What’s ahead

The U.S. Supreme Court’s rul­ing on the health­care re­form law sets up a tight win­dow for in­dus­try play­ers to shape the law and their op­er­a­tions ahead of ma­jor pro­vi­sions rolling out in the com­ing months and years. They’ll work un­der the cloud of states thr

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White House

Ad­min­is­tra­tion of­fi­cials are poised to re­lease an ar­ray of com­pli­cated reg­u­la­tions im­ple­ment­ing the law, in­clud­ing ones es­tab­lish­ing a frame­work for min­i­mum ben­e­fits that health plans will be re­quired to pro­vide.

HHS has re­leased two bul­letins to of­fer the in­dus­try some guid­ance on es­sen­tial health ben­e­fits, but those were not ac­tual reg­u­la­tions. It’s un­clear whether the next step will be a pro­posed or fi­nal rule.

The Amer­i­can Hos­pi­tal As­so­ci­a­tion has ex­pressed some con­cern with the gov­ern­ment’s in­ten­tion to al­low state of­fi­cials to base the min­i­mum ben­e­fits on bench­mark plans in their states, ar­gu­ing that pa­tients may end up with less cov­er­age and higher out-of-pocket costs. Amer­ica’s Health In­surance Plans sup­ports the state flex­i­bil­ity as a tran­si­tion ap­proach but has called for HHS to eval­u­ate the clin­i­cal ef­fec­tive­ness and costs of the pack­ages.

An­other pend­ing rule would re­quire Medi­care Ad­van­tage plans to have med­i­cal-loss ra­tios no lower than 85% start­ing in Jan­uary 2014, bring­ing them in line with a Pa­tient Pro­tec­tion and Af­ford­able Care Act rule al­ready in ef­fect for plans in the large-group mar­ket.


Hos­pi­tals have turned their at­ten­tion to the parts of the Af­ford­able Care Act set to go into ef­fect this year, in­clud­ing new pro­grams aimed at im­prov­ing qual­ity and curb­ing pa­tient harm.

The first phase of the CMS’ value-based pur­chas­ing will be­gin this fall, ty­ing a por­tion of hos­pi­tals’ an­nual pay­ment up­date to per­for­mance on 12 clin­i­cal process-of-care mea­sures—cov­er­ing ar­eas such as heart fail­ure care and preven­tion of health care-as­so­ci­ated in­fec­tions—as well as a com­pos­ite mea­sure of pa­tient sat­is­fac­tion. How well hos­pi­tals scored dur­ing the ini­tial per­for­mance pe­riod, which ran from July 1, 2011, through March 31, will de­ter­mine their value-based in­cen­tive pay­ments, af­fect­ing all dis­charges begin­ning Oct. 1.

Also on Oct. 1, the CMS will kick off its Read­mis­sions Re­duc­tions Pro­gram, which will pe­nal­ize hos­pi­tals whose read­mis­sion rates put them in the bot­tom-per­form­ing quar­tile. Us­ing 30-day read­mis­sions data for heart fail­ure, heart at­tack and pneu­mo­nia, the agency will cal­cu­late “ex­cess read­mis­sion ra­tios,” based on hos­pi­tal dis­charges from July 1, 2008, through June 30, 2011. Hos­pi­tals with high read­mis­sion rates stand to face a penalty of up to 1%, in­creas­ing to 3% in 2015.


For in­sur­ers, the court’s de­ci­sion to up­hold the re­form law’s in­di­vid­ual man­date as a tax on the unin­sured was only the first step toward the sweep­ing cov­er­age changes sought in the com­mer­cial mar­ket.

AHIP Pres­i­dent and CEO Karen Ig­nagni, said the de­ci­sion kicks off a con­certed ef­fort to show Congress that in­creas­ing pre­mi­ums by about 2% in 2014 as a result of the leg­is­la­tion may work against the goal of ex­pand­ing cov­er­age. “Peo­ple haven’t re­ally got­ten in un­der the hood of the leg­is­la­tion.”

One pro­vi­sion in­sur­ers are tar­get­ing greatly

re­stricts how much they can raise pre­mi­ums for el­derly ben­e­fi­cia­ries in in­di­vid­ual and small­group plans, which Ig­nagni said will have the ef­fect of in­creas­ing what younger adults will pay. Un­der ex­ist­ing age-rat­ing poli­cies, the el­derly may pay rates as much as 85 times more than a young adult ben­e­fi­ciary, but the law com­presses that ra­tio and says no adult can be charged more than three times as much as any other.

Also not widely dis­cussed has been the tax that is im­posed on high-cost em­ploy­er­spon­sored plans—the pro­vi­sion dubbed the “Cadil­lac tax” dur­ing Con­gres­sional de­bate on the law—at 40% of the value of the plan worth more than $10,200 for an in­di­vid­ual or $27,500 for fam­i­lies, start­ing in 2018.


Physi­cian ad­vo­cates say they’ll keep lob­by­ing to get things omit­ted from the law, as well as to re­move some parts of it and ex­tend pro­vi­sions they like but see as too tem­po­rary.

Their first pri­or­ity is to estab­lish a Medi­care re­im­burse­ment sys­tem to re­place the sus­tain­able growth-rate for­mula that the ACA left in­tact and puts doc­tors on peren­nial col­li­sion course with dras­tic rate cuts. Most physi­cian groups also re­main com­mit­ted to killing the In­de­pen­dent Pay­ment Ad­vi­sory Board, a panel es­tab­lished by the law to find ways to re­strict Medi­care cost growth.

Mean­while, many are also hop­ing to per­suade the ad­min­is­tra­tion to ex­tend a pro­gram that brings Med­i­caid pay­ment for pri­mary-care physi­cians in line with what Medi­care pays, which ex­pires af­ter 2014. A spokes­woman for the Cal­i­for­nia Med­i­cal As­so­ci­a­tion said ex­tend­ing the rate bump is key to draw­ing enough physi­cians to care for pa­tients newly cov­ered un­der the law’s Med­i­caid ex­pan­sion.

Dr. Glen Stream, pres­i­dent of the Amer­i­can Academy of Fam­ily Physi­cians, said he’s most in­ter­ested in the CMS In­no­va­tion Cen­ter’s Com­pre­hen­sive Pri­mary Care Ini­tia­tive, which is re­cruit­ing prac­tices to par­tic­i­pate in seven mar­kets test­ing a com­bi­na­tion of fee-forser­vice, care-man­age­ment fees and shared-sav­ings in­cen­tives.

Home care

The home health­care in­dus­try’s first move af­ter the ACA was up­held was to re­new ef­forts to pre­vent Medi­care re­im­burse­ment cuts from Congress as it con­tin­ues on its cost­cut­ting ef­forts.

The home-health in­dus­try has taken greater cuts rel­a­tive to its size than other seg­ments, such as hos­pi­tals, and can’t han­dle any more, said Val Hala­man­daris, pres­i­dent of the Na­tional As­so­ci­a­tion for Home Care & Hos­pice. By the NAHC’s cal­cu­la­tions, the home health­care seg­ment is in line to re­ceive cuts of more than $77 bil­lion from Medi­care over the next 10 years. The ACA will cut $39.7 bil­lion through 2019, the CMS will cut an es­ti­mated ad­di­tional $32 bil­lion through 2013 as a result of its an­nual rule-set­ting and the ef­fect of se­ques­tra­tion will re­duce pay­ments by $6 bil­lion over the next 10 years, ac­cord­ing to the NAHC.

To cut fur­ther or im­ple­ment pa­tient co­pay­ments—an idea said to be un­der con­sid­er­a­tion by con­gres­sional staffers—would be un­fair, Hala­man­daris said. If Congress wants to cut spend­ing, it should de­lay im­ple­men­ta­tion of the ACA. “A cou­ple of years de­lay would save sig­nif­i­cant amounts of money.”


Med­i­cal de­vice man­u­fac­tur­ers con­tinue to push for a re­peal of an ex­cise tax man­dated by the health­care re­form law be­fore it goes into ef­fect in Jan­uary. Start­ing in 2013, man­u­fac­tur­ers will be re­quired to pay a 2.3% ex­cise tax on the sales of med­i­cal de­vices. It’s ex­pected to cost the in­dus­try up to $29 bil­lion over the next decade.

The ex­pan­sion of in­sured pa­tients is ex­pected to have only a “mod­est ben­e­fit” on the med­i­cal tech­nol­ogy in­dus­try, ac­cord­ing to Citi an­a­lyst Matthew Dodds. “While the ex­pan­sion of in­sured pa­tients will help the hos­pi­tal sec­tor, we doubt this will al­le­vi­ate initiatives to re­duce sup­plier costs,” Dodds said in a re­search note.

The in­dus­try’s trade groups adamantly op­pose the tax, which has also raised con­cerns with providers who worry that the cost of the tax will in­stead by passed along to hos­pi­tals that pur­chase med­i­cal sup­plies. The House of Rep­re­sen­ta­tives passed leg­is­la­tion last month that would re­peal the tax. How­ever, the White House has in­di­cated it would veto the bill.

In­for­ma­tion tech­nol­ogy

While the ACA has few pro­vi­sions specif­i­cally tar­get­ing health in­for­ma­tion tech­nol­ogy, there are sig­nif­i­cant health IT im­pli­ca­tions in the re­form law.

State gov­ern­ments, for ex­am­ple, have to set up en­roll­ment in­fra­struc­tures for the health in­surance ex­changes un­less they cede the re­spon­si­bil­ity to HHS. In just five months, HHS will de­cide who will op­er­ate a state’s ex­change, and by late sum­mer next year, the ex­changes are to start tak­ing ap­pli­ca­tions for cov­er­age start­ing Jan. 1, 2014. Among the IT re­quire­ments are a Web por­tal for cus­tomer sup­port.

Dozens of health­care or­ga­ni­za­tions, mean­while, have set up ac­count­able care or­ga­ni­za­tions to par­tic­i­pate in Medi­care pro­grams en­cour­ag­ing the model, while some oth­ers are ex­per­i­ment­ing with pa­tient-cen­tered med­i­cal homes un­der the law. Both re­quire ad­vanced IT in­fra­struc­ture to co­or­di­nate care and mea­sure out­comes.

Many more hos­pi­tals and physi­cians have a lot of work to do, ac­cord­ing to Dave Roberts, vice pres­i­dent of gov­ern­ment re­la­tions for the Chicago-based Health In­for­ma­tion and Man­age­ment Sys­tems So­ci­ety. “They’re go­ing to need ac­cess to in­for­ma­tion from var­i­ous sources and to be able to pull all of the dis­parate in­for­ma­tion to­gether, ex­change in­for­ma­tion be­tween lo­cal fa­cil­i­ties and re­gions, so there is go­ing to be a lot of use for IT,” Roberts said.

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