Friday, August 18, 2017

Very Brief Blog: The Cost of Adding Vision, Dental, Hearing to Medicare

Dating from the original benefit package in 1965 law, Medicare excludes nearly all services for dental, vision, or hearing.[*]  But there are some NEW efforts in 2017 to add these allied healthcare services to Medicare.

Authors from Johns Hopkins and the New York Academy of Medicine raise the topic in this week's JAMA (here).   They say that a benefit cost can't be quantified perfectly, but could be constrained as a $150 deductible, 20% cost share, and $1500 cap.  Such a benefit would cost about $2B  per year as a de novo Medicare benefit.  For perspective, Medicare is about a $600B program.  To provide the benefit at no government cost, it could be self funded by a $25/month premium.  Between those two options, you could have a self-insured program that is supplemented by low income premium support, at estimated at $1B government cost.   The authors describe several current legislative efforts.


[*] There are some quirks.  The vision exclusion is for "refractions," though medical interventions like cataract surgery or glaucoma are certainly covered.  The hearing benefit excludes routine tests and hearing aids, but some implanted nerve based devices are covered as they have been ruled to not be "hearing aids" which are audio amplifiers with little speakers.  The dental benefit excludes services for "teeth and supporting structures" so both root canals and treatment for gingivitis are out, but medical conditions in the mouth like tongue cancer or broken jaw are covered.

Monday, August 14, 2017

Brief Blog: CMS - Cancellation of Some Bundled Payment Programs PUBLISHED

Proposed Rule Published.  Online here.
Trade Press: here.  CMS Press Release here.

For more trade press:

  • American Journal of Managed Care, "CMS To Cancel Mandatory Cardiac, Expanded Joint Replacement Bundles," here.
  • Cardiovascular Business, "Cardiac Bundles to be Canceled by CMS," here.
  • Healthcare Informatics, "CMS Provides More Details on Proposal to Eliminate Mandatory Bundled Payment Programs," here.
  • Medpage Today, "Docs, Hospitals Respond to CMS Retreat," here.
  • Forbes (earlier, June 2017):  "Alternatives Are Needed to Flawed CMMI," here.

For a 250-page commissioned independent review of the successes and difficulties of smaller CMS initiatives, here.


The draft rulemaking has some interesting features.

  • Change of Administration.  They note the Agency has a right to revise its policies and especially with "a change in administration."   
  • (1) Some Programs Shrink.  They believe the older program, the Comprehensive Joint program, is in its second year but the number of mandatory metropolitan zones may be halved - and even where they remain, more hospitals excluded - while still obtaining valid statistical data on program savings for the Actuary. 
    • The only, or one of the only, statistically successful programs has been the Medicare Diabetes Prevention Program, which is being rolled out nationally in 2018 based on its cost-savings value in demo programs.  
    • In speeches, outgoing director Dr. Patrick Conway has bemoaned that numerous CMMI early programs failed to be rigorous enough or successful enough to meet the Actuary's criteria for expansion.
  • (2) Some Delayed Programs Are Now Killed. The newer programs have been delaying since the November 2016 election and are hereby canceled, although the Agency could revive parts of such programs at a future date if it sees fits.   
    • New Programs More Like Grants, Less Like Laws.  Likely, the rule notes, new programs would be voluntary and solicited by grant application or RFP rather than instituted as law by rulemaking.   However, if a couple voluntary centers embrace a demo program, it is harder to know if it is a benefit that is valid to roll out nationally, which is one of the reasons for the existence (raison d'etre) of CMMI.  
  • Frees Up CMMI Budgets?  Because the CMMI or Innovation Center has a finite budget, the sudden cancellation of some large programs might free up budget for other programs.
  • Telehealth Expansion by CMMI.  Notably, the joint replacement model includes home telehealth evaluation, a very important new kind of Medicare service.  It's represented by 9 G-codes which CMS is offering to pay a little more for (G9481ff).  
    • But the important thing is that tucked inside all the joint replacement demo program legalese is open access to home-based telemedicine.   Regular CMS telemedicine has very restricted sites of service. 
  • Making CMMI Program Expansion HARDER.  Congress gives CMMI the authority to create Demo Programs, and then to expand and extend them if they convince the Actuary that money is saved.   Very few CMMI programs have met the Actuary's standard for results and credibility, which you can glean from public CMMI documentation and from speeches of the outgoing director, Dr. Conway where he reiterates that CMMI program designs are not meeting the scrutiny of actuaries.   
    • CMMI makes this budget appraisal problem worse if it allows participants cherry pick themselves, making it harder for the Actuary to later certify that the programs would work on a nationwide, take-all-comers basis.  
    • If you don't eat your vegetables today (such as randomized trials and regionally mandatory enrollment zones), you won't get your dessert tomorrow (program expansion after savings certification.)

Original Article

Bundled payment programs are sometimes viewed as the messiah that can save us from the high costs of fee-for-service systems.   On the other hand, they have also been roundly criticized for poor design or lack of impact or both (here).

Healthcare Dive reports on August 14, 2017, that HHS may be proposing to cancel or heavily modify some bundled payment programs.   The Healthcare Dive article is here, citing a rule in process at the Office of Management and Budget here.  Coverage also at Axios, noting Secr. Tom Price's longstanding dislike of "innovative" CMS bundling programs (here). MedCityNews, here.

The rule has the title:  Cancellation of Advancing Care Coordination through Episode Payment and Cardiac Rehabilitation Incentive Payment Models; Changes to Comprehensive Care for Joint Replacement Payment Model (CMS-5524-P).

For a review of the "Mixed results" of payment reform experiments at CMS, also on August 14, see Nichols et al. at Health Affairs, here.  See also a Health Affairs article by Kahn, a couple days earlier, here.

The current director of the Innovation Center at CMS will be moving to a private sector position on October 1 (here).

Thursday, August 10, 2017

ACLA and NILA Propose CMS Must Follow PAMA Rules, Not "Panel Pricing" Rules, in 2018

On July 31/August 1, CMS held the annual new code pricing meetings for the Clinical Laboratory Fee Schedule.

One topic received special prepared comments from both the American Clinical Laboratory Association and National Independent Laboratory Association (ACLA and NILA).

Traditionally, CMS has markedly reduced what it pays for routine clinical chemistry through a body of rules for panel test pricing - a body of policy found in neither regulation or statute.  ACLA and NILA argue that the text of PAMA, read closely, overrides prior agency pricing rules for panels.

A lot of money is in play.  Currently, the chemistry panel test codes pay out about $700M per year in Part B (here), while the panel prices typically represent a discount up to 75% on the analytic components if they were individually priced tests.

I summarize my understanding of the arguments in bullet points next, and for further discussion, see a link at the end of this blog to a PDF document in the cloud that includes my informal transcripts of the NILA and ACLA public discussions.


o   Based on public records, CMS pays $700M through the CPT chemistry panel pricing codes. 
o   The panel pricing policies probably save several hundred million dollars.

o   PAMA law requires CMS pay for lab tests, based on each CPT code, and based on market prices.  There is no option in PAMA that allows for the complex repricing maneuvers that occur today under CMS panel pricing rules.
o   NILA and ACLA are very aware of this and they are warning CMS it cannot apply panel pricing rules under PAMA.

o   To my eye, taking PAMA literally, CMS has only a few options.
§  (A) Ignore PAMA, continue panel pricing, and risk legal protests; or
§  (B)  Circumvent PAMA by making its own new G codes.
o   There is a chance that a “leg fix” could be sought by CMS to restore the panel price concept that was superseded by PAMA, and CMS might foresee that a quite large dollar volume is involved.

An 11-page PDF of the NILA and ACLA arguments, along with my own introductory summary, is in the cloud  here.

Let's show an example, a hypothetical.  Let's say a 12-panel test is $20, and each of the analytes is $10.  A doctor orders the 12-panel test, and gives several ICD-10 codes as justification. The laboratory notes that none of the ICD-10 codes justifies the 12th analyte, and under CMS instructions, the lab can bill only for analytes that are medically necessary.  So the lab bills for the 11 analytes.   Currently, no stack of analytes exceeds the cost of the corresponding full panel, so CMS pays no more than $20 for the 11 analytes (ghost price ATP11).  If PAMA is taken literally, the lab is billing 11 CPT codes for 11 analytes, let's say at $10 each, so under PAMA the payment rises to $110 instead of $20.[*]

There may be a parallel to the 2009 federal appellate case Hays v Sebelius.  For some years, statute had required CMS to pay for Part B injectible drugs at 106% ASP.  However, CMS informally applied its own commonsensical "least costly alternative" pricing, which lowered prices.  Court said no: CMS must pay as written in statute.  Here, for the lab industry, CMS pays for panel tests with a capped, "commonsensical" rule which lowers prices.  But if this informal rule is challenged, a court may say no:  CMS must pay for the codes exactly as instructed by Congress in the PAMA statute.

[*]  Readers may recognize the Merchant of Venice principle at work, wherein a contract is suddenly and dramatically interpreted adverse to the party that wrote it.

For a deeper dive into quirks and values of panel pricing, here.

Tuesday, August 8, 2017

Brief Blog: Patrick Conway MD, Chief Medical Officer, Leaves CMS to Join BCBS North Carolina

Patrick Conway MD, the high profile Chief Medical Officer of CMS and the head of its Innovation Center (CMMI), is stepping down from government service.

On October 1, 2017, Conway will become the CEO of BCBS North Carolina.

Conway has served at CMS since 2011.

Triangle Business Journal here, Washington Examiner here.


I recently posted links to several of Conway's Youtube speeches, with unoffical transcripts, here.

Brief Blog: SoCalBio To Hold DIgital Health Summit (November 7); Annual Conference (September 29)

SoCalBio Digital Health: November 7
The Los Angeles-based Southern California Biomedical Council holds its first ever digital health summit at USC on November 7, 2017.  Registration here, agenda here.   The conference focuses on IoMT - Internet of Medical Things - and includes panels on remote patient monitoring, opportunities and challenges for IoMT, providers & efficiency, and new frontiers (genomics, AI, digital biomarkers).

SoCalBio Annual Conference: September 29
SoCalBio's 19th annual conference will be September 29, 2017, at the Hilton Long Beach; website here.

CLSA in Beverly Hills: Robert Califf MD: August 24
Not related to SoCalBio, but sponsored by the California Life Sciences Association, CLSA, former FDA commissioner Dr. Robert Califf will be speaking in Beverly Hills, Thursday, August 24, 2017, webpage here.  For a mid August op ed in JAMA by Califf, see here.

Concentric Circles of Innovation in Advanced Laboratories

The Sky Is Falling
In the lab industry, there is much concern that commodization and reimbursement pressures (from PAMA to laboratory benefit managers or LBMs) are killing profitability and innovation, and could eventually reduce customer service.

Digital Genomics
At the same time, new horizons are being explored, such as digital genomics.  See, for example, my discussion of DarwinHealth, here, and a protype overview of the "digital genomics industry," here.  But more evidence of "digital genomics" is everywhere.  For example, in one day I saw that the Boston academic spin-out lab Claritas Genomics emphasizes its alliance with digital genomics firm WuXiNextCode, itself a spinout from the famous legacy firm DeCode.  And the former CEO of Claritas Patrice Milos is now CEO of a digital genomics firm Medley Genomics, with several co-founders from the computer science departments of Princeton and Brown.  In the last couple weeks, more news from Genepeeks which uses genetics combined with software called "Virtual Progeny" - a heavy bioinformatics play in the preconception space (see patent).   Veritas Genetics acquires artificial intelligence firm Curoverse.   Genome analytics firm Genoox raises $6M.  The list goes on.

But in addition to just improving a service (like more sophisticated interpretation of sequence data or better integration with EHRs),. Digitization is also allowing firms to change the nature of their offerings and their scope-and-scale in creative ways.   I'll discuss this with reference to two works, the classic Nobel prize winning work of Coase in the 1930s, and a new 2017 book on "complementary innovation" by Robertson.

Is "The Nature of the Firm Lab" Changing?
"The Nature of the Firm" is a 1937 economics paper (which won the Nobel in 1991) on how firms develop and thrive best as independent units or as conglomerates, what is insourced, what is outsourced - i.e., the boundaries of the firm. (The answer has to do with "transaction efficiencies," specialization, and other factors; only part of the answer is economics of scale.)  

This sounds esoteric relative to the nitty gritty business of getting in blood and tissue samples in the door and issuing a report back to the physician.   But the business school perspective helps in understanding, categorizing and predicting real-world changes in the genomics industry.  [more after the break.]

Wednesday, August 2, 2017

Very Very Brief Blog: Full CMS Transcript Posted for CLFS Two Day Meeting

Many readers track by blog feed, therefore, notice of an update.

Yesterday's blog about the CMS Clinical Lab Fee Schedule meeting has been updated with a full, two-day transcript.   Click HERE.


Tuesday, August 1, 2017


On July 31 and August 1, CMS held its annual CLFS new code pricing meeting.
    CMS website here.  My earlier blog with an overview of the agenda, here.

An unofficial rapid transcript of both day one and day two is online in the cloud HERE.
     144 pages, 80,000 words.  This is a Word doc for readers to download and annotate.
     An alternate version as PDF is here.
     The CMS list of all codes to be discussed is here.

For video, CMS Youtube Links are here:
  • Monday July 31 morning session here.
  • Monday July 31 afternoon session here.
  • Tuesday August 1 morning session here.

More after the break.