In This Issue:

• Sharing Clinical Trial Data: Maximizing Benefits, Minimizing Risk
• The Future of MassHealth: Five Priority Issues
• Understanding the Mexican Healthcare System: Challenges and Opportunities
• 2015 Holds Promise—and Progress—for Post-Acute and Long-Term Care
• Captive PCs of Growing Interest to New York Behavioral Health Providers
• The Healthcare Landscape Continues to Transform: How Can You Be Ready for the Major Changes Ahead?

Sharing Clinical Trial Data: Maximizing Benefits, Minimizing Risk

Author: Deven McGraw, Partner, Healthcare Industry

Editor’s note: At the request of 23 public and private sector sponsors—including major life sciences companies, as well as U.S. and international regulators—the Institute of Medicine (IOM) created a committee to develop guiding principles and strategies for responsibly sharing clinical trial data. The committee’s report was issued on January 14 and includes four key recommendations, summarized briefly below. Click to download a free PDF of the full report. Manatt partner Deven McGraw, a member of the (IOM) committee, can provide firsthand insight into its findings and implications. To schedule a briefing with Deven and your team, click here.

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Clinical trial data should be shared responsibly in order to advance medical science and improve the health and well-being of the population. Responsible sharing of clinical trial data will allow other investigators to perform additional analyses and reproduce published findings, strengthen the evidence base for regulatory and clinical decisions, and increase the scientific knowledge gained from investments in clinical trials. Data sharing can accelerate new discoveries by avoiding duplicative trials, stimulating new research ideas and ensuring that the efforts of clinical trial participants and investigators yield maximum scientific knowledge.

At the same time, sharing clinical trial data presents risks, burdens and challenges, including the need to:

• Protect the privacy and honor the consent of clinical trial participants.
• Safeguard the legitimate economic interests of sponsors (e.g., intellectual property rights).
• Guard against invalid secondary analysis, which could undermine trust or harm public health.
• Give researchers adequate time to analyze their data and achieve appropriate recognition for their intellectual contributions.
• Assuage the fear of research institutions that requirements for sharing clinical data will be unfunded mandates.

The Committee’s Goal

The objective of the IOM committee was to facilitate a global ecosystem for responsible sharing of clinical trial data, ultimately leading to better therapies. With that goal as a guidepost, the committee conducted its study, identifying four key principles for data sharing:

        1. Maximize the benefits of clinical trials while minimizing the
        risks of sharing clinical trial data.

        2. Respect individual participants whose data are being shared.

        3. Increase public trust in clinical trials and sharing trial data.

        4. Conduct the sharing of clinical trial data in a fair manner.

The Committee’s Recommendations

Drawing on these principles, the committee developed four recommendations designed to maximize the benefits and minimize the risks associated with data sharing. The committee believes these recommendations will continue to be useful in the future, as circumstances change and unforeseen issues emerge.

• Recommendation #1: Stakeholders in clinical trials should foster a culture in which data sharing is the expected norm and should commit to responsible strategies aimed at maximizing the benefits, minimizing the risks and overcoming the challenges of sharing clinical data for all parties.
• Recommendation #2: Sponsors and investigators should share the various types of clinical trial data no later than the times specified in the committee’s report (e.g., the full analyzable data set with metadata no later than 18 months after study completion—with specified exceptions for trials intended to support a regulatory application—and the analytic data set supporting publication results no later than 6 months after publication).
• Recommendation #3: Holders of clinical trial data should mitigate the risks and enhance the benefits of sharing sensitive trial data by implementing operational strategies that include employing data use agreements; designating an independent review panel, including members of the lay public in governance; and making access to clinical trial data transparent.
• Recommendation #4: The sponsors of this study should take the lead, together with or via a trusted impartial organization(s), to convene a multi-stakeholder body with global reach and broad representation to address, in an ongoing process, the key infrastructure, technological, sustainability and workforce challenges associated with the sharing of clinical trial data.

Conclusion

The committee concludes that all stakeholders—participants, sponsors, regulators, investigators, research institutions, journals and professional societies—have roles in responsibly sharing clinical data, and details what each should do to foster a responsible data sharing culture. Its recommendations represent an attempt to balance the interests of the different stakeholders with the public interest of having the best information possible about the effectiveness and safety of therapies.

The Future of MassHealth: Five Priority Issues

Authors: Patricia Boozang, Senior Managing Director | Stephanie Anthony, Director | Dori Glanz, Senior Analyst

Editor’s Note: Massachusetts has long been a national leader in health insurance coverage. Its Medicaid program, MassHealth, is the second largest payer of healthcare services in the state, with spending projected to reach $13.7 billion in state fiscal year 2015.

A new governor coming into office presented a unique opportunity to take a fresh look at MassHealth and its role in the Commonwealth’s healthcare system. In a new report for the Massachusetts Medicaid Policy Institute (MMPI), a program of the Blue Cross Blue Shield of Massachusetts Foundation, Manatt Health shares the results of over 40 interviews conducted with a range of stakeholders to determine the major opportunities and challenges for the MassHealth program. Based on the interviews, we identified the top five priorities for the new governor and examined key issues, policy options and impacts for each focus area. The article below provides an Executive Summary of the report’s findings. Click to download a free PDF of the full report.

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The past decade marked an era of seismic change in the Massachusetts healthcare market and one in which the Commonwealth led the nation in coverage and delivery system reform. In 2006, Massachusetts passed its comprehensive healthcare reform law (Chapter 58 of the Acts of 2006). It has since achieved nearly universal coverage through a combination of expanded Medicaid, private market reforms and individual subsidies to purchase coverage in the nation’s first health insurance exchange, the Massachusetts Health Connector (the Connector).

The national healthcare coverage reforms implemented earlier this year, part of the Affordable Care Act of 2010 (ACA), were modeled on the Commonwealth’s successful reform road map. Having closed the coverage gap for most residents of the Commonwealth, Massachusetts policymakers turned their attention to reining in healthcare spending growth across all payers, culminating in landmark legislation, Chapter 224 of the Acts of 2012. In the first full year following enactment of Chapter 224, the Commonwealth appears to be making progress. Total healthcare costs in the Commonwealth grew by 2.3 percent, well below the 3.6 percent benchmark set for 2013.¹

As the steward of healthcare coverage and financing for an expected 1.7 million low- and moderate-income individuals, or one in four residents,² MassHealth is at the center of these reforms. With anticipated expenditures of $13.7 billion in 2015, MassHealth spending represents over 30 percent of the state budget. This gross figure includes both state and federal Medicaid dollars, and the federal government reimburses more than half of this total dollar amount. The MassHealth program is expected to generate $7.7 billion in federal revenues this fiscal year, representing more than 80 percent of all federal revenues to be received by the Commonwealth.

As a result of this spending and revenue generation, MassHealth is a major contributor to the Commonwealth’s economy. MassHealth’s most important role, however, is articulated in its mission:

                   To improve the health outcomes of our diverse members,
                   their families and their communities, by providing access
                   to integrated healthcare services that sustainably promote
                  health, well-being, independence, and quality of life.

With this mission in mind, over the past decade MassHealth has implemented a sweeping array of initiatives, including eligibility expansions for children, single adults, and special-needs populations; alternative payment methods (APM) through its Primary Care Payment Reform Initiative (PCPRI); enhanced access to home- and community-based long-term care services; and One Care, a major delivery system reform for non-elderly adults who are eligible for both MassHealth and Medicare.

As MassHealth has grown over the last decade, it has become more administratively complex. MassHealth sits alongside 15 other agencies and departments under the Executive Office of Health and Human Services (EOHHS) and shares responsibilities for the Medicaid program with several of these agencies. MassHealth also has interdependencies with other parts of government, including the Executive Office of Administration and Finance and the Connector. The program has over 150 eligibility categories and is run by over 800 staff.

As a new governor takes office, there is a unique opportunity to take a fresh look at MassHealth. Given the program’s size and critical role in providing health coverage to one-quarter of the state’s residents, MassHealth will be one of the new governor’s top priorities.

From July through September of 2014, MMPI and Manatt Health conducted over 40 in-person and telephone interviews regarding the major opportunities and challenges for the MassHealth program. Interviewees included representatives of the provider community, the business community, insurers, consumers, and state and federal government, as well as Medicaid policy experts and former commissioners and directors.

Among the issues raised by stakeholders, the following five priorities emerged.

1. Elevate and Consolidate MassHealth Leadership.

MassHealth must have empowered leadership with the skill set, authority and accountability to implement the governor’s strategic direction. Many stakeholders suggest that MassHealth’s current administrative structure and status within state government impede effective program leadership and, ultimately, prevent state leaders from fully harnessing the program’s power to drive change. Galvanizing the agency may require restructuring MassHealth’s place within state government and elevating the role of the Medicaid Director.

2. Leverage MassHealth’s Purchasing Power to Accelerate Delivery System Reform.

MassHealth is missing a significant opportunity to use its purchasing clout to accelerate payment reform and delivery system transformation. Stakeholders urge MassHealth leaders to revamp the program’s fragmented purchasing approach and develop a comprehensive and cohesive purchasing strategy that better leverages the program’s size and purchasing power to achieve its Triple Aim goals.³

To achieve these goals, most stakeholders encourage MassHealth to push care management innovation to the provider level, with MassHealth retaining responsibility for purchaser functions. Many stakeholders feel that community health centers in particular can play a critical role in implementing these reforms because of their deep connections to the communities they serve and their ability to link to efforts that address social determinants of health, such as food sources, housing supports and social support resources.

3. Lead Behavioral Health Delivery and Payment Reform.

Unlike the other priority areas, behavioral health reform is acknowledged as “bigger than MassHealth” —meaning that the imperatives for improving the Commonwealth’s mental health and substance use disorder delivery system are critical to all residents of the state. But it disproportionately impacts MassHealth, as the largest payer for behavioral health services.

The consensus of stakeholders is that those impacted by mental illness and substance use disorders are unable to access the treatment they need. While MassHealth cannot single-handedly solve the problem, it must be a leader in addressing challenges in the state’s behavioral health delivery system through enhanced investment. Increased investment in the behavioral healthcare infrastructure also has the potential to reduce acute care medical costs, as untreated behavioral health disorders can lead to physical health issues or functional impairment.

4. Take on Comprehensive Long-Term Care Reform.

MassHealth’s dominant role in paying for long-term services and supports (LTSS) for a large and growing number of seniors and people with disabilities adds up to a looming crisis as we prepare for the aging of the baby boomers. The greatest opportunity to ensure MassHealth’s future sustainability is to reform the LTSS delivery and funding systems.

Stakeholders laud recent MassHealth efforts to expand access to community-based LTSS and integrate comprehensive services for high-need subpopulations. They express concern, however, about the lack of a more comprehensive strategy to ensure access to community-based LTSS that are person-centered and comply with the Americans with Disabilities Act (ADA). They also point to the need for MassHealth leaders to develop focused LTSS cost-containment strategies, to advance a strategic plan for the future role of nursing facilities as more care moves into the community, and to work with the private sector on a long-term LTSS financing plan to help ensure the financial sustainability of the MassHealth program.

5. Invest in MassHealth Infrastructure.

Transformation and innovation require investment in people and technology. Stakeholders identify the need for critical MassHealth infrastructure enhancements in several areas, including staffing covering a wide range of expertise and information technology (IT) systems.

Stakeholders particularly single out a need for MassHealth to invest in the subject-matter experts and IT systems necessary to perform high-level, sophisticated and timely data analytics. MassHealth holds a wealth of data that could better inform basic program metrics, key cost drivers, and reinvestment of savings. Not only will increasing data analytics improve MassHealth program operations and oversight, but making data and analysis publicly available will enhance MassHealth’s relationships with external stakeholders and deepen public understanding and support of the program.

Conclusion

By addressing these priorities, the new governor has the opportunity to demonstrate Massachusetts’ ongoing commitment to healthcare reform. Equally important, the Governor can position MassHealth as a major catalyst for transformation of the Commonwealth’s healthcare delivery system and continue Massachusetts’ legacy of national healthcare reform leadership by providing a model for Medicaid as a critical driver of payment and delivery system reform.

1 Massachusetts Center for Health Care Information and Analysis. Annual Report on the Performance of the Massachusetts Health Care System. September 2014
2 Massachusetts Medicaid Policy Institute, MassBudget, and the Massachusetts Law Reform Institute. The Fiscal Year 2015 Budget for MassHealth and Health Reform Programs. Budget Brief, September 2014. Available online at http://bluecrossfoundation.org/publication/fiscal-year-2015-budget-masshealth-and-health-reform-programs.
3The Triple Aim is a framework developed by the Institute for Healthcare Improvement for optimizing health system performance through “(1) improving the patient experience of care (including quality and satisfaction); (2) improving the health of populations; and, (3) reducing the per capita cost of health care.” See http://www.ihi.org/Engage/Initiatives/TripleAim/Pages/default.aspx.

Understanding the Mexican Healthcare System: Challenges and Opportunities

Author: Andrew Rudman, Managing Director, ManattJones Global Strategies, LLC

Editor’s Note: Having implemented reforms across a wide range of sectors in the first two years of his term, Mexican President Enrique Peña Nieto is expected to turn to healthcare in 2015. During his campaign, he committed to establishing a universal healthcare system—and it’s likely he will move to deliver on that promise this year. The challenges are great. There is, however, basic consensus on the changes needed to strengthen Mexico’s healthcare system. In a new white paper, summarized below, ManattJones Global Strategies reviews the current Mexican healthcare system, analyzes potential reforms, and identifies ways the private sector can contribute to change. Click to download a free PDF of the full paper. ManattJones offers a firsthand understanding of the Mexican market, with an on-the-ground team in Mexico City and a network that reaches into the highest levels of federal, state and municipal governments.

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Mexico’s healthcare system is underfunded and inadequately organized to meet the needs of a population that is both enjoying greater longevity and struggling with the increasing prevalence of non-communicable diseases, such as diabetes, obesity, heart disease and cancer. Although the profile of Mexican patients has changed dramatically, the healthcare system has remained substantially the same since the Health Ministry was established in 1943.

While all Mexicans have access to basic healthcare services at least on paper, quality varies considerably. In reality, in some cases, access also is questionable. Those who can, rely on private services to augment, if not replace, services provided by the state institutions.

An Historically Divided System

Since its inception, coverage under Mexico’s public healthcare system was based on employment status. Salaried workers were covered under one of two programs:

              1. The Mexican Social Security Institute (Instituto Mexicano
              del Seguro Social, or IMSS) was created in 1943 to
              provide healthcare coverage to private sector, formal,
              salaried workers and their families.

              2. In 1959, the Institute of Social Services and Security for
              Civil Servants (Instituto de Seguridad y Servicios Sociales
              de los Trabajadores del Estado, or ISSSTE) was established
              to provide coverage for government employees and
              their families.

Non-salaried or informal sector workers were excluded from formal social insurance schemes. Their healthcare needs were addressed by the Ministry of Health.

Prior to passage of the 2003 health reform program, approximately 40 percent of the population was covered by the IMSS, 7 percent by ISSSTE, and no more than 2–3 percent by private health insurance. The remaining 50 percent of the population (roughly 50 million people) lacked adequate access to public healthcare coverage.

To address the issue, President Vicente Fox proposed legislation offering subsidized, publicly-provided health insurance to the fifty million Mexicans, mostly poor, who were not covered by social security. In April 2003, the Congress approved the System for Social Protection in Health (SSPH), that went into effect on January 1, 2004 with the goal of achieving universal coverage by 2010.

A Profile of the Current System

The healthcare system remains divided, with coverage based on employment.

• Formal, private sector employees and their families are covered by IMSS, whose over 57 million beneficiaries make it one of the largest insurance providers in the Western Hemisphere.
• Public sector employees and their families are covered by ISSSTE (roughly 12 million persons).
• The state oil company (PEMEX), the armed forces (SEDENA), and the navy (SEMAR) have their own, smaller, institutions.
• Self-employed, unemployed, non-salaried and informal sector workers, and those who do not work are covered by one of several federal programs managed by the Ministry of Health including the Seguro Popular program and IMSS-Prospera, which in total cover roughly 55 million persons.
• A small number of persons are eligible for coverage under multiple institutions.

In addition, the system includes a private sector component with insurance companies and service providers that maintain their own clinics and hospitals.¹

The quality, scope, and approach to healthcare varies across the segments, Each maintains its own network of doctors, clinics, hospitals, pharmacies, treatment centers and unions…its own drug and device formularies…and its own standards of care.

In addition, the Mexican healthcare system does not allow for “portability.” Patients—except those experiencing obstetric emergencies—cannot access the facilities belonging to any institution except their own. In other words, an ISSSTE beneficiary living next door to an IMSS pharmacy could not fill a covered prescription at that facility but would have to travel to the nearest ISSSTE pharmacy or pay out of pocket. Of note, the main political parties in Congress have proposed expanding the conditions for which portability will be permitted to include cardiovascular diseases, diabetes, cancer, obesity, transplants, HIV-AIDS, leukemia, and hemophilia.

Approvals for drugs and devices are granted by the health regulator, COFEPRIS. These approvals apply to all institutions. The decision to purchase a particular medicine or device, however, is made through the General Health Council (CSG)—an inter-institutional body charged with determining whether its members should purchase the approved products. While each institution sits on the CSG, each, in practice, also makes an independent decision regarding formulary inclusion, often based on budgetary constraints. The result is that people covered by different institutions have access to different medicines and devices.

Peña Nieto’s Reform Plans

During his 2012 campaign, President Peña Nieto ran on a platform of establishing a universal healthcare system. The National Development Plan (Plan Nacional de Desarrollo 2013- 2018) and the National Development Plan’s Program for the Health Sector (Plan Nacional de Desarollo 2013-2018—Programa Sectorial de Salud), issued in early 2013, included proposals to emphasize prevention and ensure even the poorest citizens access to adequate healthcare. The program pledged to:

        1. Consolidate protective actions, health promotion, and disease
        prevention.

        2. Ensure effective access to quality healthcare.

        3. Reduce the risks affecting the health of the population.

        4. Close existing gaps in health between different social
        groups and regions.

        5. Ensure the generation and effective use of health resources.

        6. Advance the construction of the National System of
        Universal Health under the stewardship of the Ministry
        of Health.

Peña Nieto proposed to increase the authority of the Ministry of Health, promote stronger cooperation between state-run medical programs and private institutions, and strengthen the regulation of healthcare facilities. For the poor, he promised to:

• Intensify training and supervision of maternal and pre-natal caregivers.
• Augment vaccination marketing campaigns within poverty-stricken areas.
• Focus on prevention, diagnosis and treatment of diseases, as well as create a comprehensive strategy for combating epidemics and malnutrition.
• Develop a mobile medical units program, with emphasis on vulnerable areas.

The Surge in Non-Communicable Diseases (NCDs)—and the Increase in Longevity

The incidence of non-communicable diseases has increased in Mexico. It now has among the world’s highest rates of diabetes and obesity. Heart disease and cancer rates also have grown—partly as a result of longer lifespans. Average life expectancy has increased from 70 in 1990 to 75 in 2011.² Longer lifespans place additional demands on the healthcare system and its budget. Mexico currently spends roughly 6.2% of its budget on healthcare—one of the lowest rates in the OECD (Organization for Economic Cooperation and Development).³

System reform, therefore, must both improve how resources are spent and increase the total amount available. In addition, the focus must move from treatment to prevention. To date the government has taken limited steps to address these objectives.

Proposals for Improvement

One concrete proposal for improving the health of Mexican citizens was the imposition of new sales taxes on sugared beverages and foods (the so-called “junk food” tax). Recent reports, however, indicate that consumption has not declined dramatically.⁴

The Peña Nieto Administration also sought to improve the efficiency of the drug procurement process. In October 2014, IMSS coordinated the “Licitación del Año” or “Sale of the Year”—a “Dutch auction” style procurement, covering roughly 90 million citizens, with a total expenditure of $3.7 billion. In addition, IMSS took steps to guarantee transparency, competitiveness and consistency across the system.

The Peña Nieto Administration also has put a high priority on promoting medical tourism. Mexico receives medical tourists, primarily from the United States, who are seeking treatment for conditions not covered by U.S. insurance or access to therapies not approved by the FDA. The government aspires to attract a different type of patient—one seeking care for conditions that are covered by insurance but are far less expensive in Mexico. Treatment costs in Mexico can be anywhere from 36% – 89% less than in the United States.

Earlier this month, the chair of the Chamber of Deputies’ Healthcare Commission announced that the Peña Nieto Administration will present a reform proposal when the Congress reconvenes in February. Public sources suggest it will promote universal care and institution of “portability” among the existing institutions.

Challenges to Reform

The divided nature of the Mexican healthcare system makes reform a daunting task. One of the initial steps in the process is “portability”—the right of beneficiaries in one system to use the facilities of another. Portability would reduce inefficiencies and provide an effective way to evaluate quality of care across institutions. Nevertheless, it will not be implemented easily. There are at least five main challenges.

        1. Reimbursement. Allowing patients to choose their treatment
        facilities will require developing a system for inter-institutional
        transfers, as well as negotiating the appropriate rate to be paid
        for a given service or procedure. The institutions will have to
        develop a system to account for cross-institution (or “out of
        network”) treatment that will require initial expenditures to
        upgrade IT systems and develop interconnectivity to exchange
        information and transfer payments.

        2. Health Records. Portability would require the institutions to
        exchange patient records to ensure physicians can properly treat
        patients, avoid harmful drug interactions and remove the potential
        for system abuses (such as patients seeking multiple prescriptions).
        Developing health IT systems is complex, however, and raises
        patient privacy concerns.

        3. Standards of Care. Because the institutions have made
        independent decisions about which treatment options to use, the
        systems provide different types of care, even for the same illness.
        Portability will require some sort of reconciliation of, or training
        on, these differing standards to ensure beneficiaries receive equal
        care, regardless of which institution’s facilities they use.

        4. Labor. Each institution negotiates its employment contracts
        independently. Portability will, in all probability, drive patients
        toward or away from certain facilities. Increases in workload at
        high-preforming facilities may create labor strife. Decreases in
        workload in under-performing institutions could generate pressure
        to re-assign personnel or reduce work schedules—changes the
        unions may not accept. Portability even could lead to the
        consolidation and closing of underutilized facilities, generating
        opposition among local politicians.

        5. Resources. Portability will require expenditures from a system
        that is already underfunded. Developing integrated systems to
        manage payments across the institutions and permit the exchange
        of health records, while ultimately cutting costs, will initially
        require new allocations. In addition, the differences in standards
        of care may require additional training of personnel to ensure that
        portability reduces rather than perpetuates differences among
        institutions.

Opportunities

The changing healthcare system in Mexico is opening up several key opportunities.

        1. Reimbursement and Health IT technology and
        implementation. Should the Peña Nieto Administration decide
        to establish portability, there would be ample opportunities for
        private sector firms to offer services related to payment
        mechanisms and medical record development and access.

        2. Medical tourism. The dramatic cost differences for some
        procedures between Mexico and the United States and the
        emphasis on personal care following surgery give Mexico
        important advantages. In addition, as the Affordable Care
        Act (ACA) is implemented, an increasing number of employers
        will seek affordable options for employee healthcare. A medical
        tourism program developed in partnership among an insurer, an
        employer and a Mexican hospital could be an effective way to
        ensure adequate, affordable treatment.

        3. Creative procurement. Combined purchasing across the
        institutions can be an effective means to achieve economies of
        scale. Along with efforts to standardize care across institutions,
        this approach should make an important contribution toward equal
        care for all Mexicans, regardless of income source. From the
        perspective of product producers and distributors, combined
        purchase will necessitate more creative bids, such as risk sharing.

        4. Regulatory convergence. The National Development Plan
        calls for promoting international health cooperation. The President
        seeks to strengthen surveillance of epidemiological emergencies,
        comply with international treaties on human health rights, and
        encourage new patterns of international cooperation in public
        health. While much of this remains rhetorical, the Peña Nieto
        Administration has embarked on an effort within the Pacific
        Alliance (PA) to establish a common regulatory system among the
        four member countries (Mexico, Colombia, Peru, and Chile),
        creating a single market of roughly 200 million people. If the
        agreed regulations match international standards, the result should
        be faster introduction of innovative technologies into Mexico and
        its fellow PA countries.

Conclusion

The fractured Mexican healthcare system provides treatment for roughly 110 million patients who are living longer and demanding better care. The current system is inadequate to address Mexico’s growing needs. As the Peña Nieto Administration begins to make the systemic changes that will bring reform, the opportunities for public-private partnerships and foreign investment will be considerable, particularly for companies willing to explore innovative approaches.

1 Gómez Dantés, Octavio, Sergio Sesma, Victor Becerril, Felicia Knaul, Héctor Arreola, and Julio Frenk. “Articulo De Revision.” Salud Pública De México. N.p., 2011. Web. http://bvs.insp.mx/rsp/articulos/articulo_e4.php?id=002625.
2 “Health Profile: Mexico.” World Health Rankings. World Life Expectancy, n.d. Web. http://www.worldlifeexpectancy.com/country-health-profile/mexico.
3Study conducted by IMS Health for the Asociacion Mexicana de Industrias de Investigacion Farmaceutica (AMIIF), January 2014.
4“Survey Shows Mexicans Drinking Less Soda After Tax; Majority of Participants Now Relating Sugary Drinks to Health Problems,” Wall Street Journal (WSJ.com edition), October 13, 2014.
5“Health Tourism”, 2013 report prepared by ProMexico.
6 It should be noted that the institutions already meet periodically to reconcile accounts for treatment of obstetric emergencies based on a fixed cost per treatment according to Under-Secretary of Health Eduardo Gonzalez-Pier (interview published in El Universal, September 1, 2014).

2015 Holds Promise—and Progress—for Post-Acute and Long-Term Care

Author: Stephanie Anthony, Director

Editor’s Note: Hospitals traditionally have viewed a patient’s discharge as the endpoint of their care responsibilities. Little attention was paid to the next steps in treatment once the patient left the building. In reality, however, hospital stays frequently are just one step in ongoing episodes of care. Ensuring a smooth transition from acute to post-acute and long-term care (PAC and LTC) settings is critical to achieving optimal health outcomes, as well as preventing unnecessary hospital readmissions and emergency department visits. In a new post on McKnight’s Long-Term Care News blog, summarized below, Manatt Health explores the numerous forces converging to make acute care providers focus on what happens to patients post-discharge. Click to read the full post.

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Both payers and acute care providers are taking notice of the critical role PAC and LTC services play in ensuring the continuity and quality of care, particularly for patients who are elderly, chronically ill or struggling with behavioral health issues. These patients historically have been served in unmanaged fee-for-service delivery systems. The Affordable Care Act (ACA), however, is driving fresh opportunities to improve quality and contain costs for these populations through new value-based purchasing arrangements. Clearly, the time is right for real change—and real progress—in the PAC and LTC arena.

What’s Driving the Change in PAC and LTC?

1. A dramatically changing population

According to the Congressional Budget Office, by 2050, 20% of the U.S. population will be 65 or older. Adding to the soaring demand for LTC and PAC services is the growth in younger patients with chronic and disabling conditions. To be prepared, PAC and LTC providers must develop:

• New treatment models that address chronic disease management, as well as integrated or coordinated care at the provider level across physical health, behavioral health and social support needs.
• New staffing models that are person-centered and interdisciplinary.
• New training curricula to ensure all providers and care managers are trained in emerging care coordination and management models that support patients with chronic and comorbid conditions.

2. Increased payer and policymaker attention on spending, quality and outcomes

There are significant opportunities to improve care and limit costs for populations with chronic conditions. Forces driving change include:

• Financial penalties for hospitals—and, soon, for skilled nursing facilities and other PAC providers—for avoidable hospital readmissions.
• A shift to value-based (versus volume-based) payments and a commitment to population health management to improve quality and control costs.
• Increased capitated managed care arrangements for elderly and disabled populations. To stay in network, PAC and LTC providers must demonstrate quality and cost effectiveness.
• A focus on standardized health and functional assessments to ensure that patients are placed in the lowest-cost setting that meets their needs.
• A rise in quality measurement and reporting. PAC and LTC providers must develop metrics to assess results—and implement improvements.

3. The integration of large health systems with PAC providers

Facing financial penalties for readmissions, health systems are increasingly looking to partner with PAC providers. There are several potential integration paths:

• Clinical integration. Seeking to increase hospital throughput, ease transitions across care settings and prevent readmissions, hospitals and health systems are developing screening criteria to identify high-need, high-cost populations who would benefit from care management/care coordination and referrals to PAC settings. To support improved care management and coordination, hospitals are investing in data analytics and information technology systems, sharing physician staff across acute and PAC settings, and developing effective treatment, transition and follow-up plans for patients and their families.
• Structural integration. Health systems are creating care systems—called continuing care networks or integrated delivery systems—that manage treatment across the care continuum.
• Financial integration. Hospitals and PACs are testing approaches for sharing financial risk and benefiting from mutual savings through emerging payment models that pay for episodes of care across multiple settings.

Conclusion

Acute, PAC and LTC providers are joining forces to ensure seamless care transitions, enhance quality and improve outcomes, while protecting their own financial futures. In this new environment, acute care providers must recognize the importance of PAC and LTC providers in supporting patients post–discharge, and lowering readmission rates and emergency room usage. PAC and LTC providers also must realize their own critical role in the care continuum, and adapt administratively, clinically, structurally and financially to the rapidly changing healthcare landscape.

Captive PCs of Growing Interest to New York Behavioral Health Providers

Authors: Robert Belfort, Partner, Healthcare Industry | Anne O’Hagen Karl, Associate, Healthcare Industry

The Challenge Facing New York’s Behavioral Health Organizations

New York’s not-for-profit mental health and substance abuse providers are being asked by the state’s Medicaid program and private insurers to transform the way in which they deliver services. Rather than operating in narrow silos that focus on a discrete set of behavioral health services, these organizations are expected to integrate their care with the full spectrum of mental health and substance abuse treatment as well as primary care and other physical health services.

Unfortunately, the rigid regulatory framework governing the delivery of behavioral health services in New York is not well-suited to promote this goal. Behavioral health facilities and programs must generally be licensed by the Office of Mental Health, the Office of Alcohol and Substance Abuse Services or the Office of People With Development Disabilities under the Mental Hygiene Law. Medical clinics, referred to under New York law as diagnostic and treatment centers, must be licensed by the Department of Health under Article 28 of the Public Health Law.

Fitting integrated care models into this licensing scheme may be prohibitively expensive or entirely infeasible. For example, licensed clinics must meet strict architectural requirements that drive up the cost of facility development. In addition, they must generally deliver care at a specific service site. An organization providing behavioral health services on a periodic basis in a large number of changing locations (such as homeless shelters) cannot meet this requirement. Organizations that need the flexibility to provide behavioral health services in a client’s home face a similar obstacle. Finally, co-location of behavioral and physical health services may be difficult because of strict limits on the volume of medical care that may be delivered under a Mental Hygiene Law license and analogous restrictions on the delivery of behavioral health services under an Article 28 license.

While Performing Provider Systems may seek waivers of certain regulatory requirements under the Delivery System Reform Incentive Payments (DSRIP) program, those waivers are limited to DSRIP projects. Behavioral health providers that become aware of these impediments have been seeking an alternative to the traditional state licensing scheme.

New York’s Corporation Practice of Medicine Prohibition

Like many other states, New York generally prohibits unlicensed business or not-for-profit corporations from employing physicians to provide medical or behavioral health services. This prohibition on the “corporate practice of medicine” is not set forth in statute or regulation. Instead, it is based on judicial and administrative interpretations of New York’s licensing laws. Through various court decisions and agency opinions, the prohibition on the corporate practice of medicine has been applied not only to physicians, but to other healthcare professionals such as psychologists and licensed clinical social workers as well. Therefore, in seeking alternative models for care delivery, behavioral health providers must carefully navigate around the state’s corporate practice restrictions.

Legal Authority for Professional Corporations

The major exception to the corporate practice bar is the authority granted under the New York Business Corporation Law and the New York Limited Liability Company Law to create professional corporations (PCs) and professional service limited liability companies (PLLCs), respectively, to employ physicians and other healthcare professionals. In a PC or PLLC practicing medicine, only New York-licensed physicians actively involved in the entity may serve as shareholders/members or directors/managers.

Private medical practices are typically structured as PCs or PLLCs. PCs and PLLCs do not have to be licensed under the Mental Hygiene Law or the Public Health Law to deliver professional services and they are not tethered to particular service locations. As a result, they present an appealing alternative to behavioral health organizations seeking flexibility.

The “Captive PC” Model

The main challenge behavioral health organizations face when seeking to set up PCs or PLLCs is the requirement that all owners and governing body members must be licensed professionals. This obligation prevents a not-for-profit organization from maintaining ownership and control over a PC or PLLC in the same manner as a traditional subsidiary. Instead, an alternative model must be employed to assert control over the PC or PLLC through indirect means. This model is generally referred to as a “captive PC.”

Although the specific legal arrangements may vary, most captive PCs share several key features. For ease of explanation, we discuss below a PC established to practice medicine. The model operates similarly for PLLCs or for PCs delivering other professional services.

• First, a PC is established, the stock of which is owned by a licensed New York physician. The physician shareholder is often a high-level employee of the sponsoring not-for-profit organization.
• Second, the physician often enters into a stock transfer or similar agreement under which the organization is granted the right to direct the physician to transfer his or her shares in the professional corporation to another licensed physician designated by the organization.
• Third, although the physician is the owner of the captive PC’s stock, he or she does not typically invest his or her own money to capitalize the entity. Instead, the organization usually provides capital through a loan agreement. As a result, the bylaws of the captive PC generally prohibit the distribution of dividends by the captive PC to the shareholder.
• Fourth, the captive PC enters into a long-term management agreement under which the organization provides all of the space, equipment, supplies, administrative staff and other infrastructure necessary for the captive PC’s operation in return for a fee. The captive PC does not typically own any tangible assets and does not employ any individuals other than the physicians.

The Internal Revenue Service (IRS) has granted certain captive PCs affiliated with not-for-profit organizations a tax exemption. The IRS has taken the position in these cases that, notwithstanding the captive PC’s for-profit status, which is dictated by State law, the captive PC is essentially under the control of the not-for-profit organization and its legal structure ensures that it will advance the organization’s tax-exempt purpose. Several of the captive PCs that have been granted tax exemptions are located in New York.

Potential Benefits of a Captive PC

For organizations looking to advance their missions using innovative service delivery models, a captive PC can be an attractive option. It permits the delivery of care in a wide range of settings, without strict limits on the location or nature of the services being provided. The model also minimizes construction and ongoing compliance costs. Moreover, as New York shifts its Medicaid program to managed care, the favorable fee-for-service reimbursement licensed facilities receive in comparison to private practices has less impact. These are some of the reasons a number of New York’s behavioral health providers have been establishing or contemplating the creation of captive PCs over the past few years.

The Healthcare Landscape Continues to Transform: How Can You Be Ready for the Major Changes Ahead?

Although we’ve come a long way in defining the specifics of our healthcare transformation since the passage of the Affordable Care Act (ACA), 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 has been creating a series of analyses, fully explaining new federal healthcare guidance and its implications. With so many important changes still ahead, clients have requested that we continue delivering our analyses in 2015.

To meet this demand, we will provide ongoing “Federal Healthcare Guidance Summaries” in 2015, covering all new guidance issued over the coming year. Topics have been expanded this year to include not only Exchange and commercial market regulations but also Medicare and Medicaid managed care rules. Among the anticipated new regulations, revisions and policies we’ll cover are:

• HHS Notice of Benefit and Payment Parameters for 2016 and CMS 2016 Letter to Issuers in the Federally-Facilitated Marketplace. Draft versions of both documents were published at the end of 2014, and final versions are expected to be released by February 2015. These will set benefit parameters for 2016, and potentially 2017, including prescription drug minimum requirements, network adequacy standards, consumer assistance policies (availability of provider directories and formularies), and policy about how individuals will be reassigned to new plans if they do not actively select a new plan each year. Draft versions of both documents for 2017 will be published in late 2015 and also will be covered.
• Medicaid Managed Care regulation. CMS has said it intends to publish this spring its first major proposed revision to the Medicaid managed care regulations in more than a decade. Topics that likely will be covered include network adequacy, the relationship between Medicaid, Qualified Health Plans (QHPs) and other affordability programs created by the ACA, new provider contracting arrangements, and prescription drug coverage.
• Application of Mental Health Parity and Addiction Equity Act of 2008 to Medicaid Managed Care, CHIP, and Alternative Benefit Plans. This proposed regulation, scheduled to be published in the spring, would address unresolved issues regarding the interaction of the parity law with Medicaid expansion and managed care programs, as well as in the Children’s Health Insurance Program.
• Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Programs. CMS had proposed significant changes to the Medicare Advantage and Part D programs in early 2014. Many of the most controversial provisions relate to administration of Part D. CMS decided not to finalize those provisions but to address them in later rulemaking. Final CMS action is expected in 2015.
• Notices, Appeals and CHIPRA. In January 2013, CMS released proposed regulations requiring the coordination of Medicaid/CHIP eligibility notices and eligibility appeals processes to other insurance affordability programs. The proposed regulations also addressed the implementation of CHIPRA eligibility-related provisions including eligibility for newborns whose mothers were eligible for and receiving Medicaid or CHIP coverage at the time of birth. Final CMS action is expected in 2015.
• Application of Liens, Adjustments and Recoveries, Transfer-of-Asset Rules and Post-Eligibility Income Rules to MAGI Individuals. In February 2014, CMS issued a State Medicaid Director Letter providing guidance on how the long-term services and supports-related statutory and regulatory requirements, including the estate recovery rules, apply to individuals who are eligible for Medicaid under Modified Adjusted Gross Income (MAGI) eligibility rules and receive coverage for long-term services and supports. It is expected that CMS will release proposed regulations formalizing this guidance in 2015.
• Medicaid Premium Assistance. In January 22, 2013 draft regulations, CMS proposed letting states use Medicaid/CHIP funding to purchase coverage for eligible beneficiaries in the individual market, including through Qualified Health Plans in Marketplaces. Final guidance is expected in 2015.
• National Association of Insurance Commissioners’ (NAIC) Managed Care Plan Network Adequacy Model Act. On November 12, 2014, NAIC proposed revisions to its Network Adequacy Model Act. (The Act states that a managed care plan shall maintain a network sufficient in numbers and types of providers to assure that all services to covered persons be accessible without unreasonable delay.) During 2015, NAIC will be reviewing comments on the Model Act and likely promulgating final amendments. Concerns have been expressed that current network adequacy standards for health plans in Exchanges are inadequate, but the Department of Health and Human Services has indicated that it will await action by NAIC before considering further steps to enhance the federal network standards.

If you would like to subscribe to the guidance summaries, please call your Manatt contact or click to email Patricia Boozang.