Life Science Compliance Update

March 24, 2017

Deloitte Survey on Value-Based Care


We have written for years about the transition in health care from volume-based to value-based payment models. But the process has been a slow one. According to the Deloitte 2016 Survey of US Physicians, a nationally representative sample of 600 US primary care and specialty physicians, confirms the slow pace of adoption of value-based payment models among physicians. Generally, physicians are reluctant to bear financial risk for care delivery. Yet many physicians conceptually endorse some of the principles behind value-based care, such as quality and resource utilization measurement. The survey results suggest that financial incentives have not changed and tools to support value-based care vary in maturity and availability.


Since 2011, the Deloitte Center for Health Solutions has surveyed a nationally representative sample of US physicians on their attitudes and perceptions about the current market trends impacting medicine and predictions about the future state of the practice of medicine. The general aim of the survey is to understand physician adoption and perception of key market trends of interest to the health plan, health care provider, life sciences, and government sectors. The 2016 survey included 600 US primary care and specialty physicians and had new questions on MACRA. The national sample is representative of the American Medical Association (AMA) Masterfile with respect to years in practice, gender, geography, practice type, and specialty, so as to reflect the national distribution of US physicians.  The AMA is the major association for US physicians and its Masterfile is a census of all US physicians (not just AMA members). The database contains records of more than 1.4 million US physicians and is based upon graduating medical school and specialty certification records.

Survey findings

The Deloitte survey suggests organizations should seek to tie physician compensation to performance, equip physicians with the tools to meet performance goals, and investment in technology capabilities to connect and integrate the tools. First, notably, the study found that value-based payments make up a small proportion of physician compensation, similar to its 2014 findings. A majority of physicians (more than 8 in 10) still report being compensated under fee-for-service (FFS) or salary. While physician participation in value-based payment models is increasing (30 percent in 2016 versus 25 percent in 2014), few physicians participate in models that have the greatest downside risk (10 percent in capitation and 4 percent in shared-risk arrangements).

Even for organizations participating in CMS pilots, such as accountable care organizations (ACOs), a study revealed that the structure of physician compensation was similar to that in organizations that were not part of an ACO. The study found that physicians in ACOs and those not in ACOs earned 49 percent of their compensation from salary, 46 percent from productivity (volume), and only about 5 percent from quality and other factors.Not only are value-based sources of payments an uncommon source of physician compensation, but the proportion of compensation tied to performance, such as better quality or lower cost, is also small.

One-half of physicians in the survey reported performance bonuses less than or equal to 10 percent of their compensation, and one-third reported that they were ineligible for performance bonuses. These numbers are well below the threshold (20 percent of total compensation) that the literature suggests would be effective in incentivizing physicians and producing behavior change. Interestingly, physicians reported that they would be willing to accept sizeable proportions of compensation at risk, if required to. The median reported proportion is 15 percent, meaning one-half of surveyed physicians would put more than 15 percent of compensations at risk and the other half would accept less than 15 percent.

Some more attractive value-based arrangements

Most physicians reported that they prefer FFS and/or salary. As in 2014, few physicians preferred value-based payment models that carry significant financial risk (such as capitation and shared risk). However, compared to 2014, more physicians preferred models that include some upside risk component, such as shared-savings models.

  • 85 percent of physicians said they would need additional resources to comply with Medicare required quality reporting at their practices;
  • 74 percent said that collecting and reporting the information for these quality measures is burdensome;
  • 83 percent did not feel that the measures accurately capture quality of care for their specialty.

Physicians with access to some types of advanced capabilities (for example, clinical protocols and/or care pattern information) were less likely to say they feel underprepared for quality reporting requirements such as those considered under MACRA. But even in this group, most say that quality reporting is burdensome. For instance, 72 percent of physicians with access to clinical protocols versus 82 percent of those without described quality reporting as burdensome, and 84 percent versus 87 percent said they would need additional resources to comply with reporting requirements.

When asked about improvements to care pattern reports, physicians cited that they would like the data to be adjusted for patient complexity or severity (60 percent), to be trustworthy and consistent with their experience (51 percent), and to have a stronger focus on outcomes instead of processes (36 percent). Some of the desired features had more to do with the delivery and usability of care pattern reports than with their actual content.

Physicians report low use of cost and quality data in informing patient referrals

For organizations building value-based care capabilities, understanding physician referral behaviors and patterns of referrals can be a way to find savings or improve outcomes. One study found that, in cases where treatment guidelines were unclear, physicians in high-spending regions were much more likely to choose intensive clinical approaches than physicians in low-spending areas, and a number of those approaches involved referrals (for example, referrals to specialists for one-time consultations or for ongoing management, to tests and diagnostic procedures, to hospitals or intensive care units).

There is also high variation in health care prices that is unrelated to quality; this variation exists even within the same markets, where the prices for the same procedure can vary by a factor of three or four. Surveyed physicians cited trust or working relationship (75 percent) and specialized expertise (69 percent) as the top two criteria in patient referrals. Other studies also show that physicians value clinical expertise. Consistent with the literature, patient access considerations (51 percent) are also prominent in referral decisions. This is especially true among primary care (58 percent) and nonsurgical specialists (60 percent).

The survey results suggest data-driven and evidence driven referral patterns are uncommon: Only 15 percent of physicians said they take into account outcomes or quality ratings when they make referrals. Cost considerations were also infrequent, as 15 percent of physicians considered patient co-pays and insurance in-network status and only 1 percent

Understanding physicians’ willingness to participate in value-based payment models

To better understand the factors most likely to contribute to physicians’ participation in value- based payment models, the study built a regression model that used a combination of demographics, practice-setting characteristics, and measures of tools and resource availability. It found that, with regard to their willingness to adopt value-based payment models, physicians can be classified in three broad segments:

  • With appropriate incentives, these physicians were likely to participate in value-based payment models. Many already had experience with—and the tools for—value-based care and performance-based compensation models.
  • On the fence. These physicians were more cautious about value-based payment models. They had less experience with them, and fewer supporting tools.
  • Resistant physicians were skeptical about value-based care and unlikely to participate in these models, even with incentives.

Willingness to participate in value-based payment models was higher among younger physicians and those who were employed by or affiliated with a health system. Older physicians and those in independently owned practices, especially in solo practices, were more likely to be resistant to value-based payment models. Those who had a high Medicare Advantage payer mix, practiced in the west, and/or were surgical specialists were more willing to participate in value-based care.

The analysis also revealed large differences among segments in attitudes, experience with performance-based compensation, and risk tolerance. For instance, 36 percent of physicians in the willing segment already receive some compensation from a value-based source of payment versus 24 percent of physicians who are on the fence and 21 percent of resistant respondents.

The demographic and practice setting differences between the segments have particular implications for value-based care efforts. For instance, solo practitioners and those in small practices might be more difficult to engage effectively as they tend to be more resource-constrained, both in terms of staffing and technology availability. Interestingly, the analysis shows that the availability of tools and resources helps mitigate the effects of non-modifiable demographic characteristics. For instance, when physicians have care pattern information, clinical protocols, and Stage 3 Meaningful Use EHRs, their willingness to participate in value-based care increases. Making these tools available could help move physicians from the on the fence to the willing category.

Fourth Due Diligence Summit for Life Sciences



The 4th Due Diligence Summit for Life Sciences, taking place on May 18 and 19 of this year in Boston, Massachusetts at the Hyatt Regency Boston. This is a cross-functional life science event focused on the needs of due diligence professionals. This conference will highlight the latest merger and acquisition trends in the market, educate due diligence professionals on the different aspects and challenges faced by cross-functional team members, and provide attendees with the strategies and insight they need to effectively conduct thorough due diligence to ensure a profitable investment in a new product, portfolio, company or strategic alliance.


This event is the perfect platform for due diligence professionals to convene with their functional counterparts to discuss the best ways to work across their organization, as well as with external advisors. The event also provides attendees a multitude of networking opportunities. Join your peers at the industry’s leading event to gain valuable insight from industry leaders, and take advantage of the quality networking opportunities at this two-day action-packed event.


Attendees will learn how to create and deploy an effective gap analysis to identify gaps in the product portfolio and regulatory standards; gain valuable insight from cross-functional due diligence team members, as well as leaders in the medical device and biotech industries; understand how to develop strategic objectives for a deal and accelerate synergies to ensure a high-performance organization; learn how to evaluate and effectively manage strategic alliances through case studies from industry leaders; and evaluate the scope, validity, and enforceability of a target’s patterns.


If you are interested in attending, you can register here.

March 23, 2017

Will Trump Repeal Medical Device Taxes?


Part of President Obama’s landmark health care bill, the Affordable Care Act, imposed a federal tax on medical devices. That tax was temporarily suspended in January 2016, which allowed some medical device companies (i.e., OrthoPediatrics Corp. based in Northern Indiana) to hire more workers. The CEO of OrthoPediatrics is hoping that President Donald Trump, together with Congress, will turn the temporary suspension into a permanent repeal. 

OrthoPediatrics Instituted a Headcount Freeze

OrthoPediatrics, founded in 2006, develops and markets implantable orthopedic devices, such as metal plates that can be attached to bones, to treat deformities and traumatic injuries in children. It has 60 employees in its Warsaw, Indiana headquarters, and 94 sales representatives around the United States.

When the tax was in full effect, CEO Mark Throdahl said, OrthoPediatrics "had almost a headcount freeze during 2015" because of the revenue that was siphoned away by the tax. Since the tax's temporary suspension, he said, "We've resumed an aggressive pace of hiring and investment."

AdvaMed Quickly Started Lobbying

The medical device industry is seeking to frame the fight as a jobs issue. Immediately following Trump's election victory, industry lobbying group AdvaMed wrote to him and Vice President-elect Mike Pence asking for permanent repeal of the tax.

In the letter, AdvaMed President Scott Whitaker wrote, "The medical device tax has been a significant drag on medical innovation, and resulted in the loss or deferred creation of jobs, reduced research spending, and slowed capital expansion."

Industry complaints like these led Congress last year to temporarily suspend the 2.3 percent excise tax on the sale of non-retail medical devices, such as pacemakers, heart valves and artificial hips. It had been in effect for only three years.

J.C. Scott, head of government affairs at AdvaMed, said companies "feel a great sense of urgency in trying to get complete repeal done early next year, rather than later in the year, because companies need certainty."

There are about 9,000 U.S.-based medical device manufacturers. The industry accounts for about 520,000 U.S. jobs and has $150 billion in direct sales, AdvaMed spokesman Mark Brager said.

Indiana (Vice President Pence’s home state) is home to several device companies. So are Minnesota, California and Massachusetts. Lawmakers from these states helped push through the temporary suspension of the device tax.

Trump Executive Order

One of President Trump’s first orders of business was signing an Executive Order that allowed government agencies, "to the maximum extent permitted by law... to waive, defer, grant exemption from, or delay the implementation of any provision or requirement of the Act [Affordable Care Act] that would impose a fiscal burden on any State or a cast, fee, tax penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications."

Congressional “Repeal and Replace” Attempt

In early March 2017, House Republicans unveiled their plan to repeal and replace Obamacare, and the released legislation includes ending the medical device tax for good.

While that is a significant victory for medical device makers, there are still open questions as to how the rest of the Republican plan will affect the industry. Those questions could be just the tip of the iceberg, as an industry that is deeply affected by federal policy tries to game out what the new regime, headed by Donald Trump and his GOP allies, will mean for their businesses.

We look forward to continuing to provide updates as we continue working in what seem to be uncharted political waters.


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