California Strategic and Operational Plan for HIE Complete

Healthcare Transactions Weekly is happy to report that its recommendations for amendments to California's submission to the Office of the National Coordinator (ONC) for HIE funds were included in the final Strategic and Operational Plan for HIE submitted to ONC on April 6th.

The original comments and their incorporation to the HIE Plan can be viewed on the CHHS website pages 12 and 13.

Unexpected Boon for HSAs: Medicare Surtax Shields

HSAs have always shielded their owners from tax on ordinary income, investment income, and spending on medical expenses. Despite talk in early legislative sessions about extinguishing HSAs, the tax benefit of HSAs is now broader than before. While a significant portion of the Patient Protection and Affordable Care Act is funded by a 3.8% Medicare surtax, HSA holders are well equipped to avoid the additional tax.

Normally, HSA contributions are exempt from payroll taxes, like Medicare tax. In the case of high income individuals, however, the contribution limits of around $6000 cap the available tax benefit. Now, however, the tax shield is more effective because there are more taxes to protect against. High income individuals with investment income can shield a potentially unlimited amount of investment income from the Medicare tax, so long as the legal ownership of the investment is within the confines of an HSA trust account. 

The following description of how the surtax functions is excerpted from U.S. Trust Tax Alert 2010-2. 

 This surtax of 3.8% will be imposed on certain individuals, trusts and estates. The surtax will be imposed on individuals with “net investment income” to the extent that modified adjusted gross income exceeds: 

o $250,000 for taxpayers who are married filing jointly or surviving spouses; 

o $125,000 for taxpayers who are married filing separately; and 

o  $200,000 in all other cases. 

These amounts (e.g., $250,000 for a married couple) are not indexed for inflation.

Example: Assume the same facts as Example 1, and that husband and wife have net investment income of $100,000.  Their modified adjusted gross income exceeds the threshold by $300,000 (i.e., $550,000 minus the $250,000 threshold).  Accordingly, the Medicare surtax will be assessed only against the $100,000 of net investment income, resulting in $3,800 surtax.  

Patient Protection and Affordable Care Act Opportunities

Reading the healthcare reform legislation can be frustrating if you are not a government entity, nonprofit, or provider. As discussed at e-CareManagement this week, readers are likely interested in how they may participate in some of the demos and projects in HR 3590, Patient Protection and Affordable Care Act  (PPACA). The problem is that many of the ideas for implementing the innovations contained in the bill do not exist in the government/nonprofit/provider context. My suggestion for implementers of technology would be to pursue the following analysis:

Step 1: What types of entities are eligible project participants? If your entity isn't  eligible, go to step 2.

Step 2: Will the project be administered in a manner that provides opportunities for subcontractors? If so, go to step 3.

Step 3: Determine whether your organization is suited to be a subcontractor to an eligible entity.  

Here's an example using Section 4206 on "Individualized Wellness Programs". Maybe you can be on the receiving end of "appropriation of such funds as may be necessary".

Step 1 – Eligibility. The recipient of funds under Sec. 4206 must be a “community health center” funded under 42 U.S.C. 245b, which is found under “health center” at 42 U.S.C. 254b. To qualify, you must fit within one of the trendy categories of “health services” listed there, or certain exceptions. If you don’t qualify, go to Step 2.

Step 2 – Administration. The Secretary of HHS will dole out grants for 4206 directly to the “community health center”. The health center will likely have ties to state government because one of the two factors for determining criteria is comments received from state officials.  Sec. 254(b)(3)(B). Under open government protocols followed these days by most states, you will be able to find out which wellness programs your state is endorsing doing by looking at the state department of health web site.

Step 3 – Subcontracting Options. Section 4206 is a new program, so there aren’t any established entities with subcontracting processes to use as an example. But if you look at the pattern established with HITECH Act funds in California, for example, we aer just now getting through the public comment process of its operational plan for ARRA funds earmarked back in February 2009. Consulting firms have been facilitating the process and design of the solutions, and will likely continue to do so.

Here's a table showing the eligible entities and administrative processes for Sections 4206, as well as Section 3510 on Navigators and 4202 on Community-Based Wellness.

Mensa kids on Provigil can get 'er done

The topic of this blog is healthcare transactions, having much to do with the way that incentives are organized in the healthcare industry. Attorneys get trained for years to criticize deals designed by other people, and healthcare at this point is running the gauntlet. But maybe the lawyers interpreting the new regulations should do a bit of navel-gazing themselves.

One of the chief concerns among would-be health system reformers is that the fee-for-service model creates perverse incentives. E.g., doctors get paid more when they do more, and more care tends on average to be worse care. The same concern applies in the legal setting. Lawyers looking at a deal who get compensated based on billable hours have an economic incentive to spend more time. The additional time spent can be helpful, or it can raise issues that are a harmful distraction from business fundamentals.

A refreshing approach is articulated at http://www.clientrevolution.com/, where Shepherd Law Group CEO observes the following:

"While many lawyers claim they cannot offer fixed prices because they cannot figure out what a particular matter costs, lawyers do not need to know if they are making money on every particular matter. They simply need to know their law firm is keeping revenues above expenses and operating overall at a profitable level. Their focus should be on bringing in as many new matters as possible."

This approach gives up the kinds of metrics and controls that accountants would consider to be essential safeguards. "Bringing in as many new matters as possible" sounds like a recipe for a client service shortfall, but then again maybe Mensa kids on Provigil can get 'er done. Or in corporate-speak, maybe a professional services firm is unlike other kinds of businesses, because the professional has instincts for when value is being delivered and a capacity to develop relationships that are intrinsically valuable. Time will tell the fate of Shepherd Law Group and its ilk.

DURSA, health reform, and California privacy rules

The National Health information network has now provided a template agreement for organizations seeking to participate in health information exchange -- the Data Use and Reciprocal Support Agreement (DURSA).

California is one of the states challenged to determine what modifications to the DURSA, or state law, for health information exchange (HIE) to achieve its full potential. In my view, the DURSA review is a timely opportunity to address the proliferation of disease management services that may diverge from the disease management services contemplated in California Civil Code Sec. 56.10(c)(17). 


Certain features of “accountable care” and “medical home” approaches contained in the recent health care legislation seek to enlist the services of a disease management firm to provide both the types of disease management services described in Health Code Section 1399.901, and additional services that would arguably provide better quality assurance and cost control in California if the disease management organization was more broadly permitted by the California law to participate in HIE under DURSA. A disease management organization seeking to validate population health trends or evidence-based practices, for example, would have to seek the support of either a multitude of physicians (Sec 56.10(c)(17)(A)), or the health services plan (56.10(c)(17)(B)), making such validations more difficult.

HR 3590 Signed!

Time for all manner of vendors to consider whether their services will be rendered invaluable, redundant, or worthless as a result of the new legislation.

To support the political claims of "immediate impact", the bill contains certain sections will require states to procure new consulting and technology services.

Among the most straightforward requirements are those found in Section 1103, requiring states to establish new web services in just 3 months. An extension may be granted, or the exact meaning of "establish" can be argued, but no doubt resource-strapped states will be turning to vendors for assistance.

Here's the text:


SEC.  1103.  IMMEDIATE INFORMATION THAT  ALLOWS CONSUMERS  TO IDENTIFY AFFORDABLE COVERAGE OPTIONS.
(a)  INTERNET    PORTAL   TO    AFFORDABLE    COVERAGE   OPTIONS.— (1)  IMMEDIATE    ESTABLISHMENT.—Not   later  than  July  1,
2010,  the  Secretary, in consultation with the  States, shall estab- lish  a mechanism, including an  Internet website, through which  a resident of any  State may  identify affordable health insurance coverage options in that State.
(2)  CONNECTING   TO   AFFORDABLE   COVERAGE.—An Internet website established under  paragraph (1)  shall, to  the   extent practicable, provide  ways  for  residents of any  State to  receive information on at least the  following  coverage options: ...

This will be quite a boon to outfits like ConnectedHealth.com, which already have a clear and concise platform for giving realtime price quotes. The question will be the various states' appetites for making, buying, or renting the solutions they need.

Larger vendors like Accenture, with a long history of Medicaid management information systems, will have the ability to offer the full suite of information required to be provided by the sites. The information required requires tapping databases that have seldom been brought together in one place:


(A) Health insurance coverage offered  by health insurance  issuers, other than coverage that provides reimburse- ment only for the  treatment or mitigation of—
(i) a single disease or condition; or
(ii)   an   unreasonably  limited  set   of  diseases  or
conditions (as determined by the Secretary);
(B)  Medicaid coverage under  title  XIX  of  the   Social
Security Act.
(C)  Coverage under  title  XXI  of  the   Social   Security
Act.

(D) A State health benefits high  risk  pool, to the  extent
that  such   high   risk   pool  is   offered   in   such   State;  and
(E)   Coverage under  a  high   risk   pool

Population Health Management

As someone who lived in Wisconsin for 3 years, "population health management" sounds like issuing licenses to hunters to shoot deer. As applied to people, however, the hunt in population health management is for behavioral causes of disease within a population, and then identifying strategies to prevent the disease. Sounds harmless enough. To find the diseases and causes does require aggregating personal information of people within the population, raising some objections.

In Buck Consultants 2009 survey, several employers engaged in "managing wellness" announced 2 vision statements that are remarkable, especially since the trend has been for employers to shift away from defined benefits and towards defined contribution plans. Perhaps this shift is not indicative of an overall decrease in taking responsibility for employees' healthcare.

• “valuing employees’ health as much as their intellectual knowledge”
• “our vision is to make people feel better than they ever thought possible"

No doubt each of these statements will include qualifications and disclaimers of liability prior to becoming actual policy. Indeed, finalized corporate HR policies are often difficult to discern due to the care that is taken to avoid offense. If the above statements really do become the core of health benefits policy, it is worth considering the implications in the context of privacy and anti-discrimination regulations.  

Valuing employees' health seems to give the employer the right incentives during the course of the employment relationship, but the hiring and termination decisions are also implicitly impacted by valuing employees' health. With average employment tenure approaching just 3 years, firing and hiring happens a lot.  While various regulations protect employees in the hiring and firing process, those regulations cannot reach secret motives. In this case, the employer is making its preference for the health of its employees explicit. Careful wording of such preferences will be required to steer clear of privacy and ADA issues here.