Diagnostics & Imaging Week Washington Editor

Another organization has chimed in on Congress’s proposal to fund expansion of the Children’s Health Insurance Program (CHIP), and the House version of the CHIP bill, known as the CHAMP Act (Children’s Health and Medicare Protection), has found yet another opponent.

A recent letter to House speaker Nancy Pelosi (D-California) by the Society of Nuclear Medicine (SNM; Reston, Virginia) warns that the provision of the CHAMP Act that would cut spending on imaging for Medicare patients would have “a harsh impact on underserved populations who have little or no insurance or cannot afford to pay out of pocket for imaging services,” according to Peter Conti, chair of SNM’s government relations committee.

Operators of skilled nursing facilities (SNFs) recently voiced their opposition to cuts to SNF funding embodied in the CHAMP Act.

Gary Dillehay, who chairs SNM’s coding and reimbursement committee, said that the CHAMP bill includes a notion about the current level of utilization of imaging equipment that is “based on flawed data,” a position he said that both the Centers for Medicare & Medicaid Services and the Medicare Payment Advisory Commission have both acknowledged.

According to Dillehay, the flawed idea that imaging equipment is used 70% of available time rather than 50% is at the bottom of the problem and that cuts will expand the unit cost of imaging services. This utilization curve “is an integral component used in Medicare rate setting for imaging and will reduce payments” if imaging use is increased, Dillehay said.

RHIOs need ground-up approach

Some pursuits are replete with a particular kind of lesson, and the same holds for the pursuit of the regional health information organization (RHIO), which is currently the best hope for cobbling together an information technology (IT) infrastructure for the exchange of electronic health records (EHRs). One of the more conspicuous elements in the RHIO story is suggestive of a traditional economic dilemma, that of the spill-over benefit.

But there are those who think that a more ground-up approach to RHIO development would trim costs and keep the incentives in line with costs.

According to a recent article in Modern Healthcare, a group that put its resources into the development of an IT backbone for EHRs in Portland, Oregon, has suspended operations after plowing more than half a million dollars toward the effort. As matters currently stand, there is no guarantee that the group, the Oregon Community Health Information Network (OCHIN; Portland), which put 18 months into a system that would serve the metro Portland population of about 1.2 million, will be able to revive the program.

OCHIN put a stop to the effort on May 15 after hearing from a consultant who proposed a funding commitment of about $3.4 million for each of five years. While the RHIO’s anticipated savings were much greater — about $17 million a year by some estimates — the healthplans and the hospitals working in the area would be stuck with essentially the entire tab, and they were not at all certain how long it would take to recoup their investments.

On the question of whether this RHIO has drawn its last breath, Andy Davidson, president/CEO of the Oregon Association of Hospitals and Health Systems (Lake Oswego, Oregon) was quoted as saying ”the honest answer is I really don’t know.”

Richard Gibson, senior VP and chief information officer at Legacy Health Systems (Portland), a five-hospital provider system in the Portland area, said the best description of the current status of the project is “not moving forward,” but added that “it could be resuscitated” if the planners “would come back and redesign it or come back with other funding and business plans.”

Gibson added that the organization’s supporters “spent a lot of money and a lot of time,” noting that 18 months of extra hours and substantial monies were poured into the OCHIN, “so it was not cast away in an indifferent act.”

Others who have attempted to put together RHIOs have a few observations that might pertain to the Oregon experience. One of these has to do with basic human motivation, alternately known as incentives. David Lansky, senior director of health programs at the Markle Foundation (New York) said that it is not yet clear “if the incentives exist for healthcare organizations to share information.”

John Regula, who was the chair of the now-expired Northeastern Pennsylvania Regional Health Information Organization (NEPA), said that healthcare data exchange organizations have to think in terms of the business cases that providers and other funders will need in order to rationalize their continued financial support.

“It’s a noble idea to say ‘put the patient first,’ but what you have to have are business plans with the provider community” in mind, Regula said. n

Applera set to repurchase $600M

in stock from Morgan Stanley

A Diagnostics & Imaging Week

Applera (Norwalk, Connecticut) reported that, pursuant to an authorization from its board disclosed in early August, it has entered into an agreement with Morgan Stanley for the accelerated repurchase of $600 million worth of its Applied Biosystems (Foster City, California) group common stock.

Based on this agreement, Applera will pay Morgan Stanley $600 million in exchange for a variable number of shares, subject to a minimum and a maximum. The minimum number of shares will be delivered to the company within about six weeks, with any additional shares to be delivered to the company within the following six months.

The actual number of shares to be repurchased will be based upon the volume-weighted average daily price of the Applied Biosystems common stock during this period. Repurchases will be funded using the group’s cash and existing available credit. Because of the timing of the cash disbursement and the repurchase of shares, Applera said it anticipates that this repurchase will be dilutive to Applied Biosystems earnings per share in the first quarter of fiscal 2008 by about 1 cent.

The transaction is expected to be accretive to Applied Biosystems earnings per share for fiscal 2008, with the accretion dependent on the actual price paid under this transaction. In addition, during the next four to six quarters and following the conclusion of this program, the company said it intends to repurchase shares of Applied Biosystems common stock in the open market to complete its $1.2 billion share repurchase authorization.

Applera’s Applied Biosystems group serves the life science industry and research community by developing instrument-based systems, consumables, software, and services. It reported sales of about $2.1 billion during fiscal 2007.

The Celera (Rockville, Maryland) group is primarily a molecular diagnostics business that is using genomics and proteomics discovery platforms to identify and validate novel diagnostic markers, and is developing diagnostic products based on these markers as well as other known markers.

In early August, the company reported hiring Morgan Stanley to explore “alternatives” to its current tracking stock structure, including splitting into two independent publicly traded companies.