As we look into our crystal balls, we do not expect a lot of new issues in 2015. Rather, we believe that most of the significant issues will be a continuation of issues that arose in 2014 or earlier. For example, continued implementation of the Patient Protection and Affordable Care Act (the “ACA”), which was signed into law on March 23, 2010, will be a primary issue in 2015 and beyond. And, with the Republicans gaining control of the House of Representatives and the United States Senate, we can expect additional challenges to the ACA.
Of course there will always be events we cannot anticipate that will cause concern in the healthcare industry, and by definition we cannot know what they are. However, we do believe the following six healthcare issues will continue to be significant in 2015. In no particular order:
1) Subsidies in the health insurance exchanges
Under the ACA, persons with incomes between 100 and 400 percent of the federal poverty level are eligible to receive federal tax credits, if they purchase coverage through state-run exchanges. In King v. Burwell, the 4th Circuit Court of Appeals found that the IRS was appropriate in determining that the subsidy also applies to coverage provided through federal exchanges and federal-state partnership exchanges. This decision has been appealed, and the U.S. Supreme Court granted certiorari and has scheduled oral arguments for March 4, 2015. A decision is expected by late June or early July 2015. That decision, either way, will have a profound ripple effect on this aspect of the ACA.
2) Joint ventures and continued horizontal and vertical integration
As healthcare dollars continue to be squeezed, we believe there will be even greater focus on cost savings through consolidation and innovative provider contracts. Health insurance companies and health maintenance organizations will continue to look to business sectors that are not subject to the federal medical loss ratio restrictions, including continued acquisitions of physician groups. We also expect that large provider groups and hospital systems increasingly will enter into risk-share arrangements, with payors responsible for marketing, compliance and enrollment while the healthcare providers increasingly will be responsible for cost cutting. Both payors and providers will be responsible for our third issue, monitoring and increasing the quality of care.
3) Increased focus on quality of care
With the cost pressures discussed above, state and federal governments will continue to focus on ensuring high-quality care for patients. One example of this is the reduction in Medicare payments to hospitals with the highest rates of “Hospital-Acquired Conditions (“HACs”). CMS and many commercial payors have already begun refusing to pay for treatment associated with these conditions. In 2014, CMS began decreasing Medicare payments, and some states have issued fines to hospitals with significant HAC rates. This focus will continue. For example, beginning in October, Medicare will include in its analysis the rates of surgical site infections. The following year, Medicare will examine the frequency of reporting by facilities of two antibiotic-resistant germs, including MRSA. CMS has also stated that it will revise its network adequacy requirements, and the National Association of Insurance Commissioners has released for comment a new version of its draft network adequacy model law. Note that the California Insurance Commissioner has already released this year an emergency regulation regarding network adequacy.
4) Additional cost concerns
As various technologies continue to improve, costs in many sectors have started dropping. However, other costs, including some specialty pharmaceuticals, are increasingly (almost prohibitively) expensive. For example, in April 2014 the World Health Organization endorsed two new oral drugs that fight hepatitis C. At the same time, though, the Organization also noticed concern about the high price of these new medicines, one of which costs $1,000 per pill. As patients continue to expect that they will receive the newest and “best” medications and treatments, cost will continue to be a significant issue. To help control costs, and thus increase patient access, expect continued emphasis on electronic medical records and health information technology, and expect increased use of telemedicine and physician extenders (such as nurse practitioners and physician assistants). Finally, under the ACA, Medicaid payments to certain primary care physicians was based upon the Medicare payment methodology from 2013 and 2014. Such increased payments are no longer federally required beginning in 2015, and this will be of huge concern as States contemplate the battle between costs and retention of Medicaid physicians/access to care.
5) Medicaid Expansion
Medicaid expansion provides healthcare coverage to persons with incomes up to 138% of the federal poverty level. According to the Kaiser Family Foundation, 27 states and the District of Columbia have adopted Medicaid Expansion, seven states have the adoption of Medicaid expansion as “under discussion,” and 16 states currently are not contemplating the expansion of their Medicaid programs. (Status of State Action on the Medicaid Expansion Decision can be found here.) However, some of the states that are “contemplating” expansion, and even some of the states that are characterized as “not contemplating” expansion, are considering other mechanisms to cover these persons. For example, Florida business-industry groups are seeking legislative approval for “A Healthy Florida Works,” which is a program that would provide coverage to certain persons who would qualify under Medicaid expansion. Tennessee, Utah and Wisconsin also are some of the states with either existing or contemplated programs that are alternatives to Medicaid expansion.
6) Healthcare and Data Security
The ACA and the Meaningful Use programs both pose unique security challenges to the health care industry. After hacks last year in other industries, such as the Sony hack in December, there will likely be more persistent threats to healthcare data in 2015. Inadvertent leaks are not uncommon in the healthcare industry, and hackers will take full advantage of those opportunities. And with more data storage on “cloud”‘ based servers, healthcare data makes for an attractive target for cybercriminals. As a result, look for greater focus on employee training, review of systems security as well as third party review to verify that healthcare entities are as protected from cyber threats as they can be. Also, look for the Office of Civil Rights of the Department of Health and Human Services to step up its audits and penalties against entities that violate HIPAA.
As the healthcare sector continues to evolve, Akerman stands ready to assist its clients in navigating this ever changing market.