New ACO Reg has some zingers
The newly minted ACO regulation from Medicare has some zingers hidden in its 696 pages. Okay, to be fair, the actual regulation is only 70 pages long, double spaced. The rest is all preamble, where CMS describes the 1200 comments on the proposed rule, and how they have responded (or not) in the final rule.
The first zinger has to do with the Physician Quality Reporting System, known to its friends as PQRS. Since 2007, CMS has paid a bonus to physicians who report quality data. Under current rules, CMS will pay physicians ½% of allowed charges from 2012 through 2014. BUT, docs in an ACO will only be able to participate in the PQRS through the ACO. The ACO will report as if it were a group practice. If the ACO fails to report in compliance with the PQRS rules, its docs won't get the PQRS bonus. This could be an issue in recruiting doctors who may not see a clear advantage to the ACO to begin with, given all the other requirements.
A second zinger is the approach to risk adjustment. CMS has agreed to use the Medicare Advantage HCC risk adjuster for newly assigned beneficiaries. They won't use HCCs for continuing beneficiaries — people who were assigned to the ACO last year. HCCs are based on diagnosis codes on last year's claims. CMS reasons that an ACO would improve coding accuracy in year one, to get the best risk adjustment they could for continuing beneficiaries in year 2. So only new-to-the-ACO beneficiaries will get risk adjusted for higher HCC scores. BUT, if the average HCC score for continuing beneficiaries goes down in year two, then CMS will risk adjust and reduce the benchmark accordingly. The inference is that reduced scores could only reflect reduced average risk. So ACOs that are not diligent in keeping their risk scores up could be docked a chunk of money for apparent losses resulting from poor coding, not from poor care management.
To read GHG's summary on the CMS Final Rule for the Medicare Shared Savings Program, click here.
Cigna Acquisition of HealthSpring Continues Deal Drumbeat in Senior Markets
This morning CIGNA announced it was acquiring HealthSpring for $3.8 billion, continuing the drumbeat of M&A deals in the Senior market. HealthSpring Chairman and Chief Executive Officer Herb Fritch will lead Cigna's expansion in the Medicare segment. It's definitive proof that even bit players in government programs like CIGNA are investing heavily in the space as the commercial market continues to dry up while Medicare and Medicaid present tremendous growth opportunities. I'd expect to see Aetna make a similar announcement in the coming months as they acquire a different asset to boost their position with seniors. The deal should have positive implications for the other smaller Medicare plans in the industry, like Universal American and WellCare.
On its face it seems like a great deal to expand CIGNA's presence in the senior market. Assuming CIGNA is paying around $500 per life for HealthSpring's roughly 700,000 Medicare PDP lives (HS lost about 100,000 PDP lives going into 2012 by missing auto-assignment of the duals in CA), the price suggests CIGNA is paying about $10,000/member for HealthSpring's 340,000 Medicare Advantage lives. This is lower than the $15,000/member that WellPoint paid for CareMore, but a huge premium relative to recent Medicare valuations, which have normally ranged from $3,000-5,000 per member -- which argues this was an auction like for CareMore that had the effect of driving up the deal price. From the press release:
"The combination provides Cigna with several significant opportunities to further expand upon its successful growth strategy:
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Scaled presence in the highly-attractive Seniors segment, with a highly differentiated Medicare Advantage business that currently has approximately 340,000 Medicare Advantage members in 11 states and Washington, D.C., as well as a large, national stand-alone Medicare prescription drug business with over 800,000 customers;
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One of the most trusted and well-respected brands offering Seniors quality care through its highly differentiated physician partnerships;
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Future growth opportunities to expand HealthSpring's customer base by leveraging Cigna's current client relationships and to further the expansion of HealthSpring into new geographic regions, leveraging Cigna's nationwide presence, customer base and distribution capabilities;
- Ability to offer Cigna's current commercial and individual customers the opportunity to experience HealthSpring's differentiated physician coordination model; and
- Further leverage Cigna's diverse portfolio of specialty programs for the benefit of HealthSpring's customers.
Congratulations to Herb and his team and best of luck on the integration.
Medicare ACO Regs Out While Private Sector Surges
CMS released the final Medicare ACO Shared Savings Program regulations yesterday after taking a beating in over 1,200 industry comments on the draft. Let's hope they made some big changes, as Medicare is in danger of being left in the dust as ACOs surge forward in the commercial sector.
Aetna has created a company-wide organization whose entire focus is on integrating ACOs into all products and services . The HealthPartners Total Cost of Care system is now applied to two-thirds of its members, Wellpoint's multi-payer Medical Home model is expanding beyond California and New York with emerging evidence of its success, and Blues plans in Massachusetts, New Jersey and Maryland are moving forward with their own commercial ACO initiatives. Ten large national and regional health plans gave an update on how fast the ACO concept is exploding.
By contrast, the Medicare ACO program has been quiet as CMS toiled away on a rewrite of the regs, with the final rules out yesterday but relatively little interest emerging beyond the Pioneer ACO Demonstration finalists -- and many of them are still tentative pending review of the new final rule. All 7 of Gorman Health Group's applicants for Pioneer were selected -- but they're not necessarily in yet. CMS's recalcitrance on considering partial and global capitation models for Pioneers is tamping down our clients' enthusiasm as we're told capitation isn't operationally feasible for CMS until Year 3 of the demo. If the final reg isn't a dramatic improvement over the "fart in church" draft regulation in March, I worry that CMS will be left at the altar as payers and providers seek less burdensome opportunities in the commercial and Medicaid markets.
Watch this page for our take on the final regs.
PBM Compliance-Oversight: What you Don't Know Can Cost You
Whether plans stick their heads in the sand or not, it doesn't change the fact that delegating services to a contracted entity is emerging as one of the fastest growing areas of audit risk.
CMS defines Compliance-Oversight Activities to include developing effective metrics and controls, monitoring and reporting, and risk assessment with corrective action for any delegated entities or contractors. Compliance refers to all contract compliance requirements and includes FWA compliance elements and requirements of the plan sponsor.
A Compliance-Oversight Plan should be structured in a way that is data driven — quantifiable performance metrics and monitoring with measurable outcomes. The goals of a Compliance Oversight plan should be proactive — to prevent, detect and respond ("find and fix") and focused — targeted on risk areas.
CMS has made it clear that the stakes have never been higher for the cost of non-compliance. In the area of oversight of contracted entities the warnings are beginning to play out in a variety of ways. At best, a plan sponsor can expect a corrective action plan that comes with intense scrutiny. Recently, CMS announced a series of actions against non-compliant activities that included fines and penalties. At worst, a plan risks non-renewal of its contract with CMS.
There are more subtle costs to the lack of compliance oversight that may not bring down the wrath of a CMS audit. Plans that fail to monitor the activities of their PBM effectively may have a deleterious impact on customer satisfaction. Poor satisfaction will result in lower CAHPS scores and reduced Plan Ratings.
Kaiser Health announced this week that the 9 Five-Star Plans earned in excess of $4 billion in bonus payments for 2012 Plan Ratings. Starting in January, plans with three stars or better will get bonuses of 3 to 5 percent of their total Medicare payments. Five-star plans also can market to and enroll members year-round, while all other plans enrollment is limited to Medicare's annual open period. What's more, CMS will aggressively encourage consumers to move their Medicare policies to the higher-ranked plans, giving them a big boost.
Failure to adequately provide compliance oversight to PBMs or other contracted entities is not only risky; it is also a costly failure by a plan sponsor at a time when resources are diminishing. Don't be caught unprepared.
GHG is hosting Medicare Advantage and Part D Compliance Leaders at our Compliance Forum 2011. We'll be addressing CMS' highly energetic regulatory activities and other key issues November 2-4 in Las Vegas. View the preliminary agenda here.
In addition, we're now offering a delayed payment pricing option, just in case your travel budgets have run out before your questions have. If you register now, the registration fee payment will be delayed until January 2012.
Click here to pre-register.
To Save Medicare, Talk to Patients and Stop Spending on Things That Don't Work
Just about every discussion on the Hill about "saving Medicare" these days is talk about decreasing reimbursements to providers and health plans. There's also a lot of talk about preventive care -- and yes, I'll say it -- prevention has little potential of saving money in Medicare. You can't prevent away heart disease or diabetes in elderly patients; you might postpone it but you will eventually pay. Medicare is still, fundamentally, an end of life program -- 1 out of 4 Medicare dollars are spent in the last 6 months of life. And it's unsustainable in its current form. So there's only two real solutions: to talk to beneficiaries about their wishes for their end of life care; and to stop spending money on things that don't work.
Last week in The Lancet Harvard researchers found that among 1.8 million Medicare beneficiaries who died in 2008:
- nearly 1 out of 3 had surgery in the last year of life;
- nearly 1 out of 5 had surgery in the last month of life;
- nearly 1 out of 10 had surgery in the last week of life.
Those are astounding numbers, and controversial. Of course many of those procedures were performed to relieve suffering or to prolong life. But the researchers said they know from experience -- as all of us do in eldercare -- that doctors often operate to fix something but that will not save a dying patient -- to avoid the difficult conversations with patients and caregivers about their prognosis and what they want. So often it's "cut to cure" fix-it docs and adult children, with too much drama and way too little information, driving these decisions -- not the patient, long in advance of the care episode.
The New York Times noted that In the last year alone, what researchers have found both useless and harmful, according to leading medical journals:
• Feeding tubes, which can cause infections, nausea and vomiting, rarely prolong life. People with dementia often react with agitation, including pulling out the tubes, and then are either sedated or restrained.
• Abdominal and gall bladder surgery and joint replacements, for those who rank poorly on a scale that measures frailty, lead to complications, repeat hospital stays and placement in nursing homes.
• Tight glycemic control for Type 2 diabetes, present in 1 of 4 people over 65, often requires 8 to 10 years before it helps prevent blindness, kidney disease or amputations. Most don't live long enough to reap the benefits, and so endure needle sticks and diet guilt in their last days.
We all have our own experiences and anecdotes. Medicare routinely pays for hip replacements for Alzheimer's patients, even though most couldn't complete physical therapy for rehab and resume activities of daily living. Last year my 96-year-old grandfather suffered through a $120,000 back fusion surgery he didn't want or need (he hasn't been out of his motorized scooter in 5 years) but his doctor and local community hospital insisted he have. What did he want? "A lethal dose paid for by Medicare Part D." Last month he failed his second suicide attempt. We just want him to find some peace -- and he'll never find it at the end of a surgeon's blade.
We don't talk enough about how we want to die in this country. I think we honor one's life by allowing them to die with dignity, the way they want to go. These are not conversations most doctors like to have, but they must occur if we're to bring any sense to Medicare expenditures. We no longer have the luxury of a wide-open entitlement program.
Since the Terri Schiavo circus we have lived in an age of distortions like "Death Panels," where open dialogue on end of life is politicized and limits on what Medicare will cover are demogogued as rationing. But Medicare Advantage plans are uniquely positioned to advance the cause of professional counseling for beneficiaries on their last wishes, preventing unnecessary surgeries based on the patient's preferences and likely clinical outcomes, and promoting the enthusiastic use of palliative care. A number of plans are leading quietly in this area, like UPMC in Pittsburgh, Excellus Blue Cross/Blue Shield in upstate New York (which actually has dedicated medical directors for end of life and palliative care), and any PACE site like On Lok in San Francisco. We have much to learn from them -- they should be applauded and emulated for their courage in the face of the politics of end of life care.
There are few more personal issues than end of life counseling and care. These are thoughts ... I'd love to hear yours.
Prescription Drug Abuse: A Growing Compliance Risk for Medicare Advantage Plans
The GAO recently released a report on fraud and prescription drug abuse in Medicare Part D. Prescription drug abuse is a serious and growing public health problem. According to the CDC, drug overdoses, including those from prescription drugs, are the second leading cause of deaths from unintentional injuries in the United States, exceeded only by motor vehicle fatalities. Unlike addiction to heroin and other drugs that have no accepted medical use, addiction to some controlled substances can be unknowingly financed by insurance companies and public programs, such as Medicare Part D.
The report released by the GAO describes beneficiary doctor shopping in the Medicare Part D program for 14 categories of frequently abused prescription drugs. The objectives were:
(1) To determine the extent to which Medicare beneficiaries obtained frequently abused drugs from multiple prescribers;
(2) To identify examples of doctor shopping activity;
(3) To determine the actions taken by (CMS) to limit access to drugs for known abusers.
The analysis found that about 170,000 Medicare beneficiaries received prescriptions from five or more medical practitioners for the 12 classes of frequently abused controlled substances and 2 classes of frequently abused non-controlled substances in calendar year 2008. These individuals incurred approximately $148 million in prescription drug costs for these drugs, much of which is paid by the Medicare program. Most of these 170,000 Medicare beneficiaries who were prescribed prescriptions from five or more practitioners were eligible for Medicare Part D benefits based on a disability. Specifically, approximately 120,000 Medicare beneficiaries (about 71 percent) were eligible for Medicare Part D benefits based on a disability. Of these 170,000 beneficiaries, approximately 122,000 beneficiaries (72 percent) received a Medicare Low-Income Cost-Sharing (LICS) subsidy.
The Government Accountability Office (GAO) is a key driver for identifying issues of accountability in government agencies that translate into Congressional initiatives resulting in CMS auditing activity for Medicare Advantage Plans. CMS currently requires Part D plans to perform retrospective drug utilization review (DUR) analysis to identify prior inappropriate or unnecessary medication use and provide education, such as alert letters, to the prescribers involved. By analyzing historical prescription claims data, the drug plans can identify individuals who are likely obtaining excessive amounts of highly abused drugs or potentially seeking such drugs from multiple medical practitioners. However, according to CMS Part D program officials, federal law does not authorize Part D plans to restrict the access of these individuals, leaving little recourse for preventing known doctor shoppers from obtaining hydrocodone, oxycodone, and other highly abused drugs.
The GAO recommends for CMS to review the findings, evaluate the existing DUR program, and consider additional steps, such as a restricted recipient program for Medicare Part D that would limit identified doctor shoppers to one prescriber, one pharmacy, or both for receiving prescriptions. CMS should consider the experiences from Medicaid and private sector use of such restricted recipient programs, including weighing the potential costs and benefits of instituting the control. In addition to a restricted recipient program, CMS should consider facilitating the sharing of information on identified doctor shoppers among the Part D drug plan sponsors so that those beneficiaries cannot circumvent the program by switching prescription drug plans. Finally, in considering such controls, CMS should seek congressional authority, as appropriate.
Medicare Advantage often employs weak, ineffective DUR programs that fail to identify fraud and abuse in the Part D drug benefit or, once fraudulent or abusive patterns are identified, lack any systematic follow-up of the information. Plans can expect this to become a CMS Audit Hot Button. A relatively small percentage of the Medicare population impacts a significant financial impact. Clearly, there is a favorable ROI for plans to develop strong DUR programs. The Gorman Health Group can help in developing effective, proactive utilization management programs for your Medicare Advantage Plan.
Regulations, Duals and Stars
GHG recently posted our summary of the October 3 proposed rule on changes to the MA and Part D programs for FY 2013. Most of the provisions in this rule are codifying current policies or implementing ACA provisions without interpretation. However there are two provisions of special interest. The first is a proposal to allow fully integrated dual eligible SNPs (FIDE) to offer supplemental benefits that are targeted to the needs of their enrollees such as personal care services, custodial care or in-home meal delivery. This is an exciting opportunity for dual SNPs to provide even more meaningful integration of Medicare and Medicaid services and is consistent with the movement in CMS, Congress and the health policy community to find better solutions to providing more coordinated care for dual eligibles. AHIP has joined the bandwagon and recently released its proposal to "Achieve Medicare/Medicaid Integration for Dually Eligible Beneficiaries" through managed care solutions.
The other regulatory provision of interest is proposed authority for CMS to terminate or non-renew MA and Part D plans that do not achieve at least an overall 3 star rating for 3 consecutive years, beginning with contract year 2013 ratings. This would be a discretionary authority and low performing plans would not automatically be terminated from the program. CMS just released the 2012 plan ratings. The good news is that 9 MA plans received 5 star ratings for 2012 and overall plan ratings increased to 3.44 from 3.18. However there are almost 70 MA plans and almost 150 Part D plans that had overall scores under 3 stars for 2012.
Shared Savings in ACOs is not a fair game
In the proposed rules for ACOs, and in the rules for Pioneer ACOs, CMS has established a clear preference for ACOs to take down-side risk. CMS wants to be repaid if an ACO records costs that are higher than expected. This is proposed as a reasonable counter-balance to the proposed payments that CMS will make to an ACO if it succeeds in generating savings .
But the effect is to put ACOs at a disadvantage. Downside risk means that failure has a cost, in addition to the cost of providing administrative support to the ACO. There are two scenarios under which an ACO could fail, and be subject to down-side payments back to CMS. One is through intentional actions to increase charges, and the other is random events. But providers don't need to form ACOs to find ways to intentially increase their Medicare revenues, and it is hard to picture a scenario in which an ACO would be an appealing vehicle to do this. And, of course, many collective actions among providers to increase Medicare revenues could be illegal. So this leaves random events as the most likely cause of ACO failure.
ACOs are being given this deal: spend money to find ways to reduce your Medicare revenues, and we'll share some of the savings with you. But, if random events wipe out your savings, you have to repay us a share. Where is the upside to this deal?
Another approach, capitation, has been shown to be an effective alternative payment model for a generation. Under capitation, CMS could calculate the capitation so it guarantees itself savings. Capitation converts Medicare from the open ended committment of FFS to a defined cost model. Providers can then modify internal payment arrangements within the capitated entity, to incent and recognize performance in a way that FFS Medicare cannot.
We're waitng to see if the final ACO regulations will take cognizance of decades of experience with capitation in the private sector, to provide an alternative to shared savings that really is a fair game.
To read GHG's summary on the CMS Final Rule for the Medicare Shared Savings Program, click here.
Costs Too High?
Well, more news and comments out lately about the cost of health insurance, or actually the premium trend being too high. Additionally, articles on the cost of healthcare and it being too high. So, let's give this some quick thought: What's the difference between "price" and how "cost" is often referred to?
To me, the price of a product or service is what you have to pay to get it. For example the price of a gallon of gas two weeks ago in Mendocino CA (there is only one station in this small and charming community on the northern coast) was$5.79 per gallon. No competition for gas up there so they seem to price accordingly. In healthcare the "cost of care" is commonly referred to when talking about a population such as "Medicare lives." Cost of care for a population is not driven by the price of a unit of service alone, but by the combination of the number or services (utilization rate) and the price per unit produced for that service. Well, then is the problem the price per unit or the number of units purchased, or a combination of both?
After years ihealthcare, my view is this: the price per unit is rarely the issue anymore, at least where major payment sources such as Medicare and Medicaid have either driven price reduction or prevented any meaningful price increase trend, as they control the payment amount. Certainly there are exceptions in both of those payment categories and in the private insurer marketplace, but generally the issue is not the price paid per unit of service. More significantly, the issue is the number of units of service incurred by individuals within these payment categories.
The issues driving this increase in utilization are fourfold:
- First an increase in need for services due to population aging and population health status;
- Second the drive of services on the supplier side. Providers operating at the margin of necessity of care often provide more services because they are financially encouraged to do so (aka income), and they want to avoid the risk of malpractice litigation for overlooking necessary care;
- The lack of price sensitivity to the person who receives those services. Most insured individuals don't pay out of pocket costs, and most care providers don't provide pricing information, so even if the individual were to seek competitor pricing information, it is nearly impossible to find the best combination of price and quality.
- And finally the improvement of technology, where today we are able to provide services and care unheard of even 10 years ago, with resultant impacts on both lives and healthcare cost.
So what is the solution to these challenges? My thoughts on that coming next time.
The Difficulty in Making A Thousand Flowers Bloom
Politico included a recent article on "Why Moving on Delivery Reform is so Difficult" that described the dilemma facing Henry Ford Health System, which resulted in a decision to withdraw their application for the Medicare ACO program. They would rather focus on participating in private sector initiatives, which offer more predictability and flexibility than demonstrations designed by CMS.
It has been hard to follow the many starts and stops from the Center for Innovation as they are rolling out ACA funding for delivery reform demonstrations. CMS has many more hurdles in initiating demonstration programs than private payers. For example, the process needs to be competitive and give all parties a chance to be considered. The demonstration design needs to address the policy questions, but also produce data for an objective evaluation. There is a large bureaucracy involved in clearing politically sensitive projects and it always takes longer than expected. And another complexity is that operational support depends on offices and staff outside the Innovation Center.
Two recommendations would improve the process for potential applicants who have limited resources and leadership time to make a commitment to a new way of doing Medicare business:
First a master schedule and work plan would be helpful so that applicants would know the range and timing of funding opportunities. For example, the recently released Primary Care Demonstration was unexpected and seemed to be a revival of the medical home demonstration that CMS put on the back burner last year. The bundled payment demonstration was of interest to many of the ACO applicants but the application process partially overlapped the Pioneer ACO demonstration process.
It would also be helpful to know all of the requirements in advance of submitting an application. As others have suggested, streamlining the number of quality reporting measures and making them more consistent with core measures used by the private sector would make the Medicare demonstrations more attractive.