Medicare Releases Draft Proposal For Patient Observation Notice

KFF Health News, June 16, 2016

The NOTICE Act requires that starting Aug. 6, Medicare patients receive a form written in “plain language” after 24 hours of observation care but no later than 36 hours. Medicare is soliciting feedback on the draft notice through Friday.

This article first appeared June 16, 2016 on the Kaiser Health News website.

In just two months, a federal law kicks in requiring hospitals to tell their Medicare patients if they have not been formally admitted and why. But some physician, hospital and consumer representatives say a notice drafted by Medicare for hospitals to use may not do the job.

The law was a response to complaints from Medicare patients who were surprised to learn that although they had spent a few days in the hospital, they were there for observation and were not admitted. Observation patients are considered too sick to go home yet not sick enough to be admitted. They may pay higher charges than admitted patients and do not qualify for Medicare's nursing home coverage.

The NOTICE Act requires that starting Aug. 6, Medicare patients receive a form written in "plain language" after 24 hours of observation care but no later than 36 hours. Under the law, it must explain the reason they have not been admitted and how that decision will affect Medicare's payment for services and patients' share of the costs. The information must also be provided verbally, and a doctor or hospital staff member must be available to answer questions.

And patients could have questions, said Brenda Cude, a National Association of Insurance Commissioners consumer representative and professor of consumer economics at the University of Georgia. She said the notice is written for a 12th-grade reading level, even though most consumer materials aim for no more than an eighth-grade level. It "assumes some health insurance knowledge that we are fairly certain most people don't have."

Medicare is soliciting feedback on the draft notice through Friday.

Medicare officials declined to comment while the draft form is under review. But they have expressed support for efforts to explain observation care.

"We are in complete agreement with the notion that the patient should certainly know their status and know it as early as possible," Sean Cavanaugh, Medicare's deputy administrator, told a Senate committee last year when asked about the notice legislation. "And we've been pushing very hard through educational channels, even providing sample materials that hospitals could use to educate their beneficiaries on what status they have."

Many hospitals also support the effort. "It's important for patients to understand their status in the hospital," said Katie Tenoever, senior vice president and general counsel for the Federation of American Hospitals.

But the form does not meet the expectations of Rep. Lloyd Doggett, D-Texas, who co-sponsored the law.

"I am concerned that the proposed notice fulfills neither the spirit nor the letter of the law," Doggett said in an interview.

It doesn't require the hospital to explain exactly why the patient is getting observation care instead of being admitted, he said, and doesn't clearly explain the difference between Medicare's Part A hospitalization and nursing home benefit and Part B, which covers outpatient services, including doctor's visits, lab tests and hospital observation care.

The notice, he said, also does not sufficiently explain why observation patients are ineligible for Medicare's nursing home coverage, which under law requires at least three consecutive days as an admitted patient.

The draft notice also has raised some concerns among doctors. It says that observation care is provided in order to help the doctor decide whether the patient is sick enough to be admitted. But Dr. Jay Kaplan, vice chairman for emergency services at Ochsner Health System in New Orleans and president of the American College of Emergency Physicians, said it should explain that the doctor's decision is not always final. Hospital officials also can decide that patients don't meet the admission criteria and should get observation care. If Medicare auditors find that hospitals erred by admitting patients who should have been in observation, Medicare pays nothing for their care.

The number of Medicare observation patients rose to almost 2 million in 2014, 5 percent more than 2013, according to government statistics.

The notice's information on drug coverage has also raised concerns. It reads, "Generally, prescription and over-the-counter drugs, including 'self-administered drugs,' given to you by the hospital in an outpatient setting (like an emergency department) aren't covered by Part B."

Those "self-administered drugs," usually taken at home for chronic health conditions like high cholesterol, are generally covered by the patient's separate Medicare Part D drug plan but the coverage often doesn't apply inside the hospital. Most hospital pharmacies do not participate as in-network pharmacies with Part D plans, said Marina Renneke, a Humana spokeswoman.

However, that section "was really quite confusing," said Kaplan. Medications given to treat the illness that brought patients to the hospitals are covered under Part B, he said.

Joanna Hiatt Kim, the American Hospital Association's vice president for payment policy, said, "A number of hospitals already voluntarily distribute their own notices."

Still, her association has raised some questions about how to carry out the federal requirement in a letter to Medicare.

For example, although the federal law requires notice to observation patients after 24 hours and before 36 hours, several states tell hospitals to provide a notice when observation care begins and it may include different details. Should patients get two notices?

Then there's the matter of timing. The final notice is expected shortly before hospitals must start giving it to patients. AHA is asking for an additional six months to get ready.

 

As Hospital Chains Grow, So Do Their Prices For Care

KFF Health News, June 13, 2016

As health care consolidation accelerates nationwide, a new study shows that hospital prices in two of California’s largest health systems were 25 percent higher than at other hospitals around the state.

This story first appeared June 13, 2016 on the Kaiser Health News website.

By Chad Terhune

Researchers said this gap of nearly $4,000 per patient admission was not due to regional wage differences or hospitals treating sicker patients. Rather, they said California's two biggest hospital chains, Dignity Health and Sutter Health, had used their market power to win higher rates.

"California experienced its wave of consolidation much earlier than the rest of the country and our findings may provide some insight into what may happen across the U.S. from hospital consolidation," said the study's lead author, Glenn Melnick, a health care economist at the University of Southern California.

Dignity and Sutter disputed the idea that they can dictate rates, saying they face ample competition.

Hospital chains that buy up other facilities, clinics and physician offices often tout savings and improved services from coordinating patient care and eliminating inefficiencies. The researchers found no evidence that any potential savings were being passed along to the employers, insurers

The study, published in the Journal of Health Care Organization, Provision and Financing, comes as Sutter faces a lawsuit and an investigation by state Attorney General Kamala Harris for potential harm to consumers. Dignity and other big medical groups are also subjects of the attorney general's inquiry.

One limitation of the study is that it draws only on claims data from Blue Shield of California, the state's third-largest health insurer. However, experts say that what Blue Shields pays is a good proxy for the industry as a whole.

The prices in the study reflect the actual amounts paid by Blue Shield, not billed charges or list prices.

The research showed that from 2004 to 2013, the amount paid by Blue Shield to nearly 60 hospitals owned by Dignity and Sutter jumped 113 percent compared to a 70 percent increase at about 175 other California hospitals.

At the beginning of that ten-year period, prices were similar at all the hospitals studied. However, by 2013, the average payment per patient admission was $19,606 at Dignity and Sutter hospitals and $15,642 at the other hospitals.

James Robinson, a University of California, Berkeley professor of health economics, said the study's findings show how dominant health systems use revenue from higher prices to get even bigger.

"It allows them to further expand by acquiring medical groups which gives them even more bargaining power," Robinson said.

Sutter spokesman Bill Gleeson said the health system's recent price increases to insurers have been extremely low and its charges are in line with competitors. He also cast doubt on the study's validity because of its reliance on data from Blue Shield, which has clashed publicly with Sutter over prices and contracts.

"This a self-serving play by Blue Shield to use stale and potentially misleading data to further its contract negotiations with Sutter Health and an attempt to advance its position in pending litigation," Gleeson said.

Melnick said Blue Shield shared its claims data but wasn't involved in the analysis or the conclusions of the study. The San Francisco-based insurer declined to comment on the study until it could review the findings.

Dignity said a number of factors affect its prices for commercially insured patients. It cited high labor costs, the need to pay for state-mandated seismic upgrades and the expense of treating a rapidly growing Medicaid population in California.

Dignity, a nonprofit based in San Francisco, is California's largest hospital chain, with 32 facilities in the state and seven more in Arizona and Nevada. It posted an operating profit of $423 million on annual revenue of $12.4 billion in the year ending June 30, 2015.

Sutter's nonprofit system, based in Sacramento, includes 24 hospitals and 34 surgery centers. It reported $11 billion in revenue last year and an operating profit of $287 million.

Hospitals run by Kaiser Permanente, both an insurer and health system, weren't in the claims data analyzed.

The study's authors said lawmakers should consider limiting the use of "all-or-none" negotiating tactics that force health plans and employers to accept all of a health system's hospitals, clinics and physician groups or risk losing access to them all.

Gleeson, the Sutter spokesman, said his health system does not use all-or-none contract provisions.

"There are many health plan products that include pieces and parts of Sutter Health," he said.

UC Berkeley's Robinson said he was "dubious about the state getting in there and regulating different forms of private contracting."

Beyond Sutter and Dignity, prices grew substantially across all hospitals from 2004 to 2013. The average payment per admission increased 76 percent from $10,113 to $17,818.

The increase occurred at a time when other economic indicators rose more modestly. California household income, for example, increased 23 percent during that period.

Sutter faces a class-action lawsuit, filed by a Blue Shield-run grocery workers' health plan and supported by other employer and business groups, that accuses the health system of imposing anticompetitive terms and illegally inflated prices. Sutter disputes the allegations.

FDA Eases Paperwork To Help Some Patients Get Experimental Drugs

KFF Health News, June 8, 2016

Doctors will now file an application for FDA approval that contains just 11 questions, 15 fewer than the old form. They should be able to complete this new version in 45 minutes, the FDA said.

This article first appeared June 8, 2016 on the Kaiser Health News website.

By Rachel Bluth

Doctors will now file an application for FDA approval that contains just 11 questions, 15 fewer than the old form. They should be able to complete this new version in 45 minutes, the FDA said. The new form is simpler because it was designed for individual patients, replacing an all-purpose format that had been used by doctors acting on behalf of individuals or small or large groups of patients.

There had been concerns that doctors unfamiliar with how to submit the old form might have been deterred from applying for compassionate access, which is also known as expanded access, said FDA spokeswoman Sandy Walsh.

The policy is intended to help patients with incurable diseases who have tried all standard therapies and hope to extend their lives by taking experimental drugs not yet approved by the FDA, said Dr. Edward Kim, chair of the Department of Solid Tumor Oncology at the Carolinas HealthCare System's Levine Cancer Institute.

The FDA's old form was a "pretty laborious process," Kim said. When doctors are serving patients whose time is precious, every minute saved on paperwork can help, he said.

In streamlining its path to approval, the FDA has bolstered a larger movement in the U.S. to make experimental drugs more accessible to certain patients. Currently, 20 states have "right to try" laws aimed at improving terminally ill patients' access to experimental treatments, according to the Regulatory Affairs Professionals Society.

Despite benefits for time-pressed physicians, the FDA's slimmed-down application form might not speed those drugs faster to patients whose time is running out.

Doctors still must first obtain a letter of authorization from that drug's manufacturer. That's voluntary and the FDA can't compel them to grant permission. Manufacturers might reject requests because they're worried about liability if the drug causes harm or they might consider the drug unsuited for a particular patient.

"There has been a tendency to focus on this FDA paperwork as the significant part of gaining access to drugs, but where most requests stop is with the company making the drug," said Mark Fleury, a policy analyst at the American Cancer Society Cancer Action Network.

After doctors get manufacturers' consent, they next submit an application to the FDA. It has approved 99 percent of the applications filed for the past six years, FDA figures show. Only 14 out of 1,430 applications were rejected in fiscal year 2015.

Expanded access is intended for patients unable to get access to drugs that are being tested in clinical trials. Sometimes a patient is unsuited for the trial or there might not be a trial to enter at the time the patient needs the drug.

Investigational drugs aren't without risk. The FDA hasn't vouched for the safety of the drugs and they could cause unknown side effects, such as liver damage.

They may also be ineffective. Just because a drug is working for a patient in a clinical trial, doesn't mean it will work for another patient in different circumstances who doesn't qualify for that trial.

Details On Death Certificates Offer Layers Of Clues To Opioid Epidemic

KFF Health News, June 3, 2016

Dr. James Gill walked through the morgue in Farmington, Connecticut, recently, past the dock where the bodies come in, past the tissue donations area, and stopped outside the autopsy room.

by Jeff Cohen/WNPR

This story is part of a partnership that includes WNPR, NPR and Kaiser Health News.

"We kind of have a typical board listing all of the decedents for the day," Gill said, pointing to the list of names on a dry erase board. "Overdose, overdose, overdose, overdose overdose. That's just for today."

Gill is the chief medical examiner for the state of Connecticut, and of the nine bodies in his custody that day, four were the remains of the people who likely died from an accidental drug overdose. A fifth was a probable suicide involving drugs. It was a sad, but typical day, he explained, with a practical consequence for the state's morgue: Gill is running out of room to store bodies.

"We've had to buy some extra racks and things so we can store more," he told me. "But we really probably need more cooler space. We're kind of outgrowing the storage space here."

In the past two years, Gill's office has seen a more than a 50 percent increase in autopsies. That's mostly because of the spike in accidental drug overdoses, he said. Heroin is the big player. Fentanyl deaths have surged, too.

I sat with Gill in the so-called family room just off the lobby of the examiner's office. In explaining why good data on exactly which drugs killed exactly which people is important, Gill recalled a conversation he once had with a mother whose daughter had died of a drug overdose the previous year. The mother called Gill to learn more.

"Can you tell me, did she suffer?" the woman wanted to know. "Was she in pain?"

"And I explained to her," Gill said, "that, with an opioid death, the person just gradually goes to sleep and it's very painless.

 "And she started crying," Gill told me, fighting tears of his own. "And it gave her some comfort."

There's another reason to get solid data — so you can craft a public health response to the epidemic. Specificity about a death today could help save a life tomorrow, he said. A death certificate needs to say more than something vague like "opioid intoxication" to help both law enforcement and public health officials curb the distribution — and hopefully abuse — of opioids.

"Well, what are those opioids? Are they heroin or are they Oxycontin?' " he asked rhetorically. The precise answer can make a difference in figuring out what actions to take.

But not all death certificates have as much information as they could. When Gill took the job just a few years ago, only 63 percent of Connecticut's drug deaths had specific drugs listed on the death certificate. Today 99 percent do.

"I found that the doctors here, a lot of them were certifying the deaths as acute or multi-drug intoxication," Gill told me. "And I said, 'No, we need to spell out what the drugs are that are causing the death.' So, it would be 'acute intoxication due to the combined effects of heroin, diazepam and alcohol' — and that's how we certify the deaths now. We're very specific about what we're finding in the toxicology."

In 2014 , the most recent year that data are available, only Rhode Island did better than Connecticut in getting and passing along these sorts of comprehensive details. Conversely, only about half of deaths in some other states — including Pennsylvania, Indiana, Mississippi and Louisiana — have specific information on the death certificates.

There are a lot of contributing factors that could explain the variation from state to state, Gill said.

First, not all people who certify deaths have the same training.

Second, when lots of drugs are involved, some people may not be comfortable singling out one or two as the cause of death. Custom could play a role, too — the "We've always done it this way" factor. So might size. Connecticut is small and centralized in the way it handles these cases.

"All of the deaths are examined here by the same group of medical examiners, the same investigators," Gill said. "So we can kind of establish that common technique and certification ability. Whereas, in a lot of jurisdictions — New York, for example — it varies by county."

Margaret Warner, an injury epidemiologist with the Centers for Disease Control and Prevention, focuses on monitoring trends in mortality, using death certificate data, and she agrees that lots of variables contribute to Connecticut's success in gathering better data. But one of them is pretty basic: clear communication with the people who determine and report the cause of death.

"The thing that's different between 2012 and the current year," Warner told me, "is that Dr. Gill — who knows that we want those specific drugs written down on the death certificate — is now writing them down. So some of it's about reaching out to the certifiers to make sure that they know we want the specific drugs involved."

The CDC is actively working on that, Warner said.

But, in Gill's experience, not everyone wants all that information documented.

"I remember one call from a family member who was upset that we put heroin on the death certificate," he said. "Their son had died of heroin, and they didn't want it on the death certificate because they were afraid that the public was going to hear about it and know that that person died of heroin. And I said, 'I'm sorry, but this is a public health issue.' "

And, judging from the data, it may be a big public health issue for a long time to come.

Blue Shield ‘Lifts The Veil’ On Executive Pay

KFF Health News, May 27, 2016

Blue Shield of California, for the first time, has listed the compensation for its 10-highest paid executives by name. The company also offered details, such as base salary and incentive awards.

By Chad Terhune, Kaiser Health News

In its first detailed disclosure on executive pay, nonprofit Blue Shield of California said Chief Executive Paul Markovich made $3.5 million last year – a 40 percent increase since he took the top job in 2013.

The San Francisco-based health insurer has faced criticism for years from consumer advocates about its lack of transparency on executive compensation, and the issue attracted even more scrutiny after a state audit raised questions about the insurer's big pay increases and large financial reserves.

Following that audit, in 2014, California revoked Blue Shield's state tax exemption, which it had held since its founding in 1939.

In the report issued Thursday, Blue Shield for the first time listed the compensation for its 10-highest paid executives by name. The company also offered details, such as base salary and incentive awards.

Markovich made $2.5 million in 2013, $3 million in 2014 and $3.5 million last year. That 2015 compensation included a base salary of $1.07 million and incentive plan payouts of $2.45 million.

Blue Shield is California's third-largest health insurer with 4 million members and $14.8 billion in annual revenue. The company's 10-member board is led by Chairman Robert Lee, a retired Pacific Bell executive, and also includes Leon Panetta, who served as defense secretary and as director of the Central Intelligence Agency during the Obama administration.

"While we have been providing reports as required to regulators, it left something to the imagination," said company spokesman Steve Shivinsky. The company wanted to "lift the veil and make sure we are going above and beyond what is required so there is a higher level of transparency."

Shivinsky said Markovich's pay increases reflect the company meeting or exceeding many of its performance goals as well as the overall growth of the company. His reported compensation doesn't include retirement plan payouts that accumulate over time and would be reported when an executive leaves the company, Shivinsky said.

Consumer advocates said Blue Shield waited far too long to share details with their policyholders and the public.

"This is the kind of information that should have been forthcoming from Blue Shield a long time ago," said Anthony Wright, executive director of Health Access, a consumer advocacy group. "We are paying for these salaries through our premiums."

Jamie Court, president of Consumer Watchdog in Santa Monica, said the new report still doesn't address all of the deferred compensation and retirement money that top executives could leave with.

"Blue Shield is a black hole when it comes to where the money is going," Court said. "They are the least transparent health insurance company in America."

The company didn't provide information about executive pay until it was required to do so by a 2010 state law. Even then, the company wouldn't put names with the amounts listed and didn't spell out what was included in terms of salary, bonuses or other compensation.

In the new report, Blue Shield didn't provide any details on payouts prior to 2015, including for former CEO Bruce Bodaken.

Michael Johnson, the former public policy director at Blue Shield who has become a critic of the company, said last year that Bodaken received about $20 million as part of his 2012 retirement package, on top of his annual pay. He was chairman and CEO from 2000 to 2012.

Blue Shield had omitted the pay for Bodaken and other executives who had departed during 2012 from a state filing that required annual compensation data on the company's 10-highest paid employees.

The company said it interpreted the rule to apply only to executives still employed at the time it filed the paperwork, which was March 2013 in that case.

Blue Shield insists it did nothing wrong, and the company called the $20 million figure for Bodaken "speculative."

"We won't go and revisit previous board decisions or payments made to executives," Shivinsky said. "Our board spent a lot of time discussing this, and going back in time didn't seem like a reasonable step to take."

Although pay increases and the former CEO's retirement package have drawn fire, the annual compensation of top executives is comparable to what other health care companies pay. Many of Blue Shield's competitors are publicly traded industry giants that pay their CEOs more.

Anthem Inc., which sells Blue Cross policies in California and 13 other states, paid CEO Joseph Swedish $13.6 million in salary and other compensation last year.

Nonprofit Kaiser Permanente also pays top executives more than Blue Shield. George Halvorson, Kaiser Permanente's former chairman and CEO, made $10.4 million in 2014, the latest figures available.

But Kaiser Permanente and other insurers are more transparent about salaries than Blue Shield. Kaiser lists compensation for dozens of executives in its federal 990 filings as a nonprofit, tax-exempt organization.

Blue Shield doesn't file a form 990 because it falls into a unique category. It has paid federal income taxes for years under a change Congress made in 1986 to treat large Blue Cross Blue Shield health plans the same as for-profit insurers. But it had been exempt from California income taxes before the state revoked that status in 2014.

In the new disclosure, the second- and third-highest paid executives for 2015 are no longer at the company.

Janet Widmann, who was then an executive vice president, received $3.4 million last year. That amount may include one-time payments such as retirement or pension money, according to the company. Next was Robert Geyer, the former senior vice president for customer quality, who made $2.5 million.

In all, the top 10 executives at Blue Shield received $18.8 million.

The questions about transparency have come as the insurer has experienced significant growth. Blue Shield's enrollment last year shot up 17 percent to 4 million members, due in large part to the $1.2 billion acquisition of insurer Care1st. Annual revenue also increased 11 percent to $14.8 billion.

This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

Inventing a Machine That Spits Out Drugs in a Whole New Way

KFF Health News, May 26, 2016

The Defense Department is funding a device that produces 1,000 pills in 24 hours and raises the possibility that hospitals and pharmacies could make their own pills as needed.

By Martha Bebinger, WBUR. This story is part of a reporting partnership among NPR, WBUR and Kaiser Health News.

In a lab at the Massachusetts Institute of Technology, all the work that happens in a vast pharmaceutical manufacturing plant happens in a device the size of your kitchen refrigerator. And it’s fast. This prototype machine produces 1,000 pills in 24 hours, faster than it can take to produce some batches in a factory.

Allan Myerson, a professor of chemical engineering at MIT and a leader of the effort, says it could become eventually an option for anyone who makes medications, which typically require a lengthy and complex process of crystallization.

“We’re giving them an alternative to traditional plants and we’re reducing the time it takes to manufacturer a drug,” he said.

The Defense Department is funding this project because the devices could go to field hospitals for troops, hard-to-reach areas to help combat a disease outbreak, or be dropped at strategic spots across the U.S.

“If there was an emergency you could have these little plants located all over. You just turn them on and you start turning out different pharmaceuticals that are needed,” Myerson said.

Sounds simple? It’s not. This mini drug plant represents a sea change in how medications have been made for a long time.

“For roughly two centuries, to be honest,” says Tim Jamison, a professor of chemistry at MIT and one of Myerson’s partners, along with Klavs Jensen, a professor of chemical engineering at MIT. “The way that we tend to do chemistry is in flasks and beakers and that sort of thing, and we call that batch chemistry — one batch at a time,” he says.

That’s the way virtually all pharmaceuticals are made. Big batches of chemicals are synthesized, then they have to cool down, then are synthesized again to create new compounds. Then those compounds have to crystallize, filter and dry. Powders are added to make a tablet or capsule. These steps that can take months. This new device, says Jamison, produces medicine in one fast continuous process.

“We had to figure out new ways to make molecules, new ways to think about making molecules but from my perspective that has also provided us with a lot of opportunities that are very powerful,” said Jamison. His lab and Myerson’s also are collaborating with the Novartis-MIT Center for Continuous Manufacturing, which is funded by the pharmaceutical company Novartis.

The prototype raises the possibility that hospitals and pharmacies could make their own pills as needed, says James McQuivey, an analyst at Forrester Research.

“If it can done at lower cost, here’s one way at least that we could reduce the exorbitant cost of medications and that could a social good as well as an economic good,” McQuivey said.

Most of the cost of an expensive drug is not the materials or manufacturing or transportation said McQuivey; it’s in the drug makers’ monopoly control. So, he said, “If we can distribute the manufacturing of anything, pharmaceuticals included, so that more people have the opportunity to manufacture it, now there will be competition among those manufacturers.”

Drug makers have at least two big concerns about the widespread use of this device, says Dr. Paul Beninger, who oversees pharmaceutical safety at manufacturer Genzyme Sanofi. He said first and foremost, the drug industry worries about intellectual property rights.

Drug manufacturers own exclusive rights to produce the drugs they develop for a period of time, typically three to five years depending on how much is new in the drug. His other worry is safety, including monitoring of machines to ensure quality and safety.

“There are some really significant issues that this MIT project has to deal with if they’re going to try and make this a successful venture,” he said.

MIT researchers say continuous monitoring would be built into the continuous production process. The Food and Drug Administration is working on how to oversee this type of process.

On the patent concern, MIT developers say the device is being tested to make generic drugs for now, but that pharmacies or hospitals might someday license the right to produce drugs that have just been approved, not existing ones.

For now, their focus is on making an even smaller more portable unit, producing more and more complex drugs and seeking FDA approval for the device.

This story is part of a reporting partnership with NPR, WBUR and Kaiser Health News.

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