Health Update

In This Issue:

  • Ten Years In: Charting the Progress of Health Information Exchange in the U.S.

  • How the ACA Is Changing the Management of Patient and Healthcare Data

  • Medicare Part D Proposed Rule: Where Did Things Go Wrong?

  • New, Free Webinar from Manatt Health and Bloomberg BNA: “The Evolution of Health IT and EHRs”

  • Much Critical ACA Guidance Is Just Emerging. How Can You Be Ready for the Major Changes Still Ahead?

Ten Years In: Charting the Progress of Health Information Exchange in the U.S.

Authors: William Bernstein, Partner, Chair, Healthcare Division, Manatt, Phelps & Phillips, LLP | Helen Pfister, Partner, Healthcare Industry, Manatt, Phelps & Phillips, LLP | Susan Ingargiola, Director, Manatt Health Solutions

Editor’s Note: Efforts to digitize the U.S. healthcare system and make it possible to exchange health information electronically have been underway for more than a decade. Manatt Health has created a new report for the California Healthcare Foundation taking stock of the nation’s health information exchange (HIE) progress and summarizing the opportunities and challenges that lie ahead. The report describes the HIE landscape as it stands today, nearly 10 years after the creation of the Office of the National Coordinator (ONC) and 5 years after the passage of the Health Information Technology for Economic and Clinical Health Act (HITECH). It assesses the nation’s HIE efforts in three areas: electronic health record (EHR) adoption; standards, certification and incentives for HIE; and governance. Below is a summary of key highlights. Click to download the full report.

HITECH: Federal Dollars Spur Adoption and Use

The modern era of HIE-related public policy began in May 2004 with the appointment of the first national coordinator for HIT and the release of the federal government’s first comprehensive HIT strategy document. At that time, however, federal support for HIT did not have significant funding and therefore focused primarily on the private sector.

In 2009, Congress passed HITECH as part of the American Recovery and Reinvestment Act. HITECH’s cornerstone was the Medicare and Medicaid EHR Incentive Programs, which provide hospitals and professionals with financial incentives for the “meaningful use” of EHR technology to improve patient care. In 2015, the Medicare program will transition from offering incentives to imposing penalties on those not meaningfully using EHRs.

The U.S. Department of Health and Human Services (HHS) originally envisioned that the Meaningful Use Incentive Programs would evolve through three stages over five years. In December 2013, however, it proposed to extend the timeline by two years. Stage 1 focuses on EHR adoption, basic electronic data capture and medication ordering. Future stages require providers to use EHRs for exchanging health information and improving care, efficiency and population health. In addition to establishing the EHR Incentive Programs, HITECH allocated more than $2 billion for HIT and HIE infrastructure development.

EHR Adoption Rate Growth and Gaps

The adoption of EHRs has increased dramatically since HITECH was implemented in 2010. Adoption rate highlights include:

  • 44% of hospitals had adopted EHRs in 2012, up from just 17% in 2011.

  • As of February 2014, HITECH’s Regional Extension Center (REC) program has worked with nearly half of the nation’s primary care providers, helping 90% of those adopt EHRs and 62% demonstrate stage 1 meaningful use.

  • According to the 2013 National Ambulatory Medical Care Survey, nearly 80% of office-based physicians report using an EHR system.

  • As of December 2013, the Medicare and Medicaid EHR Incentive Programs had paid almost $19 billion to 335,000 professionals and 4,400 hospitals.

Despite the widespread increase in EHR adoption, serious gaps remain. Providers in rural and low-income areas, as well as long-term care and behavioral health providers, have lower adoption rates than the general provider population.

Concerns Around the Meaningful Use Program

While most agree meaningful use has been an effective policy lever in Stage 1, some believe it could impede further EHR adoption. Concerns include:

  • Stage 2 may be moving too quickly and be too complex in its requirements.

  • Meaningful use may prevent providers from using EHRs to their full potential by putting completing the program’s steps before improving health outcomes.

  • There are too many meaningful use measures that are too tactically focused.

  • The role of EHRs in care coordination and analytics is being overemphasized.

Standards and Certification—Federal Government Efforts

As it was 10 years ago, achieving interoperability—the ability of two healthcare providers to exchange data and present it in an understandable manner to patients—continues to be an important HIT goal. Despite the inclusion of standards in the meaningful use program, however, the healthcare system has yet to achieve interoperability. The current federal strategy for developing and adopting HIE standards is articulated in a June 2013 report to Congress from ONC. According to the report, ONC’s approach includes:

  • Supporting flexible, incremental and modular standards.

  • Selecting standards that work for the future.

  • Making incremental changes with community feedback.

  • Supporting implementation and precertification testing.

Standards and Certification—Private and State-Based Efforts

State and private sector players have contributed to standards development. In February 2011, 19 states and 43 EHR/HIE vendors formed the EHR Interoperability Workgroup, which released its first set of functional, technical and test specifications in 2013.

In March 2013, a coalition of EHR vendors formed the CommonWell Health Alliance to address the problem of interoperability. The alliance will initially certify core interoperability services and standards for vendors to embed in their software. The services the alliance will test in its 18- to 24-month proof-of-concept phase include:

  • Cross-identity management services—identifying patients as they move among settings, regardless of the underlying software.

  • Patient consent and data access management—providing a HIPAA-compliant, patient-controlled way to simplify managing consents and authorizing data sharing.

  • Patient record location and directed query services—delivering a history of recent patient encounters and, with the right authorization, patient data across multiple providers and care episodes.

HIE Incentives and Payment Reform

In addition to requiring compliance with technological standards, the federal government has sought to encourage HIE through payment incentives, beginning with meaningful use requirements and now including the payment reform provisions of the ACA. Experts agree, however, that widespread HIE won’t occur until new payment approaches, such as bundled payment options, accountable care organizations (ACOs) and medical home initiatives, create the case for information exchange. According to many experts, HITECH was meant to be coupled with ACA-style payment reform provisions.

The ACA includes a series of new payment and delivery system initiatives that, in some measure, require better HIT systems. For example, to function successfully, ACOs need timely access to performance metrics, patient events and patient status information. The proliferation of ACOs is a contributing factor to large health systems’ desire to build or procure their own HIEs. State efforts to redesign their Medicaid programs to reward more efficient and coordinated care also are drivers of HIE.

HIE Governance

HIE governance refers to the establishment and oversight of common behaviors, policies and standards that enable trusted HIE among a set of participants. While the need for governance is widely recognized, the last 10 years have not brought a consensus on the nature or extent to which governance is required at the national, state, regional or community levels.

There have been several efforts at the national level to establish HIE governance, none of which have been successful. With the passage of HITECH, Congress required ONC to establish a governance mechanism for the Nationwide Health Information Network (NHIN). Public feedback, however, indicated that market conditions were not right. Therefore, ONC decided instead to define general principles for supporting HIE. In May 2013, ONC released the “Governance Framework for Trusted Electronic Health Exchange” outlining four categories of principles for HIE governance:

  • Trust principles provide guidance on patient privacy, meaningful choice and data management.

  • Business principles focus on responsible financial and operational policies, emphasizing transparency and patients’ best interests.

  • Technical principles prioritize standards to support trust and business principles, as well as to further interoperability.

  • Organizational principles identify approaches for good governance.

In addition to national efforts, there have been a number of state-level HIE governance initiatives. One major effort was the 2009 launch of the State Health Information Exchange Cooperative Agreement Program. Through this program, ONC provided $564 million in HITECH funds to states and state-designated entities for developing plans that address statewide policy, governance, technical infrastructure and business practices in support of HIE.

ONC’s support is winding down as funding was from 2010 through 2013. The future of state initiatives will rest on whether stakeholders decide to provide continued financial support.


Nearly a decade after the establishment of the ONC and five years after the passage of HITECH, the U.S. is progressing with harnessing the power of health information to support more cost-effective and higher-quality care. The combination of government initiatives and market forces is propelling the nation forward to a time when creating, sharing and using electronic information to improve healthcare decision making and management will be commonplace.

How the ACA Is Changing the Management of Patient and Healthcare Data

Author: Jonah Frohlich, Managing Director, Manatt Health Solutions

Editor’s Note: In the February issue of PharmaVoice, Manatt Health examines how the ACA is driving faster transformation of the healthcare delivery system. Key points are summarized below. Click to download the full article.

The ACA is accelerating a reorganization of the healthcare delivery system from episodic, reactive, acute management of patients to proactive, population-based delivery models. This transformation requires both payers and providers to manage high-risk patients and chronic diseases aggressively, identify risk factors and engage patients in self-management. All of these tasks demand accurate, timely, secure information, available to both patients and providers. Organizations able to manage the heavy flow of information needed to optimize health outcomes, contain costs and support high-needs patients while keeping less complex patients healthy will gain more market share.

The Importance of Data Convergence

Current medical record systems do a good job of digitizing health data, and their adoption has been rapid. The number of hospitals using electronic health records soared from 9.4% in 2008 to 44.4% in 2012.

Other tools are needed, however, to support population-based care delivery models. Registries, analytics and business intelligence systems are being deployed to:

  • Identify high-risk populations,

  • Apply protocols for prompting patient outreach,

  • Assess treatment pathways,

  • Report measures internally and externally to inform decision making, and

  • Demonstrate value to health plans and purchasers.

Effective implementation across all of these applications requires a convergence of clinical, financial and utilization data into a single data stream that can be mined across the delivery spectrum. That integration, however, demands trust among the participants—and a rationale for sharing their information with other players. With its regulatory changes and focus on financial alignment, the ACA is providing that rationale, giving healthcare stakeholders incentives for collaborating to improve outcomes and limit costs.

Data Standards and Governance

To automate integration so data can become an actionable part of the healthcare planning and delivery processes requires addressing two key areas—data standards and data governance:

  • The slow pace of developing interoperability standards remains a hurdle to the seamless integration and exchange of data. Moving forward demands the faster and broader adoption of specifications and systems that can handle extracting, translating and loading large data sets from a variety of sources into a normalized data repository.

  • Accessing and integrating data effectively require a full understanding of the laws and practices governing its use. Organizations that know the rules and have robust privacy and security policies will be better prepared to manage the flood of information from all of their partners.

The Shift from Volume to Value

As health reform moves forward, we are seeing a shift in the focus of our regulatory, delivery and payment systems from volume to value. This new perspective will mean changes for both providers and product suppliers, including the need to:

  • Become successful risk-bearing organizations.

  • Demonstrate the real value of their products, in lowering costs and improving outcomes for complex patients, as well as in increasing the chances of keeping less-acute patients healthy and out of expensive treatment settings.

  • Support a value-based purchasing strategy.

Organizations that effectively navigate these changes will allow more of their products to be integrated into the benefits packages provided on exchanges.

Medicare Part D Proposed Rule: Where Did Things Go Wrong?

Author: Ian Spatz, Senior Advisor, Healthcare Industry, Manatt Health Solutions

Editor’s Note: In a recent Health Affairs blog post, Ian Spatz analyzes the widespread pushback against the Medicare Part D proposed rule. Highlights are summarized below. Click here to read the full post.

On January 10, the Centers for Medicare and Medicaid Services (CMS) published a Medicare Part D proposed rule that set off a firestorm of dissent. Fundamentally, CMS has suggested some major changes to the decade-old Medicare prescription drug program that further inserts itself into directing the terms of competition in Part D.

The CMS proposed rule has united a disparate group of interests who, while not agreeing on much else, do agree they want the proposal to go away. For example, on February 28, 277 organizations (with more continuing to join)—including patient advocates, insurance companies, health plans, employers and both brand and generic drug companies—signed a letter slamming the proposed rule. Following that, 20 of the 24 members of the Senate Finance Committee wrote CMS Administrator Marilyn Tavenner, urging her to scrap the plan.

What’s Causing the Controversy?

While some may like parts of the proposed rule, as a whole, many believe the status quo is better than the Part D future Medicaid has presented. Some key areas of controversy include:

  • Introducing new criteria for protected drug classes. From the start of Part D, CMS believed there were certain conditions for which patients and physicians needed immediate access to a broad choice of medicines that might not be available if a Part D plan excluded them from its formulary. CMS is now suggesting criteria for whether a class of drug would need this protection. The result is that two of the six protected classes, antidepressants and immunosuppressants, would lose their protection immediately, and antipsychotics might lose it in a year. While Part D plans support this result because of potential cost savings, drug companies and some beneficiary groups are concerned that patients and caregivers won’t know how to navigate the process of appealing a drug coverage denial.

  • Expanding medication therapy management. Part D requires plans to provide extra medication counseling and coordination to beneficiaries with multiple chronic conditions and high drug costs. CMS is planning to expand that requirement significantly. Pharmacy groups are cheering the move, but plans question the value of the added costs.

  • Limiting plan offerings. CMS has proposed a series of changes that would limit the number and kind of plans offered under Part D. One change would limit of the use of preferred pharmacy networks. Plan sponsors oppose the change, claiming limited networks lower premiums and cost sharing for beneficiaries, while CMS is concerned they actually increase costs. Another change limits the number of plans offered in a region, with CMS asserting that too many choices with too little differentiation causes confusion. Opponents don’t understand why CMS would take choices away, asserting that beneficiaries are able to pick the plan that’s right for them.

  • Breaching the principle of noninterference in drug pricing. In its proposed rule, CMS surprised everyone by stating that it needed to define the limits of its powers related to drug pricing. Its proposed language has alarmed Part D plans and provided little comfort to drug companies.


Each of these issues and more have inflamed groups with strong interest in Part D. While not all agree on every issue, the powerful pushback indicates that now may not be the right time to rock the Part D boat.

New, Free Webinar from Manatt Health and Bloomberg BNA: “The Evolution of Health IT and EHRs”

Click here and Enter Code LGAUEXT5 to Register Free and Earn CLE.

Join Manatt Health and Bloomberg BNA at a new, free webinar, “The Evolution of Health IT and EHRs: Setting the Stage for Growth and Value.” The webinar details the emergence of health IT, focusing primarily on developments over the last decade that have accelerated the adoption and use of electronic health records (EHRs). The program will begin by providing a framework for understanding health IT, tracking its growth from its inception through the IOM (Institute of Medicine) to its implementation through HITECH (Health Information Technology for Economic and Clinical Health Act).

The session will provide definitions of key concepts and terms, deciphering the alphabet soup of acronyms around health IT. It also will share insights into the role that federal and state governments play in accelerating, coordinating and overseeing health IT.

In addition, the webinar will give participants an in-depth look at the benefits EHRs deliver, including how they increase the efficiency, effectiveness, quality and safety of care. The program will track the market and policy changes that have supported the adoption of EHRs, including a detailed assessment of the federal initiative for supporting their meaningful use. In addition, it will explore the impact of EHRs on medical practice—and offer a practical discussion of the legal liabilities and risks associated with EHR use. Attendees will gain valuable insights into:

  • The evolution and growth of health information technology over the past 10 years, detailing key reports, programs, legislation and milestones.

  • The key concepts and terms around the electronic capture, transmission, exchange and use of health information.

  • Governmental coordination of health IT, including federal leadership and oversight, the roles that states play and the guidelines for public/private partnerships.

  • The value and benefits of EHRs.

  • Government actions to accelerate adoption, including actions to remove regulatory barriers and support implementation.

  • The meaningful use of EHRs, delving into the full range of requirements, incentives and penalties.

  • The effects EHRs will have on medical practice, including potential EHR-related errors; federal efforts to address EHR safety; and EHR use, legal liabilities and risks.

Click here and enter code LGAUEXT5 to register free. 


William Bernstein, Partner, Chairman, Healthcare Division, Manatt, Phelps & Phillips, LLP

Jonah Frohlich, Managing Director, Manatt Health Solutions

Anne O. Karl, Associate, Healthcare Industry, Manatt, Phelps & Phillips, LLP

Much Critical ACA Guidance Is Just Emerging. How Can You Be Ready for the Major Changes Still Ahead?

As the Affordable Care Act (ACA) moves into full implementation, it is dramatically changing the nation’s healthcare landscape. Although we’ve come a long way in defining the specifics of our healthcare transformation since the ACA’s passage, many critical details are just now emerging in upcoming federal regulations and policy guidance. These new rules will require that all healthcare stakeholders rethink how they manage their organizations and structure their business relationships.

To help our clients navigate this volatile healthcare environment, Manatt Health began a series of analyses in 2013, fully explaining each guidance and its implications. The analyses provide concise, informative summaries, including relevant timelines, operational details and responsibilities, so you can respond effectively. With so many important changes still ahead, clients have requested that we continue delivering these important tools in 2014.

To meet this demand, we will provide an ACA Guidance Package for 2014, covering all new guidance issued over the coming year. (Click for a list of anticipated guidance.) The Package includes:

  • All Medicaid Guidance Summaries

  • All Insurance Guidance Summaries

Plus, new this year, we also will send you the new Bloomberg BNA portfolio, “Affordable Care Act Implementation: Regulations, Models and Implications,” authored by the health reform thought leaders at Manatt Health. Based on our deep experience with the ACA, Bloomberg BNA selected Manatt to “write the book” on healthcare reform, creating a practical guide to the complex statutes and regulatory requirements shaping our new healthcare system, as well as sharing key implementation considerations. Complete with hands-on practice tools, the portfolio offers a detailed discussion of every aspect of reform, from private insurance to Medicaid expansion to Marketplace models to certification standards to market reforms and mandates.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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