Information Advantage Group, San Francisco, IAG.co, 415.346.3860

Summer 2011-August

Information Advantage Group’s Healthcare Digest is focused on the emerging delivery models and tools for the hospital-to-consumer continuum. In a fast-read format, we provide only the vital news that is essential to keeping you current on the latest and most notable trends, ideas, research, results, technological developments and helpful resources. Thank you in advance for any suggestions you may want to share…Jim Bloedau, Managing Partner.

Click on titles below for quick navigation, once there, click on abstract title to go to source.

MACRO TRENDS • WSJ SURVEY: ECONOMISTS OPTIMISTIC, SEE 3.1

GDP FOR SECOND HALF OF THE YEAR • CONSUMER SENTIMENT TAKES A STEP BACK • 750 SMALL BUSINESS SURVEY: DON’T SEE PPACA

HELPING THEM MUCH RIGHT NOW • MORE THAN TWICE AS MANY MEN LOST THEIR JOBS

THAN WOMEN DURING THE RECESSION HEALTHCARE MACROS • BLS: HEALTHCARE THE LEADING GROWTH CATEGORY

SINCE THE 2000 BREAKOUT • CONGRESSIONAL BUDGET OFFICE ESTIMATES OF

HEALTHCARE’S IMPACT ON DEBT • HEALTH AFFAIRS: & CMS ACTUARY – EXPECT ERRATIC,

BUT INCREASING GROWTH IN HEALTHCARE SPENDING • HARVARD STUDY: SMALL RURAL HOSPITALS HAVE

LOWER SURVIVAL RATES FOR MI, CHF AND PNEUMONIA • CMS LOOKING AT TELEHEALTH REIMBURSEMENT

EXPANSION • UNITEDHEALTH RECOMMENDS TELEMEDICINE, NURSE

PRACTIONERS AND PHYSICIAN ASSISTANTS FOR RURAL HEALTH

• CAREGIVERS “OUT OF POCKET” SPEND ALMOST HALF A TRILLION – A 9.54% CAGR AND NO SIGNS OF SLOWING DOWN

• PAYERS ARE IN THE MARKET FOR GUESS WHO… PHYSICIANS AND HOSPITALS

• HEALTHCARE IT MARKET ACTIVITY HIGH – M&A AND STOCKS OUTPERFORMING – PAYERS MOST ACTIVE

• FDA CALLS FOR COMMENT ON MOBILE MEDICAL DEVICES

• DOWNLOADED MOBILE HEALTHCARE APPLICATION RANKS 16 OUT OF 19 IN POPULARITY BY CONSUMERS

ACO • AMA SURVEY: EMR AND JOINING AN ACO TOP

PRIORITIES • DARTMOUTH AND BROOKINGS INSTITUTE: SEE STEEP

GROWTH IN THE NUMBER OF ACOS AFTER 2013 • SURVEY: THE UNINSURED, ACO PARTICIPATION AND

BAD DEBT ARE TOP HOSPITAL CONCERNS • BIGGEST ACO CHALLENGE – PHYSICIAN ACCEPTANCE

• THOSE ACOS WHO STARTED EARLY ARE SHOWING GOOD RETURNS FOR ESTABLISHED MEDICAL GROUPS

• ROI FROM ACO/PCMH STILL PREMATURE • ACOS – THEY ARE NOT JUST FOR MEDICARE • NEJM: HYBRID ACOS ARE STARTING TO TAKE SHAPE • COMMONWEALTH FUND STUDY: SHARED RISK MODELS

ARE FAR AND FEW BETWEEN • NEWLY RELEASED - HELPFUL RESOURCES MEDICAL HOME • MGMA SURVEY: STRONG INTEREST IN FORMING PCMH • NEWLY RELEASED - HELPFUL RESOURCES: HIE • SIX YEAR OLD TENNESSEE HIE MAY BE SHUTTERED –

CAN’T FIND A SUSTAINABLE FINANCIAL MODEL • 9% INCREASE IN HIES • KLAS STUDY: STRONG GROWTH IN PRIVATE HIES • NEWLY RELEASED - HIE HELPFUL RESOURCES: PHYSICIAN & PROFESSIONALS • TELE-PSYCHIATRY JOINING THE RANKS OF LEADING

TELEHEALTH VENDORS • MGMA SURVEY: TOP FIVE MEDICAL PRACTICE

CHALLENGES • AMERICAN JOURNAL OF MEDICINE STUDY:

READMISSION RATE BRINGS INTO QUESTION WHETHER PHYSICIANS ARE KEEPING UP TO DATE

PATIENT-CONSUMER –CAREGIVER-EMPLOYER • OPTIMISTIC PROJECTION OF PERSONAL HEALTH RECORD

MARKET • PATIENTS CHARGING DOCTORS FOR BAD SERVICE • 6X RETURNS FROM CORPORATE PROMOTION OF FITNESS • UNION WORKERS LESS LIKE TO LOSE HEALTHCARE

COVERAGE • NEWLY RELEASED - PATIENT-CONSUMER-CAREGIVER

HELPFUL RESOURCES OVERSIGHT -INFLUENCE -INNOVATION • REGULATORY: • IRS SEEKING COMMENT ON REDEFINING “FULL TIME

EMPLOYMENT” FOR HEALTH COVERAGE • TECH & INNOVATION:

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MACRO TRENDS

Despite the three business sentiment indices retreating from their recent advances, a majority of surveyed economists remain optimistic for the GDP to pick up in the second half of this year. AS to employment growth, the only encouraging news is that employment of men has started to recover a bit from the 2:1 hit over women taken during the recession. Uncertainty may rule the days, but optimism may rule the weeks.

WSJ SURVEY: ECONOMISTS OPTIMISTIC, SEE 3.1 GDP FOR SECOND HALF OF THE YEAR For July, 2011, the Wall Street Journal’s monthly survey of 55 leading economists showed general optimism about the second half of the year. They see Q2 as a continuation of the Q1 soft patch but with a strong rebound thereafter. In fact, the average GDP estimates of 3.1 for Q3 and Q4 and a couple of cheerful economists see a 5.0 handle on GDP in the second half of 2011.

(Advisorperspectives.com, July 28, 2011) Top

CONSUMER SENTIMENT TAKES A STEP BACK

• The University of Michigan Consumer Sentiment Index final report for July came in at 63.7, a drop from the 71.5 June final number but only 0.1 below the July preliminary reading of 63.8. To put this month’s report into the larger historical context since its beginning in 1978, consumer sentiment is about 26% below the average reading and 27% below the regression line on the chart above.

• The Conference Board Index is the more volatile of the two, but the general pattern and trend are remarkably similar to the Michigan Index, and finally,

• The prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB Business Optimism Index.

Consumer and small business sentiment remains at levels associated with other recent recessions. The trend in sentiment since the

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Financial Crisis lows has been one of general improvement. But the July preliminary and final consumer confidence numbers constitute a giant step backward. (Dshort.com, July 29, 2011) Top

750 SMALL BUSINESS SURVEY: DON’T SEE PPACA HELPING THEM MUCH RIGHT NOW The National Federation of Independent Business' (NFIB) July 25, 2011 report from a survey of 750 small employers with 50 or fewer employees taken during the April and May 2011 period found that the overwhelming majority of small business owners do not expect the PPACA (healthcare reform) law to reduce costs or regulatory burdens - almost 33% felt that premium increases but not in better care will be the end results of the law. One year after passage of PPACA:

• 42% of small employers (employs 50 or less) offer employee health insurance - since PPACA passage, 1% have added and 4% dropped health insurance,

• 12% small employers have seen their health insurance plans terminated or would not be available to offer one in the future, and

• 26% of low-wage employers are very likely and 31% somewhat likely to explore dropping their health insurance plans for heavily subsidized exchanges.

(NFIB, July 25, 2011) Top

More than twice as many men lost their jobs than women during the recession According to Pew Research analysis of Labor statistics, the weakness in the economy and unemployment rate has been harder on men, over the full span of the recession and recovery to date: During the December 2007 through June 2009 recession:

• Men lost over twice as many jobs as women - men accounted for 5.4 million, or 71%, of the 7.5 million jobs that disappeared from the U.S. economy - women only lost about 2.1 million jobs,

Since the official “end” of the US recession in June 2009 through May 2011, • Men have gained 768,000 jobs and lowered their unemployment rate from 10.6%

to 9.5%, and • Women lost 218,000 jobs and their unemployment rate climbed from 8.3% to

8.5%.

Most notably in retail trade, men have gained jobs while women have lost them - in five other sectors, that include health services and education and business services, men gained jobs at a faster rate than women. Even in the face of gaining jobs at a faster rate since June 2009:

Unemployment Rate

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• From December 2007 to May 2011, employment of men has fallen by 4.6 million, and their unemployment rate has gone from 5.1% to 9.5% and

• For women, since December, 2007, 2.4 million jobs have been lost and their unemployment rate has increased from 4.9% to 8.5%.

(Marketing Charts, July 8, 2011) Top

HEALTHCARE MACROS

Healthcare spending will continue to be erratic in the near future due to the cuts, breaks and reformulations of delivering care (e.g. payers buying physicians and hospitals, ACO, PCMH) yet to roll out. However, the feds still see the total Medicare, Medicaid and CHIP spend on healthcare to continue consuming a growing portion of our GDP...up to 10% by 2035 from its current 5.6%. Correspondingly, what is not seen to be slowing down is the current 9.54 CAGR for out of pocket spending by family caregivers…a most fertile area into the future due to a greater burden for payment being placed on the patient and indirectly related family. Always hit heavily by reimbursement policy, rural areas are seeing continuing evaluation for expansion of remote care telemedicine and monitoring technologies - mobile technology continues to get defining attention from the FDA. All this is part of the swelling activity in the healthcare IT arena which is one of the more active areas in the stock market.

BLS: HEALTHCARE THE LEADING GROWTH CATEGORY SINCE THE 2000 BREAKOUT The Bureau of Labor Statistics (BLS) divides all consumer expenditures into eight categories and assigns a relative size to each to produce the Consumer Price Index for Urban Consumers (CPI-U). Most notably, since 2000, Medical Care (the red line) has been the fastest growing category. (dshort.com, July 15, 2011) Top

CONGRESSIONAL BUDGET OFFICE ESTIMATES OF HEALTHCARE’S IMPACT ON DEBT Of Course, the financing of Medicare and Medicaid are at the top of the list of many as negotiations continue over increasing the national statutory debt limit. Some key elements in the argument include:

• Medicare, Medicaid and CHIP spending is estimated to account for 5.6% of the nation's GDP in 2011 and could reach 10% by 2035, according to a CBO long-term outlook released June 21.

• According to a June 27 letter signed by 65 national and 50 state medical societies, including the American Medical Association, the 10-year cost of preventing future

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cuts was $48 billion as recently as 2005 and is now the cost is about $300 billion over a decade.

"CBO's 2011 Long-Term Budget Outlook" estimates that under current law: Medicare physician pay is to be cut by 29.4% beginning Jan. 1, 2012, and other savings, like an excise tax on high-premium health insurance plans, starting in 2018.

• The tax cuts of 2001 and 2003 that were extended through 2012 and 2013 would expire, as would lower overall tax rates and relief from the alternative minimum tax.

• Federal debt would reach 70% of the gross domestic product by Sept. 30, 2011, 40% increase since 2008, and would stabilize around 75% in the next decade, but reach 85% by 2035.

(Amednews, July 4, 2011) Top

HEALTH AFFAIRS: & CMS ACTUARY – EXPECT ERRATIC, BUT INCREASING GROWTH IN HEALTHCARE SPENDING Two reports published July 28, 2011:

A report by the Medicare Office of the Actuary estimated that:

• Health spending per year through 2020 will grow by an average of 5.8%, compared to 5.7% without the health overhaul.

• This growth rate equals $4.6 trillion in 2020, a doubling of the $2.6 trillion spent in 2011.

New analysis from the journal of Health Affairs shows: • In 2010, national health spending grew at 3.0% (compared to 4% in 2009) its

slowest rate ever recorded because more Americans not seeking treatment because they had lost health coverage when they lost their jobs.

• In 2014, national health spending should grow 8.3%, and then drop 6% during the 2015 to 2020 time period.

• The number of Americans with employer-sponsored insurance will grow from 163 million to 170 million in over the 2010 to 2014 period; this is expected to drop back to168 million by 2010 because Baby Boomers join Medicare and employers dropping health coverage for workers.

(Kaiser Health News, July 28, 2011) Top

HARVARD STUDY: SMALL RURAL HOSPITALS HAVE LOWER SURVIVAL RATES FOR MI, CHF AND PNEUMONIA In the first national study of its kind, researchers at the Harvard School of Public Health found that patients admitted to a critical access hospitals (CAH) for heart attack, congestive heart failure or pneumonia had a 30-70% higher odds of dying within 30 days. CAHs are defined as geographically isolated facilities with no more than 25 acute care beds and account for more than 25% of acute care hospitals in the United States by the Medicare Rural Hospital Flexibility Program of the 1997 Balanced Budget Act.

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Appearing in the July 6, 2011, Journal of the American Medical Association, researchers found that, despite more than a decade of policy efforts to improve rural health care, substantial challenges remain - increasing use of telemedicine was a strong suggestion for improving these conditions. (HealthcareITNews, July 7, 2011) Top

CMS LOOKING AT TELEHEALTH REIMBURSEMENT EXPANSION In 1999, CMS started paying for telehealth consultations for patients residing in underserved rural areas, if they were accompanied by their doctor. Allowable reimbursement laws and regulations have expanded over the years for services and approved "originating sites" for telehealth to include 35 new services to its covered list since 2003.

In its recently proposed rule on changes in physician payment, CMS said that it would consider the proven clinical benefits of a telehealth service in deciding whether to cover that service. Up to now, providers have had to show that a telehealth service is "equivalent when furnished in person or through telehealth"--a criterion that CMS calls the "comparability standard." This openness to expanding reimbursement is clouded with concerns about how far the agency will go in expanding such coverage.

Coverage for tele-stroke, tele-ICU, and some other established telehealth services is desired by providers, however CMS specifically states that it does not believe it should cover the remote provision of critical care services. (Information Week, July 08, 2011) Top

UNITEDHEALTH RECOMMENDS TELEMEDICINE, NURSE PRACTIONERS AND PHYSICIAN ASSISTANTS FOR RURAL HEALTH Growth estimates in a recent study from UnitedHealth Group' research arm show that by 2019, a 16% (5 million people) increase in rural Americans with health coverage, either through the insurance exchanges or Medicaid, will eclipse a 13.5% (25 million) growth rate in urban areas. This is of primary concern due to rural areas having higher than average rates of chronic diseases, such as heart disease and diabetes, and often sparse availability of primary care doctors. When doctors were asked about accepting new patients under the expanded program:

• 84% of rural doctors currently accept new Medicaid patients, only 65% of urban doctors do,

• 59% expected to be taking on new Medicaid patients in the first year of the expansion program (2014), 44% of urban doctors will do so, and

• 30% from both groups were uncertain what they will do that year.

The report goes on to recommend that interstate telemedicine and expanding the "scope of practice" of physician assistants and nurse practioners will offer greater efficiencies and coverage to the underserved areas. (UnitedHealth, July27, 2011) Top

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CAREGIVERS “OUT OF POCKET” SPEND ALMOST HALF A TRILLION – A 9.54% CAGR AND NO SIGNS OF SLOWING DOWN According to AARP's July 2011 update study on the cost that caregivers incur:

• In 2009 there were about 42.1 million family caregivers in the US providing daily care to an adult with limited daily activities, and about 61.6 million provided care at some time during the year.

• Of these caregivers, it was estimated that their unpaid service and contributions showed a 9.54% CAGR amounting to $450 billion in 2009, up from $375 billion in 2007.

In the related MetLife June 2011 update study on the cost of care giving:

• Over the past fifteen years, the number of adult caregivers providing care or financial assistance has shown a 300% growth, or about 25%, mostly Boomers,

• $3 trillion in lost wages, Social Security benefits and pensions - for individual female caregivers, the cost of care giving in these terms is $324,044; for male caregivers $283,716,

• Those providing care were almost equally split between working and nonworking - those providing care who were 50+ and working were more likely who work and provide care to a parent are more likely to have fair or poor health than those who do not provide care to their parents.

• Although equally split in contribution, care giving daughters are more likely to provide basic care and sons are more likely to provide financial assistance.

Both studies point to the need for caregiver caution, education and coaching to minimize threats to their future financial security and health.

(AARP, July 2011) Top

PAYERS ARE IN THE MARKET FOR GUESS WHO… PHYSICIANS AND HOSPITALS Two related, but distinctly subtle insurance trends are very quietly emerging: First, insurers are accelerating their buying of physician groups with four of the five largest health insurers have increased physician holdings in the past year:

• CIGNA Medical Group piloted its CareToday clinics in 2006 as an alternative to traditional doctor's offices in Arizona,

• UnitedHealth Group has been buying medical groups and launching physician management companies,

• In December, 2010, Humana purchased Concentra, an urgent-care system based in Texas, and

• In June, 2010, WellPoint acquired CareMore Health Group, a California health plan operator that owns 26 clinics.

Secondly, it’s early, but insurers are buying hospitals: • As of July 2011, a transaction has yet to involve a major hospital system, making a

proposed merger between Pittsburgh-based West Penn Allegheny Health and Highmark highly significant.

• A spokesperson for a leading consultancy, Oliver Wyman, is reported to say, "We work with insurance companies all over the country, and every single one of them is

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discussing this in their board rooms. Some are very aggressive, some have decided not to do it," says Ted Schwab.

Both trends are thought to be a fight between the insurance and hospital industries as they fight to control primary care and are precipitated by:

• Demand for primary care physicians is already in high-gear and if insurers own the physicians they could control an entire health system by influencing referrals.

• A national deficit and sky-rocketing healthcare costs may now play in payers’ favor and has promoted a collaborative tone with providers through care coordination initiatives and accountable care organizations.

• Looming on the back burner is an exploratory trend of cutting the insurer out of primary care which has led to big cost-savings - it's estimated that up to 35-40% of overhead costs in a private practice come from insurance processing costs.

(Becker's ASC Review, July 14, 2011) Top

HEALTHCARE IT MARKET ACTIVITY HIGH – M&A AND STOCKS OUTPERFORMING – PAYERS MOST ACTIVE Health Growth Partners Q2 2011 Healthcare IT and Services Market and M&A Report report finds the healthcare IT market:

• In Q1, Healthcare stocks outperformed broader markets with a 7.3% gain in the S&P healthcare index as compared to a 0.4% decline in the S&P 500.

• M&A deal volume for Healthcare IT and services M&A remains well above normal historical patterns, but shrank from the record-setting first quarter of 2011.

Major M&A trends include: • Whether or not the healthcare reform law remains in current form, the healthcare

market as a whole is migrating toward an outcomes-based healthcare delivery model -the accountable care model (ACO) is enjoying trepidation, early formulations and a growing list of successful deployments,

• The movement toward ACOs and other integrated payment models is driving investment in data, analytics, and care management platforms,

• A rise in non-traditional HIT companies acquisitions activity (see report for M&A listings),

• An increase in investment and acquisition interest by payers who are rethinking their HIT strategies for risk and data management and the medical loss ratio,

• Despite an active market, discipline and discrimination rule the day for acquirers, and

• A corresponding increase in private equity investor’s activity that are looking to capitalize on this favorable market.

HGP considered eight sectors when evaluating the performance of publicly-traded companies – details of the components of these sectors can be found on Page 8 of the report: The high performing HGP indices in the

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first half of 2011 were Payers (47.3%), Disease Management (23.8%), and HIT Services (20.2%). (Health Growth Partners, July 19, 2011) Top

FDA CALLS FOR COMMENT ON MOBILE MEDICAL DEVICES The U.S. Food and Drug Administration's new draft guidance published July 19, 2011 and asks for public comment on the guidance by Oct. 19, is focused on those mobile medical apps that present the greatest risk to patients when they don't work as intended. This breaks out into two groupings (Class II or III) of mobile apps that:

• Transform the mobile platform into a medical device, such as sensors or transducers that turn a mobile device into a stethoscope, glucometer, ECG or possibly decision-support apps.

• Control an already FDA-regulated device function, operation, or energy source functions such as insulin pumps, automatic inflating a BP cuff, displaying data from bedside monitors and medical images from a PACS server.

This guidance generally excludes apps that function as: online medical reference (PDR), fitness, wellness, EHR, PHR, billing, administrative and any generic tools such as an iPhone magnifying glass or LED light that aren't marketed as performing a medical function. (FierceMobileHealthcare, July 19, 2011) Top

DOWNLOADED MOBILE HEALTHCARE APPLICATION RANKS 16 OUT OF 19 IN POPULARITY BY CONSUMERS The Nielsen Company in Q2, 2011 shows games as the most popular mobile app category among users who have downloaded an app in the last 30 days - 64% of mobile app users have downloaded a game app, 60% weather and 56% social networking. Health apps were third from the bottom at 13% or 16 out of 19. (Nielsenwire, July 6, 2011) Top

ACO

Early starter “ACO” pilots have been turning in good results and those thinking of forming or joining one continue to rise. Growth in ACOs is projected to take off in 2013 and until then we will see any number of creative variations serving distinct interest groups and the usual array of nay sayers. This has most looking for the best way to structure and align with the developing ACO model - clearly one size will not fit all.

AMA SURVEY: EMR AND JOINING AN ACO TOP PRIORITIES With an almost equal representation between joiners and non-participants or undecided respondents, healthcare executives this week revealed their intentions to participate or forgo the accountable care organization (ACO) Shared Savings program at the 19th Annual Health Forum and the American Hospital Association Leadership Summit.

• 45% will definitely join (18% probably, 27% will join); on the flip side, 36 definitely will not join (11% definitely will not, 25%probably will not; 9% were unsure.

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• 69% strongly agreed that hospitals will have to learn how to make money on Medicare-level reimbursement; 27% somewhat agreed.

When asked to rank their major priorities attending executives stated: 93% electronic health records

• 89% redesigning care delivery process and procedures, • 61% advanced diagnostic technology, • 35%advanced therapeutic technology such as the da Vinci, • 30%social media.

(Fiercehealthcare, July 22, 2011) Top

DARTMOUTH AND BROOKINGS INSTITUTE: SEE STEEP GROWTH IN THE NUMBER OF ACOS AFTER 2013 According to Elliott Fisher, director of Dartmouth's Center for Health Policy Research in conjunction with the Brookings Institute:

• Upwards to 80 healthcare organizations currently use private accountable care models - expect 100 ACOs by next year.

• By 2013, there will be 200 ACOs and a steep growth to 500 and 1,000 over the three following years.

(Fiercehealthcare, July 25, 2011) Top

SURVEY: THE UNINSURED, ACO PARTICIPATION AND BAD DEBT ARE TOP HOSPITAL CONCERNS U.S. News and Fidelity Investments surveyed 1,852 hospital executives to find:

• 78% are moderately to extremely concerned about how to provide care to the uninsured during the next three years,

• 66% are moderately to extremely likely to be a part of an ACO, • 65% are moderately to extremely concerned about the hospital's level of bad

debt, • 55% are moderately to extremely concerned about the cost of transitioning to a full

electronic medical record, and • 52% are moderately to extremely likely will increase incentives for vendors,

physicians and employees to promote wellness.

(US News, July 18, 2011)

BIGGEST ACO CHALLENGE – PHYSICIAN ACCEPTANCE In an online question, readers of Healthcare Finance News chose what they think the biggest challenge in forming accountable care organizations (ACOs) is:

• 44% Getting Physician acceptance • 26% cost • 18% Integrating IT systems • 13% Establishing evidence-based medicine

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(Healthcare Payer News July, 17, 2011) Top

THOSE ACOS WHO STARTED EARLY ARE SHOWING GOOD RETURNS FOR ESTABLISHED MEDICAL GROUPS Greater Rochester (N.Y.) Independent Practice Association and Advocate Physician Partners and now Brown & Toland Medical Group in San Francisco have reported that they have done well with their clinically integrated independent practice association - an accountable care organization - model.

• Brown and Toland recently posted annual report state that it made almost $6.8 million in operating income last year and distributed close to $6.7 million in quality bonuses to its more than 800 doctors to cap its 11th consecutive year of positive financial results.

• With 115,000 HMO and 175,000 PPO members, it credited much of the success to decreasing healthcare costs, reduction in administrative costs and by adopting an “all products” strategy that includes administering two PPO plans.

(Modern Healthcare, July 12, 2011) Top

ROI FROM ACO/PCMH STILL PREMATURE In a March 2011, e-survey looking at how the Patient Centered Medical Home (PCMH) and accountable care organization (ACO) models were being practiced and the benefits received, results from 115 organizations showed:

• Close to 61% are unsure of the level of ROI, 30% think it's too early to tell, • 40% with a PCMH program claim that 21% or more of their patients are a designated

medical home. • 80% who have case managers on the PCMH care team have embedded one their

physician practice, • almost 33% saw staff buy-in to the medical home concept was the biggest challenge

faced in 2011, • Nearly, 82% use EHRs in their medical home, 60% are e-prescribing, • 36% stated they planned to participate in an ACO in the next 12 months, and • Remarkably, 59% have seen a decrease in visits to the ER because of the medical

home.

(HIN, July 19, 2011) Top

ACOS – THEY ARE NOT JUST FOR MEDICARE Although most are thinking that ACOs are strictly for Medicare, an assessment of "ACO readiness" in 90 markets found six additional populations to target beyond Medicare.

• For hospitals and large systems: Think about your own employee health plan, • Self-insured employers: early examples show reduced spending, • Health plans/insurers: Payers are entering into these agreements with health

systems as an insurance product, most notably: • Aetna and the Carillion Clinic • Humana and Norton Healthcare Health system • CIGNA and Piedmont Medical Group • Three major Minnesota insurers and Fairview Health Services

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• Medicaid: Primary care physicians at Community Care of North Carolina are paid fees for their services, plus a $3-5 management fee per member, per month for coordinating care.

• The uninsured: The Camden (NJ) Coalition of Healthcare Providers uses care management programs for the uninsured and is putting accountable care principles to work for some of its most fragile citizens.

• Individuals: Frustrated by increasing premiums, business leaders are backing away from employer-sponsored health plans.

(HealthLeadersMedia, July 14, 2011) Top

NEJM: HYBRID ACOS ARE STARTING TO TAKE SHAPE In a recent New England Journal of Medicine article a novel care delivery model was proposed: Community Health Center (CHC) and Academic Medical Partnerships (AMP), or CHAMP ACOs. The authors posit a new ACO model that is a combination of the subspecialist expertise, medical technology, and inpatient care of local academic medical centers (AMC) with CHCs and an emerging subgroup of CHCs known as teaching health centers (THCs). It is thought that by combining the best elements of AMCs and CHCs, these CHAMP ACOs could deliver high-quality, cost-effective care to low-income Americans while training the next generation of health care professionals. This collaborative approach offers several advantages over fee-for-service Medicaid or managed care:

• THCs would take more focused on primary care rather that the typical AMC subspecialist practice,

• CHC offer primary care closer to their homes, rather than being forced to travel to hospital-based clinics,

• THCs are closer to the idea of practice integration and team care than an ad hoc network of community practitioners and would foster better continuity of care,

• AMCs offer a ready-made or shorter startup course for administrative structure to manage the CHAMP’s performance, quality of care, and finances and

• CHAMP ACOs would foster a more collaborative approach to cost containment than usual under Medicaid Managed Care, which often pits payers against providers, leaving patients caught in the middle.

The biggest obstacle to this model is seen by the authors as not being financial, but regulatory. A recently proposed rule by CMS will prohibit CHC Medicare patients from joining an ACO. (NEHM, June 1, 2011) Top

COMMONWEALTH FUND STUDY: SHARED RISK MODELS ARE FAR AND FEW BETWEEN A Commonwealth Fund-commissioned study summarizing research on ACO shared-risk payment models released July 25, 2011, conducted in partnership with Booz Allen Hamilton, interviewed 16 health care payers with experience in private sector “ACO like” programs. The study showed:

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• All of the studied models included the fee-for-service model, but did not find any models currently in place that both move away from fee-for-service and include financial risk to the provider for a patient population.

• Programs that incorporated shared risk from the start were the least common. • There were few shared-risk payment models that were operational; most are very

early stage of development or implementation.

(Businesswire, July 25, 2011) Top

NEWLY RELEASED - HELPFUL RESOURCES • AHIMA has released Accountable Care: Implications for Managing Health Information • The American Medical Association has released a guide for physicians on accountable

care organizations, and includes: legal structure, governance issues, physicians' role in ACOs and a review of eight related business decisions a physician can take.

• A report, commissioned by Premier and performed by Milliman Inc., is based on critical variables such as size of the targeted population, potential for down-side financial risk, prospective versus retrospective beneficiary assignment, potential capital needs and current regional medical costs.

• The Hill published a July 14, 2011 EARLY DRAFT of the ACO "PIONEER ACCOUNTABLE CARE ORGANIZATION BENEFICIARY ALIGNMENT AND FINANCIAL RECONCILIATION SPECIFICATIONS." Although it is incomplete, the forty-three page draft details elements, methods and timelines that Medicare proposes to require.

MEDICAL HOME

MGMA SURVEY: STRONG INTEREST IN FORMING PCMH The Medical Group Management Association's recent survey, The Patient Centered Medical Home - 2011 Status and Needs Study, of 341 primary care and multispecialty practices nationwide found that 70% have begun or are thinking about transforming their practices to a patient-centered medical home model. Approximate percentages of major challenges of this strategy included:

• 50% - agreements on care coordination with referral physician, • 40% - financing the cost of transforming to a PCMH, • 40% - coordinating care for high-risk patients, • 40% - implementing an EHR system to support PCMH related functions, • 35% - forecasting the financial effects of the transformation to PCMH.

Approximate percentages of major challenges of the most common PCMH processes included: • 80% - assigning patients to a primary care clinician, • 70% - mental health issues and referring patients to the right agency, • 70% - e-prescribing with pharmacies, • 70% - sharing decision making with patients and family members, and • 45% - maintenance of chronic disease registries.

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Competing standards and accreditation programs for PCMHs produce one of the highest percentages - 91% called for a standardized set of criteria for PCMH evaluation. (Healthcare Financial News, July 2011) Top

NEWLY RELEASED - HELPFUL RESOURCES: • AHRQ: Patient-Centered Medical Home: Strategies to Put Patients at the Center of

Primary Care • MGMA: The Patient Centered Medical Home - 2011 Status and Needs Study • Draft Federal PCMH Catalogue of Activities - Summary Template

HIE

With a 9% YOY growth in the number of HIEs, we’re beginning to see stronger indications that privately offered HIEs are succeeding where public ones don’t as much. Part of this shift is driven by a physician’s affinity to local affiliations, like hospitals and IPAs, and trade associations way before governmental…healthcare happens locally not regionally or nationally.

SIX YEAR OLD TENNESSEE HIE MAY BE SHUTTERED – CAN’T FIND A SUSTAINABLE FINANCIAL MODEL After six years, CareSpark, the Kingsport, Tenn.-based RHIO with 1.28 million patients in its data base, is at risk of shutting down because it has failed to come up with a sustainable plan to stay financially afloat. With its federal funding pulled last March by the Health Information Partnership of Tennessee, this sends a cautionary note out to publicly funded HIEs. According to a recent KLAS report, privately funded HIEs are faring better. (Fierce Health, July 8, 2011) Top

9% INCREASE IN HIES The eHealth Initiative's July 14, 2011 survey of 255 health information exchange (HIE) shows:

• Net growth of 9% to total 255 in 2011, • Overall, pressure is mounting to meet federal requirements, complete complex

systems integration and uncertainties about accountable care organizations, • 10 HIE have closed - 4 consolidated into other HIEs, 4 closed operations and 2 were

for-profit operations that were purchased and their HIE operations closed,46 are new, 24 have sustainable business models (up from 18 in 2010) all producing a ,

• 43% (110) are concentrated in only 10 states: Population determines activity - two populous states that are vastly different in size have roughly the same number of HIEs. New Jersey, ranked 47th in size but 9th in population has 9 HIEs, while California ranked third in size and first in population has 10. New York and Texas each have 17 HIEs. The other 10 states are Florida (12), Michigan (10), North Carolina (9), Ohio (9), Washington (9) and Oklahoma (8),

• 85 advanced initiatives are offering at least one service that supports meaningful use requirements,

• HIE are developing complex privacy controls for patients that surpass federal requirement - 46 offer opt-out at a data-type level, such as lab and radiology results, up from 13 in 2010, 28 offer opt-in, while 36 maintain opt-out for sensitive data,

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• Behavioral or mental health providers report good benefits from seeing more data through the exchanges,

• Laboratory results, medications and radiology reports are the leading transactions, • 46% (117) report systems integration is a moderate or major challenge, • 25% will support ACOs, despite uncertainty about accountable care organizations

(ACOs), a quarter of the respondents indicated that they will support an ACO, • In addition to struggling with business models and value, groups are facing new

challenges related to technical aspects and systems integration, • 55% (113) plan to include the federal Nationwide Health Information Network’s

(NwHIN) Direct Project into their system, • Those HIEs who have solved their initial technical issues and are offering analytics,

quality reporting, wellness programs and education to providers, and • Authors of the study concluded that private sector HIEs have the momentum and

those who are fast movers have the best chance for survival in transformational healthcare system.

(eHealth Initiative, July 14, 2011) Top

KLAS STUDY: STRONG GROWTH IN PRIVATE HIES Based on interviews with 230 HIE customers and covering 35 vendors, a leading health IT researcher, KLAS, found in a just released report that for the 2010-11 period:

• The number of live private health information exchanges increased from 52 to 161,

• The number of live public HIEs grew much slower--from 37 to 67, • Medicity, Relay Health and Cerner had high performance scores among private HIE

users, • Axolotl and Orion scored well among public HIE customers, • The powerhouse Epic Systems actually scored higher in the private category, but

because most of the Epic Exchanges KLAS was able to validate were between Epic hospitals, and

• As to physicians interested in public HIEs, their concerns include: governance and financial viability, information overload and searching through it all, data integrity of sources and outside sources of data going into their electronic records systems.

(Health Data Management, July 8, 2011) Top

NEWLY RELEASED - HIE HELPFUL RESOURCES: • 2011 Report on Health Information Exchange: A Changing Landscape - Full Report • HIMSS Electronic Health Record: Supporting a Robust Health Information Exchange

Strategy with a Pragmatic Transport Framework

PHYSICIAN & PROFESSIONALS

The attention directed toward the physician-to-consumer market under all of the new rules and models for healthcare have providers thinking hard about how to gain efficiencies and improver the consumer experience in an era of

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increasing risk. Improved communication and patient participation and collaboration through the use of technology are proving itself again.

TELE-PSYCHIATRY JOINING THE RANKS OF LEADING TELEHEALTH VENDORS Due to Medicare and Medicaid moving so slowly to reimburse for telehealth services, patients are becoming more willing to pay for some treatment themselves. Joining the ranks of leading telehealth vendors like American Well, Relay Health and 2nd.MD, tele-psychiatry providers are trying to crack the private-pay telehealth market.

• Cope Today and HealthLink Now are offering what is becoming a standard business model for direct-to-consumer online care. In this model, patients choose their own and interacted directly with the provider for scheduling and pay for online visits in 15-minute increments. The times offers an interesting data point:

• According to Cope Today, the average privately paid telehealth visit runs about 43 minutes, the first 10 minutes of the visit free, leaving 33 minutes for billing at $35 per 15-minutes equaling $70 for a telepsychiatry session.

(FierceMobileHealthcare, July 13, 2011)

MGMA SURVEY: TOP FIVE MEDICAL PRACTICE CHALLENGES MGMA members identified management challenges in MGMA’s fourth annual Medical Practice Today: What members have to say research. Members can access the full analysis online. For comparative data click here. (MGMA July, 2011) Top

AMERICAN JOURNAL OF MEDICINE STUDY: READMISSION RATE BRINGS INTO QUESTION WHETHER PHYSICIANS ARE KEEPING UP TO DATE Patients whose doctors have been in practice for at least 20 years stayed longer in the hospital and were more likely to die when compared to those doctors who had been practicing for five years or less, according to a July 11, 2011 report in the American Journal of Medicine. The study looked at 6,500 patients who'd been hospitalized between 2002 and 2004 at New York City's Montefiore Medical Center in the Bronx and found:

• Patients with the most experienced physicians had more than a 70% increase in their odds of dying in the hospital and a 50 percent increase in their odds of dying within 30 days. However, when researchers adjusted for how sick the patients were (complicated medical problems), they found that only the sicker patients were at higher risk when cared for by the more experienced physicians.

The results highlight "issues that we have as a medical profession in keeping up to date...it's a quality of care problem that has been recognized for five to 10 years," said Dr. Niteesh Choudhry of Harvard Medical School. (The American Journal of Medicine, July 11, 2011) Top

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PATIENT-CONSUMER –CAREGIVER-EMPLOYER

The “Consumer Miracle” seems to be getting some traction in the form of penalty fees being charged by patient to doctors for poor service. Another round of studies is showing the patient’s willingness to get involved in their health and this is delivering huge returns to the employers…if they sponsor the programs…and they’re union.

OPTIMISTIC PROJECTION OF PERSONAL HEALTH RECORD MARKET In the face of Google pulling out of the personal health record (PHR) market, a leading market research company has released a report claiming the PHR market generated $312 million in 2010 and will exercise a compound annual growth rate (CAGR) of 5.8% to reach $414.8 million in 2015 and enjoy an overall increase of 33% in revenue. Interesting trends contributing to this hopeful projection include new collaborative care models, greater participation in their care and use of tech by the patient/consumer, the graying of America, caregivers and family who are technologically competent enough to gain greater efficiencies by monitoring their personal health information electronically and then acting on it. (Hitechwatch, July 7, 2011) Top

PATIENTS CHARGING DOCTORS FOR BAD SERVICE Having exceeded their patience for a doctor who was late for her scheduled appointment, the patient figured out her hourly wage working as an IT specialist at Boeing in Everett, Washington, doubled it for the two hours spent in the waiting room and mailed the invoice to their doctor. In response, the doctor sent her a check for $100, the full amount requested. Some other examples are:

• $5 when a patient is kept waiting more than 15 minutes, • A handmade soap or a bottle of lotion for more than a 10 minute wait and • When on doctor recently had to miss a day of work because of a family emergency,

he gave the patients whose appointments he canceled $50 at their next appointment.

(CNN, June 30, 2011) Top

6X RETURNS FROM CORPORATE PROMOTION OF FITNESS A study by the Society for Human Resource Management shows that the proportion of companies offering gym benefits has held steady since 2007. The reason, according to many studies, is that wellness benefits provided in the workplace yield more productive employees who require less health care. More impressive is:

• According to a Mercer 2010 national survey, there was an 11% growth in the number of companies with 20,000 or more employees providing fitness centers.

• A 2010 Harvard Business Review article found that companies providing wellness programs, that include fitness as a component, can enjoy a ROI as much as six times the cost of sponsoring them.

• In a separate 2010 review in the Journal of Health Affairs by another group of Harvard researchers, both medical costs fall by about $3.27 and absenteeism falls by about $2.73 for every dollar spent.

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• Seen as a leader in wellness programming, Johnson & Johnson surmised that its wellness programs slowed the rate of increase of its health-care costs by $565 per employee.

• After reanalyzing 32 of the best studies, Health Affairs researchers could not offer a formula for which attributes of wellness programs are most important - it varies. They did conclude that single programs like Weight Watchers may be helpful but are unlikely to create the largest returns - continuously instilling and overall atmosphere that encourages wellness, is the most important element.

(Washington Post, June 21, 2011) Top

UNION WORKERS LESS LIKE TO LOSE HEALTHCARE COVERAGE A just released study by the nonpartisan Employee Benefit Research Institute in Washington found that during the early recession period union workers were less likely to lose employer-based health coverage than nonunion workers. For the 2007 to 2009 period: The overall percentage of union workers with any health coverage from a union or employer showed:

• Union workers fell from 93.4% to 91% – a 2.6% decline, • Nonunion workers fell from 74.3% to 70.6% – a 5% decline.

The overall percentage of union workers with health coverage only from an employer showed: • Union workers covered by health insurance through their own job fell from 82% to

80.4% - a 2% drop, • Nonunion workers with coverage through their own job, coverage fell from 55.9% to

52.2% - a 6.5% drop.

Researchers warned that as unionization in the private sector continues to decline, so will the overall percentage of workers with employer-based coverage. (EBRI, July 21, 2011) Top

NEWLY RELEASED - PATIENT-CONSUMER-CAREGIVER HELPFUL RESOURCES

• The American Medical Association (AMA) released a new chapter in its physician resource manual on hospital-physician employment, ACOs, CO-OPs and other Options: A "How-To" Manual for Physicians Navigating a Post-Health Reform World, released July 21, 2011, cautioning that accountable care organizations (ACOs) can take many shapes and forms - check out the chapter on physician-hospital employment agreements.

• Valuing the Invaluable: 2011 Update - The Growing Contributions and Costs of Family Caregiving

• How Union and Nonunion Health Insurance Coverage Fared During the Recession by Employee Benefit Research Institute

Top

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OVERSIGHT -INFLUENCE -INNOVATION

REGULATORY:

IRS SEEKING COMMENT ON REDEFINING “FULL TIME EMPLOYMENT” FOR HEALTH COVERAGE In response to the largest US employers who are asking the IRS for clarification about the pending law that requires employers with 50 or more full-time workers to offer affordable insurance or pay a penalty, the IRS has floated the idea of giving employers a "look-back" period of between three and 12 months to determine whether certain workers met the full-time definition. The problem rose from the issue of who counts as a full-time worker and how do companies decide whether insurance is "affordable." Set to kick in three years, the law defines a full-time employee as one who works at least 30 hours per week on average in a given month. If this is the case, then the employer is obligated to provide affordable health care or pay a penalty of $2,000 per worker, excluding the first 30 workers. This proposal was met with enthusiasm from employers groups. Top

TECH & INNOVATION: Mobi Health News' midyear update of July 21, 2011 presented some recent data points for the mobile healthcare market:

• Only an 11% increase in pharma mobile projects since 2006 (Ernst & Young) • 30% of US physicians are using iPads (Manhattan Research) • 31% of medical devices include wireless capabilities (CC) • 35% of US adults are using smart phones (Pew) • $84 million 2010 sale in mobile medical apps (Kilogram) • 600 million health apps to be downloaded by 2012 (Pyramid)

(MobihealthNews, July 21, 2011) Top ® Information Advantage Group prepared this report as a general informative and educational guide and basis for further discussions and diligence. This report includes qualitative and quantitative statements that reflect plans, estimates, data, consensus views and beliefs of vendors, industry experts and commentaries provided by public sources and IAG analysts. Best efforts have been made in assessing the reliability of these statements. IAG disclaims all warranties, express or implied, as to the accuracy, completeness or adequacy of such information and fitness of this research to a particular purpose. IAG shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. IAG advises that any discussion or listing of a company or product of any kind in this report should not be deemed to be an endorsement of said company or product. The opinions expressed herein are subject to change without notice. This report is intended to be one of the many information sources including other published information and analysis of these sources by the reader. The reader assumes the sole responsibility for the selection of these materials to achieve its intended results. The reader is urged to exercise the utmost discretion making the information enclosed in this report available to others that may need to analyze such material in the course of their evaluations. Each resource cited in this report is the property of the originating author or publisher and will not be individually reproduced or distributed by the reader.