By Mary Agnes Carey, CQ HealthBeat Associate Editor

AUGUST 1, 2006 -- The Department of Health and Human Services (HHS) announced Tuesday final regulations meant to support physician adoption of electronic prescribing and electronic health records technology.

The rules create new exceptions and safe harbors from two key federal fraud and abuse laws governing the donation of electronic health information technology and services, HHS said in a news release.

Under current anti-kickback law, written by Rep. Pete Stark, D-Calif., physicians are prohibited from referring Medicare patients for certain designated services to entities, such as hospitals, with which the physician has a financial relationship. Such practices could be seen as illegally inducing referrals of patients or recruitment of enrollees.

The exceptions and safe harbors announced Tuesday, published by the Centers for Medicare and Medicaid Services and HHS' Office of Inspector General, establish conditions under which hospitals and other certain groups can donate to physicians items such as interoperable electronic health records software, hardware, training for electronic prescribing, and other duties.

According to HHS, the exceptions and safe harbors protecting such arrangements will sunset on Dec. 31, 2013, in line with the president's goal of adopting the technology by 2014.

"This is a big day for the advancement of health information technology," HHS Secretary Michael O. Leavitt said in a conference call with reporters.

President Bush has said that he wants most Americans to have an electronic medical record within 10 years and that such records will reduce health care costs and improve patient care. To help encourage hospitals, physicians, and other health care providers to invest in electronic health record systems, HHS announced last month a list of ambulatory, or outpatient, electronic health record systems approved by a federal panel.

But some physicians, hospitals, and other providers are reluctant to invest in electronic health record systems, fearing the technology will become outdated and unable to share information with other providers—the essence of "interoperability," which advocates say can reduce paperwork and shave billions off health care costs.

Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, a trade group representing health insurers, said the new regulations would "create a uniform template to support e-prescribing and the creation of electronic health records."

Ignagni added, "We believe that these new exceptions to the Stark and anti-kickback rules to expedite the exchange of technology throughout the health care system now eliminate the need for Congress to act on this matter."

Separately on Tuesday, both Ignagni and Leavitt said they took issue with provisions of health care information technology legislation (HR 4157) that would not allow health information systems to be compatible.

"Unfortunately, the House bill contains the serious flaw of treating health IT as if it doesn't need to be interoperable," Leavitt told reporters. "That's like having a cell phone that can't talk with other cell phones from another network."

Leavitt urged House and Senate conferees "to reexamine the bills and make interoperability a specific requirement."

By Sarah Abruzzese, CQ Staff

July 31, 2006 -- Every American will have health care coverage by 2012 if Sen. John Kerry, D-Mass., gets his way, the senator said in a speech on Monday.

The 2004 presidential candidate told a crowd assembled in Boston's historic Faneuil Hall, "I return to discuss health care, which is not only the great unfinished business of half a century, but a matter of fundamental moral values," according to text of the speech released by his office.

Kerry, who is talked about as a contender for the Democratic nomination in 2008, previously campaigned on bringing a comprehensive health plan to Americans.

Through his plan, medical coverage would first be expanded to all children; the federal government would defray high-cost health care, helping to keep premiums low; and every American would have access to health care similar to that provided to members of Congress, using tax credits to help make health care affordable for small businesses, the middle class, and people between jobs. It also would focus on preventative care, so Americans aren't waiting until the last moment to seek care and entering emergency rooms.

Kerry proposes that his "Health Care for All Americans" plan will be paid for by repealing tax cuts for individuals earning over $200,000 annually that were enacted by President Bush.

But if this policy is similar to the one Kerry was touting during his presidential run, it won't work, said Ed Haislmaier, a research fellow for Health Policy Studies at the Heritage Foundation, a conservative think-tank. "It is a top-down approach," he said. "It is the managerial 'we are going to sort it out for everybody' approach."

Josh Holmes, a spokesman for the Republican National Committee, said, "Big government proposals aren't anything new for John Kerry or the Democratic party."

But Kerry said his plan is in response to a worsening health care situation. "This president and his party still have nothing to offer on health care other than a Medicare prescription drug plan that has turned out to be an unfolding disaster for seniors and a massive giveaway to the big drug companies," he said.

But Kerry isn't the only one in politics thinking about universal health care as a solution to problems with the U.S. health care system. Massachusetts already is on its way to near universal health care after a massive overhaul of the state's health care services enacted by Republican Gov. Mitt Romney.

The law, signed April 12, requires each Massachusetts resident to have insurance coverage by July 1, 2007. Under the plan, state funds now paid to providers for treating the uninsured would be used to help pay premiums for low-income residents. At the same time, employers who do not offer insurance would be charged a per-employee fee to help fund the program.

Several other Democrats also are proposing universal health care plans. Last week Sen. Ron Wyden, D-Ore., and Rep. Pete Stark, D-Calif., announced their different versions of a universal health care plan.

By John Reichard, CQ HealthBeat Editor

August 4, 2006 - The Blue Cross Blue Shield Association held a telephone briefing Friday to announce creation of a database of claims filed on behalf of 79 million enrollees—a treasure trove of information that employers working with health plans can use to extract greater value for their health care dollars.

Called "Blue Health Intelligence," the database is more than twice the size of the next largest database in the United States, the association said in a press release.

The unveiling comes in a health care era in which "information" is king—and data is viewed as the key to unlocking efficiency in a system bloated with excess from spending on unnecessary or overpriced services and products, according to many analysts.

Officials with the Blues described various efficiency and product safety breakthroughs made possible by the massive size of the database, which they called the largest of its type in the world.

One example they point to is the field of comparing treatment outcomes for the same medical condition. Health policy analysts have long touted treatment comparison as having great potential for improving U.S. health care efficiency, but getting such a program off the ground has been a struggle.

Analysts will be able to do head-to-head comparisons of prescription drugs to see which work best—the kind of research industry avoids because of marketplace risks of adverse results, and the kind government infrequently subsidizes.

The expanse of the database—which covers patients in every U.S. ZIP Code, according to Dr. David Plocher, senior vice president for health management and informatics at Minnesota Blue Cross-Blue Shield—means the findings of those comparisons will be far more reliable than studies based on a relatively small number of patients.

Eliminating geographic variations in services—another holy grail in the drive for greater efficiency—also may be within closer reach.

Studies by Dartmouth Medical School researcher John Wennberg and other analysts have documented sharp geographic variations in the use of certain types of surgical and other medical procedures for a specific condition—variations that make health care much more expensive in certain parts of the country with no apparent advantage in outcome.

Plocher said in an interview Friday that the database allows researchers to go beyond simply documenting variations and begin developing more detailed information on the treatment outcomes associated with those variations.

Employers working with Blues plans can use that information to design more efficient health plans. If heavy use of a particular type of imaging in a city or state yields no advantage in outcome, for example, employers in those areas could opt for health plan designs requiring higher co-payments for that service. Or, doctors making heavy use of certain procedures with no advantage in treatment outcomes could be placed in networks requiring higher out-of-pocket payments by enrollees picking them, Plocher said.

Plocher cited an example where the database would permit a publishing company in one part of the country to compare its health costs with those of a branch in another part of the country to determine why costs were rising at different rates. The analysis might find differences in the rate of treatment for low back pain or heart problems, for example, and allow the employer to customize the health plan services it chooses accordingly, he said.

The database also will be used to assess the value of medical devices. For example, it could be used to examine how heart patients with costly implanted defibrillators do compared with patients who do not have the device.

"That's the beauty of this database," Plocher said.

Plocher also pointed up the database's ability to quickly pick up safety problems associated with new drugs and devices. Just as researchers were able to identify safety problems associated with the prescription painkiller Vioxx by combing through a large database of health claims, they also will be able to identify hazards using the new database, but with much greater certainty because of its size, Plocher indicated.

The next largest database with drug data is "one-third this size," he said, referring to Ingenix, based in Eden Prairie, Minn., and operated by the insurer UnitedHealth Group.

As an example of the difficulty researchers have determining safety problems with drugs on the market, Plocher noted a recent call from a drug company researcher trying to determine the incidence of a side effect associated with a new vaccine. The process involved getting claims data in non-standard formats from about 30 companies to try to piece together a safety profile. The new database would permit such an analysis from a single workstation, Plocher said.

However, it has not been determined whether drug manufacturers will be permitted access to the information. The database wasn't envisioned as a way to advance the interest of drugmakers, Plocher said, and the Blues have yet to decide whether they will sell data to drug companies. Access would have to "fit with our mission."

To help with the aim of assessing the effectiveness and safety of drugs, the association has contracted with Harvard and Johns Hopkins researchers to advise on study designs. "We have half a dozen [studies] already planned," Plocher said.

But Blues officials emphasized the use of the data in the employer market. Bob Greczyn, chief executive officer of Blue Cross-Blue Shield of North Carolina, said the database is a "very robust tool to help employers make better decisions."

Access to the data is currently confined to Blues plans. Officials said consumers would not have direct access, but would benefit through data included in published reports and studies. Research comparing drugs would be published, Plocher said, but drug data won't begin to come into the database until the middle part of next year.

Twenty of the nation's 38 Blues plans are taking part. Blue Cross-Blue Shield Association President Scott Serota said he hopes all plans will participate, "but we have to sequence it. We can't load all the data at once."

By John Reichard, CQ HealthBeat Editor

AUGUST 1, 2006 -- The Centers for Medicare and Medicaid Services (CMS) announced Tuesday that two types of changes to improve the accuracy of Medicare inpatient payments will be launched this fall—contrary to a request by the hospital and medical device industries.

CMS said it will phase in the changes, making payments more closely reflect the costs of care and severity of illness, to prevent sharp swings in payment. Hospital and medical device lobbies called for delaying the start of the accuracy provisions until fiscal 2008 and phasing them in after that time, a request joined by Senate Finance Committee Chairman Charles E. Grassley, R-Iowa.

Instead, CMS is heeding the wishes of House Ways and Means Committee Chairman Bill Thomas, R-Calif., and the Medicare Payment Advisory Commission by starting both changes in fiscal 2007.

But thanks to its phase-in plan, CMS appears to have blunted much of the industry criticism of the provisions. Rick Pollack, executive vice president of the American Hospital Association, praised the three-year phase-in of "cost weights" to adjust payments on the costs of care rather than what hospitals charge for care.

"While we continue to have concerns about the rule's impact, CMS has listened to the hospital fields' views and made important changes from its proposal," Pollack said. "While we continue to believe a one-year delay is needed given the rule's complexity, we are committed to working with CMS to ensure any needed changes are addressed in future years."

"At first blush . . . it appears that the rule addresses many of the concerns that were raised by patient, physician and hospital groups," said Stephen J. Ubl, chief executive officer of the Advanced Medical Technology Association, which lobbies for medical device firms. "We look forward to working with the administration and CMS over the three-year phase-in period to further improve the accuracy of inpatient hospital payments."

Under a proposed rule governing the changes, CMS would have fully implemented the cost weights in fiscal 2007, which starts October 1. "Severity adjustments" classifying patients on the severity of their illnesses, paying more for sicker ones and less for healthy ones, were to be implemented in fiscal 2008.

The new timetable speeds up "severity adjustment" by starting it this fall, but only for a limited number of "DRGs," the diagnosis-based payment categories to which patients are assigned for purposes of calculating Medicare inpatient payment rates. The proposed rule would have applied severity adjustment to all DRGs in fiscal 2008. CMS Administrator Mark B. McClellan said it's still possible all DRGs will be severity adjusted in fiscal 2008, but told reporters Tuesday afternoon CMS will consider delaying severity adjustment of some DRGs until after fiscal 2008 under an as-yet-undetermined timetable.

Prior to fiscal 2008, CMS will evaluate severity adjustment systems as a prelude to increasing the number of DRGs affected. "CMS will require that hospital stakeholders have easy access to the new system," the agency said in a press release. An interim report comparing severity-adjusted DRG systems will be completed by the end of 2006 and will be released for public comment.

The accuracy provisions seek to end the ability of hospitals to limit their care to certain patients and to certain procedures as a way to boost their profits. "Hospital payments should promote the best care for all patients, not the treatments that happen to be most profitable, and we are now on a path to making sure that happens," said Department of Health and Human Services Secretary Michael O. Leavitt. Because of the rate adjustments, payments to cardiac specialty hospitals will drop 5 percent between fiscal 2006 and fiscal 2009, CMS said. Complaints about "cherry picking" patients and procedures have centered on these facilities.

The accuracy provisions are part of the final fiscal 2007 rule for Medicare inpatient payments, under which payments to all hospitals will increase an average of 3.5 percent in fiscal 2007 when all provisions of the rule are taken into account. No individual DRG will have a payment reduction of more than 5.4 percent under the rule.

CMS also announced a final rule governing payments to inpatient rehabilitation facilities in the fiscal year starting Oct. 1. Payments to the 1,240 facilities will rise by about $50 million in fiscal 2007, the agency estimated. Although the rule increases payment rates 3.3 percent, it also applies a 2.6 percent reduction to offset billing practices that do not accurately reflect how sick patients are, CMS said. The proposed version of the rule would have applied a 2.9 percent offset.

The final rule for the facilities also includes accreditation requirements that must be met by suppliers of prosthetics and of durable medical equipment, such as walkers, wheelchairs, and hospitals beds. Along with a competitive bidding program to be announced "shortly," the accreditation procedures "will promote quality and avoid unnecessary costs in providing needed durable medical equipment," McClellan said.

By Sarah Abruzzese, CQ Staff

AUGUST 1, 2006 -- Hispanic and black adults are up to three times as likely to be uninsured as their white counterparts, according to a new report released Tuesday by The Commonwealth Fund.

The report finds an estimated 15 million Hispanic adults, or 62 percent, ages 19 to 64 were uninsured at some point during 2005—three times the rate among whites. More than six million, or 33 percent, of blacks experienced a health care gap or were uninsured during 2005.

"These findings are extremely troubling and indicate missed opportunities to ensure a healthy and productive workforce," Commonwealth Fund President Karen Davis said in a statement released by her office. "Minority Americans face persistent disparities in rates of health care coverage, as well as cost and access barriers to care even when they do have health insurance."

The report found 76 percent of Hispanics with incomes under 200 percent of the federal poverty level—or $38,700 for a family of four—were uninsured. Of those with incomes equal to or exceeding 200 percent of the federal poverty level, 40 percent were uninsured. The study also found that 27 percent of uninsured Hispanic adults with health problems did not visit the doctor. And the group also felt the least confidence in their ability to manage their health care problems, with 31 percent not confident.

Only 17 percent of whites and 16 percent of blacks in the same situation didn't feel confident about their ability to handle their health care. And 17 percent of whites and blacks hadn't visited a doctor in more than a year.

While only 44 percent of blacks with income below 200 percent of the poverty level were uninsured, they reported higher rates of health problems, with 63 percent saying they suffered from one of four diseases: hypertension, heart disease, diabetes, or asthma. And while 23 percent of those with incomes at or over 200 percent of the poverty level were uninsured, 45 percent reported chronic health problems.

The report also finds that one-third of black adults visited an emergency room for conditions that could have been treated by a doctor and 61 percent of those who were uninsured reported medical bill or debt problems. This contrasts with the 56 percent of uninsured whites and 35 percent of uninsured Hispanics who reported debt or bill problems.

Racial disparities in hospital visits for blacks (non-Hispanics) and Hispanics are not new. The Agency for Healthcare Research and Quality released a study in July through the Healthcare Cost and Utilization Project finding that in 2003, blacks generally had the highest rate of preventable hospitalizations, followed by Hispanics. The study specifically found that blacks had the highest preventable hospitalization rates for diabetes and circulatory diseases as well as pediatric asthma, adult asthma, perforated appendix, dehydration, and low birth weight.

By Sarah Abruzzese, CQ Staff

AUGUST 3, 2006 -- The U.S. health care system lags behind other industrialized nations despite providing some of the best health care in the world, but implementing policies to increase quality and access to care could reverse the trend, according to a new report by The Commonwealth Fund.

The report, put together by the group's Commission on a High Performance Health System, examines sources of failure within the system, such as decentralization of care providers and lack of health information technology, and recommends ways to address the problems.

Despite the fact that the United States spends the most money on health care, the report says, the country needs to implement significant and systemic changes to increase access, quality, and efficiency of care for all Americans, especially for vulnerable populations. The country needs wide-scale policies and practices to improve safety, expand the use of health IT, reward high-performance health care providers through a payout system, expand access to health care quality and cost data, and expand health insurance coverage.
The report also says that health care providers must be held accountable for meeting quality, safety, and efficiency benchmarks.

"There is wide agreement among the public, policymakers, and health care professionals that we should get much more from our health care system," said Commission Chair James J. Mongan, president and chief executive officer of Partners HealthCare System in Boston, in a statement. "Our message to the nation is that our future health and economic well-being depends on acting now to begin the transformation."

The Commission on a High Performance Health System, which consists of 18 commissioners, was formed in July 2005 to address health care issues.