In today’s edition of “The Healthcare Round-Up”, we’ve pulled together the best healthcare/ reimbursement related news you may have missed as you were counting down to 2012, finalizing your too-packed J.P. Morgan Healthcare conference calendar, or discussing the merits of Teva’s new CEO, the erudite Jeremy Levin.
From next week onwards, we’ve resolved to post the round-up at the start of the work week, in time to help you impress colleagues during your regular conference calls. (Er, resolutions come with a grace period, right?) Make sure to tell us what you like — and what you don’t. Post a comment at the bottom of the page; or, for the more circumspect, email comments to firstname.lastname@example.org.
1. Accounting for accountable care: Accountable care organizations aren’t just coming – as of January 1, 2012 they’re… here! Recall that Medicare revealed the names of its 32 pioneer ACOs in late December and this new delivery system, which emphasizes efficiency as well as outcomes, went live on Sunday. Come April 1st, when the standard Medicare Shared Savings program gets underway, even more patients will be participating in this payment reform experiment. If ACOs are the healthcare delivery vehicle of the present, it behooves drug and device makers to board the reform train sooner rather than later.
How best to do this? One way, according to a story in the Jan. 3 “The Pink Sheet” is for product makers to form partnerships with ACOs. Such alliances could, of course, be tied to the utility of an individual product –say sharing data that demonstrates product X is not only easier to dispense than products Y, Z, and A but provides a better (or at least similar) healthcare outcome. Beyond demonstrating the value of a product at a good price, experts like the Center for Medicare and Medicaid Innovation’s William Shrank believe product makers have the opportunity to participate more broadly in the ACO model, helping to boost adherence across all treatments.
That’s a tenet also voiced in an opinion piece published in the December 28 issue of the New England Journal of Medicine that channels Lance Armstrong’s memoir “It’s Not About The Bike”. “If an ACO were a bicycle, its wheels, spoke, and gears would be the criteria used by payers such as Medicare to determine providers’ eligibility, the methods used to assign patients to a given ACO, and the manner in which financial bonuses are calculated,” the authors write.
But the success of said ACOs depends on whether the organizations employing the model have the healthcare IT tools required to support patient care.
What’s one area that could be tripped up by the ACO movement? In the Pink article, Ted Okon of the Community Oncology Alliance predicts new, costly cancer medicines could have a tough road to adoption, in part because ACOs won’t be able to readjust their cost benchmark from Medicare to account for newer, more expensive therapies.
- Read the “Pink Sheet” story here.
- Click here to access “Achieving Accountable Care – ‘It’s Not About The Bike’”
2. It costs more, but is it worth more? It’s not just pricey cancer therapies that will come under the “value” lens. Ezekiel Emanuel, an oncologist and contributing opinion writer for the New York Times, decries the building of new proton beam treatment facilities as “a medical arms race” in this Jan. 3 piece. A form of radiation, proton beam therapy offers theoretical advantages over more standard – and cheaper—X-rays because the particles can be focused more precisely on the cancerous tissue, leaving the surrounding healthy cells intact. But for now there’s no evidence this therapy, which is substantially more expensive than the more standard X-ray approach, leads to better survival – or even fewer side-effects. Calling the use of proton beam therapy “unsustainable public policy,” Emanuel recommends instead embracing a dynamic pricing model. Via this approach, Medicare might pay more for proton beam therapy but only in instances where there is evidence of greater effectiveness. For cancers like prostate, for instance, Medicare would initially reimburse for the procedure at the same rate as other cheaper alternatives. If studies showed proton beam therapy provided better results, reimbursement would increase. If no data showed an advantage to the approach, coverage would continue, but at the lower payment rate. In spirit, it’s an approach similar to pay for performance agreements; in practice this kind of dynamic pricing might be easier for payers to administer because it sets a base case reimbursement rate from the get-go, rather than a higher price that must be rebated if the procedure ultimately fails.
- Click here for the NYT opinion piece by Emanuel.
3. Will improving clinical quality really reduce healthcare costs? Probably not, according to a team of researchers from Dartmouth’s Institute for Health Policy and Clinical Practice in the most recent issue of the New England Journal of Medicine. The problem, says the team, is healthcare’s rigid cost structure, which is “relatively insensitive to small changes in patient volume, resource-use, or the severity of patients’ health conditions.” In other words, many of the big ticket healthcare items – think equipment or operating room time – are fixed costs; an intervention that decreases O.R. utilization, for instance, won’t negate the sunk costs required to equip the space or pay the staff required to run it. “Because of these cost behaviors, quality-improvement efforts that reduce lengths of stay or readmissions…do not create substantive bottom-line savings. They generally create capacity to treat additional patients,” the researchers write. And increased capacity means…you guessed it, increased healthcare costs, especially if new staff must be hired to serve the larger patient population.
All is not lost, however. The Dartmouth team believes it’s possible to lower healthcare costs by focusing on overall utilization rates and eliminating unnecessary services. But to do so “hospitals will need to adapt their cost structures and capacity to accommodate lower per capita utilization rates as well as reductions in the per-episode intensity of care.”
- Read the NEJM perspective in its entirety here.
4. Build an innovative contract and payers will come: That seems to be the take-home message from a recent survey by HealthEdge, a healthcare IT play developing software and tools aimed at payers. Okay, maybe there is a little bit of wish fulfillment happening. In a survey of 100 execs from payer groups around the US published in December, 48% of those surveyed said they will use value-based benefit designs, 55% said they will participate in ACOs, and another 51% will utilize pay-for-performance models. Should the latter prove true, that would result in a marked uptick in novel contracting; P4P isn’t wildly popular in cost-sensitive Europe for reasons we’ve discussed. In the U.S., such risk-sharing deals are even rarer, with Cigna being the only major payer willing to strike such arrangements (in diabetes and MS, if you are keeping track). Surprise, surprise; survey participants also admitted they don’t have the IT tools required to implement these new payment models, including an ability to support the new ICD-10 coding standard that goes into effect in 2013. As we wrote in an earlier post, product makers should thank their lucky stars that ICD-10 migration is tying up resources that might otherwise be dedicated to the management of bundled payments.
5. How to price biosimilars: How should biosimilars be priced compared to their originators? Intuitively, one might expect the same steep discounts associated with small molecule pharmaceuticals. The reality is far more nuanced. For starters, legislators drafting the Affordable Care Act didn’t want the high price of an innovator product to be a disincentive to prescribing follow-on drugs. Thus, the Medicare Part B payment for biosimilars is based on the following formulate: the compound’s average sales price plus 6% of the ASP of the reference product. Then there are the incentives of the specialist pharmacist to consider. In this First Take from The RPM Report, Mark McCamish, who heads Sandoz’s global biopharmaceutical development, admits “I can tell you we have made mistakes where we priced a product substantially below [the originator].” Come again? In our wacky reimbursement environment, the reality is that when Sandoz (or Baxter via Momenta or Amgen through its Watson collaboration) sells a biologic for 50% less, the specialty pharmacy’a incentive to sell the product also drops by half since they get 6% of the sales price of the product. “In that situation, we had to raise our price to sell the product,” he tells RPM. Thus the optimal scheme for pricing biosimilars may be to list the product for the same amount as the innovator, and then offer big discounts –via rebates—to pharmacy benefit managers.
- Read this story from the January RPM Report for more.
6. Aetna diversifies with the iTriage app: At first blush, why so much fuss about Aetna’s acquisition of mobile health app maker iTriage? The deal, which came to light in mid-December at Aetna’s investor day, is months old – it was apparently inked in September — and its value hasn’t been disclosed. Maybe the hoopla is because Aetna is one of the few payers trying to actively rethink its strategy to remain competitive in the new world order that is ACOs. A deep dive by MobiHealthNews postulates iTriage “looks to be at the forefront of Aetna’s consumer engagement strategy.” The supposition is that by providing tools to patients –remember that part of the healthcare triumvirate?—Aetna can amass some brand loyalty. Since the mobile app, which has a symptom navigator that identifies nearby health facilities as well as a means to book appointments, works via both Apple’s iTunes and Android’s software, it already appeals to hyper-connected, Internet savvy consumers. But Aetna isn’t stopping there, with plans for additional tools that provide patients with an accurate estimate of the costs associated with their care. Aetna’s head of strategic diversification, Charles Saunders, called the iTriage app, as well as the clinical data integration capabilities it recently acquired via Medicity, tools that are provided in a “payer neutral way.” If Saunder and his team manage their integration into Aetna’s ACO model correctly, however, the result for the payer’s bottom line may be anything but neutral.
- Read the MobiHealthNews story here.
Image courtesy of flickrer BazaarBizarreSF via creative commons.