Key Takeaways

• CMS-proposed rule changes extend Medicare Advantage and Part D plan coverage for telehealth services starting in 2020
• Proposal includes enhancements to the Star Ratings methodology, which include updating the cut-point determination methodology as well as adjustments for Star Ratings in times of uncertainty, such as hurricanes.
• Under the proposed changes, starting in 2019 in Medicare FFS, CMS will reimburse for virtual check-ins, evaluation of patient submitted photos, and prolonged preventive services regardless of patient location and care facility.

What the Rule Changes Mean

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.

Easing Reimbursement via Classification

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.

Driving Near-Term Adoption: Patient Satisfaction and Ease of Access

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.

Impact on Providers and Vendors

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.

Conclusion

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.

Key Takeaways:

• Humana and Walgreens jointly announced a partnership for Human to operate senior-focused primary care clinics in Walgreens stores.
• This comes as a response to a clear industry need for new “front doors to care” and other investments in retail health by competitors to both companies.
• We predict these sorts of deals and services will expand in number and into other regions with these and other companies in response to unsustainable healthcare spending.

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.

Overview

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.

Outlook: Humana

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.

Outlook: Walgreens

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.

Looking Ahead

We see four key questions about the Humana-Walgreens partnership.

Will patients come?

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.

Will it actually bend the cost curve?

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?

How quickly will the model expand?

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.

Will they build or buy an EHR?

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.

By Brian Murphy and Brian Eastwood

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.

Certified EHRs as Enablers of Interoperability

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.

Figure 1: Adoption Levels of 2015 CEHRT
Source: Office of the National Coordinator for Health Information Technology. ‘Certified Health IT Developers and Editions Reported by Hospitals Participating in the Medicare EHR Incentive Program,’ Health IT Quick-Stat #29. Available at https://dashboard.healthit.gov/quickstats/pages/FIG-Vendors-of-EHRs-to-Participating-Hospitals.php.

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.

Price Transparency: Easier Said Than Done

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.

Patients (Not) Using Their Data

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.

Reporting Burden Reduction

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.

Table 1: Proposed Scoring Methodology for Promoting Interoperability Program (PI)

HHS is also mulling whether to abandon these measures altogether in favor of scores calculated at the objective level.

The TEFCA Angle

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 21^st 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:

1. How much will it cost providers to comply and can they make money for providing access to their data?
2. Will TEFCA compliance, as a practical matter, accomplish anything? Will it make it easier for healthcare stakeholders to use each other’s data?

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.

MIPS and APM Concerns

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.

Mandating Interoperability with Other Regulations

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.

Bottom Line

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.

CMS decision removes important barrier for some Medicare cancer patients to access next generation sequencing and companion targeted therapies as well as potential clinical trials.

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, (F1CDx^TM), 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 F1CDx^TM, 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:

• EHR systems should have workflows to manage needs of patients who can benefit from existing gene-based therapies. This may or may not include more complete sources of “-omic data,” but the trend will be to gather more insights from these kinds of data even if not maintained directly within the EHR.
• HCOs with IT infrastructure and processes to help patients identify potential alignment with clinical trials should consider how they will add to their existing systems to include genomic sequencing and facilitate candidacy evaluation based on findings of such diagnostic information.
• HCOs should consider how they will properly educate and inform the patient and relevant members of the care team with respect to NGS.
• HCOs should consider how factors related to NGS will be communicated across the care team.

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.

November saw the acquisition of yet another HIE vendor by a payer (Humana). An in-depth analysis of this acquisition and its implications was provided to Chilmark Advisory Service (CAS) clients at the end of November. Following are abstracts of the three research notes in our latest Monthly Update.

Humana Leaps Into the HIE Market
The health insurance industry is undergoing massive upheaval. Payers don’t need a crystal ball to see that in the near future, providers will sell services directly to employers, and that insurers need to get creative in order to stay competitive. With its acquisition of HIE vendor, Certify Data Systems, Humana joined two other payers in the HIE market: Aetna and UnitedHealth Group. Yet Humana’s strategy sets it apart from the other payers. On a single day in November, Humana announced not one but three acquisitions: Certify plus two Florida-based managed care service organizations. Humana has clearly articulated its plan to become the preferred Integrated Delivery Provider to Medicare Advantage members and dual eligibles. By adding Certify’s strong HIE capabilities to its bag of tricks, along with the ability to deliver primary care directly to a large Medicare population, Humana has positioned itself to do just that. (more…)

On March 31st, the HHS’s Center for Medicare and Medicaid Services (CMS) dropped its neutron bomb (proposed Accountable Care Organization (ACO) rules, caution PDF) on the healthcare industry. Much like the neutron bomb, the proposed rules will leave buildings standing, but any healthcare organization (HCO) planning to become a successful ACO will need to decimate cherished internal processes to create new models of care delivery. Those new models of care delivery by an ACO are intended to meet three core objectives of these proposed rules:

1. Deliver better care for individuals
2. Provide better health for populations and
3. Lower growth on Medicare expenditures.

The proposed rules, which go by the overall heading of Medicare Shared Savings Plan (MSSP), provide as an incentive an ability for an ACO to share in the expected savings to CMS (it’s a rather complicated two tier structure) that also includes some downside risk should the ACO not meet some of the core objectives. To become an ACO, an HCO must have a minimum of 5,000 Medicare beneficiaries under management. The first round of applicants, who will sign-on to a three year ACO contract with CMS, will begin January 1, 2012. It is envisioned, these are proposed rules after all, that subsequent HCOs wishing to become an ACO may do so at the beginning of the calendar year.

The ACO rules have been anticipated for some time (they are an outcome of the Healthcare Reform Act) and at 429pgs, this document is quite a tome. The proposed rules are very expansive covering everything from ACO governance (a Medicare beneficiary must be on the Board), to ACO marketing (CMS wants to review ALL ACO marketing material), to quality measures & reporting, to how savings will be shared. We at Chilmark Research have reviewed a good portion of these rules and provide the briefest of summaries below focusing on the healthcare IT (HIT) aspects of these proposed rules.

Bottom-line:
Without a robust HIT infrastructure already in place, an HCO simply will not cross the chasm to becoming an ACO.

The above statement is about as brief and simple as we can make it regarding these proposed rules. CMS, along with its sister agencies that helped draft these rules, have set a very high bar for HCOs to leap over to meet these requirements. We predict that exceedingly few HCOs will make that leap in the inaugural year for the following reasons:

The ACO will need to report on 65 quality measures in five categories. Even though the quality measures chosen are well-known, accepted standards, few HIT systems today can automatically produce such reports. Thus the overhead burden of manually creating such reports may result in little upside gain for an HCO.

Core to the ACO model that CMS proposes is facilitating transitions in care via use of HIT (e.g., summary of care record) not only within the ACO but also beyond the ACO to whomever a beneficiary cares to see. This requires a level of local/regional health information exchange (HIE, the verb) that simply does not exist today in most communities. Sure, its coming but it won’t be ready in 2012.

An ACO must have at least 50% of its primary care physicians (PCPs) be “meaningful EHR users” as defined by the HITECH Act. The big challenge with EHR adoption under the HITECH Act has always been the small PCP practice. Will an ACO be able to aggregate enough of these practices to meet the 50% threshold?

Patient-centered care is a hallmark of these proposed rules with the term mentioned on nearly every page. A core objective that an ACO will need to meet is:

“…ACOs must have systems in place to identify high-risk individuals and processes to develop individualized care plans for targeted patient populations.”  And goes on to state: “The individualized care plans should include identification of community and other resources to support the beneficiary in following the plan.”

A robust HIT infrastructure will be required to facilitate and automate many of the processes required to identify at-risk populations and create and share those beneficiary-specific care plans. Very few HCOs today have the systems and processes in place to enable the creation and distribution of such care plans.

After reviewing these proposed rules the first thing that came to us was:

From an HIT perspective, meeting meaningful use criteria is a cakewalk in comparison to meeting these proposed ACOs rules, they are that big, that much of a game changer.

Clearly, CMS is taking this somewhat unique opportunity to create a future model for healthcare delivery that will meet those three core objectives mentioned at the beginning of this post. But in doing so, there is the very real danger that CMS has bitten off far more than it can chew, which will ultimately result in an even bigger bureaucracy at HHS than the one we have today and subsequently higher administrative costs. (Seriously, review all marketing material that an ACO proposes to use? What were they thinking?).

There is also the issue of HIT maturity in this sector and the woeful lack of process maturity that we discussed in a previous post. Exceedingly few HCOs will rise to the ACO challenge in the early years. Therefore, are we setting ourselves up for a colossal failure or more likely, a nation of haves and have nots wherein those communities with skilled, IT savvy HCOs will ultimately be able to capitalize on the MSSP at the expense of their smaller rivals? There is plenty of language in the proposed rules to prevent predatory and monopolistic practices but the threat is there just the same should one HCO, by becoming an ACO, become more profitable than their competitors down the street or across town squeezing them out of business.

One of my favorite sites is the Wall Street Journal’s Healthcare Blog.  You can almost always find any health-related topic that the WSJ publishes in its regular print edition here, which is nice.  But what I like is the ability to comment on specific articles or posts.  And what I like even more, is reading the comments of others which as a general rule are thoughtful and informative.

This week provides a particularly fine example.

On Feb 4th, the WSJ Health Blog had a short post discussing President Bush’s budget proposal and its impact on Medicare and Medicaid spending.  The posting is typical of WSJ’s high quality reporting standards and the comments…

Well, go see for yourself.   You’ll more than likely get quite an education.

This week, the LA Times has an interesting article on how major insurers Cigna and Aetna will be reimbursing physicians for providing online consultations.  It is encouraging to see these major payers step-up and support such practices. Other payers will likely follow as this could become a key service differentiator that would be attractive not only to just patients and physicians, but more importantly to these payer’s customers – employers.

Employers are aggressively looking to reign in healthcare costs, which continue to grow faster than just about any other cost an employer may have. This has led to a dramatic up-tick in interest by employers for employee health and wellness solutions including among others, PHRs. Some forward-thinking employers, however, are looking beyond just healthcare insurance costs. For example, enabling an employee to meet with their doctor online from the comfort (I use that term loosely) of their office at work rather than having to spend an hour or more driving to and from a doctor’s office is a nice productivity boost for that employer.

Taking it to the next level of embedding such physician-patient communication/consultation within the context of an employee’s PHR just adds to the value proposition (of course the PHR is absolutely secure and the employer has absolutely no access to identifiable employee data contained therein). The value here is that not only does the employee/patient share their PHR with a physician online but together, they can go over such things as recent lab results, review images, discuss action plans and keep a record of all communications right there within the PHR.

Since its inception, PHR vendor Medem has always felt that physician-patient communication was critical to the success of PHR adoption by both patients and physicians and structured their solution around that fundamental belief. In a conversation with Medem’s Chief Medical Office, Henry DesPhillips, last week as part or our PHR Research Study, DePhillips’s stated that they are seeing increasing interest for their solution from payers.  Medem traditionally has  marketed and sold their solution almost exclusively to physicians, pitching it as a platform physicians could use to  improve patient services and retention.  In light of the rapid changes now occurring among payers such as reimbursing physicians for online consultations, Medem expanded its marketing efforts in early 2007 directly targeting payers.  They are getting some traction in the market having landed Medical Mutual of Ohio in 2007. If more payers follow Aetna and Cigna’s lead, Medem is in a good position to experience some healthy growth as they are one of the few independent PHRs now in the market with strong patient-physician communications capabilities.  While Medem certainly has an early jump on its competitors, many who I’ve spoken with are currently developing similar capabilities that they plan to release in 2008.

Another, slightly different example is Kaiser-Permanente. Awhile back I did a post on their big PHR roll-out, though I was not all that enthused at the time as I am not a big fan of tethered PHR solutions. Despite my own reservations, Kaiser is seeing very strong adoption among its membership, upwards of 50,000 new users/month. And what is one of the key features of this PHR that all those customers are most excited about? Yup, online consultations and appointment scheduling with their doctor(s).  (Note: At the top of that LA Times article in a picture of a Kaiser physician providing an online consultation.)

To date, I have not come across any independent studies (if you know of any please enlighten me) that point to the efficacy of online consultations, be it improved outcomes, better quality of care, lower total costs of care, etc. Regardless, intuitively I believe there are significant savings here. Unfortunately, as that LA Times article points out, the big payer elephant in the room is the federal government (Medicare) who are loathed to adopt anything new and have no plans to adopt online consultation at this time.

This is unfortunate as the most recent budget proposal by President Bush looks to simple, across the board cuts in Medicare reimbursements rather than how technologies such as this may contribute to lowering the total costs of care delivery but that is another story…