 700 MA patients per physician at these new clinics, they are likely to only serve 1,500 to 2,000 Medicare patients in addition to the four existing Partners in Care clinics in the Kansas City area. Humana currently supports more than 65,000 MA and Part D prescription drug members in the Kansas City area. Will those few thousand beneficiaries regularly seeking care at Walgreens be enough to decrease hospital admissions and ultimately the medical loss ratio?
While Humana has acknowledged that retail could be a powerful distributor of provider capabilities for its MA members, its view that model as still unproven. Humana expects to experiment with smaller, more targeted retail initiatives vs. broader ones, at least in the near term. Walgreens as well appears to be in no rush to rapidly expand this concept either, with its pilot starting at two sites and expected to last at least 12 to 18 months.
It has not been disclosed if Partners in Primary Care is using a commercially available EHR or choosing to build its own product. Some primary care clinics focused on the MA population, such as One Medical, use a commercially-available EHR (eClinicalWorks). Others such as ChenMed and Iora Health have chosen to build much, if not almost all, of their own IT offerings, including a proprietary EHR. The startups that have built proprietary solutions felt that commercially available EHRs were not well-suited for their patient populations for several reasons (such as insufficient HCC coding and documentation support); as long as they only served the Medicare population, they found they were better off building and maintaining their own EHR.
We expect this type of coordinated care services model for MA beneficiaries to expand to other geographies over time. While this partnership is immaterial to either Walgreens’ or Humana’s financials over the next few years, it shows how both companies are focusing more heavily on their longer-term clinical strategy and responding to other competitors “front door to care” strategy for MA – especially CVS-Aetna and UnitedHealthcare-WellMed.
Promoting Interoperability: MU Fades to Black
Seeking to liberate the industry from its self-created morass of siloed data and duplicative quality reporting programs, the Department of Health and Human Services (HHS) issued 1,883 pages of proposed changes to Medicare and Medicaid. It renamed the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs (known by all as Meaningful Use) to Promoting Interoperability Programs (PI).
As widely reported, it would eliminate some measures that acute care hospitals must report and remove redundant measures across the five hospital quality and value-based purchasing programs. It would also reduce the reporting period to 90 days. HHS will be taking comments until June 25, 2018.
HHS believes that APIs will solve all of the problems that patients and healthcare stakeholders have with data access. HHS also seems prepared to declare that TEFCA compliance and 2015 Edition CEHRT guarantees that those APIs are in place.
HHS believes that requiring hospitals to use 2015 Edition CEHRT in 2019 makes sense because such a large proportion of the hospitals are “ready to use” the 2015 Edition. Ready to use is not the same as using. 2015 Edition EHRs may not be as widely deployed as HHS indicates. The following 10 month old snapshot from ONC shows hospitals have not aggressively moved to adopt 2015 Edition CEHRT.
Current adoption levels by HCOs are undoubtedly better, and many vendors have 2015 Edition technology ready to go, but hospitals can only change so fast. The rush to get hospitals on the most current edition has to do with the most relevant difference between the 2014 and 2015 Editions – the API requirement. APIs will be the technical centerpiece of better, more modern interoperability but adoptions levels are still low. APIs, by themselves, offer the promise of better data liquidity. For this promise to become a reality, healthcare stakeholders need more than just a solid set of APIs.
HHS is also proposing that hospitals post standard charges and to update that list annually.
This is a nice thought, but it will take some heavy lifting to pull this off. For starters, HHS doesn’t even have a definition of “standard charge” and is seeking stakeholder input before the final rule is published. HHS also must determine how to display standard charges to patients, how much detail about out-of-pocket costs to include (for patients covered by public and private insurance), and what noncompliance penalties are appropriate.
Above all, there’s the thorny issue of establishing what a standard charge is in the first place. Charges vary by payer. Can a hospital truly state, without a doubt, the cost of an MRI or a colonoscopy? Most cannot – and technology alone will hardly solve this problem.
The existence of APIs will stand in the stead of the old view/download/transmit (VDT) requirement. Regarded as one of meaningful use’s most troublesome and fruitless requirements, this rule has been shed by HHS because of “ongoing concern with measures which require patient action for successful attestation.”
VDT is one of several MU Stage 3 requirements pertaining to patient engagement – along with providing secure messaging or patient-specific educational resources – that HHS has proposed dropping, under the pretense that it is “burdensome” to healthcare providers. While hospitals have struggled to get many patients to participate, the VDT requirement set the bar at one patient out of an entire population. What’s more, dropping the requirements fails to take into account how burdensome it is for patients to try to access their data, communicate with their physicians, and learn about their conditions and treatment options. It is also contrary to CMS Administrator Seema Verma’s remarks, first at HIMSS18 and again this week, indicating that the agency seeks to “put patients first.”
HHS says that third-party developed apps that use APIs will deliver “more flexibility and smoother workflow from various systems than what is often found in many current patient portals.” Whether such apps deliver “smoother workflow” is not a foregone conclusion.
HHS proposes “a new scoring methodology that reduces burden and provides greater flexibility to hospitals while focusing on increased interoperability and patient access.” The proposed scoring methodology uses a 100-point system (explained over 24 pages) in which attaining a score of at least 50 means there will be no Medicare (or Medicaid) payment reduction.
HHS is also mulling whether to abandon these measures altogether in favor of scores calculated at the objective level.
The biggest regulatory effort in recent months related to interoperability, other than this proposal, has been ONC’s proposed Trusted Exchange Framework and Common Agreement (TEFCA), required under the 21st Century Cures Act. TEFCA, well along in the planning stages, is a new set regulations from ONC whose goal is to catalyze better data availability using APIs. HHS in this regulation wants public comment on whether participation in a TEFCA-compliant network should replace the process measures in Health Information Exchange objective. Stated another way: Should TEFCA compliance replace 80 percent of the score for PI (75 percent in 2020)?
TEFCA is widely expected to provide a safe harbor from data blocking liability although ONC has been mum on this point. TEFCA then could do double duty: Eliminate the need to meet or report on health information exchange metrics and provide a shield from data blocking enforcement.
But there are, as yet, unanswered questions about TEFCA:
HHS is also considering doing away with Public Health and Clinical Data Exchange objective. It floated the idea that a provider that supports FHIR APIs for population-level data would not need to report on any of the measures under this objective. This would replace 90 percent of the score for PI (85 percent in 2020) when combined with the TEFCA knockout.
The specific API mentioned, called Flat FHIR and still in development, will probably contribute to part of the complex process of public health and registry reporting. This activity currently requires highly skilled data hunter-gatherers, usually with clinical credentials. In many organizations, these hunter-gatherers manually sift and collate multiple data sources to meet the varied requirements of the recipients of different registries. Flat FHIR, assuming it were production-ready, will certainly help, but it is unlikely that it could provide all, or even most, of the information needed for the range of public health reporting programs.
HHS acknowledges that providers are less than thrilled with aspects of the Quality Payment Program (QPP). HHS wants to know how PI for hospitals can better “align” with the requirements for eligible clinicians under MIPS and Advanced APMs. In particular, it wants ideas about how to reduce the reporting burden for hospital-based MIPS-eligible clinicians. It is undoubtedly looking for market-acceptable ideas to reduce the reporting burden where it is arguably more deeply felt – among non-hospital-based MIPS-eligible clinicians. While reducing or eliminating the reporting burden would help such providers, the big unanswered question, as it is with hospitals, is the burden of getting to 2015 Edition CEHRT.
HHS also asks the industry how it could use existing CMS health and safety regulations and standards to further advance electronic exchange of information. It is ready to change Conditions of Participation (CoPs), Conditions for Coverage (CfCs), and Requirements for Participation (RfPs) for Long Term Care Facilities regulations to this effect. It wants to know whether requiring electronic exchange of medically necessary information in these regulations would move the interoperability needle.
HHS believes that APIs will solve all of the problems that patients and healthcare stakeholders have with data access. HHS also seems prepared to declare that TEFCA compliance and 2015 Edition CEHRT guarantees that those APIs are in place. It roundly ignores the mesh of incentives that make stakeholders unwilling to share data and patients unable to access data. The industry has cried out for less process reporting and better insight into outcomes for years. This will accomplish the former but set the industry back with respect to the latter if interoperability is declared solved based on technology alone.
One More Step in the Long Road of Precision Medicine
For any new therapy, diagnostic or device brought forth by our healthcare innovation community, there are three high-level barriers generally encountered on the path to commercialization: Regulatory approval, payment confirmation (generally coverage by public and/or private healthcare payers) and adoption by healthcare providers. For new classes of therapy, such as genetically targeted therapies and their companion diagnostics, there is often a greater challenge to pass regulation, assure coverage and gain adoption since there is little precedent.
As of mid-March, there is new precedent to leverage for gene-based diagnostics and all stakeholders in the development of genomics applications in medicine. Following the November 2017 approval by the FDA of Foundation Medicine‘s FoundationOne CDx, (F1CDxTM), the Centers for Medicare & Medicaid Services (CMS) proposed a National Coverage Determination (NCD) for diagnostic lab tests that include Next Generation Sequencing (NGS). These first steps were the culmination of a great deal of work by industry players, researchers and regulators. On March 16, 2018, CMS announced a finalized NCD for NGS for Medicare patients with advanced cancer (including Stage III, Stage IV, recurrent, relapsed, refractory or metastatic cancers). These are diagnostic tests that, as companions to other diagnostics, identify treatment options based on certain genetic mutations.
As policymakers and payers take on the burden of cost coverage, the progression of the healthcare sub-industries focused on leveraging patient’s genetic and other “-omic data” will benefit from the step toward better coverage.
The burden of payment for genetic sequencing was a topic of discussion at HIMSS18 among players in the space of gene-based therapy (HIT, providers, etc.). Prior to the CMS coverage decision, patients often had only the option to pay out of pocket for genetic sequencing. Based on this NCD, Medicare patients with advanced cancer have coverage. That coverage will be limited to FDA approved diagnostics, such as F1CDxTM, but the test results may be used both to match patients with FDA-approved gene based therapies and to identify patient candidacy for clinical trials of therapies not yet approved by the FDA. This potentially charts a clearer, more predictable path for additional NGS diagnostics in development, not only because of payment and regulatory precedent, but importantly because of the potential to speed up clinical trials for gene based therapies if candidates are identified more quickly.
Patients diagnosed with cancer, or really any life-threatening condition, want and deserve access to the latest proven advancements in medicine. This NCD marks a big step in patient access and for development of targeted therapies and companion diagnostics. It also brings stakeholders attention to the looming challenge of payment at a systemic level. This remains a primary focus of the discussion among payers and policy makers.
CMS Administrator Seema Verma and other high-ranking Government officials have discussed their intentions to curb costs for Medicare and Medicaid specifically related to novel genetically targeted therapies because they come at notably high cost. Therapies of this type can be priced between $300,000 and $500,000, with some reaching as high as $1 million. CMS does not negotiate prices, so its efforts to reduce the cost burden are focused on alterations to the format of payment for state agencies and managed care organizations who do. Some concepts floated by officials include paying less for a given drug based on the target indication used with a patient, or paying for high-cost drugs over a longer period of time. The CMS final NCD for genetic sequencing diagnostics only further brings this cost challenge to the forefront.
As policymakers and payers take on the burden of cost coverage, the progression of the healthcare sub-industries focused on leveraging patient’s genetic and other “-omic data” will benefit from the step toward better coverage. However slow and bumpy the progress may seem, expect to see continued or accelerated investment in diagnostics and therapy by both public research sources as well as private equity.
As these areas of investment continue, HIT vendors will have an opportunity to differentiate. Cancer in particular offers a slightly more carved out business channel for vendors to target with specialized solutions and a big market to warrant the investment. Cancer patients often have large care teams to manage, often have greater needs to make contact with the care team or show up for therapy and have a lot of test results to manage. EHR systems, telehealth companies, care management, risk based business models and other subsets of HIT all have an opportunity for differentiation within this specialized care community.
Vendors such as Flatiron, recently acquired by Roche for $1.9 Billion, Syapse, 2bPrecise, Orion Health and others have taken early focused steps both with respect to “Precision Medicine” and to advancements in oncology care (as the CMS NCD specifically pertains to). Healthcare IT vendors, with this NCD, have yet another signal to consider the role of genomic and other comparable complex data types in their systems.
Here are a few specific applications to keep an eye on related to this evolution:
As NGS data becomes more readily available and expected as a component of care, analysis and facilitating utility of these complex forms of data will be an opportunity for competitive advantage.
Provider Directories: An Opportunity Fraught with Challenges
A primary goal of insurance expansion under the Affordable Care Act was to improve access to healthcare. Yet as thousands of people are finding, simply having insurance coverage does not guarantee that ‘the doctor will see them now.’
Due to poorly managed provider directories, a significant percentage of clinicians who are listed on a health plan’s website may not be operating at a given facility, accepting new patients, accepting certain insurance plans, or even actively practicing.
The Center for Medicare and Medicaid Services (CMS) has taken matters into their own hands with a series of regulations and reforms aimed to improve consumers’ experiences and protect them from out-of-network charges. These looming requirements around the creation and upkeep of accurate, up-to-date provider directories offer an opportunity for technology companies – though not without a fair set of challenges for vendors as well as health plans themselves.
Consumer-Driven Forces Disrupting Primary Care
The traditional model of consuming healthcare services is changing. Frustrated consumers – accustomed to the technological advances that have improved air travel, retail, and a host of other industries – increasingly eschew the doctor’s office for newer, more convenient care delivery models. They’re even willing to pay more for these services.
This ongoing shift forces all healthcare organizations, from solo practices to sprawling academic medical centers, to reconsider how they treat low-acuity conditions now and plan to address chronic care management in the future. This month’s Domain Monitor will examine how retail health, telehealth, and direct primary care continue to threaten the traditional model of primary care, identify the challenges that these types of “convenient care” pose, and explain how prudent healthcare IT vendors can address these challenges.
Connected Care: Are We There Yet?
Healthcare organizations (HCOs) are acknowledging the need for next generation tools to realize the promise of newer models of cost-effective, outcomes-driven population health management. As reimbursement changes and business challenges put pressure on the current model of one-to-one, episode-based treatment, the need has emerged for continuous data collection on high-risk patients, in a one-to-many management framework. Yet the reality on the ground is less clear. While the general value proposition of connected care is well understood at this stage, the specific business case remains murky: which use cases, disease states, and patient populations provide the best starting point? To what extent can existing investments be leveraged to enable new models? How much do these solutions cost, and what is the anticipated ROI? With so many vendors angling to serve this market, which approaches rise to the top?
The Promise and Challenges of Analytics Marketplaces in Healthcare
Plug-and-play data analytics or finding ways to more efficiently export algorithmic models to use with large datasets has been steadily entering fields outside healthcare over the past two years. Data markets have been around for several years with offerings such as data.com (Salesforce), the Azure Marketplace, Factual, Socrata’sOpenData, Infochimps.com and DataMarket.com to name a few. These markets exist so that companies have the option of outsourcing parts of the data value chain to third parties who can extract insights.
Algorithmia.com is one example of a general marketplace for building and sharing algorithms and for making them available as a web service. We’ve seen over the years a number of data markets emerge and the next step in their evolution could also be in the direction of these new algorithmic markets. LexisNexis Health Market Science has another type of health data market with claims data in a national level warehouse containing data from all of the major payers totaling nearly 1.2 billion claims that have been scrubbed and anonymized. Clients have the ability
to obtain market insights on referrals – market dynamics for facilities.