Methodology for Testing Payment Reforms on Quality and Efficiency

The GAO study looked at the effects of several different factors when determining the role that Medicare payment options had on the quality and efficiency of the care received by patients:

• Episode-based payment models vs. traditional fee-for-service Medicare reimbursement
• Voluntary vs. mandatory participation by Medicare providers, particularly hospitals and physicians
• Bundled payments for care improvement (BPCI) vs. monthly or comprehensive care options

Six Episode-Based Payment Models

The six episode-based payment models were outlined in Table 1 of the GAO report:

• BPCI Model 1: In this voluntary version of the episode-based payments testing, hospitals were provided with discounted payments for Medicare services during inpatient hospital stays. They were also held responsible for spending by Medicare on services rendered 30 or more days after the patient was discharged that added up to more than the historical average for these services.
• BPCI Model 2: In this voluntary model, hospitals and group practices were assigned a target price for the treatment of up to 48 clinical conditions. If they exceeded this target amount, the health care providers were responsible for repaying Medicare. If they were able to treat the conditions for a lower amount, they received additional payments from Medicare.
• BPCI Model 3: The retrospective post-acute care only model covered the 90 days following an acute care procedure. Like Model 2, this voluntary version offered financial incentives for keeping post-acute care costs low and required repayments for costs that exceeded the target amount.
• BPCI Model 4: Model 4 of the Medicare episode-based tests provided an advance lump-sum payment to the hospital for all Medicare services provided by hospitals, physicians, and other practitioners during the patient’s stay. These health care providers received payments from the hospital and submitted no-pay claims to Medicare to substantiate their payment requests under this voluntary testing model.
• Comprehensive Care for Joint Replacement: In this mandatory model, hospitals were eligible to receive additional payments or required to make repayments for Medicare services that exceeded a target price. This testing model also took into consideration the hospital’s compliance with established quality performance standards for the care provided during a single inpatient stay and 90 days of post-discharge care for hip or knee replacement surgeries.
• Oncology Care Model: This innovative and voluntary testing model provides monthly payments to health care providers over a six-month period following patient chemotherapy. By keeping costs under a target price set by Medicare, providers can potentially receive performance-based payments,

The testing for Models 1 through 4 have already been completed. Testing for the Comprehensive Care for Joint Replacement model will continue through December 2020, and the Oncology Care Model is scheduled for testing through June 2021.  In October 2018, CMS launched a new nationwide bundled payments model, the Advanced Bundled Payments for Care Improvement (Advanced BPCI) demonstration.

A Range of Providers Included in Medicare Payment Reform Demonstrations

While most of the payment testing plans were based on hospital stays or in-patient treatment plans, the range of providers eligible for participation in these tests included the following groups:

• Hospitals
• Physician group practices
• Individual physicians
• Post-acute care providers who deliver treatment after the patient has been discharged from the hospital – particularly, skilled nursing facilities (SNFs) and home health agencies (HHAs)
• Specific providers who offer treatment for complications related to the procedures or treatments covered by Medicare

Any or all of these providers, including the hospital, can be held accountable by Medicare for the success and quality of care and the charges billed for treatments provided by their facilities or medical practices.

Large Hospitals are More Likely to Participate in Medicare Payment Reform Demonstrations

The GAO report found that larger hospitals were more likely to participate than smaller hospitals and health care providers. Other factors that were positively correlated with voluntary participation in Medicare’s voluntary testing models included the following:

• Hospitals located in urban locations were more likely to participate in the Medicare testing process than those in rural or suburban areas.
• Higher spending per episode was also found to be prevalent in the hospitals that elected to participate in the voluntary testing models established by Medicare.
• Teaching hospitals were more heavily represented in the testing models than in the overall health care industry in the United States.
• Hospitals that reported a higher number of qualifying care episodes were also more likely to choose to participate voluntarily in this testing process.
• Access to robust CMS data was cited as a motivating factor for voluntary participation for some physician group practices.
• Gaining experience in modern value-based payment methods was also a reason given by some providers for deciding to participate in the voluntary testing phase of these CMS programs.

For the BPCI Model 3 Retrospective Post-Acute Care Only testing, the majority of participants were skilled nursing facilities and home health agencies. The Oncology Care Model, which was instituted as a mandatory testing strategy, involved 190 physician group practices selected by Medicare.

Preliminary Results Already Available

While two of the studies are still ongoing, initial reports indicate that the voluntary testing models were primarily chosen by providers who tailored their participation to ensure the greatest financial benefits for their organizations. Table 3 of the report indicated that health care providers were much more likely to join testing models that could be used to their financial advantage through redesigning their patient care models or altering their procedures in some way.

Mandatory participation, however, shifted the benefits more evenly between CMS and the providers, with some health care organizations and physicians indicating that they believe the benefits are primarily on Medicare’s part. CMS indicated that many of those who participated in the mandatory programs might have declined if that option had been available to them.

Mandatory vs. Voluntary Models of Payment Reform

While no decisions have yet been made about wide-scale mandatory or voluntary implementations of any of these Medicaid payment models, some specific benefits of each approach have been identified by CMS:

• Voluntary participation is generally perceived to be more beneficial to health care providers and allows them to choose the models and the episodes best suited to their style of practice and their patient populations. This can also allow for greater flexibility in testing experimental payment strategies and in determining the practical effects of these models.
• Mandatory programs allow CMS to perform a more accurate evaluation of these programs over a wider range of health care providers. This approach can often result in the best data collection during these testing regimens. Additionally, providers in the Comprehensive Care for Joint Replacement, which is currently the only mandatory testing model, indicated that their participation made it possible for them to access Advanced Alternative Payment Models (APM) as a part of the Quality Payment Program, which might not otherwise have been available to their practice or organization. This can provide significant benefits for physicians, health care providers, and hospitals while ensuring the best possible care for patients within the Medicare system.

Other Factors That Should Be Considered in Assessing Payment Reforms

During the course of the testing, participants and stakeholders were encouraged to comment on their experiences and to offer suggestions. Some of the most important factors that stakeholders cited included the following:

• Ensuring the ability of participants in mandatory programs to access advanced APM options and their benefits
• Adjusting target prices based on populations with sicker patients, allowing for greater flexibility in treating these severely ill individuals
• Tracking and accounting for changes in the general characteristics of patient populations to reduce the risk of hospitals only accepting healthier patients and avoiding the added costs these individuals could represent

CMS plans to take GAO’s suggestions and comments into consideration when assessing the results of the completed testing regimens and the ongoing models. Health care providers should keep a close eye on future GAO reports concerning these CMS testing models to prepare effectively for future changes in the way Medicare processes payments for a wide range of medical services.

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The pharmaceutical market is set to reach $1.5 trillion globally by the year 2023, according to a new report by the IQVIA Institute for Human Data Science and entitled The Global Use of Medicine in 2019 and Outlook to 2023: Forecasts and Areas to Watch. This valuable resource provides detailed information on the changes we can expect in the pharmaceutical field and the most likely outcomes for the U.S. and nations around the globe.

The IQVIA report indicates that spending on biopharmaceuticals will continue to rise in the next four years. Slower growth will be the rule more than the exception on a global basis:

• The United States is expected to see compound annual growth of five to eight percent through 2023. Pharmaceutical manufacturers will continue to experience growth in the three to six percent range, which is significantly slower than in the five years just previous.
• Europe’s growth in the pharmaceutical sector is also expected to slow down to between one and four percent, which is likely to be significantly less than its 3.8 percent growth rate in the past five years.
• China is an emerging market in the pharmaceuticals field with $137 billion in spending during 2018. Some of this increase in spending is the result of reforms at the central government level and expanded coverage for residents across the country.
• Thanks to its aggressive approach to generic medicines and favorable exchange rates, Japan will actually see spending go down in the pharmaceutical field between now and 2023.

Developed markets are likely to be primarily responsible for the continued financial growth in the pharmaceutical sector. Emerging markets in this field are likely to see slower top-line growth in the next five years.

Other Factors Likely to Play a Role in Growth of Drugs and Biologics

The primary elements in play in the pharmaceutical industry vary considerably depending on the area of the world under consideration. For instance, the pharmaceutical industry in the United States will be affected by the expiration of patents and the emergence of cheaper generic alternatives, which will cut into the profitability possible for manufacturers and distributors within the U.S.

Losses of exclusivity and the arrival of lower-priced generics will also reduce revenues for some pharma companies, with an expected aggregate loss of $95 billion in the U.S. alone. Newer products on the road to release, however, will offset some of these losses and will help to promote ongoing profitability for established firms.

The release of biosimilar products is expected to slow down in the next five years, with Europe outstripping the U.S. during this time period. By 2023, however, changes in U.S. approval policies will likely spur increases in biosimilar applications and potential savings for consumers.

Spending on specialty medicines will continue to increase, going from $336 billion in 2018 to a predicted $475 billion to $505 billion by 2023 across developed markets. Most of this growth will be driven by five areas of the specialty marketplace:

• HIV treatments
• Treatments for multiple sclerosis
• Oncology
• Medications for autoimmune disorders
• Immunology pharmaceuticals, including immunoglobulins, immunosuppressants and interferons

Spending in these five classes is expected to account for 74 percent of the growth in specialty medications over the next five years. Specialty medications, however, only represent about 13 to 14 percent of the overall pharmaceutical marketplace.

The global pharmaceutical market will exceed $1.5 trillion by 2023 growing at a 3%−6% compound annual growth rate over the next five years.

Expansion of Next-Generation Biotherapeutics Approvals

Gene therapies, regenerative medications, cell-based therapies, and other next-generation biotherapeutics (NGBs) have not made a major impact on the pharmaceutical industry over the past few years, with only nine of these medications currently on the market globally. This is expected to change over the next five years because of increased buy-in on the part of government agencies and improved reimbursement mechanisms for companies who invest in these products.

• It is expected that between five and eight new NGBs will receive approval from the U.S. Food and Drug Administration (FDA) and other regulatory agencies around the globe.
• The ethics of gene editing therapies will continue to be hashed out both in the court of public opinion and in the regulatory environment. The recent use of CRISPR technologies to modify the DNA of two children born in China has already sparked controversy. The results of these alterations will be monitored closely both by local researchers and the global medical community.
• One of the most important barriers to NGBs in the general medical marketplace is the high price of developing, testing, and releasing these products compared with the relatively small number of people who can benefit from the treatment regimens.
• Another issue with NGBs is that some do the job too well. When patients can be cured or their conditions remedied with a very short course of treatment, the ability of pharmaceutical firms to profit from these medications is limited.
• Larger pharmaceutical firms are generally the only companies capable of absorbing the costs of development for NGBs and are expected to continue to dominate this sector of the pharmaceutical industry.

While NGBs show a great deal of potential in treating a range of diseases, the high costs associated with these treatments is likely to suppress growth and reduce new developments in this field.

Prescription Digital Therapeutics Hitting the Market

Mobile applications that monitor health and provide reminders and alerts to patients have been around for a number of years and number in the thousands. When combined with prescription medication devices, however, these apps constitute prescription digital therapeutics that can be used to combat a number of different conditions and illnesses. The first prescription digital therapeutics treatment to be approved, reSET, got the go-ahead in November 2018 and is designed to treat substance abuse disorder. Other digital therapeutics are expected to seek approval in upcoming years, including treatments for Alzheimer’s disease, ADHD in children, schizophrenia, and major depressive disorder in adult patients.

Addressing Tropical Diseases

Tropical diseases have long been overlooked in the pharmaceutical industry. Today, charitable organizations and international health agencies are making a concerted effort to address these issues. This focused approach to diseases that primarily affect individuals in Latin America, Africa, and Asia will likely lead to the development and approval of as many as 10 treatment options for neglected tropical diseases like Dengue, malaria, tuberculosis, leishmaniasis, and even rabies. Distribution of these medications will continue to be an issue, especially in areas ravaged by poverty or subject to military conflicts.

Artificial Intelligence in the Medical Marketplace

Machine learning and artificial intelligence (AI) applications are expected to continue to influence the ways in which patients are diagnosed and treated in the modern medical marketplace. Some of the most important developments are expected to include the following:

• Predictive analysis of patient groups will allow the subdivision of patients into categories conducive to better care.
• Big data mining techniques will continue to be perfected and will offer new insights into the pharmaceutical needs of patients across a wider range of populations. This will drive research and development over the next few years.
• Personalized treatment regimens based on AI are unlikely to see widespread use during the next 10 years. Development of these applications, however, is expected to continue for the foreseeable future.
• The protection of personal data and private information will pose challenges for pharmaceutical and technological firms tasked with creating this next generation of medical AI and machine learning.

As AI becomes more robust and more integrated with other phases of medical research and treatment, it will play an increasingly dominant role in allowing researchers and caregivers to provide the most effective treatments for patients in the future.

Increasing Roles for Real-World Evidence

Real-world evidence (RWE) is taking its place alongside randomized controlled trials (RCTs) as a source of information for researchers in the medical field. In December 2018, the FDA approved and released a strategic framework that expands the use of RWE in evaluating biologic and small-molecule cures. By taking real-world data and RWE into account, it may be possible to speed the testing and approval process for drugs, especially those intended to treat rare diseases.

Patient Advocacy and Engagement

Pharmaceutical firms will also be adding patient care advocates to their roster of employees. These staff members will take on a number of responsibilities in hospitals and research laboratories:

• Building partnerships with patient advocates and organizations to determine the right approaches for clinical trials and other activities
• Designing and presenting patient-centric research and development practices
• Establishing frameworks for building RWE platforms and accessing big data from a variety of sources
• Engaging with patients about digital technologies and applications
• Investing time and effort in interactions with patients and patient groups to determine priorities and needs among these constituencies

This is a positive move that will promote the best care and treatment solutions for patients and improved engagement on the part of pharmaceutical firms.

Drug Pricing Policy Reforms on the Way

Thanks to a run of bad publicity about pharmaceutical firms, “excessive” profits, the overpricing of drugs, and pharmacy benefit managers (PBMs), most analysts expect major reforms in the way in which drug prices are set, rebates and PBM deals structured, and the reimbursements available to pharma firms and PBMs from government programs and health insurance companies. This could reduce out-of-pocket costs for patients and may even spur increased competition among pharmaceutical firms in the next five years.

The Role of Emerging Biopharmaceutical Firms in Driving Research and Development

Emerging biopharma (EBP) companies are defined as those firms that spend less than $200 million annually on research and development or that earn less than $500 million annually in revenue. These companies are responsible for 72 percent of all research and development in the pharmaceutical industry. The IQVIA report predicts that over one-third of the drugs brought to market in the next five years will be launched by EBP firms.

Innovation in the Pharmaceutical Industry

As mobile applications and cloud-based technologies increase in popularity among patients, they will also provide added methods of communication and increased options for research and development of profitable medications among the major players in the pharmaceutical industry. This may also lead to reduced operational costs and increased partnerships between large life sciences companies and EBP companies to mitigate financial risks for both parties.

Opioid Prescriptions Continue to Decline

Existing federal and state policies on prescribing and administering opioid-based medications are already reducing the number of patients who rely on these drugs to combat pain. Different states in the U.S. have experienced significantly different rates of success in reducing the per-capita morphine milligram equivalent (MME) for patients within their borders. The goal of current regulations and proposed legislation is to reduce the MME to under half of the record high levels reported in 2011. This will require a concerted effort on the part of physicians and caregivers, especially in states that lack the legal framework for limiting the use of these drugs as therapeutic solutions for pain.

Ten Key Trends to Watch Over the Next Five Years

In the fascinating, fact-filled report, the exceptional team at the IQVIA Institute for Human Data Science identify and explain ten trends to watch over the next five years. In summary:

1. Patient Engagement: Pharma companies will continue hiring patient care and patient advocacy specialists as they expand health advocacy capabilities and bring these in house. By the end of this year, most of the top 20 pharma companies will have a senior level position in charge of patient advocacy.
2. Digital Therapeutics (DTx):  New prescription digital therapeutics (DTx) will enter the market. With indications and disease-specific treatment effectiveness claims in their software labels, mobile apps are increasingly submitted to the FDA for regulatory clearance.
3. Artificial Intelligence and Machine Learning: Life sciences firms will increase their investment in artificial intelligence, machine learning, and deep learning programs. Expect these advances to lead to new breakthroughs in the discovery and development of therapies.
4. Real-World Evidence:  Many new medicines are approved for a single or limited clinical indication. Approval of additional or alternative on-label indications requires more evidence. Manufacturers will increasingly incorporate real-world evidence (RWE) in post-market clinical trials to support regulatory approval for new novel indications.
5. Emerging Biopharma Companies:  With the absolute number of active R&D compounds increasing and shifts in life science industry research and development strategy, emerging biopharma companies (EBP) will launch new medicines in the next five years. EBPs will bring to market over one-third of all new drugs and biologics launched in the next five years. Of course, nimble, laser-focused EBPs will continue to be acquisition targets for larger biopharma companies.
6. Pricing Reforms:  In the U.S., political responses to stakeholder perceptions that patients and taxpayers are paying inappropriately high costs for medicines, the federal government has proposed a sweeping set of pricing reforms affecting Medicare and Medicaid. The proposals have “varying levels of impact and probability of being enacted.”
7. Prescription Opioids:  “Existing policies and new legislation will likely impact opioid prescribing and use through 2023, and the dynamics around prescription opioids, and issues around illicit drug use and overdoses, will remain complex and challenging to address. A range of likely scenarios around opioid prescribing trends include a continuation of the ongoing rapid declines in use, or a pattern of convergence at the levels of current lower-use states.”
8. Margin Pressures:  “The next five years likely pose a number of challenges to biopharmaceutical companies, with payer actions on prices looming, and it remains to be seen whether these companies can repeat their past successes in terms of revenues and cost management. Technology investments, such as cloud-computing, artificial intelligence, and machine learning, are among the tools being explored to improve productivity.”
9. Neglected Tropical Diseases:  “In the past decade, philanthropic organizations focused on neglected tropical diseases have made significant progress and many of the clinical development programs they have started or supported are beginning to result in drug approvals.”
10. Advanced Therapies:  “A range of novel technologies, such as induced pluripotent stem cells (iPSC) and CRISPR/Cas9, and others involving modified cells or gene-modification tools are under development. These will treat limited patient populations and raise important questions for healthcare stakeholders around cost and accessibility.”

Previous versions of the IQVIA Global Use of Medicine report have been surprisingly accurate and have provided real insights into the direction of the pharmaceutical market and the prospects for profits, innovation, and growth in this sector of the economy.

IQVIA uses a wide range of proprietary resources to compile these reports, which serve as a useful tool for health care providers and stakeholders in the medical and pharmaceutical fields. By keeping a close eye on these predictions and trends, medical professionals can prepare effectively for the changes likely to occur over the next five years and well into the future.

The post Use of Prescription Medicines Today and Forecasts for 2023: Valuable Market Insights from IQVIA appeared first on Piper Report.

Historically, randomized controlled trials have been used to determine the effectiveness and potential uses of biopharmaceutical products and medical treatments. These trials offer many advantages for researchers, including the ability to replicate testing conditions and to create control groups. Real-world evidence (RWE) and real-world data (RWD) collection on a large scale also offer real help in determining the ways in which physicians and patients actually use therapeutic options and biopharmaceutical compounds. RWE and RWD are increasingly expected by payors as they make coverage and reimbursement decisions, set formularies, negotiate rebates, and establish value-based performance expectations for providers. Real-world evidence is also essential for demonstrating the clinical utility of advanced diagnostic tests.

Three workshops on the applications and benefits of integrating real-world evidence were held through a joint project of the U.S. Food and Drug Administration (FDA) and the National Academies of Sciences, Engineering, and Medicine. The presentations and information provided at these workshops were published in Examining the Impact of Real-World Evidence on Medical Product Development: Proceedings of a Workshop Series. One of the primary goals of these workshops was to create a framework that would allow stakeholders to make the most appropriate and relevant use of RWE and data in clinical studies and evaluation processes.

Setting the Stage for Success

During the first workshop, which was held in September 2017, participants were asked to lay the foundation for creating decision aids for the use of RWE and RWD in the design of studies and research into various medical products and their uses. These decision aids were divided into four separate topics:

• Assistance in determining when RWD offers insights into eligibility for studies, treatment arrangements or potential outcomes for medical products
  
• The identification and minimization of bias in observations and comparisons
  
• Factors to consider when allocating interventions in trials intended to provide RWE for researchers
  
• Points to keep in mind when taking steps to control treatment quality in real-world trials 
  

These topics were explored during the course of the three workshops, which also introduced case studies as ways to investigate the various issues that might arise during the course of implementing RWE studies and using RWD as a tool for decision making. The general issues to be addressed were incorporated into the introduction, which also offers a useful overview of the workshops and the contents of these proceedings.

Defining the Terms

Another important task addressed by these workshops was the defining of terms related to RWD and RWE in the medical product research field. According to Gregory Simon, RWE is defined by four basic characteristics:

• Relevance: RWD and RWE is relevant to the research performed now and into the future.
  
• General applicability: The information derived from RWE will provide useful insights that will hold true for larger groups of patients in similar situations.
  
• Efficiency: RWE and RWD can be collected and compiled in less time and with reduced expense compared to formal research studies.
  
• Adaptability: Because RWE is collected from providers and patients in an actual treatment setting, it typically includes a wider range of test subjects. This allows the results to be applied to a larger group of potential patients.
  

By defining RWE and RWD in these ways, the sponsors of the workshops hoped to create broadly applicable recommendations for the incorporation of these methodologies into the research and development of new medical products and treatment plans.

Best Practices for RWD

An ongoing partnership and cooperative agreement between the FDA and the Margolis Center for Health Policy at Duke University (Duke-Margolis) has identified several best practices that can ensure the best use of RWD and the most practical approaches for regulatory agencies and researchers alike:

• Ensuring the most robust sources for primary data
  
• Integrating randomization where it is appropriate
  
• Assessing methodologies to make sure they are in accordance with the “totality of the evidence”
  
• Creating transparent and proactive analytic plans
  
• Collecting sufficient data to make practical and actionable recommendations
  

Making sure that these practices are in compliance with regulatory requirements and standards will be critical to the ongoing success of implementing RWE and RWD and incorporating it into the research and testing strategies used to determine the effectiveness and the practical uses for medical products.

Insights Derived From the Workshops

The participants in the FDA-sponsored workshops brought some of their own perspectives and observations of their patients to the forefront of the discussions. Some of the key messages identified by individual workshop participants were summarized in the following ways:

• Self-interest: Patients were most interested in RWE and RWD that applied to their own treatment plans. These individuals were also prone to misconceptions about ownership of data and erroneously believed that their data was their own property.
  
• Consistency and reliability: Participants indicated that they found value in the reliability offered by the current system, which includes clinical trials, reviews of current practices and data collection within delivery systems.
  
• Budget issues: Money continues to be a key factor in determining whether organizations, manufacturers and pharmaceutical firms will be willing to invest in RWE and RWD technologies. A framework of value-based agreements might serve to create greater stability for drug prices.
  
• Patient-centric approaches: One area that may show significant promise is the development of shared data pools for patients and for communities of patients and caregivers. While the information available from these sources may not be entirely accurate, patients may eventually be a primary source for information about new treatments and existing medical regimens.
  
• A high bar for evidence: Most participants in the workshops agreed that the bar for RWE and RWD should be set comparably high to that for evidence derived from randomized controlled trials.
  
• Fit for purpose: Widely accepted as one of the most important factors in the success of any RWE or RWD implementation, deriving relevant and usable data through these methods is essential to justify the cost and effort involved in this process.
  

Three primary groups who would be affected by the integration of RWE into current research evaluation and testing systems were identified:

• Payors indicated that cost was an overriding concern both in providing access to newer treatments and in delivering some treatments to their patients. Uncertainties about the costs of newer drugs and their effectiveness could reduce willingness to participate in RWE activities among healthcare providers.
• 
  
• Patients were most concerned about the effectiveness of newer treatments and medical products. Rather than expressing interest in the way in which these medications are tested, patients typically took a “bottom-line” approach to determine whether a particular treatment plan represented a good chance for a positive outcome.
  
• Delivery systems typically take an analytical approach to incorporate RWE and RWD into their evaluation process. These organizations usually must perform a balancing act between potential benefits for patients and the costs of testing and implementing new intervention methods.
  

Buy-in from all three of these groups must be achieved to make widespread implementations of RWE and RWD a reality in the regulatory and medical environment.

Success Stories Already Exist

The workshops also reviewed some of the existing success stories, including the Salford Lung Studies, the FDA’s own Sentinel product monitoring system and registries already in place for patients and caregivers.

The Salford Lung Study

In 2017, some of the initial results of the Salford Lung Study were published in the scholarly journal Pragmatic and Observational Research. This study evaluated the safety and effectiveness of an inhaler treatment that uses a combination of fluticasone furoate and vilanterol in a dry powder form for patients with asthma or chronic obstructive pulmonary disease (COPD).

By combining the results of randomized clinical trials with RWE collected from patients with COPD, researchers were able to evaluate the effectiveness of these treatments with much more accuracy. Some issues were encountered during the process, including the lack of resources to ensure data collection and to store it safely and properly. By creating relationships among stakeholders and establishing a cloud-based platform that allows easy access to RWE for all researchers, the Salford Lung Study continues to provide real assistance to researchers into asthma and COPD treatment options.

The Sentinel Initiative

The FDA established the Sentinel Initiative in 2008 to ensure compliance with new legislation regarding the use of electronic health data to evaluate medical products after their release. In practice, Sentinel serves as a central location for data regarding medical product safety and patient outcomes for data partners throughout the United States. The data collected is curated to ensure that it is easily searchable and can be cross-referenced to derive the most accurate and actionable information for researchers and FDA personnel.

A number of Sentinel programs were discussed, including the following six examples:

• A study to determine the safety of Warfarin and Rivaroxaban
  
• Assessment of risks of bowel obstruction in infants who had been vaccinated for rotavirus
  
• A project to link mothers with infants in the Sentinel system
  
• The use of data from electronic health records to identify subjects for randomized controlled trials related to coronary artery disease
  
• Field-testing of a mobile app for pregnant women to collect data on physical symptoms and treatments
  
• An ongoing study on the use of oral anticoagulants and their effectiveness
  

Practical applications for the Sentinel Initiative and the data collected through this system are still being explored by the FDA and their partner organizations.

Challenges and Barriers

Acquiring the right RWE data and putting it to practical use can sometimes present significant challenges for stakeholders in this process. Many of the obstacles present in the process of managing big data are also applicable to the RWE and RWD acquisition, identification, and implementation process. Some of the most critical challenges identified by participants in the joint National Academies and FDA workshops included the following:

1. Lack of knowledge about the required steps for obtaining and sharing the information
   
2. Security concerns
   
3. Worries about the risk or inaccuracy possible with RWE compilations and the process of choosing the right research methodologies
   
4. The work involved in integrating data sources from a wide range of different providers and stakeholders
   
5. Incompatibility of RWE data collection systems with existing systems in the healthcare environment
   
6. Inadequate or unavailable training in the complexities of RWE implementations
   
7. A “wait-and-see” attitude adopted by many healthcare providers regarding RWE, RWD and new technologies in general
   
8. A lack of clear regulatory guidelines that will provide a framework for the collection, storage, and sharing of RWE
   
9. Patient concerns about data privacy and the ways in which their information will be used, which can suppress participation
   

The FDA and other regulatory agencies can pave the way for increased participation and easier access to shared data by participants in these programs. Additionally, by providing training options and providing practical demonstrations of the value and reliability of RWE and RWD to stakeholders, government agencies can promote the most holistic approach to the identification of clinical evidence in the healthcare field.

Creating New Clinical Paradigms

Some of the most important potential uses for RWE have been identified as the following:

• The establishment of the right biomarkers before studies begin to ensure the right selection of participants in randomized controlled trials and other medical research activities
  
• Access to a wider range of patient records for rare diseases to help researchers and physicians to predict outcomes more accurately for their patients
  
• Reducing the approval times and increasing the accuracy of patient indications for use of new medical products, including pharmaceuticals and devices
  
• Creating hybrid approaches that incorporate randomized controlled trials with RWE that can be collected as these trials progress, allowing researchers to enjoy the best of both worlds when evaluating available evidence and results
  

As more stakeholders engage with the RWE process and begin sharing their data in a practical and actionable way, the applications of these data sets will expand to ensure the most practical benefits for patients, healthcare providers and manufacturers in the pharmaceutical and medical equipment industries.

Determining Whether Data Is “Fit for Purpose”

One of the most essential tasks in the implementation of RWE is the identification of the relevant information in what can be a mountain of data. Data must be curated and identified with relevant tags and metadata to ensure that it can be located by researchers in connection with their current activities. Creating a common nomenclature and working to eliminate sources of bias in the database can ensure that the information can be sorted, searched and utilized to provide the most accurate results for researchers. Making sure that all collected data is as accurate as possible is critical to the success of RWE and RWD implementations in the research environment and can ensure that the data is suited to the purposes for which it will eventually be used.

Controlling Treatment Quality in Real-World Trials

Another question that will affect the success of RWE implementations is the degree to which researchers should attempt to control the types and quality of treatment received by patients. This requires the establishment of standards of care that are broadly applicable across a wide range of patient situations and care conditions. Determining which patients will be eligible for treatments and which should be excluded from RWE and data acquisition will be a continuing challenge during the implementation process.

The Benefits of Blind RWE Studies

One of the primary advantages of randomized clinical trials is the ability to avoid patient and provider bias during these activities. Finding ways to provide these same benefits when conducting RWE research can ensure the most useful results. Conducting blind RWE studies can be challenging, however, because of the nature of real-world interactions between providers, researchers, and patients. By taking steps to eliminate bias and changes to outcomes that could be caused by patients and providers who are aware of the goals of ongoing studies, researchers can ensure the most accurate information and conclusions when dealing with RWE and data.

Establishing Greater Confidence in RWE and RWD Results

According to participants in the FDA workshops on RWE implementations, the degree of confidence achievable with RWE and RWD is directly related to the type of information being sought in the trials and studies:

• Comparisons of two treatment types can often produce useful information for medical personnel in determining which of these options is best suited for patients across a spectrum of illness severity and physical health.
  
• Treatments that produce measurable effects are also best suited for augmentation or study through RWE methods.
  
• RWE can be used to support existing randomized clinical trials and to fill in gaps in knowledge that can sometimes arise from these research activities.
  
• Insights into rare disease can be derived more easily with a wider group of patient experiences on which to draw.
  
• Maintaining transparency in the RWE process is critical to ensure the greatest degree of engagement and buy-in by researchers in the field.
  

One advantage of RWE and RWD is the ability to use data collected for one purpose to support other activities over time. For instance, the information collected to support insurance claims or to itemize treatment costs can also be used to support some types of RWE for a specific illness or physical condition. This could potentially allow researchers to access a complete range of information that could serve to supplement or to complement randomized controlled trials in creating the most effective treatment options for patients.

As the infrastructure and robust data sources for real-world evidence continue to grow and develop, more researchers, life sciences firms, and healthcare providers will take advantage of the testing and research capabilities of these curated collections of information. This will improve the quality of care for patients and will help to streamline the regulatory approval, payor coverage decision making, and technology assessment processes for new drugs, biologics, diagnostic tests, and medical devices.

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Background on Physician Survey and Data Analysis

The survey emailed to 630,000 physicians that forms the basis for this report is conducted by Merritt Hawkins every two years. The surveyed doctors represent 79 percent of all physicians in the U.S. actively performing patient care. Not only are findings for 2016 presented in this report, but also a comparison to those of the past surveys conducted in 2012 and 2014. Survey responses for 2016 were obtained from 17,236 physicians across all 50 states.

Scope of Findings

Analysis of the survey responses—plus 10,170 written comments—enabled findings within a variety of areas, including:

• Current state of physician morale
• Physician practice plans (e.g., plans for retirement)
• Physician practice models and patterns
• Physician payment models
• Patient access to physicians

Demographics of Physician Survey Respondents in 2016

The highest percentage of respondent physicians—50.7 percent—were between 46-65 years old, and only 36.2 percent were age 45 or younger. The gender breakdown was 64.2 percent males and 35.8 percent females. Physicians who were medical practice owners, or partners/associates in a practice, accounted for 32.7 percent of survey respondents.

Meanwhile, 34.6 percent were employed by a hospital, and 23.3 percent by a medical group. Analysis of aggregated data showed the following medical practice distribution:

• Solo practice: 16.8 percent
• 2-5 physicians: 21.4 percent
• 6-10 physicians: 13.5 percent
• 11-30 physicians: 16 percent
• 31-100 physicians: 12.4 percent
• 101 or more physicians: 19.9 percent

While 35.8 percent of all surveyed physicians were female, 45 percent were age 45 or younger. In contrast—although 62 percent of surveyed physicians were male—55 percent were age 45 or younger, but 69.5 percent were age 46 or older. This distribution suggests that female physicians are not as represented among older physicians.

Medical Specialty of Physician Survey Respondents 

The distribution among surveyed physicians who work in primary care was:

1. Family Practice: 14 percent
2. General Internal Medicine: 11.1 percent
3. Pediatrics: 10 percent

Among surveyed physicians not working in primary care, the percentages associated with the top four categories were:

• Medical specialty (42.4 percent)
• Surgical sub-specialties (5.9 percent)
• Surgical specialty (5.5 percent)
• Ob-Gyn (5.1 percent – 4 percent for physicians age 45 or younger, but 5.7 percent for those age 46 and older)

Growth Value / Quality Reporting Systems and Practice Models 

Question Number 18 in the survey in 2016 was, “Do you participate in any of the following value/quality reporting systems or practice models?” Analysis of aggregated responses revealed the following affirmative percentages:

• Patient Satisfaction Surveys: 74.7 percent
• Meaningful Use: 63.5 percent
• Physician Quality Reporting System (PQRS): 55.3 percent
• Accountable Care Organization (ACO): 36.4 percent
• Patient-Centered Medical Home (PCMH): 27.5 percent

Emerging Trends in Physician Practice Styles

The authors of this report perceive that physician practice styles are evolving.  “Though physicians continue to practice traditional, full-time, inpatient and outpatient medicine, many doctors are choosing alternative practice styles, such as part-time practice, inpatient only positions, administrative-only positions, and temporary (locum tenens work),” according to this report.

48.5 percent of physician respondents identified as independent practice owners or partners/associates in 2012, as compared to only 32.7 percent in 2016. The overall trend found was “the evolution of medical practice away from the traditional private, independent practice model and toward the employed model.”

Citing Merritt Hawkins’ earlier Survey of Final-Year Medical Residents, the authors also note that, “70 percent of newly trained physicians expressed a preference for an employed setting in their first practice situation.” Furthermore, the authors feel that “Some physician group practices now have reached the scale and scope of hospital systems.”

Morale and Professional Satisfaction of Physicians

The main patient-focused finding presented in this report is that physician practice patterns are limiting patient access to healthcare. Overall, 54 percent of physicians in 2016 rated morale as somewhat or very negative. As the authors of this report state, “employed physicians are considerably more optimistic about the future of medicine than are practice owners.”

Physician Self-Perceptions Reflect Increased Stress

Key findings regarding physician professional self-perceptions were as follows:

• 80 percent responded that they are over-extended, with no time to see additional patients.
• 72 percent responded that external factors (e.g., third-party authorizations) significantly detracted from their capacity to deliver desired quality of care to their patients.
• 49 percent responded that they often or always experience feelings of “burn-out”.
• 49 percent responded that they would not recommend medicine as a career for their own children.

Physician Hours for Non-Clinical Duties 

Among the offered response options, most survey respondents selected 6-10 hours as their time duration spent on non-clinical duties only (at 30.6 percent). However, for physicians aged 46 and older, the second-most frequent choice was 0-5 hours (at 25.9 percent). Indeed, the tabular findings suggested that younger physicians spent more time on non-clinical duties than their older counterparts. 

Physicians and Least Satisfying Aspects of Work-Life

The leading responses to the survey question, “What two factors do you find least satisfying about medical practice?” were: (1) regulatory/paperwork burdens (58.3 percent of respondents), and (2) erosion of clinical autonomy (31.8 percent). Notably, the report states that “physicians spend 21 percent of their time engaged in non-clinical paperwork.”

Impact on Medicare and Medicaid Patients

“Almost one in four primary care physicians have eliminated or reduced access to Medicare patients,” according to this report. Moreover, 33.1 percent of physicians as practice owners responded that they either do not see or limit Medicare patients, in comparison to 23.2 percent of employed physicians. From 2014-2016, the percent of surveyed physicians limiting the number of Medicare patients has increased.

Only 63.7 percent of surveyed physicians in 2016 responded—in regard to Medicaid patients—that they “see all of these patients”, and 20.3 percent responded that they “limit number of these patients.” These findings showed that Medicaid patients were even more likely to experience healthcare access barriers than Medicare patients.

Value-Based Reimbursement and Physician Practices 

Analysis of the survey results showed that—among physicians who are practice owners or partners—35.9 percent received compensation tied to value/quality as compared to 49.8 percent of employed physicians. However, the report’s authors note that “Even for those physicians who do receive value-based compensation, the great majority (77.2 percent) have 20 percent or less of their compensation tied to value.”

Familiarity with MACRA by Physician Type

There was a lack of familiarity with the Medicare Access and CHIP Reauthorization Act (MACRA) among surveyed physicians, with 55 percent of primary care physicians (PCPs) specifying that they were very or somewhat unfamiliar with MACRA. Meanwhile, only 20.6 of surveyed PCPs responded that they were very or somewhat familiar.

A noticeable disparity in MACRA familiarity was found between physicians self-identifying as practice owners/partners and those self-identifying as employees. While 57.5 percent of practice owners responded that they were “very/somewhat unfamiliar”, the percentage increased to 62 among employed physicians. 

Electronic Health Records and ICD-10 Coding 

The report found that “physicians have not bought-in” to electronic health records (EHR) and the shift to ICD-10 codes.  The key finding from survey results in 2016 was that “Only 28.9 percent of physicians indicate EHR has improved quality of care in their practices.”

Moreover, “Physician opinions of EHR have not improved appreciably since the survey was conducted in 2012.” However, the authors also note that “There is a clear generational difference in the way physicians rate the effect of EHR.”

While only 3.7 percent of surveyed physicians aged 46 and older felt the shift to ICD-10 codes had increased or improved efficiency, 9.7 percent of those under age 45 felt efficiency had been increased/improved—revealing a gap between the perceptions of this shift between younger and older physicians.

Health Reform and Delivery Models

The viewpoint of the report’s authors is that “the majority of physicians remain in a fee-for-service world and are not sufficiently engaged in or supportive of the mechanisms of healthcare reform to achieve its stated aims.” 

Differences Between Perceptions by Physician Age 

The report authors found that “Younger physicians appear less apt to be society ‘joiners’ than do older physicians, a trend that may be tied to the fact that a higher percentage of younger physicians are employees than older physicians.”

Conclusions

One of the conclusions expressed in this report is that “The primary public policy and healthcare concern attached to low physician morale is the prospect of physicians modifying their practice styles in ways that reduce patient access.”

While the authors note that a physician shortage by 2025 of up to 90,400 physicians has been predicted by the Association of American Medical Colleges (AAMC), an increasing percentage of respondents from 2012-2016 said that they would seek a non-clinical job within healthcare. Additionally, 21.2 percent of surveyed physicians in 2016 responded that they would “cut back hours” in the next three years.

This complete report is available for free download here (PDF).

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National Trends in Teen Pregnancy

“The teen birth rate has declined almost continuously over the past 20 years,” according to the U.S. Office of Adolescent Health.² A CDC report in June of 2016 showed an 8 percent decrease in the U.S. teen pregnancy rate in 2015 among 15-19-year-olds.³ This CDC report also stated a 46 percent overall decrease since 2007.

Meanwhile, the AHRQ statistical brief showed that the teen pregnancy rate increased from 2004-2006, before beginning to decrease in 2007. Wide variation in decreases between the states was also noted in all three sources—with the lowest decrease occurring in Southern states.

Hospitalizations for Childbirth Among Pregnant Teens

For 2013, the AHRQ report showed 265,370 maternal hospital stays, of which 73,570 were for females between 15-17-years-old and 72.3 percent for 18-19-year-olds. Further, AHRQ found that the average length of hospital stay (LOS) was 2.6 for both 15-17-year-olds and 18-19-year-olds. Data analysis was based on hospital stay of the mother rather than birth data.

The number of pregnant teen hospital utilizations for childbirth corresponded regionally to:

• Northeast: 30,135 maternal stays (16.2 stays per 1,000 females)
• Midwest: 55,615 maternal stays (14.0 stays per 1,000 females)
• South: 120,865 maternal stays (52.3 stays per 1,000 females)
• West: 58,755 maternal stays (23.3 stays per 1,000 females)

Health Insurers and Teen Pregnancy 

The national cost for 2013 for childbirth was $311 million in teen females aged 15-17, plus $818 million in teen females aged 18-19, per the AHRQ report. Medicaid programs pay about 70 percent of the cost of teen childbirth. In contrast, 23 percent was covered by private insurance health plans.

The difference between payers of hospital costs for pregnant females aged 15-19 versus pregnant adult females aged 20-44 are presented for comparison in the AHRQ report, as shown in the following:

Payers for maternal stays of females aged 20-44 years:

Medicaid = 1,428,125

Private insurance = 1,803,655

Medicare or other = 130,210

Uninsured = 95,175

Payers for maternal stays of females aged 15-19:

Medicaid = 190,645

Private insurance = 60,830

Medicare or other = 6,885

Uninsured = 6,580

State Medicaid Expenditures for Teen Childbirth in Hospitals 

The expected payer for childbirth among females aged 15-19 in hospitals in Florida in 2013 was Medicaid (81.3 percent) per the AHRQ report. This was followed by Georgia (79.3 percent). In contrast, private payers were expected to cover costs in Florida and Georgia for 14.3 percent and 13.3 percent, respectively. The states with the next two highest Medicaid percentages—after Florida and Georgia—were Connecticut (78.6 percent) and California (78.5 percent).

Private Health Insurance Spending for Teen Childbirth in Hospitals

The three states where private insurance was the foremost payer for childbirth hospitalizations of pregnant teens in 2013 were as follows:

• Nebraska (60.6 percent)
• Minnesota (44.6 percent)
• Utah (35.6 percent)

Complications of Pregnancy in Teens

It is well-recognized among physicians that pregnant teens are at higher risk of anemia, pre-eclampsia, and poor fetal growth than adult pregnant women. The AHRQ report data showed comparative maternal complication percentages by age category as follows:

• Anemia: 16.7 percent in ages 15-19 vs. 12.3 percent in ages 20-44
• Pre-eclampsia/eclampsia: 9.7 percent in ages 15-19 vs 8.1 percent in ages 20-44
• Poor fetal growth: 3.8 percent in ages 15-19 vs 2.6 percent in ages 20-44

The five states with the highest percentages of poor fetal growth among hospitalized pregnant females aged 15-19 in 2013 were:

1. South Carolina (6 percent)
2. West Virginia (6 percent)
3. Rhode Island (5.9 percent)
4. Kentucky (5.8 percent)
5. Georgia (5.4 percent)

State Hospitalization Comparison for Teens – Pre-Eclampsia

Pre-eclampsia is a potentially life-threatening pregnancy complication.  The five states with the highest percentages of pre-eclampsia/eclampsia among hospitalized pregnant females aged 15-19 in 2013 were:

1. Georgia (11.3 percent)
2. Rhode Island (11.3 percent)
3. Tennessee (11.3 percent)
4. North Carolina (11.2 percent)
5. Kentucky (10.9 percent)

States with Highest and Lowest Childbirth Hospitalization Rates

The AHRQ report presented the states with the highest childbirth hospitalization rates for pregnant teens from 2004-2013 as:

• Arkansas (ranging from 40.3 – 57.9)
• West Virginia (ranging from 38.6 – 40.7)
• Texas (ranging from 37.6 – 57.1)
• Kentucky (ranging from 36.4 – 45.3)
• Arizona (ranging from 31.2 – 56.2) 

The three states with the lowest rates were all located in New England (Massachusetts, Connecticut, and Vermont).

From 2004-2013, the largest decrease in the rate of teen hospital stays for childbirth was in Connecticut.

Neighborhood Incomes and Pregnant Teens

For pregnant teens between 15-19 years old who were hospitalized for childbirth in 2013, the AHRQ report showed that 43.3 percent resided in neighborhoods that were linked to incomes at the lowest quartile of the U.S. population. In major contrast, only 8.1 percent of the pregnant teens resided in neighborhoods in the highest-income quartile.

For adult pregnant women, only 26.4  percent lived in areas at the lowest quartile, while 22.6 percent lived in the highest-income quartile—showing far less difference in neighborhood income level than among pregnant teens.

Disparities in Teen Pregnancy Rates

The teen birth rate among Hispanics and non-Hispanic African Americans remained nearly twice that of the non-Hispanic white population in 2014, according to the CDC’s Morbidity and Mortality Weekly Report (MMWR) in 2016.

Nationally, from 2006 to 2014, the teen birth rate declined 41% overall with the largest decline occurring among Hispanics (51%), followed by blacks (44%), and whites (35%).

Additionally, this MMWR reported that “unemployment was higher, and education attainment and family income were lower in counties with higher teen birth rates.”

The authors of the report also stated that some states showed smaller disparities in teen pregnancies “because the teen birth rates were relatively high among all racial/ethnic groups”. As an example, they identified Arkansas as having a teen birth rate higher than the national average for Hispanics (46.5 percent), African Americans (54.6 percent), and Caucasians (37.7 percent).

Uninsured Young Pregnant Women

Rural areas and micropolitan areas (urban areas between 10,000 and 50,000 in total population) were noted in the AHRQ report as having higher levels of teen childbirth hospitalizations than large metropolitan centers. In 2014, 11 percent of 18-year-olds were still uninsured, according to a U.S. Census Bureau report issued in September 2015.

Meanwhile, the AHRQ report found a higher teen pregnancy rate among 18-19-year-olds (44.1 per 1,000) as  compared to 15-17-year-olds (11.7 per 1,000)—at a total cost in 2013 of $818 million for the 18-19-year-olds versus $311 million for the 15-17-year-olds. Therefore, lack of health insurance coverage for pregnant women who are 18-19 years old remains an economic burden to hospitals.

Highlights of Report on Teen Hospital Stays for Childbirth:

To summarize, here are the highlights from AHRQ’s statistical brief:

• In 2013, childbirth was the leading reason for teen hospital stays, constituting nearly half of all inpatient hospitalizations among females aged 15–19 years.
• Of the 265,370 teen hospital stays for childbirth in 2013, which amounted to $1.1 billion in hospital costs, over 70 percent were paid by Medicaid.
• The rate of teen hospitalizations for childbirth increased from 2004 through 2007 from 41.8 to 44.5 stays per 1,000 females aged 15–19 years but thereafter decreased to 24.9 in 2013.
• From 2007 through 2013, the rate of childbirth hospitalizations decreased faster for teens aged 15–17 years than for those aged 18–19 years (50 vs. 42 percent decrease).
• Across States, the rate of teen hospitalizations for childbirth varied by a factor of 3.
• The rate of teen hospitalizations for childbirth was highest in the South at 80.5 in 2004. Through 2013, the rate decreased by 35 percent in the South compared with a decrease of over 40 percent in other regions. Thus, the rate in the South (52.3) remained higher than in any other region in 2013.
• Teen hospital stays for childbirth also were highest and declined the least in low-income, micropolitan, and rural areas.
• Although teens were less likely to have a C-section than women aged 20–44 years, they were more likely to have preeclampsia or eclampsia, poor fetal growth, and anemia.

To read or download the full report, click here (PDF).

References:

1. Agency for Healthcare Research and Quality (AHRQ). Teen Hospital Stays for Childbirth, 2004-2013. [Statistical Brief No. 208]. August 2016.
2. U.S. Office of Adolescent Health. Trends in Teen Pregnancy and Childbearing.
3. Centers for Disease Control and Prevention (CDC). Births: Preliminary Data for 2015. National Vital Statistics Reports 65(3). June 2, 2016.
4. U.S. Office on Women’s Health. Pregnancy – Pregnancy Complications.
5. Romero L, Pazol K, Warner L, et al. Reduced Disparities in Birth Rates Among Teens Aged 15–19 Years; United States, 2006–2007 and 2013–2014. Morbidity and Mortality Weekly Report 65: 409-414. April 29, 2016.
6. Smith JC, and Medalia C. Health Insurance Coverage in the United States: 2014. Current Population Reports. [U.S. Census Bureau Pub. No. P60-253]. September 2015.

The post Teen Hospital Stays for Childbirth: Latest National and State Specific Trends appeared first on Piper Report.

Background on Buprenorphine

Opioid use disorder involves both an addiction to and dependence upon opioids.  Medications, particularly buprenorphine (long-acting partial opioid agonist), are used in combination with behavioral therapies and counseling to treat addiction to and dependence on prescription opioids and heroin.  While methadone may be provided to patients only through highly structured specialized clinics, buprenorphine may be prescribed or dispensed in physician offices, correctional facilities, public health clinics, emergency departments, and hospitals (subject to federal restrictions described below). Also, methadone accounts for a disproportionate share of opioid-related overdoses and deaths.

Buprenorphine has unique pharmacological properties making it, when properly used, highly effective in reducing opiate use and in reducing withdrawal symptoms and cravings caused by a physical dependency on opioids.  It is now sometimes used to assist in opiate detoxification.  As an opioid partial agonist, buprenorphine produces effects similar to opioids, such as euphoria, but the effects are weaker and the opioid-like effects level off at moderate doses, creating a ceiling effect.  Coupled with it being a long-acting agent that many patients do not need to take daily, this lowers both potential side effects and the relative risks of misuse and dependency while providing some increased safety in cases of overdose.  But it is a powerful medication and safeguards are necessary to prevent misuse and diversion.

NIDA-supported discoveries in basic and clinical research led to the development of buprenorphine, with the FDA first approving commercial products in October 2002.  For the US market, the FDA has approved four basic types of buprenorphine-based prescription drug products, each a Class III controlled substance:

• Bunavail (buprenorphine and naloxone) buccal film
• Suboxone (buprenorphine and naloxone) film
• Zubsolv (buprenorphine and naloxone) sublingual tablets
• Buprenorphine-containing transmucosal products for opioid dependency

Under the Drug Addiction Treatment Act of 2000 (DATA 2000), prescribing and dispensing buprenorphine in the broader range of clinical settings mentioned above is subject to additional regulation.  Physicians must complete an 8-hour course, must obtain a waiver from the U.S. Drug Enforcement Administration (DEA), and are limited in the number of their patients being treated using buprenorphine.  Initially, qualified prescribers are certified to care for a maximum of 30 patients.  After a year, they may request federal permission to use buprenorphine in treating up to 275 patients as part of an evidence-based opioid recovery program (this was increased from 100 in a new SAMHSA final rule, effective August 8, 2016).  SAMHSA maintains an online database of physicians certified to provide medication-assisted treatment of opioid addiction and dependency.

Use of Opioid Recovery Medications in Medicaid, Medicare Part D, and Private Health Insurance

A new analysis by the IMS Institute for Health Informatics of the prescribing patterns and payer mix for buprenorphine show wide state-by-state variation in Medicaid, Medicare Part D, and private health insurance.  Most troubling, the IMS Health report – Use of Opioid Recovery Medications: Recent Evidence on State Level Buprenorphine Use and Payment Types – suggests a problem in accessing medication-assisted treatment using buprenorphine, particularly in a number of state Medicaid programs.

This is especially worrisome given how opioid misuse, overprescribing, abuse, addiction, and overdose death rates are all more severe in Medicaid.  To learn more about the staggering opioid problem in Medicaid and some best practices in addressing it, please read Best Practices for Addressing Prescription Opioid Overdoses, Misuse, and Addiction, a useful 15-page informational bulletin from the Center for Medicaid and CHIP Services (CMCS) at the Centers for Medicare and Medicaid Services (CMS).

Research shows the opioid epidemic has a disproportionate impact on Medicaid beneficiaries. Medicaid beneficiaries are prescribed painkillers at twice the rate of non-Medicaid patients and are at three-to-six times the risk of prescription painkillers overdose. North Carolina found that while the Medicaid population represented approximately 20 percent of the overall state population, it accounted for one-third of drug overdose deaths, the majority of which were caused by prescription opioids. One study from the state of Washington found that 45 percent of people who died from prescription opioid overdoses were Medicaid enrollees. – Vikki Wachino, Director, Center for Medicaid and CHIP Services, Centers for Medicare and Medicaid Services

Here are the highlights from the IMS Institute’s eye-opening, 24-page analysis:

• The number of prescriptions dispensed through retail pharmacies for buprenorphine medications reached 12.5 million in the twelve months ending June 30, 2016, an increase of 6.4 percent from the prior year.
• Growth in the use of buprenorphine medications has slowed over the past five years even as there has been an increase in the calls for action to support opioid addiction recovery programs and growing evidence and recognition that medication is key to long-term recovery for patients.
• Medicaid programs account for 24% of total buprenorphine prescriptions nationally, with commercial insurance plans covering 57%, Medicare Part D plans covering 7%, and the remaining 11% of prescriptions being paid for in cash.
• States vary widely in the extent of Medicaid funding of buprenorphine use, with more than 40% of buprenorphine prescriptions covered by Medicaid programs in eight states, while in twelve states that coverage is less than 10%.
• Those states with expanded Medicaid coverage are likely to have a higher proportion of buprenorphine prescriptions covered by Medicaid and a smaller proportion paid for by cash compared to states that have not expanded Medicaid coverage of buprenorphine.
• Of the ten states with the highest prescription opioid use relative to their population, eight states have a lower than national average level of Medicaid funding for buprenorphine use.
• Patient access to – and reimbursement for – buprenorphine medications used in addiction recovery programs varies widely across states and suggests inconsistent and suboptimal approaches in many parts of the country.

The full analysis, built on a series of informative charts and with state-specific data tables, is available free here (PDF).

The study was conducted independently by the IMS Institute for Healthcare Informatics with funding support from Advocates for Opioid Recovery, a nonpartisan effort founded and led by Newt Gingrich, Patrick Kennedy, and Van Jones.

Barriers in Securing Medication-Assisted Treatment for Opioid Use Disorder

Meanwhile, a new NIDA-sponsored study of physicians and addiction specialists certified to provide buprenorphine-assisted treatment of opioid addiction and dependency shows that many federally-approved prescribers serve only a small fraction of the total number of patients permitted under federal rules.  While the strict limits described above have caused concerns that federal restrictions prevent patients from receiving recommended treatment, the data show prescribers are seeing so few patients the caps are often not a factor. Further, the data show that for many patients who do receive treatment, the duration of medication-assisted treatment is substantially shorter than what is recommended in clinical guidelines.

More than 20 percent treated three or fewer patients, and fewer than 10 percent treated more than 75 patients. The median treatment duration (53 days) was lower than expected given clinical recommendations of maintenance treatment for up to 12 months and evidence linking longer treatment to better outcomes.

The study – Physician Capacity to Treat Opioid Use Disorder with Buprenorphine‐Assisted Treatment – was conducted by researchers from the RAND Corporation and the University of Pittsburgh School of Medicine and published in the Journal of the American Medical Association (JAMA) September 20, 2016 issue.

The findings suggest that the limited number of experienced prescribers and the limited range of substance use treatment counseling options combine to create major barriers to treatment of more patients.  The researchers recommend options to make medication-assisted treatment more accessible and more consistent with guidelines, such as:

• A mentoring program for less experienced prescribers, with telephone consultations from more experienced colleagues.
• Telehealth / web-based counseling options for patients.

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ISP is the focus of an interesting Institute for Clinical and Economic Review (ICER) report, entitled Indication-Specific Pricing of Pharmaceuticals in the United States Health Care System.¹  The 42-page report describes indication-specific pricing of drugs, potential benefits for the U.S. market, and considerations for stakeholders.

Background to Development of Indication-Specific Pricing

The Institute for Clinical and Economic Review held a policy summit in 2015 that included representatives from a total of 22 health insurers (“payers”) and life sciences organizations and resulted in this white paper. The report’s overall aim is to “analyze the barriers and potential solutions for efforts to implement ISP initiatives in the US.”  Furthermore, its basic perspective is that “innovations to create and test value-based reimbursement models for drugs appear to be lagging behind efforts in other parts of the [health care] system.

Definition and Characteristics of Indication-Specific Pricing (ISP)

The model of indication-specific pricing (ISP) is described by Pearson et al—the report’s authors—as “setting different prices for different indications or for distinct patient subpopulations eligible for treatment with a medication.”

The following three different ISP models are described:

• Distinct product differentiation: authorized and marketed under different brand names with different prices.
• No brand differentiation: distinct, separate discounts are applied for each indication.
• No brand differentiation, but a single “weighted-average” price developed using estimates of indication drug use across the U.S. population, with possible retrospective reconciliation through rebates based on actual utilization.

Catalysts to Interest in ISP – Providers, Patients, and Payers

Projected to increase to 75 percent by 2020, 50 percent of oncology drugs marketed in 2014 in the U.S. were already multi-use agents, according to a Harvard Business Review article as cited in this report.² Yet, a single price is typically established for that drug, regardless of the targeted condition for which a physician prescribes it to a patient. For example, a brand-name diabetes medication is also currently prescribed for obesity, and a brand-name erectile dysfunction drug is also prescribed for pulmonary arterial hypertension.

In addition, the clinical value of a multi-use medication for each specific disorder can differ tremendously. Numerous cancer drugs are of greater or lesser clinical value for treating a particular cancer, based on certain factors (e.g., genetic subtype, disease severity, and risk level for metastasis). Whether recognized as a high-value or low-value treatment, the cost of that cancer drug is not different based on its expected effectiveness for that patient.

One particular catalyst to increased payer interest described in this report—in determining the feasibility of a private insurer shift to ISP—was Express Scripts’ ISP launch for cancer drugs in 2016.

How is an ISP Weighted-Average Price Determined?

The report describes the following process as that by which a given weighted-average price is generally derived: “Most applications of indication-specific pricing use ex-ante estimates of population use to establish a single weighted-average price, and then use some mechanism to review retrospectively the use of a drug across all its indications and apply a rebate as needed based on actual use.”

A significant obstacle toward efficient determination of a weighted-average price is that the electronic capacity does not yet exist to link patient data that is not protected by HIPAA with all indications for use of the specified drug across the U.S. population. The report also presents a related problem: “Clinicians are not always required to provide the indication when prescribing a drug, and therefore standard pharmacy claims data for indication-specific pricing are not useful.”

Potential Benefit to Payers of ISP for Multi-Indications Drugs

A few of the described potential benefits to health insurers if an ISP model becomes the norm across the U.S. healthcare system are:

1. ISP offers a new mechanism to facilitate patient access to medications within a model that seeks to balance payer needs for affordability and manufacturer needs for sustainability: General recognition exists among payers that any cost-control approach needs to balance the needs of payers, manufacturers, and providers.

2. ISP offers the potential to save money: Under the current model, payers often feel compelled to take steps to limit use of high-priced drugs in broad populations, whereas a tiered drug-price linked to clinical value may alleviate this pressure.

3. ISP offers the potential to demonstrate a commitment to innovative payment models (e.g., value-based payment models).

Potential Benefit to Drug Manufacturers

The following are some of the potential benefits of ISP for pharmaceutical and biotechnology companies:

• Provides incentives to develop high-value, secondary drug-use indications.

• Protects existing price in high-value indications.

• May assist in justifying targeted price increases.

• May assist in aligning—independent of biopharma company competitors—an individual drug’s access, value, and price.

Risks to Health Insurers and Wholesale Pharmacies

Potential risks of embracing an indication-specific pricing model for health care payers and wholesale pharmacies are as follows:

1. Could have minimal impact on affordability or even increase costs.

2. May raise concern among purchasers and patients: will require extensive communication to address probable confusion as to a specific drug’s cost.

3. Administrative burdens may prove greater than anticipated (i.e., necessary data systems may be difficult and costly for payers to develop).

Primary Challenges to ISP Implementation in the U.S.

Five of the primary challenges to U.S. implementation of ISP described in the report are:

1. The complexity of drug purchasing and delivery systems: multiple pathways and intermediaries involved in drug purchasing and delivery.

2. Insufficient data collection, information technology, and analytic capabilities.

3. Limitations of drug formulary tier structure and difficulty linking indication-specific pricing to differential patient cost-sharing.

4. Potential misalignment with Medicare provider reimbursement for office-administered drugs: Medicare reimbursement rate for physician-administered drugs (now based on a method using average sales price [ASP]) could be lowered to the point where physicians might feel their cost of acquiring a given drug would not be mitigated by the limited reimbursement available from Medicare.

5. Unintended pricing effects related to Medicaid best price provisions: If a rebate linked to one health condition generated a resulting drug price lower than the federally mandated minimum Medicaid rebate, it could trigger a new (lowered) price that could become a benchmark across Medicaid drug benefits in all states.

There are also multiple administrative, legal, and regulatory challenges that currently darken the prospects for ISP (Indication-Specific Pricing) in the US.

Federal Anti-Kickback Law and FDA Restrictions on Marketing

“The Anti-Kickback Statute (AKS) prohibits offering or receiving remuneration (broadly defined) to induce or reward referrals for items or services paid by federal healthcare programs,” explains the report. Absent a legislative fix by Congress, the authors believe this could preclude Medicare and Medicaid’s ability to embrace ISP as a model. (However, formulary-based benefit designs and cost-sharing structures in Medicare Part D and private drug coverage and preferred drug lists and state-negotiated supplemental rebates in Medicaid are not seen as kick-backs or inducement.)

Likewise, Food and Drug Administration (FDA) restrictions on pharma industry marketing related to off-label indications may present an indirect obstacle. However, this perceived FDA obstacle may be surmountable through the following:

• Selection of drugs for ISP that have minimal off-label use.
• Application of price adjustments only to labeled indications for drug prescribing.
• Using a weighted-average approach to implementing ISP.

Possible Solutions to ISP Challenges

Recommended in this report is a pilot program—initially on a small scale—of the ISP model, in tandem with a focus on orally ingested drugs. Pearson et al favor a weighted-average approach as the best choice for the pilot test, due to the greater simplicity in applying this approach to drug pricing. Additionally, they believe:

• “Payers could identify drug indications using medical and pharmacy claims data as well as existing drug management capabilities, including prior authorization and specialty pharmacies.”
• “Manufacturers with a global presence and experience executing indication-specific pricing agreements in countries that support such models can use that expertise to inform and guide implementation in the US health care system.”
• “Payers and manufacturers should favor contracts involving oral drugs for which formulary tier placement can be consistent across indications when ISP is implemented.” (This proposed solution is based on the assumption that entanglement with Medicare ASP pricing can be avoided through a focus on oral drugs in pill form.)

International ISP Utilization

The healthcare system administration by a sole government-sponsored entity has simplified ISP implementation in countries utilizing such as system. In other words, the regulatory bodies of these nations negotiate pricing and reimbursement agreements with the pharmaceutical manufacturers. For example—in the United Kingdom—flexible-pricing was introduced as an option in the 2009 Pharmaceutical Price Regulation Scheme (PPRS).

The four objectives of this PPRS scheme are described in the UK Department of Health Pricing and Supply’s published manual³ as:

• Deliver value for money
• Encourage innovation
• Promote access and uptake for new medicines
• Promote stability, sustainability, and predictability

Meanwhile, in Italy, the report states that “some products are subject to indication-specific registries that are owned and maintained by the Italian Medicines Agency (AIFA).”

Medication Distribution Channels in the U.S.

Prescription medications are currently distributed in the U.S. through an array of different channels, including:

• Drug wholesalers
• Pharmacies (retail and specialty)
• Hospitals and outpatient clinics
• Providers (i.e., through drug samples provided by drug companies)

Conclusion

The complexity of drug delivery and distribution in the U.S. adds to the challenges in implementing ISP models. Although recommending a U.S. healthcare system shift to an ISP model, the report’s authors realize that “indication-specific pricing is but one of many possible policy tools available to payers and manufacturers.” Their concluding recommendation is that an ISP model at least be attempted, with the impact on drug prices subsequently assessed.

The white paper can be downloaded in its entirety from the ICER website here (PDF).

References:

1. Institute for Clinical and Economic Review (ICER). Indication-Specific Pricing of Pharmaceuticals in the United States Health Care System. March, 2016.
2. Bach PB. “A new way to define value in drug pricing.” Harvard Business Review. October, 2015.
3. United Kingdom Department of Health Pricing and Supply. The Pharmaceutical Price Regulation Scheme 2009. December 2008.

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Value-Based Health Care and the Costliest Patients 

The subset of patients termed “high-cost” account for the highest proportion of U.S. healthcare spending. Meanwhile, the basic goal of value-based payment models (VBPMs) is to improve quality while decreasing costs. Consequently, the shift to VBPMs has engendered an increased focus on clinical and payer interventions aimed at patients diagnosed with chronic conditions.

Five percent of the U.S. adult patient population was determined as “high-need”—based on a 2009-2011 nationally-representative sample—per this report. These patients were diagnosed with multiple chronic conditions plus functional limitations. Therefore, this report compared data on adults diagnosed with three or more chronic conditions and functional limitations in adult daily living activities (ADLs)(e.g., meal preparation and eating, toilet use, bed mobility, bathing, dressing) with a similar subpopulation not enduring such functional limitations. 

Understanding how high-need adults differ from other adults can help health systems, payers, and providers design and target programs. 

Findings of Sociodemographic and Health Status Differences

Patients classified as “high-need” based on health care use were found to differ from patients diagnosed with multiple chronic conditions but not experiencing any functional limitations, as follows:

• Older age of “high need” patients: more than half were age 65 and older.
• Gender of female: 66.6 percent of all “high-need” patients were women.
• Caucasian: 75 percent of all “high-need” patients were categorized as white, non-Hispanic.
• Low income: 50 percent of all “high-need” patients had incomes below 200 percent of the federal poverty level (FPL).
• Publicly-insured: Four out of every 5 “high-need” patients were covered by Medicare, Medicaid, or both types of governmental insurance. 

Furthermore, 83 percent of the patients with functional limitations in addition to multiple chronic conditions self-reported fair or poor health status to their physicians, as compared to 38 percent of the patients with three or more chronic conditions but no functional limitations.

Medical Expenditure Panel Survey

The Agency for Healthcare Research and Quality (AHRQ) administers the Medical Expenditure Panel Survey (MEPS). Commencing in 1996, data has been collected by the AHRQ utilizing this survey from:

• Individuals and families (e.g., patients)
• Medical providers (e.g., physicians, hospitals, and pharmacies)
• Employers

The latest MEPS data file available for public use is for 2014. This report’s findings were based on analysis of a subset (nationally-representative) of MEPS data from 2009-2011.

Health Insurance Enrollment Comparison

The following was the insurance enrollment status of the patients in the MEPS data subset utilized for this report:

• Medicare: 31 percent of patients with 3 more chronic diseases and no functional limitations; 50 percent for “high-need” patients with functional limitations.

• Medicaid: 7 percent of patients with 3 more chronic diseases and no functional limitations; 13 percent for “high-need” patients with functional limitations.

• Dual Medicare and Medicaid: 3 percent of patients with 3 more chronic diseases and no functional limitations; 20 percent for “high-need” patients with functional limitations.

• Private Health Insurance: 50 percent of patients with 3 more chronic diseases and no functional limitations; 13 percent for “high-need” patients with functional limitations.

Spending Patterns of High-Need Patients 

The data brief noted that “high-need” patients spent more than twice as much on out-of-pocket (OOP) expenses as adults in the population, suggesting the impact of chronic conditions (e.g., diabetes, COPD, lupus, and leukemia) on the finances of these patients and their families.

For the time period studied, the average annual OOP medical cost ascribed to the entire U.S. patient population was $702. In contrast, patients living with three or more chronic conditions plus functional limitations accrued annual OOP costs averaging $21,021. Meanwhile, patients with three or more chronic conditions but without functional limitations accrued costs of $7,526—far less than the subpopulation with functional limitations.

Cost Burden to Medicare of Chronic Diseases 

The findings of a similar study specifically focused on lupus (SLE) costs was conducted by Garris et al. Their results were published in 2015 in Cost Effectiveness and Resource Allocation.²

In contrast to the Commonwealth Fund researchers, Garris et al utilized a random sample extracted from the Medicare claims database provided by the Centers for Medicare and Medicaid Services (CMS). Next, Garris et al compared healthcare resource utilization by SLE patients with non-SLE patients. Their analyses showed that hospital utilization within an analyzed 12-month period was 40.2 percent for SLE patients, as compared to 17.2 percent for the non-SLE cohort.

In particular, Garris et al noted that “Patients with SLE incurred significantly greater average annual healthcare costs than matched controls without SLE.” Additionally, they found that hospitalization costs were 2.7 times higher in the SLE patient sample than the non-SLE patient sample. These researchers also found a two-fold greater utilization of outpatient physician services than by the non-SLE patient sample. 

Hospital Emergency Departments – Comparison of Utilization

The Commonwealth Fund report’s findings showed hospital emergency department (ED) utilization was twice the rate for “high-need” patients as compared to patients with multiple chronic disorders but without functional limitations. The rate of utilization by these “high-need” patients was also three times that of patients with no more than two chronic disorders and no functional limitations.

ED visits were more common among high-need adults who were under age 65, living in poverty, lacking a high-school degree, and covered by Medicaid only.

Outpatient Physician Visits – Comparison of Utilization

Ambulatory care physician visits by “high-need” patients were annually 50 percent more on average than for adults with multiple chronic conditions not experiencing functional difficulties. Meanwhile, the average annual number of paid home health care days was 26.1 for patients classified as “high-need” as compared to 1.6 for the adult patient population as a whole.

The report also stated that “Patients with a higher average number of doctor’s visits were under age 65, had relatively high income, were college-educated, and were privately insured.”

High-Need Patients More Likely to be Persistently High-Cost

Based on a one-year investigation compared to a following-year investigation, “high-need” patients were determined to fall within the top 10 or 5 percent of costliest patients, nationally. As compared to patients with chronic conditions but no functional limitations, “high-need” patients were determined to fall within the top 5 percent in terms of cost over a two-year period.

As a result, the authors of this report suggest to health policymakers that, “focusing on the high-need group may offer a better yield in identifying patients for intervention.”

Implications of Key Findings

This report concludes that “As health system reform shifts payment away from fee-for-service to value-based care models, the incentives to focus on and improve care for high-cost patients will grow.” Patient-centered medical homes (PCMHs) may be especially effective for these “high-need” patients in enabling better health status and reducing emergency department utilization.

To read or download a copy of the complete report, click here (PDF).

References:

1. Hayes SL, Salzberg CA, McCarthy D, et al. High-Need, High-Cost Patients: Who are They and How Do They Use Health Care? A Population-Based Comparison of Demographics, Health Care Use, and Expenditures. Commonwealth Fund. August 2016.
2. Garris C, Shah M, and Farrelly E. The Prevalence and Burden of Systemic Lupus Erythematosus in a Medicare Population: Retrospective Analysis of Medicare Claims. Cost Effectiveness and Resource Allocation.  Cost Effectiveness and Resource Allocation. May 2015.

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Introduction and Background of Payment Reform Methods

The authors specify in the report’s introduction that, “…most of what are considered value-based payment reform models are being implemented on top of current, volume-based payment approaches.” Additionally, they point out that, “Too often, analyses of payment methods are based on idealized versions and focus on the incentives the payment method embodies while ignoring practical issues.”  Explored in this large-scale report are a range of attributes embodied in the various reform approaches, along with the payment methods that constitute their underlying architecture.

Context, Design, and Operational Issues in Payment Methods

The context, design, and operational issues involved in the described payment methods are crucial in terms of their achieving value in terms of health economics outcomes. As the report presents, “Pricing power resulting from some form of consolidation may therefore have differential impacts on the success of payment methods, such as population-based payments, designed for large provider organizations.” Furthermore, the report’s authors suggest, “…private payers have more flexibility than traditional Medicare to design benefits that complement particular payment approaches.”

Overall Perspectives on Health Insurer Payment Methods

The authors’ overall perspective is illustrated in the introductory statement, “A fee schedule inherently contains incentives to provide more services, often more than needed or appropriate.” Moreover, the report’s underlying viewpoint is that “…too much of the discussion of payment reform has focused on payment models’ theoretical effects rather than on their interactions with other payment methods.”

Consequently, this report focuses on the nine provider payment methods used by third-party payers or insurers—public and private—to pay physicians and hospitals, in order to determine complementary payment and benefit design approaches that are the most likely to achieve the goal of value-based, cost-effective medical care.

While different naming labels may be applied to payment models, the models described in this report are based on those included in Berenson et al’s A Typology of Payment Methods. The nine specific payment methods described in this report are:

• Base Payments: 1) fee schedules for physicians and other health professionals; 2) primary care capitation; 3) per diem payment to hospitals for inpatient stays; 4) diagnosis related group-based payment to hospitals for impatient stays; 5) global budgets for hospitals; 6) bundled episode-based payments; 7) population-based payments, including capitation.
• Incremental Payments: 8) shared savings; 9) pay-for-performance.

Fee Schedules for Physicians and Other Health Professionals

In many health systems of other nations as well as the U.S., fee schedules are the foundational approach on which other payment methods are based. Public payers historically have viewed predetermined payment maximums as a preferred approach. Medicare’s physician fee schedule as of 1992 has been based on estimates of covered services’ relative resource costs; the value of a physician’s work as measured by (a) time, and (b) service intensity, and professional liability costs. As the report points out, “Most U.S. payers base their own fee schedules on Medicare’s, although they generally use different conversion factors.”

The following are some of described strengths of this approach:

• In contrast to payments based on provider charges, a fee schedule gives payers more control over payment, offers predictable payments, and counters the inevitable inflationary effect of UCR-based payment methods.
• A fee schedule implicitly adjusts for the different case mixes different physicians and group practices experience, thereby paying comparatively more for sicker patients that require more services.
• The approach provides payers and healthcare researchers with data about patient care, which can then be analyzed to establish performance measures.

Its major weaknesses include:

• Fee schedules encourage over-provision of services.
• This method ignores whether the service was appropriate or performed well.
• Fee schedules can contribute to care fragmentation.
• Activities not coded and covered for payment may be marginalized.

In regard to the fee schedule based payment model, “Payers, including Medicare, have recently recognized they can create new fee schedule codes to reward evaluation and management activities that had never been specifically paid, including complex chronic care management.” They also perceive, “Some elements of value-based payment can actually be included on a fee schedule.” Lastly, “For physician payment, only capitation approaches represent a rejection of fee schedules as the base payment.”

Primary Care Capitation

Capitation is described in this report as a prospective unit of payment in which a payer (insurer) makes a fixed payment to a provider for a defined set of services, regardless of the quantity of services actually provided to the patient.  Typically, the provider organization assumes financial risk for most health services under their direct delivery.  (The context here is capitation at the provider level, sometimes referred to as sub-capitation, rather than how capitation is used by purchasers to pay a health plan.)

This payment model typically entails patient selection of a primary care physician (PCP) who acts as a gatekeeper. A major point presented in reference to primary care capitation is that it “establishes spending limits for the patients a physician is responsible for, thereby creating financial incentives in favor of activities that reduce spending.”

Strengths of this method are the following:

1. Primary care capitation places “performance risk” on clinicians, providing them financial incentives to limit provision of unnecessary services.
2. Approach internalizes to the PCP decisions over the allocation of activity and costs, permitting more flexibility in individualizing medical care to meet patients’ needs.
3. Gives payers predictable and capped costs, while providing the recipient clinician a predictable cash flow.

One major weakness of this method is that it can lead to short-changing on patient care (e.g., prevention services) that does not compromise clinician care to a given patient in the short-term, but may foster future chronic disorders. Another is that per capita payment provides physician practices a financial incentive to accept more patients than is optimal in comparison to their total capacity to effectively care for them.

How Capitation Can Lead to Carve Outs

The report’s authors observe that, “Primary care capitation gives physicians strong incentives to refer patients to providers outside the purview of their capitation payments”. They also describe how a shared savings approach is now being employed by Accountable Care Organizations (ACOs) to manage risk-pool health spending. The opinion expressed in the report is that “Payers can encourage performance of particular services by making them targets of a complementary P4P [pay-for-performance] program or ‘carving out’ services from the capitation package.” Their conclusion is that a hybrid approach of capitation, fee schedule payments, and P4P programs are compatible.

For example, Medicare’s Merit-Based Incentive Payment Program (MIPS), mandated by Congress in 2015 and being phased-in starting in 2017, links Medicare Part B physician fee-for-service payments to performance. This program factors in four performance categories to determine the provider’s composite performance score: 1) quality, 2) resource use, 3) clinical practice improvement activities, and 4) meaningful use of electronic health record (EHR) technology.

Per Diem Payment to Hospitals for Impatient Stays

The per diem payment method still predominates in payer-hospital contracting for inpatient services. According to this report, large medical centers and ACOs are advantaged in per diem payments. The researchers believe that—if the payer and inpatient facility can accurately predict the number and mix of cases—a more accurate calculation of per diem rate can be determined. In other words, the larger the volume of cases corresponding to a payer, the more predictable they believe will be the average daily cost and concomitant per diem rate. Meanwhile, “carve-outs” allowing separate payment of high-cost items are often incorporated into per diem contractual arrangements.

Per Diems versus DRGs

Historically, most U.S. health insurers preferred per diem rates because it helped the insurer control volume-based utilization by denying additional inpatient days not supported by medical necessity.  It is also simpler to administer. However, private payers are now finding DRG-based payment methods more attractive because of the stronger financial incentive for shorter inpatient stays.

Two suggested strengths of the DRG payment method are:

1. Per diem payments have led for over 30 years to straightforward administration and contracting, which has facilitated administrative standardization and supporting software development to facilitate coding and billing.
2. Per diems provide some constraints on cost-generating “revenue management” behavior of hospitals.

Per diem payment method weaknesses described in this report are:

1. Hospitals have no incentive to avoid unnecessary inpatient days for a given patient;
2. The per diem payment model does not engender much transparency in contrast to DRGs about hospitals’ clinical activities or outcomes.
3. Efforts to control costs may require monitoring through third-party length-of-stay (LOS) medical reviews, thereby introducing administrative complexity and even inappropriate intrusion into the medical care provided.

Diagnosis Related Group Based Payment to Hospitals for Inpatient Stays

While private health plans and state Medicaid agencies often use different methodologies than Medicare, the basic set-up for diagnosis-related group (DRG) based payments reflect these core elements:

• A patient classification system to group patients with similar clinical characteristics and relatively homogeneous resource consumption (into hundreds of DRGs).
• Hospital cost information used to determine DRG weights.
• A standard monetary conversion factor, used to convert DRG weights into base payment rates for each DRG.
• Actual payment rates, obtained by adjusting the DRG base rates for structural differences across hospitals.

Three key strengths of DRG payment systems are:

1. Because the payment amount per principal diagnosis is fixed, hospitals have strong incentives to reduce costs per inpatient stay.
2. DRGs may be more market-oriented than other hospital payment systems because hospitals may improve quality and efficiency by especially treating patients for which the hospital has a competitive advantage.
3. Having a uniform, standard classification system facilitates transparency and permits inter-hospital comparisons by hospitals and consumers.

However, three weaknesses are:

1. With a fixed payment per case, hospitals retain an incentive to increase the number of patients hospitalized despite feasibility of ambulatory care for these patients.
2. DRGs entail more complexity as a payment system, requiring coding expertise, data systems, and coding oversight by payers.
3. Hospitals may transfer patients to other hospitals or post-acute facilities, generating insurer over-payments from the artificially-low LOS.

The DRG payment approach assumes that hospitals treat a random variation of patients, per the report’s authors. They also mention that most DRG payment systems include outlier payments as insurance against incentives to avoid or prematurely discharge potentially costly patients. In assessing the compatibility with other payment methods, this report concludes that “DRGs can readily be used in the calculation of bundled episode payments.”

Global Budgets for Hospitals

The main objective of global budgeting is to constrain the amount a hospital can spend in order to limit the total dollars spent on health care within the system. As the authors explain, “A global hospital budget implies that all payers participate and thus is simpler to operationalize in a single-payer or all-payer environment.”  These hospital global budgets are generally established through one of three approaches:

• Historical
• Capitated
• Normative

Global budgets may be less compatible with tired-network payer benefit designs per this report.

Bundled Episode Payments

A prospective payment is made in this payment method for all medical care a patient receives over the course of a defined clinical episode or period of management. Additionally, the episode of care has the following two dimensions: 1) a clinical dimension, and 2) a time dimension. This approach is designed to transfer financial responsibility for the technical risk that is under the included provider’s control, but not the probability/insurance risk that relates to the burden of illness in any large patient population. Therefore, the bundled providers—both the clinicians and medical facilities—have common financial incentives to control the cost of the bundle.

Global Capitation to an Organization

Capitation payment in this model for services delivered by different physicians—or at different levels of care—is combined into a single prospective payment to an integrated care organization or a large physician group practice. For health plan enrollees, capitated payments are expressed as per member per month (PMPM) payments, and usually adjusted for at least age and sex and ideally by other factors, including health status.

As the report’s authors state, “By accepting a defined fixed payment to provide contracted services, providers assume the financial risk for their patients.” Because of insurance risk, organizations working under this payment system typically purchase reinsurance.

Similarities of Investors and the Healthcare Marketplace?

Akin to savvy financial investors’ asset diversification preference, the inclusion across a sufficient number of members to spread insurance risk—and reduce potential volatility—is considered the most desirable approach within this global capitation framework. While HMOs have been mostly associated with this payment model, the report’s authors mention that self-funded employers are generally precluded from shifting risk to provider organizations.

Global capitation works best with implementation of sophisticated risk adjustment for patients’ health status.

While these authors reported global capitation as the most robust method for medical care services across the spectrum to internalize incentives for improving efficiency, they also note that the model places insurance and technical risk on providers, which can potentially result in financial losses outside of providers’ control. Subsequently, this can lead to indiscriminate service reduction.

Healthcare Administration Options

This report emphasizes that—for the most part—health care payment methods should be “viewed as falling on a continuum rather than with a clean line separating them.” The authors also believe that that health policymakers should thoroughly consider payment methods’ attributes to decide how or even whether to proceed with a given payment reform.

The report was funded by The Robert Wood Johnson Foundation written by Robert A. Berenson, MD and Divvy K. Upadhyay, MPH of the Urban Institute and Suzanne F. Delbanco, PhD, and Roslyn Murray of the Catalyst for Payment Reform (CPR).

The full report is available here (PDF).

References:

1. Berenson RA, Upadhyay DK, Delbanco SF, and Murray R. [Urban Institute and Catalyst for Payment Reform] (Updated June 2016). Research Report. Payment Methods and Benefit Designs: How They Work and How They Work Together to Improve Health Care; Payment Methods: How They Work.
2. Berenson Upadhyay DK, Delbanco SF, and Murray R. [Urban Institute] (April 2016). Research Report. Payment Methods and Benefit Designs: How They Work and How They Work Together to Improve Health Care; A Typology of Payment Methods.
3. Centers for Medicare and Medicaid Services (CMS). The Medicare Access and CHIP Reauthorization Act of 2015 Path to Value. [PowerPoint presentation]

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Physicians are a necessary component of every accountable care organization, with many ACOs led by and primarily governed by physicians.  The many organizational, systems, financial, accountability, clinical care, and performance-based features of the ACO model and shared savings will need to adapt to and work in concert with the MACRA policies.  MACRA presents significant challenges and opportunities for ACOs and for every physician, whether or not they practice with an ACO.  Depending on how the Centers for Medicare and Medicaid Services (CMS) makes the hundreds of regulatory decisions necessary to implement the law and how CMS revises current MSSP policies regarding financial risk, MACRA could be a boon to ACO growth or unintentionally result in many ACOs shutting down.

The new ACO Cost and MACRA Implementation Survey from the National Association of Accountable Care Organizations (NACCOS) provides interesting data on trends in ACO costs and insights from ACO leaders on the implications of MACRA.

MACRA Proposed Rule and CMS Policy Issues for Accountable Care Organizations

MACRA consolidates three existing Medicare physician quality reporting programs—plus adds a new program—into a single system through the Merit-Based Incentive Payment System (MIPS). Furthermore, physicians may enter either the MIPS or Alternative Payment Model (APM) track—as of approximately January 2019—as the two allowable reimbursement tracks.  Shared savings and therefore ACOs fall under the Alternative Payment Model, as does bundled payment.

NAACOS survey focused on three fundamental questions for ACO executives:

1. How much are ACOs investing?
2. How much and how quickly are ACOs able to take on two-sided risk?
3. How do ACOs feel about Track 1 being excluded from the list of proposed Advanced APMs under MACRA?

Organizational Structures, Investment Risk, and Operating Costs of Medicare Accountable Care Organizations

Eighty percent of the survey respondents represented ACOs with organizational structures that were physician-owned or a hybrid (physician and hospital participating together, but ACO not owned by a health system or academic medical center).  Among respondents working as part of a group with centralized operations and other shared services among more than one ACO, only 30 percent represented multi-ACOs while 70 percent were associated with a single ACO.

Not surprisingly, the survey found overall that “the investment risk is substantial.” Eighty-seven percent of respondents ranked their start-up investment and ongoing operational costs as either very significant or significant, while only 6 percent ranked these as nominal or negligible.  Regards participating in the MSSP, over three-quarters of the ACO respondents considered their financial investment to be “very significant” or “significant.” Notably, a comparison of the average operating costs of single ACOs and multi-ACOs showed a tremendous difference in dollar amounts, with the average operating cost of single ACOs ($1,943,276) almost double that of multi-ACOs.

The following is a breakdown of estimated ACO costs for participating in the MSSP, derived from analyses of all survey responses and sub-categorized by ACO types:

1. Clinical and Care Management – Single ACOs: $772,020; Multi-ACOs: $350,456.
2. Healthcare IT, Population Analytics, and Reporting – Single ACOs: $563,403; Multi-ACOs: $351,305.
3. ACO Management, Administration, Financial, Legal, and Compliance – Single ACOs: $479,781; Multi-ACOs: $221,773.

As Clif Gaus, ScD, CEO of NAACOS points out, “many ACOs are under enormous pressure from the significant operational investments combined with unfavorable policies.”

ACO Leader Perspectives on Shared Losses

In the shared savings model, accountable care organizations that meet or exceed specific CMS-defined performance objectives and reduce Medicare expenditures for the population served (compared to projected per capita costs), the ACO receives a substantial portion of the savings.  These shared savings – “upside risk” – go the ACO as a whole, are in addition to regular payments for services provided by the providers participating in the ACO, and may be used to cover ACO implementation and operating costs and distributed to participating physicians, hospitals, and other providers.  CMS has been interested in moving ACO players to a model that includes “downside risk” where the ACO would owe Medicaid money in the event actual per capita costs exceed projected spending.

Many ACOs see themselves as already sharing losses across their business lines, absorbing cost differentials between the expenses and reimbursement or absorbing costs of patients unable to pay.

If CMS requires downside risk, 43 percent said they would leave the MSSP but around 33 percent responded that they would either definitely or likely continue to participate. Interestingly, almost half of single ACOs replied that they would leave the MSSP program, and the report’s authors stressed that single ACOs are the most likely to disengage from the program if CMS requires downside risk for all ACOs.

MACRA Implications for Accountable Care Organizations

MACRA regulates how physicians will be paid under Medicare beginning in 2019. However, CMS proposed requirements disqualify many ACOs from receiving future Medicare payment increases.  The CMS proposed rules published in May 2016 identified the APMs that will qualify participating physicians for bonus payments and exemption from MIPS reporting as:

• Comprehensive Primary Care Plus
• Next Generation ACO
• Medicare Shared Savings Program Tracks 2 and 3
• Oncology Care Model (OCM) with two-sided risk
• Comprehensive ESRD Care (CEC) Model for large dialysis organizations

Meanwhile, NAACOS survey responses revealed a high degree of willingness to leave the MSSP if deemed ineligible for the 5 percent Advanced APM Bonus. Similar to the response to possible future financial losses, the respondents associated with a single ACO expressed hypothetically a far higher likelihood of leaving the program than those associated with multi-ACOs. On the other hand, over three-quarters of the ACO respondents felt that they would be ready for downside risk within the next six years, and 44 percent said they need 1-3 years to be ready for downside risk.

Why Physicians Should Care About Accountable Care Organizations

Health care market consolidation is a hot issue, with ACOs playing a growing role as the health care supply chain flattens.  A report by the California Health Care Foundation (CHCF) posits three key driving forces for consolidation at the provider level:  (1) accountable care organizations, (2) bundled payment, and (3) implementation of the patient-centered medical home (PCMH) model. CHCF points to the escalating trend of hospitals and health systems acquiring ACOs – this at the same time they are buying physician practices.  For Medicare, it is fair to say CMS is “pot committed” to shared savings and bundled payment as core reforms. The underlying concepts and lessons learned are being incorporated in payment reform demonstrations.

About 23.5 million US health care consumers are now served by an ACO—including 6 million Medicare beneficiaries. At the current rate, the number of patients served through Medicare, Medicaid, private, or multi-payor ACOs is projected to reach 105 million. From January 2011 to January 2015, the number of ACOs grew from 64 to 744. The number of ACOs has grown to 782 by December 2015.  This includes a mix of ACOs participating only in Medicare and others in Medicaid, the commercial market, or a combination of markets.  Currently, about 433 ACOs participate in Medicare shared savings. Each purchaser or health plan compensates ACOs and providers differently and set their own performance expectations, although they may mirror the CMS defined approach.

Just as physicians must adapt to the world of value-based payment and assumption of financial risk for clinical performance and efficiency, physicians must adapt to the new delivery system models such as ACOs and patient-centered medical homes and specific payment reform methodologies, including shared savings, bundled payment, and other episode or condition-based reimbursement.

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