The burgeoning mobile medical applications business got a look on Tuesday at how the government plans to regulate some of the industry.
The U.S. Food and Drug Administration's draft guidelines signal that of the thousands of mobile medical apps available today, it will seek to oversee only a small subset of apps – the ones physicians would most likely use to diagnose or monitor a patient's medical condition. These include applications that could impact how a currently regulated medical device (such as ultrasound equipment) performs. Apps that could transform smartphones or tablets into regulated medical devices (such as a blood glucose meter) could also qualify for FDA oversight.
An app that allows a doctor to view a medical image on an iPhone would also fall under the proposed guidelines as would one that turns an iPad into an EKG device to determine if a patient is having a heart attack.
Mobile apps that would not come under the guidelines include applications that would allow a physician to view a medical video or an application that could automate general office operations.
The healthcare community, especially hospitals and physicians, has been waiting for the FDA to reveal its plans to oversee the fast-growing mobile medical apps industry.
"The use of mobile medical apps on smartphones and tablets is revolutionizing healthcare delivery," said Jeffrey Shuren, M.D., J.D., director of the FDA's Center for Devices and Radiological Health in a statement. "Our draft approach calls for oversight of only those mobile medical apps that present the greatest risk to patients when they don't work as intended."
FDA has already cleared a handful of mobile medical apps used by physicians and other health care professionals, such as a smartphone-based ultrasound, an application for iPhones and iPads that allows doctors to view medical images and X-rays, and an app that can help diagnose and treat radiation injuries. The guidelines will not apply to apps that help consumers manage their own health and wellness, such as apps that track calorie intake and body weight.
In addition to safety concerns, the FDA said in the draft guidelines that it plans to take into account the technical limitations of mobile devices, such as small screen size and low contrast ratios, which might negatively affect the ability to accurately read images.
The FDA proposes these regulatory requirements for mobile medical application manufacturers:
Must register each year with the FDA and provide a list of the devices they market.
Must comply with applicable labeling regulations found in 21 CFR Part 801, and Part 809 for radiological health products.
Must follow direction from the FDA for testing and development of those mobile medical apps requiring clinical investigations to support marketing.
Must prepare and submit to the FDA an appropriate premarket submission as required for the device classification.
Must comply with the quality system regulation to help ensure that products consistently meet applicable requirements and specifications.
Must develop requirements for their products that will result in devices that are safe and effective, and to establish methods and procedures to design, produce, and distribute their devices.
Must comply with adverse event reporting requirements.
Must correct problems voluntarily or at the request of the FDA.
The FDA is accepting comments on the 30-page proposed guidelines for 90 days.
It looks like health insurers will have some competition for customers when affordable insurance exchanges open for business in July 2014. On Monday the Department of Health and Human Services announced a proposed rules governing the creation of consumer-operated and- oriented plans, or CO-OPs.
CO-OPs will offer healthcare coverage to individuals through the AIE and to small businesses through the small business health option programs or SHOP exchanges. The private, non-profit, member-governed health plans are designed to create another consumer option for cost-effective healthcare insurance.
The proposed rules set four requirements for a CO-OP: It must
Be non-profit,
Use an integrated care model,
Be member-run, and
Be approved by the state insurance department
“CO-OPS will look like a regular insurance company. They’ll take risk, make reimbursements and process claims,” explained Courtney R. White, a principal and consulting actuary in the Atlanta office of Milliman Inc., who authored a brief about CO-OPS.
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Interest has been slow on the uptake but is catching on. White suspects that as presented in the Affordable Care Act, CO-OPs may not have looked very sophisticated, but with the ACO movement and integrated delivery systems in place “there is a structure to them; they aren’t just thrown together.”
Provider groups and associations have recently expressed interest in CO-OPs. He identifies accountable care organizations, integrated delivery systems and chambers of commerce as likely candidates to form CO-OPs. In his brief he notes that hospital and physician groups appear best situated for CO-OPs because through an integrated care model “they hold the key to creating a competitive product.”
HHS, which hopes to have one CO-OP per state, will help kick-start the process with $3.8 billion in loans to start-up and capitalize the new health plans.
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According to the proposed rules, two types of interest-bearing loans will be available. The start-up loan will fund initial administrative costs; the solvency loan will fund the ongoing insurance reserves necessary for a CO-OP to offer health insurance coverage. Startup loans must be repaid within five years and solvency loans must be repaid in 15 years. Loans will be awarded by July 1, 2013,
White says CO-OPs could change the health insurance paradigm. “They’ll be competing against established health plans but they’ll have a great story to tell: we’re member-run and we put our profits back into the business to lower member premiums, and to improve member benefits and care.”
He says the biggest hurdle for CO-OPS will be risk selection. He adds that despite the billions of dollars the government is investing in CO-OPS health plans will still have an advantage within the exchange because they already have networks in place and understand the market.
Federal grants awarded on Thursday will help fund capital projects at 278 school-based health centers, the Department and Health and Human Services announced.
Although HHS has described the grants as the first installment of a three-year, $200 million program, the House passed in May a bill that would eliminate the program this year. HR 1214 has been assigned to the Senate Committee on Health, Education, Labor, and Pensions. It is considered unlikely that the Senate will schedule a vote on the bill.
Services provided at school-bases health centers include health screenings, health promotion, and disease prevention activities and wellness programs. They also enable children with acute or chronic illnesses to attend school. More than 350 centers applied for the grants.
The current grants, which were made available through the Affordable Care Act, will be used to help selected school-based health centers establish new sites or upgrade their current facilities. The funds are available for construction, renovation, and equipment but cannot be used to meet staffing needs, such as for school nurses. HHS estimates that the centers currently serve about 790,000 patients and that the awards will enable them to serve an additional 440,000 patients.
"We know that if kids aren't healthy then kids can't learn," said Secretary of Education Arne Duncan in a press release. "These grants will make it a lot easier for working moms and dads to help get their children the healthcare they need and deserve... and help children succeed in the classroom."
In a statement, the National Assembly on School-Based Health Care identified these representative projects:
HEALS in Huntsville, Ala. will build two new SBHCs, implement an electronic health records system to link the clinics and update medical and office equipment.
The Dorchester County Health Department in Cambridge, Md. will construct a new modular building for the SBHC located at North Dorchester High School. The center will include videoconferencing equipment to provide off-site psychiatry services for students needing medication management for mental health disorders.
Neighborcare Health in Seattle, Wash. will build a new SBHC, replace outdated equipment at current sites, and purchase portable dental equipment to use at multiple SBHC sites.
According to the assembly, the 1,900 school-based healthcare centers across the country provide access to primary care, mental health and dental services for nearly 2 million students. About 57% of the centers are located in urban areas.
This article was updated at 9:18 ET to correct an editing error.
Efforts to gain health insurance coverage for an autism treatment called applied behavior analysis have taken several steps forward in Michigan and California.
Health plans traditionally balk at authorizing the treatment. Blue Cross and Blue Shield of Michigan is facing a class action suit for denying an autism treatment called applied behavior analysis, while Blue Shield of California, under pressure from state officials, has reached a settlement to provide coverage for ABA services under certain circumstances.
Autism is a complex neurobiological disorder often characterized by language and communication difficulties, as well impaired social interaction. Despite extensive research, the cause remains unknown and there is no known cure. According to the Centers for Disease Control, 1 in 110 American children are diagnosed with an autism disorder.
Health plans across the country, including Kaiser Permanente, CIGNA, Empire Blue Cross Blue Shield, and Anthem Blue Cross, have been reluctant to cover the costs of ABA treatments, which can involve 20 to 40 hours per week of one-on-one therapy and can cost $30,000 to $50,000 annually. The health plans often contend that is ABA is experimental or that it is an educational service and doesn't meet the definition of medical care. In addition, licensure of ABA therapists can be a sticking point.
Medicaid, however, does cover ABA, and the U.S. Surgeon General and the American Academy of Pediatrics have recognized the success of behavioral treatments for autism.
Some 27 states have laws on the books that require private health insurers to cover the diagnosis and treatment of autism disorders, including ABA. Legislation is pending in Michigan and California. Most states limit annual ABA benefits to under $50,000 but have no lifetime benefit restrictions. Louisiana state law limits lifetime ABA benefits to $144,000. The federal Affordable Care Act will require coverage for behavioral therapies beginning in 2014.
On Thursday the U.S. District Court in Detroit granted class action status to a suit involving the Michigan Blue's rejection of beneficiary claims based on the "investigational/experimental" nature of ABA treatment. A copy of the ruling was supplied by the plaintiff's attorney.
This is at least the fourth time the Michigan plan has faced a similar lawsuit for denying coverage for ABA treatment. In April 2010, more than 100 families shared a $1 million settlement when the health plan agreed to reimburse families who had paid out-of-pocket for the ABA treatment after May 1, 2003 at Beaumont Hospital in Royal Oaks, Mich.
In June 2010, the health plan agreed to a $125,000 settlement with a family rather than take that case to court. A third case is pending.
In a telephone interview, John Conway, a Detroit-based attorney who has worked on the Michigan cases as well as lawsuits against other health insurers, explained that in health plan files obtained under a court order for the initial lawsuit the Michigan Blues plan acknowledged that ABA was a valid treatment for autism.
"They simply deny ABA treatment because it is expensive," he said.
In an e-mail statement, Helen Stojic, spokesperson for the Michigan Blues said the class action designation "was a decision to continue the case and is not a ruling on the merits of the case. We believe that we have been more progressive than other Michigan insurance companies in addressing autism. In 2009, we became the first insurer in the state to offer businesses with our coverage the option to purchase coverage for autism treatment programs that provide intensive early intervention ABA. To the best of our knowledge, we are the only insurer in Michigan to offer this coverage option to businesses."
Conway and Gerard Mantese have filed several other lawsuits against insurers that deny benefits for ABA. On July 12 a federal judge in Detroit refused to dismiss a class action suit against Empire Blue Cross Blue Shield of New York. The two are awaiting a decision on a motion for class action in a lawsuit against CIGNA. Mantese and Conway represent military beneficiaries seeking coverage of ABA therapy from the Department of Defense and its insurer, TRICARE. In March 2011, a federal court in Washington D.C. granted class action status to the military beneficiaries in that case.
In general health plans oppose state coverage mandates citing increased healthcare costs as the reason. Efforts to obtain comments from several health plans as well as America's Health Insurance Plans, an industry group, were unsuccessful.
Blue Shield of California signed an agreement last week with the California Department of Managed Health Care that will require the health plan's HMO products to cover applied behavioral analysis. In the agreement the department "asserts that ABA is a covered healthcare service that health plans must arrange."
In a statement Paul Markovich, the Blue Shield CFO, made it clear that the health plan disputes the department's stand and will "seek guidance from the courts regarding what the law requires." He also notes that "our policies specify that services by unlicensed people are not covered and ABA services are frequently provided by unlicensed people."
Lorri Unumb contends that the licensure issue is unfounded. The vice president of state government affairs for Autism Votes, an advocacy group that supports legislation mandating autism treatments, notes that California doesn't have a licensing process for ABA therapists and when that is the case a state will usually just rely on the national board certification.
Thanks to the way the governance of health plans is structured in California, the DMHC agreement covers only HMOs; PPOs are governed by the state Department of Insurance.
On Thursday the DOI issued a press release announcing enforcement action it planned to take against Blue Shield's PPO plans for denying autism treatment. The order to show cause requires representatives of Blue Shield to appear before an administrative court judge to address a number of violations, including denying coverage on the grounds that ABA is experimental and not including ABA providers in its network.
In an e-mail exchange, a spokesperson for the DOI said ABA is not specifically mentioned in the state's mental health parity law but that the department interprets that law to require coverage because "it is the established standard of care for treating autism and repeatedly has been upheld in independent medical review as medically necessary."
The DOI also takes issue with the health plan's contention that ABA services are often supplied by unlicensed providers noting, like Unumb, that there is no ABA-related license in California but that treatment can be provided by nationally certified providers of ABA therapy.
In the Blue Shield press release Markovich said the insurer is prepared to sign a similar agreement with DOI that it has with DMHC. The DOI spokesperson replied "we cannot speculate on the signing of such an agreement. The immediate next step is the administrative law hearing, the date of which will soon be set."
The Independent Payment Advisory Board, a controversial body with a $15 million budget but not a single elected member, continues to generate discord in Washington. Kathleen Sebelius, Secretary of Health and Human Services, spent several hours over two days this week defending the board before two House committees.
Mandated by the Affordable Care Act to go into effect by 2014, IPAB has been decried by physicians groups such as the American Medical Association and the American Hospital Association. The board will be a 15-members panel of doctors, nurses, medical experts, and consumers who recommend ways to reduce healthcare spending.
But Republicans and some Democrats support repeal of the board, which will have the power to analyze the drivers of Medicare cost growth and then recommend to Congress policies to reduce that growth. At least one bill, HR 452, has been introduced to repeal the boars.
The two days of testimony before the Republican-led House Budget Committee on Tuesday and health subcommittee of the House Energy and Commerce Committee on Wednesday included Sebelius and more than 15 witnesses representing consumer advocates, policy analysts, attorneys and physicians.
The testimony and questions touched on some common themes: the power of the IPAB, the effect of decreased provider payments on patient access, and the definition of rationing. Although the IPAB was the focus of the hearings, the participants often took the opportunity to tout or pan the Republican plan to redesign Medicare.
In an acrimonious appearance before the House Budget Committee Sebelius drew sharp contrasts between the Republican plan for Medicare and the IPAB. "The Independent Patient Advisory Board makes recommendations to Congress," she said. "It is forbidden by law to do exactly what the Republican budget plan does. It may not shift costs to seniors and it may not change benefits."
Committee Chairman Paul Ryan (R-WI), the chief architect of the Republican budget plan, which is often referred to as the Ryan plan, pressed Sebelius to explain how unilateral decision making by "this board of 15 unelected officials whose decisions can only be overturned by a supermajority in Congress" could possibly be the best way control healthcare costs.
Noting IPAB's initial $15 million budget Ryan said, "I just don't think we should invest all of this money and power in the decisions of 15 people versus giving beneficiaries a choice of how they want to spend their healthcare dollars."
Sebelius responded that the Republican plan to provide premium support to Medicare beneficiaries "is nothing but cost-shifting that has no plan for the delivery of healthcare and doesn't save a penny."
Republicans on both committees expressed concerns about the composition of the IPAB. Sebelius explained that the members will be appointed by the president with confirmation by the Senate. Their salaries will be about $165,000 annually. President Obama hasn't nominated any members yet, but Sebelius said she expects the IPAB to be active by 2014 as required by the ACA.
Rep. Ryan stated that IPAB was effectively unaccountable because its decisions would be almost impossible for Congress to reject or modify. "If IPAB proposes a change in provider payments and Congress doesn't agree with that recommendation, by law our only recourse is to develop another proposal that will save an equal amount of money."
Sebelius noted that while IPAB was tasked by law with "preserving the future of Medicare by making proposals to hold down costs" it would only make proposals if Medicare spending was growing too quickly based on the GDP. She cited a CBO study that projected IPAB would not need to take any action for at least 10 years.
At Wednesday's meeting of the health subcommittee of the House Energy and Commerce Committee Sebelius fielded question after question about the possibility of IPAB reducing provider payments that could result in rationing of services.
"If IPAB decides to reduce provide payments for dialysis is it possible that some providers will stop offering dialysis?" asked subcommittee chairman Joe Pitts (R-Penn). "And won't that limit patient access? That's rationing."
Sebelius explained that IPAB is forbidden by law from taking any steps that would reduce or eliminate services. "IPAB can't ration care." She said reductions in provider payments might mean that some Medicare providers would decide to no longer deliver a service but noted that is just like the way it works in private health insurance.
While the Department of Health and Human Services' proposed rules for the creation of health insurance exchanges presents a set of challenges to health insurers, the proposed regs are receiving mostly positive comments from stakeholders, including industry groups and consumer advocates.
The rules, proposed Monday, outline the requirements a state must meet to launch an exchange. And while few have had the chance to fully review the 200+ pages of rules, as might be expected, stakeholders have been able to quickly focus on the sections that apply to their interests.
At the announcement of the proposed rules Monday, HHS officials emphasized the flexibility that states will have in development of a HIX. Steve Larsen, director of the center for consumer information and insurance oversight at HHS, said that states may design "exchanges that work for them."
The industry group, America's Health Insurance Plans embraced the HHS decision to put states in the driver's seat in the development of HIX. "We agree that states are in the best position to establish exchanges because they have the experience and local-market knowledge to ensure exchanges meet the needs of consumers in their state," said Karen Ignagni, AHIP president and CEO in a statement. She cautioned that as they develop exchanges, states should take care to "avoid duplicating existing state regulations that will add complexity and increase costs for consumers."
Mike Russo, a policy analyst at U.S. PIRG, a consumer advocacy group, said in a statement that "HHS released a menu, not a recipe" and he encouraged state leaders to "take the flexibility they've been given to design a strong, negotiating exchange on behalf of consumers. Consumers need this new exchange to lower costs and improve the quality of their coverage."
While also supportive of design flexibility, Stephen Finan, senior policy director of the American Cancer Society Cancer Action Network, noted in a statement that with flexibility "comes a responsibility for states to create exchanges that meet the wide-ranging needs of people with cancer and other life-threatening chronic diseases." He added that ACS-CAN hopes that the final rule "will include more specifics that define the minimum standard for an effective exchange."
The role HIX are expected to play in helping to reduce healthcare costs was noted by Terry Gardiner, vice president of policy & strategy for the Small Business Majority. "The most important component of healthcare reform for small businesses is the creation of state health insurance exchanges. They will lower the high cost of insurance premiums and reduce the administrative costs that are so often the driving force behind skyrocketing rates for small group plans, "Gardiner said in an email.
The governance of health insurance exchanges was on the mind of several groups. PIRG's Russo stated that HIX "must be run by and for businesses and consumers, not by and for the insurance lobby." He added that HIX need to have the "power to negotiate for lower premiums and push for reforms that improve the quality of care. As our exchange board members begin to set policies and build the exchange, they should focus on delivering results for consumers."
There was some disagreement concerning how health plans should be selected to participate in HIX. ACS-CAN's Finan said, "exchanges should be empowered to select which plans they offer and to limit exchange participation to high quality plans." AHIP, on the other hand, supports a wide panel of health plans in each exchange as long as the plans meet the standards set forth in the draft rules.
"All health plans offering coverage in the new exchanges will be required to meet new quality and performance standards. To enhance competition and preserve consumer choice, all health plans that meet these new standards should be allowed to offer coverage in the exchanges."
The inclusion in exchanges of health plans "currently serving low-income people in Medicaid and CHIP" is important to Margaret Murray, CEO of the Association for Community Affiliated Plans.
The National Community Pharmacists Association, which has an adversarial relationship with pharmacy benefit managers, is happy that the draft rule included language that affirmed the need for PBMs operating in the exchanges to confidentially disclose to the health plan and HHS any information regarding PBM practices. "The disclosure requirements should help health plans in the exchanges achieve a better bargain for patients as wasteful PBM practices are discouraged and more readily identified, " explained Douglas Hoey, RPh and executive vice president and CEO of NCPA.
Efforts to contact the National Governor's Association for a comment were unsuccessful. Nor did the National Association of Insurance Commissioners respond to request for comment. The AMA was preparing its statement on Tuesday afternoon.
Public comments will be accepted for 75 days. The final rules are expected later this year.
The long-awaited proposed rules for health insurance exchanges were revealed Monday and so far industry reaction has been generally positive. But health insurers face new business risks and increased competition as they work to figure out how to appeal to the individual and small group market.
HIXs are among the Accountable Care Act's arsenal of cost-cutting weapons. Individual states will create these new marketplaces where almost anyone will be able to compare the prices and benefits of a mix of health plan offerings. The idea is that through exchanges individuals and small employers will enjoy the same cost breaks on healthcare insurance as big employers.
Much of the HIX focus has been on what states will need to do to create and manage exchanges, but a new report says health plans need to get in the game and start planning how they will position themselves to sell their products in what is estimated to be a $60 billion business.
"The exchange is an entirely new market that doesn't exist now," Jeffrey Gitlin, a health industry principal at PricewaterhouseCoopers, explained in a telephone interview. "Payers will need to make some significant changes in the way they do business."
So what are the key considerations for insurers as they prepare for health insurance exchanges? A PwC report, Change the Channel: Health Insurance Exchanges Expand Choice and Competition, offers some insight into what insurers are thinking about as they take the leap into exchanges. The study is based on a nationwide survey of 1,000 consumers and 153 health insurance executives concerning their expectations of exchanges. PwC also conducted in-depth interviews with 35 healthcare industry leaders.
Here are some of the highlights:
1. Health insurers want to participate in exchanges but they're worried. More than 52% of the healthcare executives said their companies plan to participate in exchanges. PwC estimates that HIX will generate $60 billion in premiums in 2014 and that number could more than triple by 2019. So what's not to like? Adverse selection is a big worry. "It's critical that insurers understand the risk adjustment process," said Gitlin. That means developing analytics on the enrollment population, learning about their medical status and understanding how to deliver cost-efficient, evidence-based care to them.
2. Insurers will need to shift from risk selection to risk management. Insurers will need to manage the risk they receive rather than rely on choosing the risk they will manage. Health plans are notorious for rejecting coverage for individuals who don't fit their risk profile. That will no longer be an option. Insurers will be required to cover a minimum level of services identified by the HHS as the "essential health benefits" and no applicant can be denied coverage. Each state will conduct its own actuarial analysis.
3. Insurers prefer the open exchange to the active purchaser exchange but they don't have a say in the design. The open model allows any health plan that meets state and federal criteria to participate in the exchange. This is the model used by Utah and is the exchange of choice for 44% of the survey participants. The active purchaser model, which is used by Massachusetts, requires insurers to compete to be selected to participate in the exchange. Only 10% of insurers like this model.
States will have the flexibility to decide what model they want to implement so insurers will face variations in exchange designs across the country. The differences could make some exchanges profitable for some insurers but not for others the report shows, and insurers will need to decide which ones they will enter.
4. Health insurance will shift from a wholesale to a retail business. Some 37% of healthcare insurance executives who said they plan to participate in exchanges said their companies aren't active in the individual market today and 20% don't offer small group policies. Gitlin says insurers will need to learn a new business and compete in ways they never have before to earn consumers' business and loyalty. That means understanding who the consumers are, what motivates them and how they behave so insurers can tailor communications, products, and services to this new market.
5. Business will be brand neutral. According to the report, the four most important considerations in selecting a health plan are price, benefits, provider network and coverage area. A company being well known is the least influential attribute. Gitlin says that means insurers will need to be prepared to compete for exchange business on the basis of value for the consumer.
Gitlin cautions that health insurers will also face a huge consumer education challenge to help individuals understand the benefits of purchasing health insurance through an exchange. In the PwC survey some 56% of consumers didn't even know what health insurance exchange was.
The creation of health insurance exchanges took another step forward with the release Monday of the long awaited proposed rules that outline the requirements a state must meet to launch an exchange.
The exchanges, which were created by the Affordable Care Act, are expected to provide coverage to an estimated 11.5 million people, including members of Congress, in 2014. According to a March 2011 report from the Congressional Budget Office, health insurance exchange enrollment by individuals and small businesses will grow to 27.6 million by 2021.
Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services, announced the proposed rules at a Washington, D.C press conference saying the exchanges will provide individual consumers and small businesses with a “one-stop shop to purchase healthcare coverage” and force health insurers to compete by making healthcare premium charges more transparent.
The ACA requires that states create HIX or what the HHS refers to as “affordable insurance exchanges” by January 2013 and that the HIX be up and running by January 2014.
To jumpstart the process, 49 states, the District of Columbia and four territories accepted HHS grants to plan and operate exchanges. Only Oklahoma declined the funds. More than 50% of the states have taken the additional step of passing legislation or taking administrative action to begin building exchanges.
The proposed rules provide details on the purpose, scope and operation of the exchanges. The rules cover these key areas:
Basic functions of a HIX. The exchanges are state-based competitive marketplaces where individuals and small businesses will be able to apply for, comparison shop and purchase private or public health insurance. HIX will be responsible for business functions such as eligibility and enrollment systems, as well as financial and health plan management. Each exchange will be required to have a navigator or outreach and education program for individuals and small businesses.
Standards for establishing a HIX. Each exchange will need HHS approval. States will submit their proposals for meeting HIX requirements, including a readiness assessment that demonstrates that the proposed exchange meets operational standards for exchanges such as setting up a call center and a website. HHS plans to develop a template for the exchange proposal.
Offering insurance through a Small Business Health Options Program or SHOP. The proposed rule permits businesses with as many as 100 employees to be eligible to offer coverage through a SHOP, which will be operated by an exchange. Similar to individual coverage, the SHOP program will have a website where employees can shop for the best prices and benefits. Employers can select a level of coverage they will offer (bronze, silver, gold or platinum plans) and define their contribution toward their employees’ coverage.
Certifying health plans for HIX participation. The proposed rules suggest the minimum standards to qualify a health plan, including the size of its network and service area. However a state may decide to set additional standards such as affordability and quality to meet the special needs of its population.
Premium stability. To help protect HIX insurers and enrollees from market uncertainties as healthcare reform is implemented, HHS proposes to offset the claims for high-risk enrollees.
To reduce duplication and the administrative burden on the states, HHS also announced that it will be available to partner with states to make exchange development and operations more efficient. States will have the flexibility to design “the exchanges that work for them,” explained Steve Larsen, director of the center for consumer information and insurance oversight at HHS.
Under the proposed rules, states can elect to develop statewide or regional exchanges or partner with HHS in the development of an exchange. States can operate an exchange as an independent public agency, as part of an existing agency or they can create a non-profit organization to run the exchange.
HHS also announced that it may provide conditional approval to states that don’t meet the January 2013 deadline for HIX certification but which have made sufficient progress to the point that HHS believes the state will have the exchange ready for the required January 2014 launch.
Public comment on the proposed rules, which run more than 200 pages, will be accepted over the next 75 days. To facilitate the public comment process, HHS will convene a series of regional listening sessions and meetings. The location of those sessions will be announced at a later date. The final rules are expected later this year.
A ruling by the Third Circuit Court of Appeals in Philadelphia will allow a portion of a kickback case against UnitedHealth Group Inc. and its subsidiary, AmeriChoice New Jersey, to proceed. A three-judge panel made the ruling in an appeals case from district court.
The whistleblower suit involves charges by two former employees that UHG and AmeriChoice provided kickbacks to a New Jersey medical clinic to induce the clinic to switch its patients to the healthcare provider's Medicare and Medicaid programs.
Charles Wilkins and Daryl Willis also alleged that AmeriChoice violated the Medicare Anti–Kickback Statute by “enticing doctors to provide the names of patients eligible for Medicare and Medicaid programs” and that the insurers “knowingly violated several Medicare marketing regulations, resulting in their submission of false claims for payment to the federal government.”
The Third Circuit last week affirmed the district court’s May 2010 dismissal of False Claim Actallegations based on UHG and AmeriChoice’s violation of Medicare marketing regulations. However, it remanded part of the case back to district court for further proceedings.
According to the ruling the district court erred in granting the motion to dismiss the portion of the suit that involves allegations that UHG and AmeriChoice submitted false claims to the government by violating the Medicare Anti-Kickback Statute.
The district court had held that compliance with the AKS was not a condition for payment from the government under the federal health insurance program and that Wilkins and Willis didn’t have a claim for relief under the False Claims Act.
According to the facts and procedural history included in the ruling, Wilkins and Willis began working with UnitedHealth Group and AmeriChoice in 2007, Willis as a general manager for Medicare/Medicaid marketing and sales and Wilkins as a sales representative. In 2008, UnitedHealth terminated Wilkins' employment and demoted and then terminated Willis, allegedly for their complaints about what they perceived as illegal practices.
Among the allegations in the suit, which was filed in 2008, is that AmeriChoice's sales representatives paid $27,000 to Reliance Medical Group to switch certain eligible beneficiaries to its Medicare and Medicaid plans and that United Health's sales representatives offered payments to physicians in exchange for the physicians providing the names of potential new enrollees eligible for Medicare and Medicaid.
In remanding the anti-kickback portion of the suit the Third Circuit Court of Appeals noted “compliance with the AKS is clearly a condition of payment under Parts C and D of Medicare and appellees (UHG and AmeriChoice-New Jersey) do not refer us to any judicial precedent holding otherwise.” The ruling also stated that Walkins and Willis “ by alleging that appellees violated the AKS while submitting claims for payment to a federal health insurance program, have stated a plausible claim for relief under the FCA.”
UnitedHealth Group has not issued a statement on the case.
The six-hospital Provena Health and the six-hospital Resurrection Health Care have reached a definitive agreement to merge. The two signed a letter of intent in February 2011 to explore merge opportunities. No financial details were disclosed.
With more than 100 sites in Illinois and Indiana, the merged Provena-Resurrection will be one of the largest health systems in Illinois. The merger will create a 12-hospital system with more than 3,600 beds, almost 23,000 employees and a medical staff of more than 4,900. It will include 28 long-term care and senior residential facilities, more than 50 primary care and specialty care clinics and six home health agencies. The new system will have combined operating revenues of $2.7 billion.
Still, the 10-hospital Advocate Health Care with more than $4.5 billion in operating revenue in 2010 is expected to remain the dominate system in the Chicago area. According to articles in the Chicago Tribune, Advocate has embarked on a series of mergers and acquisitions to strengthen its market position. It is considering a merger with Sherman Hospital in Elgin. Advocate is also shoring up its physician alignments. The 800-physician Advocate Medical Group announced in June its merger with the 50-physician Midwest Heart Specialists.
James Unland, president of the Chicago-based Health Capital Group, which helps with mergers, acquisitions and reorganizations, sees the deal as part of a potential statewide move by the merged health systems. He points to the OSF Saint Francis Medical Center in Peoria as a possible acquisition target for the newly merged Provena and Resurrection health systems.
Unland views the merger as strengthening both systems in the bond market, which could make capital development funds available to their facilities.
The state-required certificate-of-need application for the Provena-Resurrection merger was filed on Tuesday morning with the Illinois Health Facilities Services Review Board. A specific timeline has not been developed for the review, which will include a public hearing.
Courtney Avery, administrator for the IHFS board, estimates that a vote could come at the board's Oct. 12 meeting. Because of the size of the merger, the Illinois Attorney General' office is also expected to conduct a review.
In a telephone conversation Brian Campbell, senior vice president for public affairs at Resurrection termed the deal a "merger of equals." He said Provena and Resurrection will merge into a single system with a new name. The new system's CEO has not yet been named. It is unknown if Sandra Bruce or Guy R. Wiebking, the CEOs and presidents of Resurrection Health Care and Provena Health, respectively, will be considered to head the merged system. The CEO will be named by the five sponsoring religious congregations.
In recent reports Moody's Investors Service has noted that Provena and Resurrection and have each struggled with volume declines related to the economy and that physician relationships have been a trouble spot for both systems. Physician alignments and their referral streams are of growing importance as healthcare reform is implemented.