A plan to down-weight Medicare Advantage star ratings to reflect the impact of beneficiary socioeconomic status has been put on hold, prompting strapped health plans to press for relief.
Federal officials are stuck at the drawing board.
Lois Simon
President, Commonwealth Care Alliance
Since last year, the Centers for Medicare & Medicaid Services has been mulling risk-adjustment of Medicare Advantage star ratings to reflect the impact of beneficiary socioeconomic status on health plan performance. In February, CMS proposed down-weighting a half-dozen Medicare Advantage star ratings, partly on the basis of statistical evidence linking disadvantaged socioeconomic status to relatively poor clinical outcomes in star-rating metrics such as hypertension control.
In the final 2016 MA payment rate and "Call Letter" rules announced Monday, CMS dropped the plan to down-weight six MA star-rating metrics. The agency "believes additional research into what is driving the differential performance on a subset of measures is necessary before any permanent changes in the Star Ratings measurements can be developed and implemented."
In a conference call Monday with reporters, CMS Deputy Administrator Sean Cavanaugh said federal officials remain committed to "adjustments in the future" to help create a level playing field for MA health plans with high percentages of disadvantaged beneficiaries.
For regulators, the key hurdle is gaining a better understanding of the causal relationships between socioeconomic status (SES) and delivery of healthcare services, Cavanaugh said. "There's not yet a consensus on what is driving the observed differences."
The differences are real and have a price that MA health plans are paying, Lois Simon, president of Boston-based Commonwealth Care Alliance (CCA), told me Tuesday. "Star ratings are lower in Medicare Advantage plans that are serving high percentages of 'dual-eligibles,'" she said, using the common designation for disadvantaged seniors who are eligible for services under both Medicare and Medicaid.
She says it takes more optimization of resources to serve these individuals. "It is harder to reach them. It can be harder to establish trust with them. You need to expend more resources to achieve good health outcomes with this population."
MA health plans garner reimbursement bonuses if they can cross the four-star threshold in MA's five-star rating program. CCA's MA health plan, which serves about 5,600 seniors with a high percentage of dual-eligible beneficiaries, has been able to achieve an overall 4.5-star rating through an expansive and expensive approach to team-based care, Simon says.
CCA assembles larges teams of caregivers around beneficiaries ranging from primary care physicians to geriatric social workers. "All of them work collaboratively on a baseline assessment. Many of those baseline issues are not medical, and we identify resources in the community that can make a difference in people's lives: finding safer housing; helping people apply for assistance programs like food stamps; arranging for mental healthcare services; and monitoring the medications for frail elders – we check to see who's going to go to the drugstore and actually pick it up," she says.
Richard Bringwatt
President, SNP Alliance
"These are the kinds of things I do as a daughter for my mother," Simon adds, "but not everyone has that kind of family support."
'Outside the Control of the Plans'
Richard Bringwatt, president of the SNP Alliance, a Washington, DC-based trade association that represents special needs plans, says CMS has to find a way to offset the costs tied to providing healthcare services to dual-eligible seniors or risk driving the payers who serve this population out of the MA market.
"By not risk-adjusting for SES, you create incentives to avoid the poor," Bringwatt says. "Before risk-adjustment [was adopted in healthcare], there was an incentive to avoid sick people and to avoid the people with complex cases."
He thinks CMS has made the right call to delay the modest proposal to risk-adjust MA star ratings for SES, but he wants federal officials to act soon.
"The stars program still disadvantages dual-eligible beneficiaries served by specialty care plans. CMS needs to keep itself on the hook for providing meaningful relief in the short term while it seeks to find a more workable solution for the long term."
Last month, the SNP Alliance and Bowie, MD-based Inovalon released a data-heavy study on the impact of beneficiary SES on Medicare Advantage star ratings. The study, which includes claims data from 2.2 million MA beneficiaries, used the largest data set available, says Christie Teigland, PhD, Inovalon's senior director of statistical research.
Inovalon researchers worked closely with CMS officials to establish that several SES factors have a demonstrable impact on MA star-rating performance. "This kind of analysis was never available before," she told me.
Bringwatt says one of the key findings of the study is that underlying factors associated with disadvantaged neighborhoods such as shortages of physicians are driving weak performance in MA star ratings for health plans with high percentages of dual-eligible beneficiaries. "The differences are outside the control of the plans [and] independent of the design of the plans."
Teigland says the Inovalon study found wide variation in the impact of SES on Medicare Advantage star ratings, including geographic variation and different blends of SES factors affecting star metrics in varying degrees. "Different factors influence different measures."
The study focused on seven MA star metrics, including breast cancer screening rates. Poverty rates were associated with performance for most, but not all, of the seven MA star metrics. Teigland says breast cancer screening rates demonstrated geographic variation due to "different standards of practice across the country."
CMS faces "a long process" establishing the mix of SES factors that are impacting star metrics and crafting an appropriate solution, Teigland adds.
"If you're going to do it right, you have to go through a process that has a lot of variables to it," she says. Time is of the essence for MA health plans that serve populations with high percentages of dual-eligible beneficiaries because "the plans can't wait that long. Plans are bleeding and losing dollars."
Alternative Approach to Level Playing Field
Teigland says the risk-adjustments to MA star ratings for SES that were proposed in February were not adequately targeted to have a significant impact.
"We ran those numbers and there was zero impact on the average star rating. The aggregate result was zero change," she says. About 15 out of 500 MA health plans her team studied would have posted star-rating gains under the CMS plan to down-weight six MA star metrics to reflect SES impact.
Simon says a better option to account for the higher costs linked to serving dual-eligible MA beneficiaries is to add an adjustment factor to the overall payment methodology that would offset the financial burden of serving a high-risk population. "It would be cleaner to make the adjustment on the payment methodology and let the stars ratings fall where they may."
This week, the Empire State is taking a bold step toward boosting consumerism in the healthcare industry, with enactment of a new transparency law that sets responsibilities for providers, payers, and patients.
New Yorkers know how to cut a deal.
Ambitious healthcare transparency legislation approved a year ago in Albany goes into force this week. The "Emergency Medical Services and Surprise Bills" law features consumer protections for out-of-network care, a pricing benchmark for healthcare services based on nearly 2 million NY insurance claims, and an independent dispute resolution process for providers and payers to arbitrate contested billings.
Robin Gelburd
FAIR Health President
FAIR Health Inc., a not-for-profit corporation founded in 2009 to build a national database of insurance claim information and serve as a resource for the healthcare industry, is providing the data for setting the new transparency law's pricing benchmark. FAIR Health President Robin Gelburd says the new law has thrust the Empire State into the healthcare transparency limelight.
"New York was successful in getting the law passed because it seeks to afford consumers tangible protections but there's breathing room in the law," Gelburd told me this week. "It's not intended to be overly intrusive on provider network design. It's a workable solution and approach."
She says the new law was adopted with widespread support, even among healthcare providers, who have been wary of transparency initiatives in other states.
"There's a balancing of a variety of different interests. In New York, the medical society was at the table, as well as the hospitals. … There was a lot of give-and-take, and there was general satisfaction in the compromises they had to make"
Fittingly with Major League Baseball returning to action this weekend, the independent dispute resolution (IDR) mechanism in the new law features "baseball arbitration." The Medical Society of the State of New York website says the IDR mechanism ensures fairness for providers and payers.
"Either the physician or insurer could bring the claim to the IDR process. To encourage reasonableness on both sides, the IDR entity would be required to choose between the plan's payment or the non?participating physician's fee ("baseball arbitration"). Only in the rare instances where the reviewer believed that a settlement is reasonably likely or both the physician fee and insurer payment represent unreasonable extremes, the reviewer can give the parties ten business days to negotiate a fee without consequence if one or neither party wished to participate in such a re?negotiation."
The pricing benchmark is a crucial component of the new transparency law because it exemplifies the initiative's attempt to "properly contextualize" healthcare information and "create a common vocabulary" to promote apples-to-apples comparisons, Gelburd says.
Under the new law, pricing of healthcare services is geared to usual and customary costs (UCC) drawn from FAIR Health's insurance claim database. The UCC pricing benchmark is 80% of the average billing for a service found in the FAIR Health database.
"Health plans have to describe how they reimburse relative to that benchmark, but they don't have to pay at that level," Gelburd says. "New York took the step of applying a standardized meaning to usual and customary cost."
She says the pricing benchmark is slated to play a pair of crucial functions. "It will serve as a point of articulation for benefits that are available to a health plan member. It will also play a role in dispute resolution. If the insurer and the provider don't agree on the bill for services … UCC becomes one of the relevant factors to look at. It gives you some structure, some guide posts to help guide the conversation."
Gelburd says the FAIR Health claims database is serving as an indispensable source of truth for healthcare stakeholders in New York and across the nation.
"Everyone needs independent data to advance decision-making. Our database has become an oasis that many people are coming to drink from," she told me, adding that the national database is helping healthcare officials to craft network adequacy regulations, develop benefit design innovations, and direct epidemiological research. "It's become a real looking-glass for the country. We feel the responsibility of the trust that people have placed in us."
New York’s new transparency law has great promise but much work lies ahead.
"Given the creativity and the good intentions that went into crafting this law, there are many more steps to take," Gelburd says. "Now, the real challenge is to make sure there's consumer awareness of the law, and all the key stakeholders have to make sure there are resources available to consumers."
For health plan members, the new transparency law provides several consumer protections related to provider networks, she says.
"Networks are the source of the river [for claims disputes]. One of the key issues that's being addressed by the law is surprise bills. To avoid surprise bills, you have to go to the source of the river and find out what's in-network and out-of-network. This law places the burden on everyone."
Under the new law, if a health plan member cannot find a particular service or doctor in-network, "there is a pathway to get that certification" and avoid out-of-network billing, Gelburd says. The law allows plan members to request access to a particular service or doctor to be considered in-network and for health plans to evaluate the requests. Patients have appeal rights.
Transparency is essential to make sure providers, payers, and patients are treated fairly, she says: "For this law to work, consumers need to go to information that's reliable, robust, and up-to-date."
Healthcare Consumerism has Far to Go
New York has taken a leap forward in achieving healthcare industry transparency; but on a national scale, the journey has just begun, according to the findings of a consumer survey that the National Health Council released last month.
The survey focused on people with chronic illnesses who purchased health coverage last year on the new public insurance exchanges. The research included six focus groups in three cities and more than 400 health plan beneficiaries polled nationwide. A significant information gap is among the top findings of the research: Only 42% of gold plan enrollees reported having enough information to select a health plan, with even worse results for silver and bronze enrollees, who reported having enough data to make an informed decision 37% and 24% of the time, respectively.
Marc Boutin, CEO of the NHC, which is a Washington, DC-based nonprofit patient advocacy group, says consumerism is establishing a tenuous hold in the healthcare industry. "The first stage of consumerism is there's a demand in the marketplace. What we're seeing in healthcare is there is consumer demand for information, and now the system needs to build up to meet that demand," he told me this week.
Boutin says the healthcare industry needs to reach three milestones before consumers can play a constructive role in the marketplace: transparency in transactions; making transaction information easily accessible, useful and uniform; and presenting information in a "machine-readable" format.
"There's been a lot of movement on the transparency side, but you need all three elements to create the tools that make consumerism work," Boutin says, adding that providing consumers with information on health service cost appears to be an obstacle nationwide. "Cost is not reported in a way that is transparent, uniform, or machine-readable yet."
While fostering consumerism in healthcare will take several more years of effort, Boutin is hopeful the country has reached a tipping point.
"We're still pretty close to the ‘hopelessly opaque’ mark on the spectrum, but we're seeing dramatic movement. Transparency and uniformity are the first two big steps you have to take. And this needs to go farther than the exchanges. It needs to go to the broader insurance industry. It's just a matter of time."
The transparency law in New York applies to all health plans that are purchased or renewed after April 1.
Medicare's standard for delineating outpatient vs. inpatient status at hospitals won't be in full force until the end of September if a bill to repeal the sustainable growth rate formula is passed in April.
After a year-long enforcement freeze, hospitals want to keep two-midnight Rule audits on ice.
"The two midnight rule is an arbitrary, time-based benchmark," Priya Bathija, says senior associate director of policy at the Chicago-based American Hospital Association. "Before two midnights, [admission to the hospital] was always the physician's decision based on medical judgment: a patient's medical history, the facilities available, the risk of an adverse event, diagnostic testing, and consultation with the patient."
According to rule, hospital stays spanning less than two midnights are considered outpatient care and billed under Medicare Part B. Hospital stays spanning more than two midnights – or stays that doctors expect to span at least two midnights – are considered inpatient care and billed under Medicare Part A. Medicare Part A pays providers at rates higher than Part B, which requires patients to share 20% of the bill.
The two midnight rule was adopted Oct. 1, 2013, the beginning of the 2014 federal fiscal year. But amidst widespread provider protestas a backdrop in April 2014, Congress and the president delayed enforcement until at least the end of this month.
The American Hospital Association has called for the enforcement freeze to continue until Oct. 1, the beginning of the 2016 federal fiscal year. If the so-called SGR fix bill is enacted into law, that delay will become a reality. The bipartisan bill passed in the House last week. The Senate is expected to vote on it in April and President Obama has said he will sign it.
If, however, federal officials insist on enforcing the Two-Midnight Rule, Bathija says hospitals need more time to ensure compliance with the length-of-stay rule. "For AHA members, they should be implementing the Two-Midnight Rule, but the enforcement freeze should continue. It gives hospitals more time to make sure they can comply," she said.
In a letter to CMS last month, Linda Fishman, AHA senior vice president for public policy, called for delayed enforcement of the two midnight rule as part of a reform initiative for Medicare's Recovery Audit Program and short stay payment (SSP) for hospitals. "We strongly urge CMS to undertake comprehensive reform of the RAC program to improve its management and fairness. RAC reform should go hand-in-hand with an SSP solution; without such changes, implementation of the two-midnight policy will continue to be problematic," Fishman wrote to CMS Deputy Administrator Sean Cavanaugh.
The AHA wants federal officials to expand payment of hospital outpatient services beyond Medicare Part B. "We believe that an SSP policy, supplementing the existing two-midnight policy, could reimburse hospitals more accurately for the resources used to treat patients who stay in the hospital less than two midnights," Fishman wrote.
She says limiting hospital payments to Medicare Part B often does not reflect the intensity of medical treatments in the first days of care. "Under the two-midnight policy, CMS generally considers hospital admissions spanning two midnights appropriate for payment under the inpatient [rates]. In contrast, hospital stays of less than two midnights are generally considered outpatient cases by CMS, regardless of clinical severity."
She says the two-midnight policy results in "inadequate reimbursement to hospitals for beneficiaries who require an inpatient level of care, but who stay in the hospital less than two midnights."
Fishman says a prime goal of the AHA reforms is for Medicare payments to more accurately reflect the cost of services during short hospital stays. "In many cases, the payment rates are far less than the costs incurred by the hospital. CMS could, for example, consider allowing hospitals to record a room and board charge associated with these services, thereby more accurately reflecting their costs."
A CMS spokesman says "CMS is evaluating options for next steps in our medical review strategy."
Two-Midnight Rule Foes Face Time Pressure
Most hospitals realize the time is nearing to comply with the Two-Midnight Rule, healthcare and finance analysts say.
Ronald Hirsch, MD, vice president of the regulations and education group at Chicago-based Accretive Health and former medical director of case management at Sherman Hospital in Elgin, IL, says hospitals have had enough time to adapt to the Two-Midnight Rule.
"The rule has actually been in full force since October 1, 2013… Hospitals should be ready for full auditing and subject to full auditing," Hirsch says.
"The rule is simple. It is two steps: does the patient require hospital care and is that care expected to take over two midnights. That is so much simpler than the previous risk-based method of deciding who gets admitted and who gets observed. That method resulted in 800,000 appeals and a two-year appeals backlog. But there still is a subjective component to who needs to be in the hospital and how long that patient will require to get better. If doctors use rational decision-making and document that rationale, there should be no problem."
Daniel Steingart, a vice president and senior analyst at New York-based Moody's Investor Service, says most hospitals are already operating under the two-midnight rule. "Just about everybody is complying with the rule. Over the past year, we've seen a reduction in hospital inpatient stays directly related to the rule."
The rule is part of a broader financial trend, Steingart says. "It's certainly a piece of the puzzle in the slowing of inpatient revenue and growth in other reimbursement areas. There's been a general shift to outpatient care. The two midnight rule is not a major driver; there are other reasons more people are being treated on an outpatient basis. There have been changes in health plans to higher deductibles and copays for patients. That generally slows volume of services."
Value-based payments such as shared savings contracts and bundling are also driving down medical service volume, Steingart says. "Providers are incentivized to spend less money, which tends to slow down revenue growth."
Hospitals are crying foul over the rule to seek revenue relief wherever they can find it, he says. "It's part of the revenue pressure on hospitals. It's tied to the shift from volume to value, but the shift is on a very small scale so far. The rollout is uneven. Healthcare is still local. It's not like the country switched a switch on the wall. About 4% to 6% of provider reimbursement comes in value-based contracts. Only a few markets are in front of that. It's a relatively slow train moving out of the station toward Medicare's goal for 50% value-based reimbursement."
Widespread provider-payer integration appears inevitable, but health systems, hospitals, and physician groups face a years-long learning curve.
Healthcare providers are clearly interested in offering their own insurance coverage products for patients, but adoption is more like a steady flow than a flood.
Herb Kuhn
President and CEO,
Missouri Hospital Association
In January, St. Louis-based Ascension Health became the latest large health system to embrace the health plan business, with a $50 million bid to acquire a Michigan-based insurance carrier. Officials at Ascension and US Health and Life Insurance Company declined to comment, but Herb Kuhn, president and CEO of the Missouri Hospital Association, says the proposed acquisition deal is a sign of the times.
"An increase in strategic partnerships is a natural extension of efforts to improve healthcare delivery between hospitals and among providers and payers. The shift from volume to delivery of value is fundamentally redefining relationships and structures. At the same time, these new organizations are gaining new capacity to look around the corner at a changing system and adapt to the new environment," says Kuhn.
He says the merging of provider and payer services into one organization has become a prime strategy in the healthcare industry to drive the retooling of American medicine. "It's connecting historically independent actors in the system to improve care and organizational performance. A team approach, with shared goals, will greatly accelerate clinical redesign efforts and assist in how the organizations reshape their medical management models. Moreover, it will help providers align their efforts, increasing patient and consumer engagement and enhancing the healthcare experience."
For many providers, taking on this strategy is easier said than done, according to a HealthLeaders Media intelligence report released this month. The findings of the report, which surveyed more than 300 leaders at health systems, hospitals, and physician organizations, offer several insights:
Data is an enticement. 43% of survey respondents saying they are using payer data to better understand the care experience of patients.
Size matters. 26% of health systems reporting ownership or operation of a payer business unit or health plan, compared to 16% of hospitals and 7% of physician organizations.
Providers are wary. 28% of survey respondents reporting that they assessed whether to launch a payer business unit or health plan then decided against it. Only 16% of the healthcare provider officials reported owning or operating a payer business unit or health plan.
'Synergy Capture' Key to Provider-Payer Integration
Bill Copeland, vice chairman of New York-based Deloitte LLP, says it will take a decade for healthcare providers to establish successful models for incorporating payer business units and health plans into their organizations.
"Unlike the 1990s, when we saw health systems develop health plans then pull back, the market has changed enough that this is here to stay," he says. "There's been a lot of consolidation among providers. They actually have networks of physicians to work with. They have more expertise in managing care."
Copeland says the fact that providers are embracing payer functions is a predictable response to the revolutionary changes sweeping across the healthcare industry.
"It isn't doing the same things the same way they have for the past 50 years… It's very natural for industries to do this kind of vertical integration. It allows you to unlock value. You don't have to give up value to a payer. You can reward the right behavior in doctor compensation and increase value in care. You can change the setting. Care doesn't have to be in an office. It can be a nurse in a car driving around visiting patients."
While vastly higher levels of provider-payer integration appear inevitable, providers face several challenging obstacles, Copeland says.
"You have to have reserves. Providers are going to be regulated by new organizations that they're not used to working with. They need staff with new competencies that they're not used to hiring. There's a tension in provider and payer relationships, and [some providers] don't want to introduce that tension into their organizations."
Copeland agrees with one of the key findings of the HealthLeaders intelligence report. "I do think it takes a health system. You have to have a critical mass that creates something that will be interesting to your community. You have to ask, 'Do you have enough delivery system assets that would be adequate enough that you don't have to fill holes and gaps?' You need a strong balance sheet."
Providers who are considering payer initiatives should focus on the "synergy capture," Copeland says.
"The critical piece to making this work as a provider is taking advantage of the integration. This is not a standalone effort. It's the synergy capture. Ultimately, you will achieve more affordable care and improved patient experience. Unlocking the value is not being constrained by the ways we do things today. Physicians are eager for this kind of change. There is a long list of things that are constraining the system that, through vertical integration, you are able to unlock."
North Carolina Health System Committed to Bearing Risk
Last summer, UNC Health Care decided to offer a Medicare Advantage health plan in partnership with Irvine, CA-based Alignment Healthcare. Louisville, KY-based Humana was added to the partnership mix in November.
Allen Daugird, MD, MBA, president of UNC Physicians Network and UNC Health Care's chief value officer, says the MA health plan is off to a slow start but has been a good investment.
"We have about 1,600 enrollees and had hoped for more, but we're satisfied. Some of this we think is because the concept of a narrow-network HMO Medicare Advantage plan that requires signing up with a primary care provider is a new one for North Carolina. It was also a new product for Humana, who relied on their sales force, which might not have totally understood the Alignment model. And lastly, unexpectedly, Duke launched a new, similar narrow-network MA HMO in partnership with Aetna," he said last week.
"Successes include Alignment having three care centers operational by January and providing many 'jump start' visits to new enrollees, where a comprehensive medical evaluation occurs and bridge prescriptions are provided until patients get in to see their new primary care provider if they are changing practices. Having the Alignment Care Centers on UNC's version of Epic was also a success, and makes information sharing much easier and effective. Another success is that we have been able to develop permanent collaborative communication and problem-solving structures for providers and Alignment. Lastly and most importantly, seniors in Wake County North Carolina now have a new Medicare option that has the most extensive and cost-effective set of benefits available."
Daugird says UNC Health Care's MA health plan is a building block for the organization's future.
"We see the march toward value care and risk contracts only accelerating. The recent announcement by [the Centers for Medicare & Medicaid Services] about its plans to accelerate value payment programs underlines this. The state of North Carolina is also very interested in moving its Medicaid populations into risk-value programs. Employers and insurance plans are, too. To prepare for all this, we continue to build a population and value-care infrastructure to support care and cost management as well as the necessary IT and analytic systems."
Prominence Health, a business unit of Catholic Health Initiatives, gives the non-profit hospital operator a key to unlocking value in provider-initiated insurance enterprises.
When you are trying to make big strides, it helps to have a large footprint.
Juan Serrano
Senior VP of Payer Strategy and Operations,
Catholic Health Initiatives
Catholic Health Initiatives, an Englewood, CO-based nonprofit health system, operates 105 hospitals in 19 states. CHI has a three-pronged health insurance strategy: a payer business unit called Prominence Health; Medicare Advantage health plans offerings in six states; and commercial health insurance products and services offered through a partner in Arkansas.
Juan Serrano, senior vice president of payer strategy and operations at CHI, told me last week that the sprawling faith-based health system's payer business unit has been able to leverage several advantages. Parts of the transcript of our conversation have been edited for brevity and clarity.
HLM: How would you characterize the maturation process at Prominence Health? Is it past the start-up phase?
Serrano: We regard our health plan and corporate health business as in operational- and growth-phase: We are fully operational across all health plan segments. We are entering new markets and launching new employer-focused solutions, and our sales and marketing channels are actively developing our growth channels.
HLM: From a big picture and organizational view, what kind of impact has Prominence Health had on CHI? For example, has CHI been able to make gains in population health management?
Serrano: Our Prominence Health insurance, network, and population health management capabilities are advancing our health system's ability to negotiate, operate, and manage a growing portfolio of customer populations, from the Medicare Shared Savings Program and bundled payments, to value-based relationships with most major health insurers, and risk-based arrangements aligned with CHI's objectives to improve the health of our communities through active participation in each person's health and wellbeing.
HLM: Among providers, health systems seem most interested in launching their own health insurance business units. What risk-bearing advantages does CHI have over smaller provider organizations?
Serrano: Having a distribution channel for healthcare services accelerates population [health] management. We also have [Medicare Advantage] membership scale. It can take three to five years to build up, and you typically need 15,000 to 20,000 members. By spreading Medicare Advantage over six markets now and 12 markets eventually, we can quickly reach scale. You need infrastructure for health plan operation: IT, operating a call center, operating a claims center. You need to have all those functions in place. The reserve funding and the marketing function may be the largest economic barrier. You have to come up with the financing resources to market Medicare Advantage health plans.
HLM: "Unlocking value" has become a catch phrase in healthcare industry vertical integration. How is CHI integrating health insurance into the organization in a way that maximizes value creation?
Serrano: We have actively transitioned our business model from a hospital-centric organization to a health system organization. CHI is well-positioned with an effective provider network. We are organizing our providers into more capable networks to build and improve population health management.
HLM: CHI acquired a commercial carrier in Arkansas. Is the health system planning to sell more commercial health insurance?
Serrano: Probably a dozen of our states are attractive from a Medicare Advantage perspective. For commercial licenses, we are looking across our entire footprint. QualChoice in Arkansas is the only place where we are operating an insurance license today.
Part of that market is third-party administration [of group insurance plans]. We are expanding our administration of commercial insurance to other markets. There are 20,000 members who are part of the CHI health system's insurance coverage in Nebraska. We're being thoughtful of where we want to offer insurance products. We want to be confident. [The Patient Protection and Affordable Care Act] is impacting insurance pricing. We want a clear line of sight on how insurance products are going to fit into our portfolio from an economic perspective.
HLM: To maximize the benefits of having in-house health insurance products, is it important for an integrated health system to close gaps in the continuum of care?
Serrano: We have been both employing physicians and affiliating with physicians. Our physicians have a mission to provide care where it is needed, not necessarily in a CHI hospital. Our goal is to be "clinically integrated." It's a more pluralistic approach to providing care in the community.
HLM: In the US healthcare industry, there is a natural and historical tension between providers and payers. How has that tension played out at CHI with the health system's new payer business unit, Prominence Health?
Serrano: The payer unit has the same goal, providing care, but with the added goal of discouraging unnecessary spending such as avoidable hospitalizations. Then there's arguing over pricing and the fee schedule.
We came at the tension from two directions. First, there was a realization the tension is going to happen anyway. We embrace the tension. Second, it's about partnership and sharing. It's not about the health system getting more money from the payer. It's also not about the payer getting more money from the health system. Rather, it's about creating value.
We saw the benefits as outweighing the risks of working with a competing business model. It's a partnership within the same family of companies. [Developing payer capabilities] allows us to factually inform the health system about what does work and what does not work. For us, operating a health plan is about realizing the synergy benefits.
HLM: Is CHI trailblazing health system vertical integration?
Serrano: There are some aspects of what we're doing that are truly innovative; but 20 or 30 years ago, you had HMOs and other forms of managed care. Some aspects of what we're doing have been tried before. What we have been doing is making sure our business model avoids the pitfalls that came before.
The health plan has to be operated effectively. There has to be sufficient funding, underwriting resources, and an effective network of care. Much of the innovation is focused on new models of care, doctor compensation, and managing the patient experience in a way that is significant for the consumer. In healthcare, consumer engagement has really lagged. We're doubling down on how to improve the consumer experience.
HLM: Regulators require health plans to carry hefty reserves. Have reserve requirements for Prominence Health squeezed CHI's ability to invest in other areas?
Serrano: We certainly have those conversations. We benefit from having a very strong balance sheet. Parking cash in reserves—you restrict your use of cash when you put it in reserves. Having the capacity to move cash into reserves is a characteristic of CHI. It creates a long-term dynamic. The way the economics are intended to work reflects the global impact on CHI, with growth of market share and a synergistic dynamic.
The key is unlocking the value between these two organizations. Over the long term, we will more than offset the parking of CHI cash in reserves. We have multiple health plans in multiple markets. We have a collective family of offerings. Over time, the health plans will repay CHI.
An appellate court ruling is a setback for federal officials in their effort to award a new round of contracts for Medicare's Recovery Audit Program.
A US Court of Appeals ruling earlier this month that invalidates a provision of Medicare's 2014 Recovery Audit Program contracts is the latest setback for federal officials who administer the program.
Melissa Jackson
Senior Associate
Director of Policy,
American Hospital Association
The 2014 contracts were slated to be awarded last year, but a series of challenges from Recovery Audit Contractors (RACs) has delayed the rollout of the new contracts. In the meantime, the Centers for Medicare & Medicaid Services has temporarily extended the original round of RAC contracts awarded in 2008.
"It's the ongoing saga of the RAC contracts," says Melissa Jackson, senior associate director of policy at the Chicago-based American Hospital Association.
In April 2014, one of the inaugural RAC contractors, Fairfax, VA-based CGI Federal Inc., filed a lawsuit against the government in the US Court of Federal Claims. CGI asserted a payment provision of the 2014 Recovery Audit Program contracts violates federal law.
CGI objected to a change in the timing of payment for contingency fees that RAC contractors receive when audits of healthcare providers reveal over payments from Medicare. Specifically, the original Recovery Audit Program contracts require Medicare to pay RAC contingency fees after the first level of appeal, which takes about 120 days. The 2014 Recovery Audit Program contracts set the timing of RAC contingency fee payment after the second level of appeal, which can take more than 400 days.
In August 2014, the US Court of Federal Claims ruled in favor of the government, and CGI appealed the case to the US Court of Appeals for the Federal Circuit.
On March 10, the US Court of Appeals reversed the lower court's decision. The appellate court decided that the change in payment terms violates federal contract law; specifically, the 2014 Recovery Audit Program contracts ran afoul of a prohibition against terms inconsistent with customary commercial practices. The case was remanded to the US Court of Federal Claims.
This week, CGI and CMS offered brief comments on the Court of Appeals ruling.
"We are pleased at the court's decision to recognize our position against the new payment terms proposed for Medicare recovery auditors. [The appellate court's] ruling encourages private sector participation in a vital government initiative to identify and recover improper payments for the Medicare program," said Linda Odorisio, vice president for global communications at CGI.
A CMS spokesman provided the following comment: "CMS is reviewing the court's decision related to Recovery Audit contingency fees, but cannot comment at this time on the decision or next steps in this process."
Reading the RAC Tea Leaves
Susan L. Smith, JD, a legal analyst at New York-based Wolters Kluwer Law & Business, says the US Court of Appeals ruling is a victory for CGI.
"Because the new payment terms are included in CMS's proposed RAC contracts, it is likely that CMS will be required to rebid the contracts without those terms. Furthermore, CMS may be required to consider CGI in its renegotiations because the appellate court determined that CGI was a prospective bidder at the time it filed its complaint in the Court of Federal Claims," Smith said this week.
Jackson also views this month's court ruling as a win for CGI, but she says it is hard to predict how CMS will react to the decision. "If CGI had lost this appeal, they would have been out of contention for future contracts. How CMS moves forward depends on how the lower court handles it," she said.
The timing of RAC contingency fee payments has little bearing on healthcare providers, Jackson says, noting that the level of the fees is more problematic. "We are continuing to press for fundamental reform of the RAC program and its financial incentives. We really don't have an opinion on when the RACs get paid. We have an issue with RAC fees that range from 9.5% to 12% [of the Medicare payments recovered through RACs]. That's really what's driving their bad behavior."
In addition to alleging overly zealous RAC clawbacks of Medicare payments, the AHA is critical of CMS's efforts to keep hospitals informed about developments in the Recovery Audit Program, Jackson says.
"For hospitals, it's really an issue of transparency. We want to have CMS clearly communicate how the new RAC contracts are going to work. We want a period of time so hospitals can 'onboard' with their new RACs. Hospitals have not been entirely aware of when the audits have started," she said, noting a two-month hiatus in RAC auditing last summer while CMS struggled to come to grips with the CGI court case. "It's been hard to have consistent and clear information coming from CMS."
The unveiling of two innovation facilities last week signals the willingness of payers to help find "actionable, outcomes-driven" healthcare solutions.
With the coming of spring, innovation is in the healthcare industry air.
In separate announcements last week, two initiatives were launched in Seattle and Chicago.
In Seattle, Cambia Health Solutions held a grand opening for Cambia Grove, a 9,000-square-foot innovation facility designed to provide "a collaborative environment for innovators, entrepreneurs, employers, the public sector, and community stakeholders," according to a company statement.
Nicole Bell
Executive Director of Cambia Grove
Nicole Bell, executive director of Cambia Grove, says her facility has grand innovation objectives.
"We are not an innovation center, accelerator, incubator, or co-working space," Bell said last week. "Our mission is to raise up the healthcare sector here and become a powerhouse cluster, more like Boston or Nashville for the healthcare industry. We encourage the regional health plans, providers, and large employers to figure out together what types of common unmet needs in healthcare we have, and commission some of the 'solutioning' work to entrepreneurs… We believe that matchmaking will encourage more novel approaches, as well as encourage young businesses to take root here."
And in Chicago last week, America's Health Insurance Plans unveiled the AHIP Innovation Lab. The Washington, DC-based trade industry association aims for this facility to help health plans use "peer groups of healthcare professionals, thought leaders, and subject matter experts to turn ideas into actionable, outcomes-driven solutions to a particular challenge," it said in a statement.
AHIP's 26,000-square-foot innovation facility is designed to help health plans and other healthcare organizations navigate the changes sweeping across the industry, VP of Communications Ben Jenkins said last week.
"Technology is driving stakeholders to improve through innovation. In this new consumer-driven marketplace, stakeholders from all sectors understand that it's essential to work together to find solutions to complex challenges facing patients and the healthcare industry as a whole—and many companies are stepping up," he said.
Jenkins says the AHIP Innovation Lab's corporate partners, including Accenture, Amgen, and GE Healthcare, "will contribute guidance and thought leadership centered on this shared goal of solving complex healthcare challenges."
'The Return Will be on the Economic Impact'
Bell says Cambia Grove is an embodiment of Cambia Health Solutions' commitment to play a transformative role in the healthcare industry. Cambia Health Solutions is the corporate parent of more than 20 companies, including the Regence brand of BlueCross BlueShield affiliates that operates in Idaho, Oregon, Utah and Washington State.
Cambia Health Solutions is a not-for-profit, tax-paying holding company founded with an idealistic view of return on investment, Bell says. "As such, we can think about our mission a bit differently. The return will be on the economic impact on this region, which we call home."
Cambia Health Solutions is bearing the full cost for the innovation initiative, Bell says. "Cambia Health Solutions is funding the facility, the staff, supporting programs and events as a way to build community and to establish the Pacific Northwest as an innovation hub for the industry," she said, adding none of Cambia Grove's "anchor partners" are providing funding for the initiative.
Entrepreneurs who take advantage of Cambia Grove's resources will not be required to pay fees or other compensation.
"We are providing the space at no cost to the entrepreneurs and anchor partners. All [intellectual property] resulting from collaboration or partnerships remain with the entrepreneurs," she said. "The Cambia Grove was created for the betterment of the health industry as a whole and to build a community that doesn't currently exist in the region. Our goal is to connect innovators and entrepreneurs with those they might not otherwise have access to. We feel that a rising tide lifts all ships and that this approach will not only benefit Cambia, but the industry as whole by making Seattle a national center that drives the new health economy."
Bell says Cambia Grove and other innovation initiatives across the country reflect a pressing need among healthcare organizations to adapt to a rapidly changing business environment.
"It seems like we have reached an inflection point, where the industry will not tolerate the waste and perverse economic incentives that were the norm for so long. The way we see it, the Pacific Northwest is very well-suited to be the first place in the country to achieve the triple aim in healthcare: better health, better care and lower costs. We have natural advantages that, if harnessed, will allow us to transform this industry as we have for the online retail, tech, aerospace and coffee industries."
"We hope that the work we do provides a good example, so that others in the community will take the step to begin 'sitting around the table' with young companies more often. Cambia Grove isn't about 'flying cars,' it's about coming together and solving some of the toughest issues—palliative care, connecting caregivers with just-in-time data on patients, combatting depression, reaching people in more rural settings," she says.
'Community of Innovation to Improve Healthcare'
A pair of academics says Cambia Grove deserves an "A" for effort.
Susan Penner, RN, DPH, an adjunct faculty member at the University of San Francisco School of Nursing and Health Professions, says Cambia Grove is taking an unprecedented approach to healthcare innovation.
She sees it as "a unique innovation initiative because it brings start-ups, university research programs and health insurance plans together to foster a community of innovation to improve healthcare." And, she says, says Cambia Grove should be able to bear down on some of healthcare's most vexing problems.
"One example of the potential of Cambia Grove is finding creative ways to reduce preventable hospital readmissions. A possible approach would be to combine resources, technology, and medical expertise to fund mobile van units to provide easily accessible care and support for selected health concerns. Patients with disorders such as high-risk pregnancies, congestive heart failure, or asthma could receive care at their home, workplace or school with improved health outcomes. A health plan investing in similar ventures would demonstrate long-term savings," she said.
Spyros Kitsiou, PhD, an assistant professor at the Department of Biomedical and Health Information Sciences at the University of Illinois at Chicago, says there is an existential need in the healthcare industry for innovation initiatives such as Cambia Grove.
"Healthcare is changing like never before. Sweeping healthcare reforms and market forces have transformed the way healthcare is delivered. The rapid growth of health information technologies and e-health innovations are creating significant opportunities for healthcare professionals, practitioners, researchers, and organizations for improving processes and practices. Continuous advances in mobile technologies are changing the ways that medical research is conducted and provide us with new ways for discovering patterns that we have never seen before, and addressing persistent problems such as patient empowerment and engagement in the process of care. Many healthcare industry organizations must adapt to these changing inputs to maintain an equilibrium."
A pair of healthcare industry experts say widespread employer adoption of private exchanges for health benefits is on the horizon and approaching fast.
The future of private health insurance exchanges is bright, but it is more like the dawn of day than the noontime sun.
Bill Brown
Manager of Digital Distribution,
Highmark Inc
"We were expecting a lot more for 2015. We got about 50% of where we thought we were going to go," Bill Brown, manager of digital distribution at Highmark Inc., told me last week.
The Pittsburgh-based BlueCross BlueShield affiliate has marketed private exchanges to employers for three years, which is a relatively short time span in the employer-sponsored insurance market, he says. "Our brokers and our employer groups still don't know that much about private exchanges. They're still nervous about it."
Highmark's experience mirrors the national market for private exchanges, according to Michael Thompson, a principal at PricewaterhouseCoopers LLC. In December, the New York-based consultancy released a national survey of employers that assessed employer activity in the private exchange market.
"A lot depends on what your expectations were for this year. If you were expecting explosive growth, it's fallen short of those expectations," Thompson says. "Many people believe 2016 will be the turning point."
Several factors dampened employer enthusiasm for private exchanges this year, Brown and Thompson say.
In 2014, the nearly disastrous rollout of the Patient Protection and Affordable Care Act-spawned public exchanges prompted employers to second guess private exchanges. "Year One of healthcare.gov scared a lot of people away. This year, [open enrollment for the public exchanges] went a million times better than Year One. Now, employers are ready to listen about private exchanges," Brown says.
The Highmark executive said one of the prime selling points of private exchanges, digital enrollment, is also a prime perturbation point. "People are nervous about data security after Target and Anthem," Brown says, referencing major data breaches at the Minneapolis-based retail giant and Highmark's fellow BlueCross BlueShield affiliate. "That's one of the biggest things employers are worrying about."
He says federal regulatory "grandmothering and grandfathering of the small group market" for PPACA compliance has also slowed the uptake of private exchanges. "They don't have to go from their current insurance product to an ACA-rated product this year. Those groups want to stay in the group coverage they have already."
Thompson says some employers, particularly those with more than 1,000 workers, have already adopted health benefit capabilities featured in private exchanges such as digital enrollment and multiple health plan choices for employees.
"You can have employers that have been very aggressive with their health benefit strategies. They may find that a private exchange does not advance their health benefit strategies. Some employers question where the value is in the equation. There is an opportunity where private exchanges offer something employers aren't offering already."
Widespread employer adoption of private exchanges is nearly inevitable, Brown and Thompson both believe.
"Digital enrollment is going to dominate the market sooner rather than later," Brown said. "The Baby Boomers are moving out of the market, and the Millennials do almost 80% of their transactions on their phone or tablet. The sky's the limit for the digital space."
While large employers may already have many of the capabilities featured in private exchanges, employers with fewer than 100 workers are in an entirely different administrative situation, Brown says. "The private exchange brings something they don't have." He notes that adoption of a private HIX generates several value propositions for small businesses, including online enrollment, analytics, billing and financial functions on one platform, and cost savings from replacement of paper-based processes.
Thompson says the primary driver of private exchange growth is the potential to create value for employers and their workers. "Employers are asking, 'Can we change the nature of the decisions employees are making?'… There are employers who have struggled to advance their health benefits strategy." He points out that the challenge of maximizing the value of wellness programs and achieving a level of employee engagement that helps workers make value-based decisions in health plan selection.
If private exchanges can prove their effectiveness to employers, they will become "the stewards" of employer-sponsored insurance across the country, Thompson says. "Employers generally don't want to manage health benefits themselves; but, before they turn it over, they want to see a better track record."
Private exchanges can perform the full range of health benefit functions that have historically been the bailiwick of insurance companies and employer human resources departments, he says. Those functions include changing health plan design over time, providing enrollment tools, helping workers to access healthcare services, and fostering engagement in wellness programs. "It's an entirely new role in the healthcare system," he says of the emerging private exchange market.
Given the uncertainty about the trajectory of private exchange growth in recent years, health insurance carriers such as Highmark have been facing a daunting business development challenge.
"There's a fine line between waiting for the change and forcing everybody into it," Brown says of Highmark's group clients. Established insurance carriers also need to be wary of losing business to competitors such as innovative start-up companies. "You don't want them to advance too far and leave you in the dust."
Highmark hedged its bets on private exchanges, Brown says. "We have a little bit of a mix. We had upstarts develop the technology, but it's been kind of a cooperative growth." Highmark's primary information technology partner for private exchanges, Seattle-based Array Health, has similar business relationships with several BlueCross BlueShield affiliates. "They decided that working with multiple carriers was the way to go."
Highmark set the foundation for its private exchange strategy about five years ago, Brown says. "We didn't know whether these new private exchanges would take off four or five years ago." Other commercial insurance carriers, healthcare consultancies and insurance brokers were launching their own private exchanges and "we realized, in midstride, that these guys were going to do this, whether we did it or not."
Private exchanges are a great example of the necessity for established insurance carriers to adapt to the changing healthcare industry landscape, he adds.
"Technology changes quickly, and healthcare has been pretty darn slow to change in the past. We need to become more nimble in the retail world and in the Millennial world. If Millennials can't access something on their phone from us, they're going to leave us behind."
CMS's most ambitious accountable care payment model to date presents more risk for providers, but offers financial enhancements to sweeten the pot.
With the announcement of a new accountable care payment model last week, federal officials are forging ahead with their efforts to boost value-based payments for Medicare services.
The Next Generation ACO model unveiled last week seeks to advance Medicare's accountable care payment initiatives, according to Patrick Conway, MD, chief medical officer and deputy administrator for innovation and quality at the Centers for Medicare & Medicaid Services.
"Building upon experiences from the Pioneer ACO model and the Medicare Shared Savings Program, the Next Generation ACO… sets more predictable financial targets, enables providers and beneficiaries greater opportunities to coordinate care, and aims to attain the highest quality of care," Conway wrote in a CMS blog post.
A fact sheet for Next Generation ACO lists several "core principles" for the new accountable care payment model:
Protecting Medicare fee-for-service beneficiaries' freedom to seek the services and providers of their choice
Engaging beneficiaries in their care through benefit enhancements that directly improve the patient experience and reward seeking care from ACOs
Creating a financial model with long-term sustainability
Using a prospectively-set benchmark that incentivizes quality, rewards both improvement and attainment of efficiency, and transitions away from an ACO's recent expenditures when setting and updating the benchmark
Limiting fluctuations in aligned beneficiary populations and respecting beneficiary preferences by supplementing a prospective claims-based alignment process with a voluntary process
Smoothing ACO cash flow and supporting investment in care improvement capabilities through alternative payment mechanisms
In an indication that the Next Generation ACO is an advanced accountable care payment model, CMS forecasts that only 15 to 20 healthcare organizations will participate. That level of participation would be on par with Pioneer ACO, which currently has fewer than two dozen participants down from 32 at the start.
Healthcare organizations interested in participating in the Next Generation ACO program face a May 1 deadline to submit a letter of intent to CMS.
High Hopes
In a statement provided to HealthLeaders last week, CMS said the Next Generation ACO "offers the highest accountability – or risk – of any ACO model to date, and that risk is paired with ways to better engage the beneficiary and offer services beyond traditional Medicare like [skilled nursing facility] stay without three-day hospitalization, expanded telehealth services, and a reward direct to beneficiaries for using ACO providers."
The statement also provided the rationale behind CMS's estimate for the participation level in Next Generation ACO: "This is a model that tests many new concepts… We also expect organizations willing to assume this level of accountability will have had previous ACO experience and familiarity with similar alternative payments that align reimbursement with value and better health."
Providers Cautiously Optimistic
Healthcare providers say they want to see more details about Next Generation ACO, but are generally positive about the initiative.
Janis Orlowski, MD, chief healthcare officer at the Association of American Medical Colleges, says the Next Generation ACO appears to be a step in the right direction for Medicare's accountable care programs.
"I applaud them for listening to what our concerns were and coming out with a different program. In the end though, the devil is going to be in the details," she said last week. "These programs become very complicated through the course of their development."
Orlowski says Next Generation ACO appears to address two areas in Medicare's accountable care programs that have drawn withering criticism from healthcare providers: long-term stability in the setting of program's financial benchmark and assignment of Medicare beneficiaries to ACO organizations to allow providers to work more closely with their patients.
Orlowski says benchmark calculations for MSSP and Pioneer ACO have been problematic for providers. "Each year, [CMS] has calculated it in a slightly different way," she said. "They're short on details, but what they say is they're creating a model with long-term stability."
Providers will be watching how the Next Generation ACO model addresses the patient-assignment element of the program closely, Orlowski says. "In the fact sheet, they say beneficiaries will still have the flexibility they have in the fee-for-service model, which is a concern for providers. If the issues about beneficiary assignment are not clearer, there will be concerns about the Next Generation ACO."
Robert Wah, MD, president of the Chicago-based American Medical Association, makes similar observations.
"From what we have seen, the new ACO model could be a step forward and may help physicians improve care quality and lower costs. For example, the Next Generation ACO program will help physicians better predict their patient populations and will allow patients to voluntarily choose to become involved in an ACO, both tenets we raised in our comment letter last month. The program will also provide more budget predictability, so ACOs can plan ahead for how to achieve needed savings. The AMA additionally supports CMS' decisions to waive certain Medicare regulations, such as the three-day hospital stay required for nursing home coverage, and to expand the use of telemedicine, which will allow participants to better coordinate care."
Premier Inc. says the Next Generation ACO adds a welcomed accountable care option for Medicare providers, but few organizations are prepared to participate in the new model.
"We believe it's important for CMS to offer a broad array of options that span across the risk continuum. This gives providers the choice to select the model that best fits where they are in the journey to alternative payment and accountable care," Premier said in a statement. However, "it appears to involve even greater risk, providing a range of advanced payment models, including capitation. Since this is probably the most advanced option of all the ACO programs, it's not likely that a plurality of facilities have the skills, capabilities, infrastructure and appetite for the risk that would be necessary to participate. But it still will provide valuable learnings for others that are rapidly working to get there."
The healthcare providers that have the wherewithal to participate in the Next Generation ACO will be playing a trailblazing role in ongoing efforts to push Medicare away from the fee-for-service payment model, Premier suggests.
"We really support CMS' willingness to test new beneficiary engagement strategies using telehealth, home health and skilled nursing care without a prior hospitalization. We also believe that the [new] model's use of reward payments in exchange for receiving services inside the ACO network will be a powerful tool for engaging beneficiaries and incenting choices that lead to better health outcomes at a lower total cost."
Personalized drug therapies based on genetic profiling can help avert hospitalizations and boost compliance, but the economic impact on drug makers has yet to be determined.
One of the largest health systems in Illinois is aiming to become a leader in precision medicine.
Evanston, IL-based NorthShore University HealthSystem formally launched a pharmacogenomics clinic last week and is set to unveil the not-for-profit organization's multifaceted Center for Personalized Medicine by early April, health system officials say.
Henry "Mark" Dunnenberger, PharmD
In addition to the pharmacogenomics clinic, NorthShore's Center for Personalized Medicine is slated to have several core components, such as personalized medicine consult clinics, where genomic specialists will help diagnose and treat patients based on genetic information.
Other elements of the Center for Personalized Medicine include cancer care based on genetic profiling as well as a research initiative to collect and analyze DNA samples from 100,000 people in the Chicago metropolitan area.
Henry "Mark" Dunnenberger, PharmD, a senior clinical specialist at NorthShore who is leading the new pharmacogenomics clinic, said this week that his facility has the potential to benefit a wide swath of patients "across the spectrum of disease care."
He describes pharmacogenomics as being revolutionary on two medication fronts: dose adjustment and medication selection. "It could be your body doesn't clear a drug very well. It could be that a drug doesn't do you any good. We can pre-emptively modify your therapy."
"It limits trial and error. It alleviates time to improve symptoms. We're providing safer medication, which avoids hospitalization," he says, noting the application of pharmacogenomics in prescriptions of medication helps boost patient compliance. "There are [fewer] side effects… If you can tell patients, 'we tailored this therapy for you,' then they are more likely to take it."
Personal Impact
The molecular biologist leading NorthShore's effort to collect 100,000 DNA samples from Chicagoland residents has experienced the value of pharmacogenomics firsthand.
Kathy Mangold, PhD, had a family history of a serious clotting disorder, deep vein thrombosis, and decided to have her blood analyzed to see whether she had a genetic predisposition for the condition. Testing revealed Mangold had a mutation that increased her risk for blood clots as much as 20 times. And she started taking preventative medication – one aspirin per day.
Mangold, who started working for NorthShore in 1999, also underwent drug metabolism testing for Warfarin, the frontline medication for deep vein thrombosis, and found that her body breaks down the drug more slowly than most patients. "That information sat in my medical record for a long time," she said.
Then in January 2014, Mangold underwent surgery to remove a benign brain tumor. "I didn't have a blood clot when I was in the hospital, but I wasn't as active as I should have been when I got home," she said.
She developed a blood clot in one of her legs and because of information gleaned from the testing years earlier, was prescribed to take Warfarin at a dosage level 40% lower than the standard therapy, but safer for her.
The molecular biologist's personal experience with personalized medicine has benefited several members of her family, as well. "Taking an aspirin a day is a simple fix. I shared [this information] with my family, and they also were tested. They could have a discussion with their physicians to decide the best thing to do."
There are millions of Americans who do not have pharmacogenomics facilities in their communities, but they still can benefit from the technology, Mangold says.
Three of her brothers live in Montana towns with populations as low as 100 people, 30 miles from the nearest hospital. "They could get blood taken and sent off for testing. Then their doctors could consult with us at NorthShore. It's not [a level of care] as grand and complete as we have at NorthShore, but they still had access. They could get this care even in a rural area of Montana."
Mangold said she also shared her pharmacogenomics information with some of her cousins, in part because genetic mutations associated with deep vein thrombosis have been linked to pregnancy complications. "It has had a far-reaching impact on my family."
Pharmacogenomics' Impact on Bottom Lines
In addition to the potential for pharmacogenomics to have a broad impact on patients, the technology is likely to have a significant financial impact on the healthcare industry, Dunnenberger says.
Prescribing the right drug, at the right dosage, at the right time has obvious financial benefits for healthcare providers, including avoidance of costlier interventions such as surgical procedures. "There's a little more cost upfront, but we're pushing to a preventive model of care."
The impact of pharmacogenomics on drug makers, however, "is yet to be determined," Dunnenberger says.
For decades, pharmaceutical companies have banked on a volume-based business model: The more drugs they sell to more people at the highest possible dose, the more profits they have generated. While pharmacogenomics is likely to cut into sales volume for many medications, there is a silver lining for drug makers, he says.
"There are some drugs that never make it to market because of their toxicity profile. Pharmacogenomics could be a method to rescue some drugs: 5 to 10% of patients may be able to tolerate a drug," he said. "In those cases, you have to have a very specific mutation for the drug to work."
The pharmacogenomics clinic at NorthShore is the first of its kind in the Chicago metropolitan area, according to Dunnenberger. Several other large healthcare providers across the country have launched pharmacogenomics clinics and research facilities, including Mayo Clinic's Center for Individualized Medicinein Rochester, MN, and the Center for Experimental Drugs and Diagnostics at Boston-based Massachusetts General Hospital.
