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It will be years before we can evaluate Obamacare's ultimate success or failure. In the meantime, however, we can monitor the market effects of the Act's coverage and tax provisions, which have just begun to take shape. In many markets across the country, insurers and employers are changing the health plan options offered to their employees.  These newly offered health plans often feature higher contributions from employees toward the insurance premium, higher deductibles and higher out-of-pocket expenses such as co-payments for doctor visits and for emergency room use. Some plans have adjusted the scope of benefits offered, increased or decreased the number of plan options and/or changed eligibility requirements for group coverage.  Any of these decisions can have lasting impact on the U.S. healthcare economy.  Indeed, recently published research by Austin, Luan et al. in the policy journal, Health Affairs, estimates that changing premium contribution levels by just $100.0 could induce 2.25 million individuals to transition to the exchanges and increase federal outlays by $6.7 billion.

Clearly, some insurers have renewed the current plans for another year.  Yet, it is equally clear that some employers are taking this opportunity to restructure benefits and shift more costs to employees and their families.  While it is easy to get distracted by the brouhaha over the websites that support the new insurance market exchanges, more intelligence can be gained by observing consumer behavior through the rigorous discipline known as behavioral economics. In this month's edition of our newsletter, we again bring you a sampling of the events, issues and strategies, which may indicate the beginning of new trends that will shape the healthcare economy for the next 20 years.

Ruben J. King-Shaw Jr., Managing Partner & Chief Investment Officer

Policy

Federal

  • Key part of EHR incentive program halted due to government shutdown
    A recent article by healthcaretechnologyonline.com states that due to the government shutdown, multiple operations of HHS' Office of the National Coordinator for Health Information Technology stopped which includes administration of the Certified Health Information Technology Product List, a public repository of complete and modular EHR systems that have been tested and certified to standards developed by the ONC, and the work on federally-funded Standards and Interoperability Framework
  • FDA issues the final medical app guidance
    As per a recent article in Healthcareitnews.com, the FDA has issued its final guidance for mobile medical application developers, committing to limited regulation for most health and wellness apps while applying risk-based standards to diagnostic and quasi-medical device apps. The FDA will focus “on a subset of mobile medical apps that present a greater risk to patients if they do not work as intended”
  • Federal government expecting strong health plan signups
    According to unpublished estimates of approximately 7.0 million enrollments obtained by The Associated Press, the Obama administration's internal projections called for strong enrollment in the states in the first year of new health insurance market. Although, technology glitches have frustrated many consumers trying to sign up for coverage online, and efforts to upgrade and repair healthcare.gov are ongoing
  • Obamacare cuts costs of sexual healthcare with co-pay elimination
    Healthcare finance states that due to the Affordable Care Act, vital sexual health services for men and women are now covered by insurance plans at no extra cost with co-pay being eliminated. This low-cost preventive services and more insurance coverage could translate to significant improvements in Americans’ sexual health
  • HHS issues Program Integrity Rule finalizing policies for ACA
    Per CMS.gov, HHS released a rule finalizing a number of policies related to the implementation of the Affordable Care Act, including provisions regarding Affordable Insurance Exchanges, also known as the Health Insurance Marketplaces. These policies, though, are largely unchanged from previous proposed rules and guidance documents
  • Navigators help get Native Americans insurance
    According to Modern Healthcare, Insurance enrollment helpers are encouraging Native Americans to sign up for coverage under the nation's new healthcare law, even though they are exempt from the ACA, saying it will help them better access X-rays, mammograms, prescription drugs and trips to specialists not covered under Indian Health Service
  • CMS postpones ‘Two-midnight rule’ audit
    Per Healthcarefinancenews.com, the Centers for Medicare & Medicaid Services has postponed the auditing process of its new two-midnight rule, allowing hospitals 90 days to get accustomed to the change. The regulations by CMS are meant to outline and clarify the difference between hospital inpatient and outpatient stays. While medical necessity will still be taken into account, the rule said, if a patient’s stay is fewer than two midnights, the hospital will be paid on observation status instead of inpatient status
  • CMS issues Medicare DSH interim final rule
    According to Fierce Healthcare, the Centers for Medicare & Medicaid Services issued an interim final rule that modifies the process for uncompensated care payments for hospitals eligible for Medicare disproportionate share hospital (DSH) payments for cost-reporting periods that span more than one federal fiscal year. The interim final rule clarifies operational concerns raised in the final rule released last month and also changes the data used in the uncompensated care payment calculation to ensure Indian Health Service hospitals are included in certain factors of the calculation
  • CMS extends the PQRS exemption deadline to October 18
    As per cmanet.org, the CMS has extended the deadline to sign up for a PQRS (Physician Quality Reporting System) exemption via the "administrative claims-based reporting mechanism." This reporting mechanism has been made available as an alternative method of avoiding the 1.5% PQRS payment penalty in 2015. Physicians who cannot or choose not to participate in PQRS and wish to sign up for an exemption via the administrative claims-based reporting mechanism now have until October 18, 2013 to submit their request
  • Insurers meet with the Federal government on fixing health exchange issues
    A recent article by Bloomberg states that the heads of WellPoint Inc. (WLP), Aetna Inc. and at least 10 other insurers met with the Obama administration to discuss correcting flaws in how data from the U.S. health-care marketplaces is transferred to the companies

State

  • Ohio Medicaid expansion approved
    A recent article by Daily Kos states that the legislative oversight panel in Ohio has approved Gov. John Kasich's plan to expand Medicaid under Obamacare. In an end-run around the state's Republican-dominated legislature which refused to pass the expansion, the approval means that more than 275,000 people in the state will now have health coverage
  • South Dakota doctors urge state to expand Medicaid program
     A recent article by Modern Healthcare states that South Dakota doctors are renewing pressure on Gov. Dennis Daugaard to expand the state's Medicaid program under President Barack Obama's healthcare overhaul. Without the expansion, low-income people without insurance will continue to get expensive care in hospital emergency rooms, and hospitals will shift the cost of unpaid bills to patients with private insurance resulting in a rise in private insurance premium
  • Overall Medicaid spending in New Mexico up
    According to a report from Bizjournals, New Mexico’s general fund spending on the Medicaid program would drop next year under the Human Services Department’s budget request even though costs are expected to rise. HSD is seeking approval of a $5.8 billion budget, a 7.3% increase from the current year. The agency projects Medicaid enrollment will grow by more than 137,000 with the federal matching funds rate going up
  • State accreditation program to be developed for Texas
    According to Healthcareitnews, a to-be developed accreditation program will certify qualified HIE applicants to ensure they're operating under accepted and uniform standards in the handling of protected health information. Once the program is developed, EHNAC (Electronic Healthcare Network Accreditation Commission) and THSA (Texas Health Services Authority) will review technical performance, business processes, resource management and other relevant information to ensure that accredited HIEs within Texas are interoperable with state and federal programs, and provide the private, secure and proper exchange of health information in accordance with established laws and public policy

Strategy

  • Health insurance exchanges could negatively affect non-profit hospitals next year
    According to Moodys, commercially insured patients will likely start obtaining health coverage through exchange plans, which could have lower provider reimbursement rates which will affect the non-profit hospitals. Other risks include uncertain contracts between exchange plans and hospitals and a growth in bad debt
  • Health insurance cost increases projected to accelerate in 2014
    Aon Hewitt reports showed the average health-care premium rate increase for large employers in 2013 was 3.3% - the lowest health-care premium rate increase in a decade, down from 4.9% in 2012 and 8.5% in 2011. In 2014, however, average health-care premium increases are projected to move back to the 6.0% to 7.0% range as the effect of recession and uncertainty go away
  • M-health users surge to record high levels
    According to the Manhattan Research Cybercitizen Health study, 95.0 million Americans are currently using mHealth technologies, up 27.0% from 75.0 million just in 2012. The study also shows that mobile health adoption, activities and attitudes vary greatly among the patient audiences tracked, highlighting the need for marketers to understand mobile behavior by unique therapeutic segments
  • S&P Dow Jones Indices launces new Index
    Per Healthcarefinancenews, S&P Dow Jones launched a new index S&P Healthcare Claims Index that measures claims data from 33 health insurance companies and other organizations to calculate the growth in commercial healthcare costs. It reveals that medical and prescription drug costs combined rose 3.5% for the 12 months through May 2013 compared with the year-ago period when the total cost grew 4.7%
  • Healthcare has most job openings in September despite BLS' latest report showing slow growth
    In a U.S. Employment Outlook report published by Simply Hired, the healthcare industry leads among all other employment industries in the number of job openings available in September, with nearly one-third of all new job postings relating to the healthcare industry. The latest Bureau of Labor Statistics jobs report for September, showed that the healthcare industry only added 6,800 new jobs in September, remaining nearly unchanged from August with an average of 19,000 jobs a month added in 2013, compared to an average of 27,000 a month in 2012
  • Health IT jobs on growth trajectory
    According to the report ‘Industrial Relations: A Journal of Economy and Society’, 2.5% of healthcare job openings between 2007 and 2011 were related to electronic health record implementation, or other health IT initiatives. It also found an 86.0% increase in job listings each month related to electronic health records or clinical informatics
  • Healthcare prices remain sluggish
    Per October Altarum's Health Sector Economic Indicator report, Healthcare price inflation (HCPI) in August was 1.0% higher than last year and growing at a historically low rate. The HCPI remains low due to lower hospital price growth at 1.5% year-over-year, its lowest rate since 1.3% growth in December 1998
  • 1.0% of patients make up 21.0% of U.S. health spending
    Kaiser reports that a small percentage of the population drives the majority of the country's health care costs. But the people who fall into this category are not the uninsured but the high frequency patients who have multiple emergency room visits or hospital admission per year. Most of this is going to change under the Affordable Care Act where hospitals will pay penalties for some Medicare patients readmitted within 30 days of discharge

Industry Activity

  • QuadMed to buy Novia CareClinics
    According to Bizjournals, QuadMed LLC (a subsidiary of Quad/Graphics), which runs employer-sponsored health care management plans and on-site primary care clinics, plans to buy Novia CareClinics LLC which has expertise in shared clinics, small to midsize companies and the public sector. The two organizations will merge their executive management and operations teams. Together, QuadMed and Novia CareClinics will run more than 90 clinic locations in 18 states and serve more than 150,000 patients
  • The Wellness Network acquires Logicare
    Per Bizjournals, the Wellness Network, the parent company of The Patient Channel, The Newborn Channel, and HealthStyle Press has acquired Logicare, a hospital patient education software company. The transaction will double the size of The Wellness Network. The company says its channels are the largest in-hospital television networks in the United States and are available in more than 2,000 hospitals
  • Mednax inks its ninth acquisition for 2013
    According to Bizjournals, Mednax paid an undisclosed amount of cash for Dayton Newborn Care Specialists, which is now part of its Pediatrix Medical Group subsidiary.  The acquisition will help provide Mednax with the support needed for the business operations of their practice, such as billing, compliance, credentialing and recruiting, as well important research, education and quality initiatives
  • Lexmark acquires PACSGEAR for $54.0 million
    HealthcareITnews states that Lexmark International has acquired PACSGEAR, which develops connectivity technology to manage and share medical images and integrate them with picture archiving and communication systems and electronic medical records. Acquired for approximately $54.0 million, PACSGEAR will be folded into Lexmark’s subsidiary Perceptive Software. PACSGEAR technology is deployed in approximately half of all US based hospitals
  • WellTok buys IncentOne, a New Jersey healthcare incentive and design management company
    According to Bizjournals, Denver-based WellTok Inc. has acquired IncentOne, a New Jersey healthcare incentive and design management company. The combined resources of the two businesses will create a platform matching consumers to personalized activities designed to improve their health
  • Partners` HealthCare signs deal to acquire Hallmark hospitals
    A recent article from Bizjournals states that Partners HealthCare signed an agreement to acquire the two hospitals of Hallmark Health, folding them into what is already Massachusetts’ largest health care system. If the deal is approved, the plan would bring a net loss of 82.0 beds. The plan is in line with Partners’ strategy to move more care to community facilities and outpatient settings, which are lower-cost than its flagship Boston teaching hospitals
  • CareFirst invests $20.0 million in Healthways
    Per Bizjournals, CareFirst, the BlueCross BlueShield entity serving the mid-Atlantic region, has made a $20.0 million investment in Healthways, provider of wellness and disease management services to more than 1.0 million patients who are enrolled in CareFirst's Patient-Centered Medical Home Program, expanding the existing relationship between the two companies. CareFirst serves about 3.4 million people in D.C., Maryland and Northern Virgina

Research

  • HIE shows cost savings in emergencies
    According to a study by the American College of Emergency Physicians, beyond improving the quality of emergency care, giving physicians access to data from a health information exchange saved nearly $2,000.0 per patient due to avoidance of services that may have been given. Based on Medicare-allowable charges, or $1,947.0 per patient, the total of savings for patients, based on a sample of 532, was $1.035 million
  • Hospitals cutting labor costs based on hospital prices
    Per a recent study published in Health Services Research, hospitals slash labor costs to make up for lost revenue when Medicare (under Affordable Care Act) cuts hospital prices. Hospitals eliminate 1.7 full-time jobs for every $0.1 million drop in Medicare revenue, and nurses accounted for one-third of those cuts. On average, hospitals do not appear to make up for Medicare cuts by “cost shifting,” but by adjusting their operating expenses over the long run
  • Cloud computing market projected to reach $3.9 billion this year
    According to a report by Kalorama Information, cloud computing in healthcare, due to increasing storage demand, is expected to register strong growth by 2013 end, with the market expanding more than 20.0% from 2012. The biggest driver behind the double digit numbers is the large number of providers getting on board with e-prescribing
  • Health IT apps saturating the market
    According to a new HIMSS Analytics report, many health IT applications are now approaching their market saturation point, having been installed at more than 75.0% of U.S. hospitals. A few, in the area of virtualization software and dictation with speech recognition though, are growing fast with big market potential which along with disaster recovery systems and single sign-ons – is likely to continue, as they're installed in less than 50.0% of U.S. hospitals
  • Medicaid spending, enrollment to rise-even in states without expansion
    Kaiser reports enrollment in Medicaid will rise on average by almost 9.0% in fiscal year 2014. And even those states that have refused or haven't yet committed to expanding eligibility will see a jump in enrollment of 5.0% as more people learn about the program through outreach campaigns designed to increase awareness about online health insurance exchanges and participation
  • Community health centers to get hit in absence of Medicare expansion
    According to a study by George Washington University, community health centers will suffer due to the states’ decisions not to expand Medicaid under the federal health law. Researchers estimates that 518 health centers in the more than two dozen states not expanding Medicaid will lose out on $555.0 million next year, regardless of the patient demand, because their uninsured patients won’t get Medicaid or federally subsidized coverage in the new online health insurance marketplaces
  • ACOs associated with integrated systems, not high medical spending 
    According to a new study in Health Affairs, provider integration and not high medical spending, appears to drive the formation of accountable care organizations(ACOs). The analysis was based on the 116 Medicare Shared Savings Program ACOs and the original 32 Pioneer ACOs, which include an estimated 2.3 million Medicare fee-for-service beneficiaries. 77 private sector ACO-like organizations were also included in the study
  • ACOs more likely to be found in markets with hospital and doctor consolidation
    A new study by HMS analyzing five markets around the country found that ACOs were providing care to more than half the Medicare patients in the traditional fee-for-service program.  The study also found that ACOs are found more in markets with higher consolidation rates by hospitals and doctors. In one out of five markets, 5.0% to 20.0% of Medicare fee-for-service enrollees were included in the ACOs; the rest of markets had less than 5.0% of Medicare fee-for-service enrollees in ACOs

Website:  http://www.mansacapital.com/


About Mansa Capital:
Mansa Capital is a health care private equity investment firm specializing in high growth companies in the health care services and health care technology sectors. Mansa focuses on companies as they prepare for expansion, acquisition, privatization or IPO. We integrate strong expertise in health care policy, regulation, and reimbursement with vast experience in health care operations, marketing, finance, and medical administration. Mansa makes equity investments in operating companies with enterprise values up to $150 million. We build shareholder value by working with management to implement strategic initiatives that grow top-line revenues. Mansa's Managing Partner and CIO, Ruben J. King-Shaw Jr., directs the firm's investment activities, in addition to managing the firm's equity portfolio. The firm has offices in Boston, MA, New York, NY, and Miami, FL.

This newsletter is provided for information purposes only. The information is believed to be reliable and is based on publicly available information, but Mansa Capital does not warrant its completeness or accuracy. Opinions, estimates, and assumptions constitute our judgment as of the date hereof and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. 2013 Mansa Capital©

Mansa Partner