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EXECUTIVE ManagedHealthcareExecutive.com The C-Suite Advisor Managed Healthcare Executive Risk-sharing pitfalls SEVEN MISTAKES TO AVOID SPECIAL REPORT Prescription drug spending surges March 2016 VOL. 26 NO. 3 MARCH 2016 Risk-sharing pitfalls | Cadillac tax delay: What to do now | Prescription drug spending surges | Dementia costs surpass all other diseases VOLUME 26 | NUMBER 3 PAGE 18
Transcript
Page 1: Managed Healthcare Executive EXECUTIVE Risk-sharing · Managed Healthcare Executive Risk-sharing ... As a national healthcare company serving nearly 10 ... payers and pharmaceutical

EXECUTIVEManagedHealthcareExecutive.com The C-Suite Advisor

Managed H

ealthcare Executive

Risk-sharingpitfallsSEVEN MISTAKES

TO AVOID

SPECIAL REPORT Prescription drug spending surges

March 2016 VOL. 26 NO. 3

MA

RC

H 2016

Risk-sharing pitfalls | C

adillac tax delay: What to do now

| Prescription drug spending surges | D

ementia costs surpass all other diseases

VOLU

ME

26 | NU

MB

ER

3

PAGE 18

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MANAGING RISK FOR PATIENTS: SMART

SHARING YOURGJ?9FAR9LAGF�K� RISK WITH US:POPULATION HEALTHIER

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ManagedHealthcareExecutive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 1

Opinionfrom DANIEL J. HILFERTY

n the past decade, no industry has under-

gone as much transformation as healthcare. With ad-

vancements in science, medicine, and technology, not to

mention the vast changes brought by the Aff ordable Care

Act, healthcare companies must be ready to innovate at

every juncture.

As a national healthcare company serving nearly 10

million people in 25 states, Independence Blue Cross and

its affi liates understand this well. We have created a strat-

egy that focuses on encouraging and developing innova-

tion in everything we do.

Th rough the Human-Centered Innovation Program, we

aim to solve some of the most pressing healthcare prob-

lems by moving forward with promising ideas that put

people and physicians at the center of everything we do.

In doing so, we believe we can make the healthcare experi-

ence more convenient, more eff ective, and less expensive.

On the cutting edge We developed our own sophisticated scientifi c model that

can identify who is at risk for serious health issues that

could require a hospital visit. Th is allows us to intervene

to help lower that risk by off ering customized programs

and services that can help members stay well. Our success

rates have been so high—a 40% to 50% reduction in hos-

pital admission rates among critically ill patients—that

we’re expanding the program. We’ve collaborated with

NYU Langone to identify those at risk for type 2 diabetes,

and intervene before they become symptomatic. 

We’re also committed to bringing oncology care ad-

vances to our members. Th at’s why we are so interested

in companies such as NantHealth, which uses genomic in-

formation and medical data to develop personalized treat-

ment plans for people with cancer and other diseases. We

recently contracted with the company for whole genomic

sequencing for members with certain types of cancer and

are the fi rst major insurer to cover this testing.

Supplying necessary resourcesWe also disrupted the status quo by rethinking the way

primary care doctors practice. Tandigm Health, a joint

investment between Independence and DaVita Health-

care Partners, is a physician-led management company

that provides more than 380 primary care physicians

with analytical tools and access to real-time data to help

them better manage chronic conditions like diabetes

and heart disease. Tandigm physicians are rewarded for

the quality of care they provide, not for the number of

patients they see.

We are also investing in and collaborating with exciting

new companies such as Biomeme and CareCam. Biomeme

provides quick DNA testing and onsite disease tracking on

smartphones. CareCam helps chronically ill patients stay

well using mobile technology and video coaching.

Helping others succeed Last May, we joined other industry leaders  to form the

CEO Council for Healthcare Innovation Collaborative. Th e

goal is to connect early-stage health companies with large

healthcare institutions to help them better understand

the problems that need solving. Th ese connections will

make it easier for new companies to more quickly produce

products and services that improve people’s health.

We don’t view ourselves as a healthcare company, but

as an innovation company—powered by partnership, in-

vestment, and information. It all starts with putting the

needs of people and their physicians at the center of ev-

erything we do.

ABOUT THE AUTHOR ❚

Daniel J. Hilferty is the president and CEO of Independence Blue

Cross. He is a member of the Managed Healthcare Executive

editorial advisory board. 

Making the healthcare

experience more convenient,

more effective, less expensive

‘Human-centered’ healthcare innovation

I

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2 Managed Healthcare Executive.comMANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016

EXECUTIVEEditorial Advisory Board

David Calabrese, RPh, MHP, is vice president and

chief pharmacy offi cer of OptumRx, a pharmacy benefi ts fi rm that

manages more than 200 million prescriptions each year on behalf

of 25 million members.

Kevin Ronneberg, MD, is vice president and associate

medical director for health initiatives at HealthPartners, an

integrated, nonprofi t healthcare provider and health insurance

company located in Bloomington, Minnesota.

Mark Boxer, PhD, is executive vice president and global

chief information offi cer for CIGNA, where he is responsible for

driving the company’s worldwide technology strategy.

Daniel J. Hilferty, MPA, is president and chief

executive offi cer of Independence Blue Cross, a leading health

insurer in southeastern Pennsylvania with nearly 10 million

members in 25 states.

Joel V. Brill, MD, is the chief medical offi cer for Predictive

Health, LLC, which partners with stakeholders to improve coverage

of value-driven care that optimizes health for people.

Margaret A. Murray, MPA, is the founding chief

executive offi cer of the Association for Community Affi liated Plans,

which represents 54 nonprofi t safety net health plans in 26 states.

Roy Beveridge, MD, is senior vice president and chief

medical offi cer for Humana, where he’s responsible for developing

and implementing Humana’s clinical strategy with an emphasis on

advancing the company’s integrated care delivery model.

Don Hall, MPH, is principal of DeltaSigma LLC, a consulting

practice specializing in strategic problem solving for managed

care organizations. He most recently served as president and chief

executive offi cer of a nonprofi t, provider-sponsored health plan.

Douglas L. Chaet, FACHE, is senior vice president of

contracting and provider networks at Independence Blue Cross in

Philadelphia. He is also the founder and chairman emeritus of the

American Association of Integrated Healthcare Delivery Systems.

Dennis Schmuland, MD, is chief health strategy offi cer,

U.S. Health & Life Sciences division of Microsoft Corp., where he

is responsible for setting the company’s strategy and overseeing

solutions for the managed care industry.

Perry Cohen, PharmD, is chief executive offi cer of The

Pharmacy Group and the TPG family of companies, which provides

services to associations, healthcare and information technology

organizations, payers and pharmaceutical companies.

Paul J. Setlak, PharmD, MBA, is associate director,

Outcomes Solutions, at Astellas Pharma, where he focuses on

strategic market access, pricing and reimbursement.

Mission Managed Healthcare Executive provides healthcare executives at health plans and provider organizations with analysis, insights, and strategies to pursue value-driven solutions.

CONTENT

SARA MICHAELVP, Content & Strategy

AUBREY WESTGATEExecutive Editor(203) 523-7116, [email protected]

TRACEY L. WALKER Content Manager(440) 891-2732, [email protected]

NANCY BITTEKERDirector, Design and Digital Production(203) 523-7074, nancy.bitteker.ubm.com

ROBERT MCGARRGroup Art Director(440) 891-2628, [email protected]

PUBLISHING & SALES

GEORGIANN DECENZOExecutive Vice President, Managing Director

KEN SYLVIAVice President, Group Publisher

TOD MCCLOSKEYSales Manager Classifi ed/Display Adv(440) 891-2739, [email protected]

PATRICK CARMODYAccount Manager Classifi ed /Display(440) 891-2621, [email protected]

JOANNA SHIPPOLIAccount Manager, Recruitment Advertising(440) 891-2615, [email protected]

SARAH CAMERON MIFSUDVP, Digital Solutions

DON BERMANSales Director, Digital Media

ALEX CALAccount Director, Digital (203) 523-7042, [email protected]

TERRY TETZLAFFDigital Traffi c Coordinator(218) 740-6585, [email protected]

DAVID DONOVANVP, Digital Products

MEG BENSONSpecial Projects Director

AMY ERDMANVP, Marketing

GAIL KAYEDirector of Marketing & Research Services

RENEE SCHUSTERList Account Executive(440) 891-2613, [email protected]

MAUREEN CANNONPermissions(440) 891-2742, [email protected]

PRODUCTION

KAREN LENZENProduction Director(218) 740-6371, [email protected]

AUDIENCE DEVELOPMENT

JOY PUZZOVP, Marketing & Audience Development

CHRISTINE SHAPPELLDirector, Audience Development

KELLY KEMPERAudience Development Manager

REPRINTS: 877-652-5295 ext. 121, [email protected]. Outside US, UK, direct dial: (281) 419-5725. Ext. 121 SUBSCRIPTION SERVICES: 888-527-7008

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3Managed Healthcare Executive.com MANAGED HEALTHCARE EXECUTIVE ] MARCH 2016

COVER STORY

EXECUTIVE

ESSENTIALS

6 TECHNOLOGY Diagnostic imaging: from volume to

value

by Rachael Zimlich

23 POLICY OUTLOOK Cadillac tax delay: what to do now

by Adam Solander and Brandon Ge

25 DRUGS IN THE PIPELINE Personalized medicine

by Tracey Walker

26 SPECIAL REPORT Prescription drug spending surges

by Karen Appold

30 PHARMACY BEST PRACTICES CMS unveils enhanced MTM program

by Mari Edlin

33 HEALTH MANAGEMENT   Dementia costs surpass all other diseases

by Christopher Cussat

36 BUSINESS STRATEGY Price transparency: where are we now?

by Karen Appold

38 THE LIST Six skills shared by successful executives

by Aubrey Westgate

39 HOSPITALS AND PROVIDERS Medical schools tackle dollars and sense

by David Richardson

COMMENTARY

1 OPINION ‘Human-centered’ healthcare innovation

4 MANAGED CARE OUTLOOK New payment models require out-of-the

box thinking

5 LETTER OF THE LAW What’s new in OIG’s work plan?

17 INDUSTRY ANALYSIS What you can do to combat opioid abuse

DEPARTMENTS

2 EDITORIAL ADVISORS

Co

ve

r: G

etty

Imag

es/iS

tock

/Get

ty Im

ages

Plu

s/kt

simag

e

18 Overestimating your partner

20 Overlooking important resources

21 Not evaluating the broader network

22 Failing to shift compensation

Risk-sharing pitfallsSeven common mistakes to avoid

Volume 26 Issue 3

MARCH 2016

© 2016 UBM. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical including by photocopy, recording, or information storage and retrieval without permission in writing from the publisher. Authorization to photocopy items for internal/educational or personal use, or the internal/educational or personal use of specifi c clients is granted by UBM for libraries and other users registered with the Copyright Clearance Center, 222 Rosewood Dr. Danvers, MA 01923, 978-750-8400 fax 978-646-8700 or visit http://www.copyright.com online. For uses beyond those listed above, please direct your written request to Permission Dept. fax 440-756-5255 or email: [email protected].

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MANAGED HEALTHCARE EXECUTIVE does not verify any claims or other information appearing in any of the advertisements contained in the publication, and cannot take responsibility for any losses or other damages incurred by readers in reliance of such content.

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Managed Healthcare Executive (ISSN 1533-9300, Digital ISSN 2150-7120) is published monthly by UBM Medica 131 W First St., Duluth MN 55802-2065. Subscription rates: 1 year $99.00, 2 years $145.00 in the United States & Possessions; 1 year $122.00, 2 years $173.25 in Canada and Mexico; 1 year $192.00, 2 years $295.00 in all other countries. For air-expedited service, include an additional $87.00 per order annually. Single copies (prepaid only): $9.00 in the United States, $22.00 all other countries. Back issues, if available: $15.00 in the U.S.; $17.00 all other countries. Include $6.85 per order plus $2 per additional copy for U.S. postage and handling. If shipping outside the U.S., include an additional $10 per order plus $3 per additional copy. Periodicals postage paid at Duluth MN 55806 and additional mailing offi ces. POSTMASTER: Please send address changes to Managed Healthcare Executive, P.O. Box 6178, Duluth, MN 55806-6178. Canadian GST number: R-124213133RT001, PUBLICATIONS MAIL AGREEMENT NO. 40612608, Return Undeliverable Canadian Addresses to: IMEX Global Solutions, P. O. Box 25542, London, ON N6C 6B2, CANADA. Printed in the U.S.A.

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MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 ManagedHealthcareExecutive.com4

Managed Care Outlookthoughts from JEREMY EARL

ne of the most promising de-

velopments of the post-Af ord-

able Care Act era has been the

shift to value-based payment

models. Part of this is driven by

the Centers for Medicare and

Medicaid Services, which has

set an ambitious goal of tying 90% of Medicare reimburse-

ment to value by 2018.

T e shift is no less dramatic in the commercial market

where an estimated 40% of provider payments were value-

based as of the end of 2014, according to a recent study by

the Catalyst for Payment Reform. 

Value-based payment models share a common goal: To

incent providers to manage the cost and quality of care for

a def ned population or episode of care. T ese payment

models hold great promise, but they raise many legal is-

sues and strategic considerations that require MCOs to

think outside of the fee-for-service box.  

Here are four critical considerations that are integral to

successful implementation of a value-based model:

1Provider risk assumptionCertain value-based models require providers to ac-

cept downside risk. T is raises several potential legal is-

sues, including which benef t product types can be used

to transfer insurance risk without the need for additional

licensure on the part of providers. T e ef ect of provider

risk assumption largely depends on state insurance re-

quirements, which vary.

2Network adequacyNarrow networks are increasingly common and

they complement value-based payment by ensuring there

is a suf cient volume of patients for providers willing to

accept value-based payment. Creating a narrow network

comes with its own set of legal considerations. Network

access and adequacy standards are rapidly evolving, and

they vary depending on the product market and provider

type. In addition, evolving state standards regulate not

only provider access, but the process used to select nar-

row network or preferred tier providers. T ere are recent

well-publicized examples in several states of providers

bringing legal challenges against their exclusion from a

network or the preferred tier of a network. MCOs therefore

need to ensure they adhere to network standards to avoid

costly and disruptive legal battles.

3Data sharingProviders’ success in value-based payment models

depends on successfully managing health across a popu-

lation or episode of care. T is requires access to timely and

relevant data about their attributed enrollees, including

information about the services provided by other provid-

ers. T is raises a host of issues under HIPAA, state privacy

laws, and data privacy restrictions, and also could impli-

cate conf dentiality restrictions in health plans’ agree-

ments with other providers.

4Government payment modelsT e Department of Health and Human Services’

(HHS’) ef orts to encourage value-based payment in

the traditional Medicare program include the Medicare

Shared-Savings Program, the Pioneer ACO Model, and the

bundled payment pilot programs. MCOs should be famil-

iar with these models, and the provider f nancial relation-

ships permitted and encouraged by HHS through fraud

and abuse waivers and other legal guidance. 

T ese payment models can be leveraged by commer-

cial payers and providers as they adopt new models of

care designed to ef ectively manage population health.

ABOUT THE AUTHOR ❚

Jeremy Earl is a partner in the health industry advisory

practice at McDermott Will & Emery. He is based in

Washington, D.C.

Four critical considerations

New payment models require out-of-the-box thinking

O

ES741440_MHE0316_004.pgs 02.24.2016 00:43 ADV blackyellowmagentacyan

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ManagedHealthcareExecutive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 5

Letter of the Lawthoughts from DEBORAH DORMAN-

RODRIGUEZ and DAVID KAUFMAN

he U.S. Department of Health and Hu-

man Services Offi ce of Inspector General

(OIG) issues an annual work plan sum-

marizing the health program reviews

planned by OIG for the upcoming year. 

Its Fiscal Year 2016 plan provides im-

portant information and guidance to

healthcare executives. Here are some of the key takeaways.

2015 resultsOIG expects recoveries from providers and health plans of

more than $3 billion for 2015.  Further, the legislative, regu-

latory and administrative actions OIG supported saved ap-

proximately $20.6 billion. OIG reviews resulted in the exclu-

sion of 4,112 individuals and entities from participation in

federal healthcare programs; 925 criminal actions; and 682

civil actions, including false claims and unjust-enrichment

cases. In June 2015, OIG participated in the largest national

healthcare fraud intervention in its history, resulting in more

than 240 subjects being charged with defrauding Medicare

and Medicaid.

2016 plansOIG will expand its focus on delivery system reform and the

eff ectiveness of alternate payment models, coordinated care

programs and value-based-care purchasing. Data analytics

will be used to identify additional issues for further analysis

and scrutiny. As more attention is directed to addressing the

rising cost of healthcare, reviews and enforcement actions

can be expected to increase. New areas the OIG will review

include:

Medicaid❚ Federal government recoveries from managed care plans not

meeting medical loss ratio requirements;

❚ Methodologies for assigning MCOs accurate federal medical

assistance percentages; and

❚ State treatment of specialty drug payments, including pharmacy

reimbursement amounts.

Medicare Parts C and D❚ Part D benefi ciaries prescribed drugs with severe drug

interactions;

❚ Medicare Eligibility Verifi cation transactions submitted by

pharmacies to determine eligibility for the Part D program;

❚ CMS’ oversight of Part D pharmacies; and

❚ Growth in pharmacy reimbursement for brand-name drugs under

Part D between 2010 and 2014.

Affordable Care Act (ACA)❚ Examination of the loan award selection process, fi nancial

condition, and other factors relating to the Consumer Operated

and Oriented Plan loan program; and

❚ Expenditures of ACA Marketplace Establishment Grants for

contractor services claimed by marketplace grantees.

Medicare Parts A and B:❚ Outpatient claims billed during inpatient stays;

❚ Validation of data reported for hospital value-based purchasing

and acquired condition reduction programs;

❚ Skilled nursing facility therapy services payments;

❚ Medical necessity for orthotic braces;

❚ Quality oversight of ambulatory surgery centers;

❚ Overutilization of durable medical equipment;

❚ Anesthesia services;

❚ Documentation of necessity for physician home visits;

❚ Payments for prolonged evaluation and management services;

❚ Accountable care organizations that have been successful in the

Medicare Shared Savings Program;

❚ Procedures to prevent Medicare services from being rendered to

incarcerated benefi ciaries and individuals not lawfully present in

the United States; and

❚ Management of ICD-10 implementation.

ABOUT THE AUTHORS ❚

Deborah Dorman-Rodriguez, a partner at Freeborn &

Peters LLP, leads the fi rm’s healthcare practice group. David

Kaufman, a partner at Freeborn & Peters LLP, serves as a key

member of the healthcare practice group.

Here’s where you can expect

What’s new in OIG’s work plan?

This column is written for informational purposes only and should not be construed as legal advice.

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ManagedHealthcareExecutive.com6 MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016

TRANSFORMING CARE THROUGH HEALTH IT

Technology

nder fire for years for causing healthcare costs to spike, diagnostic imaging utilization has

been on the decline for nearly a decade and pay-

ers are curbing payouts. But radiologists are developing new ways to use imaging to diagnose and monitor disease, along with new methods to control costs and radiation exposure to patients from unnecessary scans.

In 2003, roughly 206 million imaging services were provided to 34.8 million Medicare beneficiaries, increasing to 326 million services by 2006 for 35.9 million beneficiaries, according to the Harvey L. Neiman Health Policy Institute report, “Medical Imaging: Is the Growth Boom Over?”

A reversal began in 2007, however, and by 2010 diagnostic imaging expenditures for Medicare recipients declined by

21% from the 2006 levels.For privately insured patients,

imaging is the slowest growing service, with a decline of 5.4% from 2009 to 2010, according to a 2013 report from the American College of Radiology (ACR). That same report found that imaging in patients over age 65 years fell from 12.8% in 2003 to 10.6% in 2011.

Patrick Hope, executive director of the Medical Imaging and Technology Alliance, says that diagnostic imaging utilization has been curbed over the last decade as a result of lower reimbursements and a greater push to make sure that imaging is appropriate and necessary. This is important not only to contain costs, but to control exposure. “You don’t want to expose the patient to too much radiation,” says Hope, adding that more safeguards are being built into imaging equipment to enhance patient safety.

“Sometimes the best imaging exam is no imaging exam,” adds Katherine P. Andriole, PhD, associate professor of Radiology at Harvard Medical School, assistant medical director of Imaging IT at Brigham and Women’s Hospital, and director of imaging informatics at the Center for Evidence-Based Imaging.

Finding balanceIf used correctly, diagnostic

imaging can be extremely valuable in terms of early diagnoses and better management of the patient—particularly if a physician is trying to determine if a patient is improving, says Andriole.

Studies have linked imaging to longer life expectancy, declines in mortality, avoiding surgeries, fewer hospital admissions, shorter hospital stays, and shorter emergency department wait and treatment times, according to the Harvey L. Neiman Health Policy Institute report.

If providers are too conservative with diagnostic imaging utilization, they could also miss or delay diagnoses. It’s obviously better to catch breast cancer in stage 0 or 1 rather than in stage 4, Hope says.

Keith J. Dreyer, DO, PhD, FACR, FSIIM, vice chair of radiology at Massachusetts General Hospital and associate professor of

radiology at Harvard Medical School, says there has been criticism over the cost and volumes of imaging services in the past,

but radiologists themselves have little control over these factors. “We don’t order exams,” he says. “They’re ordered and we perform them.”

Diagnostic imaging: From volume to valueA more precise, efficient future

U

Slow growthFor privately insured patients, imaging is the slowest growing service, with a decline of 5.4% from 2009 to 2010.Source: American College of Radiology

DREYER

by RACHAEL ZIMLICH

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ManagedHealthcareExecutive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 7

Technology

The Center for Medicare and Medicaid Services (CMS) has decreased the amount it pays for exams, and new legislation will require physicians to consult guidelines before ordering high-cost diagnostic exams by 2017 in order to reduce the amount of unnecessary exams.

Using these types of guidelines can reduce ordering rates by 10% to 15%, Dreyer says, but they typically are not used by commercial payers. 

Dreyer adds that physicians who consult guidelines before ordering diagnostic exams may even get patients the care they need faster, since ordering the wrong exam can delay accurate diagnoses and necessary treatment. “Doing too much imaging or anything in medicine is never a good thing, and following guidelines is the best way to practice medicine.”

New tools that utilize guidelines and offer feedback to physicians as soon as they order imaging may also help providers balance cost and quality, Dreyer says. “The message to get to commercial payers is that this is happening with Medicare/Medicaid, and because providers are putting this in place inside of their electronic health records, it will be there for commercial payers to take advantage of as well,” he says.

Andriole agrees that interest in programs that advise physicians on the use of imaging exams is increasing. Hospitals that are investing in such systems can have a computerized order entry system give physicians immediate feedback regarding whether they ordered the right test, whether there is a better test, or whether the test they ordered will be useful for the data they are seeking.

New business management

tools also help radiologists track how their department is performing, volumes in scanning, where there are bottlenecks, and where improvements can be made. “By making the process more effective, [imaging] goes to the physician faster and gets the patient treatment faster,” Andriole says. “Now that we have a lot of electronic systems, we are able to automate some things, which expedites and improves [productivity].”

Today’s imaging provides better images and more

customizations than in the past, allowing physicians to get more specific information from the scans, says Dreyer. Patients also have greater access to more low-cost, low-dose options such as low-dose CT scans for lung cancer screening.

Dreyer also predicts that precision medicine—the combination of genetics and imaging—will be used more to monitor populations of patients to screen for diseases with genetic dispositions.

42%decline in physician

office payments

Between 2006 and 2014, physician office payments for rendering the seven most frequently performed CT services, as paid for under the Medicare Physician Fee Schedule, declined by 42% on average.

—Medical Imaging and Technology Alliance

$700

$600

$500

$400

$300

$200

$100

$02006 2007 2008 2009 2010 2011 2012 2013 2014

Courtesy of the Medical Imaging & Technology Alliance

HOPPS payments

MPFS TC payments MPFS TC payments for second/subsequent services under MPPR

Rate of medical inflation (Medical CPI)

Changes in average payment rates for top 10 services by volumeMagnetic Resonance (MR)

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MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 ManagedHealthcareExecutive.com8

Technology

Exploring new frontiers Several new uses for diagnostic imaging are also on the horizon. While these uses could result in higher utilization rates, they could also lead to lower healthcare costs in the long-term as diseases are detected and addressed earlier.

A German study, “F-FDG PET Is an Early Predictor of Overall Survival in Suspected Atypical Parkinsonism,” showed that FDG-PET scans can predict the survival of patients suspected

to have atypical Parkinsonism syndrome.

A European study, “Detection of Alzheimer’s disease signature in MR images seven years before conversion to dementia: Toward an early individual prognosis,” found that MRIs may be able to detect Alzheimer’s as early as seven years before the onset of symptoms

And, MRIs may also be useful in predicting therapeutic effects of antipsychotics—traditionally a trial-and-error

class of medications, according to the study, “Baseline Striatal Functional Connectivity as a Predictor of Response to Antipsychotic Drug Treatment.”

Other new frontiers in diagnostic imaging include digital breast tomosynthesis (DBT), which is a three-dimensional scan of the arch above each breast to give a dimensional reconstruction.

“The thought is that in a two-dimensional mammogram, there can be lesions behind tissues that you might not be able to see or tell exactly where in the breast it is,” Andriole says. “[Often] the radiologist may call the patient back [after mammograms] for a lesion and it turns out it’s a negative thing.”

Though this technology isn’t really new, it is just now gaining traction and patients are begin-ning to ask for it, she says, adding that radiologists who use DBT re-port feeling as though they make fewer recalls for false negatives.

Ultrasounds are also on the rise for use in mammography to determine densities, and multimodality imaging that allows more thorough imaging and interpretation is becoming more popular in cancer care, says Andriole.

Other newer diagnostic tools include the combination of PET and CT scanning to detect changes in lesions over time.

Hope says much research is being conducted and funded through Medicare into determining whether PET scans can lead to earlier diagnoses of Alzheimer’s and dementia. “There’s a lot on the line because, up until now, there hasn’t really been any good, effective treatments,” he says.

Rachael Zimlich is a writer in Columbia Station, Ohio.

Changes in average payment rates for top seven services by volumeComputed Tomography (CT)

MPFS TC payments

HOPPS payments

MPFS TC payments for second/subsequent services under MPPR

Rate of medical inflation (Medical CPI)

Courtesy of the Medical Imaging & Technology Alliance

$350

$300

$250

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$02006 2007 2008 2009 2010 2011 2012 2013 2014

Fact: Thirteen payment cuts in just eight yearsBetween 2006 and 2013, Congress and the Centers for Medicare and Medicaid Services established 13 separate Medicare payment reductions for medical imaging services.

—Medical Imaging and Technology Alliance

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Managed Healthcare Executive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 17

INDUSTRYAnalysisWhat you can do to combat opioid abuse

OPIOID ABUSE is a scourge that has touched, in one way or another, all of us who work in managed care.   The numbers are daunting: an estimated 14,800 overdose deaths in 2008, and more than 475,000 emergency de-

partment visits the following year. And the societal cost of opioid abuse is stag-gering: an estimated $53 billion to $72 billion per year.

Medicaid man-aged care plans are

in a unique position to intervene with respect to opioid abuse and other sub-stance use disorders. These plans have a track record of coordinating care to address the medical, behav ioral health, and social service needs of benefi ciaries. Thanks to the structure of managed care contracts, plans also have the flexibility to take innovative approaches to combat the illicit use of opioids.

But the issue is daunting for health plans to take on alone. That’s why the Association for Community Affiliated Plans convened representatives from 13 plans to identify successful strate-gies employed by safety net health plans. They include:

SCREENING AND REFERRALS

Screening, brief intervention, and referral to treatment (SBIRT) is an evidence-based practice used to identify, reduce, and prevent misuse and abuse of alcohol and illicit drugs. Two plans—Texas Children’s Health Plan and Passport Health Plan—pro-vide training and tools to providers to improve SBIRT services. Passport even amended contracts with some providers to pay for SBIRT services on a fee-for-service basis, even when they were paid via capitation.

BENEFICIARY OUTREACH

Identifying members who may ben-efit from substance use disorder treatment is challenging. Common-wealth Care Alliance uses outreach professionals, including behavioral health specialists, social workers, and mental health counselors. They focus on helping members fulfill critical life needs before addressing substance abuse. Gold Coast Health Plan uses community health work-ers to reach beneficiaries.

SPECIALIZED SERVICES

MCOs are uniquely poised to address the full range of life challenges that may contribute to addiction through specialized support services. Care-Source applies predictive modeling to identify members at high risk, and then combines a lock-in program with

high-touch case management servic-es to connect members to community resources to help address needs out-side the traditional healthcare system.

LOCK-IN PROGRAMS

Medicaid lock-in programs identify beneficiaries with claims that sug-gest patients are visiting multiple pharmacies and physicians seeking prescriptions—and limit them to a single pharmacy or prescriber for all medications.  Horizon NJ Health iden-tifies candidates for a lock-in through claims data and uses pharmacists as a hub for communication with both patients and the plan.

MAT PROGRAMS

Suboxone has been used effectively in Medication-Assisted Treatment (MAT) programs for opioid abuse, but can also create euphoria and cause dependence, opening the door for misuse and abuse. AmeriHealth Cari-tas is forming quality standards for Suboxone prescription and is develop-ing a network of preferred Suboxone prescribers based on best practices.

This past October, a study in JAMA

brought some good news, finding a slight downtick in opioid use disor-ders. But abuse continues to exact a steep toll. The size of the problem de-mands collaboration across the entire spectrum of managed care.

MURRAY

Margaret Murray

C H I E F E X E C U T I V E O F F I C E R O F T H E A S S O C I AT I O N F O R C O M M U N I T Y A F F I L I AT E D P L A N S

Thirteen plans convene to share experiences

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CHANGE ALWAYS REQUIRES RISK, but neither payers nor providers can sit on the sidelines in the bold new world of value-based care. Th ose considering entering into risk-sharing agree-ments need to focus fi rst and foremost on their long-term goals and realize the importance of partnership and collaboration, says Howard Kahn, principal and consulting actuary with Milliman, where he works primarily with com-mercial payers on Medicare Advantage risk management contracts. When payers and pro-viders fail to adopt this perspective, the nego-tiations that lead up to agreements can quickly turn into standoff s, during which both parties “red line” the contract in an attempt to get the most money out of the other. “Th at’s not a win-win situation,” says Kahn. “And it’s not a great way to enter into an agreement.”

Instead, Kahn advises focusing on producing a reasonable and fair methodology that works for all parties involved. What both sides need to

realize is that they’re aligned in terms of trying to minimize the cost of care, getting better rates for premiums, improving quality, and creating better relationships that will drive patients to the provider, he says.

To ensure your organization is making a rea-sonable and fair decision next time it is present-ed with a risk-sharing opportunity, we asked Kahn, and several other industry experts, to weigh in. Here are seven risk-sharing mistakes that they say are critical to avoid.

1/ OVERESTIMATING YOUR PARTNERIt’s tempting for payers to try to shift as much risk as possible to providers, says Mike Th omp-son, principal with global human resources services at PwC. But if providers aren’t capable of taking on that risk, the end result could be a negative event that the provider can’t manage and the payer assumes isn’t its responsibility. Ge

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EXECUTIVE VIEW

Considering a risk-sharing agreement? Here are some tips:

❚ Evaluate your poten-tial partner’s ability to take on risk, such as its technology use and past experience;

❚ Prepare for tense contract points, such as how savings will be measured; and

❚ Determine what resources you can provide your partner, such as incentives to assist with data analytics.

Avoid these mistakes and realize long-term goalsby AINE CRYTS

Risk-sharingpitfalls

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Risk-sharing pitfalls

As Thompson sees it, if providers take on more risk than they can handle, it can lead to one of three potential negative outcomes:

❚ The payer bails the provider out and doesn’t require

it to live up to the terms of the contract—this can

lead to ill will and unexpected losses for the payer.

❚ The provider accepts the losses and then

terminates the contract—ill will builds up here,

too, in addition to discontinuity of care with the

provider.

❚ The provider organization goes bankrupt and the

courts decide that either the payer or the provider

is liable—and that translates into ill will for

everyone involved.

To head off the chance that a provider is taking on too much risk, both parties have to be thoughtful as to how these risk-sharing

agreements are structured. For example, a thoughtful approach might be to put a cap on the provider’s potential losses—meaning that the provider is at risk but has a limit on the percentage of fees at risk, perhaps 20%, says Thompson. Placing a cap on potential losses

becomes increasingly im-portant when the care pro-viders are at risk for provid-ing—such as pharmacy and hospital costs—isn’t directly provided by them.

Some of the partnerships that grew out of the Medi-care Shared Savings Program

(MSSP) exemplify how risk-sharing agreements can fail if participants overestimate their readi-ness, says Thompson. Many providers decided to change programs or drop out of the MSSP

THOMPSON

Risk-sharing advice for providers

Providers want to take on more risk, says Stephen Linesch, senior vice president of administration and devel-opment at CAPG, a trade association for physician organizations around the

country. Still, he ad-mits that there aren’t enough experienced provider groups that are prepared to take on the amount of risk preferred by the federal government.

Before provid-ers enter into the negotiation phase with payers, he recommends that they first talk with their peers to learn from their experiences—especially if they’re in Texas and the West Coast, where providers have more experience taking on risk than in other parts of the country. Linesch says some of CAPG’s members have been taking on risk for more than 20 years.

Linesch cautions that many large providers are losing money on multi-year agreements related to small capitated-risk populations. While these payers are at a loss in terms of what to do, he says they should have

had a better handle on their costs—through actuarial assumptions—before entering these agreements. “I look at it as an algebraic question,” says Linesch. “The total cost of care equals the cost per unit multiplied by the number of units.”

At a foundational level, payer and provider executives need to ask themselves if they want to invest in their transformation to a value-based system, says Mike Thompson, principal with global human resources services at PwC. “For payers, it’s a ‘no brainer,’” he says. “For providers, it’s not as clear that [they] should invest.”

“There’s a threat and an opportunity to going down this path early. Be-cause no matter what happens ... the more visionary executives know they can’t lose by providing high-quality and high-value healthcare. But it’s hard work to create incentives to change your organization’s culture to embrace value-based care,” he says.

The best way to sell value-based care to a provider’s chief financial officer is to have a conversation about realigning incentives so that the entire organization is focused on providing

value—and ultimately that can lead to more sustainability over time, says Thompson. Still, he admits that the road to value-based care is not easy.

On another level, it’s pretty straight-forward, says Ben Isgur, director of the Health Research Institute at PwC. “First you need to assess your strengths. Where are your centers of excellence? Take a hard look at those and the other things you do. If you do those things well, keep doing them. If you don’t, change how you do them. Or, get more cost efficient.”

Providers also need to get a better understanding of patients’ prescrip-tion adherence, says Gerald Meklaus, principal at Accenture. “If patients are leaving the doctor’s office and don’t get them filled or can’t afford them, they get sicker because they’re not adhering to their therapy,” he says.

“You need to have a pharmacist contact your high-risk patients and figure out why they’re not filling [their prescriptions]. You have to help [patients] navigate through that prescription maze where they’re see-ing multiple doctors and their care is uncoordinated.”

LINESCH

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PY1 PY2 PY3

}

(Projected spending with no intervention)

Shared savings

accountable care organization (ACO) program altogether, because their organizations weren’t prepared to deliver value-based care in a way that didn’t negatively impact their businesses.

Thompson’s advice is for payers to be both realistic and patient when considering a pro-vider’s ability to organize itself into a high-val-ue delivery system. “It takes time to turn that ship. You can’t assume they’re going to assume maturity overnight. You have to find a way to consider the right level of data sharing and de-termine the right targets to make for meaning-ful, substantive change—without blowing up the partnership effort,” he says.

2/ OVERLOOKING IMPORTANT RESOURCESMany of the provider organizations that par-ticipated in the MSSP (and had difficulty doing so) didn’t have access to enough real-time infor-mation about the patients they serve to make timely decisions, says Ben Isgur, director of the Health Research Institute at PwC. This brings up another major pitfall to avoid when entering into risk-sharing agreements: Failing to check up on technology capabilities.

Payers must consider whether providers have the technology infrastructure to improve care delivery, says Kahn. If, for example, a pro-vider isn’t using data analytics or doesn’t have a robust technology solution to enable popula-

tion health management, payers should consid-er providing financial incentives to the provider to help it build out its practice.

It can be in the best interest of a payer to give these types of infrastructure payments to a provider—that is, if the end goal is to help the provider meet its quality goals and financial tar-gets, he says.

3/ FAILING TO PREPARE FOR TENSE DISCUSSION POINTSOne sticking point in the negotiation can be who takes on the high cost of drugs, says Ira Rosenberg, president of Managed Care Resourc-es, a consulting firm. Providers often try to get devices and high-cost drugs carved out of risk-sharing arrangements, but payers don’t want to take that on. “You see a lot of negotiations break down over those specific issues,” says Rosenberg. This is because providers typically look at the costs they have the greatest oppor-tunity to control and consider which services have a high degree of variability. There are a lot of new drugs and devices entering the market each year—and that introduces a great deal of variability in terms of cost. That’s why it would be in the interests of the provider to not include these new drugs and devices in the contract. On the other side, payers would rather have those items included in the cap so as to limit their risk exposure.

Risk-sharing pitfalls

HYPOTHETICAL THREE-YEAR CONTRACT: Care management to shared savings

Expenditure reduction

Bonus on top of FFS baseline

Source: Leavitt Partners

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Payers and providers also need to realisti-cally consider which patients are included in the risk-sharing structure, says Gerald Meklaus, managing director at Accenture. There’s no point in connecting a provider group with very sick patients and paying a rate for a healthy population, he says. “The sicker population will need more care, so you’re only setting up a provider for failure if you’re not paying them appropriately.”

Another huge point of contention when nego-tiating agreements is how you measure savings, says Kahn. The Centers for Medicare & Medicaid Services (CMS) has done some work on this—in terms of coming up with minimum savings rates determined by an actuarial analysis. The intention behind a minimum savings rate is to minimize the chance that providers share in a surplus that’s generated by pure chance—rather than a surplus that’s generated as a direct result of changes implemented by the provider, he says. For example, the same patient population from year to year is expected to incur different claims costs, even if medical care doesn’t change. The size of the attributed population under the risk contract, internal stop-loss built into the risk contract, and the line of business involved—such as commercial, Medicare, or Medicaid—can all contribute to random fluctuations.

The philosophy behind a minimum savings rate will be different from payer to payer. Kahn says he typically sees rates close to 0% and rang-ing upwards to about 2% to 3%.

4/ NOT CONSIDERING THE BIGGER PICTURESince the priority is to create a winning proposi-tion for both parties, payers need to make sure that the provider is focused on aligning the in-centives of high-value healthcare throughout the healthcare delivery system, says Thompson. A great way to gain insight into a provider’s cur-rent capabilities is to take a look at how it is

using technology and analytics to support the delivery of high-quality care.

If you don’t pay attention to this, and you’re more concerned about signing a one-year deal, the whole thing could blow up if the provider is on the losing side and can’t provide care for pa-tients, he says.

If a provider is already organized as a patient-centered medical home (PCMH), it indicates the provider is already thinking about providing team-based care, which is key to reducing costs while delivering high-quality care, says Isgur.

It’s also a good idea to consider the provid-ers’ use of non-physician providers in a team-based model. “Many of those non-physician clinicians—such as nurse practitioners and nutritionists and social workers—are the ones helping to manage cost and improve quality,” he says. Consider, for example, the fact that obesity is a big problem in the U.S., he says. “If you ask who’s going to do a better job in terms of helping people to reduce weight and live a healthier life-style, it isn’t going to be a physician who has that to worry about out of about 500 [other] things. It’s [going to be] a nutritionist.”

Isgur says payers should think about quality first: Who’s going to do a better job of managing the patient’s care? Secondly, they should think about cost: A nutritionist is paid less by the hour. “That’s the framework we think payers should be looking for: quality first, cost second,” he says. “Often the answer is a team of caregivers.”

5/ NOT EVALUATING THE BROADER NETWORKPayers need to make sure they evaluate the network they have before embarking on a risk-sharing agreement, says Meklaus. “Performing a rigorous assessment of capability is valuable in understanding those differences and not extending risk to organizations ill-prepared to manage it; or conversely, failing to extend risk to those capable of managing it. Within this

Risk-sharing pitfalls

If a provider is already organized as a PCMH, it indicates the provider is already thinking about providing team-based care, which is key to reducing costs.—BEN ISGUR, PWC

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Risk-sharing pitfalls

context, payers should be evaluating ACOs for governance, leadership, infrastructure, and technology, especially analytics,” he says.

Narrow networks, which are becoming more common across the country, are being used to manage costs. Payers are selecting providers to join these narrow networks based on their his-tory of managing costs while providing high-quality care, says Meklaus. Still, those networks can’t be too narrow—or they won’t be accept-able to members making provider choices. “It’s always a balance. It’s about geography and spe-cialty coverage, and the ability to accept risk. ... That’s why evaluating your network is impor-tant,” he says.

6/ FAILING TO SUPPORT YOUR PARTNERS Payers must be willing to release helpful infor-mation to providers, such as which patients are included in the risk pool, claims data, and detailed information about labs and pharmacy that provide a comprehensive picture of the pro-vider’s patient population, says Meklaus. Once providers have access to this information, they’ll need to effectively identify sub-segments of that population that are at risk and create interven-tions that apply to those populations, he says.

Payers also need to be realistic about their ability to provide the appropriate claims and other data to providers. For instance, while ad-judicated data may be lagging in time, it can be helpful when trying to identify areas of high uti-lization and opportunities to address over-uti-lization. It may be easier for traditional HMOs to provide adjudicated data to providers since their members have a primary care provider, who serves as their gatekeeper for referrals. With PPO plans, it’s a bit more complicated to appropriately attribute members to a network. First you need to take a look at where members have received a majority of their primary care by looking at claims data, and then patients can be attributed to primary care providers. Meklaus recommends working with a software

analytics vendor that is able to do this type of analysis.

Keep in mind that adjudicated data can fall short in addressing specific patients—specifi-cally because of time lags, says Meklaus. Often, by the time a patient shows up as at-risk in the claims data, their status has changed, which could mean their heath has improved, gotten worse—or they may have died, says Meklaus.

For this reason, giving providers timely ac-cess to information about the patients they serve is another key to success, he says. If payers can provide up-to-date health information to providers, providers will be able to proactively identify patients who are in most need of care—especially those with chronic conditions, such as heart disease, diabetes, or obesity, he says. Once they have this information, they can craft strategies to keep high-cost patients out of the hospital or the emergency room.

7/ FAILING TO SHIFT PROVIDER COMPENSATIONHow physicians are being paid after a provider decides to take on a full-risk, or close to a full-risk agreement also impacts the success of a risk-sharing arrangement, says Thompson. If physi-cians continue to be paid on a fee-for-service basis, their daily work flows won’t align with the value-based reimbursement model the organiza-tion has taken on. That can be a very dangerous scenario, says Thompson, who notes that this often happens with independent practice asso-ciations.

Providers are “in between a rock and a hard place,” says Meklaus. “They’re seeing their reim-bursement drop for fee-for-service visits. Mar-gins are tight, yet we’re asking them to add new capabilities. In many cases, they have no capital to make these investments. Any help that payers can provide to providers to help build out their capabilities will go in the right direction so that providers can take on more risk over time.”

Aine Cryts is a writer based in Boston.

Payers should be evaluating ACOs for governance, leadership, infrastructure, and technology, especially analytics.—GERALD MEKLAUS, ACCENTURE

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LEGISLATIVE / POLICY DEVELOPMENTS, TRENDS AND IMPACTS

Policy Outlook

any within the healthcare industry breathed a col-lective sigh of relief when one of the Affordable

Care Act’s (ACA’s) most controversial provisions—

the Cadillac Tax—was recently delayed until 2020. 

The delay, however, has resulted in a great deal of confusion as to what changes were made to the law; what employers, unions, in-surers, and governments (affected entities) should do now to prepare; and what the future might hold for the Cadillac Tax.   

For and againstThe purpose of the Cadillac Tax was to stem the rising tide of healthcare costs by discouraging the provision of overly rich benefit packages. The Cadillac Tax does this by placing a 40% tax on the dollar value of coverage exceeding $10,200 for individuals and $27,500 for other coverage.  

Proponents have argued that this tax will discourage the provi-sion of overly rich benefit packages that lead to price insensitivity and cause healthcare consumers to demand more and more expensive services.

However, critics argue that the Cadillac Tax does not effectively address this issue because it will affect far more modest plans and will result in affected entities

discontinuing many important services that lead to efficient care in order to avoid the thresholds. 

Of particular significance, the Cadillac Tax thresholds are indexed for inflation based on the Consumer Price Index for All Urban Consumers (CPI–U), which is a statistical metric developed to

monitor the change in the price of a set list of products for urban consumers. This creates an issue for affected entities because the cost of healthcare has traditionally risen much faster than the CPI-U, so if the trend continues, the Cadillac Tax will eventually affect all plans.

The legislationThe legislation delaying the Cadil-lac Tax made certain permanent changes that affected entities will welcome. Of particular note, the legislation makes the Cadillac Tax penalties tax deductible. This par-ticular change is welcome news as many affected entities have argued

that, if ever touched by the Cadil-lac Tax, they would need to drop benefits because of the difficulty in justifying a payment that will grow in amount every year because of the indexing of the thresholds and will provide no additional benefit to beneficiaries or tax benefits to the affected entity.

Additionally, the legislation requires that the U.S. Comp-troller General and the National Asso-ciation of Insurance Commissioners conduct a study on whether the Cadillac Tax uses appropri-ate standards in

determining age and gender ad-justments to the thresholds. Thus, it is possible that these recom-mendations may form the basis for additional legislative changes.

The delay While the debate on the future of the Cadillac Tax is certain to rage on for years to come, it is impor-tant that affected entities not for-get that the Cadillac Tax is still on the books. Despite a perception of widespread support for repeal, the Cadillac Tax was one of the princi-pal pay-fors of the ACA and will be difficult to repeal from a budgetary standpoint. Thus, affected entities must prepare as though the law is

Cadillac Tax delay: what to do nowby ADAM SOLANDER and BRANDON GE

Before it hits you, consider effective benefit strategies

While the debate on the future of the Cadillac Tax is certain to rage on, it is important that affected entities not forget that the Cadillac Tax is still on the books.

M

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MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 Managed Healthcare Executive.com24

Policy Outlook

going into eff ect in 2020.From a preparation stand-

point, the two-year delay provides aff ected entities with additional time to create a sustainable benefi t package that will stay below the Cadillac Tax thresholds. Any long-term plan to avoid the Cadillac Tax must address the way in which providers are paid and must imple-ment population health strategies to improve the health of benefi -ciaries.

Th e good news for aff ected entities is that since the ACA was enacted, the Cadillac Tax and the Medicare Shared-Savings Program (MSSP) have combined to create a market where aff ected entities are now in a better position to off er more effi cient and eff ective benefi t packages. While the MSSP has been met with a lukewarm recep-tion, it did begin a provider system transformation that has fi nally begun to operationalize the move away from fee-for-service to more accountable payment models.

Th ese accountable services are being marketed outside of the Medicaid context and present

opportunities to incorporate prod-ucts such as referenced pricing and bundled payments into traditional coverages. Additionally, a boom in the telemedicine fi eld off ers an opportunity for innovative aff ected entities to off er lower-priced services and programs that specifi cally address cost drivers in their plans.

Future outlook At this point, the long-term fate

of the Cadillac Tax is uncertain. Nevertheless, the Cadillac Tax has already caused aff ected entities to take a close look at the ben-efi ts they off er and come up with strategies to more effi ciently and eff ectively off er health coverage. Additionally, the Cadillac Tax has spurred a great deal of innovation both from the population health and payment reform points of view.  Th erefore, even if the Cadil-lac Tax is eventually repealed, proponents are likely to argue that it has been a success.

Adam C. Solander is a member of the fi rm in the Health Care and Life Sciences practice, in the Washington, D.C., offi ce of Epstein Becker Green. Brandon C. Ge is an associate in the Health Care and Life Sciences practice, in the fi rm’s Washington, D.C., offi ce.

The two-year delay provides affected entities with additional time to create a sustainable benefi t package that will stay below the Cadillac Tax thresholds.

GE

Cadillac Tax Timeline March 2010

The Affordable Care Act—and the Cadillac Tax—are signed into law.

July 30, 2015

The IRS issues Notice 2015-52, addressing additional issues for administering the Cadillac Tax.

February 23, 2015

The IRS issues Notice 2015-16, offering initial Cadillac Tax guidance.

December 18, 2015

The president signs a bill delaying the Cadillac Tax for two years.

January 1, 2020

The current Cadillac Tax effective date.

January 1, 2018

The effective date of the Cadillac Tax prior to the two-year delay.

SOLANDER

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U.S. stakeholders can learn from Brazil’s experience

Changes in healthcare financing affect everyone

Healthcare fi nancing and delivery in the United

States is undergoing great change, from how

payers reimburse physicians for their services

to how consumers receive and purchase health

insurance coverage. For the major industry

players, knowledge is key to successfully navi-

gating these transitions.

A critical piece of that knowledge is under-

standing what’s happening to the industry in

this country and why, and what’s happening in

healthcare beyond our borders. Learning how

other countries address healthcare fi nancing

and delivery and how they troubleshoot similar

problems can help us better address our own

challenges.

Th at’s why Managed Healthcare Executive

recently interviewed Francisco Balestrin, MD,

chairman of the board of directors of the Bra-

zilian National Association of Private Hospitals

(ANAHP), to discuss the changing healthcare

industry in Brazil. ANAHP is an organization of

leading private hospitals in Brazil that seeks to

improve healthcare quality and patient safety.

Balestrin is also executive vice president of the

VITA Network, and president designate of the

International Hospital Federation.

Managed Healthcare Executive (MHE):

What are some of the changes

occurring in Brazilian healthcare

that are the most exciting and

encouraging for the future of

healthcare in that country?

Balestrin: Healthcare in Brazil is slowly becom-

ing more professional and better managed.

2015 has been the fi rst year in which foreign in-

vestment has been permitted in the healthcare

sector. We have seen a wave of consolidation—

A D V E R T O R I A L

Q&AFrancisco Balestrin, MD, Chairman of the board of directors of the Brazilian

National Association of Private Hospitals (ANAHP)

1

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A D V E R T O R I A L2

both in healthcare providers and payers, which

is making the market more competitive.

Brazil has a Unifi ed Health System with

two approaches—a public and a private one.

Th e public part is taxpayer-funded and freely

available to all, but the good intentions of

the creators of the system are often diffi cult

to translate into reality. Th ere are issues with

management and funding that make health-

care provision in the public system less than

ideal. Th e fact that there is a public healthcare

system, however, is one of our country’s most

important achievements, and it is an advanced

and democratic proposal, with a fundamental

role in reducing the country’s inequalities.

Th e private system is starting to see some

major changes. Th ere are more than 50 million

people covered in that system. Th ere are some

ideas being experimented upon in areas such

as new management and payment models. Th e

Brazilian National Private Hospitals Associa-

tion has started a pilot program to implement

the DRGs in some hospitals.

Th ere is a consensus in the industry on the

need to promote sustainability and reduce

waste, and this applies to many areas—from

purchasing, where we are seeing the fi rst move-

ments to set up group purchasing organiza-

tions, to information technology, where many

hospitals are implementing systems to better

manage the quality of care.

Overall, it is an exciting time to be practic-

ing healthcare in Brazil. Innovation, corporate

governance and sound management are taking

hold as a culture within the industry and there

are many investment opportunities in what

is still a relatively underexplored sector in the

country.

MHE:

What are some of the biggest

challenges currently facing Brazilian

healthcare?

Balestrin: Brazil is among the 10 largest econo-

mies in the world, with an incredible potential

for growth. Even though we have seen massive

advances in the past few decades—life expec-

tancy at birth has risen by nearly 12 years in

the past 30 years—we still have a long way to

go until we can provide adequate and eff ective

health coverage for the whole population. Th e

challenges involve resources and investments,

management, and some Brazilian specifi cities.

Brazil is starting to deal with the

challenges posed by an aging popula-

tion without entirely overcoming the

challenges of a young, developing coun-

try. Th erefore, we have a triple disease

burden, in which the chronic diseases

of old age occur simultaneously with

infectious diseases and a high incidence

of trauma—mainly due to poor safety in

roads and highways, as well as, unfortu-

nately high levels of social violence.

Th ose demand three very particular in-

stances of care, each with its own costs and

structures. It is a challenge to maintain this

system, especially when the country underin-

vests. Government investment in its three lev-

els—federal, state, and municipal, is only 4.1%

of GDP, a number that is too small for a country

that has a goal of providing universal health-

care. Private investment, at 5.1% of GDP, brings

the total up to 9.2%, and makes up for some of

the shortfall, but only around a quarter of the

population has access to private healthcare

through some sort of private insurance.

Alongside the underinvestment, however,

there are also defi ciencies in management and

leadership. Th ere are, of course, world-class

hospitals and professionals in Brazil, in the

private as well as in the public sector, but there

is not yet a system-wide culture of excellence.

Th is means that a large proportion of the re-

sources in the system are not used to their full

potential.

Changes in healthcare fi nancing affect everyone

“Brazil is among the 10 largest economies in the world, with an incredible potential for growth.”

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A D V E R T O R I A L3

MHE:

What are some of the biggest ways

that Brazilian healthcare differs from

healthcare in the United States?

Balestrin: Th ey are two very diff erent ideas.

Th e Brazilian system is a bolder proposition.

Th e idea that the State should provide health-

care for all its citizens, under the principles of

universality, equity and integrality, has taken

root in Brazil and is cherished by the popula-

tion. Economic conditions and management

issues, however, mean that public healthcare

is not as readily available, nor as eff ective, as it

should be.

Brazil is also a country in which the popu-

lation is less evenly spread throughout the

territory. Th ere are more large metropolises

and fewer mid-sized cities than in the United

States. Th is means that the population in the

countryside areas often has diffi culty accessing

health services, and that economies of scale are

hard to achieve in a large part of the country.

Th e challenges of the United States are, in a

large part, a product of its own successes. In-

novation in healthcare has been raising costs,

but also quality of care. Today, if you have the

resources, the United States is probably the

best place in the world to seek treatment for a

health condition. Th e world’s best profession-

als, as well as the most advanced technology,

is available. What is striking, however, is that

overall population health is below the levels

found in most developed countries. Of course,

there are cultural factors at play—some of the

lifestyle choices made by many Americans lead

to these results.

Th ere is a more individualistic notion of

health in the United States, in which the issues

of personal responsibility are more important,

but issues concerning population-wide health

are relatively neglected. In Brazil, the govern-

ment has taken a more active role in promoting

health, with some interesting results. Smoking

levels have markedly declined, there is a large

vaccination program, which is completely free,

and free provision of HIV/AIDS medication has

generated relatively low transmission levels.

MHE:

What are some of the lessons

you think the Brazilian healthcare

industry can learn from the United

States?

Balestrin: Th e Brazilian healthcare industry

has a lot to learn from the United States, and a

lot of catching up to do. Advanced experiences

of care management, such as the DRGs, which

have been implemented for at least 30 years in

America, are just now taking their fi rst steps in

Brazil. Without better care management, new

payment and reimbursement models will be

hard to achieve.

Also, we do not fi nd in Brazil as strong a cul-

ture of innovation as in the United States. Inno-

vation in Brazil often meets many regulatory,

cultural and legal challenges, and is seldom

done in an environment specifi cally structured

for the purpose. As a result, many new ideas are

not implemented, and improvement in quality

of care happens at a slower pace.

Further, with Brazil’s aging population, we

have a lot to learn with America in caring for

the elderly. Even allowing for cultural diff erenc-

es in family structures and familial relations, it

is clear that Brazil will need a massive invest-

ment in care alternatives for the elderly, espe-

cially those with chronic diseases, but who do

not necessarily need acute care.

Most of all, however, standards of corporate

governance are higher in America. Better gov-

ernance, in the long term, means higher stan-

dards of care, better patient safety, and more

stability and long-term profi tability for the

shareholders. Th e healthcare sector in Brazil

has only recently been realizing the importance

of these issues, and has started implementing

better compliance procedures and acting ac-

cording to established codes of conduct.

MHE:

What are some of the lessons you

think the United States can learn

from the Brazilian healthcare

industry?

Getty Images/Hem

era/Getty Images Plus/Robert Biederm

ann

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Balestrin: Th e United States might also have

something to learn from Brazil as well. Despite

the public system’s many fl aws, it is an achieve-

ment of a massive scale to provide healthcare for

200 million people in a large and diverse coun-

try, independently of income or social class. It is

our most important legacy for the future.

Th ere is also a lot to learn from the creative

solutions for working with limited resources.

Brazil has some very cheap and eff ective pro-

grams—such as the “Family Health Program,”

in which teams composed mostly social work-

ers and nurse technicians promote health in

the poorer families.

Fear of legal liability has made medicine in

America get used to excess. Most academic

studies indicate that Americans are over-ex-

amined and over-medicated, wasting many

resources. Th e need to have a paper trail to

justify every decision is certainly a factor in

that. Th is has also led to a distancing between

healthcare professionals and patients, in which

there is less of a human touch in the healthcare

process.

Brazil has also built a robust regulatory

environment for healthcare. Th ere has been

a specifi c independent government agency

with a mandate to regulate private healthcare

plans for more than 15 years. Th is has created

relatively stable rules for the system and some

degree of protection for consumers.

Overall, Brazil’s and America’s healthcare

systems are in many ways a refl ection of the

countries themselves. Both nations are huge

and diverse, and are challenging countries to

practice healthcare. I am confi dent that deep-

ening exchanges, sharing best practices and

creating learning experiences between the two

countries could be of enormous benefi t to both

of them.

A D V E R T O R I A L

Balestrin is president

designate of the

International Hospital

Federation and chairman

of the board of directors

of the Brazilian National

Association of Private

Hospitals (ANAHP),

a supporter of the

upcoming Hospitalar

conference, which

brings together

thousands of hospital

leaders, professionals

and health thinkers

from across the world.

This year’s conference

will be held May 17

to May 20 in

São Paulo, Brazil.

Organiser

17-20

May

2016

hospitalar.com

23rd International Fair of Products, Equipment, Services and Technology for Hospitals, Laboratories, Pharmacies, Health Clinics and Medical Offi ces

Expo Center NorteSÃO PAULO - BRAZIL

THE MOST IMPORTANT

HEALTHCARE EVENT IN THE AMERICAS

Visit & Learn

Tel.: +55 11 4878.5990 E-mail: [email protected] us: @hospitalarfeira t /hospitalar

Changes in healthcare fi nancing affect everyone

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Managed Healthcare Executive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 25

Drugs In The Pipeline

he number of personalized medicines approved over the last two years has in-creased sharply and contin-

ues to increase, representing a trend in medical develop-

ment towards therapeutics that can be tailored to individual patient efficacy and safety, according to a new analysis.

The analysis, “2015 Progress Report: Personalized Medicine at FDA,” from the Personalized Medi-cine Coalition (PMC), identifies an upward trend in the number of personalized medicine approvals at FDA, with personalized medicines accounting for more than 1 in 4 novel new drugs approved in 2015.

The analysis also found that:

❚ 13 of the 45 novel new drugs

approved by FDA in 2015

are personalized medicines

(approximately 28%).

❚ Five of the 14 approved oncology

indications in 2015 are personalized

medicines (approximately 35%).

FDA also approved a number of significant new personalized medi-cine indications for previously exist-ing drugs that redefine and expand their intended populations.

“With these new approvals, there

are increasingly more tools in the managed care toolbox,” says analysis author Daryl Pritchard, PhD, vice president, science policy, PMC. “Per-sonalized medicines and managed care go hand-in-hand as both focus on understanding and providing the most effective and valuable therapeutic option to individual patients. For many health conditions, diagnostic tests can help guide treat-ment decisions so as to provide safer, more effective care.”

Personalized medicine is an evolving field in which physicians use diagnostic tests to determine which medical treatments will work best for each patient, says Pritchard.

“By combining the data from those tests with an individual’s medical history, circumstances and values, healthcare providers can

develop targeted treatment plans,” he says. “This in turn can bring down costs ... because many patients will have improved out-comes and/or will

have avoided adverse events.” Reimbursement, policy, and

coverage are among some of the chal-lenges for personalized medicine, says Pritchard. Educating providers about personalized medicine’s clinical and economic value is key.

Tracey Walker is content manager for Managed Healthcare Executive.

Fifty-nine percent of respondents to a recent survey by Health Catalyst said precision medicine will not play a significant role in their organizations in the next five years. Among respondents from nonacademic hospitals and health systems, the number who said precision medicine will play an average, small or non-existent role in their organizations between now and 2020 jumped to 68%.

After President Obama announced a $215 million precision medicine initiative in his State of the Union address last year, many expected healthcare systems to increase precision medicine efforts. “As—historically—expected, academic medical

centers seem to be leading the healthcare industry when it comes to clinical use of DNA sequencing and precision genomics,” says David Crockett, PhD, senior director of research and predictive analytics for Health Catalyst. “Is this really spreading into mainstream healthcare? Maybe not as fast as the hype suggests.”

The tricky balance is between “standard care” and “tailored care” (precision medicine), says Crockett. “It’s hard to standardize to evidence-based best practices, reducing variation and waste to save money—while expecting every patient to get treated a little differently because of DNA test results.”

Health execs hesitate to jump on board

Personalized medicine can help guide treatment decisionsAs the number of these tailored options

increases, educating providers is key

by TRACEY WALKER

TPRITCHARD

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MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 Managed Healthcare Executive.com26

Special Report

Prescription drug spending growth is projected to slow down to an average 6.3% annual growth from 2015 through 2024 be-cause of improving economic conditions, changes in benefit management designed to encourage better drug adherence for people with chronic health conditions, and antici-pated changing clinical guidelines designed to encourage drug therapies at earlier stages of treatment, according to the Centers for Medicare & Medicaid Services.

In looking at the recent surge in medica-tion spending, many factors played a role, including prices escalating for brand medi-cations and the ongoing increase in utiliza-tion of specialty therapies, including rapid uptake of new hepatitis C therapies and ex-pensive compounded therapies, says Jona-

than C. Roberts, president, CVS/Caremark, and executive vice president, CVS Health, Woonsocket, Rhode Island.

As a result of market forces, plan spon-sors can no longer rely on the wave of less-expensive generics to control drug costs, ac-cording to the Express Scripts report. They need to act now to more tightly manage the benefit, implement smarter formularies, control the use of compounded medica-tions, and offer clinical support to ensure that all patients are able to achieve the best health outcome possible.

Here’s a closer look at the forces behind the sharp rise in medication spending.

SPECIALTY MEDICATIONS Specialty drugs tend to be much more com-plex than conventional medicines, such as pills, and may require injection. FDA has significantly increased the number of spe-cialty medications that it has approved in the last 10 years from six specialty drugs in 2005 to 27 drugs in 2014. “Because specialty drugs tend to cost considerably more than traditional drugs, the breakdown becomes significant,” says Benjamin Isgur, director, PwC Health Research Institute, New York, New York.

Specialty medicines now account for one-third of spending, according to the

Rising costs of brand medications, increased use of specialty therapies, play a role BY KAREN APPOLD

Prescription drug spending surges

In 2014, the pharmacy landscape underwent a seismic

change, and healthcare payers faced the highest annual in-

crease in drug spending since 2003, according to the “2014

Drug Trend Report” by Express Scripts. In addition, new

medication spending reached $373.9 billion in 2014, up

13.1%, the highest level since 2001 when growth was 17%,

according to the IMS Institute for Healthcare Informatics

report, “Medicines Use and Spending Shifts: A Review of

the Use of Medicines in the U.S. in 2014.”

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Special Report

IMS report, despite representing only 1% of all U.S. prescriptions. And, spending on specialty medications more than doubled from 2013 to 2014, according to the Express Scripts report.

Isgur says specialty drugs are addressing conditions that didn’t have good treatment regimens previously. “Th ey are coming on market as researchers work to fi nd cures and other benefi ts for patients who haven’t had them in the past,” he says.

Hepatitis C treatments are a good ex-ample. Since mid-2014, many options be-came available that cost more than $1,000 a pill, resulting in a full-course treatment that could cost $80,000 or more. “Despite the hefty price tag, the benefi ts seem quite high as patients are being cured or at least living greatly improved lives,” Isgur says.

Hepatitis C drugs accounted for 45% of the total increase in specialty spending, de-spite having the second-lowest prescription volume among the top 10 specialty condi-tions, according to the Express Scripts re-port. Th e United States spent nearly 743% more on hepatitis C medications in 2014 than in 2013.

ORPHAN DRUGS Most new drug launches are specialty phar-maceuticals that are increasingly targeting more common conditions. Such is the case with hepatitis C treatments that launched in 2014, which have a potential patient popu-lation in the millions, Roberts says. Another example is FDA’s approval and launch of new PCSK9-inhibitors in 2015, which are in-dicated for lowering low-density lipoprotein cholesterol in certain patient populations.

In addition to specialty drugs, pharma-ceutical companies are launching orphan drugs to treat extremely rare conditions and diseases with very small, specifi c popu-lations—typically only several thousand patients or fewer, according to the Express Scripts report. Orphan drugs are among the most expensive medications in the United States, often costing tens of thousands of dollars per prescription. According to the report, the high expense is warranted and necessary to fund manufacturer research and development costs for these and future medical breakthroughs that may not hap-pen otherwise.

In the last fi ve years, 61 orphan drugs were launched, the largest number in any

fi ve-year period since the passage of the Or-phan Drug Act in 1983, according to the IMS report. Eighteen orphan drugs launched in 2014, including nine treatments called “ultra-orphan” drugs, for diseases affl icting fewer than 10,000 patients. Cancer remains the most common orphan category.

Th e reasoning behind the focus on or-phan drugs is multi-fold. Historically, drug manufacturers’ business models focused on research and development of key drugs to treat common conditions that aff ected millions of patients. Th ese branded medi-cations became blockbusters because of the volume of patients treated and a high, but not exorbitant, price tag, according to the Express Scripts report. As a result of patent expirations, generic competition, and a withering pipeline of broad-reaching drugs, manufacturers are shifting their drug discovery, development, and pricing strate-gies. “Now, manufacturers are focused more on medications that treat a small number of patients with diseases such as cancer, or patients with rare diseases such as heredi-

tary angioedema,” says Rochelle Henderson, se-nior director of research, Express Scripts, St. Louis, Missouri.

Manufacturers also are tailoring molecular drugs to patients with specifi c genetic profi les known to

be aff ected by certain diseases, so the drugs are more eff ective in treating those specifi c patients. For example, Ruconest (C1 esterase inhibitor [recombinant]), approved in July 2014, treats adult and adolescent patients with hereditary angioedema, which aff ects fewer than 10,000 Americans. Another such drug, Cerdelga (eliglustat), off ers an oral al-ternative to enzyme replacement therapy for adult patients with Gaucher disease type 1, an inherited lysosomal storage disorder that aff ects approximately 6,000 patients in the United States.

In addition, more than 1,000 targeted cancer treatments, many genetically guided, are in development. One such niche cancer drug is Keytruda (pembrolizumab), an im-munotherapy approved in September 2014 to treat a small subpopulation of patients with certain genetic expressions of ad-vanced, non-small cell lung cancer. “Th ese drugs oftentimes have little or no compe-

HENDERSON

EMPLOYERS AIM TO CURB SPECIALTY DRUG COSTS

26%of employers’

medical plans

address specialty

drug cost and

utilization.

That number is

expected to triple

in three years.

53%of employers say

they are adding

new coverage

and utilization

restrictions for

specialty pharmacy.

32%of employers say

they plan to add new

restrictions by 2018.

Source: 20th Annual Towers Watson/NBGH Best Practices in Health Care Employer Survey

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MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 Managed Healthcare Executive.com28

Special Report

tition and are often much more effective than the broader-spectrum drugs they are replacing as first or second-line treatments,” Henderson says. “Many have unprecedented costs, however, as pharmaceutical compa-nies aim to maintain profit margins and re-coup their investments in drug discovery.”

Isgur says the high price tag is also due, in part, to the fact that a smaller patient population takes orphan drugs. “The cost is shared by a smaller number of patients,” he explains.

And although orphan drugs are expen-sive, there is a flipside. “By improving pa-tients’ lives, keeping patients out of hospi-tals, and preventing procedures such as an organ transplant, there may be a cost sav-ings,” Isgur points out.

NEW INNOVATIONS Spending on new brands increased dramati-cally in 2014, as new treatment options for hepatitis C, cancer, multiple sclerosis, and diabetes had stronger uptake than new medicines in prior years, according to the IMS report.

“But despite the recent focus on develop-ing and promoting specialty medications, a considerable drug market for medications indicated to treat more common chronic conditions, such as high blood cholesterol and diabetes, still exists,” Henderson says. Combined, these medications affect at least 19 million Americans.

Diabetes medications were the only non-specialty therapy class to have a sig-nificant increase in per-member-per-year (PMPY) drug spend in 2014, largely because

of two newly approved drugs known as so-dium-glucose co-transporter 2 inhibitors, or SGLT2 inhibitors, according to the Express Scripts report.

COMPOUNDED MEDICATIONSIn 2013 and 2014, spend for compound med-ications escalated rapidly. Compounded drugs now rank as the third most expensive therapy class on a PMPY basis, displacing high blood pressure medications, which had ranked among the top three most-expensive traditional therapy classes for at least a de-cade, according to the Express Scripts re-port.

Until the 1950s, most prescriptions were prepared using the compounding process, however, mass pharmaceutical production replaced this method by the 1970s. The vol-ume of compounded prescriptions contin-ued to drop over time, representing less than 1% of all prescriptions by the early 2000s. Their share is similar today, according to the report.

Many factors play a role in the increases in cost and use of compounded medications. “Key reasons include changes in industry practices that make it easier to track medi-cation costs, compounding pharmacies’ marketing and billing practices, physician prescribing, and patient demand,” Hender-son says.

FEWER GENERIC OFFERINGSIn the past, drug spending decreased as more drugs had generic options become available. But in recent years, fewer drugs were offered as generics because fewer blockbuster drugs were coming off patent.

In addition, generic drug prices have in-creased, perhaps because fewer manufac-turers are making generic drugs. In certain classes, only one or two manufacturers are making a drug. This is because manufactur-ers aren’t enticed to produce a product at a low price point, Isgur says. “If there is a prob-lem with the supply pipeline, there can be a disruption of manufacturing which creates shortages and raises prices.”

When pending patents expire and generic drugs become more available, pharmaceuti-cal manufacturers often employ strategies to preserve their market share, including rais-ing prices for their branded drugs, Roberts says. For CVS/Caremark PBM clients in 2014, price increases for branded drugs—for both

Compounded drugs now rank as the third most expensive therapy class on a PMPY basis, displacing high blood pressure medications.—EXPRESS SCRIPTS

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ManagedHealthcareExecutive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 29

Special Report

non-specialty and specialty brands—con-tributed a combined 10.7% to drug trend,

more than 50% of the total trend, he says.

According to the Ex-press Scripts Prescription Price Index, which tracks the pricing for a market basket of the 80% most commonly used brand drugs and a separate bas-

ket for the 80% most commonly used ge-neric drugs, average brand drug pricing more than doubled (up 127%) from 2008 to 2014, while average generic drug prices were cut in half (down 62%) during that same time period.

It’s also important to note that perhaps the most anticipated innovations in this category were generic versions of biologic drugs, called biosimilars. Th is is because ex-act copies are not possible, the IMS Institute for Healthcare Informatics report states. Th e fi rst biosimilar applications were fi led in 2014, fi ve years after legislation created the biosimilar pathway.

REGULATORY FORCESVarious legislative and regulatory forces have also attributed to the increase in medi-cation spending. Congressional legislation approved in 2012 granted new approval au-thorities to FDA, including the ability to ex-pedite the development and review of drugs deemed “breakthrough therapies.”

In 2014, more than 40 breakthrough therapy designations were approved and 10 drugs with the designation were launched, making lifesaving drugs quickly available to the most vulnerable patient populations, according to the IMS report. Drugs deemed breakthroughs are often launched within a month of approval to provide new therapies to patient populations as quickly as possi-ble. Seven of the 10 were orphan drugs, and the non-orphan drugs (meningitis vaccine, hepatitis C) serve large populations and provide cures for potentially fatal diseases, according to the report.

Also in 2014, states  began to  expand Medicaid, the government’s health in-surance program for low-income Ameri-cans.  An additional 8.7 million American adults and children were added to Medicaid enrollment as a result of the Aff ordable Care Act (ACA), bringing the total number of

Medicaid benefi ciaries nationwide to nearly 70 million, according to the Henry J. Kaiser Family Foundation.

With increasing access to prescription drug benefi ts under Medicaid and the ACA, there was a corresponding rise in prescrip-tion utilization, Roberts says. PMPY spend for Medicaid plans rose 10.2%, to $882.43 in 2014, primarily due to a 10.7% increase in unit cost, the Express Scripts report stated. Total traditional trend was 2.8%, refl ecting a 0.5% decrease in utilization and a 3.2% increase in unit cost. Spend for tra-ditional medications contributed 72.2% of total PMPY spend in 2014.

Th e largest impact on Medicaid in 2014 stemmed from the avail-ability of new, high-priced hepa-titis C therapies, Henderson says. Expensive hepatitis C drugs con-tributed signifi cantly to a 35.8% increase in specialty drug spend in Medicaid. Th e 2014 specialty drug spend increase was three times the increase in specialty drug spend seen in 2013.

With more than 750,000 Ameri-cans with chronic hepatitis C re-ceiving state-funded healthcare through Medicaid or the prison system, the burden of paying for the cost of these hepatitis C treat-ment regimens falls dispropor-tionately on state budgets, Hen-derson says. Given the prevalence of hepatitis C in the Medicaid population and the extreme cost, PMPY spend for this category among Medicaid plan sponsors rose 321.8% to $55.02—the largest drug trend for any single therapy class. In addition, spend for this therapy class was higher than that for all other spe-cialty therapy classes, according to the Ex-press Scripts report.

“As states continue to try to manage the cost of care for Medicaid, interest in the use of managed care remains high,” Henderson says. “Many states that chose Medicaid ex-pansion had previously used some form of managed care to control the operational and medical costs of managing enrollee benefi ts.”

Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.

ROBERTS

Specialty

medicines now

account for

ONE-THIRDof spending,

despite

representing

ONLY 1%of all U.S.

prescriptions.

Source: IMS Institute for Healthcare Informatics

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MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 Managed Healthcare Executive.com30

INNOVATIVE IDEAS FOR DRUG UTILIZATION AND MANAGEMENT

Pharmacy Best Practices

t has been a decade since the Medicare Modern-ization Act took effect, creating Medicare Part

D and tacking on manda-tory medication therapy

management (MTM) services to encourage the appropriate use of drugs by older adults.

In 2010, the Centers for Medicare & Medicaid Services (CMS) significantly tweaked MTM, providing changes in targeting criteria and giving the program more consistency. Three years later, the comprehensive medica-tion review (CMR) as part of MTM services became a mandate for every program.

This evolution will be capped by Part D Enhanced MTM slated for January 1, 2017. Introduced by CMS’ Center for Medicare and Medicaid Innovation (CMMI) for Prescription Drug Plans (PDPs) only [Medicare Advantage-Pre-scription Drug plans—MA-PDs) and PDPs participate in the cur-rent MTM program]—it should provide more flexibility along with prospective and performance incentives.

Enhanced MTMCMMI’s overall goals for Enhanced MTM are:

❚ Improving compliance with medi-

cation protocols through appropri-

ate prescribing and proper use;

❚ Reducing medication problems;

❚ Increasing patient knowledge of

the drugs they take; and

❚ Improving communications among

prescribers, pharmacists, caregivers

and patients.

Kurt Proctor, senior vice presi-dent, strategic initiatives, National Community Pharmacists Asso-ciation, applauds the enhanced model emphasizing its incen-tives for prescribing appropriate drugs and for reducing other healthcare costs, such as fewer

hospitalizations and emergency department visits. However, he acknowledges that MTM results in higher drug utilization and costs because of

increased adherence and pharma-cist participation.

The Congressional Budget Of-fice estimates that a 1% increase in the number of prescriptions filled would cause Medicare’s spend-ing on medical services to fall by roughly 0.2%.

Proctor also looks forward to more flexible eligibility criteria so that those who really need MTM services are targeted, not just be-cause they meet requirements.

Agreeing with Proctor, Mary Jo Carden, vice president, govern-ment and pharmacy affairs for the

Academy of Managed Care Phar-macy (AMCP), says, “MTM may not be the best way to go for some beneficiaries even if they meet cri-teria requirements, but those most in need should receive it.”

Michael Johnsrud, senior vice president, health economics and outcomes research for Avalere, a health-care consulting company, says enhanced MTM

will give plans the ability to design creative MTM programs to solve over- and under-identification of eligible members, target them ap-propriately, leverage services and benefits and improve outcomes. “It should enable pharmacists to improve drug utilization, control side effects and increase adher-ence,” he says.

Standardization challengesCarden is concerned that phar-macists currently are not receiv-ing sufficient reimbursement for their services in MTM programs. She notes that MA-PDs and PDPs are not reimbursed based on the number of members, resulting in less payment for pharmacists.

She also points out that MTM lacks electronic standards across states for delivering MTM and rec-

CMS unveils enhanced MTM program

I

PROCTOR

CARDEN

Model could improve compliance, but reimbursement

challenges remain by MARI EDLIN

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Pharmacy Best Practices

Managed Healthcare Executive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 31

ommends the adoption of special clinical codes to be used across all platforms. AMCP supports System-atized Nomenclature of Medicine Clinical Terms that provide core general terminology for electronic health records and include terms for pharmaceuticals, devices, diagnoses, clinical findings and symptoms.

Due to a lack of reimbursement and electronic standardization, Carden says some pharmacists are resistant to providing MTM.

On the other hand, she notes that emerging telehealth models for completing MTM requirements that utilize pharmacists more di-

rectly, and recognition of pharma-cists as providers in some states, are helping to drive participation.

Proctor anticipates that Star Ratings related to drug adherence and utilization should drive MTM services, increasing completion of all MTM components while show-ing improvement.

Carden says the Star Ratings are not just process measures, but they also require outcomes, trig-gering pharmacist interventions to accomplish them.

The ratings measure the follow-ing percentages: adults older than age 65 who are taking high-risk medications; patients with diabe-

tes/hypertension who receive an ACE inhibitor or an angiotensin receptor blocker; patients taking medications for diabetes, high cholesterol and hypertension who have adherence rates greater than 80%; and beneficiaries who received a CMR with a written summary in the CMS standardized format.

Carden outlines other challeng-es related to inconsistency facing AMCP: lack of clarity regarding quality and outcomes measure-ments that will be used, and lack of clarity regarding the process for creating and adopting measures and the frequency with which

Current MTM vs. Enhanced MTMCurrent MTM Enhanced MTM model

Starting Jan. 1, 2017, 11 states representing five Part D regions will test the new program during a five-year performance period, with performance-based incentives continuing for another two years.

CRITERIA❚ Have multiple chronic diseases; two is the

minimum needed for enrollment. There are nine primary chronic diseases outlined by CMS; beneficiaries with at least five also qualify.

❚ Take multiple drugs. Two is the minimum, and eight is the maximum number of drugs a Part D sponsor may require for targeted enrollment.

❚ Are likely to incur annual costs for covered Part D drugs greater than or equal to the specified MTM cost threshold, which is $3,138.

COMPONENTS1. Interventions for beneficiaries and prescribers.

2. An annual CMR.

3. Quarterly targeted medication reviews (TMRs) with follow-up interventions when necessary.

COMPONENTS❚ Additional regulatory flexibility to design and

implement new MTM strategies allowing for more individualized outreach and engagement, along with risk-based interventions.

❚ Prospective payments for more extensive MTM services outside the Part D bid and paid on a per member per month basis.

❚ Performance payments through an increased direct subsidy to plans that decrease fee-for-service expenditures in Medicare Parts A and B. A minimum 2% reduction could earn a fixed $2 per member amount increase in the subsidy.

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Pharmacy Best Practices

measures will be updated and communicated.

Johnsrud says there also should be more standardization of codes used to bill third-party payers for MTM services provided during a face-to-face engage-ment between a pharmacist and patient.

Typically, pharmacists are reimbursed on a fee-for-service basis, but Proctor says there is a trend toward reimbursement based on performance. Th e three “pharmacists-only” CPT profes-sional services codes are based on time rather than on complexity.

In addition, Johnsrud sees a gap among payers, health systems and pharmacists in standards for MTM services off ered, and advocates for pharmacist access to patient clinical information to achieve eff ective MTM.

Commercial plans on boardWhile most of the MTM activity is taking place in Medicare, the private sector is adopting similar services for its members.

Priority Health, a Michigan-based health plan, initiated its MTM program in 2010 and a year later, partnered with Outcomes MTM, which designs, delivers and oversees the administration of MTM programs. Outcomes MTM created a national network of contracted pharmacists and developed an electronic platform for Priority Health, which enables pharmacists to see a queue of eli-gible patients for MTM identifi ed through claims data, along with patient medication needs.

Th rough reporting from Outcomes MTM, Priority Health can document services, total cost of care, medical and pharmacy costs, HEDIS scores due to MTM and success of its MTM program.

Pharmacists bill the plan to re-ceive reimbursement; they receive a defi ned fee-for-service payment and incentives for identifying and resolving medication problems, the latter paid annually.

Erica Clark, director of clinical pharmacy programs, Priority Health, says that pharmacists are anxious to provide MTM services

in the plan and as demand increases, they should fi nd opportunities to expand their own services.

Based on its 2011 Part D

MTM program, the plan launched an aggressive MTM program for its commercial members in 2015, becoming the only plan in Michigan using community pharmacists at retail pharmacies and those embedded in enhanced patient-centered medical homes. Priority Health also added phar-macists in primary care offi ces to the network.

In order to include every Medicare benefi ciary—regardless if they meet MTM criteria—Prior-ity Health established an opt-out,

all-in strategy and provides an opportunity for pharmacists and physicians to refer patients. “Some members might think they don’t need MTM services, but we have seen them benefi t,” Clark says.

To meet MTM requirements for Priority Health’s Medicare population, members need to be taking four or more medications, have three or more chronic condi-tions, and exceed CMS’ annual dollar threshold. Priority Health also is measuring the number and percent of members who receive a CMR.

Twenty-two percent of Priority Health’s members—based on 2014 data and reported in 2016—received CMRs. Th e national average for PDPs is 15.4% in 2016, according to CMS.

Patients often decline a CMR because they believe their doctor or nurse does this for them when reviewing their medications. Clark emphasizes that there is a diff erence between medication reconciliation at the doctor’s offi ce and the more robust and complete review of all prescribed and over-the-counter medica-tions through an MTM program.

For that reason, Priority Health is focusing on educat-ing members and providers about the value of MTM and has stepped up its outreach strategies to schedule CMRs with members.

When Priority Health analyzed total cost of care, it found that while there was an investment in MTM services, the result was a decrease in both pharmacy and medical spend. Of the cost sav-ings, 90% was attributed to medi-cal cost savings, says Clark.

Mari Edlin is a frequent contributor to Managed Healthcare Executive. She is based in Sonoma, California.

While most MTM activity is taking place in Medicare, the private sector is adopting similar services for its members.

CLARK

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Managed Healthcare Executive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 33

Health ManagementBEST PRACTICES FOR OPTIMAL OUTCOMES

t is well known and docu-mented that dementia has significant adverse effects on those who suffer from

the disease. But it also can have negative physical

and emotional consequences on family members, friends and even professional caregivers who witness patients’ gradual cognitive decline. As if all this is not burden-some enough, the costs linked to dementia treatment appear to be some of the highest in healthcare overall.

A report published in the November 2015 issue of the Annals

of Internal Medicine, “The Burden of Health Care Costs for Patients With Dementia in the Last 5 Years of Life,” summarizes a research analysis funded primarily by the National Institute on Aging (NIA).

The analysis determined that during the last five years of demen-tia patients’ lives, total healthcare spending was more than a quarter-million dollars per person. This was approximately 57% more than costs associated with deaths from other diseases. The analysis esti-mates that total healthcare spend-ing was $287,000 for those with probable dementia and $183,000 for other Medicare beneficiaries. For more on the study findings, see

sidebar, “Study highlights the high cost of dementia.”

Cost driversKori D. Novak, PhD, MBA, a researcher at Oxford University and a fellow at Stanford University School of Medicine, agrees with the study findings related to the

costs associated with dementia. “This is often due to the costs that many people are not prepared for, such as extended homecare or dementia units

in assisted living,” she says. For example, the Alzheimer’s Associa-tion estimates that semi-private rooms in an average nursing home cost $77,500 per patient per year, and private rooms cost $87,600 per patient per year—while basic services in assisted living average $42,000.

“Further, it has been my experi-ence that as the disease progresses, families also begin to incur ad-ditional costs such as time away from jobs, travel to and from the patient, counseling services, etc.,” she says, adding that in some cas-es, the healthcare costs to families with a dementia patient are almost

double the costs for those with family members without a demen-tia diagnosis.

Mike Newell, RN, MSN, founder and president of LifeSpan Care Management, says dementia costs are high due to the burden of care and the fact that these individu-als need constant attendance and supervision. “They are not safe to

make their own decisions or direct their care, and the type of care required is not covered by health insurance or entitlements,” he says.

Another reason for high costs may be because of the disease’s higher social impact factor, which is more than any other disease condition.

Vivek Chail, MBBS, DMRD, DNB, general practitioner and radiologist from iCliniq, further explains, “[Because] it is a chronic condition which is slowly progres-sive and might occur over decades, this causes individuals to become more dependent on social support and rehabilitation services.”

Dementia costs surpass all other diseasesShared resources are key to curbing costs

Report: During the last five years of dementia patients’ lives, total healthcare spending is approximately 57% more than costs associated with deaths from other diseases.

by CHRISTOPHER CUSSAT

I NEWELL

NOVAK

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Health Management

Curbing costsExperts say there are some ways to reduce the costs associated with dementia. Novak believes one key lies with sharing knowledge about the resources available to these patients, such as adult day centers or assisted living communities that have dementia units. “Making resources known to the medical community is one way we can curb the associated costs of demen-tia,” she says. “In this way, physi-cians can refer newly diagnosed individuals to a social worker or to a place where the families can get information on the assistance they can receive.”

Novak adds that costs can be better controlled for dementia-re-lated medications. “Of course, this becomes entangled with Medicare, Medicaid, formularies, pharmacy benefits and private insurance companies. In the long-term, working with these entities may be the only way we can readjust the cost of care for this disease.”

Newell contends that support-ive therapies, which include early recognition and a “social” plan of care, may be the most effective way to reduce costs. “This would also consist of diagnosing the cause of dementia and treatment using

fall 2015 report, “The Burden of Health Care Costs for Patients

With Dementia in the Last 5 Years of

Life,” summarizes a research analysis funded by the National Institute on Aging (NIA).

The researchers used data from the Health and Retirement Study, along with linked Medicare and Medicaid records, to calculate the “social” costs of all types of care for 1,702 Medicare fee-for-service beneficiaries aged 70 years and older who died between 2005 and 2007. Patient records were divided into four groups: those with high probability of dementia; those with cancer or heart disease; or those with another cause of death.

The investigators calculated costs for patients from Medicare, Medicaid, private insurance, out-of-pocket and informal care over the last five years of life. Insurance, hospital, physician, medication, nursing home, hired helpers, in-home medical care and other expenses were the specific categories of spending included in the analysis. Here are some of the key findings:

❚ Although the average Medicare expenditures across all four disease categories were similar, almost all other costs were consistently higher for

people with dementia. For example, with Medicaid, expenditures for patients who died with dementia averaged $35,346 vs. $4,552 for those without dementia.

❚ The dementia group had significantly higher enrollment in Medicaid at the start of the five-year study period (21%) than those who died from cancer (8%), heart disease (8%), or other causes (13%).

❚ Enrollment in Medicaid during the last five years of life also increased for those with dementia (27%) compared to those with cancer, heart disease and other causes (12%, 15% and 15% respectively). Out-of-pocket spending for families who had loved ones with dementia was $61,522 compared to $34,068 for those without dementia.

❚ Informal care costs were estimated to be $83,022 for people with dementia vs. $38,272 for those without dementia.

❚ In addition, out-of-pocket spending as a proportion of total household wealth five years before death was significantly higher (median of 32% for dementia and 11% for other diseases).

A

Study highlights high cost of dementia

Supportive therapies, which include early recognition and a “social” plan of care, may be the most effective way to reduce costs.

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Health Management

Managed Healthcare Executive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 35

supportive measures (e.g. ACE inhibitors for those with hyper-tension, diabetes, etc.) and social stimulation.” He adds that the goal is to provide the patient with a safe, coherent environment and to proactively address any attendant health issues that would cause an expensive hospital admission.

Early diagnosis and global education are also within Chail’s recommendation of how to ad-dress dementia’s cost imbalance. “Creating awareness can go a long way in the detection of dementia at an early stage and starting ap-propriate treatment,” he says. “In addition, community participation and bringing together families of patients suffering from dementia can help exchange information and treatment awareness of the condition.”

Rebecca Palm, chief strategy of-ficer and cofounder of CoPatient (a healthcare expense management

company), says that arranging for homecare is another cost-lowering mecha-nism. “Homecare is often the least finan-cially draining

option if there are appropriate safety measures and caregivers in place.” She adds that many new technologies address the needs of dementia patients living at home. “Some solutions are simple, such as smart medication packaging and dispensing to simplify com-plex medication schedules and adherence. Others can perform ad-vanced monitoring of the person’s behavior and safety.”

Christopher Cussat is a medical writer based in Pittsburgh.

Money Management❚ In 2015, the direct costs to

American society of caring for those with Alzheimer’s will total an estimated $226 billion, with half of the costs borne by Medicare.

❚ Average per-person Medicare spending for people ages 65 or older with Alzheimer’s and other dementias is three times higher than for seniors without dementia. Medicaid payments are 19 times higher.

❚ Nearly one in every five Medicare dollars is spent on people with Alzheimer’s and other dementias. In 2050, it will be one in every three dollars.

❚ Unless something is done, in 2050, Alzheimer’s is projected to cost over $1.1 trillion. This increase includes a five-fold increase in government spending under Medicare and Medicaid and a nearly five-fold increase in out-of-pocket spending.

Source: The Alzheimer’s Association

2010

0

$200

$400

$600

$800

$1000

$1200 14

12

10

8

6

4

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Source: Alzheimer’s Study Group. A National Alzheimer’s Strategic Plan: The Report of the Alzheimer’s Study Group (March 2009); Alzheimer’s

Association, Changing the Trajectory of Alzheimer’s Disease: A National Imperative (May 2010); National Institute of Health Office of the Budget website.

Alzheimer’s Cost and Funding 2010-2050Number of Americans with Alzheimer’s Alzheimer’s Cost of Care Alzheimer’s Research Funding

PALM

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MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 Managed Healthcare Executive.com36

Business StrategyTOP-LINE OPERATIONAL TRENDS

n order for the United States to improve value in its healthcare system, more must be known

about how much medical procedures, devices, and

drugs cost. The Institute of Medicine estimates that $105 bil-lion of annual waste in healthcare spending can be attributed to a lack of competition and excessive price variation.

“Insufficient public data on the price of healthcare services contributes to this waste by deny-ing consumers the information they need to make smart choices,” says Kristof Stremikis, MPP, MPH, senior manager, Pacific Business Group on Health, San Francisco. “Greater price transparency will

improve the functioning of healthcare markets and lead to better, more affordable care across the U.S. healthcare sys-tem, particularly

when combined with meaningful information on quality.”

Bumps in the roadBut providing price information to consumers before they seek healthcare can be very challeng-ing, says Suzanne Delbanco, PhD, executive director, Catalyst for Pay-ment Reform, Berkeley, California. “It’s hard to predict exactly what healthcare services a patient will

need, despite the fact that there are negotiated prices for each of the components of care that can be shared in advance.”

Factors such as variation in care delivery, different approaches for measuring outcomes, and wide-ranging products and services compound the price transparency issue. “The diversity of payers in a market that contract with providers at different rates and serve different populations (e.g., Medicare, Medicaid, groups, individuals) adds to the complex-ity,” says Delbanco. “As purchas-ers, providers, and policy makers pursue change, the lack of provider competition, health plan and pro-vider restrictions on data use, and policy makers’ concerns about the unintended consequences of price transparency will also pose challenges.”

Transparency pushMany forces are working to improve price transparency. First, leadership at the federal level has been strong. “And where Medicare goes, others will follow,” says Eliza-

beth Mitchell, president and CEO, Network for Regional Health-care Improve-ment, Portland, Maine. “Provid-ers understand that they will be

held accountable and [be] paid for greater value in the near future. So

they want the necessary informa-tion, tools, and support in order to be successful in this transition.”

Secondly, Mitchell says, more consumers are enrolling in high-deductible plans and are facing difficult truths about what this means in terms of their contribu-tion to their healthcare costs. In addition, employers are avoiding raises and cost of living adjust-ments because healthcare costs are consuming those dollars.

Finally, communities are becoming increasingly aware that more resources are going toward healthcare, and consequently crowding out funds that might otherwise go toward strengthen-ing schools, roads, or other social goods, Mitchell says. “All of this has made healthcare stakeholders more price sensitive, and will be furthered by the federal govern-ment’s push to pay-for-value programs.”

Slow progressThe good news is that some prog-ress has been made in cost trans-parency. In particular, Americans with health insurance through larger insurers most likely have access to a consumer-oriented tool with price information about most of their healthcare services. “This is significant progress from five years ago,” Delbanco says. However, she says, Americans insured through smaller, regional health plans may not have access to these tools, nor do most of the uninsured.

Price transparency: where are we now?New tools fuel progress

I

MITCHELL

STREMIKIS

by KAREN APPOLD

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Business Strategy

Managed Healthcare Executive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 37

A growing number of purchas-ers and employers have turned to third-party vendors in search of tools and services that engage their employees and dependents, and encourage more careful selec-tion of healthcare providers and

services. “Over the last several years, indepen-dent vendors ... have made sig-nifi cant strides in developing price transpar-ency products

designed to help consumers shop for healthcare,” Delbanco says.

In addition, most major na-tional health plans off er websites that help patients fi nd provider-specifi c and healthcare service-specifi c cost and quality informa-tion. Th ese tools are often linked to the plan member’s benefi t design information such as copay or coinsurance information, and can portray information about out-of-pocket cost sharing that correlates to where the member is in meeting his or her deductible and account balance.

Several plans are also contribut-ing price and performance data to multi-payer claims databases, such as the California Healthcare Performance Information System. In 2014, three of the nation’s largest insurers agreed to provide con-sumers with access to an online database (guroo.com), which pro-vides cost and quality information.

State-level activityStates have the authority to pass laws to ensure that their citizens have access to healthcare prices. However, a recent review of state transparency laws conducted by Catalyst for Payment Reform and the Health Care Incentives Improvement Institute (HCI3) showed that 90% of states fail to

provide adequate price informa-tion to consumers.

However, Delbanco is quick to point out that this bleak picture masks recent legislative and regu-latory activity that has sprung up

nationwide. “Some states, includ-ing Connecticut and New York, are just now assembling their all-payer claims databases and working on consumer-facing websites,” she says. “Maryland is in the process of embarking on a signifi cant eff ort to publish prices on healthcare ser-vices, and the state of Washington recently enacted a new law that establishes a statewide all-payer claims database.”

New Hampshire returned to a high score this year after a brief hiatus because of an inactive website. “Its rebound shows that even small states can develop and maintain a useful and consumer-friendly website on healthcare prices,” Delbanco says.

Karen Appold is a writer in Lehigh Valley, Pennsylvania.

Source: Catalyst for Payment Reform and the Health Care Incentives Improvement Institute (HCI3), “Report Card on

State Price Transparency Laws,” July 2015.

TX LA

MS AL GA

SC

NC

VA

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DELBANCO

The annual amount of waste in healthcare spending due to lack of competition and excessive price variation. —INSTITUTE OF MEDICINE

$105

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MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 Managed Healthcare Executive.com38

The List

THE ABILITY TO COLLABORATE“In today’s highly complex, matrixed healthcare world, none of us can go it alone. We must not be closed-minded and must approach each and every day in a positive, good-natured and open fashion relative to how we work with others. In turn, this behavior will translate into greater openness amongst others to do the same in return.”—David Calabrese, vice president and chief pharmacy officer, OptumRx

THE ABILITY TO BE A GOOD LISTENER“Listen, listen, listen. Take the time to learn what is important to the other person/entity/group, etc. Be flexible and think creatively to demonstrate your and your organization’s value as you collaborate to achieve win-win solutions.”

—Joel Brill, MD, CMO, Predictive Health, LLC

THE ABILITY TO PRIORITIZE EFFECTIVELY“Being able to prioritize and stay committed to work that is in support of your strategic objectives is critical. You must master the art of saying no, and choose to not work on projects that have inherent value yet aren’t prioritized whether due to strategic goals, timing or resources. You also need to be able to step back and reassess priorities frequently to ensure that you are aligned with a continuously changing industry landscape or work environment.”

—Kevin Ronneberg, MD, vice president and associate medical director of health initiatives, HealthPartners

THE ABILITY TO EMBRACE CHANGE “It’s important that we meet the ‘challenge of change’ and commit to finding a better way to deliver efficient, quality healthcare.”

—Douglas Chaet, senior vice president, contracting and provider networks, Independence Blue Cross

THE ABILITY TO ACT QUICKLY “In a healthcare environment that is changing at lightning speed, healthcare executives must anticipate trends and pivot strategically so they are best positioned to succeed. In addition to thinking ahead, executives must also be nimble and quick to act so they don’t get left behind when the next big idea hits.”

—Daniel J. Hilferty, president and chief executive officer, Independence Blue Cross

THE ABILITY TO FOCUS ON THE CONSUMER“I think the most critical skill is the ability to keep you and your team focused on the customer. It’s easy to get distracted as you deal with all the issues facing you, but far and away the most important issue you face each day is taking care of your plan’s customers.”

—Don Hall, principal, DeltaSigma LLC

by AUBREY WESTGATE

THE MANAGED HEALTHCARE EXECUTIVE EDITORIAL ADVISORY BOARD SAYS THESE SKILLS ARE CRITICAL

TO SUCCESS AS A HEALTHCARE EXECUTIVE.

DO YOU HAVE WHAT IT TAKES?

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Managed Healthcare Executive.com MANAGED HEALTHCARE EXECUTIVE ❚ MARCH 2016 39

Hospitals & ProvidersCLIN ICAL CONSIDERATIONS WITH SYSTEMWIDE IMPACT

ast year, McGraw Hill published a new textbook for medical students, “Un-derstanding Value-Based

Healthcare,” which focuses on how clinicians can de-

liver better care at lower cost. However, one of the co-authors of the book, Neel Shah, MD, of Harvard Medical School, says it has been hard to find schools with space to fit the volume into the curriculum.

Still, cost issues are working their way into medical study, says Janis Orlowski, MD, chief healthcare officer at the As-sociation of American Medical Colleges (AAMC). “In the past we didn’t spend a significant amount of time on costs, but there’s been a change. Now, over 90% of medical programs are teaching students about costs,” she says. “Medical schools have always taught quality, but now they are teaching it in a different way, looking at value and saying, ‘Does the cost and the qual-ity equal value to the patient?’ Something may be valuable, but it may also be so costly that other alternatives may be better for the patient.”

The fundamentals A recent report by National Public

Radio (NPR) highlights an initia-tive at the David Geffen School of Medicine at UCLA pioneered by Reshma Gupta, MD, that incor-

porates cost and value discussion into everyday lectures.

Orlowski says medical students need a basic understanding of costs, be it costs associated with patient copays, or costs associated with treatment decisions. They also need to understand how those costs impact patients and patient compliance, she says.

Citing the wide range of health plans that practitioners may encounter, she says healthcare finances have become very com-plicated and that clinicians should

not attempt to provide precise information on patients’ out-of-pocket costs. However, she says, they “should have a relative idea of the difference in cost between an X-ray and an MRI, or between a brand name or a generic antibiotic.”

She encourages clinicians to employ a team approach to costs. For example, a patient with diabe-tes may need to see a podiatrist, an endocrinologist, a physical thera-pist, and a financial expert who can help them understand costs.

Rick Gundling, vice president of healthcare financial practices for the Healthcare Financial Man-agement Association (HFMA), says the emerging focus on cost has been a timely development. “Some of the factors driving talk of costs are rising deductibles and

employer high-deductible health plans as well as new third-party transparency tools.”

He says healthcare custom-ers and patients are becoming “increasingly aware of their out-of-pocket expenditures.”

Knowledge to practiceBut it’s not solely a matter of communicating costs to patients, a lot can be done to address costs before they directly impact the patient’s wallet or “threaten them with financial ruin,” Shah says.

Medical schools tackle dollars and senseCost considerations are added

to med school curricula

L

by DAVID RICHARDSON

“Over 90% of medical programs are teaching students about costs.” —JANIS ORLOWSKI, MD, ASSOCIATION OF AMERICAN MEDICAL COLLEGES

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Hospitals & Providers

One problem, he says, is that the medical education environment consistently sends mixed messages to trainees, creating ambiguity about the role costs should play in decisions and treatment options.

“We spend lots of time hunting down things that are incredibly rare but that require extensive and expensive testing to track down,” he says. “We are criticized for the things we didn’t do, but should have done, but we are never ever criticized for things we did that we didn’t have to.”

Shah says acclimating medical trainees to pursue excessive and exhaustive diagnostic protocols can be counterproductive in their later careers as practitioners. “It is not unusual for a first-year resident to spend hundreds of thousands of dollars ordering tests with the click of a mouse for patients, with no feedback or oversight, and have no idea they spent so much money.”

Correcting this issue could be as straightforward as including an on-screen prompt within medical testing ordering systems apprising trainees of the costs of each proce-dure, while encouraging vigilance regarding these costs, says Shah.

Shah believes rethinking the diagnostic process can represent a cost-saving practice that can be readily taught in medical school and implemented almost imme-diately.

An initiative by Robert Fogerty, MD, at Yale School of Medicine, trains students to avoid exces-

sive diagnostic testing through “a friendly competition” dubbed I-CARE. Fogerty presents case studies as a component of daily rounds. He encourages trainees, acting as teams, to compete with one another to arrive at the correct diagnoses at the least expense.

Using actual price and cost data, each team presents its workup of the case. To take the les-son home, the team that reaches the correct diagnosis at the lowest expenditure may declare victory.

Lifelong learning Orlowski says case studies are one way to facilitate “lifelong learn-ing” on cost awareness. “As people go from medical school into their clinical years, they can refer back to those case studies in light of new knowledge, new technologies, policies and costs,” she says.

Shah is founder and executive director of Costs of Care, which sources, curates, and disseminates knowledge from patients and

clinicians to help health systems provide high-value care and which is supported by funding from the ABIM Foundation. The organiza-tion has developed a project called “Teaching Value,” in partnership with AAMC and HFMA. This year, the program plans to recognize seven institutions that have mod-eled best practices for managing and reducing costs.

AAMC has also partnered with HFMA to develop a workbook on common terms and explanations of financial issues surrounding care costs, says Orlowski, adding that the organization has made the book the basis for its work with medical schools.

“It continues to be a crowded curriculum,” she says. “We teach the basics in medical school, but most importantly we have to teach students how they can continue to educate themselves in the future.”

David Richardson is an award-winning writer on science and public policy based in Baltimore.

“It is not unusual for a first-year resident to spend hundreds of thousands of dollars ordering tests with the click of a mouse ... and have no idea they spent so much money.”—NEEL SHAH, MD, HARVARD MEDICAL SCHOOL

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