• It occurs to me that the belated federal benefits enrollment period finally ended yesterday.
• The President issued several executive orders on Friday that reversed several Bush administration positions on government contracting. The Washington Post reported the Washington Post reports that these orders
  

  Require federal [service] contractors to offer jobs to current workers when contracts change.
  Reverse a Bush order requiring federal contractors to post notice that workers can limit financial support of unions serving as their exclusive bargaining representatives. [FEHBlog note — this is Section 5.61 of the current OPM standard contract]
  Prevent federal contractors from being reimbursed for expenses meant to influence workers deciding whether to form a union and engage in collective bargaining.

  Govexec.com reports that the NTEU and AFGE are pleased by these developments.

• You may recall that in May 2006, a laptop computer and external hard drive containing the personal information of millions of veterans was stolen from a VA employee’s home in Montgomery County, MD. The police later found the laptop and tests indicated that the personal information was not wrongly used, and the VA provided credit counselling. Nevertheless, a lawsuit ensued, and the AP reported last week that the VA has agreed to pay $20 million to settle the lawsuit, subject to judicial approval. According to the AP,
  

  The money, which will come from the U.S. Treasury, will be used to pay veterans who can show they suffered actual harm, such as physical symptoms of emotional distress or expenses incurred for credit monitoring [and of course their lawyers].

• The New York Times reported yesterday that the healthcare industry could benefit from “disruptive innovation.”
  

  Disruptive innovators in health care aim to shape a new system that provides a continuum of care focused on each individual patient’s needs, instead of focusing on crises. Mr. Christensen and his co-authors argue that by putting the financial interests of hospitals and doctors at the center, the current system gives routine illnesses with proven therapies the same intensive and costly specialized care that more complicated cases require.

  The article describes Kaiser Permanente, a group model HMO, as a successful integrated mode. The article quotes managed care maven Uwe Reinhardt

  “It is much cheaper than pay-for-service systems, because they have absolutely no incentive to overtreat you, but they have every incentive to keep you healthy,” he says. “Kaiser still makes mistakes — any large system does — but their facilities always come out ahead in every service quality survey I’ve reviewed.”

  Of course Kaiser Permanente has been around for over sixty years. According to Kaiser’s Fast Facts website, it has brought the following innovations to U.S. health care are:

  prepaid insurance which spreads the cost to make it more affordable

  physician group practice to maximize their abilities to care for patients

  a focus on preventing illness as much as on caring for the sick

  an organized delivery system, putting as many services as possible under one roof

  Kaiser has an interesting approach but it’s not for everyone (at least pending Medicare for All). The Wall Street Journal reports that CMS and commercial health plans are considering adopting a middle ground of paying doctors for episodes of care similar to Medicare’s hospital diagnosis related group payments — as opposed to a fee for service basis. The Bridges toExcellence group advocates this approach, but the medical community is concerned. According to the Journal,

  “It’s hugely worrisome to us,” said Lawrence Martinelli, an infectious-disease specialist in private practice in Lubbock, Texas. “There’s concern about not only how much you’re going to get paid, but whether you can negotiate a contract where you can at least break even.”

  “Ay, there’s the rub.” (hey, I’m quoting Shakespeare here.)

There’s a lot of health care spending in the House economic stimulus bill (HR 1). There are the significant COBRA changes (Section 3002) that I discussed in last weekend’s update and this Business Insurance article. There are many changes to the HIPAA privacy and security rules (beginning at Section 4401), including a new nationwide privacy breach notice requirement. Also the bill (Sec. 9902) would create a federal panel known as the Federal Coordinating Council for Comparative Effectiveness Research to

(1) assist the offices and agencies of the Federal Government, including the Departments of Health and Human Services, Veterans Affairs, and Defense, and other Federal departments or agencies, to coordinate the conduct or support of comparative effectiveness and related health services research; and(2) advise the President and Congress on–(A) strategies with respect to the infrastructure needs of comparative effectiveness research within the Federal Government;(B) appropriate organizational expenditures for comparative effectiveness research by relevant Federal departments and agencies; and(C) opportunities to assure optimum coordination of comparative effectiveness and related health services research conducted or supported by relevant Federal departments and agencies, with the goal of reducing duplicative efforts and encouraging coordinated and complementary use of resources.

This new panel reminds me of the Blue Cross Association’s recommendation that Congress pass a law creating an institute

“that would support research comparing the effectiveness of new and existing procedures, drugs, devices, and biologics based on four key principles:

1. funding should be ensured by asking all payers – government and private – to contribute;
2. the Institute should support a broad range of research, especially clinical trials;
3. significant education programs and incentives are needed; and
4. the new Institute should be governed by a board with both public and private representation.”

Membership in the new Council would be limited to federal officials and employees, but it would be funded by the taxpayers. In the end, the new Council bears the most similarity to the Federal Health Board advocated by HHS Secretary designate Tom Daschle.

When the Food and Drug Administration approves a new drug for marketing, it authorizes the use of a label that prescribes the appropriate uses for the drug. In order to achieve FDA approval, the drug manufacturer must demonstrate the safety and efficacy of the drug in three levels of patient testing.

It’s illegal for a drug manufacturer to promote the use of one of its FDA approved drugs for so-called off-label or unapproved uses. Earlier this month, Eli Lilly & Co. agreed to plead guilty to promoting the off-label use of its anti-psychotic drug Zyprexa. Lilly also agreed to pay $1.4 billion (with a b) in fines and damages.

Yesterday Pfizer announced its acquisition of fellow drug maker Wyeth. Pfizer also announced a big drop in earnings. It turns out that a major cause of the drop is a proposed $2.3 billion (again with a b) settlement of the federal government’s charges that Pfizer promoted off label use of the painkiller Bextra and other Pfizer drugs (as reported at philly.com). Wow.

However, it’s lawful for doctors to prescribe FDA approved drugs for off-label uses. Whether the patient’s health plan will cover the off-label use is another question. Medicare Part B covers cancer drugs. Business Week reports that

Although it is not the case with other drugs, Medicare must reimburse doctors or patients for virtually all cancer drug uses, even those not yet approved by the Food & Drug Administration. And it is not permitted to favor the lowest-cost treatment. As a result, says author Dr. Peter Bach of Memorial Sloan-Kettering Cancer Center in New York, “the prices of cancer drugs appear to be rising faster than the health benefits associated with them.”

[Dr.] Bach recommends that Congress rectify the situation by establishing a center for comparative effectiveness—a concept embraced by President Obama’s Administration—that would determine when a cancer drug’s use is reasonable and necessary, based on clinical research. However, Bach acknowledges that patients may not be keen on this solution, as an authority other than their oncologist would end up restricting their access to some treatments. “This is going to be tough going,” he says. “But that is maybe one of the trade-offs we need to make to bring prices under control.”

A law creating a regulatory pathway for FDA approval of follow-on biologic drugs (or biogenerics) also would help. AIS reports that “the follow-on biologics debate will likely see renewed action with Waxman overseeing the House commerce committee, some say.” It should.

• Govexec.com reported on the new OPM Acting Director, Kathie Whipple. Ms. Whipple’s bio is now posted on OPM.gov.
• Congress is busily working on the economic stimulus package. Both Houses are prepared to provide health care providers with at least $20 billion in funding for health care technology. Of course, the devil is in the details, particularly the new privacy and security requirements under consideration — House/Senate. Karen Ignani, who is President of the health insurance industry’s trade association AHIP, warned in a press release that
  

  “Investing in health information technology will make the health care system safer, more efficient, and more effective. Patients need the peace of mind of knowing that their personal health information is protected. However, if Congress enacts provisions that inhibit the secure exchange of health information, it will turn back the clock on efforts to coordinate patient care, improve health care quality, promote prevention and wellness, conduct comparative effectiveness research, and streamline health care administration.”

• One aspect of the House bills that caused me to jump out of my chair is the proposal to drastically increase the COBRA continuation coverage period. Currently, an employee who loses his or her job, is entitled to self-pay continuation coverage for 18 months. If the employee is in the 29 month waiting period for Social Security disability benefit-based Medicare coverage, then she can receive an 11 month extension at 150% of the standard premium as opposed to 102%. The House panels are proposing to allow COBRA coverage to age 65 for any employee who loses his or her job after either after achieving ten years of service with the employer or after reaching age 55 (regardless of tenure with the company). According to this Business Insurance report, business groups have voiced concerns about this proposal because it changes the nature of this temporary coverage program and it would be quite expensive for employers.
• Another Business Insurance report provides industry reactions to the United Healthcare/Ingenix settlement with the New York Attorney General that will replace the Ingenix usual reasonable and customary databases with an independent database developed by a qualified university designated by the New York AG.
• AIS Drug Benefits report advises that Rep. Henry Waxman (D Calif), Chairman of the House Energy and Commerce Committee, is very interested in enacting a law that would create a regulatory pathway for follow-on biological drugs — a move that would save health plans and consumers millions of dollars.
• Finally, Business Insurance reports on a settlement between a group of ERISA governed plans and the attorneys representing the class members in the Vioxx settlement that allows those plans a portion of the class recovery to reimburse the plans for the expenses incurred to treat their participant’s heart ailments attributable to Vioxx use.

• The big news of the past week was the United Healthcare and Aetna settlements with the NY Attorney General and the American Medical Association to replace the Ingenix usual reasonable and customary databases with an “independent” database created by a “qualified university” to be appointed by the NY Attorney General. A copy of the NY Attorney General’s report is here. A copy of the Aetna settlement is here. The response by the managed care industry trade association is here. While this is a happy outcome for doctors who operate outside of health plan networks, it’s not a good deal for consumers or doctors who participate in health plan networks.
• Last October, the Department of Health and Human Services’ Office of the National Coordinator of Health Information Technology held a conference on medical identity theft. Last week, Booz Allen issued a final report on that topic to the ONC. The New York Times reports today that privacy issues may interfere with the President elect’s plans to include electronic medical record funding in the next stimulus package.
• Eli Lilly & Co. conceded that it violated federal law by encourage the off label use of its blockbuster drug Zyprexa. Forbes.com explains that
  

  Lilly admitted to promoting the drug to elderly patients for off-label use as a treatment for dementia. The drug caused increased risk of death in this patient group. Zyprexa was approved in 1996 and will lose patent protection in 2011. It had annual sales of $4.7 billion in 2007.

  According to a U.S. Justice Department press release,

The global resolution [with Eli Lilly] includes the following agreements: A plea agreement signed by Eli Lilly admitting guilt to the criminal charge of misbranding. Specifically, Eli Lilly admits that between Sept. 1999 and March 31, 2001, the company promoted Zyprexa in elderly populations as treatment for dementia, including Alzheimer’s dementia. Eli Lilly has agreed to pay a $515 million criminal fine and to forfeit an additional $100 million in assets.

A civil settlement between Eli Lilly, the United States and various States, in which Eli Lilly will pay up to $800 million to the federal government and the states to resolve False Claims Act claims and related state claims by Medicaid and other federal programs and agencies including TRICARE, the Federal Employees Health Benefits Program, Department of Veterans Affairs, Bureau of Prisons and the Public Health Service Entities. The federal government will receive $438,171,544 from the civil settlement. The state Medicaid programs and the District of Columbia will share up to $361,828,456 of the civil settlement, depending on the number of states that participate in the settlement.

The qui tam relators will receive $78,870,877 from the federal share of the settlement amount.

A Corporate Integrity Agreement (CIA) between Eli Lilly and the Office of Inspector General of the Department of Health and Human Services. The five-year CIA requires, among other things, that a Board of Directors committee annually review the company’s compliance program and certify its effectiveness; that certain managers annually certify that their departments or functional areas are compliant; that Eli Lilly send doctors a letter notifying them about the global settlement; and that the company post on its website information about payments to doctors, such as honoraria, travel or lodging. Eli Lilly is subject to exclusion from Federal health care programs, including Medicare and Medicaid, for a material breach of the CIA and subject to monetary penalties for less significant breaches.

• CMS issued three Medicare national coverage determinations holding that
  

  Wrong surgical or other invasive procedures performed on a patient; Surgical or other invasive procedures performed on the wrong body part; and Surgical or other invasive procedures performed on the wrong patient.

  are “never events” for which no Medicare reimbursement will be made.

HHS announced today that HIPAA covered entities (health plans, heath care providers who use electronic transactions, and health care clearinghouses) must adopt the ANSI X12 5010 electronic transaction standards by January 1, 2012, and the ICD-10 diagnosis and hospital procedure code sets by October 1, 2013. HHS adopted the health care industry’s recommended implementation schedule. This conversion is a huge undertaking.

• United Healthcare and its Ingenix subsidiary raised the white flag again today by agreeing to settle the American Medical Association’s lawsuit over the validity of the Ingenix usual reasonable and customary (UCR) databases that insurers often use to set out-of-network provider rates. While not conceding liability, the defendants agreed to pay $350 million into a fund to be distributed to doctors and consumers. The lawsuit had been pending since 2000 in the federal district court in Manhattan. The AMA claims victory here.
• The New York attorney general announced today that Aetna has agreed to contribute $20 million toward the cost of retaining a qualified university to create an independent UCR database. According to Aetna’s press release, Aetna
  

  will stop using the Ingenix databases for the purpose of determining “prevailing” or “usual, customary and reasonable” charges when members receive covered care from providers outside a health plan’s network. Aetna will instead help the Attorney General to create a new independent database for this purpose, and will use the new database when it is ready for use. Aetna is contributing $20 million to a nonprofit organization to help create the new database and to help educate members about reimbursement rates.

• The New York AG’s press release provided more details:

Under Attorney General Cuomo’s agreement with Aetna:

Aetna will pay $20 million toward a new, independent database run by a qualified nonprofit organization;

The nonprofit will own and operate the new database, and will be the sole arbiter and decision-maker with respect to all data contribution protocols and all other methodologies used in connection with the database;

The nonprofit will develop a website where, for the first time, consumers around the country can find out in advance how much they may be reimbursed for common out-of-network medical services in their area;

The nonprofit will make rate information from the database available to health insurers;

The nonprofit will use the new database to conduct academic research to help improve the health care system;

The nonprofit will be selected and announced at a future date.

• The AMA in another press release called upon insurers to follow Aetna’s lead. However, the Ingenix databases are not the only show in town. Many insurers use Medicare’s resource based relative value schedule (RVRBS) to set their out of network rates.