On Monday, November 22, 2010, the U.S. Department of Health and Human Services (“HHS”) issued regulations addressing the medical loss ratio provisions of the Affordable Care Act (the “MLR Rule”). Certain provisions in the MLR Rule address expenditures for health information technology (“HIT”) initiatives. These provisions will be of particular interest to those engaged in the HIT industry in connection with health insurers or insurance-related products. Technology and data management vendors, wellness and disease management providers utilizing IT, health information exchanges and their participants, IT consultants, health care providers and health systems and third-party administrators should all be familiar with the HIT provisions of the MLR Rule so that they can consider how these factors will shape the focus for HIT developments and services, as well as the economic realities facing their businesses and customers.

Background. Generally, the MLR Rule requires health insurers to spend 80 to 85 percent of premium dollars on medical care and activities that improve health care quality. Under the rule, the “medical loss ratio” (“MLR”) is calculated by adding a health insurer’s incurred claims and expenses for “activities that improve health care quality,” and dividing that sum by the insurer’s premium revenue minus taxes, licensing and regulatory fees. The MLR Rule text and preamble provide specific guidance on HIT expenditures as a component of the MLR, including HIT expenditures related to the meaningful use requirements under the Medicare and Medicaid electronic health record (“EHR”) incentive program.

HIT Activities That Improve Health Care Quality. Under the rule, “activities that improve health care quality” must be designed to improve health quality and to increase the likelihood of desired health outcomes in ways that may be measured, must generally be directed towards individuals or specified segments of enrollees, and must be grounded in evidence-based medicine. In the preamble to the MLR Rule, HHS states broadly that any expense for HIT that is attributable to improving health care, preventing hospital readmissions, improving patient safety and reducing errors, or promoting health activities and wellness to an individual or segment of the population will be considered an expenditure for “activities that improve health care quality” (i.e., an activity that can count as a “good” expense in the MLR). HHS cites numerous examples, including HIT initiatives that support: case management, care coordination, and medication and care compliance initiatives; the identification and elimination of ethnic, cultural or racial disparities in the effectiveness of clinical practices; comprehensive hospital discharge planning and post-discharge reinforcement and counseling; the identification and use of best clinical practices and evidence based medicine; prospective prescription drug utilization review aimed at identifying adverse drug interactions; wellness assessments and coaching programs designed to address wellness or lifestyle issues or specific chronic diseases or conditions; public health education campaigns, certain rewards, incentives, or bonuses; and the provision of EHRs and patient portals. The MLR Rule also lists numerous HIT expenditures and activities excluded from consideration as “activities that improve health care quality,” including activities primarily designed to control costs, the pro rata share of expenses for business lines or products that are not subject to the MLR Rule, expenses (including HIT expenditures) related to establishing or maintaining a claims adjudication system (such as costs for implementing the new ICD-10 requirements and other HIPAA standards), retrospective and concurrent utilization review expenses, certain fraud prevention activities, and marketing expenses.

Activities Consistent with the Meaningful Use of EHRs. In addition to the expenses described above, the MLR Rule expressly addresses HIT initiatives related to the “meaningful use” of EHRs under the Medicare and Medicaid EHR incentive program. Specifically, the rule provides that expenditures for “activities that improve health care quality” include certain HIT expenses that are consistent with the meaningful use requirements, and which may in whole or in part improve quality of care, or provide the technological infrastructure to enhance current quality improvement or make new quality improvement initiatives possible. Such activities include:

  • Making incentive payments to health care providers for the adoption of certified EHR technologies and their “meaningful use”
  • Implementing systems to track and verify the adoption and meaningful use of certified EHRs by health care providers, including those not eligible for Medicare and Medicaid incentive payments
  • Providing technical assistance to support adoption and meaningful use of certified EHRs
  • Monitoring, measuring, or reporting clinical effectiveness
  • Tracking whether a specific class of medical interventions or a bundle of related services leads to better patient outcomes
  • Advancing the ability of enrollees, providers, issuers or other systems to communicate patient-centered clinical or medical information rapidly, accurately and efficiently to determine patient status, avoid harmful drug interactions or direct appropriate care (which may include EHRs accessible by enrollees and appropriate providers to monitor and document an individual patient’s medical history and to support care management
  • Reformatting, transmitting or reporting data to national or international government-based health organizations for the purposes of identifying or treating specific conditions or controlling the spread of disease
  • Provision of EHRs, patient portals, and tools to facilitate patient self- management

Opportunities and Pitfalls Are in the Details. HIT vendors, service providers and others involved with HIT initiatives with health insurers should familiarize themselves with the HIT provisions of the MLR Rule so they can understand where the opportunities (and pitfalls) lie with respect to insurers’ HIT initiatives and expense accounting. The MLR Rule will be published soon in the Federal Register, and in the meantime can be obtained through HHS’s Office of Consumer Information and Insurance Oversight website. The MLR Rule was issued as an interim final rule, and is effective January 1, 2011. HHS will accept comments for 60 days after its publication in the Federal Register.