Week of 6/03/2013

HRI regulatory center weekly newsletter

This week’s regulatory and legislative news

More healthcare pricing data made public

HHS made more healthcare pricing data public this week, one month after releasing a cache of average charges for inpatient services billed to CMS by 3,300 hospitals. This time, the government posted average charges billed for 30 outpatient procedures, such as endoscopies and nerve injections. HHS also posted county-level numbers on Medicare spending, utilization, and chronic conditions, and a user-friendly dashboard for comparing costs nationally. HHS Secretary Kathleen Sebelius announced the new release at Health Datapalooza IV, an annual conference held in Washington, D.C., which advocates for greater transparency of healthcare data.

HRI impact analysis: Data transparency is a priority for Sebelius, who has promised to continue to release similar troves and encourage the use of them through grants and competitions. The May release of inpatient data triggered a flood of stories by national and local media. As more data become available and more user-friendly, media and consumers will likely question how prices are set by hospitals and other healthcare providers. Some hospitals and physician groups have begun to reassess their pricing structures, tying them to costs and market conditions and ensuring they are defensible.

HHS data reveal physician EHR use, purchasing patterns

The Obama administration this week released detailed information about the number of physicians who are using electronic health records, including the types of systems purchased, their clinical specialty, and where they stand under the federal government’s “meaningful use” program. The data, released as part of a broader government initiative to assist researchers and developers, include information on 146,000 doctors across the U.S.

HRI impact analysis: Analysts can track a number of key market indicators, including the most popular EHR system used by providers in a particular state, region, or community. In 2013, for example, five EHR companies were being used by more than half of the 9,661 physicians who had recently purchased a system. The companies include Allscripts, NextGen Healthcare Information Systems, Epic, eClinicalWorks, and Cerner, according to the report. Tracked year-by-year, analysts can determine which systems fit best with certain physician practices—and which ones have fallen out of favor among providers participating in the government’s health IT incentive programs.

FDA reform heats up during summer months

Several FDA-related bills making their way through Congress this summer must overcome key hurdles in order to become law. At the top of the agenda is legislation targeting counterfeit medicines. On Monday, the House passed a bill to establish a system that would “track and trace” prescription drugs from manufacture to sale at the pharmacy counter. The Senate has its own plan to secure the drug supply chain but has yet to vote on it. The Senate bill would also increase FDA’s oversight of compounding pharmacies following a recent meningitis outbreak linked to tainted drugs. However, lawmakers in the House are not convinced that FDA needs additional authority to properly monitor compounded medicines.

HRI impact analysis: As drugmakers face continued pressure to demonstrate value and justify costs, a national track and trace system could help firms develop more efficient distribution systems and hone their marketing and sales programs. Manufacturers may also benefit from enhanced FDA scrutiny of entities that are large suppliers of compounded medicines. Requiring compounders to meet tougher quality and safety standards could help manufacturers even the playing field as they compete to be the supplier of choice for hospital pharmacies.

Insurance exchange rate announcement reflects market uncertainty

Covered California, the state’s newly-formed insurance exchange, recently noted that the 13 plans offering coverage in 2014 will charge premiums that are 29% below to 2% above the state’s average 2013 small group premiums. The announcement, however, sparked debate in policy circles over the value of comparing exchange plans to the current small group and individual markets. Current small group and individual markets do not cater to the population that the new marketplace targets in 2014. In addition, tax credits and discounts will cause the actual out-of-pocket expense for an exchange plan to vary significantly based on income.

HRI impact analysis: As the exchange markets take shape, there will be wide variations in design, pricing, and governance. In states such as California, insurers are required to compete for a spot on the exchanges—in those instances, competition may keep prices lower. In states that take a more laissez-faire approach to regulating plan participation, and/or where only a few plans apply to participate, rates could play out differently. The exchange population also remains a wild card, making it difficult to forecast likely cost and financial risk. For now, many—including some of the largest national insurers—are approaching the exchanges with caution, sticking to a limited number of familiar markets and waiting to see what happens in the first years of implementation.

Highmark, West Penn deal spurs strict oversight

State officials in Pennsylvania pledged to closely monitor the newly formed partnership between health insurer Highmark and the West Penn Alleghany Health System, issuing a wide range of rules that establishes antitrust firewalls, bans the use of exclusive contracts, caps the length of provider contracts, and prohibits so-called “most favored nation” deals. The strict terms come one month after the state’s insurance department conditionally approved Highmark’s acquisition of the health system, creating one of the largest integrated health networks in the nation.

HRI impact analysis: While a number of factors made the deal complex, the state’s ruling ultimately sets a high bar for future insurer and provider partnerships. It also telegraphs the degree to which state governments may regulate such deals even as they become more common. The conditions were designed to quiet concerns that Highmark would use its size and reach to tamp down competition. Under terms of the deal, Highmark must set up firewalls preventing the sharing of competitively sensitive information, such as pricing and confidential strategies, between its provider and insurer entities. It also must make regular financial disclosures and is prohibited from entering into exclusive contracts with its healthcare providers. The system can only contract with providers for five years without the prior approval of the state. One provision requires Highmark to monitor its impact on community hospitals, which tend to have lower costs, while another requires the system to develop a transition plan if it decides to cut ties with UPMC after its contract expires at the end of next year.

The Massachusetts Experience: New wave of consolidation for health sector

The second installment in HRI’s series examining health reform in Massachusetts focuses on the post-reform landscape for insurers and providers. HRI’s analysis reveals that the state experienced a swell in consolidation and partnerships in the health sector following enactment of universal coverage. Providers and health plans faced financial challenges. Meanwhile, over time, patients began using the emergency room more appropriately. To learn more, visit the project’s website.

Employers get final rules on Wellness and SHOP

Last week the administration released two final rules many employers have been waiting for—the first on employment-based wellness programs and the second on the Small Business Health Options Program (SHOP). Read PwC’s analysis of the final wellness rule here.

Upcoming events & deadlines

  • June 28 – Letters of intent due for round two of the Health Care Innovation Awards.
  • July 12 – Comments due on the proposed rule implementing the methodology for reducing Medicaid Disproportionate Share Hospital (DSH) allotments.
  • July 30 – Comments are due to the FDA on new models of antibacterial drug development.

Quote of the week

"Since [2006], and mostly in the last two years, 17 organizations have merged, affiliated, announced a consolidation, [or] announced a new relationship. I jokingly say to them, 'you're speed dating,'" said Lynn Nicholas, president and chief executive of the Massachusetts Hospital Association, about the rise in consolidation and partnerships in the Massachusetts’ healthcare sector following the enactment of the state’s 2006 health reform law.

In the news

The New York Times reports that a global alliance of more than 70 research institutions, including the NIH, was unveiled this week. The new partnership will allow researchers across the world to share genetic and clinical information as they seek to develop more targeted treatments for diseases like cancer.

Factually correct

8.4 billion – the amount of money in federal payments that states that opt out of Medicaid expansion will be missing out on according to a recent Rand Corporation study.

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