10/29/21 Weekly Update

Summarizing the week that was in the business of healthcare

Oct 29, 2021

Welcome to The Donut Hole’s weekly summary. The news doesn’t stop. Lucky for you, we are here to help you take in the week that was in the business of healthcare.

Kaiser Permanente Defrauded Medicare of $1 Billion, DOJ Alleges

Yikes! A recent complaint filed by the Justice Department (DOJ) alleges that Kaiser Permanente defrauded Medicare of about $1B by adding diagnoses to patients' medical records to increase reimbursement, a practice known as upcoding. The DOJ said Kaiser mined the medical files of Medicare Advantage patients for additional diagnoses and then sought to have the physician add the new diagnoses to the medical records retrospectively using an addendum, making it seem as if the new diagnoses had been addressed in some way during the patient visit when it had not. “The driver was money: so that Kaiser could submit these improper diagnoses to the Centers for Medicare & Medicaid Services (CMS) for payment,” attorneys with the department said in the filing. Kaiser disputes the claims and says it will defend against the allegations.

The practice of upcoding is unfortunately not uncommon in the Medicare Advantage space, where health plans are incentivized to make their populations seem as sick as possible to earn more revenue via risk adjustment. We discussed an Office of Inspector General (OIG) report on chart reviews and risk adjustment in a recent issue.

Commentary: We may sound like a broken record, but we need to seriously examine Medicare Advantage and institute reforms that reduce the incentive to upcode and/or more strongly enforce current regulations. As the system is currently constructed, the health plans with resources, such as UnitedHealth, Humana, CVS Aetna, and Kaiser, are able to spend the money to mine their patients’ records for additional diagnoses, leading to “sicker” patients, higher risk adjustment revenue, and consequently more resources to mine future patients’ records. It is a vicious cycle that disadvantages smaller plans and the American taxpayer.

Primary care docs strained by vaccine hesitancy, potential telehealth rollback as COVID-19 pandemic drags on

Traditional primary care faces numerous challenges, including the continued rise of “alternative front doors” like Teladoc, khealth, and CVS MinuteClinic and vaccine misinformation. Perhaps the most worrisome threat to the specialty, though, is the potential return of restrictive pre-COVID virtual care payment regulations for Medicare and the many states that have not enacted reimbursement parity laws. In a recent survey from the Larry A. Green Center, 64% of surveyed primary care clinicians said telemedicine proved to be a major asset in preserving their ability to serve patients during COVID and 41% fear their practice won’t be able to offer virtual care if pre-pandemic payment regulations are reinstituted.

Commentary: The world has changed, and it’s about time virtual care reimbursement caught up. CMS and all states should institute permanent reimbursement parity to ensure providers are paid the same for virtual and in-person visits. Yes, telemedicine presents some challenges. Patients, particularly complex patients, should have to go see their providers in-person in some cases, and, just as with in-person visits, virtual care has the potential for fraud and abuse. But virtual care has demonstrated its ability to improve access during COVID and clearly has a place in primary care and other specialties.

Amazon’s Alexa is coming to a hospital near you

The pace of healthcare news from big tech is unrelenting. In this latest story, Amazon is launching Alexa for hospitals, senior living facilities, and other healthcare settings. The announcement follows a year-long pilot of Alexa-enabled devices in healthcare facilities, including Northwell Health, Cedars-Sinai, BayCare, and Houston Methodist. Expected hospital use cases include allowing patients to send messages and requests to the nursing staff and provider / patient communication. In senior living facilities, Alexa can call a set list of family and friends, remind residents to take their medication, and review meal options for the day.

Commentary: Alexa may not represent a fundamental transformation of the U.S. healthcare industry but it could provide a way to improve the patient experience, coordinate clinical teams, streamline note-taking, and help seniors more safely age in place. We are encouraged by Amazon’s progress to date and look forward to seeing Alexa address more and more healthcare use cases moving forward. The possibilities are endless.

Mark Cuban-Owned Company To Launch Pharmacy Benefit Management Services

Large purchaser coalition PBGH forms new venture to lower employer health costs, starting with PBM launch

In a timely follow up to our recent deep dive on pharmacy benefit managers (PBMs) and drug plan design, two stories offer some hope of change, at least in the PBM landscape. The first is that billionaire Mark Cuban is launching a new PBM that will incorporate manufacturing, pharmacy services, and wholesale distribution under one operation and open an online pharmacy that will sell 100 of the most commonly prescribed generic medications at a fixed 15% markup. The PBM will prioritize transparency and will reportedly share 100% of the rebates they receive from biopharma with their clients.

The second story is that national employer group the Purchaser Business Group on Health (PBGH) is starting a new company to develop healthcare products for large employers. One of the products is a new PBM, EmsanaRx. PBGH notes a lack of accountability from PBMs to their employer clients, who don’t have access to the information about drug costs, discounts, and administrative fees they need to accurately evaluate PBM performance. PBGH includes Walmart, Costco, Microsoft, Intel, and Tesla, among others, but EmsanaRx and other products will be available to outside companies as well.

Commentary: We are encouraged by these efforts to improve the drug plan administration landscape, but are skeptical for two reasons. First, as we noted in our deep dive, the PBM industry is highly concentrated. Just three PBMs, CVS Health's Caremark, UnitedHealth's OptumRx and Cigna's Express Scripts, control 80% of the market. It will be very challenging for new entrants to gain any sort of meaningful scale. Second, neither announcement focus on the current patient experience. Both aim to address employer frustrations with rising costs and lack of accountability. Unless the current reverse insurance paradigm for patients is remedied, many Americans will continue to needlessly suffer from poor drug plan design.

The Donut Hole