What Happens If the Cost of Specialty Medicines Exceed Our Willingness to Pay?

---Terri Bernacchi, PharmD, MBA,  President, Cambria Health Advisory Professionals, and FOUNDER, SME Health Systems

In quoting the premise of the linked article below, “There appear to be no limits now on the prices drug companies can set and that insurers and patients must pay for new life-extending therapies,” I have mused that I may be a dinosaur for believing that there is a difference between “fiscal reality” and “fiscal fantasy”.

As long as some other party (besides the patient) assumes the majority of the cost of a drug, product, or treatment, the patient is buffered from the true cost of care.  This begs the question, “Is there a top limit beyond which the payer will no longer accept the coverage liability, regardless of the long-term beneficial outcomes?”   Certainly, without a third party to assume the payment, most patients will forego the benefit of costly product innovations. (See the link:   http://www.modernhealthcare.com/article/20150307/MAGAZINE/303079985/the-high-price-of-precision-medicine )

However, this question is being asked more than ever before and, as we head toward more personalized medicines and an over-drawn health care checkbook, it is also more relevant. 

Perhaps, if we can start with a few premises that virtually all would agree with, we will be able to isolate the “root causes” and solve these challenges more rationally. 

• Premise:  It is good to treat or prevent diseases that cause pain, suffering, or early death. 
• Premise:  The cost of treating (or preventing) diseases that cause pain, suffering, or early death needs to be affordable to both the individual and the health care system which pools resources on behalf of a population to pay for these needs
• Premise:  The development of medical and pharmaceutical innovations requires investment in Research and Development (R&D) by companies and shareholders that expect to be reasonably compensated for the investment.
• Premise:  There is probably a price limit beyond which patients or the system will not be willing or able to support.
• Premise:  If the cost of R&D exceeds the ability to generate a payback because either the price per unit that the market will bear is too low or the total number of potential patients is too small, the manufacturer will abandon the development of that product.
• Premise:  A period of patent protection that expires within a short time after the drug makes it to market may mean that the manufacturer cannot generate enough sales to cover the cost of R&D and a return attractive enough to interest investors.
• Premise:  Some innovative products that make it to market may be associated with a very high cost, but which provide only an incremental or marginal benefit for their cost that makes them unsuitable for first-line use.  

If we can agree, in principal, that the above Premises are true, then a sound solution would recognize the fundamental challenges relating to developing, marketing, paying for and using today’s new pharmaceutical and device products.  Only solutions that address the needs and incentives of the patient, payer (health plan or employer) and manufacturer will ultimately be successful.    

Fixing this may involve a change to regulations.  We should compute:

• The cost of R&D
• The time for a company to gain sales before loss of patent exclusivity and the introduction of lower cost generics (at which time, the brand manufacturer sees their sales plummet to near-zero levels).
• The number of potential patients
• The list price per treatment

Doing rough math in a crude example, if a company has spent (net present value) $2.5 Billion to get a drug through the regulatory process, and the necessary return must be at $3.0 Billion or even more in order to “break even” for the shareholders, then profits must be sufficient over the period of exclusivity (which may be very short (< 5 years) to return that $3 Billion.  For example, if they have only 3 years to get that payback, they will require a higher list price than if they have 6 years before loss of exclusivity. 

If there are 50,000,000 potential patients rather than only 1,000,000, they could go to market with a lower price.
 

If the “outcome” is of high impact, the price that the market will bear is higher than a product with a lower or marginal impact.  If the payer is able to recognize cost-offsets, for example, on the medical side, it may tolerate a higher priced drug treatment or device.

However, very often, the manufacturer may have invested that same $2.5 B in a product which has been recognized to have only a marginal benefit in a subset of patients.  In order to recoup the R&D investment, this means that even marginal product innovations will have a high price tag.  Because of their own cost containment needs, however, payers are likely to deny coverage or impose restrictions in order to manage costs.  
So What Can Be Done?  

With a couple of minor tweaks in the way that products are approved and afforded patent protection in the United States, the price per treatment could be reduced and the incremental, marginal benefits of new products be realized. 

1. One option:  allow the manufacturer to appeal to approval authorities (FDA, FTC, SEC) a means to drop the go-to-market price to a negotiated level, in exchange for additional time under patent protection to secure their return on investment.  Other competing brands in the therapeutic class could still come to market, but a generic drug would be delayed until the agreed upon patent expiry date comes to pass.
2. Another option:  allow manufacturers and payers to work on contracting initiatives without generating new concerns around “best price” to create “outcomes” assurances and allow new product adoption for even products with marginal innovation or clinical benefit.  These outcomes may include non-product cost mitigations (e.g., prevented surgeries or hospitalizations).
3. Last, allow payers and manufacturers (perhaps using formal partnerships between the payer, the patient, and banking or finance companies) to facilitate product use in year one and allowing the payer to amortize the cost over 3 to 5 years.  The financing may have to "follow the patient" if they change to another payer.  If the manufacturer is enabled under #2 above, to provide some measurable outcomes assurances in the out-years that would not hurt their own financial statements or create a new “best price”, this could reduce the payer’s one-year underwriting anxieties.

Long and short of it is this:  we need to invent a few new measures to contend with the “high price of precision medicine” or perhaps abandon the fruits of our innovation because they have simply become unaffordable.
 

I will be writing more on this topic at a future time and look forward to your dialogue.
 

   Terri is the Founder of SME Health Systems and Cambria Health Advisory Professionals.  She is a Senior Partner at Valiant Health, LLC.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers, clients nor other colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years of experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

Thinking Ahead! Assure That Next Generation Contracts Don’t Give You New Compliance Headaches

---Terri Bernacchi, PharmD, MBA,  President, Cambria Health Advisory Professionals, and FOUNDER, SME Systems &  CIS Strategic Consultant, Audit and Risk Assurance

No one can argue that the US health care system is changing at an epic pace.  Not surprisingly, these changes also impact contracts between pharmaceutical manufacturers and their various trading partners.  The evolving environment around contracts requires that a manufacturer must be willing to do more than just issue the familiar discount, rebate, or coupon to reduce the “listed” price of the product in exchange for its purchase.

New kinds of contracts (sometimes labeled as “Outcomes” or “Value-Based”) promise to change the basis for exchange from a simple “discount off of list price” to a “value to the purchaser” in exchange for its price, discounted or not.  Contract language always attempts to define difficult terms between the parties.  The parties themselves are undergoing unprecedented changes in terms of how they select and use pharmaceutical and device products; it is possible that the number of contracts will expand as the manufacturer tries to reach more local or regional customers with a next generation contract. 

Contracting with New Customer Types for Different Reasons.  Brand, bio-similar, and generic products will certainly continue to be contracted with traditional risk-holding parties for pricing discounts:  Medicaid, Medicare Part D, Commercial, Distributors or GPOs.  However, in addition to standard deals with those parties, next generation contracts may involve the exchange of more than price discounts for purchases.  These new contracts will provide payments for time and materials spent in proving value, exchanging data or evidence, and analyzing anonymized patient feedback.  These contracts may involve providers or Accountable Care Organizations, Hospital systems, or other provider entities.  They may also involve health plans and other payers providing a fee in exchange for working toward a shared goal of adherence or positive health outcomes, rather than just a price discount.

Price Transparency Factors Driving Prescriber Behavior Changes.  A key change driver that executives must fully grasp is what is going on at the physician level as the system moves away from “fee for service” care where the physician is unaware of the component costs associated with drugs or devices and into the “accountable care” arena where product cost has real consequences to the practice of medicine and possibly to the physician’s own compensation. 

More than ever, hospitals and health plans are using data to examine the cost effectiveness profiles of individual physicians to confirm that doctors included in their risk-based contracting arrangements are providing good member outcomes while holding down costs.  This means that manufacturers are going to have to convince an increasingly skeptical physician of the VALUE of their product.

“During a recent panel discussion on analytics and accountable care organizations, Darren Shulte, MD, MPP, president of Apixio, stated that cost transparency can have a powerful effect on practice patterns. By showing physicians how their costs stack up against their colleagues, Shulte said, they have a chance to see how the choices they make for a patient affect the total cost of care.”  (See:  http://www.healthcarefinancenews.com/blog/using-cost-transparency-change-physician-practice-patterns  )  

Defining Squishier Terms in Contracts.  A manufacturer’s current and next generation contracts will need to consider “price” but also the definition of “value” or “outcome”.  Further, the definitions of these terms and the impact of the contract will need to be rational to the prescriber.  This will continue to be particularly challenging and will probably vary by contract, based upon the context of the product options, the disease states, and the parties.  These contracts themselves must also address how success metrics will be calculated, what data is necessary to prove the metric is accurate, and how the data itself will be gathered and disseminated.   Thinking ahead now about how to define the terms, measure the results and verify or “audit” the results is critical to achieving a successful contract outcome.  

Never sign a contract that you don’t know exactly how you would be able to audit the terms or payments!

Be Pragmatic.  There are a number of practical concerns you should address before you jump into these next generation contracts.  You may want to pose a few key questions to your legal, managed markets, and trading partner teams. Among these:   

•  Can you define the terms you and your contracting partner are aiming for under your contract?  Or is the definition overly “squishy”?  How do you tighten the definitions?

•  Can you agree on the metrics that will define the relative success or failure of your objectives?

•  Can you quantify the “return on the contract” for your organization?  For your trading partner’s?

•  What is the monetary value based on?  A percentage of “list” price?  A “Fair Market Value” for services or data or something else?

•  Are you confident that your Contract Operations team can actually administer the new agreement, either in the contract management system or outside of it? 

•  How will you audit and confirm compliance, so that you are not just paying blindly and trusting without verifying?

•  How will regulators view these payments?  Do they contribute to or trigger a government pricing rule for the product?  If so, how?  Do they need to be reported as part of the Sunshine Act?   

•  Are the parties compliant with HIPAA and other data security or privacy rules? 

The time to plan is now, before you find yourself behind the competition in next generation contracting; however, the time to anticipate compliance and regulatory challenges is also now or maybe even yesterday.   

  See Link at CIS: 
 

http://cis-partners.com/cis-compliance-blog/thinking-ahead-assure-that-next-generation-contracts-dont-give-you-new-compliance-headaches/

Marketing, HIPAA, Rules & Exceptions

---Terri Bernacchi, PharmD, MBA,  President, Cambria Health Advisory Professionals

Health Care Reform (the ACA, PPACA, “Obamacare” or whatever you want to call this hot mess) was basically an outline or framework.  Along with ACA, there have been  myriad other bills and regulatory or administrative rules which have come out piecemeal since 2009 that---combined---make it very difficult to assimilate, plan, or manage changes in business operations for many businesses directly or indirectly involved in the US Health Care Sector. 

One of these—HITECH---contains some rules that impact what is considered prohibited in terms of “marketing” drugs directly to patients, citing HIPAA and other related privacy rules. 

In 2009, the HITECH Act was signed into law as part of the American Recovery and Reinvestment Act. (ARRA) One effect of HITECH was to reduce the range of permitted communications with patients.  It declared that a communication “about a product or service . . . that encourages recipients of the communication to purchase or use the product or service shall not be considered a health care operation” if the covered entity receives direct or indirect payment in exchange for making the communication.

As is common with federal regulations or laws, there were various limited exceptions to the rules, but the net result of this specific provision is that payments to covered entities (such as pharmacies) to provide particular types of communications to patients on behalf of a pharmaceutical company would be considered marketing and thus excluded under HIPAA permitted “TPO” (treatment, payment or operations activities.)  The HITECH Act did not, however, state whether some communications (done for compensation) might be considered “treatment,” and thus, excluded from the “marketing” label.

Health and Human Services undertook rulemaking (recently released) in the Final Rule.  Permissible communications that are not considered marketing (e.g., refill reminders) should have been clarified by the Final Rule. 

If covered entities receive any financial (direct or indirect payment) remuneration in exchange for making the treatment-related or health care operations-related communication, the communication is now thus considered marketing. If the same activity goes on without remuneration, it is okay. 

Importantly, this represents a striking departure from past law and guidance and common practice.  The rule also dropped the opt-out requirement under which a patient may choose to “opt out”.  

There are more details in the Final Rule, including the exception for “face-to-face” versus electronic, telephone or written messaging.  HHS announced that it would not enforce the restriction on financially remunerated prescription refill reminders until November 7, 2013.  That means that these rules are currently in place, and enforceable.

• Interested parties can download a copy of an excellent analysis here supplied by Arnall Golden Gregory.  LLP http://www.agg.com/The-HIPAAHITECH-Final-Rule-Pharmaceutical-Manufacturers-Required-to-Thread-the-HIPAA-Marketing-Needle-12-03-2013/
• A copy of the final rule is at this link:  http://www.gpo.gov/fdsys/pkg/FR-2013-01-25/pdf/2013-01073.pdf
• And a copy of the guidance summary can be found here:  http://www.hhs.gov/ocr/privacy/hipaa/understanding/coveredentities/marketingrefillreminder.html

 

Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers, clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years of experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

NCPDP Releases New White Paper on E Prescribing & Formulary Compliance

---Terri Bernacchi, PharmD, MBA,  President, Cambria Health Advisory Professionals

 

For the past 3 years, two workgroups associated with the National Council of Prescription Drugs has worked on a white paper to inform readers about the positive benefits (and related challenges) of the new “electronic prescribing” process.  I worked with this group personally.

The benefits of better record keeping, greater efficiencies and fewer errors due to physician handwritten prescriptions are associated with a technology that has also generated some new challenges.  For example, the group focused this paper on challenges relating to current processes between pharmaceutical companies who pay rebates based upon how formularies are implemented by health plans to offset costs. 

Interested parties will want to stay informed and work toward continued improvement in these processes, promoting a greater understanding regarding how this technology can be used to improve patient care, product selection, and still support business relationships. 

Just this week, NCPDP has released this daunting, but collaborative effort describing the following about e prescribing, formulary compliance and the manufacturer-payer trading partner relationships:   

ü  How the actual process of e prescribing works and the parties involved in the process. 

ü  That the contract language between manufacturers and payers is generally loose and proprietary.  This has fostered variability in some components of data exchanged in support of the invoicing and payment processes.

ü  That contracts between parties often establish rebate/discount eligibility based upon how therapy options are depicted in a formulary drug class, offering differential discounts based on whether rules have been properly applied in the formulary. (For example, a higher rebate is applied if the product is one of two in a preferred category, versus one of three.)

ü  These contracts may also employ language that spells out requirements regarding how the product should be displayed to the prescriber.

ü  That the process involves dynamic data used to illustrate, for any point in time, an accurate depiction of how a product or many products are depicted in any version of a Formulary, as well as how the patient’s benefit and coverage rules (including out-of-pocket, copay or co-insurance amounts) are impacted by the formulary.

ü  That formulary information is made available to EHR/electronic prescribing vendors with various levels of data elements supplied by processors/payers and plans, and at variable intervals.

ü  That formulary information is displayed in different ways by the vendors that support the electronic prescribing process. 

 

Interested parties can download a copy of the whitepaper here:  http://www.ncpdp.org/Whitepaper.aspx  

 

Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers, clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years of experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

 

Advocating for the Individual in a World of RWE and CER

---Terri Bernacchi, PharmD, MBA,  Senior Partner, Valiant Health

The history of the Federal Food and Drug Administration is a fascinating story that balances the federal government’s actions in support of keeping the citizenry safe from snake oil salesman selling poison and the food and drug supply “pure” against the capitalist that drives innovation in the area of health care improvement.  The story of the FDA is one that will never be over but unless someone actually understands what has happened in the past and WHY certain official positions have been imposed, the beneficial nuances can be completely lost in the jargon.

For example, the FDA was charged with assuring that a manufacturer wishing to market a health, food, or cosmetic product in this country was SAFE.  Later, impositions regarding proving the “efficacy” of the product, in line with the manufacturer’s claims, were added.  This became of particular interest as health care financial risk was born by third parties, including the Government under Medicare and Medicaid payments. 

Now, CER (Comparative Effectiveness Research”) has taken the FDA’s scope of authority yet farther as the research manufacturers must assume before and after a product is launched involves establishing more than just, “Can I prove that this product is more effective than a placebo?”  Defined in various ways, CER is described by the IOM as “the generation and synthesis of evidence that compares the benefits and harms of alternative methods to prevent, diagnose, treat, and monitor a clinical condition or improve the delivery of care. The purpose of the research is to help consumers, clinicians, purchasers, and policy makers to make informed decisions that will improve health care at both the individual and population levels.”

The American Recovery and Reinvestment Act of 2009 (ARRA) and the ACA reignited the federal government’s interest in CER.

There is a cost (which is not surprisingly added to the cost of the product) to prove safety and a cost to prove efficacy.  When you go to prove comparative efficacy, you are risking that you will lose.  It’s tantamount to betting your bank account at the craps table in Las Vegas because you cannot really be sure which way it will turn out. 

In fact, this CER craps table, has become part of the requirement under new federal requirements but sometimes the forest is lost for the trees.   For example, the Forbes article linked below cites TWO studies on diabetes drugs that concentrated on Safety (being no worse than placebo) but said nothing about effectiveness.  At what cost?    The author concludes, “Rather than mandating narrow studies of cardiovascular studies, we should be encouraging studies that let us know which regimen is best for which patients, based on what they actually do for patients.” 

He does not recommend ignoring safety, he’s just looking for an equally important conclusion.  I am sure there are also CER studies underway to answer his question.  

http://www.forbes.com/sites/harlankrumholz/2013/09/03/is-no-worse-than-placebo-good-enough-for-new-diabetes-drugs/

The other perspective on this is from the Heritage article linked below, referencing that this concept in the UK resulted in a system whereby CER was used to reject certain treatments for mostly budgetary reasons.

“CER use in the U.K. has been a far cry from what is implied by the rhetoric used to promote PCORI. Rather than focusing on the individual needs of patients, the United Kingdom’s National Health Service (NHS) uses comparative and cost-effectiveness information to limit options as a budgetary tool.

The NHS offers health coverage to all British citizens and determines which treatments will be covered and paid for, and under which circumstances. Decisions are based on “recommendations” by the National Institute for Health and Clinical Excellence (NICE), who’s stated purpose is to create clinical guidelines and standardize care using cost-effectiveness information, but the NHS is required to adhere to all of the recommendations made by NICE.

If a treatment is not covered, patients are able to go outside the NHS and receive it privately without regulatory or statutory obstacles—if they are able to afford this. (Because of Medicare’s restrictions on private contracting, American seniors would not have this same option.)” 
http://www.heritage.org/research/reports/2012/04/comparative-effectiveness-research-under-obamacare-a-slippery-slope-to-health-care-rationing

Thus, the benefits of CER (which may derive clarity for the practitioner to apply to individual patients) must be weighed against the need to treat each patient as an INDIVIDUAL whose needs, wants, and situations may require the flexibility which a system conformed to the latest CER may not allow. 

  Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers, clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years of experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

Seeing 2014 Through the Fog: Anticipating the Impact of Personal Incentives Under Obamacare

---Terri Bernacchi, PharmD, MBA,  Senior Partner, Valiant Health

So what is it?  Will premiums go up by double digits or will they go down?  Is it possible that for a small group of people in some states, premiums will go down, but for a larger group of people on some exchanges or in some states, the premiums may be fairly criticized as “sky-rocketing”? 

It’s really hard to understand if any side in the health care debate is completely lying when the news headlines on what is coming are so completely polar opposites.  Is it possible that recent media “spin” on Obamacare’s health exchanges are fairly characterized as “lies, deceit and untruth”?  The political stakes are high, to be sure, but as people ask you for advice on what to do in their own personal situation, it would certainly be nice to be able to go somewhere and actually “see through the fog” on their behalf.   My premise is this:  people will do what is in their best interest, assuming they can see it. 

On Friday, Senator Harry Reid admitted to a PBS audience in Nevada, that the Accountable Care Act was always just a step toward a public system, getting there by pushing private health care insurers out of business.   At least now, the truth seems to be coming out as some portions of the new law (widely panned by experts and consultants on all sides of the political spectrum as a failure in process.)

An article by CNN Money noted that under the health care reform act, insurers must offer a package of essential benefits -- including maternity, mental health and medications -- and they must cover all who apply. The imposition of these richer benefits will cause price hikes in some states where a lower cost, bare bones policy may have been sufficient for coverage for young, healthy people in the past. Isn’t it logical then, for a primitive student of human behavior, to predict that some young, healthy people won’t want to take on the increased cost because they don’t “need” the additional benefit or the additional cost?  They’ll pay the $95 per year or 1% of their income to avoid a cost that may be $3,000 per year or more. 

• “Our analysis found that 21-year-old men will pay a lot more for an exchange plan, but 42-year-old women and 62-year-old men will shell out less for a silver-level plan that comes with a $2,500 deductible and a roughly $25 co-pay for office visits.”

It may be that part of what must happen as this mess unravels is that we must better understand what happens in terms of individual incentives.  If a premium increase is unaffordable and if the individual has other alternatives (including doing nothing), then young, healthy people can be expected to forego coverage, and older/unhealthy people will sign up for lower cost coverage.  Predictably, then the exchanges will fail under the weight of insufficient premium to cover incalculable risk.  And people will be begging for something to be done. 

Is this, therefore, given Harry Reid’s recent comments, an unintended consequence of a well-meaning public policy or is it the success that was anticipated all along, leading the country to a federally controlled, single-payer system?  

Link:  http://finance.yahoo.com/news/where-obamacare-premiums-soar-095700316.html?CFID=24988291&CFTOKEN=70696857&jsessionid=2e302825861375967192417   

http://www.forbes.com/sites/theapothecary/2013/08/10/sen-harry-reid-obamacare-absolutely-a-step-toward-a-single-payer-system/

Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers, clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years of experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

Hospital Readmission Penalties Create Continued Policy Debate

---Terri Bernacchi, PharmD, MBA,  Senior Partner, Valiant Health (See also:  http://www.valianthealth.com/blog/hospital-readmission-penalties-create-continued-policy-debate/ )

 

A by-product of CMS’ cost reduction efforts associated with payment (or penalty) for quality results, is the much vilified Star Rating measure on All-Cause Hospital Readmissions. These efforts hit the Medicare Advantage plan’s Star Ratings results but also impact hospitals Medicare reimbursement rates directly. 

Two-thirds of hospitals are now facing readmission penalties totaling approximately $280 million in 2013, according to experts.  These 2,271 U.S. hospitals were found to have readmission rates higher than the CMS models predicted, and each of them will receive a penalty this year, as high as 1% of their reimbursement for Medicare patients. (Penalties will increase to 3% by 2015.)

The number of hospitals penalized is much higher than most observers would have anticipated on the basis of CMS's previous public reports, which identified less than 5% of hospitals as outliers.  (See NEJM Article by Drs. Karen E Joynt, MD & Ashish K. Jha, MD)  Path Forward on Medicare Readmissions at http://www.nejm.org/doi/full/10.1056/NEJMp1300122 )

The debate includes concerns that the safety-net hospitals caring for a higher proportion of members with socio-economic challenges are those least able to afford a penalty. Most agree, however, that setting a lower quality standard for these hospitals would not be ideal.   Many hospitals (and associated Medicare Advantage Plans) now have placed special focus on “helping patients make the transition from inpatient care to outpatient or community settings”.  A key part of this coordination is the ability to identify and intervene early in the hospitalization and post-discharge course.

See Links:  http://www.chrt.org/blog/the-aca-and-the-hospital-readmissions-policy-debate/

          http://www.nytimes.com/2013/03/30/business/hospitals-question-fairness-of-new-medicare-rules.html?pagewanted=all&_r=0

Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers or clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years of experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

Achieving 5 Stars on the Rx Side—The Secret?

---Terri Bernacchi, PharmD, MBA,  Senior Partner, Valiant Health (www.valianthealth.com )

http://www.valianthealth.com/blog/achieving-5-stars-on-the-rx-sidethe-secret/

To succeed in an increasingly challenging reimbursement environment, Medicare Advantage plans must work in close collaboration with physicians to identify at-risk populations and facilitate interventions that that improve quality and lower cost.  That is true for both the Part C & Part D portions of the program.

Some Medicare Advantage plans will thrive at the top of the quality ratings heap no matter what happens in the surrounding environment.  Those plans have some common elements that give them a weighty advantage in terms of statistics and actual results.  The common themes?  Cooperative providers, clean data management processes, enabled clinical teams and executive leadership, and a clear, prioritized plan.  In a phrase, they are able to exert maximal control over the variables that drive results which drive reimbursements.  

Kaiser Permanente, for example, attributes its success to “a deep understanding of the star measures along with internal and external organizational processes and protocols”.  They believe this has allowed the plan to achieve a Part D summary rating of 5 in 7 of the 8 regions. 

Matt Nye, the vice president of Pharmacy Care Support Services, National Pharmacy Programs and Services of Kaiser Permanente spoke at the Academy of Managed Care Pharmacy’s spring meeting in San Diego in April 2013.  His discussion included a brief company overview: coverage of 9 states and D.C. with 8.9 million members, 165,000 employees, 15,000 physicians, 36 hospitals and medical centers, and 1.05 million Medicare members. Nye noted that Kaiser’s program includes outpatient, inpatient, and ambulatory care pharmacies and services, home infusion, drug distribution, mail order and central fill operations, and centralized services.

Kaiser has some advantages in drug therapy management relating to its business model:  it is an integrated practice model.  He noted that they have placed an emphasis sharing accountability between physicians and pharmacists to ensure the appropriate use of medications. 

Even if a plan does not have the benefit of “owning” the full scope of clinical, distributive, and practice infrastructure, the lessons learned from Kaiser can still be applied.  Using technology and data management techniques, internal and organizational processes can be aligned to create common incentives and opportunities to maximize quality results to assure success in the current and future years.

Link:  http://www.ajmc.com/conferences/AMCP_Spring-2013/Optimizing-Care-Deliver-with-Medicare-Star-Ratings-The-Successes-and-Challenges-of-Managed-Care-Organizations

Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers or clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA.