The Washington Post reports this afternoon that

Office of Personnel Management Director Katherine Archuleta resigned under pressure on Friday, a day after Obama administration officials announced that two major breaches last year of U.S. government databases holding personnel records and security-clearance files exposed sensitive information about at least 22.1 million people.”  

The report further explains that

The White House announced that Beth Cobert, deputy director for management at the Office of Management and Budget, will take over the personnel agency in an acting role until President Obama appoints a permanent replacement. OPM has not had a deputy director since 2011; the president’s nominee for the  No.2  job [retired Navy Admiral Earl L. Gay] has been held up in Congress for many months.

Here is Ms. Cobert’s CV from the White House OMB website:

Beth Cobert is the Deputy Director for Management. She was confirmed on October 16, 2013. Cobert previously served nearly thirty years at McKinsey & Company as a Director and Senior Partner. During her tenure, she worked with corporate, not-for-profit and government entities on key strategic, operational and organizational issues across a range of sectors, including financial services, health care, legal services, real estate, telecommunications, and philanthropies. She led major projects to generate performance improvements through process streamlining, enhanced customer service, improved deployment of technology, more effective marketing programs and strengthened organizational effectiveness. Within McKinsey, Cobert held multiple leadership roles in people management including recruiting, training, development and performance management of staff. She has been a champion for professional development and initiatives to support women’s advancement to leadership positions. Cobert also previously served as a board member and chair of the United Way of the Bay Area and as a member of the Stanford Graduate School of Business Advisory Council. Cobert received a bachelor’s degree in economics from Princeton University and a master’s degree in business administration from Stanford University. She and her husband Adam Cioth have two children. 

Quite a resume.

Fierce Health Payer reports today that Cigna and Anthem now are making progress on their merger negotiations after a hiccup in those negotiations occurred a couple of weeks ago.

On the regulatory front, CMS issued a proposed rule Wednesday on Medicare Part B payments to physicians for 2016. This is the first Part B rule released since Congress repealed and replaced the sustainable rate of growth formula earlier this year. “Through the proposed rule, CMS is beginning implementation of the new payment system for physicians and other practitioners, the Merit-Based Incentive Payment System (MIPS), required by the legislation.” It appears quite complicated like everything in Medicare.  CMS must have made the hospitals’ day yesterday by announcing a new bundled payment pilot for hip and knee replacement surgeries.

Under this proposed model, the hospital in which the hip or knee replacement takes place would be accountable for the costs and quality of care from the time of the surgery through 90 days after—what’s called an “episode” of care.
Depending on the hospital’s quality and cost performance during the episode, the hospital would either earn a financial reward or be required to repay Medicare for a portion of the costs. This payment would give hospitals an incentive to work with physicians, home health agencies, and nursing facilities to make sure beneficiaries receive the coordinated care they need with the goal of reducing avoidable hospitalizations and complications. Hospitals would have additional tools – such as spending and utilization data and sharing of best practices – to improve the effectiveness of care coordination.
By “bundling” these payments, hospitals and physicians have an incentive to work together to deliver more effective and efficient care.  This model would be in 75 geographic areas throughout the country and most hospitals in those regions would be required participate. 

The ACA regulators today announced a final rule on the ACA mandate for women’s preventive health care which must delight religious employers.

OPM has been pressing FEHB plans to help reduce hospital readmissions.  Fierce Healthcare reports that the leading causes of readmissions are heart attacks, congestive heart failure, and flying somewhat below the radar screen sepsis.

For 30-day readmissions, sepsis accounted for 20.4 percent of cases. The rates for congestive heart failure were 23.6 percent and for heart attacks, 17.7 percent. UCLA estimated the annual cost of sepsis-related readmissions in California during the study period was $500 million, whereas congestive heart failure accounted for $229 million and heart attacks cost the system $142 million.  “Sepsis is a leading contributor to excess healthcare costs due to hospital readmissions,” the researchers concluded. “Interventions at clinical and policy levels should prioritize identifying effective strategies to reduce sepsis readmissions.”

On a related note, the Leapfrog Group released the results of its annual hospital transparency survey

Key findings from this report include:

Never events policy compliance remains low. The rate of hospitals meeting Leapfrog’s standard has remained at 79 percent from 2012 to 2014, meaning one in five hospitals won’t commit to apologizing to the patient and waiving all costs associated with the event if a Never Event, such as a foreign object left in after surgery or an air embolism, occurs at their facility.
Rates of certain hospital-acquired conditions remain a problem. One in six Leapfrog reporting hospitals have higher infection rates than expected for central line infections (CLABSIs) and one in ten perform poorly in preventing catheter-associated urinary tract infections (CAUTIs).
Hospitals are struggling to comply with safe practices. Urban hospitals continue to outperform rural hospitals: about 20% more urban hospitals met Leapfrog’s standard for safe practices and showed greater year-over-year improvement in meeting the requirements.
More hospitals with intensive care units are complying with Leapfrog’s ICU Physician Staffing standard. Studies show that meeting the standard can reduce ICU mortality by 40%.

Have a good weekend.
 

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Right now, a House Science, Space, and Technology subcommittee is holding a hearing on the OPM data breach. The subcommittee issued this helpful overview of the situation.  The Federal Times reports that the National Treasury Employees Union has joined AFGE in filing a lawsuit over the OPM data breach. The article explains

While other suits — like the one filed by AFGE — are based on alleged violations of the Privacy Act, the NTEU suit makes the case that OPM’s failure to secure personal information violated employee’s constitutional right to privacy.  NTEU lawyers noted the Privacy Act requires plaintiffs to meet a higher standard, such as proving damages occurred and that the violation was willful and intentional.  “Our approach isn’t really focused on recouping damages,” said NTEU general counsel Greg O’Duden. “We are looking for a court injunction that will cure the source of the problem; that will ensure that OPM gets its act together and institutes appropriate security measures.”

Fierce Health Payer has this useful update on state of health insurer mergers and acquisitions.

The American Medical Association has raised the white flag over the ICD-10 battlefield.  On Monday, the AMA and the Centers for Medicare and Medicaid Services issued a joint press release offering doctors an ICD-10 transition plan. The AMA explains that the transition plan addresses

• Claim denials. For the first year ICD-10 is in place, Medicare claims will not be denied solely based on the specificity of the diagnosis codes as long as they are from the appropriate family of ICD-10 codes.This means that Medicare will not deny payment for these unintentional errors as practices become accustomed to ICD-10 coding. In addition, Medicare claims will not be audited based on the specificity of the diagnosis codes as long as they are from the appropriate family of codes. This transition period will give physicians and their practice teams time to get up to speed on the more complicated code set. Both Medicare Administrative Contractors and Recovery Audit Contractors will be required to follow this policy.

• One of the commenters on the AMA website asked what does a family of codes mean? Another commenter replied “Family of codes means if you submit a claim with diabetes type 2 and is should have been DM 2 with diabetic retinopathy, they are not going to stop payment because you used a less specific code in the “diabetes family”

• Quality-reporting penalties. Similar to claim denials, CMS will not subject physicians to penalties for the Physician Quality Reporting System, the value-based payment modifier or meaningful use based on the specificity of diagnosis codes as long as they use a code from the correct ICD-10 family of codes. In addition, penalties will not be applied if CMS experiences difficulties calculating quality scores for these programs as a result of ICD-10 implementation.
• Payment disruptions. If Medicare contractors are unable to process claims as a result of problems with ICD-10, CMS will authorize advance payments to physicians.
• Navigating transition problems. CMS has said it will establish a communication center to monitor issues and resolve them as quickly as possible. This will include an “ICD-10 ombudsman” devoted to triaging physician issues.

CMS explained in the joint press release that it otherwise is sticking to its single coding policy — “the Medicare claims processing systems will not have the capability to accept ICD-9 codes for dates of services after September 30, 2015, nor will they be able to accept claims for both ICD-9 and ICD-10 codes.”

If  non-Medicare carriers want to adopt the transition plan approach to claim denials,, there won’t be a lot of time to reprogram claims systems to accommodate the change before October 1.

Health Affairs has a great post about CalPERS use of reference pricing with joint replacement surgeries. According to the post,

With reference pricing, the health care purchaser places a limit on what it will contribute towards payment for a particular procedure, assuring that the selected payment limit allows appropriate access for patients. The payment limit typically is the median or some other mid-point in the distribution of prices in the local market. Consumers who select a provider that charges less than the purchaser’s limit receive standard coverage, with minimal cost sharing. Consumers who select a provider charging above the contribution limit must pay the entire difference.

The post further explains

The application of reference pricing to inpatient orthopedic surgery led to significant price reductions from some of the hospitals whose initial prices were above the CalPERS payment limit. These price reductions have increased; the number of California hospitals charging prices below the CalPERS reference limit ($30,000) rose from 46 in 2011 to 72 in 2015.
It should be emphasized that reference pricing has caused actual price reductions, not merely slowdowns in the rate of price growth. This is the way markets are supposed to work.
Reductions in prices contribute to affordability of care. In the first two years after implementation, reference pricing saved CalPERS $2.8 million for joint replacement surgery, $1.3 million for cataract surgery, $7.0 million for colonoscopy, and $2.3 million for arthroscopy.

The post suggests that reference pricing does not adversely affect health service quality and is best used when patients can price shop for services, such as joint replacements.

Finally, the FEHBlog nearly fell out of his chair when he read that a recently enacted federal law that used increased IRS penalties as a pay go. Lockton consulting explains that

These increased penalties apply to [the ACA reporting forms the 1095-B and 1095-C] and other information returns and filings, such as W-2s, and are effective for reporting required to be filed or furnished after 2015. For example, the increased penalties would apply to the first year’s filings under the ACA, which relate to 2015, but are due in early 2016.
The general penalty for failure to file a required information return with the IRS (which is subject to reduction, waiver or increase for various reasons) will increase from $100 per return to $250 per return.
The cap on the total amount of penalties for such failures during a calendar year will increase from $1,500,000 to $3,000,000.
If a failure relates to both an information return (e.g., a Form 1095-C required to be filed with the IRS) and a payee statement (e.g., that same Form 1095-C required to be furnished to the individual), these penalties are doubled.
If a failure is caused by intentional disregard, the new $250 penalty noted above is doubled to $500 for each failure, and no cap applies to limit the amount of penalties that can be applied with respect to that calendar year.
As you consider these increases, keep in mind that these do not affect the IRS’s enforcement policy for the first year of ACA filing. Specifically, the IRS will not penalize employers “that can show they make good faith efforts to comply with the [ACA] reporting requirements.” So, we still have the “good faith efforts” standard, but the penalties that will apply if that standard is not met are much more severe.

Wonderful.

Federal News Radio reports that OPM is offering federal agencies guidance on their employee health and wellness programs. Wouldn’t it be helpful and perhaps even lower the cost curve a little if OPM coordinated the health and wellness programs that federal agencies and FEHB plans offer?

Last week, CMS proposed changes to the Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, quality provisions, and payment rates for the next calendar year.  Modern Healthcare reports that

For 2016, the agency proposes a 0.2% cut to outpatient prospective payment system (OPPS) rates.  While those changes might seem small, approximately 3,800 hospitals and 60 community mental health centers are paid under the OPPS and the decrease means they’ll collectively receive an estimated $43 million less than they got in 2015.
On the flip side, ambulatory surgical centers will get a modest 1.1% bump.
That will result in the 5,300 ASCs currently being reimbursed by Medicare getting an estimated $186 million more than what they got this year.  Both proposals were immediately criticized by provider trade groups.

Shocker.

The combination of Aetna and Humana:
Builds on each company’s respective efforts to provide innovative, technology-driven products, services and solutions to build healthier populations, promote higher quality health care at lower cost, and offer greater transparency and convenience for consumers.
Increases Aetna’s Medicare Advantage membership to 4.4 million and improves Aetna’s ability to serve members and their providers with cutting-edge technology and best practices.
Brings together two companies with leading percentages of membership in Medicare plans rated four stars or higher.
Creates a leading health care services and pharmacy benefit franchise, serving members who use over 600 million prescriptions annually.
Strengthens care management capabilities by taking the best-of-breed provider solutions, including robust offerings of patient-centered provider services, clinical intelligence, value-based reimbursement models, data integration and analytics solutions from both companies.
Brings together two companies with longstanding commitments to promoting wellness, health, and access to high-quality health care for everyone, while supporting the communities in which they serve.

Impressive. The combined company would be the second largest health insurer after United Healthcare. The Wall Street Journal reports that

Both chief executives said they are confident the transaction will be approved, citing complimentary, rather than overlapping strengths—Aetna in commercial selling, and Humana in Medicare. Antitrust reviews are “never totally predictable, but we believe it’s very manageable,” Aetna CEO Mark Bertolini said.  

The Journal further explains that

A takeover approach for Humana earlier this year thrust the biggest health-insurance companies into a five-way merger frenzy. Cigna Corp. and Aetna were vying to buy Humana, while fielding takeover approaches of their own. Cigna and Anthem Inc. have rekindled talks after Cigna earlier rejected a public takeover bid of $184 a share from Anthem, its larger rival, and UnitedHealth Group Inc. earlier approached Aetna.
Meantime, Medicaid-focused Centene Corp. said Thursday that it agreed to buy Health Net Inc., in a deal worth about $6.3 billion.  The consolidation momentum in the health-insurance industry is being fed by a desire to diversify and cut costs, amid a landscape changed by the Affordable Care Act. 

Mr. Toad’s wild ride.

Well, half of 2015 has already flown by and we find ourselves three months away from the ICD-10 coding set compliance date. The codes are used to identify patient diagnoses and hospital procedures. Muy imporanto for health plans.  The systemic change blows up the number of codes exponentially.  CMS, which regulates the HIPAA transaction and code sets, is cheering on the start of the new system. The doctors are freaking out. The health plans, which are legally bound to implement the massive change, are concerned that Congress may require them to manage two coding systems during a transition period.

Under HIPAA’s original “if you build it they must come” system, health plans must comply with the changes; doctors only have to comply if they engage in electronic transactions. Five years after HIPAA was enacted Congress changed the Medicare law to require medical practices to submit Medicare claims electronically. That’s what is causing doctors to freak out. CMS is saying that it will not pay Medicare claims with dates of service on or after October 1 unless the claim uses the ICD-10 codes. Health plans understandably are following CMS’s lead.

Health Analytics reports that the lobbyists are fighting up on Capitol Hill over this issue, and it may come down to the wire. HIPAA was enacted to facilitate electronic claims transactions and this coding change does little if anything to push that ball forward. The change is touted as a boon to public health analysts. A train wreck may be coming. It won’t be as dramatic as the healthcare.gov catastrophe in October 2014, but it could be bad. The FEHBlog is not optimistic.

The FEHBlog noted on Monday the interesting development that a federal union AFGE has sued OPM and an OPM contractor over the data breach. As this Nextgov article accurately reports,  these data breach lawsuits don’t have a great track record in court because of the inherent difficulty in proving sizeable data breach damages. Here, however, there is an unprecedented twist — the breach of the SF-86 background check forms. Those affected people unfortunately may have an easier time proving sizeable damages but the FEHBlog is not certain that these unique circumstances can be adjudicated in a class action. It’s not a simple case. Time will tell.

Also it’s worth noting this Federal Times report that the government is warning federal employees and annuitants about spear phishing scams related to the OPM breach.  Take care.

The FEHBlog realized with horror today that he had failed to provide a link to The Week in Congress’ review of last week’s actions up on Capitol Hill. Here’s the missing link.

For over a decade, the HIPAA Privacy and Security Rules have provided the regulated parties with necessary flexibility to conduct business while safeguarding data. Modern Healthcare nevertheless reports on a controversy over the appointment of privacy lawyer Deven McGraw to head HIPAA enforcement at HHS’s Office for Human Rights.  Apparently, some consider Ms. DeGraw to be too moderate.  The FEHBlog thinks that the federal government is lucky to have Ms. DeGraw.

Of course, it may be hard to appreciate the ongoing value of HIPAA when there seems to be another large data breach overtime you turn around. The OPM breach illustrates the difficulty of keeping ahead of the very bad guys.  The law simply has a hard time keeping up with technology whether it’s used for good or bad.

Defense One analyzes OPM’s efforts to enhance its data security. Today OPM took offline for repair E-QIP, its “web-based platform used to complete and submit background investigation forms.”  Also today, a large federal employee filed a class action lawsuit against OPM and a contractor Keypoint Government Solutions over the data breach.

Congress is now out of session for the upcoming Independence Day holiday.  Nextgov has provided its perspective on last week’s OPM data breach hearings. The Federal-Postal Coalition, which encompasses most federal employee and annuitant groups, has written a letter to the President about the issues created by the data breaches.

The Supreme Court ends its current term tomorrow with three argued cases left to decide according to ABC News.  As the FEHBlog and many others expected, the Supreme Court did legalize same sex marriage nationwide last Friday. This decision affects OPM’s rule allowing federal employees residing in the states that were not licensing those marriages to enroll the children of same sex domestic partners in the FEHBP. Children enrolled under this rule will lose their coverage at the end of this year unless their parents marry before then.

Fortune reports that the Supreme Court’s King v. Burwell decision reinvigorated merger and acquisition activity in the health insurance sector. The report indicates that Humana’s Board of Directors prefers Aetna’s acquisition proposal to Cigna’s.

Finally, Onclive provides an interesting report on three different health insurer approaches to control the exploding cost of oncology care.

The FEHBlog has been following the SCOTUSblog this month because as a DC lawyer it is fun to watch the Supreme Court decisions.  Yesterday, the Supreme Court issued its hotly awaited decision in King v. Burwell. The Court in a 6-3 decision written by the Chief Justice preserves the status quo with respect to subsidies in the ACA exchanges.  That’s not a bad result in and of itself and the decision does not directly impact the FEHBP. If the decision had gone the other way, the likely result would have been that Congress would preserve the status quo on subsidies at least until after the next Presidential election and in return wrangle some ACA amendments out of the Administration. It would be messy but it would be small “d” democratic in the FEHBlog’s view.

This blog, which has been around for close to 10 years now, has documented how ACA has complicated and raised costs for the FEHBP.  The key small “d” democratic flaw in the ACA is that it was enacted with no big r republican votes. If the Supreme Court had decided King v. Burwell the other way (and Justice Scalia explains in his dissent how it could have), then, the ACA could have become more palatable to both parties. But now, the ACA will remain a big issue for the 2016 Presidential election. The Supreme Court decision raised the stakes.

Today or Monday, the Supreme Court will decide the same sex marriage case. If as I expect the Supreme Court rules that the Constitution requires states to license same sex marriages, OPM will promptly and properly extend federal employee benefits coverage to same sex spouses nationwide.

Yesterday, OPM finished its gauntlet of data breach hearings on Capitol Hill There’s a good Govexec update on those hearings here.

Anthem is continuing to pursue Cigna. Forbes has an interesting report on various business factors complicating this potential merger.

OPM announced yesterday that the agency is prohibiting FEHB plans from generally excluding gender transition or sex transformation services for transgendered services beginning next year. In June 2014, OPM removed the FEHBP wide exclusion for those services, and several plans, such as Aetna and the Foreign Service Benefit Plan, began to offer coverage for those services in 2015.

Health Data Management reports on an HCCI health care price transparency initiative that merits attention.

The centerpiece of HCCI’s undertaking is a website that it launched this past February—www.Guroo.com. Underlying the user-friendly site is a statistically-driven cost calculator that provides average national and regional charges for common medical procedures that can be planned for in advance, like childbirth and knee replacements.
The procedures are grouped together as “care bundles,” which are meant to represent a typical consumer experience around a set of services such as maternity care. Currently, the site provides pricing for 78 care bundles and is working to expand the number to more than 300. Which procedures to include in care bundles was determined by mining claims data for the most commonly used CPT codes.
Along with pricing, HCCI is also working to provide standard quality measures for these care bundles based on reported outcomes and consumer surveys conducted through the Guroo.com site.

Cool.

Drug Channels mines the Fortune 500 to divine and compare the profitability of eight drug channels companies —AmerisourceBergen, Cardinal Health, CVS Health, Express Scripts, McKesson, Omnicare, Rite Aid, and Walgreens. Useful.

Happy Fathers Day all.  Congress is in session this week. There are three hearings scheduled on the OPM data breach – Senate Appropriations subcommittee with OPM oversight responsibility, Tuesday at 10 am; full House Oversight and Government Reform Committee on Wednesday at 10 am and the full Senate Homeland Security and Governmental Affairs Committee on Thursday at 9:30 am. The House committee held a hearing following by a confidential session last week. The New York Times provided more background on both sessions this morning.  Here’s a snippet from the article that caught the FEHBlog’s eye:

“This [referring to the data breach] was classic espionage, just on a scale we’ve never seen before from a traditional adversary,” one senior administration official said. “And it’s not a satisfactory answer to say, ‘We found it and stopped it,’ when we should have seen it coming years ago.”

The FEHBlog reads we in the context of this snippet to mean the U.S. government, not just OPM. This breach like the Anthem, Premera, and Sony breaches present national security issues.  The country has to pull together to stop further breaches. What steps should be taken in the meanti”me?

Note — In a June 12 post, the FEHBlog referenced a Wall Street Journal story reporting that one of the OPM breaches may been discovered in the course of a sales presentation by CyTech. OPM asserts according to Fortune that the CyTech assertion is inaccurate.

In 2009, the FEHBlog attended a NASCAR race with a friend. It was the last regular season race before the Chase, and Dale Earnhardt, Jr. needed to finish in the top five and several contenders needed to not cross the finish line in order for Junior to make the Chase. Junior’s hood was adorned with a sketch of Elvis. Who could not be pulling for Junior. Late in the race when Junior was in the top five and the drivers required to DNF were in the garage, a fan in my row screamed (and you had to scream it was so loud) that “It was happening.” Of course, less than five minutes later Junior crashed and the hopefully DNF drivers got back on the track. So you shouldn’t count your chickens before they hatch. Similarly. the Wall Street Journal reported yesterday that Anthem had made a public bid — directly to the shareholders — to acquire Cigna and that Aetna had made a proposal to the Humana board, which after all is soliciting proposals. Here is a link to a more detailed AP article from the Hartford Courant. The Wall Street Journal reported within the hour that the CIGNA Board rejected Anthem’s latest offer but held the door open for further discussions. Who knows how this will end up?, but certainly something is happening.

Finally, the FEHBlog ran across two stories about doctors doing good deeds:

• The New York Times ran a monster story this morning about how U.S. hospitals have collaborated for the good of their patients to vastly accelerate heart attack care with impressive results. 

“With no new medical discoveries, no new technologies, no payment incentives — and little public notice — hospitals in recent years have slashed the time it takes to clear a blockage in a patient’s arteries and get blood flowing again to the heart. The changes have been driven by a detailed analysis of the holdups in treating patients and a nationwide campaign led by the American College of Cardiology, a professional society for specialists in heart disease, and the American Heart Association. Hospitals across the country have adopted common-sense steps that include having paramedics transmit electrocardiogram readings directly from ambulances to emergency rooms and summoning medical teams with a single call that sets off all beepers at once.”

• The FEHBlog noted that at the ASCO conference earlier this month, a leading oncologist from Memorial Sloan Kettering hospital publicly complained about the high cost of oncology drugs. The Wall Street Journal discusses how another physician from this hospital developed a Drug Abacus tool “that compares the cost of more than 50 cancer drugs with what the prices would be if they were tied to factors such as the side effects the drugs produce, and the amount of extra life they give patients. In many cases, the website calculates a price that is lower than the drug’s market price.” Kudos all around.