By Rebecca Adams and Adriel Bettelheim, CQ Roll Call

October 1, 2014 -- Over the last five months of 2013, the biotech firm Genentech Inc. paid more than $130 million in consulting fees, royalties, licenses, and other general disbursements to doctors and teaching hospitals across the United States, including $75.4 million to the City of Hope National Medical Center in Monrovia, Calif.

The medical device maker DePuy Synthes and pharmaceutical giant Pfizer Inc. similarly laid out more than $20 million over the same period while manufacturers including Zimmer Holding Inc., AstraZeneca Pharmaceuticals LP and Arthrex Inc. also gave large sums, according to a federal database of industry payments reviewed by CQ Roll Call. 

The transactions are legal and, in many cases, may hasten medical research, But they also illustrate the pervasive financial ties between health industry manufacturers and providers that members of Congress such as Sen. Charles E. Grassley, R-Iowa, have long contended may unduly influence care decisions.

The Centers for Medicare and Medicaid Services on Tuesday offered the most detailed look at the financial arrangements to date, identifying $3.5 billion worth of transactions for the final five months of 2013. The agency detailed 4.4 million transactions involving 546,000 physicians and almost 1,360 teaching hospitals.

The disclosure stemmed from the 2010 health care law (PL 111-148, PL 111-152) and capped a nearly decade-long transparency push by Grassley and like-minded lawmakers, who included language in the law requiring manufacturers to report to the federal government any gifts or payments worth at least $10 that they give physicians. 

CMS broke down the payments into general payments, including speaking and consulting fees, meals and travel; research grants; and investment or ownership stakes held by doctors and hospitals. The agency said it would issue annual updates and create a website that consumers can use to track providers.

Physicians’ groups that lobbied for months to delay the release questioned the accuracy of the information.

“While we appreciate the efforts of the Centers for Medicare and Medicaid Services to verify the identification of physicians in each report from industry and to de-identify reports where there were discrepancies, we remain very concerned about the accuracy of the data released today,” the American Medical Association said in a statement. The physician trade group said about 550,000 physicians were affected by the disclosure requirements.

Drug industry officials said their marketing practices are shifting away from direct payments to providers and suggested the health law was not the only driving factor.

“Industry practices have changed in general to meet the demands of the changing marketplace,” said Pharmaceutical Research and Manufacturers Association general counsel John Murphy in an interview. 

The $130 million in payments from Genentech, a unit of Swiss health giant Roche Group, were more than three and a-half times more than those from DePuy, a subsidiary of Johnson & Johnson and the second-biggest giver among manufacturers, at $35.6 million, according to a CQ Roll call analysis of the five months of federal data. Pfizer was third at $20.5 million, followed by Zimmer Holding at $17.3 million.

City of Hope topped the list of health system recipients of general payments over that period, netting $122.7 million, according to the data. General Hospital Corp. took in $12.5 million over the same period while the Denver Health and Hospital Authority collected $5.35 million.  

Genentech said the payments to City of Hope were royalties awarded through a patent licensing agreement based on sales of Genentech and Roche products, including the cancer drugs Herceptin, Avastin and Rituxan, which is also used to treat rheumatoid arthritis.

About 58 percent of the company's spending that was reported in the database was to City of Hope, said Genentech spokeswoman Nadine Pinell. Of the remainder, about 85 percent was for research and development costs.

"Our ability to engage with doctors, researchers and opinion leaders in robust dialogue on approved and investigational medicines is vital to our research," said Pinell.

Device manufacturer Zimmer Holdings paid more than $4 million to the Cleveland Clinic and more than $5 million to Massachusetts General Hospital, according to the data. Zimmer spokeswoman Monica Kendrick and Cleveland Clinic spokeswoman Eileen Sheil said the payments were licensing fees for a hip device but declined to elaborate. Massachusetts General officials said they needed more time to review the data.

Forty percent of the 4.4 million transactions were stripped of identifying details because CMS officials were uncertain the data could be connected to a single physician or teaching hospital after reviewing three different databases. Those payments are expected to be re-published in an identifiable way next year, CMS deputy administrator Shantanu Agrawal said on a call with reporters.

Details of another 190,000 payments were not released because manufacturers requested a delay of up to four years citing ongoing research or pending approval of a product by the Food and Drug Administration. Another 9,000 records were withheld because a physician or hospital disputed the accuracy of the data during a 45-day review period.

About 26,000 physicians and 400 teaching hospitals registered in a system to review payments.

Insurers used the data release to question the financial arrangements, specifically whether they are benefiting the drug industry.

"These payments, while not nefarious in every case, are a perfect symbol for the misaligned incentives in our health care system,” said America’s Health Insurance Plans spokesman Brendan Buck. “While most health care stakeholders are working together to find ways to lower costs, drugmakers remain focused on strategies to keep them inflated.”

The website CMS set up to review the data was unusable at times on Tuesday. The site also did not combine the contributions of some corporations' business units, complicating efforts to identify the highest spenders. CMS officials said they will create a second, more consumer-friendly website within a month so patients can have an easier time searching the records.

“This is just the first phase,” said Agrawal of CMS.

By John Reichard, CQ HealthBeat Editor, and Rebecca Adams, CQ HealthBeat Associate Editor

September 30, 2014 -- The Centers for Medicare and Medicaid Services (CMS) on Tuesday released a trove of data surrounding physicians and academic hospitals’ financial ties to drug and device makers, identifying recipients of 4.4 million payments totaling nearly $3.5 billion during the last five months of 2013.

Forty percent of the payments were stripped of personal identifiers because the agency could not verify that the payments were accurately attributed to a single physician or teaching hospital. Those payments are expected to be re-published with identifiers next year, said CMS Deputy Administrator Shantanu Agrawal on a call with reporters.

Records of another 199,000 payments were not released, either because a physician or hospital disputed the accuracy of the data during a review or because the law allows manufacturers to request a delay in data releases linked to ongoing research for up to four years or until the FDA has acted on the product’s approval.

CMS officials said they will unveil a consumer-friendly website within a month to make it easier for patients to search the records.

“This is just the first phase,” said Agrawal.

CMS emphasized such payments can hasten medical breakthroughs. But the release of the data is likely to put the medical establishment on the defensive. Doctors and teaching hospitals will face questions about whether the payments led to decisions to prescribe costly pharmaceuticals and order expensive medical procedures.

The financial links “do not necessarily signal wrongdoing,” CMS said in a statement announcing the first phase of the “Open Payments” program. But the agency implicitly acknowledged the transparency effort may arouse public confusion and suspicion.

“Open Payments does not identify which financial relationships are beneficial and which could cause conflicts of interest,” Agrawal said. “It simply makes the data available to the public.”

Consumers and health plans will be left to sort out how the payments affect the quality of care they receive.

“While these data could discourage payments and other transfers of value that might have an inappropriate on research, education, and clinical decision making, they could also help identify relationships that lead to the development of beneficial new technologies,” Agrawal said.

The sheer sum of the payments identified on Tuesday appeared to vindicate the efforts of Sen. Charles E. Grassley, the Iowa Republican who championed the data release, saying extensive financial connections within the health sector and their potential for inappropriate care were little understood.

Grassley has cited an example of a doctor who declined to reveal how much she received from the maker of the antipsychotic drug Seroquel.

The physician was behind a study recommending the drug for bipolar disorder in teenagers, even though only eight teens completed the study. She later disclosed receiving income from eight drug companies, including all five makers of drugs like Seroquel.”

Consumers Union policy analyst Lisa Swirsky praised the data release, saying drugmakers “need to put more focus on research, less focus on marketing, and we hope this kind of financial transparency will encourage that.”

But American Society of Hematology President Linda Burns warned that research and development efforts could be harmed.

Transparency is “critically important,” but industry sponsored research and development “has paved the way for significant scientific discoveries that have benefitted millions of patients.”

Similar releases of data in the past have not persuaded patients to drop their doctors if they value the relationship, said Dan Mendelson, president of the Avalere Health consulting firm. “I tend to believe that the value of this kind of a data release is in terms of long-term signaling to providers as opposed to wholesale change in which provider a patient is seeing.”

Mendelson added the life sciences industry already is shifting its strategy away from paying doctors as a form of marketing.

By Rebecca Adams, CQ HealthBeat Associate Editor

September 29, 2014 -- The Centers for Medicare and Medicaid Services will soon release a rule updating the main program that pays groups of hospitals and doctors that coordinate patients’ care through accountable care organizations (ACOs), a top agency official said Monday.

CMS Deputy Administrator Sean Cavanaugh told insurance industry executives gathered at a conference sponsored by the America’s Health Insurance Plans trade group that the so-called “shared savings” program will be modified through a proposed regulation. When asked for more information after the briefing, he did not elaborate.

The accountable care organization payment model has been encouraged by CMS officials through the Medicare shared savings program and through demonstration projects like the Pioneer program through the CMS Center for Medicare and Medicaid Innovation.

Contracts under the program are in their third and final year. Hospitals, physicians, other providers, and insurers are anxious to see what types of changes may be underway for the next phase of the program.

About 4.9 million people in Medicare are covered by ACOs in the program.

One question is whether CMS officials will adjust quality metrics. Current measures often focus on whether certain processes or procedures have been done, rather than the actual outcome of treatment, providers complain. Providers say the data is costly to report and often doesn’t reveal whether patients get better care under an ACO than in traditional fee-for-service Medicare.

“There is a consensus that the number of quality metrics need to be reduced,” said University of Southern California Chair in Medicine and Public Policy Paul Ginsburg.

Payments for the ACOs also might change. Now that the ACOs have held down spending, CMS officials might be tempted to ask groups participating in ACOs to lower spending more.

Ginsburg said he would be concerned if CMS officials changed the original benchmarks for payments, which are based on historical spending and national trends, and asked ACOs to significantly reduce spending further.

“That would be a disaster because it would greatly undermine the business case from the ACO perspective,” said Ginsburg. “If ACOs reduced that spending, you don’t want CMS to take it from them right away. If they invested a lot of money to coordinate care, you want them to have a number of years of benefit so they can get a positive return on investment.”

The proposed updates come as another ACO program run through the Innovation Center faces a decline in participation. The Pioneer program incentivized providers to participate in ACOs but those that don’t achieve their goals face financial penalties by CMS. As organizations have realized that they could be penalized for participating, several have switched from the Pioneer program to the shared savings program, which is a better deal financially for them.

The number of ACOs in the Pioneer program has fallen from 32 ACOs three years ago to 19 currently.

However, the shared savings program has grown from 27 organizations in 2011 to 338 this year.

By Melanie Zanona, CQ Roll Call

September 30, 2014 -- CMS will soon be releasing a request for information to explore various innovation partnerships with health plans and other stakeholders, according to a CMS official.

The remarks came on Tuesday at conferences on Medicare and Medicaid hosted by the trade group America’s Health Insurance Plans.

Patrick H. Conway, deputy administrator for innovation and quality and chief medical officer at CMS, said he could not provide specific details or timing on the request but said the agency will be seeking information on collaborations with health plans and stakeholders to test plan design, care delivery, network design and beneficiary, and provider engagement. “Health plan innovation is critical,” he said.

During Tuesday’s event, Conway highlighted CMS’ strategy to reform its delivery system, which aims to “optimize health outcomes by leading clinical quality improvement and health system transformation.”

The six major goals of the initiative, he said, are to make care safer, reduce costs, strengthen person and family engagement, promote effective prevention and treatment of chronic diseases, increase coordination of care and encourage healthy living among communities.

Conway touted his agency’s efforts to increase care coordination and keep patients healthy and out of the hospital, but also acknowledged that “at times, we are failing to have the whole ecosystem support families and patients in their care.”

Going forward, Conway said it will be crucial to integrate innovation across CMS and launch new specialty models, such as outpatient models that move away from the fee-for-service, alternative pain models and greater consumer incentives models. But Conway also said it’s imperative to constantly evaluate whether efforts are lowering costs and improving quality.

By John Reichard, CQ HealthBeat Editor

October 1, 2014 -- Congress isn’t likely to tackle an overhaul of Medicare’s oft-criticized physician payment formula during a lame-duck session but could accomplish the task as part of efforts to raise the government’s statutory borrowing authority next year, according to a top lobbyist for hospitals.

If that fails and lawmakers can’t find another way to offset the cost of scrapping the formula, Congress may have to pass another law temporarily blocking scheduled payment cuts, said Chip Kahn, president of the Federation of American Hospitals.

The latest patch (PL 113-93) expires at the end of March, and Kahn has a vested interest in what happens next. Lawmakers have offset the costs of blocking payment cuts to doctors by trimming Medicare payments to other providers, including hospitals.

The 17 patches Congress has passed so far temporarily blocking cuts have cost more than $170 billion, the American Medical Association recently estimated. That compares to the roughly $130 billion over 10 years the Congressional Budget Office projected it would take to scrap the formula entirely.

Extensive talks between the Senate Finance Committee and the House Ways and Means and Energy and Commerce committees on policy provisions on replacing the so-called Sustainable Growth Formula didn’t yield a resolution, with lawmakers still divided over how to cover the cost.

“We could be back into another patch,” Kahn said in an interview this week with CQ HealthBeat.

Senate Finance Committee Chairman Ron Wyden, D-Ore., has expressed an interest in replacing the SGR during the lame duck. For that to happen, Kahn said, lawmakers would have to use war savings from the Overseas Contingency Fund or find another source to avoid major cuts for Medicare beneficiaries or providers.

A number of Republicans oppose using the contingency fund. But lawmakers also are weary of repeating forestalling payment cuts or pondering deep entitlement cuts. That’s stirring hope among health care lobbyists that with the elections safely past, lawmakers will scrap the SGR without doing offsets.

“Sometimes in lame duck sessions, there’s a willingness to agree to act in a budgetary way that there might not be once you get into the regular Congress,” Kahn said.

Still, he rates the odds at no better than 20 to 30 percent because of likely objections from conservatives such as Sen. Ted Cruz of Texas.

Another vehicle could be legislation to raise the debt ceiling that is expected next year. That, too, is likely to arouse the ire of a number of conservatives who insist on offsets. But Kahn says “if you look at the configuration of the vote for the debt ceiling, those who might not be sympathetic with just letting it go are not going to vote for the debt ceiling anyway.”

The options have left hospitals and other providers bracing for possible cuts if Congress takes up another temporary payment patch.

The hospital federation says its members have already absorbed huge cuts from the health care law (PL 111-148, PL 111-152) and subsequent legislation and should be insulated from further reductions. But a recent announcement by the Obama administration that hospitals have saved billions in uncompensated care costs because of the health law could make the industry a target once again.

Although those costs were supposed to drop, they haven’t as much as originally expected because the health law hasn’t expanded insurance in all states as hospitals expected. The fear in the industry is that memories of that may be short on Capitol Hill.

By Connor O'Brien, CQ Roll Call

October 1, 2014 -- The Defense Department's health care system provides good quality care to its beneficiaries in a timely manner overall and is comparable to private-sector care, but requires improvements in areas that fall below national benchmarks, a months-long review found.

The Military Health System, which provides health care to 9.6 million service members, retirees, and dependents, contains "pockets of excellence," Defense Secretary Chuck Hagel told reporters Wednesday, but also has "gaps" that must be improved. Hagel said he would task Deputy Secretary Robert Work with leading the effort to improve the system over the next year, in coordination with the top civilian and military health officials at the Pentagon.

"We cannot accept average when it comes to caring for our men and women in uniform and their families," Hagel said. "We can do better. We all agree we can do better."

The review, which was led by Assistant Secretary of Defense for Health Affairs Jonathan Woodson, examined issues related to access to care, patient safety and quality of care. Reviewers analyzed an array of Defense Department metrics and compared them to existing national standards in civilian health centers. The working group tasked with the review also visited a selection of military hospitals and clinics to validate the metrics.

Hagel said military facilities that were deemed outliers would be required to provide action plans for improvement within 45 days. Hagel also directed that the working group develop systemwide analytics and that all current data on the department's health care system be made publicly available. He characterized his directives as "first steps."

Laura Junor, the principal deputy undersecretary of Defense for personnel and readiness, said the review did not find facilities that were deficient across the board in their performance.

"We found that no hospital systematically underperformed ... in any of the three dimensions of access, quality or safety," Junor said. "We continue to provide safe and reliable health care, but we can do better."

Junor said that the review found that, according to its metrics, the Pentagon met its healthcare access goals for scheduling appointments, and even exceeded them in some areas. She told reporters that the Military Health System's goal for specialty care was four weeks, compared with an actual average wait time of 13 days. Junor said the wait time goal for routine care was one week, compared with an actual average wait time of six days, and that the department met its goal of seeing patients needing emergency care within one day.

The review, however, did find a discrepancy between access time performance and the perception of the beneficiaries it surveyed. Work described the working group as "a little cautious" with regard to access metrics, and said the Pentagon would rely on a wide variety of feedback to determine how well military health facilities met the goals, including input from military and veterans' service organizations.

"Access is one of the issues that we have heard back that our data is not actually reflecting what our beneficiaries perceive," Work said.

"We're going to ask for a wide variety of different sources to help our feedback," he added.

Hagel ordered the review on May 28, at the height of public furor over health care access deficiencies at Veterans' Affairs Department medical facilities. Work said the Defense Department and VA systems were not comparable.

"I don't want to compare our department with their department because the have two fundamentally different missions," said Work, who described VA's patients as a stable and defined group, whereas the Military Health System serves patients with a much higher turnover rate.

"We were satisfied with the finding that we are comparable with the health care system and we have no crisis," he said, "but as everyone has said, we want to do better, we have to do better and we can do better."

Work told reporters that he would coordinate with Woodson, Junor and the surgeons general of the military services and provide regular updates to Hagel. Work described improving military health care as one of Hagel's top two priorities and said the Pentagon's efforts would not be beholden to "programmatic pressure" imposed by budget concerns.

"This is one of [the areas] that we would not skimp in what we need to do to make this system as good as we can," Work said.

"We don't — luckily, we don't believe that that is going to require a lot of more resources," he added. "What this is going to require is us digging into the data and getting better."