S I N C E 1 98 7 Public Payer Digest 2016 / MANAGED CARE DIGEST SERIES® / WHERE INFORMATION BECOMES INTELLIGENCE. PUBLIC PAYER DIGEST 2016 1 CONTENTS CONTENTS, VOL. 8

8th EditionYour Online Resource for Chronic Disease Information™www.managedcaredigest.com

In this VolumeNew Program Characteristics and Medicaid Expansion

Looking Forward to Next Generation ACOs

5,084,9614,167,528

3,872,4303,235,2051,741,087

1,992,40 02,901,0 067,368,458 8,846,3286,713,789

13.6%4.6%

14.3%22.8%

5.6%9.5%7.8%

10.0 %3.1%6.4%

MANAGED CAREDIGEST SERIES®

SINCE 1987

Public Payer Digest | 2016

PUBLIC PAYER DIGEST 2016 SANOFI / MANAGED CARE DIGEST SERIES® / WHERE INFORMATION BECOMES INTELLIGENCE.™

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1SANOFI / MANAGED CARE DIGEST SERIES® / WHERE INFORMATION BECOMES INTELLIGENCE.™ PUBLIC PAYER DIGEST 2016

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CONTENTS, VOL. 8

INTRODUCTION .................................................................................................3

EXECUTIVE SUMMARY .......................................................................................4

MEDICAREBackgrounder ..............................................................................................................................5

DemographicsMedicare Advantage Continues to Expand ............................................................................. 6

MA HMO Enrollment Edges That of MA PPOs in 2015 ................................................................ 7

UnitedHealth Remains Largest MA Organization, Grows Nearly 9% ....................................... 8

Enrollment Climbs for Medicare Advantage Plans .................................................................. 9

Medicare Inpatient Case Shares Climb for Six Selected Dxs ................................................. 10

UtilizationAdmissions Ratio Falls, ALOS Rises for Medicare HMO Members ........................................... 11

ALOS for Diabetes Mellitus Is Highest Among Profiled Dxs ...................................................... 12

Length of Stay Rises for Diabetes Mellitus Inpatient Cases ..................................................... 13

FinancialsManaged Care Share of Medicare Spending Grows ............................................................ 14

Inpatient Charges per Medicare Case Climb Steadily .......................................................... 15

Medicare Inpatient Reimbursement Increases ....................................................................... 16

Medicare Reimbursement Rate for Heart Failure Falls Again ................................................ 17

PharmacyDrug Cost Limits Shift Up for Part D Participants in 2016 .......................................................... 18

Ingredient Cost per Medicare HMO Rx Shrinks in 2015 ........................................................... 19

LIS Shares Dip Among Part D Diabetes, Oncology Patients ................................................... 20

Membership Grows for Most Top 10 PDP Enrollment States ................................................... 21

Pharmacy Costs per Staffed Bed Are Lower at Non-IHS Hospitals ........................................ 22

Part D Shares of Total Rxs Climb in 12 Common Drug Classes ............................................... 23

OOP Costs for Part D Rxs Fall for Half of Profiled Drug Classes ............................................... 24

Generic Shares of Common Medicare Prescriptions Rise ...................................................... 25

Numbers of Part D Retail Rxs Grow in Most Drug Classes ....................................................... 26

MEDICAIDBackgrounder ..................................................................................................................................... 27

Demographics

Medicaid Managed Care Penetration Nears 85% ................................................................. 28

Medicaid Portions Grow for Nearly Half of Profiled Inpatient Dxs ......................................... 29

Medicaid IP Case Portions Grow for Four Profiled Diagnoses ................................................ 30

Utilization

Hospital Days, Admit Ratios Fall at Not-for-Profit Medicaid HMOs ........................................ 31

Medicaid Discharges, Patient-Days Decline; ALOS Is Unchanged ....................................... 32

Financials

Provider Charges Climb for Medicaid Lipid Disorder Patients ............................................... 33

Pharmacy

Number of Prescriptions Dips per Member per Year for Medicaid ....................................... 34

Medicaid Portions of Retail Prescriptions Climb Steadily ........................................................ 35

Medicaid OOP Retail Rx Costs Rise for Most Drug Classes ..................................................... 36

One in Five Asthma Rxs for Males Is Covered by Medicaid ................................................... 37

Vast Majority of Profiled Medicaid Drugs Are Generic ........................................................... 38

2 PUBLIC PAYER DIGEST 2016 SANOFI / MANAGED CARE DIGEST SERIES® / WHERE INFORMATION BECOMES INTELLIGENCE.™

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Backgrounder ............................................................................................................................39

Nursing Homes

DemographicsMajority of Nursing Homes Have More Than 100 Licensed Beds ........................................... 40

Genesis Has 41% More Facilities Than Its Closest Competitor ................................................ 41

UtilizationNursing Home Occupancy Rate, Patient-Days Count Fall .................................................... 42

Rates of Top Four NH Resident Conditions Surpass 50% .......................................................... 43

FinancialsNHs With 50–100 Beds Post Fastest Revenue Growth .............................................................. 44

Assisted Living Facilities

DemographicsNumber of ALFs Continues to Grow Slowly .............................................................................. 45

Brookdale Senior Living Is Nearly Four Times Larger Than No. 2 ALF ...................................... 46

Home Care Agencies

DemographicsHome Care Agency Count Rises for Second Year ................................................................. 47

Vast Majority of Home Care Agencies Are Not Facility Based .............................................. 48

Several Home Care Agencies Debut on List of 15 Largest Providers .................................... 49

UtilizationSkilled Nursing Remains Most Common HCA Service Provided ............................................. 50

Home Care Agency Weekly Visit Count Stays Flat ................................................................. 51

Hospital-Based SNFs

DemographicsHospital-Based SNF Count Continues to Decline in 2014........................................................ 52

UtilizationSNF Unit Average Length of Stay Declines Sharply Overall .................................................... 53

Admissions, Patient-Days Decline at Skilled Nursing Facilities ................................................ 54

LTCPPs

DemographicsLTCPP Count Grows for Fifth Consecutive Year ....................................................................... 55

UtilizationMonthly Prescriptions Continue to Decrease for LTCPPs ........................................................ 56

FinancialsRx Costs Increase More Rapidly for Independent LTCPPs ...................................................... 57

LOOKING FORWARD.......................................................................................58

RESEARCH METHODOLOGY ...........................................................................60

KEY TERMS ........................................................................................................62

REFERENCES .....................................................................................................64

CONTENTS, VOL. 8 (cont.)

Comparative information at regional, state, and local levels is available by contacting your

Sanofi account executive.

The Medicare section reviews the most important

aspects of this crucial program, including

demographic overviews of Medicare Advantage

(MA), Medicare HMOs and hospital-based

Medicare. Utilization measures are also

showcased, and feature chronic-disease specific

hospital metrics for Medicare HMO members.

The financial section includes inpatient charges

for the treatment of Medicare beneficiaries and

Medicare reimbursement rates for common

diagnoses and procedures. Pharmacy utilization,

out-of-pocket costs, and retail prescription use are

also tracked. The effects of developing payment

models such as accountable care organizations

(ACOs), the Medicare Shared Savings Program,

and Next Gen ACOs are spotlighted in this section.

The Medicaid section includes trended

data on the program and its unparalleled

expansion, and spotlights how the industry is

adapting to care for its growing population.

Demographic data on common diagnoses

and procedures for Medicaid recipients are

featured, along with inpatient payer shares

of chronic disease cases. Hospital utilization,

including discharges, patient-days and length

of stay, is tracked for Medicaid HMO members

and the Medicaid population overall. Provider

and facility charges for Medicaid recipients in

inpatient and outpatient settings are featured,

as are key pharmacy benchmarks, such as

out-of-pocket costs and retail prescription

spending for common therapeutic drug classes.

The Long-Term Care section profiles the providers

and institutions serving the senior population—

again a growing sector in the health care

industry—including nursing homes, assisted living

facilities, home care agencies, hospital-based

skilled nursing facilities, and long-term care

pharmacy providers. Demographic, utilization,

financial, and pharmacy metrics are provided,

including facility counts, admission, and

occupancy rates, and commonly provided

services. Data about the nation’s largest

long-term care chains are likewise featured.

Backgrounders for each section of the Public

Payer Digest provide an overview of the topic

at hand, and key takeaways contextualize the

metrics, examining the implications of the subjects

under discussion. The data that appear in the

Public Payer Digest continue to distinguish this

important work, as well as the Managed Care Digest Series® as a whole. Decade-long trends

of industry measures are featured throughout

this Digest, lending historical perspective to

health care topics examined. Data analyzing

the significant impact of chronic disease—

patient-level claims data and diagnosis-related

hospital discharge data—likewise appear

throughout and provide valuable insight into how

Medicare beneficiaries, Medicaid recipients, and

long-term care patients are being treated for

chronic conditions. Important industry trends and

chronic disease metrics are often examined at the

regional, state, or MSA level to highlight how health

care is managed and delivered at the local level.

Sanofi is pleased to present volume 8 of the Public Payer Digest, the second report in the Sanofi

Managed Care Digest Series® for 2016. Since 1987, the Managed Care Digest Series® has focused on

helping health care organizations develop strategies, control costs, and assess value. Now in its 30th year,

the Managed Care Digest Series® remains a trusted source for the most reliable health care data and

progressive analysis, including detailed diagnosis-related, chronic disease-specific patient claims and

hospital discharges. As the population changes and the health care industry evolves, the Managed Care Digest Series® maintains its commitment to leading the health care discussion.

Medicare and Medicaid cover more lives than ever, making the in-depth profiles in the

Public Payer Digest uniquely valuable and more relevant than ever. The 2016 edition examines

the many facets of these programs and explores how legislative reforms affect them. The Digest

also analyzes the various long-term care institutions providing health care services to a large and

growing segment of the U.S. population. The three main topics (Medicare, Medicaid, and long-term

care) of this Digest are each divided into four distinct subsections of data elements: demographics,

utilization, financials, and pharmacy. Clear analyses and insightful key takeaways bring perspective to

the Public Payer Digest’s unparalleled data sets.


INTR

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INTRODUCTION

Medicare• In 2015, Medicare insured 54.5 million

Americans, or roughly one in every six people.

Of this population, 17.3 million beneficiaries

were enrolled in Medicare Advantage (MA)

plans, a 6.1% increase from 2014 (16.3 million).

• Six of the top 10 MA organizations, by

enrollment, recorded membership growth

between 2014 and 2015.

• For only the second time since 2010, MA HMO

enrollment increased faster than that of

MA PPO plans, with enrollment in MA HMO

plans (6.5%) narrowly outpacing that of

MA PPO plans (5.6%) from 2014 to 2015.

• The number of hospital admissions per

1,000 Medicare HMO members decreased

for the second consecutive year in

2015, to 250.2 from 253.4 in 2014.

• For the 11th consecutive year, the managed

care share of total Medicare expenditures

increased, to 27.4% in 2015 from 26.7% in 2014.

• For eight of the 10 top states, by Medicare

Part D prescription drug program (PDP)

enrollment, membership counts increased from

2015 to 2016. Collectively, PDP enrollment in

these top 10 states increased by 2.1%.

Medicaid• At the end of 2015, the Medicaid program

covered 72.4 million individuals, a 20.7%

increase in average monthly enrollment

from the 2013 pre-Affordable Care Act

(ACA) expansion baseline of 60 million.

• Medicaid recipients enrolled in a managed

care organization (MCO) represented 84.9%

of total Medicaid enrollees in 2015, up 14.6

percentage points from 2008 (70.3%).

• From 2014 to 2015, the number of hospital

days and admissions per 1,000 Medicaid HMO

members decreased at not-for-profit HMOs;

these ratios increased at for-profit HMOs.

• The average number of Medicaid hospital

discharges fell fractionally (1.1%) from 2013

(1,104.0) to 2014 (1,092.4). Meanwhile, average

length of stay (ALOS) per inpatient Medicaid

case remained unchanged, at 4.4 days.

• Average annual professional charges for

Medicaid lipid disorder patients rose by double-

digit percentages across profiled care settings

from 2013 to 2015, most notably at skilled nursing

facilities (47.8%) and emergency rooms (28.5%).

• From midyear 2014 to midyear 2015, out-

of-pocket (OOP) costs per Medicaid

retail prescription grew across eight

of the 12 featured drug classes.

Long-Term Care• Following an increase from 2013 (1.65 million) to

2014 (1.67 million), the total number of licensed

nursing home beds in the U.S. grew for a second

year, to 1.68 million in 2015 (up 1.5% since 2013).

• From 2014 (82.2%) to 2015 (81.5%), the

average occupancy rate for nursing

homes (NHs) overall declined fractionally,

as did total facility patient-days (to 32,142

from 32,553), and the total facility ALOS

rose by two days (to 180 from 178).

• NHs reported annual increases in revenue

from 2014 to 2015, regardless of bed size;

NHs with 50 to 100 beds posted the largest

percentage gains, by bed count, at 4.0%.

• After a decline over the three-year period

from 2010 to 2012, the total number of

assisted living facilities (ALFs) in the U.S.

rose, to 15,836 in 2015 from 15,447 in 2012,

topping the previous high of 15,781 in 2010.

• In 2015, a total of 11,543 home care

agencies (HCAs) were not physically

located in hospital facilities, up 4.0% from

2013 (11,104). Non-facility-based agencies

accounted for nearly 90% of all HCAs.

• ALOS at skilled nursing facilities (SNFs)

dropped 10.8% from 2013 (179.9 days) to

2014 (160.4). Overall SNF unit admissions and

patient-days also fell during this period.


EX

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EXECUTIVE SUMMARY


In 2015, Medicare insured 54.5 million Americans,

or roughly one in every six people in the U.S.1 A

wide variety of entities, from traditional payers

to emergent institutions like accountable care

organizations (ACOs), are aiding the program in

managing the care of this significant population.

Indeed, private managed care organizations

are assuming a greater role in handling the

health of Medicare beneficiaries, as enrollment

in Medicare Advantage (MA) plans—including

Medicare HMOs—grows alongside Medicare

membership. Yet Medicare is still very much a

public program, subject to legislative changes

and limited resources. Should these limited

resources necessitate reduced payments to

providers, physician participation may be

negatively affected. The Medicare Access and

CHIP Reauthorization Act of 2015 (MACRA) was

designed to prevent a major cut, but still set

payment updates at a rate that lags expected

cost increases.2 This, too, may impact physician

participation at a time of heightened demand.

MEDICAREBackgrounder

6.2 6.2 6.6 7.4 7.6

10.4 11.08.7

9.9 10.4 11.012.5

14.716.3

17.3

44.2 44.8 45.8 46.4 48.4 50.2 51.8 53.4 54.5

2007 2008 2009 2010 2011 2012 2013 2014 20150

7

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60

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Mill

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s)

Medicare HMOs MA Plans Medicare

8.7 9.4

13.3

MA Plan and Medicare HMO Enrollment vs. Medicare Overall, 2007–20153

LONG-TERM TREND

Data sources: IMS Health and the Centers for Medicare & Medicaid Services © 2016

1 U.S. Census Bureau. (2016). U.S. and World Population Clock. Retrieved from http://www.census.gov/popclock/2 Centers for Medicare & Medicaid Services. (2016). 2016 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal

Supplemental Medical Insurance Trust Funds. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2016.pdf

3 Enrollment figures are year-end totals, and do not include Medicare Advantage enrollees in Puerto Rico and U.S. territories.

TOP 10 STATES, RANKED BY MEDICARE ADVANTAGE ENROLLMENT, 2014–20151

STATE Enrollment 2014 Enrollment 2015 Percentage Change 2014–2015

California 2,230,464 2,353,403 5.5%

Florida 1,543,127 1,650,256 6.9

New York 1,193,779 1,223,595 2.5

Texas 1,084,129 1,212,507 11.8

Pennsylvania 996,122 1,022,260 2.6

Ohio 879,957 829,795 –5.7

Michigan 581,964 647,611 11.3

North Carolina 501,674 535,977 6.8

Minnesota 472,927 506,126 7.0Georgia 451,894 500,143 10.7

1 Enrollment figures are year-end totals and do not include Medicare Advantage enrollees in Puerto Rico and U.S. territories.2 Jacobsen, G., et al. (2015). Medicare Advantage 2016 Data Spotlight: Overview of Plan Changes. Retrieved from http://kff.org/medicare/

issue-brief/medicare-advantage-2016-data-spotlight-overview-of-plan-changes/

Key Takeaway

In 2016, beneficiaries enrolling in an MA plan have, on average, 19 different plans to choose from,

offered by six different insurance providers.2 Yet participants who remain with their current plans may

see an increase in cost sharing: premiums for enrollees in MA plans with a prescription drug component

will rise by 8%, and out-of-pocket limits on Parts A and B benefits will also go up.2 Plans may continue to

shift how they share costs with enrollees, as they also adjust to higher enrollment and medical costs.

4%

11%

18%

25%

32%

2

6

10

14

18

Enro

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nt (

Mill

ion

s)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

MA

Pen

etra

tion

Total Enrollees Total Penetration

5.56.0

7.2

8.7

9.910.4

11.0

12.513.3

14.7

12.8%13.6%

16.8%

19.5%

22.1% 22.7%23.6%

25.7% 26.4%28.4%

16.3

30.5%

17.3

31.7%

MEDICARE ADVANTAGE ENROLLMENT AND PENETRATION INTO MEDICARE, 2004–20151


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• Total MA membership grew from 2014 to 2015

in nine of the 10 top states (Ohio excepted).

Double-digit enrollment growth occurred in Texas

(11.8%), Michigan (11.3%), and Georgia (10.7%).

• Collectively, MA enrollment in these 10 states

increased by 5.5% from 2014 (9.9 million) to 2015

(10.5 million), accounting for more than 60% of

national enrollment in such plans in 2015.

Most States With High MA Enrollment See Continued Growth in Membership Counts

STATE SPOTLIGHT

• Medicare Advantage (MA) plans enrolled

17.3 million beneficiaries in 2015, a 6.1%

increase over 16.3 million the prior year. From

2004 (5.5 million) to 2015, total participation in

such plans has grown more than threefold.

• The MA share of beneficiaries also rose in

2015, to 31.7% from 30.5% in 2014. However,

this increase (1.2 percentage points) in

penetration represented a slowdown from the

2.1 point growth from 2013 (28.4%) to 2014.

Medicare Advantage Continues to ExpandLONG-TERM TREND


0.0%

17.0%

34.0%

51.0%

68.0%

Ave

rag

e L

eng

th o

f Sta

y (D

ays

)

PPO HMO

2009 2010 2011 2012 2013 2014 2015

17.0%

63.9%

25.7%

60.1%

28.3%

63.6%

28.3%

65.4%

30.4%

63.8%

31.1%

63.5%

31.0%

63.8%

SHARE OF MA ENROLLMENT BY PLAN TYPE, 2009–2015

MEDICARE ADVANTAGE (MA) ENROLLMENT, BY PLAN TYPE, 2010–20151

PLAN TYPE 2010 2011 2012 2013 2014 2015HMO 7,136,633 7,919,458 8,690,663 9,388,510 10,350,493 11,024,064

PPO 2,818,592 3,526,360 3,739,660 4,481,424 5,064,674 5,347,728

PFFS 572,540 516,975 405,954 305,965 258,189 237,033

Other2 442,179 491,271 442,092 548,675 615,456 662,478TOTAL 10,969,944 12,454,064 13,278,369 14,724,574 16,288,812 17,271,303

1 Enrollment figures are year-end totals and do not include Medicare Advantage enrollees in Puerto Rico and U.S. territories.2 “Other” includes Cost, MSA, PACE, PSO (state license), and Pilot plans.3 Jacobsen, G., et al. (2015). Medicare Advantage 2016 Data Spotlight: Overview of Plan Changes. Retrieved from http://kff.org/medicare/issue-

brief/medicare-advantage-2016-data-spotlight-overview-of-plan-changes/4 Abrahams, B. (2016). The Different Types of Medicare Advantage Plans. Medicare.com. Retrieved from: https://medicare.com/medicare-

advantage/the-different-types-of-medicare-advantage-plans/

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SANOFI / MANAGED CARE DIGEST SERIES® / WHERE INFORMATION BECOMES INTELLIGENCE.™ PUBLIC PAYER DIGEST 2016

Key Takeaway

MA PPO plans are often less restrictive than MA HMO plans because they allow enrollees to seek

specialty care without a referral and offer partial coverage for out-of-network care.3 Such flexibility

may explain the rising share of PPO enrollment as a portion of total MA enrollment. However, given that

out-of-pocket costs for MA plans are rising,3 and that MA PPO plans usually have higher costs to begin

with,4 it remains unclear whether growth in the PPO percentage of MA enrollment has leveled off.

PPO Portion of Total MA Enrollment in 2015 Is Almost Twice That of 2009

• From 2009 (17.0%) to 2015 (31.0%), PPO

enrollment as a percentage of total MA

enrollment nearly doubled. During this

period, the share peaked at 31.1% in 2014.

• The HMO portion of total MA enrollment

remained virtually flat from 2009 (63.9%) to 2015

(63.8%). This percentage was at its highest in

2012 (65.4%) and its lowest in 2010 (60.1%).

• The percent rise in MA HMO enrollment from

2014 to 2015 (6.5%) narrowly surpassed that of

MA PPO plans (5.6%), marking only the second

time since 2010 that MA HMO enrollment

increased more than that of MA PPO plans.

• From 2010 (2,818,592) to 2015 (5,347,728),

MA PPO enrollment climbed 89.7%, notably

faster than the percent rise in MA HMO

enrollment (54.5%; to 11,024,064 from 7,136,633).

Conversely, enrollment in PFFS plans declined.

MA HMO Enrollment Edges That of MA PPOs in 2015LONG-TERM TREND

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10 LARGEST MEDICARE ADVANTAGE ORGANIZATIONS, BY ENROLLMENT, 20152

0 900,000 1,800,000 2,700,000 3,600,000

MA Enrollment

Health Net Inc.

Highmark Inc.

Blue Cross Blue Shield of Michigan

WellCare Health Plans Inc.

Cigna

Anthem Inc.

Aetna Inc.

Kaiser Foundation Health Plan Inc.

Humana Inc.

UnitedHealth Group Inc. 3,505,904

3,253,465

1,347,939

1,278,486

627,252

505,800

405,911

355,136

295,946

291,897

ENROLLMENT BY PLAN TYPE, HUMANA INC., 2011–20152

2011 2012 2013 2014 20150

900,000

1,800,000

2,700,000

3,600,000

MA

En

rollm

en

t

696,032

23,629460,778

271,476

880,512

72,854

797,783

241,478

1,028,549

45,768

816,903

211,252

1,312,628

17,522

880,213

19,376 174,942

1,582,841

5,659

986,012

17,556 156,719

489,875

330,992391,030

528,897

504,678

HMO HMO-POS Local PPO Medicare-Medicaid Plan HMO PFFS3 Regional PPO

MA Enrollment in Humana HMOs and Local PPOs Doubles From 2011 to 2015

• Over the five years profiled, Humana MA

enrollment more than doubled in HMO (to

1.6 million in 2015 from 696,032 in 2011) and

local PPO (to 986,012 from 460,778) plans.

• Meanwhile, membership in Humana’s HMO-POS

and PFFS plans fell over this time frame by 76.1%

and 42.3%, respectively. Humana regional

PPO enrollment rose by a modest 3.0%.

Data source: Centers for Medicare & Medicaid Services © 2016

UnitedHealth Remains Largest MA Organization, Grows Nearly 9%

• UnitedHealth Group was again the largest

Medicare Advantage (MA) organization,

by enrollment, in 2015, with more than

3.5 million members, up 8.7% from 2014.1

• Six of the top 10 MA organizations, by enrollment,

recorded membership increases between 2014

and 2015. Membership in Humana and Aetna

MA plans each rose by 10.9% during this period.

PLAN SPOTLIGHT

1 See the Public Payer Digest for 2015.2 Data are current as of end-of-year 2015.3 Private fee-for-service4 Merle, R., and Johnson, C. (2016). Justice Department Sues to Block Two Health-Care Mega-Mergers. The Washington Post. Retrieved from

https://www.washingtonpost.com/news/business/wp/2016/07/21/justice-department-sues-to-block-anthem-acquisition-of-cigna/

Key Takeaway

In 2015, two health plan mergers (Aetna with Humana and Anthem with Cigna) totaling $85 billion

were announced. In July 2016, the U.S. Department of Justice sued to block these deals, citing lack

of competition for both commercial and MA plans. Although the corporations argue that merging

provides network expansion and efficiencies for consumers, these groundbreaking deals may not pass

regulatory scrutiny, unless the companies make structural changes to alleviate antitrust concerns.

1 CMS. (2016). Medicare Shared Savings Program Accountable Care Organizations. Retrieved from https://data.cms.gov/ACO/2016-Medicare-Shared-Savings-Program-Accountable-C/i683-k66m

2 Dawe, C., et al. (2016). Today’s Most Attractive National ACO Model Is Offered by . . . CMS. Health Affairs. Retrieved from: http://healthaffairs.org/blog/2016/04/15/todays-most-attractive-national-aco-model-is-offered-bycms/

3 See page 7 of this Public Payer Digest.


Data source: IMS Health © 2016

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Key Takeaway

In its Next Generation ACO pilot, the Centers for Medicare & Medicaid Services (CMS) attempted

to address provider criticisms of the Shared Savings Program, including the percentage of

savings providers are entitled to receive, beneficiary assignment processes, network design,

and risk adjustment.2 If the Next Generation model succeeds, it could be the catalyst that

prompts greater provider acceptance of, and participation in, the ACO program.

MEDICARE ADVANTAGE ENROLLMENT VS. MEDICARE HMO ENROLLMENT, 2007–2015

2007 2008 2009 2010 2011 2012 2013 2014 20154

8

12

16

20

Enro

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nt (

Mill

ion

s)

Medicare HMOsMedicare Advantage Plans

6.2 6.2 6.67.4 7.6

8.79.4

10.411.08.7

9.910.4

11.0

12.513.3

14.7

16.317.3

Enrollment Climbs for Medicare Advantage (MA) Plans LONG-TERM TREND

• From 2007 (6.2 million) to 2015 (11.0 million), the

number of MA HMO enrollees increased 77.4%.

Total MA enrollment rose 98.8%, to 17.3 million

from 8.7 million, during the same time period.

• Between 2007 and 2008, the MA HMO

percentage of total MA enrollment fell from

71.3% to 63.6%. Since then, this portion of MA

enrollment has never risen above 65.5%.3

Concentration ofACOs by State

1–7

8–15

16–23

24–31

32–39

40+

Next Gen ACOs

0

2

2

22

2

1

11

1

1

1

1

1

CONCENTRATION OF SSP ACCOUNTABLE CARE ORGANIZATIONS (ACOs), 20161

Next Generation ACOs Debut in 13 States as Part of CMS Pilot Program

ACO SPOTLIGHT

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1 Percentages do not sum to 100% because there is also an “other” payer category that is not shown, which includes self-pay, charity, workers’ compensation, and unknown payer sources.

2 Includes HMOs, PPOs, point-of-service plans, and exclusive provider organizations.3 Graham, J. (2013). Medicare to Cover More Mental Health Costs. New York Times. Retrieved from http://newoldage.blogs.nytimes.

com/2013/12/27/medicare-to-cover-more-mental-health-costs/?_r=0


NUMBER AND PERCENTAGE OF INPATIENT CASES PER HOSPITAL PER YEAR, BY PAYER TYPE, 2013–20141

Medicare Medicaid Commercial Insurance2

# of Cases % of Cases # of Cases % of Cases # of Cases % of Cases

DISEASE STATE 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014

ACS 120.7 123.1 68.2% 66.4% 15.4 19.3 6.4% 8.1% 39.7 43.2 19.1% 20.2%

Angina 23.3 37.1 65.5 66.4 4.5 8.4 7.7 7.2 8.7 17.3 19.8 21.7

Asthma 163.0 132.2 35.8 37.2 120.8 89.4 26.3 24.3 126.3 113.5 28.0 30.9

Breast Cancer 18.7 86.3 44.1 45.3 6.9 32.9 13.4 11.9 17.0 85.8 37.6 38.6

Depression 132.9 38.8 35.7 42.9 95.2 22.1 24.8 21.9 98.8 26.7 25.8 25.1

Diabetes Mellitus 799.0 578.8 61.3 60.6 150.9 113.5 11.6 11.6 239.7 200.2 18.8 20.8

Hypertension 1,160.9 926.7 60.0 59.3 182.8 153.0 9.4 9.6 417.0 383.5 22.1 24.4

Lipid Disorders 625.8 640.7 64.5 64.3 59.1 72.1 5.7 6.8 234.3 243.0 23.6 23.9

Osteoarthritis 109.8 55.5 59.0 58.9 8.7 7.6 3.5 3.5 63.5 35.2 32.3 33.3

Prostate Cancer 27.2 40.2 64.9 67.4 3.5 5.7 3.5 2.5 15.3 24.9 27.3 27.3

Rheumatoid Arthritis 51.6 45.4 67.1 67.1 7.1 6.9 7.2 6.6 17.3 18.2 20.7 22.7

Stroke 133.8 37.2 70.6 72.7 14.4 4.9 6.2 4.7 33.8 13.1 16.4 18.0

CHRONIC DISEASE

MEDICARE PAYER SHARE OF INPATIENT CASES, 2010–2014

20%

35%

50%

65%

80%

Perc

en

tag

e o

f Ca

ses

2010 2011 2012 2013 2014

Asthma Depression Prostate Cancer Stroke

33.9% 34.3% 34.1%

35.8%

37.2%

35.3% 35.5% 36.0%

35.7%

42.9%

62.7% 62.0% 63.7% 64.9%67.4%

70.6% 70.0% 70.2% 70.6% 72.7%

LONG-TERM TREND

Key Takeaway

As required by the Medicare Improvements for Patients and Providers Act of 2008, Medicare began

covering 80% of beneficiaries’ outpatient psychological counseling costs in 2014—the same amount

as that of most other medical services.3 Lower patient costs may have prompted more beneficiaries to

seek psychological care, perhaps leading to a rise in diagnoses that resulted in inpatient treatment.

• The Medicare percentages of inpatient

cases per hospital increased from 2013 to

2014 for angina, asthma, breast cancer,

depression, prostate cancer, and stroke.

• Of the profiled disease states, stroke (72.7%)

accounted for the largest share of inpatient

Medicare cases and asthma (37.2%)

made up the smallest portion in 2014.

Medicare Inpatient Case Shares Climb for Six Selected Dxs

• From 2010 (35.3%) to 2014 (42.9%), the

Medicare portion of inpatient depression

cases grew 7.6 percentage points, with most

of the growth occurring from 2013 to 2014.

• Similarly, after remaining virtually flat from 2010

through 2013 (70.6%), the share of Medicare

inpatient stroke cases expanded 2.1 percentage

points from 2013 to 2014, reaching 72.7%.

Medicare Percentage of Inpatient Depression Cases Increases Rapidly

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Key Takeaway

Hospital admissions per 1,000 Medicare HMO members fell 9.2% from 2013 to 2015, indicating that

efforts to shift care away from the inpatient setting may be working. However, after also dropping

from 2013 to 2014, both hospital days and ALOS increased from 2014 to 2015. This may be attributable

to a variety of factors, but it is quite possibly a reflection of the balance hospitals are trying to strike

between the cost of extended inpatient stays and the penalties they face for excess readmissions.

Admissions Ratio Falls, ALOS Rises for Medicare HMO Members

• The number of hospital admissions per 1,000

Medicare HMO members fell in 2015, to 250.2

from 253.4 in 2014. This was the second year of

decline, following an increase from 2012 to 2013.1

• Even as admission counts fell, average

length of stay (ALOS) per Medicare hospital

admission continued to rise, reaching 6.7 days

in 2015, from 6.6 in 2014 and 6.3 in 2013.1

NUMBER OF HOSPITAL DAYS PER 1,000 MEDICARE HMO MEMBERS, 2005–20152

UTILIZATION RATES FOR MEDICARE HMO MEMBERS, 2014–20152

Hospital Days per 1,000 Medicare HMO Members

Hospital Admissions per 1,000 Medicare HMO Members

ALOS (Days) per Medicare

Hospital Admission

MD Encounters per Medicare

HMO Member3

Ambulatory Visits per Medicare

HMO Member3

TAX STATUS OF HMO 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015

For-Profit 1,685.0 1,732.2 252.0 247.0 6.8 7.0 10.4 10.3 4.9 5.5

Not-for-Profit 1,530.0 1,536.5 256.5 257.1 6.1 6.0 9.8 8.9 4.0 4.1

OVERALL AVG. 1,638.3 1,672.4 253.4 250.2 6.6 6.7 10.2 9.9 4.7 5.0

Medicare HMO Hospital-Days Ratio Increases at For-Profit HospitalsLONG-TERM TREND

• Hospital days per 1,000 Medicare HMO members

at for-profit hospitals climbed 47 days from

2014 (1,685) to 2015 (1,732), compared with just

seven (to 1,537 from 1,530) at not-for-profits.

• Although the rate of growth in the hospital-

days ratio at not-for-profit facilities from 2005

to 2015 (32.7%) was more than three times

that of their for-profit counterparts (10.8%).

1 See the Public Payer Digest for 2014 and 2015.2 Only HMOs that enroll Medicare beneficiaries are included.3 Ambulatory visits differ from physician encounters. Ambulatory visits are visits by an HMO member to an HMO clinic or physician’s office that do not

require the services of a physician. Such visits are usually made for tests, prescription refills, immunizations, etc. The term “physician encounter” is self-explanatory.

1,000

1,250

1,500

1,750

2,000

Nu

mb

er o

f Da

ys

1,5631,642

1,5731,527

1,558

1,6181,645

1,597

1,7631,685

1,732

1,158

1,342 1,355

1,452

1,601

1,5901,639

1,616

1,645

1,530 1,537

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

For-Profit Not-for-Profit

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• In 2014, average length of stay (ALOS) per

inpatient (IP) Medicare diabetes mellitus

case exceeded those of the other profiled

diagnoses, regardless of hospital size or

multihospital system (MHS) ownership.

• For six of the nine profiled diagnoses, ALOS

for inpatient Medicare cases at non-MHS-

owned facilities surpassed the corresponding

means for MHS-owned hospitals, as well

as the overall averages, in 2014.

ALOS for Diabetes Mellitus Is Highest Among Profiled Dxs

CHRONIC DISEASE

2012

Ave

rag

e L

en

gth

of S

tay

(Da

ys)

2013 2014

0

1

2

3

4

In a Highly IntegratedHealth System

Not in a Highly IntegratedHealth System

Overall Average

3.6

— 2.5 —

3.7

2.6 2.7

3.6

— 2.5 —

AVERAGE LENGTH OF STAY (DAYS) PER INPATIENT PROSTATE CANCER CASE, 2012–2014

AVERAGE LENGTH OF STAY (DAYS) PER MEDICARE HOSPITAL INPATIENT CASE, 2014

SIZE ACS Angina Asthma Breast Cancer

Diabetes Mellitus

Hyper-tension

Prostate Cancer

Rheu-matoid Arthritis

Stroke

<50 Beds 1.9 — 3.7 2.2 3.9 2.5 1.5 — 3.5

50–119 Beds 2.3 2.0 3.9 2.5 4.4 2.5 1.9 — 3.5

120–249 Beds 2.4 2.5 4.2 2.7 5.0 2.7 2.7 3.0 4.0

250+ Beds 2.5 2.2 4.3 2.9 5.6 2.7 2.5 3.6 4.6

MHS OWNERSHIP

MHS Owned 2.4 2.2 4.2 2.8 5.0 2.7 2.5 3.6 4.0

Non-MHS Owned 2.7 2.4 4.3 3.3 4.8 2.9 2.9 3.1 3.9

OVERALL AVG. 2.4 2.2 4.2 2.8 4.9 2.7 2.5 3.5 4.0

ALOS Declines for Inpatient Prostate Cancer Cases in Integrated, Non-Integrated Facilities

• Regardless of affiliation with a highly integrated

health care system, ALOS per inpatient

prostate cancer case decreased from 2012

to 2014. Nationally, ALOS for such cases fell

to 2.5 days from 3.6 days during this time.

• ALOS per inpatient prostate cancer case at

hospitals not belonging to a highly integrated

health system (2.7 days) remained above that

of hospitals in highly integrated systems as well

as the overall average in 2014 (both 2.5 days).

Key Takeaway

That diabetes inpatients had the highest ALOS of the profiled disease states, regardless of

hospital size or ownership, might reflect the complicated nature of the disease. Diabetes patients

often have multiple comorbidities, and a recent study found that 27% of such patients had

undiagnosed conditions, which could lead to poor outcomes and increased hospital utilization.1

1 Lin, P. (2015). Multiple Chronic Conditions in Type 2 Diabetes Mellitus. Prevalence and Consequences. AJMC.com. Retrieved from http://www.ajmc.com/journals/issue/2015/2015-vol21-n1/multiple-chronic-conditions-in-type-2-diabetes-mellitus-prevalence-and-consequences/p-3

NOTE: Some length-of-stay data were unavailable for angina and rheumatoid arthritis.

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Key Takeaway

Driven by provisions in the Affordable Care Act, the Centers for Medicare & Medicaid Services (CMS)

have been working since October 2012 to reduce hospital readmissions via payment cuts for facilities

with higher-than-expected readmission rates. Payers are also incentivized to reduce readmissions, as

their Medicare Star ratings are partly dependent on this measure. CMS efforts appear to be paying off:

readmissions among Medicare fee-for-service members fell by roughly 14% from 2011 to 2013.

• For six of the eight regions (South Central

and South Atlantic excepted), average

length of stay (ALOS) per inpatient diabetes

mellitus case increased from 2013 to 2014.

• ALOS was highest for diabetes cases, by region,

in the Mid-Atlantic, at 5.9 days in 2014. This

region also had the highest ALOS for asthma,

hypertension, prostate cancer, and stroke.

ACUTE HOSPITAL READMISSIONS, MEDICARE FEE-FOR-SERVICE, 2008–2013

Length of Stay Rises for Diabetes Mellitus Inpatient Cases

CHRONIC DISEASE

• The number of Medicare FFS inpatient

readmissions within 30 days of an acute hospital

stay fell again in 2013, to 1,656,930, the third

consecutive annual drop since 2010 (1,949,430).

• Of these 1.7 million readmissions in 2013, 74.5%

(1.2 million) were for patients age 65 and over,

though readmissions among patients in this

age group also declined (data not shown).1

1 Health Indicators Warehouse. (2016). Acute Hospital Readmissions (Number). Retrieved from http://www.healthindicators.gov/Indicators/Acute-hospital-readmissions-number_278/Profile/ClassicData

NOTE: Some length-of-stay data were unavailable for the Mountain, East North Central, and New England regions.


2008 2009 2010 2011 2012 20131,600

1,700

1,800

1,900

2,000

Num

be

r of R

ea

dm

issi

ons

(00

0)

Inpatient Readmissions

1,992

1,945 1,9491,929

1,820

1,657

Number of Medicare Fee-for-Service (FFS) Inpatient Readmissions Declines AgainLONG-TERM TREND

AVERAGE LENGTH OF STAY (DAYS) PER MEDICARE HOSPITAL INPATIENT CASE, BY REGION, 2013–2014

Angina Asthma Diabetes Mellitus

Hyper-tension

Prostate Cancer

Rheuma-toid Arthritis Stroke

REGION 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014

Pacific 1.5 1.9 4.0 3.9 4.9 5.0 2.6 2.4 2.4 2.2 2.5 2.7 3.9 3.9

Mountain 1.6 — 3.8 3.9 4.3 4.6 2.3 2.3 2.4 2.4 3.2 — 3.5 3.5

West North Central 1.9 2.4 4.0 3.8 4.4 4.5 2.4 2.7 2.3 2.2 2.7 3.7 3.5 3.4

East North Central 2.6 — 4.0 4.0 4.4 4.5 2.7 2.6 2.5 2.6 3.6 3.2 3.8 3.7

South Central 2.3 2.5 4.3 4.3 4.8 4.8 2.7 2.7 2.5 2.5 3.9 3.5 4.0 4.1

New England — — 4.1 3.9 4.7 4.8 2.9 2.9 2.5 2.4 4.0 3.9 3.7 3.8

Mid-Atlantic 2.3 2.4 4.8 4.6 5.7 5.9 3.1 3.0 3.2 3.3 3.7 3.8 4.9 4.8

South Atlantic 2.4 2.1 4.3 4.3 5.0 5.0 2.6 2.6 2.4 2.5 3.7 3.4 4.3 4.2

MANAGED CARE PORTION OF TOTAL MEDICARE EXPENDITURES, 2004–20152

METHODS OF PHYSICIAN COMPENSATION USED BY MEDICARE HMOs, 2012–20153,4

Not-for-Profit For-Profit Overall Average

METHOD 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015

Salary 17.3% 17.0% 14.8% 14.5% 1.9% 1.9% 1.8% 1.9% 7.0% 6.9% 6.4% 6.6%

Fee-for-Service 53.8 50.9 50.8 50.0 61.9 61.7 62.5 61.9 59.2 58.1 58.4 57.5

Capitation 71.2 71.7 72.1 72.6 70.5 67.3 67.0 68.6 70.7 68.8 68.8 70.1

Bonus Program 38.5 41.5 39.3 38.7 12.4 13.1 12.5 13.3 21.0 22.5 22.0 22.8

Profit Sharing 5.8 7.5 6.6 6.5 1.9 1.9 1.8 1.9 3.2 3.8 3.5 3.6

0%

7%

14%

21%

28%

Ma

na

ge

d C

are

Sh

are

of

Tota

l Me

dic

are

Exp

en

ditu

res

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

12.8%14.0%

15.8%

18.0%

21.0%22.1% 22.2% 22.8%

24.9% 25.2%26.7% 27.4%

1414

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Key Takeaway

As enrollment in Medicare Advantage plans continues to grow (see page 5), so too does the

managed care portion of the program’s expenditure. Medicare’s expense in this category has

expanded, and the payer has also invested more in value-based reimbursement initiatives, such as

those that reward higher Star ratings. Medicare managed care plans subject to these arrangements

will likely be on the lookout for more ways to share risks with the physicians in their networks.


• For the 11th consecutive year, the managed care

share of total Medicare expenditures increased

in 2015, to 27.4% from 26.7% the prior year. Since

2004, this percentage has grown by 14.6 points.

• The amount Medicare spent on managed care

grew by 8.6% from 2014 ($155.9 billion) to 2015

($169.3 billion), while fee-for-service expenditures

rose by 2.7% (to $376.9 billion; data not shown).1,2

Expanding Percentage of Medicare HMOs Compensate Physicians via Capitation

• In 2015, the portion of all Medicare HMOs

using capitation to reimburse physicians

increased slightly, to 70.1%, but did not match

the corresponding 2012 measure of 70.7%.

• Not-for-profit Medicare HMOs were more

likely than their for-profit counterparts to use

capitation in 2015, though this share grew

faster at for-profit plans from 2014 to 2015.

1 Centers for Medicare & Medicaid Services (CMS). (2014). CMS Financial Report Fiscal Year 2014: Transforming Health Care for All Americans. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CFOReport/Downloads/CMS-Financial-Report-for-Fiscal-Year-2014.pdf

2 CMS. (2015). CMS Financial Report Fiscal Year 2015: Keeping Us Healthy for 50 Years. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CFOReport/Downloads/2015_CMS_Financial_Report.pdf

3 Only HMOs that enroll Medicare beneficiaries are included.4 HMOs gave multiple answers. Totals add up to more than 100%. Other reimbursement methods used by HMOs included discounted fee-for-service,

fee schedules, per diems, and return of risk pools/withholds.

Managed Care Share of Medicare Spending GrowsLONG-TERM TREND

Data source: Centers for Medicare and Medicaid Services, 2016

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Inpatient Charges per Medicare Case Climb SteadilyLONG-TERM TREND

Key Takeaway

Starting in 2013, Medicare began releasing data for inpatient charges for common procedures at

hospitals around the nation, revealing that charges for the same services can vary wildly. For example,

in 2013, a joint replacement costs an average of $5,300 in Ada, Oklahoma, and $223,000 in Monterey

Park, California.3 Medicare reimbursements also vary depending on the hospital, with differences

driven by average patient morbidity, as well as local costs at the hospitals themselves.3


HOSPITAL INPATIENT CHARGES PER MEDICARE CASE, 2010–20141

DISEASE STATE 2010 2011 2012 2013 2014 % Change 2010–2014

ACS $22,250 $23,507 $25,593 $26,994 $31,141 40.0%

Angina 18,721 20,354 21,651 25,747 27,369 46.2

Diabetes Mellitus 33,715 35,651 37,730 41,226 44,170 31.0

Hypertension 17,745 18,887 19,766 22,443 24,603 38.6

Osteoarthritis 47,346 49,488 51,635 50,054 55,241 16.7

Stroke 34,859 37,392 39,270 42,024 44,477 27.6

• From 2010 to 2014, average hospital inpatient

charges per Medicare case grew nearly every

year across all of the profiled disease states,

increasing the most for angina (46.2%).

• Although charges for Medicare hypertension

cases remained lower than those for other

diagnoses shown, they rose 38.6%, a larger jump

than for osteoarthritis (16.7%) and stroke (27.6%).

AMI Stroke Hypertension$0

$23,000

$46,000

$69,000

$92,000

Ch

arg

es

pe

r Ca

se

$16,999

$30,874

$56,061

$86,715

$15,957

$25,087

$38,239

$48,463

$5,737

$23,096 $22,954 $25,264

CMI <1.0 CMI 1.0 to <1.2 CMI 1.2 to <1.5 CMI 1.5+

HOSPITAL INPATIENT CHARGES PER MEDICARE CASE, BY SEVERITY, 20141,2

1 Charge data are per-case averages for inpatients with a particular diagnosis of interest. Charges may be for treatment related to other diagnoses. Data reflect the total charges billed by the hospital for the entire episode of care, and may include accommodation, pharmacy, laboratory, radiology, and other charges not billed by the physician. Data do not necessarily indicate final amounts paid.

2 Severity is approximated by the case mix index (CMI), which is a statistical measure of the average amount of resources consumed per Medicare inpatient case at a hospital. Hospitals that tend to treat more resource-intensive (i.e., severe) cases will have a higher calculated CMI.

3 Daly, R. (2013). CMS data show wide variation in hospital billing. Modern Healthcare. Retrieved from http://modernhealthcare.com/article/20130508/NEWS/305089960

Hospital Case Mix Index Drives Up Charges for Select Cardiovascular Diagnoses

• In 2014, for all three cardiovascular diagnoses

profiled, hospitals with the most severe case

mix index (CMI; 1.5 or more) generated the

highest charges per inpatient Medicare case.

• For example, inpatient charges per AMI

case were $86,715 for hospitals with a CMI of

1.5 or above, more than five times those for

facilities with a CMI of less than 1.0 ($16,999).

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• From 2013 to 2014, average Medicare

reimbursement per inpatient case rose for

nine of 12 profiled disease states. For example,

reimbursement per ACS case climbed 17.3%.

• However, average inpatient Medicare charges

also grew for each of the profiled disease states,

and Medicare reimbursement as a percentage

of these charges decreased for nine of the 12.

Medicare Inpatient Reimbursement Increases

CHRONIC DISEASE


Key Takeaway

Even as Medicare payments to hospitals increase, charges per inpatient case are growing even

faster, leading to narrowed reimbursement rates. Whether Medicare payments are tenable for

hospitals may remain an open question, but the disparity between charges and payments likely

will spur continued cost-cutting efforts on the part of health care providers.


MEDICARE REIMBURSEMENT OF INPATIENT CHARGES PER CASE, OSF HEALTHCARE SYSTEM, 2013–20141

MEDICARE REIMBURSEMENT OF INPATIENT CHARGES, 2013–20141

Average Inpatient Medicare Charges

Average Inpatient Medicare

Reimbursement

% of Inpatient Medicare Charges

Reimbursed

DISEASE STATE 2013 2014 2013 2014 2013 2014

Acute Coronary Syndromes (ACS) $26,154 $29,944 $4,019 $4,713 15.4% 15.8%

Angina 22,539 27,267 3,441 3,760 15.3 13.8

Asthma 27,672 29,605 5,170 5,458 18.7 18.4

Breast Cancer 40,100 44,466 6,258 6,711 15.6 15.1

Depression 23,491 24,542 7,139 7,419 30.4 30.2

Diabetes Mellitus 35,003 37,438 7,600 7,962 21.7 21.3

Hip and Knee Replacement/Revision 58,888 60,735 12,536 12,461 21.3 20.5

Hypertension 21,898 24,012 3,496 3,981 16.0 16.6

Osteoarthritis 54,657 56,297 11,523 11,460 21.1 20.4

Prostate Cancer 47,297 49,488 7,016 7,185 14.8 14.5

Rheumatoid Arthritis 53,211 59,906 10,164 11,521 19.1 19.2

Stroke 35,038 37,256 7,257 7,152 20.7 19.2

• From 2013 to 2014, the rate of Medicare

reimbursement per inpatient stroke case at OSF

HealthCare System, a Next Generation ACO

participant, dropped to 22.2% from 23.8%.

• Meanwhile, OSF’s Medicare reimbursement

rate per inpatient diabetes mellitus (to

23.2% from 24.2%) and prostate cancer

(to 14.7% from 12.2%) case increased.

OSF HealthCare System’s Medicare Reimbursement Rate Falls for Inpatient Stroke CasesACO SPOTLIGHT

Diabetes Mellitus Prostate Cancer Stroke0%

7%

14%

21%

28%

Perc

en

tag

e R

eim

bu

rse

d

2013 2014

23.2% 24.2% 23.8%22.2%

12.2%14.7%

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MEDICARE REIMBURSEMENT OF HEART FAILURE INPATIENT PER-CASE CHARGES, 2011–20141

• Average Medicare reimbursement per

inpatient heart failure case decreased

in each of the profiled years, to 24.8% of

average charges in 2014 from 28.5% in 2011.

• Meanwhile, average Medicare charges per

inpatient heart failure case increased each

year from 2011 to 2014. Such charges rose 20.1%

during this period, to $29,735 from $24,767.

Medicare Reimbursement Rate for Heart Failure Falls Again

CHRONIC DISEASE

$0

$9,000

$18,000

$27,000

$36,000

Ch

arg

es/

Reim

bu

rse

me

nt

Average Charges Average Reimbursement Percentage Reimbursed

28.5% 27.9%25.2% 24.8%

2011 2012 2013 2014

$24,767

$7,049

$25,932

$7,228

$28,855

$7,279

$29,735

$7,358


2 CMS. (2015). FY 2016 IPPS Hospitals Readmission Reduction Program Supplemental Data File (Final Rule and Correction Notice). Retrieved from http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-FR-Readmit-Supp-Data-File.zip

3 The total number of hospitals evaluated and penalized may include institutions that have closed or merged with other facilities. Evaluated hospitals include those in Maryland, even though they were exempted from penalties.

Percentage of Hospitals Penalized for Excess Readmissions Grows

• From 2015 to 2016, the share of hospitals

assessed a penalty for excess readmissions under

the Hospital Readmissions Reduction Program

(HRRP) increased, to 78.8% from 75.9%.

• The share of penalized hospitals assessed the

smallest penalty rose (to 80.8% from 79.8%) during

this period, as did the share of hospitals receiving

the largest penalty (to 4.3% from 4.1%).

Key Takeaway

In 2015, chronic obstructive pulmonary disease (COPD) and hip or knee replacement were added to

the set of conditions on which CMS rates hospital readmission performance. This expansion may have

contributed to the increased share of hospitals receiving penalties for 2016 Medicare reimbursement.

PERCENTAGE (NUMBER) OF HOSPITALS PENALIZED UNDER THE HOSPITAL READMISSIONS

REDUCTION PROGRAM, FY 20162,3

Not Penalized

Penalized

78.8%(2,592)

21.2%(697)

PERCENTAGE (NUMBER) OF PENALIZED HOSPITALS, BY REIMBURSEMENT PENALTY, FY 20162,3

0.01–1.0% Reimbursement Penalty

1.01–2.0% Reimbursement Penalty

2.01–3.0% Reimbursement Penalty 4.3%(111)

80.8%(2,095)

14.9%(386)



2015Penalized: 75.9% (2,638)

Not Penalized: 24.1% (838)

20150.01–1.0%: 79.8% (2,105)

1.01–2.0%: 16.1% (424)

2.01–3.0%: 4.1% (109)

Patient pays 25%of drug cost

Patient pays 5% of drug cost

Annualdeductible

2016

Initial Phase4 Coverage Gap (the “donut hole”)1,2 Catastrophic Phase

Enrollee Drug Company Part D Drug Plan

45% 50%

45% 50% 5%

5%

2016

2017

2018

2019

Patient pays 25%of drug cost

Patient pays 5% of drug cost

Annualdeductible2020

Initial Phase Coverage Gap (the “donut hole”) Catastrophic Phase

50%

50%

50%

10%

15%

20%

40%

35%

30%

50%25% 25%

$360 Max $3,310 $4,850

STANDARD MEDICARE PRESCRIPTION DRUG BENEFIT, 2016–20203

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Less Than a Third of Part D Patients on Diabetes Rxs Reach the Coverage Gap

• In 2014, 41.6% of Florida Part D participants who

filled diabetes drugs reached the coverage gap,

the highest share among the profiled states. In

California, this percentage was 21.1%.

• Nationally, 17.2% of Part D participants who

received diabetes drugs were dual-eligible; 15.3%

received a low-income subsidy. Neither group

was subject to the coverage gap in 2014.

Drug Cost Limits Shift Up for Part D Participants in 2016

• Medicare raised per-enrollee spending limits for

the initial phase of coverage in 2016 (to $3,310

from $2,960 in 2015), as well as the upper limit

of the coverage gap (to $4,850 from $4,700) for

the standard prescription drug benefit.

• In 2016, participants in their initial phase pay

25% of total costs for covered drugs, until a total

expenditure of $3,310. In the coverage gap,

enrollees’ share of drug expenses is 45% for

branded drugs and 58% for generics.

PHARMACY

1 For brand-name drugs, patient pays 45% of drug cost, manufacturer pays 50%. Out-of-pocket (OOP) spending that counts toward coverage gap up to catastrophic coverage includes both patient and manufacturer spending (95% of drug price). Also included in OOP costs are payments made by patient for covered prescription if plan has a coverage gap. Excluded from OOP costs are plan spending on drug cost (5% of drug price), plan premium, and plan spending on pharmacy dispensing fee (patient pays 55% of fee).

2 For generic drugs, patient pays 58% of drug price. This is the only expense that counts toward OOP spending in the coverage gap. Manufacturer’s contribution of 42% of drug price does not count toward OOP maximum.

3 Centers for Medicare & Medicaid Services. (2016). Costs in the Coverage Gap. Retrieved from http://www.medicare.gov/part-d/costs/coverage-gap/part-d-coverage-gap.html

4 Patient and drug spending combined, to include deductible ($360 maximum), copayments, and coinsurance.

PERCENTAGE OF DIABETES PATIENTS, BY COVERAGE GAP STATUS, 2014

Subject to Coverage Gap Not Subject to Coverage Gap

MARKET Did Not Reach Coverage Gap

Voluntary—Reached Coverage Gap Dual Eligible Low-Income Subsidy

California 29.7% 21.1% 44.5% 4.5%

Florida 36.0 41.6 8.1 14.1

New York 37.5 31.2 20.0 11.2

Ohio 46.9 27.6 10.2 15.3

Pennsylvania 46.5 22.7 18.1 12.7

Texas 28.0 37.1 13.2 21.6

NATION 36.4% 31.0% 17.2% 15.3%

STATE SPOTLIGHT

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Ingredient Cost per Medicare HMO Rx Shrinks in 2015

• Average ingredient costs per prescription for

Medicare HMO members fell to $56.80 in 2015

from $57.80 in 2013; during the same period,

the share of Medicare HMOs that penalized

physicians for prescribing policy violations rose.

• Despite a decrease in ingredient costs per

prescription, and a growing generic share of

drugs dispensed, the pharmacy percentage

of total operating costs at Medicare HMOs

increased only fractionally during this time.

PHARMACY BENCHMARKS AND POLICIES FOR HMOs WITH MEDICARE MEMBERS, 2013–20151,2

PHARMACY BENCHMARKS 2013 2014 2015

No. of Prescriptions per Member per Year 29.4 29.9 29.7

Average Ingredient Cost per Prescription $57.80 $57.20 $56.80

Pharmacy Costs as % of Total Operating Costs 14.2% 14.8% 14.8%

% of Prescriptions Filled With Generics 78.1% 78.7% 78.8%

PHARMACY POLICIES% of HMOs Allowing Choice of Branded or Generic

Pharmaceuticals 90.3% 91.5% 90.0%% of HMOs Penalizing Physicians for Violations of

Prescribing Policy 13.6% 15.5% 15.4%

Key Takeaway

The spike in the share of generic prescriptions dispensed starting in 2012 is largely attributable

to the number of branded drugs that lost patent protection between 2011 and 2013. However,

the greater complexity of biologics could impact this trend. It is more difficult and expensive

to produce biosimilar biologics than chemical compound drugs, limiting generic drug makers’

ability to rapidly bring to market generic replacements for biologics that go off patent.3


PHARMACY

1 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions dispensed, by drug class, to all patients.2 Only HMOs that enroll Medicare beneficiaries are included.3 The Economist. (2015). Going Large: A Wave of New Medicines Known as Biologics Will Be Good for Drugmakers, but May Not Be So Good for

Health Budgets. Retrieved from: http://www.economist.com/node/21637387/print

Number of Rxs Dispensed per Medicare HMO Member Rises 20.2% From 2006LONG-TERM TREND

• From 2006 (24.7) to 2015 (29.7) the average

annual number of prescriptions dispensed

per Medicare HMO member climbed 20.2%.

• The percentage of prescriptions that were filled

with generic drugs at Medicare HMOs also

grew, to 78.8% in 2015 from 49.6% in 2006.

NUMBER OF PRESCRIPTIONS PER MEDICARE HMO MEMBER PER YEAR AND PERCENTAGE OF PRESCRIPTIONS FILLED WITH GENERICS, 2006–20151,2

40%

50%

60%

70%

80%

Perc

en

tag

e o

f Presc

riptio

ns

0

8

16

24

32

Nu

mb

er o

f Pre

scrip

tion

s

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

24.725.6

27.2

30.0 29.6 29.929.3 29.4 29.9 29.7

49.6%

53.6%55.1%

58.5%

63.2%

63.7%

76.9%78.1% 78.7% 78.8%

Total Medicare Prescriptions Percentage of Prescriptions Filled with Generics

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Key Takeaway

In 2014, Part D participants filling prescriptions in the coverage gap paid just under half (47.5%)

of their out-of-pocket expenses for branded drugs and nearly three-fourths (72%) of their generic

costs.1 Whether Medicare is able to continue assuming larger shares of costs for drugs filled during

the gap—as called for under the Affordable Care Act (ACA)—depends not just on how well the

program manages future prescription expenses, but also on the long-term viability of the ACA itself.

Monthly Out-of-Pocket Costs for California Part D Oncology Rxs Top U.S. Averages

• Regardless of their coverage gap status, Part D

enrollees in California who received oncology

prescriptions had higher monthly out-of-pocket

costs than their counterparts nationally in 2014.

• For example, California oncology patients with

Part D coverage paid roughly $93 a month

during the coverage gap for prescriptions in

2014, 10.9% higher than the U.S. mean of $83.60.

LIS Shares Dip Among Part D Diabetes, Oncology Patients

• From 2013 to 2014, the percentages of Medicare

Part D enrollees who were dual eligible or low-

income subsidy (LIS) declined among those who

filled diabetes, cholesterol, or oncology drugs.

• Less than a third of Part D patients receiving

prescriptions in any of the profiled categories

reached the coverage gap in 2014; among

these classes, this share was lowest for cholesterol.

PHARMACY

PERCENTAGE OF PART D PATIENTS, BY COVERAGE GAP STATUS, 2013–2014

Dual Eligible Low-Income Subsidy Did Not Reach the Coverage Gap

Reached the Coverage Gap

DRUG CLASS 2013 2014 2013 2014 2013 2014 2013 2014

Diabetes 19.1% 17.2% 15.9% 15.3% 38.1% 36.4% 26.9% 31.0%

Cholesterol 14.9 13.5 12.9 12.2 48.2 46.5 24.0 27.8

Oncology 12.6 10.7 13.0 12.2 48.4 46.8 25.8 30.1

2013

California Nation

2014 2013 2014$0

$25

$50

$75

$100

Ou

t-of-P

oc

ket C

ost

s

$40.23

$79.48

$88.39

$37.02

$71.65

$92.70

$36.81

$60.06

$82.47

$35.18

$60.29

$83.60

Did Not Reach the Coverage Gap Before the Gap During the Gap

PART D MONTHLY OUT-OF-POCKET COSTS, BY COVERAGE GAP STATUS, ONCOLOGY, 2013–2014

CHRONIC DISEASE

STATE SPOTLIGHT

1 See the Public Payer Digest for 2014, page 19.

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0%

25%

50%

75%

100%PDP PenetrationMA Penetration

Pen

etra

tion

Ra

te

MN HI OR CA FL

43.7%

55.2%

26.4%

45.8%

31.2%

44.4%

37.2%

41.4%

35.4%

40.8%

0%

25%

50%

75%

100%

ND VT DE IA SD

PDP PenetrationMA Penetration

Pen

etra

tion

Ra

te

67.2%

18.8%

66.5%

7.6%

65.6%

9.3%

63.6%

17.4%

61.8%

20.6%

TOP 10 STATES, BY MEDICARE PDP ENROLLMENT, 2015–20161

STATE Enrollment 2015 Enrollment 2016 Enrollment Change 2015–2016

% of Total PDP Enrollment

California 2,049,217 2,139,382 4.4% 8.7%

Texas 1,572,794 1,578,834 0.4 6.4

Florida 1,406,540 1,456,163 3.5 5.9

New York 1,391,896 1,428,702 2.6 5.8

Michigan 1,097,544 1,091,790 –0.5 4.4

Illinois 1,042,146 1,079,166 3.6 4.4

Pennsylvania 1,036,172 1,064,450 2.7 4.3

Ohio 1,032,188 1,019,985 –1.2 4.1

New Jersey 880,828 898,562 2.0 3.7

North Carolina 788,192 803,424 1.9 3.3

Key Takeaway

Nearly 76% of the nation’s eligible Medicare beneficiaries were enrolled in either an MA or PDP

plan as of March 2016, though PDP plans constituted a larger portion of total Part D membership.

As Part D plans evolve, it is likely they will continue to attract even higher percentages of Medicare

beneficiaries, thus increasing the program’s share of all pharmacy expenses nationally.


1 Data are as of March of the year listed.

Membership Grows for Most Top 10 PDP Enrollment States

• For eight of the 10 top states, by

Medicare Part D prescription drug

program (PDP) enrollment, membership

counts increased from 2015 to 2016.

• Collectively, PDP enrollment in these top

10 states increased by 2.1%; as of March

2016, more than half (51.0%) of the nation’s

PDP enrollees were in these states.

Medicare Advantage Penetration Exceeds 55% in Minnesota

• As of March 2016, 55.2% of eligible Minnesota

Medicare beneficiaries were in a Medicare

Advantage (MA) plan; MA and PDP plans

enrolled 98.9% of the state’s eligible population.

• In the other four states with the highest

MA penetration rates, MA and PDP plans

together accounted for no more than

78.6% of all eligible Medicare members.

STATE SPOTLIGHT

MA AND PDP PENETRATION, 20161

TOP FIVE STATES, BY MA PENETRATION TOP FIVE STATES, BY PDP PENETRATION

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Key Takeaway

Pharmacy cost per staffed bed rose 0.7% from 2014 to 2015, and pharmacy cost per discharge

climbed a more notable 8.2% during this period. The fractional increase in the former may reflect a

more precipitous reduction in bed counts than in admissions, as hospitals seek to reconcile projected

overcapacity and operating costs.1 Growth in the latter could be influenced by efforts to reduce

readmissions and improve medication therapy management—and outcomes—across transitions of

care. For example, by beginning post-acute care therapeutic regimens before patients are discharged.


Pharmacy Costs per Staffed Bed Are Lower at Non-IHS Hospitals

• In 2014, average pharmacy cost per staffed

bed was lower for hospitals that were not

affiliated with an integrated health system (IHS;

$48,862) than for hospitals that were ($61,508).

• However, average pharmacy cost

per discharge was slightly higher at

non-IHS hospitals ($1,537) than at

their IHS counterparts ($1,511).

PHARMACY COSTS PER STAFFED BED, ALLINA HEALTH VS. NATION, 2013–2014

PHARMACY COSTS PER DISCHARGE, ALLINA HEALTH VS. NATION, 2013–2014

$0

$22,000

$44,000

$66,000

$88,000

Pha

rma

cy

Co

sts

pe

r Sta

ffed

Be

d

2013 2014

Allina Health Nation

$82,462$86,890

$55,789 $56,166

Pharmacy Costs per Discharge Drop Steeply at Allina Health Hospitals

• Average pharmacy cost per discharge at Allina

Health hospitals fell 24.3%, from 2013 ($2,025)

to 2014 ($1,533), even as it rose 8.2% across all

hospitals nationally (from $1,406 to $1,521).

• Meanwhile, average pharmacy cost per

staffed bed grew 5.4% at Allina Health, to

$86,890 from $82,462, and notably exceeded

the national average of $56,166 in 2014.

ACO SPOTLIGHT

$1,000

$1,260

$1,520

$1,780

$2,040

Pha

rma

cy

Co

sts

pe

r Dis

cha

rge

2013 2014

Allina Health Nation

$2,025

$1,533

$1,406

$1,521

AVERAGE TOTAL STAFFED BEDS AND PHARMACEUTICAL EXPENSES, PER HOSPITAL, 2014

SIZE Average Total Staffed Beds

Average Pharmacy Cost per Staffed Bed

Average Pharmacy Cost per Discharge

<50 Beds 24.9 $49,419 $1,686

50–119 Beds 81.6 54,782 1,418

120–249 Beds 177.9 58,625 1,407

≥250 Beds 421.4 67,981 1,512

MHS OWNERSHIP

MHS Owned 188.4 61,144 1,488

Non-MHS Owned 76.2 48,130 1,588

INTEGRATED SYSTEM AFFILIATION

In an IHS 181.1 61,508 1,511

Not in an IHS 104.6 48,862 1,537

OVERALL AVG. 149.8 $56,166 $1,521

1 Evans, M. (2015). Hospitals Face Closures as “New Day in Health Care” Dawns. Modern Healthcare. http://www.modernhealthcare.com/article/20150221/MAGAZINE/302219988

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• From 2013 to 2015, the Medicare Part D

percentages of the total number of

retail prescriptions filled rose in each of

the 12 profiled therapeutic classes.

• The 2015 Part D share for osteoporotics (55.4%)

was the highest of the classes, up from 49.7% in

2013; hypertensives again accounted for the

largest number of prescriptions filled.

Key Takeaway

It stands to reason that, as more eligible Medicare beneficiaries sign up for Part D plans, the

program would naturally record an increase in total numbers of prescriptions filled at retail, which

certainly occurred from 2013 to 2015. On the one hand, Part D’s growing shares of retail pharmacy

prescriptions across key drug categories indicate a sizable—and growing—expense category for

a publicly funded program. On the other, it speaks to Part D’s increasing influence on the retail

pharmacy landscape in general and ability to command lower prices for the prescriptions it fills.

Numbers of Medicare Part D Prescriptions Filled Increase Across Most Selected Classes

• The numbers of Medicare Part D retail prescription

drugs dispensed grew from 2013 to 2015 for all

but one the profiled drug classes, and most

notably for gastrointestinal drugs (35.7%).

• Although the Part D payer share of osteoporosis

drugs was the highest of the selected drug classes

in 2015, the number of Part D retail prescriptions

dispensed in this category shrank 8.4% from 2013.

1 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions, dispensed by drug class, to all patients.

MEDICARE PART D RETAIL RX PAYER SHARE AND TOTAL NUMBER OF RXs PER YEAR, 2013–20151

2013 2014 2015

DRUG CLASS Payer Share Number Payer Share Number Payer Share Number

Allergies 15.5% 8,276,116 16.8% 9,188,517 18.8% 10,295,318

Antiplatelets 46.5 27,636,804 48.8 29,576,516 51.0 31,307,226

Arthritis 20.7 20,161,050 22.0 22,122,193 22.2 23,692,740

Asthma 23.0 31,074,633 24.4 33,711,325 25.4 37,349,351

Cholesterol 34.0 76,304,718 35.8 80,898,179 37.5 84,501,122

Depression 20.8 51,315,266 21.9 56,170,356 22.9 61,933,987

Diabetes 32.2 51,501,947 33.1 55,185,142 33.7 59,827,093

Gastrointestinal 20.5 3,340,309 22.6 3,908,712 24.7 4,531,978

Hypertension 34.5 213,093,323 35.9 225,983,990 36.8 233,987,353

Oncology 31.8 4,503,734 33.1 4,791,135 34.0 5,008,755

Osteoporosis 49.7 8,664,231 52.8 8,282,157 55.4 7,939,882

Sleep Disorder 21.8 12,032,321 24.8 13,075,759 25.2 12,762,069

Part D Shares of Total Rxs Climb in 12 Common Drug Classes

CHRONIC DISEASE

PERCENTAGE CHANGE IN NUMBER OF MEDICARE PART D RETAIL PRESCRIPTIONS, 2013–20151

–12%

0%

12%

24%

36%

Perc

ent

ag

e C

hang

e

Allergies Anti-platelets

Arthritis Asthma Choles-terol

Depres-sion

Diabetes Gastro-intestinal

Hyper-tension

Oncology Osteo-porosis

SleepDisorder

24.4%

13.3%17.5%

20.2%

10.7%

16.2%

35.7%

9.8% 11.2%

–8.4%

6.1%

20.7%

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Out-of-Pocket Costs Drop for Branded Part D Gastrointestinal Drugs in California

STATE SPOTLIGHT

2013 2014 2015 $0

$15

$30

$45

$60

Brand Generic Total

Ou

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oc

ket C

ost

s

$56.76

$6.41

$13.63

$50.33

$7.99

$17.71

$44.14

$6.82

$16.70

OUT-OF-POCKET COSTS PER MEDICARE PART D RETAIL GASTROINTESTINAL RX, CALIFORNIA, 2013–20152,3

OOP Costs for Part D Rxs Fall for Half of Profiled Drug Classes

CHRONIC DISEASE

Key Takeaway

The decrease in out-of-pocket costs per Medicare Part D retail prescription across several of the

profiled drug classes could be a reflection of increasing use of generics and the further reduction

in the prescription drug coverage gap for Medicare beneficiaries. In 2014, in the so-called

donut hole, beneficiaries were responsible for 47.5% of branded drug costs; in 2015, the share

contracted to 45.0%. However, the share of Part D drug plans that require coinsurance has

climbed,4 so whether out-of-pocket costs continue to drop for some classes is yet to be seen.

• From midyear 2013 to midyear 2015,

out-of-pocket costs (OOP) per Medicare

Part D retail prescription decreased for

half of the profiled drugs classes.1

• Meanwhile, among the drug classes for which

OOP costs increased, the largest gain was for

antiplatelet drugs (29.2%). Part D OOP costs

were highest in all three years for asthma drugs.


• In California, average OOP costs for Medicare

Part D beneficiaries filling branded gastrointestinal

(GI) drugs declined 22.2%, to $44.14 in

midyear 2015 from $56.76 in midyear 2013.

• Such Medicare OOP costs for generic GI

prescriptions grew 6.4%, to $6.82 from $6.41 during

the same time. The overall average OOP cost for

branded and generic GI drugs rose 22.5%.

OUT-OF-POCKET COSTS PER MEDICARE PART D RETAIL RX, BY DRUG CLASS, 20152,3

Sleep Disorder

$0

$6

$12

$18

$24

Ou

t-of-P

oc

ket C

ost

s

Onco-logy

Asthma Osteo-porosis

Cho-lesterol

Arthritis Allergies Hyper-tension

Depres-sion

Diabetes Gastro-intestinal

Anti-platelets

$23.03$21.93$22.70

$21.10

$14.81$12.76

$17.24

$10.58$8.71

$7.57 $7.19 $6.68

1 See Public Payer Digest for 2014.2 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions dispensed, by drug class, to all patients.3 “Out-of-pocket cost” is the actual amount paid by the patient for the individual prescription. This cost mainly includes copayments, but can also

include tax, deductibles, and cost differentials where applicable.4 Andrews, M. (2016). Coinsurance Trend Means Senior Likely to Face Higher Out-Of-Pocket Drug Costs, Report Says. Kaiser Health News. Retrieved

from http://khn.org/news/coinsurance-trend-means-seniors-likely-to-face-higher-out-of-pocket-drug-costs-report-says/

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0%

10%

20%

30%

40%

Me

dic

are

Pa

rt D

Pa

yer S

hare

Branded Generic

Arthritis Asthma Cholesterol Diabetes Hypertension

32.4%

20.8%

29.5%

17.5%

38.5% 37.4% 36.3%

32.1%

36.8% 36.8%

MEDICARE PART D PAYER SHARE OF BRANDED AND GENERIC DRUGS, 20151

• From 2013 to 2015, the portions of Medicare Part D

prescriptions filled with generic drugs grew in

eight of the 12 profiled classes. In 2015, the largest

generic share was for sleep disorder drugs (97.6%).

• The most notable increase in Medicare Part D

generic drug percentages was for osteoporosis

drugs (a 17.9 percentage point increase),

followed by allergy medications (6.5 points).

Key Takeaway

In 2015, the Centers for Medicare & Medicaid Services released data identifying the top 40 drugs

influencing Medicare Part D prescription drug spending growth. Interestingly, eight of the top 10 drugs

with the largest increase in cost per unit between 2013 and 2014 were generic, with growth between

77% and 329%.2 Although branded drugs still account for most of the total Medicare Part D prescription

drug spend, the rising cost of generic medications will likely have a greater influence in the future.


Percentages of Profiled Medicare Part D Payer Branded Drug Prescriptions Lead Generics

• In 2015, the Medicare Part D portions of

total branded drug prescriptions were

larger than those of generic drugs in four

of five selected medication classes.

• For instance, this disparity between Part D payer

shares for branded and generic prescriptions

was greatest for arthritis (32.4% versus 20.8%)

and asthma medications (32.4% versus 20.8%).

PERCENTAGE OF MEDICARE PART D RETAIL RXs FILLED WITH BRANDED VS. GENERIC DRUGS, 2013–20151

Branded Drugs Generic DrugsDRUG CLASS 2013 2014 2015 2013 2014 2015

Allergies 18.1% 15.9% 11.6% 81.9% 84.1% 88.4%

Antiplatelets 17.8 22.0 26.8 82.2 78.0 73.2

Arthritis 21.4 24.1 18.0 78.6 75.9 82.0

Asthma 79.7 77.1 76.3 20.3 22.9 23.7

Cholesterol 21.8 23.0 15.7 78.2 77.0 84.3

Depression 11.3 6.8 12.1 88.7 93.2 87.9

Diabetes 38.9 39.7 41.7 61.1 60.3 58.3

Gastrointestinal 18.2 24.8 29.6 81.8 75.2 70.4

Hypertension 7.3 6.2 4.4 92.7 93.8 95.6

Oncology 6.1 5.8 4.6 93.9 94.2 95.4

Osteoporosis 27.0 22.7 9.1 73.0 77.3 90.9

Sleep Disorder 8.3 6.8 2.4 91.7 93.2 97.6

1 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions dispensed, by drug class, to all patients.2 Medicare Drug Spending Dashboard 2014 (2015). Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-

Reports/Dashboard/Medicare-Drug-Spending/Drug_Spending_Dashboard.html

Generic Shares of Common Part D Prescriptions Rise

CHRONIC DISEASE

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• From 2013 to 2015, total Medicare Part D retail

prescription volumes increased for 34 of the 40

profiled common prescriptions. In seven of eight

drug classes, volume was highest for generics.

• Of the profiled drugs, two generic cholesterol

reducers, atorvastatin calcium (28.1 million)

and simvastatin (27.0 million), had the largest

numbers of Part D prescriptions in 2015.

COMMON MEDICARE PART D RETAIL RXs DISPENSED, BY DRUG CLASS, 2013–20151

Number of Medicare Part D Prescriptions per Year

DRUG CLASS/PRODUCT Brand/Generic 2013 2014 2015

AntidepressantsSertraline Generic 7,100,568 7,840,096 8,661,681

Trazodone Hydrochloride Generic 5,831,397 6,744,380 7,813,633

Citalopram Hydrobromide Generic 6,027,760 6,104,518 6,038,511

Fluoxetine Generic 4,583,315 4,787,470 5,398,289

Escitalopram Oxalate Generic 3,619,236 4,459,008 5,290,651

AntihypertensivesAmlodipine Besylate Generic 22,707,801 25,173,209 26,175,439

Lisinopril Generic 21,286,614 22,827,112 24,830,359

Furosemide Oral Generic 17,566,647 18,235,985 18,785,519

Metoprolol Tartrate Generic 14,360,672 15,237,048 15,858,169

Metoprolol Succinate Extended Release Generic 12,723,754 14,109,247 15,313,313

AntipsychoticsQuetiapine Fumarate Generic 3,441,833 3,925,620 4,572,442

Risperidone Generic 2,646,323 2,704,891 2,710,256

Abilify Brand 1,696,069 1,818,891 1,816,071

Olanzapine Generic 1,495,793 1,623,956 1,804,955

Ziprasidone Hydrochloride Generic 727,071 746,154 781,718

Chemotherapeutic AgentsMethotrexate Generic 1,433,090 1,513,686 1,593,875

Anastrazole Generic 776,302 861,199 931,677

Letrozole Generic 300,718 344,800 384,867

Tamoxifen Generic 291,925 333,042 367,758

Megestrol Oral Susp Generic 345,068 293,459 243,054

Cholesterol ReducersAtorvastatin Calcium Generic 16,494,949 21,919,916 28,060,756

Simvastatin Generic 27,778,664 27,618,036 26,951,154

Crestor Brand 7,365,297 7,922,179 8,220,105

Pravastatin Generic 6,397,523 6,482,325 5,912,730

Fenofibrate Generic 3,117,982 3,991,875 4,094,961

Gastrointestinal AgentsDicyclomine Hydrochloride Generic 917,464 1,114,721 1,317,618

Metoclopramide Generic 1,118,956 1,072,108 1,047,983

Linzess Brand 30,209 264,521 616,105

Sulfasalazine Generic 249,113 238,930 287,729

Delzicol Brand 30,689 165,575 149,926

Nonsteroidal Anti-Inflammatory DrugsMeloxicam Generic 5,168,925 6,116,480 6,898,045

Ibuprofen Generic 3,462,368 3,607,746 4,041,074

Naproxen Generic 2,580,802 2,784,928 2,933,711

Celebrex Brand 2,526,632 2,650,369 1,410,173

Voltaren Gel Brand 1,240,873 1,718,051 1,971,891

Respiratory AgentsProAir HFA Brand 5,369,410 6,243,069 7,189,343

Montelukast Sodium Generic 3,618,507 4,874,158 5,753,531

Spiriva Brand 4,716,601 5,029,012 5,200,588

Advair Diskus Brand 4,767,556 4,748,976 4,570,030

Symbicort Brand 1,762,382 2,247,419 2,875,394

1 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions dispensed, by drug class, to all patients.

Numbers of Part D Retail Rxs Grow in Most Drug Classes

CHRONIC DISEASE


Medicaid has become the single largest health

care payer, by enrollment, in the United States.

At the end of 2015, the program covered

72.4 million individuals, a 20.7% increase in

enrollment from the 2013 pre-Affordable Care

Act (ACA) expansion baseline of 60 million.

Following the influx of new recipients, Medicaid

enrollment growth is projected to slow to a

much more modest annual rate of 1.6% and

eventually cover 78.1 million enrollees by 2024.1

As enrollment climbed as a result of Medicaid

expansion, so, too, did spending. For 2015, total

program spending is estimated at $548.8 billion, a

10.7% jump from $495.8 billion in 2014. However,

growth in Medicaid outlays is also projected to

slow going forward, averaging 5.6% annually, to

reach a still considerable $915.4 billion by 2024.1

To date, 31 states and the District of Columbia have

chosen to expand Medicaid, and 19 states have

not. Six of these expansion states (Arkansas, Indiana,

Iowa, Michigan, Montana, and New Hampshire)

received Section 1115 Medicaid demonstration

waivers, allowing them to introduce provisions

not otherwise provided for by law. Such variations

include charging premiums, providing premium

assistance to purchase health insurance exchange

plans, and establishing healthy behavior incentives.

As these state-driven modifications are implemented

and studied, their effectiveness in terms of cost of

care and outcomes likely will inform future policy.

Likewise, as more Medicaid benefits are delivered

by managed care organizations, the performance

of these plans also will be studied to determine

whether they offer greater constraints on spending

growth compared with fee-for-service Medicaid.

MEDICAIDBackgrounder

1 Centers for Medicare & Medicaid Services. (2016). Office of the Actuary Projected National Health Expenditures. Retrieved from https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountsprojected.html

2 Enrollment totals for 2010, 2011, and 2012 are from June of that year.

0

31

46

61

76

Enro

llme

nt (

Mill

ion

s)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

43.5 44.5 44.7 44.9 46.149.5 50.3

52.656.0

60.0

67.172.4

Total Number of Medicaid Recipients, 2004–20152

LONG-TERM TREND


28

DEMOGRAPHICSM

ED

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ID


Key Takeaway

The vast majority of Medicaid recipients (84.9%) are enrolled in MCOs, far exceeding MCO penetration

into Medicare (31.7%; see page 6). Even though Medicaid enrollment growth is expected to slow

in coming years (see page 27), the effectiveness of managed care approaches to controlling cost

growth will be a key variable in the financial burden Medicaid imposes on state budgets.

Medicaid Enrollment Grows in Both Expansion and Non-Expansion States

• Medicaid enrollment climbed 34% in

expansion states and 12% in non-expansion

states, from the July-through-September 2013

expansion enrollment period to April 2016.

• Medicaid enrollment doubled in Kentucky during

this period, and rose by more than 50% in eight

other expansion states. Tennessee (29%) had the

highest rate of growth in non-expansion states.

40%

52%

64%

76%

88%

Pen

etra

tion

0

17

34

51

68

Enro

llme

nt (

Mill

ion

s)

2008 2009 2010 2011 2012 2013 2014 2015

Total Enrollment Penetration

32.435.2

38.340.6

43.9 45.5

54.9

61.5

70.3% 71.2%

76.9% 77.1%75.2% 75.9%

81.8%

84.9%

MEDICAID MCO ENROLLMENT AND PENETRATION INTO MEDICAID, 2008–2015

Medicaid Managed Care Penetration Nears 85%LONG-TERM TREND

• Medicaid recipients enrolled in a managed

care organization (MCO) represented 84.9%

of total Medicaid enrollees in 2015, up

14.6 percentage points from 2008 (70.3%).

• During this period, the total number of

Medicaid MCO enrollees increased at an

even greater rate (89.8%), to 61.5 million

in 2015 from 32.4 million in 2008.

Expansion States: 34%

Non-Expansion States: 12%

All States, Regardless of Expansion: 27%

Overall Percentage Change (2013–2016)

WA59%

OR68%

CA53%

NV83%

AZ39% NM

67%

CO72%

ND23%

MN17%

IA25%

AR48%

LA4%

MT54%

IL18%

IN31%

OH26%

KY100%

WV60%

MI20%

PA18%

NY13%

VT 19%

NH 47%

Expansion States Non-Expansion States

MA 26%

RI 47%

CT N/A

NJ 36%

DE 7%

MD 40%

D.C. 12%

HI19%

AK24%

PERCENTAGE CHANGE IN MEDICAID ENROLLMENT IN MEDICAID EXPANSION STATES, 2013–20161


Data source: Department of Health and Human Services

1 The net change in Medicaid enrollment is based on data from the 49 states reporting both enrollment from April 2016 and baseline enrollment from July 2013 through September 2013 (the period before the initial marketplace open enrollment) that contain comparable enrollment groups.

29

DEMOGRAPHICS


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COMMON DIAGNOSES FOR MEDICAID INPATIENTS, BY ICD-9 CODE, 2013–2014

Type of Diagnosis Medicaid Patient %

ICD-9 CODE 2013 2014

Infectious and Parasitic Diseases (001–139)008 Intestinal infections due to other organisms 8.9% 8.6%042 Human immunodeficiency virus (HIV) 27.0 25.4

Endocrine, Nutritional, and Metabolic Diseases, and Immunity Disorders (240–279)

250 Diabetes mellitus 13.1% 14.7%276 Disorders of fluid, electrolyte, and acid-base balance 10.4 9.8

Mental Disorders (290–319)292 Drug-induced mental disorders 24.1% 29.4%295 Schizophrenic disorders 31.2 30.7303 Alcohol dependence syndrome 16.4 20.8304 Drug dependence 24.1 26.8311 Depressive disorder, not elsewhere classified 20.5 23.8

Diseases of the Respiratory System (460–519)466 Acute bronchitis and bronchiolitis 29.9% 26.5%493 Asthma 18.7 19.0

Diseases of the Digestive System (520–579)540 Acute appendicitis 13.4% 15.1%571 Chronic liver disease and cirrhosis 16.8 18.3577 Diseases of pancreas 11.0 13.5

Complications of Pregnancy, Childbirth, and Puerperium (630–679)642 Hypertension complicating pregnancy, childbirth, and the puerperium 32.3% 27.8%644 Early or threatened labor 37.8 34.3646 Other complications of pregnancy, not elsewhere classified 41.1 37.0660 Obstructed labor 29.0 26.1663 Umbilical cord complications during labor and delivery 34.1 29.6

COMMON PROCEDURES FOR MEDICAID INPATIENTS, BY ICD-9 CODE, 2013–2014

Type of Procedure Medicaid Patient %

ICD-9 CODE 2013 2014

Operations on the Nervous System (01–05)01 Incision and excision of skull, brain, and cerebral meninges 10.1% 10.7%02 Other operations on skull, brain, and cerebral meninges 16.6 17.003 Operations on spinal cord and spinal canal structures 15.1 15.6

Operations on the Respiratory System (30–34)31 Other operations on larynx and trachea 15.9% 15.5%33 Other operations on lung and bronchus 8.9 9.134 Operations on chest wall, pleura, mediastinum, and diaphragm 6.8 7.2

Operations on the Cardiovascular System (35–39)35 Operations on valves and septa of heart 7.1% 6.8%38 Incision, excision, and occlusion of vessels 9.8 9.739 Other operations on vessels 8.2 8.3

Operations on the Digestive System (42–54)43 Incision and excision of stomach 7.8% 7.5%47 Operations on appendix 13.7 15.453 Repair of hernia 7.0 7.6

Obstetrical Procedures (72–75)73 Other procedures inducing or assisting delivery 34.1% 30.1%74 Cesarean section and removal of fetus 31.0 27.2

Miscellaneous Diagnostic and Therapeutic Procedures (87–99)87 Diagnostic radiology 9.3% 9.6%94 Procedures related to the psyche 23.3 27.395 Ophthalmologic and otologic diagnosis and treatment 29.1 25.0


Medicaid Portions Grow for Nearly Half of Profiled Inpatient Dxs

• The Medicaid shares for nine of 19 common

inpatient diagnoses climbed from 2013 to 2014.

The largest such rise occurred for drug-induced

mental disorders (5.3 percentage points).

• The highest Medicaid share in 2014,

by profiled diagnosis, was for other

complications of pregnancy (37.0%), despite

decreasing from 41.1% the prior year.

0%

5%

10%

15%

20%

Perc

en

tag

e o

f Ca

ses

California Alaska New York Maryland Wyoming

13.6% 14.1%15.6%

11.6% 11.7%14.7%

16.2% 16.0%14.6%

11.5% 11.2%

14.4%

9.7% 9.2%

13.9%

2012 2013 2014

STATE SPOTLIGHT

DEMOGRAPHICS

PUBLIC PAYER DIGEST 2016 SANOFI / MANAGED CARE DIGEST SERIES® / WHERE INFORMATION BECOMES INTELLIGENCE.™ 30

ME

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1 Includes HMOs, PPOs, private fee-for-service, and exclusive provider organizations.2 “Other” includes self-pay, charity, workers’ compensation, and unknown payer sources.3 Doyle, K. (2015). Medicaid Linked With Better Blood Pressure Control. Reuters Health. Retrieved from http://www.reuters.com/article/us-health-

medicaid-hypertension-idUSKCN0T627D20151117

Key Takeaway

The expansion of Medicaid could be one of several factors in the rise of the payer’s shares

of inpatient cases for some diseases. Medicaid patients with some chronic diseases are

more apt to visit a physician than those without health insurance.3 It is possible that a

significant portion of newly covered Medicaid recipients who deferred health care services

before receiving coverage—resulting in greater levels of disease severity—are now being

identified and referred for more intensive treatment, such as hospital inpatient services.


• The Medicaid shares of inpatient (IP) cases for

four profiled diagnoses rose from 2013 to 2014.

The benchmark for acute coronary syndromes

climbed the fastest, to 8.1% from 6.4%.

• The Medicaid percentage for asthma cases

(24.3%) was the highest of the profiled

diagnoses in 2014, despite falling from 26.3% in

2013; prostate cancer was the lowest (2.5%).

PERCENTAGE OF HOSPITAL INPATIENT CASES, BY PAYER, 2013–2014

Medicaid Medicare Commercial Insurance1 Other2

DISEASE STATE 2013 2014 2013 2014 2013 2014 2013 2014

Acute Coronary Syndromes (ACS) 6.4% 8.1% 68.2% 66.4% 19.1% 20.2% 6.3% 5.4%

Angina 7.7 7.2 65.5 66.4 19.8 21.7 6.9 4.7

Asthma 26.3 24.3 35.8 37.2 28.0 30.9 9.9 7.6

Breast Cancer 13.4 11.9 44.1 45.3 37.6 38.6 5.0 4.1

Depression 24.8 21.9 35.7 42.9 25.8 25.1 13.6 10.1

Diabetes Mellitus 11.6 11.6 61.3 60.6 18.8 20.8 8.3 7.1

Hypertension 9.4 9.6 60.0 59.3 22.1 24.4 8.5 6.8

Lipid Disorders 5.7 6.8 64.5 64.3 23.6 23.9 6.2 5.0

Osteoarthritis 3.5 3.5 59.0 58.9 32.3 33.3 5.2 4.2

Prostate Cancer 3.5 2.5 64.9 67.4 27.3 27.3 4.3 2.9

Rheumatoid Arthritis 5.5 6.6 68.4 67.1 21.7 22.7 4.3 3.6

Stroke 6.2 4.7 70.6 72.7 16.4 18.0 6.9 4.5

Medicaid IP Case Portions Grow for Four Profiled Diagnoses

CHRONIC DISEASE

TOP FIVE STATES BY MEDICAID SHARE OF INPATIENT HYPERTENSION CASES, 2012–2014

Medicaid Percentages of IP Hypertension Cases Rise in Four of the Top Five Markets

• Of the five states with the highest shares

of Medicaid inpatient hypertension cases,

four recorded an increase in the portions

of such cases from 2012 to 2014.

• The largest occurred in Wyoming, where

the percentage of Medicaid inpatient

hypertension cases climbed 4.2 percentage

points (to 13.9% from 9.7%).

• From 2011 to 2015, the number of hospital

admissions per 1,000 HMO members fell for

all three profiled payers. For Medicaid HMO

members, it dipped 2.8% (to 95.7 from 98.5).

• Meanwhile, this ratio declined 6.3% for

Medicare HMO members (to 250.2 from

266.9), and 4.9% for HMO members with

commercial insurance (to 54.6 from 57.4).

HMO Hospital Admissions Ratio Declines Over Five Years, Regardless of PayerLONG-TERM TREND

NUMBER OF HOSPITAL ADMISSIONS PER 1,000 HMO MEMBERS, BY PAYER TYPE, 2011–2014

UTILIZATION FOR MEDICAID HMO MEMBERS, 2014–20151

Hospital Days per 1,000 Medicaid HMO Members

Hospital Admissions per 1,000 Medicaid HMO Members

ALOS (Days) per Medicaid

Hospital Admission

MD Encounters per Medicaid

HMO Member2

Ambulatory Visits per Medicaid

HMO Member2

TAX STATUS OF HMO 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015

Not-for-Profit 405.8 403.5 106.0 103.8 4.5 4.7 4.9 4.7 2.6 2.5

For-Profit 387.0 391.2 87.3 90.0 4.6 4.7 4.8 4.7 3.1 3.1

OVERALL AVG. 394.7 396.1 95.4 95.7 4.6 4.7 4.8 4.7 2.9 2.9

1 Only HMOs that enroll Medicaid recipients are included.2 Ambulatory visits differ from physician encounters. Ambulatory visits are visits by an HMO member to an HMO clinic or physician’s office that do

not require the services of a physician. Such visits are usually made for tests, prescription refills, immunizations, etc. The term “physician encounters” is self-explanatory.

3 Only HMOs that enroll Medicare beneficiaries are included.4 Includes HMOs, PPOs, point-of-service plans, and exclusive provider organizations.5 See the Public Payer Digest for 2014.

0

75

150

225

300

2011 2012 2013 2014 2015

266.9

98.5

57.4

265.8

97.6

58.4

275.6

98.8

58.0

253.4

95.4

53.8

250.2

95.7

54.6

Medicare3 Medicaid1 Commercial4

Nu

mb

er o

f Ad

mis

sio

ns

31

ME

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UTIL IZATION

Key Takeaway

From 2012 to 2015, ALOS and the numbers of hospital days and ambulatory visits per Medicaid

HMO member each increased notably,5 likely reflecting the influx of patients identified as newly

eligible for Medicaid under the Affordable Care Act’s expansion of the program, as well as greater

enrollment in non-expansion states facilitated by more avenues to apply for benefits. Still, from

2014 to 2015, Medicaid HMO utilization for patients under the umbrella of a managed care model

changed only slightly, perhaps suggesting better management of earlier pent-up demand.


Hospital Days, Admit Ratios Fall at Not-for-Profit Medicaid HMOs

• The numbers of hospital days and admissions per

1,000 Medicaid HMO members decreased from

2014 to 2015 at not-for-profit HMOs. At for-profit

HMOs, these ratios increased, but were still lower

than the means of not-for-profit HMOs in 2015.

• The average length of stay (ALOS) per inpatient

Medicaid hospital admission was 4.7 days at

not-for-profit and for-profit HMOs alike in 2015;

however, Medicaid members in for-profit HMOs

averaged more ambulatory visits (3.1 versus 2.5).

MEDICAID HOSPITAL UTILIZATION, 2012–2014

Discharges Patient-Days ALOS (Days)SIZE 2012 2013 2014 2012 2013 2014 2012 2013 2014<50 Beds 106.4 106.8 107.1 349.2 353.9 346.6 3.6 3.7 3.750–119 602.0 608.1 607.0 1,870.2 1,850.3 1,880.6 4.0 4.0 4.0

120–249 Beds 1,288.6 1,286.7 1,277.3 5,036.1 5,035.0 5,030.0 4.6 4.6 4.6

250+ Beds 3,065.2 3,067.6 3,105.5 15,551.5 15,551.7 15,699.5 5.7 5.7 5.7

OWNERSHIPGovernment 867.4 877.2 866.5 4,328.9 4,379.1 4,307.7 4.1 4.1 4.1

Not-for-Profit 1,252.4 1,259.3 1,249.4 5,657.1 5,681.6 5,684.0 4.6 4.6 4.6

For-Profit 910.3 909.9 890.2 3,551.8 3,554.8 3,548.5 4.1 4.1 4.0

REGIONPacific 1,521.2 1,532.3 1,511.4 7,329.4 7,382.5 7,369.2 4.7 4.7 4.7

Mountain 1,049.3 1,049.1 1,035.9 4,321.1 4,332.7 4,342.7 4.8 4.8 4.8

W. North Central 493.7 504.3 505.0 2,123.0 2,167.1 2,129.5 3.5 3.4 3.4

E. North Central 967.2 966.7 954.4 3,850.2 3,851.9 3,848.0 3.8 3.9 3.8

South Central 1,000.9 939.5 987.0 4,047.9 3,690.2 4,090.1 4.1 4.1 4.2

New England 1,263.1 1,269.8 1,269.7 5,799.7 5,827.6 5,858.0 4.7 4.6 4.6

Mid-Atlantic 1,126.5 1,132.3 1,116.1 7,967.2 7,977.0 7,851.7 7.1 7.0 7.1

South Atlantic 1,528.8 1,531.2 1,527.8 6,559.3 6,564.2 6,575.1 4.1 4.2 4.1

NATION 1,097.5 1,104.0 1,092.4 4,949.6 4,975.8 4,961.9 4.4 4.4 4.4

AVERAGE NUMBER OF MEDICAID PATIENT-DAYS AND AVERAGE LENGTH OF STAY, CALIFORNIA, 2012–2014

STATE SPOTLIGHTCalifornia Medicaid Patient-Days and ALOS Surpass National Benchmarks

• Medicaid patient-day counts at California

hospitals remained virtually flat between

2012 (8,791) and 2014 (8,789), yet consistently

exceeded the national means in all three years.

• During this period, ALOS per Medicaid case

in California held steady at 5.2 days, and

was 0.8 days higher than the corresponding

national average of 4.4 days in 2014.

1,000

3,000

5,000

7,000

9,000

2

3

4

5

68,791 8,815 8,789

5.2 5.2 5.2

Medicaid Patient-Days Average Length of Stay

Patie

nt-D

ays

ALO

S (Da

ys)

2012 2013 2014

32

UTIL IZATION


ME

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Medicaid Discharges, Patient-Days Decline; ALOS Is Unchanged

• Despite rising at hospitals with fewer than

50 beds or more than 250 beds, the average

number of Medicaid hospital discharges overall

fell 1.1% from 2013 (1,104.0) to 2014 (1,092.4).

• Meanwhile, Medicaid patient-days fell

fractionally across the U.S., to 4,961.9 from 4,975.8,

while average length of stay (ALOS) per inpatient

Medicaid case remained the same, at 4.4 days.

Key Takeaway

Fewer inpatient discharges for Medicaid recipients may indicate that efforts to reduce inpatient

hospital admissions are having an effect. However, if Medicaid expansion in 2013 introduced deferred

health care demand into the market in 2014, utilization trends may be impacted more dramatically in

subsequent years of coverage. Indeed, hospital admissions per 1,000 members rose (albeit slightly) for

Medicaid HMOs from 2014 to 2015—perhaps a precursor of things to come for the program overall.


33

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AVERAGE ANNUAL PROFESSIONAL INPATIENT CHARGES FOR MEDICAID RECIPIENTS WITH LIPID DISORDERS, 2013–20151

Provider Charges Climb for Medicaid Lipid Disorder Patients

CHRONIC DISEASE


Key Takeaway

According to the American Heart Association, the majority of adult Medicaid recipients (53%, or more

than 16 million) have a history of some type of cardiovascular illness, including hypertension, high

cholesterol, coronary heart disease, and stroke.2 With professional charges rising across most settings for

Medicaid lipid disorder patients, early interventions and lifestyle modifications to treat such conditions

before they become severe will likely become increasingly important in this high-need population.

F INANCIALS

• Average annual professional charges for

Medicaid lipid disorder patients rose by double-

digit percentages from 2013 to 2015 in five of

the six settings shown (office/clinic excluded).

• Most notably, such professional charges for

Medicaid lipid disorder patients treated in skilled

nursing facilities increased by 47.8% over this

period, and in emergency rooms by 28.5%.

AVERAGE ANNUAL PROFESSIONAL CHARGES FOR MEDICAID RECIPIENTS WITH LIPID DISORDERS, BY SETTING, 2013–20151

SETTING 2013 2014 2015

Hospital Inpatient $3,246 $3,659 $3,712

Hospital Outpatient 1,417 1,551 1,588

Ambulatory Surgery 3,132 3,583 3,645

Emergency Room 1,630 1,811 2,094

Office/Clinic 2,334 2,453 2,473

Skilled Nursing Facility/ICF 1,147 1,473 1,695

Inpatient Provider Charges Grow Rapidly for Medicaid Lipid Disorder Patients in L.A., CA

• From 2013 to 2015, average professional inpatient

charges per year for Medicaid lipid disorder

patients more than doubled in Los Angeles, and

expanded by nearly 50% across California.

• Such charges increased by 14.4% nationally

over this time. Despite this more modest growth,

national charges ($3,712) remained higher than

the California average ($3,415) in 2015.

LOCAL SPOTLIGHT

1 Professional charges are those generated by the providers delivering care to lipid disorder patients in various settings.2 American Heart Association. (2014). Critical Coverage for Heart Health: Medicaid and Cardiovascular Disease. Retrieved from https://www.heart.

org/idc/groups/heart-public/@wcm/@adv/documents/downloadable/ucm_461513.pdf

NOTE: ICF is intermediate care facility.

2013 2014 2015

Los Angeles California Nation$0

$1,200

$2,400

$3,600

$4,800

Ave

rag

e C

ha

rge

s

$2,028

$3,985

$4,483

$2,280

$3,020$3,415 $3,246

$3,659 $3,712

34

PHARMACYM

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Key Takeaway

Pharmacy spending as a percentage of overall Medicaid operating costs was only 0.8 percentage

points higher in 2015 than 10 years before in 2006 (15.1%).1 In combination with relative stability in the

number of Medicaid HMO PMPY prescriptions (up from 8.9 in 2006, but down from 10.2 in 2009), this

modest increase in the share of spending attributed to pharmacy seems to suggest that, even though

Medicaid MCO enrollment grew notably during this period, managed care models have made

progress in controlling both Medicaid prescription usage and costs.

Number of Prescriptions Dips per Member per Year for Medicaid

• After holding steady at 9.6 from 2013

to 2014, the number of prescriptions

per Medicaid HMO member per year

(PMPY) inched down to 9.5 in 2015.

• Despite this decline, pharmacy costs as

a percentage of total operating costs

grew at HMOs with Medicaid members,

to 15.9% in 2015 from 15.0% in 2014.

• From 2014 ($50.70) to 2015 ($51.80), the average

ingredient cost per Medicaid HMO prescription

increased by a modest 2.2%. However, such costs

have expanded by 8.6% since 2011 ($47.69).

• Meanwhile, the share of Medicaid HMO

prescriptions filled with generics posted a

year-on-year decrease, albeit fractional,

to 75.0% in 2015 from 75.1% in 2014.


1 See the Public Payer Digest for 2009, page 32.2 See the Public Payer Digest for 2009, page 34.

PHARMACY BENCHMARKS AND POLICIES FOR HMOs WITH MEDICAID MEMBERS, 2013–2015PHARMACY BENCHMARKS 2013 2014 2015

No. of Prescriptions per Member per Year 9.6 9.6 9.5

Average Ingredient Cost per Prescription $48.40 $50.70 $51.80

Pharmacy Costs as % of Total Operating Costs 14.6% 15.0% 15.9%

% of Prescriptions Filled With Generics 73.0% 75.1% 75.0%

PHARMACY POLICIES% of HMOs Allowing Choice of Branded or

Generic Pharmaceuticals93.0% 94.4% 93.8%

% of HMOs Penalizing Physicians for Violations of Prescribing Policy

13.0% 12.0% 11.8%

PERCENTAGE OF PRESCRIPTIONS FILLED WITH GENERICS AND AVERAGE INGREDIENT COST PER PRESCRIPTION, MEDICAID HMO MEMBERS, 2011–2015

2011 2012 2013 2014 201556%

61%

66%

71%

76%

$44

$46

$48

$50

$52

Perc

en

tag

e o

f Pre

scrip

tion

s Ave

rag

e Ing

red

ient C

ost

62.6%

71.7%73.0%

75.1%

$47.69

$48.30 $48.40

$50.70

75.0%

$51.80

Percentage of Prescriptions Filled with Generics Average Ingredient Cost

Average Ingredient Cost per Medicaid HMO Prescription Continues to GrowLONG-TERM TREND

35

PHARMACYM

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• From 2013 to 2015, the Medicaid shares of all

retail prescriptions dispensed in each of 12

profiled drug classes increased, and were highest

for asthma, allergy, and arthritis drugs in 2015.

• By volume, total retail prescriptions for Medicaid

recipients grew the most during this period for

arthritis (47.6%), cholesterol (36.7%), diabetes

(34.7%), and hypertension (33.0%) drugs.


Key Takeaway

Average monthly Medicaid enrollment expanded 26.6% from October 2013 to March 2016.2

Consequently, increased Medicaid shares of retail prescription volume in common drug

classes seem to reflect the larger number of people eligible for the program. Gains in Medicaid

prescription market shares that surpass the rate of growth in Medicaid enrollment may bolster the

supposition that these patients are introducing deferred health-care needs into the market.

MEDICAID RETAIL RX PAYER SHARE AND TOTAL NUMBER OF RXs PER YEAR, 2013–20151

2013 2014 2015

DRUG CLASS Payer Share Number Payer Share Number Payer Share Number

Allergies 13.8% 7,372,144 13.9% 7,602,174 15.8% 8,638,883

Antiplatelets 4.1 2,410,400 4.3 2,586,166 5.0 3,073,864

Arthritis 10.6 10,357,788 11.1 11,202,761 14.3 15,286,764

Asthma 18.0 24,414,624 18.3 25,234,106 19.6 28,796,028

Cholesterol 4.3 9,659,192 4.6 10,459,449 5.9 13,205,949

Depression 9.5 23,504,609 9.6 24,677,046 11.3 30,514,975

Diabetes 7.0 11,164,753 7.2 12,026,760 8.5 15,037,993

Gastrointestinal 8.2 1,337,368 8.2 1,413,428 9.1 1,675,998

Hypertension 5.1 31,786,685 5.5 34,746,539 6.7 42,291,492

Oncology 5.6 790,021 5.8 845,321 6.7 986,152

Osteoporosis 3.9 677,296 4.1 635,430 4.6 655,852

Sleep Disorder 5.8 3,199,352 5.3 2,777,519 5.9 2,979,813

• The Medicaid percentage of all retail arthritis

prescriptions filled in New Jersey climbed

to 20.3% in 2015 from 14.1% in 2013—an

increase of 6.2 percentage points.

• Meanwhile, the national Medicaid share of such

prescriptions rose 3.7 percentage points, to 14.3%

from 10.6%, and trailed those of New Jersey and

the Mid-Atlantic region in all three years.

Medicaid Share of Retail Arthritis Prescriptions Grows Faster in New Jersey Than Nationwide

STATE SPOTLIGHT

0%

6%

12%

18%

24%

Me

dic

aid

Pa

yer S

ha

re

2013 2014 2015

New Jersey Mid-Atlantic Region Nation

14.1%15.0%

20.3%

16.5%17.8%

20.5%

10.6% 11.1%

14.3%

MEDICAID PAYER SHARE OF RETAIL ARTHRITIS PRESCRIPTIONS, 2013–20151

1 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions dispensed, by drug class, to all patients.2 CMS. (2016). Medicaid & CHIP: March 2016 Monthly Applications, Eligibility Determinations and Enrollment Report. Retrieved from

https://www.medicaid.gov/medicaid-chip-program-information/program-information/downloads/march-2016-enrollment-report.pdf

Medicaid Portions of Retail Prescriptions Climb Steadily

CHRONIC DISEASE

36

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• Out-of-pocket (OOP) costs per Medicaid retail

prescription grew in eight of the 12 profiled drug

classes from 2014 to 2015. By drug class, such

costs rose most quickly for arthritis (13.1%).

• Meanwhile, Medicaid retail prescription spending

expanded in nine of the 12 drug classes. The

largest such increases were for diabetes (52.1%),

gastrointestinal (41.3%), and arthritis (31.5%) drugs.

Key Takeaway

Federal regulations limit Medicaid prescription cost sharing. As a result, copayments for recipients

earning less than 150% of the Federal Poverty Level are limited to “nominal” amounts based on

preferred or non-preferred status for a given drug.3 This limits the impact on recipients that would result

from price increases for many common drugs. However, for the Medicaid program overall, aggregate

prescription spending likely will continue to grow due to Medicaid expansion and new drug therapies,

and this may in turn drive further experimentation in Medicaid plan models at the state level.

Overall OOP Costs per Medicaid Retail Oncology Prescription Grow Slowly

• Overall OOP costs for Medicaid retail oncology

prescriptions grew 4.7%, to $4.94 in 2015

from $4.72 in 2014. Only sleep disorder and

hypertension drugs posted smaller gains.

• OOP costs per Medicaid retail prescription for

generic oncology drugs dropped fractionally

during this time, to $3.50 from $3.52, but increased

for branded oncology drugs, to $30.86 from $20.30.


1 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions dispensed, by drug class, to all patients.2 The total full price the pharmacy charges the patient for the product, regardless of the copayment situation.3 Medicaid.gov. Retrieved from: https://www.medicaid.gov/medicaid-chip-program-information/by-topics/cost-sharing/cost-sharing-out-of-

pocket-costs.html

NOTE: “Out-of-pocket costs” is the actual amount paid by the patient for the individual prescription. This cost mainly includes copayments, but can also include tax, deductibles, and cost differentials where applicable.

OUT-OF-POCKET COSTS PER MEDICAID RETAIL RX AND TOTAL MEDICAID RX SPENDING, 2014–20151,2

Out-of-Pocket Costs Medicaid Retail Rx Spending (in Millions)

DRUG CLASS 2014 2015 % Change 2014 2015 % Change

Allergies $4.81 $4.74 –1.5% $275.3 $286.5 4.1%

Antiplatelets 3.88 4.21 8.6 261.8 317.3 21.2

Arthritis 3.40 3.84 13.1 483.8 636.0 31.5

Asthma 5.84 6.27 7.3 2,532.1 2,931.8 15.8

Cholesterol 3.21 2.98 –7.2 383.2 406.1 6.0

Depression 3.22 3.22 –0.1 813.5 792.4 –2.6

Diabetes 5.03 5.57 10.6 1,768.0 2,688.4 52.1


Hypertension 2.72 2.73 0.4 514.1 563.3 9.6

Oncology 4.72 4.94 4.7 265.6 320.6 20.7

Osteoporosis 3.41 3.08 –9.5 28.2 27.3 –3.1

Sleep Disorder 3.31 3.35 1.2 64.8 48.3 –25.4

Generic Brand Total$0

$8

$16

$24

$32

Ou

t-of-P

oc

ket C

ost

s

2014 2015

$3.52 $3.50

$20.30

$30.86

$4.72 $4.94

OUT-OF-POCKET COSTS PER MEDICAID RETAIL RX, ONCOLOGY, 2014–20151

Medicaid OOP Retail Rx Costs Rise for Most Drug Classes

CHRONIC DISEASE

37

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MEDICAID PERCENTAGE OF TOTAL RETAIL RX SPENDING, DIABETES, 2013–20151

Key Takeaway

Medicaid has been steadily shifting to generic drug prescriptions over those for branded drugs: generic

drugs accounted for 81.1% of Medicaid drug claims in 2014, up from 74.2% in 2011. However, despite

this shift to generics, Medicaid drug spending per claim increased substantially between 2013 and 2014

for both branded (17.3%) and generic (7.0%) prescriptions.2 If this growth continues, Medicaid will need

to find ways to further control drug expense and utilization among its members.

• Among the drug classes profiled, asthma

drugs had the highest Medicaid portion of

total retail prescriptions for males (20.7%)

and females (18.7%) alike in midyear 2015.

• Meanwhile, the Medicaid shares of generic

arthritis retail prescriptions far exceeded the

corresponding branded shares for males (13.6%

versus 5.3%) and females (16.7% versus 6.4%).

Medicaid Portion of Total Retail Prescription Spending Grows for Diabetes

• From midyear 2013 (7.2%) to midyear

2015 (8.5%), the overall Medicaid share

of total retail prescription drug spending

for diabetes medications increased.

• During this time, the Medicaid percentage of

branded drug spending rose 1.2 percentage

points (to 8.7% from 7.5%), while the generic

share grew by just 0.4 points (to 4.9% from 4.5%).


MEDICAID PAYER SHARE OF BRANDED VS. GENERIC RETAIL RXS DISPENSED, BY GENDER, 20151

Male Female

DRUG CLASS Brand Generic Total Brand Generic Total

Allergies 14.9% 16.5% 16.2% 12.5% 16.0% 15.5%

Antiplatelets 3.1 5.3 4.7 3.7 6.0 5.4

Arthritis 5.3 13.6 12.5 6.4 16.7 15.5

Asthma 19.9 22.3 20.7 19.4 17.5 18.7

Cholesterol 2.2 5.5 5.0 3.0 7.5 6.8

Depression 8.2 11.7 11.4 9.4 11.5 11.3

Diabetes 8.2 6.1 7.0 11.5 9.0 10.0


Hypertension 3.4 6.5 6.3 4.1 7.1 6.9

Oncology 7.3 5.7 5.8 10.4 6.9 7.0

Osteoporosis 4.9 5.0 5.0 2.8 4.7 4.5

Sleep Disorder 4.3 4.9 4.8 5.0 6.5 6.5

1 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions dispensed, by drug class, to all patients.2 MedPac IssueBrief: Medicaid Spending for Prescription Drugs (2016). Retrieved from https://www.macpac.gov/wp-content/uploads/2016/01/

Medicaid-Spending-for-Prescription-Drugs.pdf

0%

3%

6%

9%

12%

Perc

enta

ge

of T

ota

l Ret

ail

Do

llars

Brand Generic Overall Average

2013 2014 2015

7.5% 7.8%8.7%

4.5% 4.4%4.9%

7.2% 7.5%8.5%

One in Five Asthma Rxs Is Covered by Medicaid

CHRONIC DISEASE

38

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ID



1 Data are as of midyear 2015 and represent the numbers/percentages of prescriptions dispensed, by drug class, to all patients.

• Of the common Medicaid retail prescriptions

shown, 34 of 40 were generic, including the

leading drug, by volume, in each product class.

• Yet Linzess, the drug with the largest percentage

growth from 2013 to 2015 (over 1400%) among

the profiled Medicaid prescriptions, was branded.

Vast Majority of Profiled Medicaid Drugs Are Generic

CHRONIC DISEASE

COMMON MEDICAID RETAIL RXs DISPENSED, BY DRUG CLASS, 2013–20151

Number of Medicaid Prescriptions per YearDRUG CLASS/PRODUCT Brand/Generic 2013 2014 2015

AntidepressantsSertraline Generic 3,721,365 4,180,959 5,259,993

Trazodone Hydrochloride Generic 2,985,343 3,274,700 3,940,795

Fluoxetine Generic 3,359,329 2,588,283 3,465,080

Citalopram HBR Generic 2,474,504 2,580,292 2,903,230

Escitalopram Oxalate Generic 1,110,644 1,584,746 2,243,887

AntihypertensivesLisinopril Generic 4,093,335 4,522,011 6,027,791

Amlodipine Besylate Generic 3,195,578 3,486,019 3,947,288

Hydrochlorothiazide Generic 2,451,855 2,710,761 3,392,342

Clonidine Generic 2,735,130 2,901,771 3,140,443

Metoprolol Tartrate Generic 2,049,341 2,250,278 2,721,163

AntipsychoticsRisperidone Generic 2,872,796 2,832,051 2,557,744

Quetiapine Fumarate Generic 1,925,092 2,010,943 2,395,500

Abilify Brand 2,005,327 2,119,228 1,960,672

Olanzapine Generic 649,864 694,130 758,990

Ziprasidone Hydrochloride Generic 439,343 496,757 490,136

Chemotherapeutic AgentsMethotrexate Generic 243,757 263,959 328,195

Tamoxifen Generic 116,879 135,245 159,212

Anastrozole Generic 104,128 107,659 121,887

Letrozole Generic 53,695 56,008 63,686

Hydroxyurea Generic 39,452 44,848 50,689

Cholesterol ReducersSimvastatin Generic 4,172,678 4,399,977 5,170,331

Atorvastatin Calcium Generic 1,687,036 2,584,700 4,413,600

Pravastatin Generic 904,745 946,884 994,887

Fenofibrate Generic 426,509 499,364 664,626

Gemfibrozil Generic 390,805 419,912 496,087

Gastrointestinal AgentsDicyclomine Hydrochloride Generic 415,847 432,739 539,974

Metoclopramide Generic 403,894 393,711 421,973

Hyoscyamine Generic 129,094 138,544 139,315

Linzess Brand 7,764 50,601 119,079

Glycopyrrolate Generic 84,001 84,467 88,097

Nonsteroidal Anti-Inflammatory DrugsIbuprofen Generic 5,221,425 5,439,626 8,145,176

Naproxen Generic 1,959,366 2,168,711 2,605,570

Meloxicam Generic 1,158,831 1,442,944 1,963,774

Diclofenac Sodium Generic 197,947 274,605 362,094

Voltaren Gel Brand 183,930 250,151 291,440

Respiratory AgentsMontelukast Sodium Generic 3,763,556 4,568,133 5,061,577

Ventolin HFA Brand 3,600,722 3,637,920 4,868,227

ProAir HFA Brand 3,381,586 3,816,027 4,528,201

Albuterol Nebulizer Solution Generic 3,495,291 3,473,004 3,619,013

Flovent HFA Brand 1,409,090 1,398,292 1,559,647


LONG-TERM CAREBackgrounder

The U.S. Department of Health and Human

Services estimates that 70% of people turning 65

can expect to use some form of long-term care

during their lives.1 The number of Americans in

that age bracket grew by nearly 19% from 2010

to 2015, and was estimated at 47.8 million as of

2015.2 As that number is expected to continue

to expand, it is not surprising that the number of

nursing homes (NHs), assisted living facilities (ALFs),

and home care agencies (HCAs) nationwide all

increased from 2014 to 2015. The long-term care

pharmacy providers3 servicing these organizations

have also grown more numerous in recent

years as that market swells. Despite the growth

opportunities, the number of hospital-based skilled

nursing facilities (SNFs) continued to slide, to 681 in

2014, a 33.9% reduction from 1,030 facilities in 2006.

As the long-term care market enters a new era

of heightened demand in the face of expected

labor shortages,4 it is difficult to predict how the

forces that shaped current trends will change in

the short-term, but one can perhaps safely assume

that efficiency—both financial and operational—

will be paramount in years to come.

2,000

0

12,000

14,000

16,000

Nu

mb

er o

f Fa

cili

ties

15,174 15,160 15,094

15,007 15,004 15,020 14,957 14,947 15,116

13,87114,157 14,995

15,070

15,781 15,72715,447 15,461

15,684

13,333 13,30913,069 13,262 13,357 13,469

13,23113,010

13,255

1,030 996 965 930 868 821 765 733

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

NHs ALFs HCAs SNFs

15,219

15,836

13,314

681

1 U.S. Department of Health and Human Services. (2016). Who Needs Care? Retrieved from http://longtermcare.gov/the-basics/who-needs-care/2 U.S. Census Bureau. (2015). Annual Estimates of the Resident Population for Selected Age Groups by Sex: April 1, 2010 to July 1, 2015. National

Characteristics: Vintage 2015. Retrieved from https://www.census.gov/popest/data/national/asrh/2015/index.html 3 Long-term care pharmacy providers (LTCPPs) are those pharmacies that have an implied contract/agreement to perform pharmaceutical

consulting and/or dispensing services to long-term care facility patients on an ongoing basis. LTCPPs tracked in this Digest must have at least one licensed pharmacist employed at the location and generate at least 50% of their revenue from long-term care facilities.


NOTE: Data on hospital-based skilled nursing facilities (SNFs) are current as of calendar year 2014.

Numbers of Long-Term Care Facilities, 2006–2015LONG-TERM TREND




Majority of Nursing Homes Have More Than 100 Licensed Beds

• Facilities with more than 100 licensed beds

made up the majority of all nursing homes

in 2015, at 52.9%. However, this percentage

declined from 53.3% in both 2013 and 2014.

• Conversely, the portion of all nursing homes with

100 or fewer licensed beds increased from 2013

(46.8%) to 2015 (47.1%); such homes held 28.7% of

all licensed nursing home beds in 2015.

LON

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DEMOGRAPHICS

NURSING HOMES, LICENSED BEDS, 2013–2015

Percentage of All Nursing Homes

Percentage of All Licensed Beds

Medicare-Certified Percentage of

All Nursing Homes

SIZE (# Licensed Beds) 2013 2014 2015 2013 2014 2015 2013 2014 2015

<50 Beds 9.7% 9.7% 9.9% 3.3% 3.3% 3.4% 89.0% 89.7% 89.6%

50–100 Beds 37.1 37.0 37.2 25.0 25.0 25.3 97.0 97.1 96.8

101–150 Beds 36.0 36.3 36.1 39.3 39.6 39.6 97.8 97.7 97.6

151–200 Beds 11.3 11.1 11.0 17.7 17.4 17.3 97.9 97.8 97.5

201+ Beds 6.0 5.9 5.8 14.7 14.7 14.4 96.8 96.4 96.5

TOTAL/OVERALL AVERAGE 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 96.6% 96.6% 96.4%

• The total number of licensed nursing home

beds grew for a second year in 2015, to

1.68 million, up by 1.5% from 1.65 million in 2013.

• However, the number of such beds per 1,000

individuals aged 65 or older fell again in 2015, to

35.1 from 36.2 in 2014, the 10th straight decline.

Total Nursing Home Licensed Bed Count Increases AgainLONG-TERM TREND

NUMBER OF LICENSED NURSING HOME BEDS AND NUMBER OF NURSING HOME BEDS PER 1,000 PEOPLE AGE 65 AND OLDER, 1994–20151

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2013 2014 20151,635

1,660

1,685

1,710

1,735

32

38

44

50

56

Num

be

r of L

ice

nse

d B

ed

s (0

00)

Num

be

r of Be

ds p

er 1,000 Pe

op

le A

ge

65+

Number of Licensed Beds Number of Beds per 1,000

1,678.3

1,658.3

1,710.8

1,716.91,721.2 1,719.9

1,700.0

1,658.3

1,667.9

1,659.11,653.5

1,672.91,678.2

53.251.9 51.9

49.748.3

47.446.2 42.7

41.440.4

38.3

36.235.1

1 “Beds/1,000” represents the number of licensed nursing home beds per 1,000 people age 65 and older. Population data are a projection of the U.S. Department of Commerce Bureau of the Census, Population Distribution Branch, published July 2015.

2 Centers for Disease Control and Prevention. (2015). Trends in Nursing Homes. Retrieved from http://www.cdc.gov/nchs/nnhs/nursing_home_trends.htm3 Decker, F. (2005). Nursing Homes, 1977–1999: What Has Changed, What Has Not? National Center for Health Statistics. Retrieved from

http://www.cdc.gov/nchs/data/nnhsd/nursinghomes1977_99.pdf

NOTE: “Medicare-certified” refers to those nursing home beds that are eligible for Medicare payment under Title XVIII of the Social Security Act.

Key Takeaway

In 1985, nursing homes with fewer than 50 beds accounted for nearly a third of all homes, the largest

share, by size. That portion was roughly halved over the next decade, as homes with between 100

and 199 beds came to dominate the marketplace,2 and the number of individuals in nursing homes

climbed.3 As seniors search for ways to get necessary services in noninstitutional settings, smaller

homes that provide care in a more home-like atmosphere may thrive.

TOP FIVE NURSING HOME CHAINS, BY NUMBER OF STAFFED BEDS, 2014–20151

0

13,000

26,000

39,000

52,000

Nu

mb

er o

f Sta

ffed

Be

ds

2014 2015

Genesis HealthCare HCR ManorCare Golden Living Life Care Centersof America

Sava Senior Care

42,397

50,058

37,138 37,079

30,123 29,90927,667 26,745

23,185 23,127



Genesis Has 41% More Facilities Than Its Closest Competitor

• In 2015, Genesis HealthCare, the largest nursing

home chain by number of facilities, had 41.1%

more homes and 67.4% more staffed beds than

Golden Living, the second largest chain.

• The top 15 nursing home chains, combined,

accounted for 16.4% of the total number of

facilities (15,219) and 17.2% of the total number of

staffed beds (1.7 million) nationwide in 2015.

LON

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DEMOGRAPHICS

NATION’S 15 LARGEST NURSING HOME CHAINS, BY NUMBER OF NURSING HOMES, 20151,2

CHAIN / HEADQUARTERS Current Rank

Previous Rank

Tax Status

Total # of NHs

Total # of Staffed

Beds

Avg. # of Beds/NH

Number of States

Genesis HealthCare / Kennett Square, PA 1 1 FP 419 50,058 119.5 35

Golden Living / Plano, TX 2 2 FP 297 29,909 100.7 21

HCR ManorCare / Toledo, OH 3 3 FP 280 37,079 132.4 29

Life Care Centers of America / Cleveland, TN 4 4 FP 215 26,745 124.4 29

Consulate Health Care3 / Maitland, FL 5 6 FP 190 21,123 111.2 21

Sava Senior Care / Atlanta, GA 6 5 FP 190 23,127 121.7 22

Evangelical Lutheran Good Samaritan Society / Sioux Falls, SD 7 7 NFP 162 11,258 69.5 24

Ensign Group, Inc. / Mission Viejo, CA 8 10 FP 129 13,803 107.0 12

Signature HealthCARE, LLC / Louisville, KY 9 11 FP 116 14,154 122.0 11

Kindred Healthcare, Inc. / Louisville, KY 10 9 FP 94 11,666 124.1 19

Trilogy Health Services, LLC / Louisville, KY 11 15 FP 93 6,652 71.5 4

PruittHealth / Norcross, GA 12 12 FP 85 9,711 114.2 4

National HealthCare Corporation / Murfreesboro, TN 13 13 FP 79 9,826 124.4 11

Senior Care Centers / Dallas, TX 14 31 FP 76 9,549 125.6 2

Veterans Health Administration / Washington, DC 15 16 NFP 75 14,190 189.2 30

TOTAL/AVERAGE 2,500 288,850 117.2 18

1 IMS Health updated its data methodology for 2014 and 2015 to account for evolving definitions of long-term care facilities. 2 This table includes all nursing homes owned and leased by these chains, and the licensed beds within those homes, as of December 2015.3 Consulate Health Care was acquired by LaVie Care Centers in late 2012. The combined company retained the Consulate Health Care name.

Only One of Top Five Nursing Home Chains, by Number of Staffed Bed, Grows in 2015

• From 2014 (42,397) to 2015 (50,058), the number

of staffed beds at Genesis HealthCare expanded

18.1%, but the average number per facility rose

by less than one bed (to 119.5 from 118.8).

• Bed counts decreased fractionally at four of

the top five nursing home chains during this

time. Life Care Centers of America recorded a

3.3% contraction in the number of beds.


As Occupancy Rate Decreases, Total Facility ALOS VariesLONG-TERM TREND

LON

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UTIL IZATION

• From 2011 to 2015, the average nursing home

occupancy rate fell 1.9 percentage points, to

81.5% from 83.4%. The only annual increase during

this period was from 2012 (82.7%) to 2013 (82.8%).

• Although total facility ALOS rose from 2014

to 2015, this measure fluctuated from 2011

(187 days) to 2015 (180). In this span, ALOS was

lowest in 2012 and 2014 (178 days both years).

Nursing Home Occupancy Rate, Patient-Days Count Fall

• From 2014 (82.2%) to 2015 (81.5%), the

average occupancy rate for nursing homes

overall declined fractionally, as did total

facility patient-days (to 32,142 from 32,553).

• Meanwhile, total facility average length of stay

(ALOS) rose, to 180 days from 178. By bed size,

ALOS grew at facilities with 101–150 beds and,

especially, at those with more than 201 beds.

NURSING HOMES, UTILIZATION RATES, 2014–2015Average Occupancy Rate

(Licensed Beds)Total Facility

Patient-Days per YearTotal Facility Average Length of Stay (Days)

SIZE (# Licensed Beds) 2014 2015 2014 2015 2014 2015

<50 Beds 83.9% 83.1% 11,846 11,770 230 226

50–100 Beds 82.3 81.7 21,882 21,769 189 186

101–150 Beds 81.5 80.7 34,648 34,396 159 163

151–200 Beds 81.8 81.2 50,022 49,511 168 166

201+ Beds 83.4 83.2 76,285 75,900 184 213

OWNERSHIPGovernment Owned 84.6% 84.7% 41,408 41,423 328 307

Not-for-Profit 84.6 83.9 32,509 31,875 188 184

For-Profit 81.2 80.4 32,151 31,801 167 172

OVERALL AVERAGE 82.2% 81.5% 32,553 32,142 178 180

80%

81%

82%

83%

84% Ave

rag

e O

cc

up

an

cy Ra

te

0

50

100

150

200

Ave

rag

e L

en

gth

of S

tay

(Da

ys)

2011 2012 2013 2014 2015

ALOS Average Occupancy Rate

187178 180 178 180

83.4%

82.7% 82.8%

82.2%

81.5%

AVERAGE OCCUPANCY RATE AND TOTAL FACILITY AVERAGE LENGTH OF STAY, 2011–2015

Key Takeaway

The role of nursing homes within the continuum of care has undergone a transformation

in recent years. Whereas these facilities were once primarily oriented toward providing

long-term care for elderly residents, they are increasingly providing medical, rehabilitative, and

physical-therapy services to people of varying ages, who return to live independently after

these interventions.1 This trend may influence many nursing home characteristics, including, but

not limited to,facility size, occupancy rates, and patient-days.


1 Marak, C. (2016). Recent Trends in Nursing Home Care. SkilledNursingFacilities.org. Retrieved from http://www.skillednursingfacilities.org/resources/nursing-home-trends/


Rates of Top Four NH Resident Conditions Surpass 50%

CHRONIC DISEASE


LON

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UTIL IZATION

• In 2015, the majority of nursing home (NH)

residents had bladder incontinence (62.8%),

depression (52.4%), Alzheimer’s-type dementia

(51.3%), or bowel incontinence (50.4%).

• From 2014 to 2015, the incidence of eight of

the most common conditions for nursing home

residents rose. The most common, bladder

incontinence, increased 1.1 percentage points.

BladderIncontinence

DocumentedDepression

Alzheimer's-Type

Dementia

BowelIncontinence

DocumentedPsychiatricDiagnosis

BehavioralSymptoms

DocumentedWeight Loss

PressureSores

SkinRashes

0%

16%

32%

48%

64%

Perc

enta

ge

of

Nus

ring

Ho

me

Resid

ents

2014 201561.7% 62.8%

51.4% 52.4% 50.3% 51.3% 49.5% 50.4%

29.1% 29.6%25.4% 25.9%

7.0% 7.1% 6.4% 6.5%—3.9%—

NURSING HOME RESIDENT CONDITIONS FROM MOST COMMON TO LEAST COMMON

PERCENTAGE OF NURSING HOME RESIDENTS RECEIVING VARIOUS TREATMENTS, BY BED SIZE, 2015

Pain Management Program Injections Specialized Rehabilitation Services0%

14%

28%

42%

56%

Perc

en

tag

e o

fN

urs

ing

Ho

me

Re

sid

en

ts

<50 Beds 50–100 Beds 101–150 Beds 151–200 Beds 201+ Beds Overall Average

51.4%45.9% 43.9% 42.4% 43.1% 45.1%

17.7%20.5%

23.3% 23.6% 24.6%21.9% 23.4% 25.3%

29.0% 28.2% 29.4% 27.1%

Key Takeaway

The landscape of nursing home care is expanding to offer not only long-term end-of-life care for the

elderly, but also short-term rehabilitation services for other patients. One possible explanation for this

shift is that Medicare covers skilled nursing facility care for short-term rehabilitation patients at $500–$600

per day, while Medicaid covers long-term nursing care at about $125 per day. However, long-term

Medicaid patients may benefit from “spillover effects”: nursing homes with more short-term Medicare

residents have better financial resources; therefore, all patients may receive better care.1

Smaller Nursing Homes Are More Apt to Have Pain Management Programs

• In 2015, pain management programs were

more common at nursing homes with fewer

than 50 beds than they were at nursing

homes with a larger number of beds.

• Conversely, larger nursing homes were

more likely to have specialized rehabilitation

services or to administer injections in

2015 than their smallest counterparts.

1 Lepore, M., and Leland, M.E. (2015). Nursing Homes That Increased the Proportion of Medicare Days Saw Gains in Quality Outcomes for Long-Stay Residents. Health Affairs, 34(12): 2121–2128.


–$5,250

$0

$5,250

$10,500

$15,750

–$100

0

$100

$200

$300

Nur

sing

Ho

me

Re

venu

e (

000)

Nursing

Ho

me

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me

(000)

$11,677

–$74

$12,034

–$72

$14,658$250

$15,264

$226 $11,326

$115

$11,566

$110

Revenue Net Income

Arizona Florida Nation2014 2015 2014 2015 2014 2015


Key Takeaway

Nursing homes are likely to face financial pressure going forward, as Medicare and Medicaid continue

efforts to find cost savings and shift settings of care. For example, a focus on rehabilitation to facilitate

returns to independent living may impact occupancy rates. At the same time, such changes could

increase reimbursement for more complex patients, and, as states recover from the most recent

recession, the majority may restore or even raise Medicaid reimbursement rather than cut it further.1

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• From 2014 ($7.5 million) to 2015 ($7.8 million),

average revenue at nursing homes (NHs)

with 50 to 100 beds rose by the largest

percentage (4.0%), by bed count.

• Nursing homes with 50 to 100 beds also reported

the largest increase in revenue from 2010 to

2015 (20.2%), followed by those with 101 to

150 beds (19.4%), and 151 to 200 beds (18.6%).

NHs With 50–100 Beds Post Fastest Revenue GrowthLONG-TERM TREND

NURSING HOME REVENUE, BY BED SIZE, 2010–2015

2010 2011 2012 2013 2014 2015$0

$7,500

$15,000

$22,500

$30,000

Nu

rsin

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om

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eve

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e (

000)

<50 Beds 50–100 Beds 101–150 Beds 151–200 Beds 201+ Beds

$4,623 $4,804 $4,848 $4,953 $5,250 $5,340

$6,461 $6,780 $6,768 $7,203 $7,468 $7,763$10,066 $10,580 $10,707 $11,488 $11,729 $12,023

$15,049 $15,656 $15,938$17,002 $17,413 $17,855

$25,273 $26,078$27,341 $27,989 $28,133 $28,611

AVERAGE NURSING HOME REVENUE AND NET INCOME, ARIZONA AND FLORIDA, 2014–2015

1 Medicaid and CHIP Payment and Access Commission. (2016). Report to Congress on Medicaid and CHIP. Retrieved from https://www.macpac.gov/wp-content/uploads/2016/06/June-2016-Report-to-Congress-on-Medicaid-and-CHIP.pdf

• Average nursing home revenue in Florida

grew 4.1% from 2014 ($14.7 million) to 2015

($15.3 million). However, net income, while

positive, shrank 9.6%, to $226,000 from $250,000.

• Meanwhile, revenue at Arizona nursing homes

rose 3.1% from 2014 ($11.7 million) to 2015

($12.0 million). Net income increased 2.7%, but

remained negative in both years.

Florida Nursing Home Average Revenue Exceeds National Benchmark

STATE SPOTLIGHT

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Key Takeaway

The first of nearly 76 million baby boomers in the U.S. hit retirement age in 2011, and, by 2030, about

20% of the country’s population will be 65 or older. The U.S. Department of Health and Human Services

estimates that roughly 70% (about 54 million people) of this generation will need some form of long-term

care.1 As of the first quarter of 2016, the occupancy rate in ALFs across the nation was already at

88.3%.2 Although the total numbers of ALFs, and beds in these facilities, are slowly increasing, it is unclear

if there will be enough of either to accommodate the growing elderly population of the country.

Corporately Owned ALF Bed Volume Rises From 2011 to 2015

• From 2011 to 2015, the total number of beds at

corporately owned ALFs grew each year, and

9.1% overall. At independent ALFs, however, the

number of beds shrank by 3.6% during this time.

• In 2011, ALF beds at corporately owned

facilities accounted for 38.3% of the total

available ALF beds nationwide. By 2015, this

percentage had climbed to 41.3% of the total.

Number of ALFs Continues to Grow SlowlyLONG-TERM TREND

• After a dip from 2010 to 2012, the number

of assisted living facilities (ALFs) in the U.S.

rose, to 15,836 in 2015 from 15,447 in 2012,

topping the previous high of 15,781 in 2010.

• From 2006 to 2015, nearly 2,000 (1,965)

ALFs were added across the nation.

However, almost all of this growth (97.2%)

occurred between 2006 and 2010.

DEMOGRAPHICS

2006 2007 2008 2009 2010 2011 2012 2013 2014 201512,000

13,000

14,000

15,000

16,000

Nu

mb

er o

f ALF

s

13,87114,157

14,955 15,070

15,781 15,72715,447 15,461

15,68415,836

2011 2012 2013 2014 20150

130

260

390

520

Tota

l Be

ds

(000

)

Corporately Owned Independent

299.0

480.7

302.9

479.7

308.8

468.6

312.8

482.7

326.2

463.6

NUMBER OF ASSISTED LIVING FACILITIES, 2006–2015

TOTAL NUMBER OF ASSISTED LIVING FACILITY BEDS, BY OWNERSHIP, 2011–2015

1 McGrath, D. (2015). “There aren’t enough nursing-home beds to meet demand.” Retrieved from http://www.cnbc.com/2015/12/07/there-arent-enough-nursing-home-beds-to-meet-demand.html.

2 National Investment Center for Senior Housing and Care (2016). “Seniors Housing Occupancy Slips Ten Basis Points in the First Quarter to 90.0%.” Retrieved from http://www.nic.org/news--press/seniors-housing-occupancy-skips-ten-basis-points-first-quarter-90-0.

46

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Key Takeaway

The percentage of senior living providers that did not have a relationship with a health care

system decreased to 15% from nearly 30% in 2009 in 2014, and many in the industry expect this

trend to continue.2 As ALFs maneuver to achieve the economies of scale needed to establish

these partnerships, it is likely that consolidation among providers will continue in the future.


Brookdale Senior Living Is Nearly Four Times Larger Than No. 2 ALF

• In 2015, Brookdale Senior Living, the top assisted

living chain by number of centers, had almost

four times the number of facilities (993) as Sunrise

Senior Living (238), the second largest ALF.

• Meanwhile, Senior Lifestyle Corporation,

Genesis HealthCare, and Bickford Senior

Living were the only ALFs in the top 15 in

2015 that climbed in ranking from 2014.

DEMOGRAPHICS

TOP FIVE ASSISTED LIVING CHAINS, BY NUMBER OF FACILITIES, 2014–20151

BrookdaleSenior Living

SunriseSenior Living

Enlivant Five StarQuality Care

Atria Senior Living

0

250

500

750

1,000

Nu

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s

893

993

240 238194 184

135 159 131 135

2014 2015

NATION’S 15 LARGEST ASSISTED LIVING CHAINS, 20151

NAME / HEADQUARTERS Current Rank Previous Rank # of ALFs # of States

Brookdale Senior Living / Brentwood, TN 1 1 993 46

Sunrise Senior Living / McLean, VA 2 2 238 30

Enlivant / Chicago, IL 3 3 184 20

Five Star Quality Care, Inc / Newton, MA 4 4 159 24

Atria Senior Living / Louisville, KY 5 5 135 28

Senior Lifestyle Corporation / Chicago, IL 6 8 111 23

Americare Systems, Inc. / Sikeston, MO 7 7 106 5

Bee Hive Homes Assisted Living / Boise, ID 8 6 104 13

Elmcroft Senior Living Communities / Louisville, KY 9 — 85 19

Capital Senior Living Corporation / Dallas, TX 10 10 85 21

HCR ManorCare / Toledo, OH 11 11 60 12

Ashley Manor / Meridian, ID 12 — 52 3

Genesis HealthCare / Kennett Square, PA 13 23 50 15

Bickford Senior Living / Olathe, KS 14 15 49 9

Benchmark Senior Living / Wellesley, MA 15 14 48 6

• Brookdale Senior Living (11.2%) , Quality

Care (17.8%), and Atria Senior Living (3.1%)

were the only ALFs among the top five

that expanded from 2014 to 2015.

• Enlivant contracted 5.2%, to 184 facilities in

2015 from 194 in 2014, and Sunrise shrank

a fractional 0.8%, to 238 facilities from 240.

The changes did not affect their rankings.

1 IMS Health updated its data methodology for 2014 and 2015 to account for evolving definitions of long-term care facilities. 2 Perkins Eastman. (2015). Senior Living 2015 Survey: An Industry Poised for Change. Retrieved from http://www.perkinseastman.com/dynamic/

document/week/asset/download/3424005/3424005.pdf

Three of Top Five Assisted Living Chains Add Facilities Between 2014 and 2015 LONG-TERM TREND

TOTAL NUMBER OF HOME CARE AGENCIES (HCAs), 2002–2015

NUMBER OF HCAs PER 1,000 PEOPLE AGED 65+, 2014–2015

California Florida TexasNew YorkIllinois Nation0.0

0.25

0.50

0.75

1.00

HC

As

pe

r 1,0

00

2014 2015

0.20 0.16

0.410.34 0.36 0.33

0.24 0.21

0.97

0.77

0.330.28


• From 2014 to 2015, in each of the five states

with the largest total HCA counts, as well as

nationally, the number of HCAs per 1,000

people aged 65 and older decreased.

• For instance, in Texas, which had more HCAs than

any other state and the highest ratio of HCAs per

1,000 retirement-aged individuals in 2014 and

2015, this ratio contracted to 0.77 from 0.97.


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11,819 11,903

12,284

13,313 13,333 13,309

13,06913,262 13,357

13,469

13,23113,010

13,255 13,314

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201511,000

11,750

12,500

13,250

14,000

Num

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Key Takeaway

Although the total number of HCAs in 2015 was essentially the same as it was in 2005, it

is possible that the count could decline steadily in the coming years—despite an aging

population. The market is highly fragmented, with more than half of HCAs generating less than

$3 million in revenue.1 Government reimbursement cuts through 2018 are likely to strain small

HCAs, preventing them from achieving the operational scale needed to compete with larger

organizations, leading to consolidation in the market.1

Home Care Agency Count Rises for Second Year LONG-TERM TREND

• The total number of home care agencies (HCAs)

nationally increased a fractional 0.4% from 2014

(13,255) to 2015 (13,314), marking the second

straight year the total HCA count has grown.

• The HCA count was virtually the same in 2015

as it was in 2005 (13,313), despite fluctuating

between these years. However, it was up 12.6%

from 2002, when there were 11,819 HCAs.

1 Harris Williams & Co. (2013). Home Health Market Overview. Retrieved from http://www.harriswilliams.com/sites/default/files/industry_reports/home_health_market_overview.pdf

Ratio of HCAs to Retirement-Aged Adults Declines in Top Five States and the Nation

STATE SPOTLIGHT

HOME CARE AGENCY INDUSTRY PROFILE, 2013–2015

# of Agencies % Agencies

TYPE OF AGENCY 2013 2014 2015 2013 2014 2015

Hospital Based 842 935 931 6.6% 7.1% 7.0%Nursing Home Based 145 143 142 1.1 1.1 1.1Rehab. Facility Based 4 4 4 0.0 0.0 0.0Official Govt. Agency 431 453 452 3.4 3.4 3.4Other 246 245 242 1.9 1.8 1.8Not Facility Based 11,104 11,475 11,543 86.9 86.6 86.7MSA SIZEMetropolitan 9,675 9,874 9,918 74.4% 74.5% 74.5%Nonmetropolitan 3,335 3,381 3,396 25.6 25.5 25.5AVG. VISITS/WEEK1–100 3,320 3,685 3,670 25.5% 27.8% 27.6%101–300 2,779 2,708 2,695 21.4 20.4 20.2301–500 1,180 1,069 1,067 9.1 8.1 8.0501+ 1,679 1,587 1,585 12.9 12.0 11.9Not Known1 4,052 4,206 4,297 31.1 31.7 32.3CERTIFICATIONMedicare-certified 9,231 10,184 9,516 71.0% 76.8% 71.5%Noncertified 3,779 3,071 3,798 29.0 23.2 28.5TOTAL 13,010 13,255 13,314 100.0% 100.0% 100.0%


1 “Not Known” includes home care agencies that did not report an average number of visits per week.2 Percentages indicate the overall share of patients with Medicare or Medicaid coverage in the responding home care agencies.3 Seegert, L. (2013). Demand for Home-Based Health Care Expected to Rise. Association of Health Care Journalists. Retrieved from

http://healthjournalism.org/blog/2013/11/demand-for-home-based-health-care-expected-to-rise/

Medicare-Certified HCAs Are More Likely to Provide Rehabilitation Therapies

• In 2015, Medicare-certified HCAs were more apt

than noncertified agencies to offer occupational

(68.2% versus 22.6%), physical (75.3% versus

24.1%), or speech therapy (63.9% versus 21.3%).

• Larger shares of noncertified HCAs offered

services such as personal care (63.0%) and

skilled nursing (82.3%) than did Medicare-

certified HCAs (45.8% and 77.1%, respectively).

Vast Majority of Home Care Agencies Are Not Facility Based

• In 2015, 11,543 home care agencies (HCAs)

were not based in facilities, a climb of 4.0%

from 2013 (11,104). Non-facility-based agencies

accounted for nearly 90% of all HCAs.

• Approximately half (47.8%) of HCAs across

the country averaged 300 or fewer visits per

week in 2015. Only 11.9% of HCAs nationally

had more than 500 patient visits per week.

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0%

25%

50%

75%

100%

Perc

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tag

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As

Medicare-certified Noncertified

SkilledNursing

PhysicalTherapy

OccupationalTherapy

SpeechTherapy

SocialServices

AssistedLiving

PersonalCare

NutritionalGuidance

IV InfusionTherapy

24.2%30.8%

74.0%

54.4%

35.1%31.7%

68.2%

22.6%

45.8%

63.0%75.3%

24.1%

77.1%82.3%

60.6%

20.4%

63.9%

21.3%

PERCENTAGE OF HOME CARE AGENCIES, WITH OR WITHOUT MEDICARE CERTIFICATION, BY SERVICE, 20152

Key Takeaway

According to the National Association for Home Care and Hospice, it costs Medicare nearly $2,000 per

day for a hospital stay and $559 per day for a nursing home stay, but just $44 per day for home health

care.3 With the senior population continuing to grow, and Medicare struggling to cut costs, it is possible

there may be a shift away from nursing home care to home health care for elderly adults.


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Several Home Care Agencies Debut on List of 15 Largest Providers

• Eight of the 15 largest home care chains

expanded from 2014 to 2015, most notably

HealthSouth Corporation (to 138 agencies from

five), which was not among the top 15 in 2014.

• Of the top 15 home care providers, seven

recorded fewer agencies in 2015 than in 2014.

Apria Healthcare contracted the most (11.1%; to

304 from 342), and also served one less state.

DEMOGRAPHICS

THE NATION’S 15 LARGEST HOME CARE CHAINS, 2014–20151

Rank Number of Agencies Number of StatesNAME/HEADQUARTERS Current Previous 2014 2015 2014 2015

Lincare Holdings Inc. / Clearwater, FL 1 1 649 599 47 47

Kindred Healthcare, Inc. / Louisville, KY 2 16 97 470 6 41

Amedisys / Baton Rouge, LA 3 3 397 365 40 37

Apria Healthcare / Lake Forest, CA 4 4 342 304 47 46

BAYADA Home Health Care / Moorestown, NJ 5 6 245 248 22 22

DaVita / Denver, CO 6 9 173 215 35 37

Maxim Healthcare Services / Columbia, MD 7 7 212 203 39 39

ResCare, Inc. / Louisville, KY 8 8 187 172 31 31

LHC Group, Inc. 9 11 153 163 16 23

Almost Family, Inc. / Louisville, KY 10 10 157 148 13 12

HealthSouth Corporation / Birmingham, AL 11 205 5 138 3 16

HCR ManorCare / Toledo, OH 12 13 118 114 25 24

Option Care Enterprises, Inc. / Bannockburn, IL 13 — — 103 — 40

CVS Health / Woonsocket, RI 14 17 90 100 37 38

Medical Services of America, Inc. / Lexington, SC 15 15 100 94 11 11

TOTAL/AVERAGE 2,925 3,436 27 31

Key Takeaway

Between 2011 and 2014, home health care and hospice acquisitions increased 80%, and Kindred

Healthcare, Inc.’s, 2014 $1.8 billion deal for Gentiva Health Services (at the time, the second largest

home care agency in the nation) was, perhaps, the most significant of them.2 Merger and acquisition

activity volume decreased by 33% in 2015, possibly indicating greater stability in the market to come.


TOP TWO HOME CARE CHAINS, BY NUMBER OF HCAs AND STATES SERVED, 2014–20151

• From 2014 (97 agencies ) to 2015 (470), Kindred

Healthcare, Inc., expanded 384.5%, becoming

the second-largest home health care agency in

the nation behind Lincare Holdings Inc. (599).

• Although it served the same number of states in

2015 (47) as in 2014, Lincare Holdings’ number

of agencies fell 7.7%, to 599 from 649; Kindred

served 41 states in 2015, up from six in 2014.

Agency Count at Kindred Healthcare, Inc., Climbs Nearly 385% from 2014

1 IMS Health updated its data methodology for 2014 and 2015 to account for evolving definitions of long-term care facilities.2 Nelson, M. (2016). Home Health M&A Trends: Deal Volume Rose, Dollar Value fell. Retrieved from http://homehealthcarenews.com/2016/08/home-

health-ma-trends-deal-volume-rose-dollar-value-fell/

0 200 400 600 800Number of Home Care Agencies

2014 2015

KindredHealthcare, Inc.

LincareHoldings Inc.

649

599

97

470

0 12 24 36 48Number of States Served

2014 2015

KindredHealthcare, Inc.

LincareHoldings Inc.

47

47

6

41



Non-Profit HCAs Employ a Higher Number of Nurses per Agency

• Not-for-profit HCAs staffed 20.4 nurses per

agency in 2015, the highest number, by

ownership type, that year. Meanwhile, their

for-profit counterparts staffed 15.1 nurses.

• On average, government-owned HCAs staffed

the fewest nurses, by ownership type, in 2015, at

10.4. By comparison, the overall average number

of nurses per agency was 51.9% higher, at 15.8.

Skilled Nursing Remains Most Common HCA Service Provided

• In 2015, 78.3% of home care agencies

(HCAs) provided skilled nursing care, the

most common service offered. Assisted living

services were provided by 69.3% of HCAs.

• The portions of HCAs that provided physical,

occupational, or speech therapy all grew slightly

from 2014 to 2015. The percentage providing

IV/infusion therapy dipped to 25.8% in 2015.

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PhysicalTherapy

OccupationalTherapy

SpeechTherapy

SocialServices

62.8% 63.1%

57.1% 57.3%53.5% 53.8%

50.8% 51.0%

69.3%

AssistedLiving

69.8%

0%

20%

40%

60%

80%

Pere

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2014 2015

SkilledNursing

PersonalCare

NutritionalGuidance

IV/InfusionTherapy

LaboratoryServices

78.2% 78.3%

50.2% 49.9%

34.5% 34.3%

25.9% 25.8% 24.2% 24.1%

PERCENTAGE OF HCAs PROVIDING VARIOUS SERVICES

Key Takeaway

Due to the predicted spike in demand from increased numbers of baby boomers requiring their

services , coupled with a shortage in individuals able to provide them, HCAs will likely adjust both their

services and their staffing in the years to come. It stands to reason that the share of HCAs offering

skilled nursing will grow, as more seniors may choose home care over assisted living or nursing home

settings. Such a shift would require additional nursing staff as well, if they are available.

Government Not-for-Profit For-Profit Total0

6

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18

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10.4

20.4

15.115.8

NUMBER OF NURSES PER AGENCY, BY OWNERSHIP TYPE, 2015

NUMBER OF PATIENT VISITS PER AGENCY PER WEEK, 2013–2015TAX STATUS 2013 2014 2015Government 315.5 285.0 284.3

For-Profit 310.5 290.3 291.4

Not-for-Profit 438.3 426.2 426.2

TYPE OF FACILITYHospital Based 360.4 338.8 338.6

Nursing Home Based 383.9 362.9 364.1

Rehabilitation Facility Based 536.3 536.3 536.3

Official Government Agency 332.7 305.9 305.6

Other 240.7 245.4 247.1

Not Facility Based 344.1 324.7 325.1

CERTIFICATIONMedicare-certified 336.9 319.3 320.9

Noncertified 366.4 346.3 335.4

OVERALL AVERAGE 344.7 324.4 324.7



Key Takeaway

HCAs can play an important role in reducing costs and improving outcomes. However, one

emerging reimbursement model—the Centers for Medicare & Medicaid Services’ Independence

at Home Demonstration—focuses on increasing the involvement of primary care providers in home

care. It is unclear what effect this will have on HCAs, which continue to face financial pressure,

including a 1.0% reduction in Medicare reimbursement in 2017, as well as increased labor costs.1

Home Care Agency Weekly Visit Count Stays Flat

• Following a decline from 2013 (344.7) to

2014 (324.4), the average number of home

care agency (HCA) patient visits per week

increased only fractionally, to 324.7 in 2015.

• However, such visits were down 5.8% overall

from 2013 to 2015. By tax status, the decrease

was largest for government agencies (9.9%)

and lowest for non-profit (2.8%) agencies.

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NUMBER OF PATIENT VISITS PER AGENCY PER WEEK, BY MEDICARE CERTIFICATION STATUS, 2010–2015

2010 2011 2012 2013 2014 2015310

325

340

355

370

Patie

nt V

isits

pe

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Medicare-certified Noncertified

339.9 341.0

339.0 336.9

319.3

328.1331.5

341.1

366.4

346.3

320.9

335.4

• From 2014 (346.3) to 2015 (335.4), the average

number of weekly visits by non-Medicare-certified

HCAs patient visits dropped 3.1%. This followed

a 5.5% decrease from 2013 (366.4) to 2014.

• Meanwhile, the weekly visit count at

Medicare-certified HCAs increased to

320.9 in 2015 from 319.3 in 2014. Since 2011

(341.0), such visits have declined 5.9%.

Number of Weekly Visits at Noncertified Home Care Agencies Falls Again LONG-TERM TREND

1 Dickson, V. (2016). CMS Proposes $180 Million Pay Cut for Home Health. Modern Healthcare. Retrieved from http://www.modernhealthcare.com/article/20160627/NEWS/160629911uploads/2013/02/Unaudited-Financial-Highlights-ResCare-3Q-14-Results.pdf


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Hospital-Based SNF Count Continues to Decline in 2014 • Following decreases of 6.8% from 2011 (821) to

2012 (765), and 4.2% from 2012 to 2013 (733), the

total number of hospital-based skilled nursing

facilities (SNFs) fell 7.1% from 2013 to 2014 (681).

• Although only 14.4% of government

hospitals housed SNFs in 2014, more than

half (54.2%) of all hospital-based SNF

beds were in government facilities.


DEMOGRAPHICS

0

250

500

750

1,000

Nu

mb

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f Ho

spita

ls

292 290 281 273 270

567540

492 460399

106 100 95 88 96

2008 2009 2010 2011 2012 2013 2014

GovernmentFor-Profit TotalNot-for-Profit

292 290 281 273 270 263

567 540492

460399 379 352

248

106 100 95 88 96 91 81

965930

868821

765733

681

NUMBER OF HOSPITALS WITH SKILLED NURSING FACILITIES, BY OWNERSHIP, 2008–2014

HOSPITAL-BASED SKILLED NURSING FACILITIES (SNFs), 2013–2014# of Hospital-Based

Skilled Nursing Facilities% of Hospitals with

Skilled Nursing Facilities% of Hospital-Based

Skilled Nursing Facility Beds

TAX STATUS 2013 2014 2013 2014 2013 2014

Government 263 248 15.1% 14.4% 54.8% 54.2%Not-for-Profit 379 352 11.2 10.4 39.5 40.6For-Profit 91 81 4.5 4.0 5.7 5.2

SIZE (# of Licensed Beds)<50 Beds 20 22 0.7% 0.8% 0.6% 0.9%50–119 Beds 155 143 8.8 8.1 9.1 9.2120–249 Beds 266 245 18.9 17.5 26.3 27.3250+ Beds 292 271 23.5 22.2 63.9 62.6

TOTAL/AVERAGE 733 681 10.3% 9.5% 100.0% 100.0%

• Between 2008 (567) and 2014 (352), the

number of SNFs at not-for-profit hospitals

declined by 37.9%, versus 23.6% at for-profit

hospitals and 15.1% at government facilities.

• Furthermore, not-for-profit hospital SNFs

accounted for 215 of the 284 of such

facilities lost between 2008 and 2014, or

75.7% of the decrease during this time.

Not-for-Profit Hospitals Drive the Drop in Number of Hospital-Based SNFsLONG-TERM TREND

Key Takeaway

Hospitals report that SNF closures are due to the high expense of operation coupled with inadequate

Medicare and Medicaid reimbursement.1 However, based on beneficiaries’ access to and quality of

care, provider access to capital, and payments in relation to providers’ costs to treat beneficiaries,

MedPAC determined that Medicare payments were “more than adequate.”2 Nevertheless, Medicare

payments to SNFs will increase by $430 million (1.2%) in FY 2016, and by an additional $800 million (2.1%)

in FY 2017. The effect of these payment increases on SNF closures remains to be seen.

1 Liu, K., and Jones, E. (2007). Closures of Hospital-Based SNF Units: Insights from Interviews with Administrators, Discharge Planners, and Referring Physicians. Conducted by the Urban Institutes for the Medicare Payment Advisory Commission. Retrieved from http://www.medpac.gov/documents/contractor-reports/Mar07_Hospitalbased_SNFs_CONTRACTOR.pdf

2 MedPAC. (2016). Report to the Congress: Medicare Payment Policy. Retrieved from http://www.medpac.gov/documents/reports/march-2016-report-to-the-congress-medicare-payment-policy.pdf

NOTE: On pages 52–54, all data pertain to hospital-based skilled nursing facilities (SNFs).

100

145

190

235

280

Ave

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of S

tay

(ALO

S)

20102009 2011 2012 2013 2014

Not in an IHN In an IHN Overall Total

179.8

205.4 210.3

227.9

263.3

245.7

118.5128.8 129.4 130.2

124.4

108.8

145.0

161.9 163.3171.2

179.9

160.4

SKILLED NURSING FACILITY UNIT ALOS (DAYS), BY SYSTEM AFFILIATION, 2009–2014

SKILLED NURSING FACILITY UTILIZATION, 2013–2014SNF Unit

AdmissionsSNF Unit

Patient-DaysSNF Unit

Occupancy SNF Unit

ALOS (Days)

TAX STATUS 2013 2014 2013 2014 2013 2014 2013 2014

Government 299.1 295.3 29,656.7 28,154.5 74.5% 71.2% 256.2 208.5

Not-for-Profit 395.2 392.2 17,993.5 18,298.9 73.2 71.7 127.9 123.1

For-Profit 288.3 294.1 10,555.5 10,656.2 73.8 73.8 151.2 160.3

BED SIZE<50 Beds 140.2 129.5 5,009.8 9,055.3 66.1% 64.9% 270.1 280.1

50–119 Beds 239.7 236.5 9,866.7 10,657.7 74.9 72.9 177.0 162.3

120–249 Beds 311.8 312.9 17,482.4 17,712.4 74.7 73.5 155.4 157.1

250+ Beds 447.9 444.9 32,596.7 30,788.7 72.8 70.0 200.5 155.0

OVERALL AVG. 346.6 343.9 21,527.8 21,191.9 73.8% 71.8% 179.9 160.4


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SNF Unit Average Length of Stay Declines Sharply Overall• Overall skilled nursing facility (SNF) average length

of stay (ALOS) fell 10.8% from 2013 (179.9 days)

to 2014 (160.4). SNF unit admissions, patient-days,

and occupancy also dropped during this period.

• The decrease in SNF unit ALOS was steepest

at government facilities (18.6%), while ALOS at

not-for-profit facilities dipped a more modest

3.8%. At for-profit SNFs, ALOS increased 6.0%.


UTIL IZATION

• From 2013 to 2014, ALOS at SNFs affiliated with

an integrated health network (IHN) fell 12.5%,

to 108.8 days from 124.4. ALOS at IHN-affiliated

SNFs dropped 16.4% from 2012.

• ALOS at non-IHN-affiliated SNFs decreased 6.7%

from 2013 to 2014. This marked the first reduction

since in the years shown, and ALOS at these

facilities was still 36.7% higher in 2014 than in 2009.

Key Takeaway

Decreases in SNF utilization may be attributed to a number of factors, including efforts to improve

chronic-disease management prior to and during inpatient episodes. However, proposed Medicare

and Medicaid reimbursement changes that place greater emphasis on patient characteristics

(age, diagnosis, functional status, and more) than on services rendered are expected to raise

payments to SNFs with medically complex cases.1 It is possible that these new payment models,

based on episode of care rather than length of stay, will further reduce ALOS at SNFs.

1 Medicare Payment Advisory Commission. (2016). Report to the Congress: Medicare and the Health Care Delivery System. Retrieved from http://medpac.gov/documents/reports/june-2016-report-to-the-congress-medicare-and-the-health-care-delivery-system.pdf


LONG-TERM TREND

IHN-Affiliated SNFs Record Largest Decrease in Average Length of Stay

SKILLED NURSING FACILITY UTILIZATION, BY REGIONSNF Unit

AdmissionsSNF Unit

Patient-DaysSNF Unit

ALOS (Days)2013 2014 2013 2014 2013 2014

Pacific 325.4 307.8 20,616.4 20,481.4 286.5 254.8

Mountain 296.1 296.6 14,445.6 14,665.8 75.0 71.9

West North Central 311.5 272.0 18,513.3 17,788.1 124.9 146.4

East North Central 389.5 400.3 15,937.1 17,460.1 131.7 103.5

South Central 347.4 357.8 17,348.0 15,291.9 130.6 101.8

New England 380.8 384.4 17,283.7 16,799.7 167.8 171.0

Mid-Atlantic 392.8 408.6 37,189.7 37,537.2 186.7 161.7

South Atlantic 311.0 312.2 20,534.4 20,270.2 182.4 178.5

OVERALL AVG. 346.6 343.9 21,527.8 21,191.9 179.9 160.4


Data source: IMS Health © 2016LON

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Admissions, Patient-Days Decline at Skilled Nursing Facilities• From 2013 to 2014, the number of admissions

per hospital-based skilled nursing facility (SNF)

unit decreased overall, to 343.9 from 346.6,

despite increasing in six of eight profiled regions.

• Average SNF unit patient-days fell 1.6%

nationally, to 21,191.9 from 21,527.8, during this

period. Yet patient-days rose in the Mountain,

East North Central, and Mid-Atlantic regions.

Key Takeaway

Traditional Medicare requires a qualifying three-day inpatient hospital admission prior to patients

being transferred to a skilled nursing facility.2 As a result, decreases in inpatient admission counts can

be expected to reduce SNF admissions. As the drive to decrease inpatient admissions continues, it

seems likely that SNF admissions may continue to fall. Meanwhile, an enhanced focus on population

health and chronic-disease management may also help to drive down SNF patient-days.

UT IL IZATION

17,000

18,250

19,500

20,750

22,000

Nu

mb

er o

f Patie

nt-D

ays

342

346

350

354

358

Num

be

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dm

issi

ons

2009 2010 2011 2012 2013 2014

SNF Unit Admissions SNF Unit Patient-Days

352.2

354.5

351.4

344.6

346.6

343.9

18,728.2

19,448.3

20,124.1

21,002.5

21,527.821,191.9

• After climbing 24.8% from 2007 (17,251.4)1 to 2013

(21,527.8), SNF unit patient-days decreased 1.6%

from 2013 to 2014 (21,191.9), but still remained

above the 2012 benchmark (21,002.5).

• Meanwhile, SNF unit admissions decreased

modestly from 2013 (346.6) to 2014 (343.9), and

were down 2.4% from 2009 (352.2), despite rising

from 2009 to 2010 and again from 2012 to 2013.

SNF Unit Patient-Days Decrease for First Time Since 2007LONG-TERM TREND

SKILLED NURSING FACILITY UTILIZATION, 2009–2014

1 See the Public Payer Digest for 2014.2 MedPAC. (2016). Report to the Congress: Medicare and the Health Care Delivery System. Retrieved from: http://medpac.gov/documents/reports/

june-2016-report-to-the-congress-medicare-and-the-health-care-delivery-system.pdf



LTCPP Count Grows for Fifth Consecutive YearLONG-TERM TREND

Retail Pharmacy Shares of LTCPP Prescriptions Dispensed Increase in 2015

• The percentages of LTCPP prescriptions

dispensed declined for all customer types except

retail and other pharmacies from 2014 to 2015.

The retail share grew to 25.6% from 22.5%.

• From 2013 (10.1%), the corporately affiliated retail

pharmacy share of the LTCPP customer mix rose

4.2 percentage points, while the corresponding

nursing home portion fell 3.2 percentage points.2


• From 2014 (1,329) to 2015 (1,403), the number

of long-term care pharmacy providers

(LTCPPs) increased 5.6%, marking the fifth

straight year the total count has risen.

• After contracting 1.1% from 2009 (1,200)

to 2010 (1,187), the number of LTCPPs

nationally expanded 18.2%. From 2005

(1,079) to 2015, the total climbed 30.0%.

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20151,020

1,120

1,220

1,320

1,420

Nu

mb

er o

f LTC

PPs

1,0791,105

1,125

1,245

1,2001,187

1,211

1,246

1,282

1,329

1,403

NUMBER OF LONG-TERM CARE PHARMACY PROVIDERS, 2005–2015

LONG-TERM CARE PHARMACY PROVIDER CUSTOMER MIX, 2014–2015

Percentage of Prescriptions Dispensed

Nursing Home

Residential Care Retail Mental Health

Facility Hospital Other1

SIZE (# of FTE Pharmacists)

2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015

1 FTE Pharmacist 42.5% 39.6% 8.6% 7.9% 36.5% 41.2% 1.6% 1.4% 2.1% 1.9% 8.8% 8.2%2 FTE Pharmacists 38.0 36.1 10.8 9.8 36.1 38.7 5.1 5.2 1.0 1.4 9.1 8.93–4 FTE Pharmacists 54.8 50.1 8.9 9.3 23.1 28.1 2.7 2.5 3.8 3.3 6.7 6.85+ FTE Pharmacists 67.4 66.9 10.1 9.7 7.4 8.4 1.9 2.0 6.1 5.7 7.2 7.2Size Unknown 57.4 57.3 12.1 11.6 15.0 15.7 4.5 4.2 2.4 2.2 8.7 9.0

OWNERSHIPCorporate 66.4% 63.9% 10.3% 9.3% 11.2% 14.3% 3.3% 3.3% 2.7% 2.5% 6.4% 6.7%Independent 45.1 42.2 12.1 10.1 28.9 32.6 3.2 3.2 3.2 3.1 9.1 8.8

OVERALL AVERAGE 52.8% 50.4% 10.3% 9.8% 22.5% 25.6% 3.3% 3.2% 3.1% 2.8% 8.1% 8.2%

Key Takeaway

Two LTCPPs account for nearly 50% of the total U.S. market,3 making for significant competition for

the remaining 50% among the 1,400 smaller providers. In 2012, the Federal Trade Commission (FTC)

objected to an attempt by Omnicare, the largest LTCPP, to acquire PharMerica, the second largest,

prompting Omnicare to drop its bid.3,4 The subsequent acquisition in 2015 of Omnicare by CVS could

be the start of more LTCPPs–retail chain integration, as they compete for their share of the market.

1 “Other” includes retirement communities, hospices, home health agencies, correctional centers, substance abuse centers, and all others.2 See the Public Payer Digest for 2015.3 Avalere Health LLC. (2015). Long-Term Care Pharmacy: The Evolving Marketplace and Emerging Policy Issues. Retrieved from http://www.mhainc.com/

uploadedFiles/Content/Resources/Avalere_LTC%20Pharmacy%20the%20Evolving%20Marketplace%20and%20Emerging%20Policy%20Issues....pdf4 FTC. (2012). In the matter of Omnicare. Retrieved from https://www.ftc.gov/enforcement/cases-proceedings/111-0239/omnicare-inc-corporation-matter

NOTE: On pages 55–57, long-term care pharmacy provider (LTCPP) data pertain only to those pharmacies that have an implied contract/agreement to perform pharmaceutical consulting and/or dispensing services to long-term care facility patients on an ongoing basis. They must have at least one licensed pharmacist employed at the location and generate at least 50% of their revenue from long-term care facilities.

Cardio-vascular

Hyper-tension

Psychiatric Diabetes Pain Gastro-intestinal

Anti-arthritics

InfectiousDisease

Alzheimer’sDisease

BehavioralConditions

0%

4%

8%

12%

16%

Perc

ent

ag

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f LTC

PP R

xs

13.2%12.9% —12.9%—

10.7%10.4%

—8.7%—

7.3% 7.4% 7.6% 7.4% 7.1% 7.3%—6.4%— 6.2% 5.9%

3.4% 3.7%

2014 2015

MOST COMMON PRESCRIPTIONS DISPENSED BY LONG-TERM CARE PHARMACY PROVIDERS, 2014–2015

NUMBER OF NURSING HOME PRESCRIPTIONS PER LONG-TERM CARE PHARMACY PROVIDER PER MONTH, 2013–2015

SIZE (# of FTE Pharmacists) 2013 2014 2015

1 FTE Pharmacist 2,753.1 2,732.5 2,770.5

2 FTE Pharmacists 4,170.1 4,142.5 4,090.7

3–4 FTE Pharmacists 6,757.3 6,706.8 6,798.5

5+ FTE Pharmacists 23,654.5 23,482.9 23,188.0

Size Unknown 17,585.9 17,585.9 17,505.9

OWNERSHIPCorporate 21,305.9 21,219.5 19,885.3

Independent 7,381.7 7,318.8 7,352.5

OVERALL AVERAGE 12,830.3 12,736.2 12,569.4



Monthly Prescriptions Continue to Decrease for LTCPPs

• The number of nursing home prescriptions

dispensed per long-term care pharmacy provider

(LTCPP) per month dipped from 2014 (12,736.2) to

2015 (12,569.4), the second consecutive decline.

• Corporate-owned LTCPPs dispensed 6.7% fewer

monthly nursing home prescriptions in 2015

(19,885.3) than in 2013 (21,305.9), but still far

more than their independent counterparts.

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Key Takeaway

The declining number of nursing home prescriptions per LTCPP since 2013 is likely a result of the

decreasing percentage of nursing homes as part of the LTCPP customer mix, which fell to 50.4%

in 2015 from 54.0% in 2013. Meanwhile, the retail pharmacy share climbed to 25.6% from 20.5%.1

LTCPPs are diversifying their market to reflect the changing long-term care landscape.

Cardiovascular and Hypertension Drugs Make Up Largest Percentages of LTCPP Rxs

• Cardiovascular medications accounted for

12.9% of LTCPP prescriptions to nursing homes

in 2015, as did hypertension medications,

the highest shares, by drug class, in 2015.

• Even as the psychiatric share of LTCPP

prescriptions contracted from 2014 (10.7%)

to 2015 (10.4%), the portion of drugs treating

behavioral conditions inched up.


AVERAGE PRESCRIPTION COSTS FOR LONG-TERM CARE PATIENTS, BY LTCPP OWNERSHIP, 2006–2015

$48

$60

$72

$84

$96

Ave

rag

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ost

$60.99 $61.62

$62.39

$62.84 $61.93 $61.72 $63.60 $62.24 $63.12

$50.06$52.21

$62.56

$70.92$72.91 $74.18 $74.80 $74.22

$89.07

$82.60

$92.53

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Independent Corporate

LONG-TERM CARE PHARMACY PROVIDER FINANCIALS, 2014–2015

Average Prescription Costs for Long-Term Care Patients

% of Total LTCPP Drug Sales to Long-Term Care Facilities

% of Total LTCPP Drug Revenue from Long-Term

Care FacilitiesOWNERSHIP 2014 2015 2014 2015 2014 2015

Corporate $89.07 $92.53 89.7% 87.0% 89.5% 87.8%

Independent 63.12 82.60 71.9 68.6 71.7 67.7

REGIONPacific $74.14 $80.57 85.4% 85.6% 84.9% 84.9%

Mountain 86.20 83.27 84.6 83.4 78.6 75.2

West North Central 101.33 145.05 57.3 53.9 60.1 56.2

East North Central 80.52 77.73 80.8 77.4 79.5 76.4

West South Central 43.06 44.38 78.2 74.8 77.6 74.3

East South Central 51.12 107.42 90.9 87.0 89.2 84.9

New England 69.73 67.56 79.0 73.8 80.2 75.4

Mid-Atlantic 73.13 72.68 85.3 83.7 84.3 82.9

South Atlantic 53.57 52.46 85.5 84.3 85.8 85.8

OVERALL AVERAGE $72.75 $86.46 79.3% 76.4% 79.1% 76.3%



Rx Costs Increase More Rapidly for Independent LTCPPs

• From 2014 ($63.12) to 2015 ($82.60), the

average cost per prescription dispensed

by independent long-term care pharmacy

providers (LTCPPs) grew 30.9%.

• Meanwhile, such costs rose just 3.9% for

corporate-owned LTCPPs, to $92.53 from $89.07.

Prescription costs for long-term care patients,

regardless of LTCPP ownership, climbed 18.8%.

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Key Takeaway

Relatively dramatic jumps in average prescription costs for long-term care patients may be reflective

of several factors, including increases in generic drug pricing and growth in the use of specialty

drugs, like those used to treat hepatitis C. Indeed, according to one industry study, specialty

prescription volume for hepatitis C patients in long-term care rose 289% from 2013 to 2014.1 Whether

demand for such drugs has plateaued will likely be a factor in future LTCPP spending trends.

F INANCIALS

• The difference in average prescription costs

between corporate and independent LTCPPs

was 41.1% in 2014, but shrank to 12.0% in 2015

as such costs at independent LTCPPs jumped.

• Nevertheless, the average per-patient

prescription cost for corporate LTCPPs ($92.53)

was nearly $10 higher than that of their

independent counterparts ($82.60) in 2015.

Gap Between Independent, Corporate LTCPP Average Rx Costs NarrowsLONG-TERM TREND

1 Binaso, K., et. al. (2015). 2015 Specialty Trends in Senior Care. Specialty Pharmacy Times. Retrieved from http://www.specialtypharmacytimes.com/publications/specialtypharmacytimes/2015/august-2015/2015-specialty-trend-in-senior-care


Medicare Looks to Next Gen ACO Model to Improve SavingsThe Centers for Medicare and Medicaid Services

(CMS) estimted that the implementation of

accountable care organizations (ACOs) would

lead to a savings of approximately $470 million

from 2012 to 2015.1 At the end of 2014, CMS

reported that its two sponsored ACO programs, the

Pioneer ACO Program and the Medicare Shared

Savings Program (MSSP), had generated more

than $411 million in savings.2 However, after paying

bonuses, these programs netted a loss of $2.6 million

to the Medicare trust fund.3 Morever, only about

half (15 of 20 Pioneer ACOs and 181 of 333 MSSP

participants) had reduced costs when compared

with their established financial baselines in 2014, and

a significant number of ACOs had increased costs.2

According to health system executives, three

challenges hinder the MSSP ACO model in particular:

(1) sharing a maximum of 50% of generated savings

provides insufficient funding for changing practice

behavior; (2) physicians do not know which patients

they are fiscally responsible for until the end of the

year, hampering care management; and (3) there

is no incentive for patients to receive care within a

particular ACO network, reducing providers’ ability to

coordinate care—one of the main goals of ACOs.4

As a response to these concerns, CMS unveiled the

Next Generation (Next Gen) ACO model, which will

start in 2017. In the Next Gen model, CMS will allow

ACOs to elect to share up to 100% of the savings

that they generate, the ACO population will be

predefined, and physicians will have autonomy

over how patients are managed. Furthermore,

CMS promises timely delivery of data sets necessary

to improve quality measurements, and spending

benchmarks will be adjusted based on the risk

of the population served.4 With these changes

implemented, Next Gen ACOs may be poised to

deliver the savings that CMS originally envisioned.

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1 CMS. (2011). Final Rule on Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations. Federal Register. Retrieved from https://www.federalregister.gov/articles/2011/11/02/2011-27461/medicare-program-medicare-shared-savings-program-accountable-care-organizations

2 McClellan, M., Kocot, S. L., and White, R. (2015). Medicare ACOs Continue to Show Care Improvements—and More Savings Are Possible. Health Affairs. Retrieved from http://healthaffairs.org/blog/2015/11/04/medicare-acos-continue-to-show-care-improvements-and-more-savings-are-possible/

3 Kaiser Family Foundation (2015). Are Medicare ACOs Working? Experts Disagree. Kaiser Health News. Retrieved from http://khn.org/news/are-medicare-acos-working-experts-disagree/

4 Dawe, C., Lewine, N., and Miesen, M. (2016). Today’s Most Attractive National ACO Model Is Offered By . . . CMS. Health Affairs. Retrieved from http://healthaffairs.org/blog/2016/04/15/todays-most-attractive-national-aco-model-is-offered-bycms/

5 Lynne, B., et al. (2016). Breaking Down the MACRA Proposed Rule. Health Affairs. Retrieved from http://healthaffairs.org/blog/2016/4/29/breaking-down-the-macra-proposed-rule

6 Terhune, C. (2014). Study: Medical Costs Up to 20% Higher With Hospital-Owned Physician Groups. Los Angeles Times. Retrieved from http://www.latimes.com/business/healthcare/la-fi-hospital-physician-costs-20141021-story.html

Physicians Must Adapt as MACRA Ties Payments to QualityTo date, the impact of value- and outcomes-

based reimbursement has been felt largely

by hospitals and integrated care-delivery

systems. However, the Medicare Access and

CHIP Reauthorization Act (MACRA) of 2015

brings performance-based Medicare payment

models to physicians and other clinicians.5

For example, one track of MACRA’s Quality

Payment Program is the Merit-Based Incentive

Payment System (MIPS). The first MIPS performance

period begins in 2017, with payment adjustment

beginning in 2019. MIPS will consolidate three

existing Medicare programs: the Physician

Quality Reporting System, the Value-Based

Modifier Program, and the Meaningful Use

of Electronic Health Records (EHRs). CMS will

also continue to evaluate reimbursement

adjustments based on patient socioeconomic

status as it has done with ACOs.5

Performance-based payment will have significant

implications for physicians in terms of practice

governance, data sharing, and financial analysis.

As a result, physicians may choose to increase

their affiliations with health systems (which

have greater capital assets and performance-

management experience) and find added

impetus to form clinically integrated networks.

Such changes in the structural relationships of

providers presume improvements in outcomes and

health care cost containment. However, there

is some evidence that physician affiliation with

health care systems may actually raise costs.6 And

even though MACRA was intended, in large part,

to eliminate dissatisfaction with the Sustainable

Growth Rate, the program may need modification

to avoid negatively impacting physician

satisfaction, or patient outcomes, as compliance

diverts resources and time away from patients.


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Cost Growth Could Create Turbulence in Long-Term Care MarketBased simply on the law of supply and demand,

it seems assured that the costs for long-term care

services will continue to grow. The rapid rise in the

number of baby boomers who will need these

services, coupled with the expected shortages of

individuals to provide them, could create a perfect

storm of sizable price hikes for services already too

expensive for many individuals.3

With necessary services priced out of reach, many

seniors in need of long-term care support are

expected to age at home, relying increasingly on

family members and volunteers for assistance with

daily living activities. Yet even this option will have

its limits, as the ratio of potential caregivers (people

in the 45–65 age range, the adult children of aging

seniors) to individuals aged 80 and over who will

likely require services is declining fast. In 2010, there

were roughly seven such caregivers to every one

individual aged 80 or over; by 2050, that number is

expected to be just three to one.4

Providers and payers are already preparing for the

coming blow of heightened demand and reduced

supply for long-term care services. Some providers

are investing in remote-care-monitoring technology

that will hopefully maximize time for their skilled

nursing personnel and place more caregiving tasks

into the hands of individuals with less training. This

could, in turn, help mitigate cost growth. Medicare,

for its part, is already monitoring hospital readmissions

from long-term care facilities, as such inefficiencies

may be far more financially damaging in the years

to come. These steps are among the many being

taken to prepare the long-term care community for

what will be a challenging era.

1 Georgetown University Health Policy Institute. (2016). Beyond the Reduction in Uncompensated Care: Medicaid Expansion Is Having a Positive Impact On Safety Net Hospitals and Clinics. http://ccf.georgetown.edu/wp-content/uploads/2016/05/Medicaid_hospitals-clinics-June-2016.pdf

2 Cross-Call, J. (2016). Medicaid Expansion Producing State Savings and Connecting Vulnerable Groups to Care. Center on Budget and Policy Priorities.3 Kwak, J., and Polivka, L. (2014). The Future of Long-Term Care and the Aging Network. Retrieved from http://www.asaging.org/blog/future-long-

term-care-and-aging-network4 Redfoot, D., et al. (2013). The Aging of the Baby Boom and the Growing Care Gap: a Look at Future Declines in the Availability of Family Caregivers.

AARP. Retrieved from http://www.aarp.org/home-family/caregiving/info-08-2013/the-aging-of-the-baby-boom-and-the-growing-care-gap-AARP-ppi-ltc.html

Medicaid Expansion: Early Results Attract Late AdoptersIn 2014, 24 states opted not to expand

Medicaid under the Affordable Care Act.

Since then, however, several have reversed

their decisions. As of July 2016, 31 states

and the District of Columbia had extended

Medicaid coverage to individuals or families

earning 138% of the poverty level. Many

states have obtained waivers from the federal

government to experiment with new program

characteristics, such as requiring recipients

to contribute to health savings accounts or

physicians to meet quality benchmarks.

The tipping point for the late adopters seems to

have come after a number of studies detailed

the fiscal and care-delivery impacts of Medicaid

expansion in some states. For instance, a

Georgetown University Health Policy Institute

study found that expansion states reported

notable reductions in uncompensated care—

especially in safety net hospitals—as well as

decreases in the numbers of uninsured patients.

The study further indicated that the resulting

improvements in the bottom line allowed

some systems and clinics to hire more staff,

open new facilities, purchase new equipment,

or launch new care coordination initiatives.1

State budgets also reflect savings, ranging from

an estimated $677 million over the next five

years in Louisiana to a combined $708 million

in New Jersey in fiscal years 2016 and 2017.2

However, challenges loom. After 2016, states

will assume up to 10% of the expansion costs

once covered by the federal government. Then

there are the effects of potential economic

downturns, when state tax revenues wane

just as Medicaid rolls grow, perhaps leading

to greater strain on expansion states. This, in

conjunction with the fact that Medicaid is also

a significant source of funding for long-term

care—a cost that is likely to grow with the

aging population —suggests that the success

of Medicaid expansion has yet to be tested.


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RESEARCH METHODOLOGY

Medicare/Medicaid

IMS Health uses a rigorous survey methodology in

producing reports and validating data. This Digest

features HMO information gathered by telephone

and email surveys between February and June 2016.

Questionnaires are refined every year to reflect

changes in industry operations and include, for

example, questions specific to the Medicare and

Medicaid populations.

Managed care data derive from a census of the

HMO industry. HMO and hospital utilization data,

gathered from state health licensing agencies,

federal government sources, and telephone or email

surveys, are effective as of December 31, 2015. When

data were not available from all plans, a smaller

sample was used.

Some of the managed care content used for analysis

is obtained from quarterly and annual financial

statements submitted by insurance companies,

as required, to a state’s department of insurance.

These statements have been collected and made

available by the National Association of Insurance

Commissioners (NAIC). Although the NAIC has

permitted use, it does not endorse any analysis or

conclusions based upon the use of its data.

Medicare and Medicaid managed care information

was gathered from operating HMOs and other

types of managed care organizations recognized

by the Centers for Medicare and Medicaid Services

(CMS). IMS Health used information from state health

licensing agencies to project Medicaid managed

care enrollment for 2015.

IMS Health often telephones managed care

organizations (MCOs) to validate and clarify

information obtained from them. IMS Health

also compares its data with those published in

other sources, including trade associations in the

managed care industry, periodicals, journals,

and state regulatory agencies. IMS Health does

this to ensure that its database includes an

accurate account of Medicare and Medicaid

managed care.

Chronic disease data included in this report were

generated using health care professional and

institutional insurance claims. IMS Health also

gathered data on prescription activity from the

National Council for Prescription Drug Programs

(NCPDP). These data account for some 2 billion

prescription claims annually, or more than 86% of

the prescription universe. These data represent the

sampling of prescription activity from a variety of

sources, including retail chains, mass merchandisers,

and pharmacy benefit managers. Cash, mail-order,

Medicaid, and third-party transactions are tracked.

Hospital Inpatient and Outpatient

The IMS Health Hospital Procedure/Diagnosis (HPD)

database contains an extensive set of hospital

inpatient and outpatient discharge records, including

actual diagnoses and procedures data for about

75% of all discharges nationwide (including 100% of

Medicare-reimbursed discharges). The HPD database

reports the numbers of procedures performed on

patients discharged from a hospital. Most states report

at least nine diagnostic and six procedure codes from

each discharge record. IMS Health uses Medicare

procedure counts and additional hospital-level

information to estimate procedure counts for the

remaining 25% of discharges—the non-Medicare

hospital discharge information in nonreporting

states. The hospital inpatient and outpatient data

provided in this Digest are current as of calendar

year 2014. See the table below for a list of common

disease states tracked.

Data for the Public Payer Digest were gathered by IMS Health, Parsippany, NJ, a leading provider of innovative

health care data products and analytic services. The information was gathered from the following sources:

DISEASE STATE ICD-9 CODES DISEASE STATE ICD-9 CODESAcute Coronary Syndromes 411R Hypertension 401.9

Angina 413 Lipid Disorders 272R

Asthma 493 Osteoarthritis 715.16, 715.26, 715.36, 715.96

Breast Cancer239.3, 238.3, 174.4, 174.8, 174.2, 174.0, 174.3, 174.9, 174.5, 174.6, 174.1

Prostate Cancer 185

Depression 296 Rheumatoid Arthritis 714.0

Diabetes Mellitus 250 Stroke 433, 434


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RESEARCH METHODOLOGY

Long-Term Care

The definition of nursing homes included in this

Digest encompasses only freestanding long-term

care facilities providing skilled and unskilled care.

No long-term care facilities attached to hospitals

or long-term care or subacute beds within hospitals

are included, as they are typically licensed by states

as part of hospitals, and their beds are counted as

hospital beds. Also, no intermediate care facilities

(ICF) or mental retardation (MR) homes are included

in the nursing home data in this Digest. These data are

effective as of end-of-year 2015.

Hospital-based skilled nursing facility data for

this report are based on information from the

IMS Health Hospital Profiling Solution©. Hospital

utilization data were compiled between midyear

2014 and midyear 2015, and are effective as of

December 31, 2014. These data were gathered from

state health licensing agencies, federal government

sources, and telephone or email surveys. Assisted

living facility data are from the IMS Health Healthcare

Market Index©, while long-term care pharmacy

provider data are from the IMS Health Long-Term

Care Pharmacy Provider Profiling Solution©.

Detailed information on corporate affiliations was

used to compile the profile of the home care industry.

This information is based on data from the IMS Health

Home Health Market/Chains Profiling Solution©. Data

are effective as of end-of-year 2015. All identified

home care agencies and home care chains are

contacted annually by telephone and by email for

survey information.

IMS Health compares its data with those

gathered by other organizations, including trade

associations, periodicals, journals, state licensing

information, and CMS.

National Retail Pharmacy Data

The Medicare and Medicaid Retail Drug Costs and

Utilization sections present national overviews of

prescription drug dispensing by retail pharmacies

to Medicare beneficiaries and Medicaid recipients.

National-level retail pharmacy data across 12

therapeutic drug classes are organized according to

major chronic disease category and include the five

most common products dispensed for eight of these

classes, paid for by Medicare and Medicaid.

Prescription metrics derive from IMS Health’s Vector

One®: Payer (VOPA) platform. Through agreements

with a variety of data providers, the IMS Health data

warehouse receives billions of prescription claims per

year. VOPA is IMS Health’s projected prescription and

patient-centric database. The only database of its kind,

it provides projected retail pharmacy prescription and

longitudinal metrics at various levels of aggregation,

including state, region, and national levels. IMS

Health utilizes a unique and patented algorithm for

de-identification of patients, ensuring compliance

with HIPAA regulations. These data are current as of

midyear 2015 and trended over three years.

The Public Payer Digest uses a variety of additional

sources, which are cited on the appropriate page or

in the References.

A review process takes place, before and during production of this report, between IMS Health and Forte

Information Resources LLC, Denver, CO, a leading provider of publishing and communications products

and services for the health care industry. Sanofi, as sponsor of this report, maintains an arm’s-length relationship

with the organizations that prepare the Digest and carry out the research. The desire of Sanofi is for the

Managed Care Digest Series® to be completely independent and objective.

Download the complete methodology at www.managedcaredigest.com.

HMO REGIONS STATESPacific Alaska, California, Hawaii, Oregon, Washington

Mountain Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming

West North Central Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota

East North Central Illinois, Indiana, Michigan, Ohio, Wisconsin

South Central Alabama, Arkansas, Kentucky, Louisiana, Mississippi, Oklahoma, Tennessee, Texas

New England Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont

Mid-Atlantic New Jersey, New York, Pennsylvania

South Atlantic Delaware, Florida, Georgia, Maryland, North Carolina, Puerto Rico, South Carolina, Virginia, Washington, DC, West Virginia


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KEY TERMS

Accountable Care Organization (ACO): An ACO

is an associated network of primary care physicians,

specialists and hospitals that actively coordinates

to provide high-quality longitudinal health care to

patients. ACOs report on quality measures, and

the providers, who themselves are accountable

for maintaining a high standard of performance,

are rewarded for their cooperation.

Affordable Care Act (ACA): The ACA was signed

into effect by President Obama in March 2010 as

part of the administration’s comprehensive health

care reform legislation. The ACA is aimed primarily

at decreasing the number of uninsured Americans,

reducing the overall costs of health care and

improving quality. In June 2012, the Supreme Court

upheld the constitutionality of most of the ACA,

and many reforms have already taken effect.

Assisted Living Facility (ALF): ALFs allow patients

to remain relatively independent while still receiving

a certain level of care. IMS Health defines an ALF

as a facility where residents are provided 24-hour

monitoring and assistance with activities of daily

living, while a nursing staff administers medications

and treatment.

Case Mix Index (CMI): Severity is approximated

by the case mix index (CMI), which is a statistical

measure of the average amount of resources

consumed per Medicare inpatient case at a hospital.

Hospitals that tend to treat more resource-intensive

(i.e., severe) cases will have a higher calculated CMI.

Congressional Budget Office (CBO): The CBO

is a public sector think tank that produces policy

analyses, cost estimates of legislation, and budget

and economic projections that serve as a basis for

Congress’s decisions about spending and taxes.

Every piece of legislation affecting the use of the

nation’s resources undergoes CBO’s scrutiny.

Coverage Gap (“Donut Hole”): The Medicare Part

D coverage gap, often referred to as a “donut hole,”

refers to a period of time during the coverage year

when the beneficiary is responsible for a larger portion

of drug costs. The ACA aims to close the coverage

gap by 2020, gradually introducing manufacturer

discounts and subsidies from the Centers for

Medicare & Medicaid Services to lower costs for

Part D enrollees.

Dual Eligibles: Dual eligibles are individuals who are

entitled to Medicare Part A and/or Part B and are

eligible for some form of Medicaid benefit. People

with Medicare who have limited income

and resources may get help paying for their out-of-

pocket medical expenses from their state Medicaid

program. Services that are covered by both programs

will be paid first by Medicare and the difference by

Medicaid, up to the state’s payment limit. Medicaid

also covers additional services (e.g., nursing facility

care beyond the 100-day Medicare limit, prescription

drugs, eyeglasses and hearing aids).

Health Insurance Exchange: A key provision of the

ACA is the creation of health insurance exchanges,

or marketplaces, in each state in which individuals

and small businesses can choose from a variety of

qualified health insurance plans. If a state chooses

not to establish its own exchange, the federal

government will establish one for it. States may

also elect to set up a partnership marketplace, in

which the state and federal governments jointly run

the exchange.

Home Care Agency (HCA): HCAs provide care to

patients in various settings recognized as the patient’s

residence, including homes, skilled nursing facilities,

hospitals, assisted living facilities and nursing homes.

Caregivers assist patients in the activities of daily

living and respite care, and may also perform minor

outpatient therapies.

Long-Term Care Pharmacy Provider (LTCPP): LTCPPs

are pharmacies that have an implied contract/

agreement to perform pharmaceutical consulting

and/or dispensing services to long-term care facility

patients on an ongoing basis. LTCPPs tracked in this

Digest must have at least one licensed pharmacist

employed at the location and generate at least 50%

of their revenue from long-term care facilities.

Managed Care Organization (MCO): Managed

care organizations control the finance, insurance,

delivery and payment of health care services

by negotiating contracts with providers and

maintaining efficient practices. MCOs include health

management organizations (HMOs), preferred

provider organizations (PPOs), point-of-service (POS)

and fee-for-service (FFS) plans.

Medicare Advantage (MA): Unlike the traditional

Medicare fee-for-service arrangement, MA (also

known as Medicare Part C) gives Medicare

beneficiaries the option of receiving Part A, Part B and

Part D benefits through a single health plan. Of the

various plan types offering MA benefits, HMOs remain

the most popular among Medicare beneficiaries,

which provide basic Medicare coverage (they must

Unless otherwise noted, all definitions are provided by IMS Health, Parsippany, NJ (2015).


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KEY TERMS

cover all of Medicare Part A and Part B health care),

plus additional coverage to fill the gaps in what is

provided by Medicare. Participating health plans are

prohibited from charging higher out-of-pocket

costs than traditional Medicare for the same services.

Medicare Part A: Medicare Part A helps cover

the costs associated with stays in, and services

administered by, hospital inpatient facilities, skilled

nursing facilities, hospices and home care agencies.

For most beneficiaries, there is no cost associated

with Part A.

Medicare Part B: Medicare Part B provides

coverage against the costs generated by medically

necessary as well as preventive services. There is a

standard monthly premium associated with Part B.

Medicare Part D: Medicare Part D subsidizes the

costs of prescription drugs for Medicare beneficiaries.

It was enacted as part of the Medicare Prescription

Drug Improvement and Modernization Act of 2003.

Medicare Shared Savings Program: The Centers for

Medicare and Medicaid Services (CMS) established

the Medicare Shared Savings Program to facilitate

coordination among providers to improve the quality

of care and reduce unnecessary costs for Medicare

fee-for-service (FFS) beneficiaries. Eligible providers,

hospitals and suppliers may participate in the Shared

Savings Program by creating or participating in

an ACO. The Shared Savings Program will reward

ACOs that lower their health care costs while

meeting performance standards on quality of care.

MedPAC: The Medicare Payment Advisory

Commission (MedPAC) is an independent

Congressional agency established by the

Balanced Budget Act of 1997 to advise the U.S.

Congress on issues affecting the Medicare program.

Nursing Home: Nursing homes are predominantly

stand-alone facilities (but can also be part of hospital

or retirement settings) that provide skilled nursing

and rehabilitation services to people who are

unable to care for themselves.

Pioneer ACO: The Pioneer ACO model is a pilot

program launched by the CMS Innovation Center

that is designed to (1) show how particular ACO

payment arrangements can best improve care

and generating savings for Medicare; and (2)

test alternative program designs to inform future

rulemaking for the Medicare Shared Savings Program.

Prescription Drug Plan (PDP): Stand-alone Medicare

prescription drug plans (PDPs) cover a prescription

drug benefit separately from Medicare Parts A and

B (hospital and doctor) coverage. Stand-alone

drug plans are meant to be used along with original

Medicare Parts A and B and medical savings

accounts (MSAs). They may also be used along with

a private fee-for-service (PFFS) plan that does not

include a prescription drug benefit, or a Medicare

Cost plan. Stand-alone drug plans are offered by

private companies.

Private Fee-for-Service (PFFS): PFFS plans are

Medicare Advantage plans in which private insurers,

under contract with Medicare, receive monthly

payments from Medicare, then reimburse providers

for the care they give to beneficiaries on a

service-by-service basis.

Retail Pharmacy: Retail pharmacy includes

pharmacy services provided to patients themselves

(rather than to health care providers) in community

or outpatient (rather than hospital) settings.

Skilled Nursing Facility (SNF): SNFs offer rehabilitation

services and medical care that are unavailable in

a nursing home and unable to be provided in a

patient’s own home. A SNF must have at least one

registered nurse on duty, and may be part of a

hospital or nursing facility.

Definition sources:

ACO: http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=61

Affordable Care Act: http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR03590:@@@D&summ2=m&

CBO: https://www.cbo.gov/about/overview

Coverage Gap/Doughnut Hole: http://healthinsurance.about.com/od/medicare/f/donuthole.htm

Dual Eligibles: http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/Medicare_Beneficiaries_Dual_Eligibles_At_a_Glance.pdf

Health Insurance Exchange: http://www.cbpp.org/files/CBPP-Analysis-on-the-Status-of-State-Exchange-Implementation.pdf

MCO: http://amcp.org/ManagedCareTerms/

Medicare Part A: http://www.medicare.gov/what-medicare-covers/part-a/what-part-a-covers.html

Medicare Part B: http://www.medicare.gov/what-medicare-covers/part-b/what-medicare-part-b-covers.html

Medicare Part D: http://www.medicare.gov/part-d/ index.html

Medicare Shared Savings Program: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/index.html?redirect=/sharedsavingsprogram/

MedPAC: http://www.medpac.gov/-about-medpac-

PDP: http://www.medicareresources.org/glossary/prescription-drug-plan-pdp/

Private Fee-for-Service: www.medicare.gov/publications/pubs/pdf/10144.pdf

Retail Pharmacy: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2720370/


RE

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REFERENCES

Medicare and Medicaid

Centers for Medicare & Medicaid Services. (2016).

2016 Annual Report of the Boards of Trustees of the

Federal Hospital Insurance and Federal Supplemental

Medical Insurance Trust Funds. Retrieved from https://

www.cms.gov/Research-Statistics-Data-and-Systems/

Statistics-Trends-and-Reports/ReportsTrustFunds/

Downloads/TR2016.pdf

CMS. (2015). CMS Financial Report Fiscal Year 2015:

Keeping Us Healthy for 50 Years. Retrieved from

https://www.cms.gov/Research-Statistics-Dataand-

Systems/Statistics-Trends-and-Reports/CFOReport/

Downloads/2015_CMS_Financial_Report.pdf

CMS. (2016). Office of the Actuary Projected National

Health Expenditures. Retrieved from https://www.cms.

gov/research-statistics-data-and-systems/statistics-

trends-and-reports/nationalhealthexpenddata/

nationalhealthaccountsprojected.html

Daly, R. (2013). CMS Data Show Wide Variation in

Hospital Billing. Modern Healthcare. Retrieved from

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NEWS/305089960

Dawe, C., et al. (2016). Today’s Most Attractive

National ACO Model Is Offered by . . . CMS. Health

Affairs. Retrieved from http://healthaffairs.org/

blog/2016/04/15/todays-most-attractive-national-

aco-model-is-offered-bycms/

Graham, J. (2013). Medicare to Cover More Mental

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to-cover-more-mental-health-costs/?_r=0

Health Indicators Warehouse. (2016). Acute Hospital

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Drug_Spending_Dashboard.html

Merle, R., and Johnson, C. (2016). Justice Department

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of-cigna/

Long-Term Care

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cdc.gov/nchs/nnhs/nursing_home_trends.htm

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Care. SkilledNursingFacilities.org. Retrieved from

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Looking Forward

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Dawe, C., Lewine, N., and Miesen, M. (2016). Today’s

Most Attractive National ACO Model Is Offered

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Lynne, B., et al. (2016). Breaking Down the MACRA

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McClellan, M., Kocot, S. L., and White, R. (2015).

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Improvements—and More Savings Are Possible.

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care-and-aging-network


Sanofi offers the information presented in the Managed Care Digest Series® for general educational and informational

purposes only. This information is not intended as a substitute for advice or recommendations from relevant professionals.

Care has been taken to confirm the accuracy of the information presented. However, Sanofi is not responsible for errors

or omissions or for any consequences from application of the information in the Managed Care Digest Series®, and

makes no warranty, expressed or implied, with respect to the currency, completeness, or accuracy of the contents of the

publication. Application of this information in a particular situation remains the professional responsibility of the user.

Uses for This Digest

These digests are used by health care providers, associations, insurers, consultants, employers and

policy analysts. Feel free to use this publication’s contents in any way you like, provided that you

credit the Sanofi Managed Care Digest Series® Public Payer Digest and IMS Health, which copyrights all

its data. Digest statistics are often used for:

• Speeches and presentations

• Planning and budgeting

• Strategic forecasting

• Comparison of industry standards with individual company performance

• Benchmarking for quality analysis and improvement

• Market projections

• Disease-state analysis

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