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Date : April 20, 2011 Time : 4:00 pm – 6:00 pm CONFERENCE CALL ONLY Dial in : 1-866-922-3257; Participant Code : 654

Date : April 20, 2011 Time : 4:00 pm – 6:00 pm CONFERENCE CALL ONLY Dial in : 1-866-922-3257; Participant Code : 654 032 36#. Roll Call . O'Connor, Maureen - Co-Chair BCBSNC Tayloe, Dave - Co Chair Goldsboro Pediatrics, American Academy of Pediatrics

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Date : April 20, 2011 Time : 4:00 pm – 6:00 pm CONFERENCE CALL ONLY Dial in : 1-866-922-3257; Participant Code : 654

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  1. Date: April 20, 2011 Time: 4:00 pm – 6:00 pm CONFERENCE CALL ONLY Dial in: 1-866-922-3257; Participant Code: 654 032 36#

  2. Roll Call O'Connor, Maureen - Co-Chair BCBSNC Tayloe, Dave - Co Chair Goldsboro Pediatrics, American Academy of Pediatrics Bell, Mark North Carolina Hospital Association Harris, Brian Rural Health Group, Inc. Hughes, Yvonne Coastal Carolinas Health Alliance Miller, Mark Novant Health Minnich, John Computer Sciences Corporation Owen, Steve Division of Medical Assistance, NC DHHS Pilkington, Phred Cabarrus County Health Department Sangvai, Devdutta North Carolina Medical Society

  3. Agenda

  4. Today’s Meeting Objectives • Advance recommendations on • the overall approach for prepayment • the business terms for what will become the foundation for the Term Sheet for those who choose to prepay

  5. Financing Approach Progress to Date

  6. Financing Approach... Estimated Costs & Known Revenue • In December 2010, NC HIE developed a four year (2011-2014) model that projected: • Total administrative and operational costs for robust Statewide HIE... $24.4 million • Total revenue from ONC Cooperative Agreement ............................... $11.9 million • Key Decisions • At March 29 meeting, the Work Group agreed that the estimated costs outlined above were reasonable to use as the basis for the pricing and financing models

  7. Financing Approach... Other attributes agreed upon to date • Participation in the statewide HIE is voluntary. • Participants can pay through one of two mechanisms (“pay-as-you-go” or “prepay”). • NC HIE will  seek prepayments to fund the anticipated four year funding gap. • Goals for prepayment will be based on the following percentages per stakeholder category • Principles: • The upfront financing model must be structured in such a way that it rewards initial investors. • The NC HIE Board of Directors should adopt a pay-as-you-go pricing model for those who do not pay upfront that nets out to a higher price point than the upfront model. • The difference between the pricing for up front and pay-go options should be sufficient to gain investment, but not so large as to discourage future participation. • The NC HIE Board must define a policy to address circumstances in which unexpected surpluses arise. • Hospitals (35%) approximately $4.4 million • Providers (10%) approximately $1.2 million • Commercial Health Plans (35%) approximately $4.4 million • Medicaid (20%) approximately $2.5 million

  8. Proposed Prepayment Approach Details

  9. Prepayment Option...Credit Account • Creation of a Credit Account for Those Who Prepay • Organizations that prepay receive a 20% “credit” for each dollar they invest that they can use to pay for access to the Statewide HIE Network. • Credits would either be applied directly (if prepayer becomes a Qualified Organization), or in-directly (if prepayer chooses to be a participant in a Qualified Organization) • Regardless of status as either prepay or pay-as-you-go, there will be a common service charge for all organizations of the same classification (size, type) • If costs are realized as expected, credit accounts will be drawn down to zero over a four year period, meaning the prepayment credit of 20% is equivalent to roughly 6% interest

  10. Prepayment Option...Capital Campaign • Prepay Option To Be Structured As A “Capital Campaign” • Prepayers will sign an Agreement Letter committing the organization to two payments. • First installment (50% of total) due at time of initial closing; • Remaining 50% paid when NC HIE Board determines Statewide HIE Network “Go-live” date • Prepayment option will be open to everyone, • Available for a limited time.

  11. Scenario Calculator Modeling Varying Elements of Costs Prepay and Pay-as-you-go

  12. Introduction: Developing Scenarios • The Finance Work Group asked NC HIE to model different scenarios to illustrate the interplay between prepayment and pay-as-you-go options and varying cost considerations • Manatt developed a “scenario calculator” to highlight the implications across multiple cost and revenue scenarios.

  13. Overview: Scenario Calculator • The “calculator” includes three variables: • Estimated costs for the administrative and technical costs for Statewide HIE over four years • The number of entities that choose to Prepay • The rate of participation for entities that choose Pay-As-You-Go • The “calculator” includes the following terms and assumptions: • Reinvestment pool: The difference between revenue and cost that is available to be reinvested at the discretion of the NC HIE Board. • Payers held constant: The contribution of payers (both Medicaid and the commercial plans is held constant) • The “calculator” shows changes in costs and revenues across three variables • Estimated administrative and technical costs • Prepay for hospitals and providers participants (payers contributions held constant) • Pay-As-You-Go adoption among hospitals and providers (payers contributions held constant). • For hospitals, a fee-per-bed proxy is used for modeling purposes only. (Does not intend to imply in any way fee-per-bed as an adopted approach), • Each variable can be expressed in one of three ways • Base Case: Reflects the current estimates • Low Case: Shows the impact of lower than expected estimates • High Case: Shows the impact of higher than expected estimates

  14. Assumptions and Variables

  15. “Base Scenario” Calculation w/ base case across all three Variables

  16. Next Steps

  17. Developing the Upfront Funding Term Sheet • Before the end of April, NC HIE will: • Work with Executive Committee and Board to develop a Term Sheet • Share a Term Sheet Draft with key stakeholders for review and feedback • In May, NC HIE will: • Open the option for prepayment and begin collecting commitments • Define process for addressing unexpected surplus • Next Finance Work Group Meeting: • May 26th, 2:00 to 4:00 PM

  18. Public Comment

  19. Attachments

  20. Board Actions Related to Finance

  21. Proposed Upfront Model - Overview • By raising the money upfront, NC HIE can: • deploy the full range of HIE services as soon as possible; • accelerate value realization; • encourage widespread participation by lowering barriers to entry; • maximize Meaningful Use participation; • lock in multi-year commitments from critical mass of constituents; and • reduce administrative burdens. • To generate required initial capital, NC HIE is planning to create a voluntary upfront payment option for participation in the exchange. • Upfront payment amounts will be based on an agreed upon percentage allocation. • Entities that pay upfront won’t have to pay charges for a fixed period of time. • Entities that don’t pay upfront can still participate, but will be subject to higher annual payment rates.

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