Year End Issues 2013

1. Year End Issues 2013

2. Potential Legislative Vehicles • Continuing Resolution • Debt Limit • Tax Reform • Entitlement Reform Package • Doc Fix: • either permanent, one-year fix, or two-year fix

4. Continuing Resolution • House appropriators have started working on the terms of a CR to keep the government funded after October 1, when the current CR expires. Its unclear how long the CR would last. • The Senate is further along in the appropriations process than the House which has only debated three of the 12 annual spending bills. • The Senate has set the level of discretionary spending at $1.058 trillion. The current fiscal year level is roughly $988 billion. • The House has set the discretionary spending level at $967 billion which is required by the sequester. Appropriators are seeking deeper cuts to domestic programs to increase spending for defense programs.

5. Continuing Resolution • Some Conservative Republicans and outside groups are pushing leadership to pass a CR that keeps the government operating but does not fund the ACA. • House Democrats have been pushing legislation to replace the sequestration cuts with $181 billion in replacement deficit reduction over 10 years. • 54 percent comes from increased tax revenue. • 46 percent comes from spending cuts.

6. Debt Limit • The fight over the debt limit is going to heat up in the next five months. • Congress and the White House will need to raise the nation’s borrowing limit to avoid default or a downgrade. • After the suspension of the borrowing limit expired May 19, the Treasury Department employed “extraordinary measures” to ensure the country keeps paying its bills. These measure are expected to be exhausted anytime from November to the end of 2013.

7. Debt Limit • Republicans intend to use the opportunity to push entitlement reform and deficit reductions. • House Speaker John Boehner: “We’re not going to raise the debt ceiling without real cuts in spending.” • Democratic leaders and the President say they have no intention on negotiating on the debt limit. • White House Press Secretary Jay Carney: “We will not negotiate over Congress’s responsibility to pay the bills that Congress ran up.” • President Obama: “We’ve seen a sizable group of Republican lawmakers suggest they wouldn’t vote to pay the very bills that Congress rang up — a fiasco that harmed a fragile recovery in 2011, and one we can’t afford to repeat.”

8. Tax Reform • The House Ways and Means Committee and the Senate Finance Committee are working on tax reform. • Both committees have been releasing options papers in an effort to develop a tax reform proposal. • Ways and Means established 11 tax reform working groups to address the issue. • The Finance Committee has taken a blank slate approach and solicited comments from colleagues on what tax expenditures should continue. • In his speeches outlining a new “Grand Bargain for the Middle Class,” President Obama is proposing to agree, as a concession to Republicans, to cutting certain corporate tax rates in return for Congress increasing spending on the Administration’s job priorities.

9. Entitlement Reform Deal • Entitlement reform deal • House Republicans are expected to offer a $500 billion deficit reduction package with entitlement reforms in exchange for increasing the debt ceiling. • Interest payments • Tax reform • Chained CPI (Savings: $230 billion) • Duals reimbursement • Beneficiary Cost-Sharing • Increasing Medicare Parts B and D premiums for wealthier seniors (Savings: $50 billion) • Increasing the annual Medicare Part B deductible (Savings: $3.3 billion) • Establishing a home health co-payment. (Savings: $730 million) *Savings over 10 years

10. Doc Fix • Doc Fix • Discussions of folding the doc fix into a bigger budget deal increases risks for the PAC sector because more savings would be needed than for a one- or two-year patch. • The House Energy and Commerce Committee has been pursuing a permanent fix but their legislation has not included any offsets yet. • Cost of a permanent fix is $139.1 billion over 10 years. • A one-year fix with a therapy cap extension would cost approximately $23 billion. • A two-year patch would cost over $36 billion.

11. Risks for SNFs • SNF Margins • Policymakers have been unwilling to address the total SNF margins as they look at policy changes. • The Senate Finance and House Ways and Means Committees cited the average SNF Medicare margin at 22 to 24 percent in their letter asking for stakeholder feedback on PAC reform. • Congressional Calls for Feedback • The House Ways and Means and Senate Finance Committees are soliciting recommendations on post-acute care payment reform. The comments are due by August 19.

12. Risks for SNFs • Market basket reductions • President’s budget would reduce the market basket updates for post-acute care (Savings: $79 billion) • Additional bad debt provisions • President’s budget would phase down bad debt to 25 percent (Savings:$25 billion) • House version of the Middle Class Tax Relief and Job Creation Act would have phased bad debt payments to 55 percent (Savings: $10.6 billion) *Savings over 10 years

13. Risks for SNFs • Therapy changes • Medicaid Reform • The House Energy and Commerce Committee has held a series of hearings on Medicaid reform. • Chairman Upton and Finance Committee Ranking Hatch released a Medicaid reform plan that focuses on letting states make patient-centered reforms and imposing fiscal discipline.

14. Post-Acute Care Reforms • President’s budget include a number of PAC reforms • Creating site neutral payments for IRFs and SNFs (Savings: $2 billion) • Establishing more stringent criteria for IRFs (Savings: $2.5 billion) • Tackling SNF Readmissions (Savings: $2.2 billion) • Creating bundled payments (Savings: $8.2 billion) • Modifying the Part B deductible for new beneficiaries (Savings: $3.3 billion) • Simpson-Bowles • Reform Medicare cost-sharing rules. (Savings: $90 billion) • Create a unified deductible, uniform co-insurance, and out-of-pocket maximum, while varying the deductible and out-of-pocket limit with income. • Restrict Medigap plans from covering near-first-dollar costs. • Impose a surcharge on retiree health plans while offering an option for seniors to “cash out” and instead use the value to subsidize their Medicare premium. *Savings over 10 years

15. Other Issues • Observation Stays • Stakeholders are pushing for legislation that would include time spent in observation toward the three-day necessary hospital stay that qualifies beneficiaries to receive nursing home services. • Some House members have expressed interest in repealing the three-day stay altogether. • There are talks of using SNFs as a payfor. • The FY 2014 IPPS proposed rule clarified the admissions status policy to curb the trend of increasing observation stays. The final rule is expected August 1. • OIG released a report on hospital use of observation status. OIG found that short inpatient stays costs Medicare and beneficiaries more than observation stays. The proposed IPPS would reduce the most expensive types of inpatient hospital stays. The report makes no recommendations. • Open enrollment in the insurance exchanges begins October 1. *Savings over 10 years

16. Commission on Long-Term Care • The Commission on Long-Term Care, established by the fiscal cliff deal, has held two public meetings to date. • The Commission’s recommendations to Congress are due in September. • The law requires a majority to pass a recommendation.

17. Outlook • We must be prepared for ANY scenario.  • We must have policy solutions on the table to  be part of the discussion.

18. Legislative Update Mark Parkinson, President & CEO

19. Policy Approach Be part of the solution by developing acceptable pay-fors

20. Hospital Readmissions • CPAC and BOG have approved language • CBO has forced changes • No shared shavings program • Secretary sets annual baseline • CBO scoring – in process • Leadership has pushed CBO • Ongoing project

21. Hips/Knees • Endorsed President’s language • CPAC & BOG endorsed • CBO score - $1.3 billion/10 years

22. Bad Debt • Background • Proposal

23. Lobbying Strategy Focus on Margins Focus on Readmits

24. August Skilled Nursing Care Center Tours • Targeting • Energy & Commerce • Ways & Means • Senate Finance • Leadership • 12 already held or scheduled • States: GA, IA, NJ, NY, OH, PA, TX, UT, VA

25. 92 Key Staffers • Lobbying August and September • Message • Margins • Readmissions

26. Late Fall Fly-Ins • November 19th-20th • December 9th-10th • Targeting • Energy & Commerce • Ways & Means • Senate Finance • Leadership

27. Advocacy Media Campaign

28. Board Approved: $700k JOBS QUALITY COST POLICY

29. Advocacy Roll-out October: Jobs September: Quality November: Cost December: Policy

30. We Are The Solution • Planned Advertisements • December 2013: The “Big Five” Sunday Shows

33. Therapy Update Mike Bassett, AHCA Senior Director of Government Affairs

34. Steps Taken • Therapy Workgroup appointed • Members: • Mary Van de Kamp, Kindred, Chair of the Workgroup • Joy Gravos, Extendicare • Joanne Wisely, Genesis • Martha Schram, GoldenLiving • Laurie Thomas, Skilled Healthcare • Ryan Beddingfield, UHS-Pruitt • Guy Cowart, Marquis Companies

35. Team Developed • Mike Bassett, Senior Director of Government Affairs • 13 years of policy and legislative experience • Most recently, Senior Policy Advisor and Acting Legislative Director for Sen. Bob Corker • Former Staff Director with the Committee on Aging • Former Legislative Assistant to Sen. Mel Martinez and President George W. Bush • Former Campaign Fundraiser for Fletcher for Governor of Kentucky • Dan Ciolek, Senior Director of Therapy Advocacy • 26 years of clinical and healthcare policy experience • Past 13 years, served as the lead expert and project manager for several CMS contracts related to therapy • Dan Elling, Alston Bird • Former staff director of Ways and Means

36. Timeline • Today’s discussion • August 14th – Therapy Workgroup meeting • Consult Finance • August 26th – Back to CPAC • September 4th - BOG

37. Therapy Cap History • Congress has extended the exceptions process every year since 2006. • Cost of extending the exceptions process is now $1 billion per year (and growing) • Current exceptions process expires on January 1, 2014 – HIGHLY unlikely

38. 2011 Reforms • Goal: Collect necessary data to better tailor the therapy benefit to patient need. • Exceptions process begins at $1,900 in 2013 • Manual medical review begins at $3,700 (top 5%) • Extend cap and exceptions process to the HOPD setting • Require supervising physician and KX modifier to appear on all claims • CMS data collection requirements • Behavioral impact?

39. 2011 Reforms • Implementation issues • CMS said they could do it, then they said they needed more money • Because of resource constraints (staffing and financial), CMS chose to roll out the new reforms in three phases • CMS targeted high spending providers, not high cost beneficiaries as the statute required • Congressional oversight • Manual medical review • The current pre vs. post-payment review is not required or envisioned by the statute • Legislation simply requires CMS to conduct such reviews in a manner “similar to” what had occurred in 2006

40. Prospects for 2013 • Therapy cap exceptions process has enough support to pass on its own – even without the “doc fix.” • Evidence? Numerous Energy and Commerce members brought up “Medicare Extenders,” and therapy caps specifically, in the Energy and Commerce Health Subcommittee markup • CMS will not have collected enough data to allow Congress significantly change the outpatient therapy benefit along the lines of 2011 goals. 2013 extension (for 2014 payment year) will likely resemble current law but there is an opportunity for improvements • Committee staff desire to make exceptions process “easier” (e.g., electronic filing, status). Which creates an opportunity for…

41. Reform Proposal • Goals • Preserve access to medically necessary therapy services for Medicare/Medicaid patients in both SNF and outpatient settings • Ensure that adequate controls and safeguards exist to protect against overutilization • Build a pathway to a value-based payment system for Part B therapy services

42. Reform Proposal (short-term) • Maintain current framework for Part B therapy safeguards • Add additional safeguards • Accountability – Redirects auditing resources to better target outlier providers, increases accountability of contractors and Recovery Auditors, and improves provider compliance. • Timing - Minimizes disruption in patient care by streamlining timing of review process by specifying timeframes for the review, communication, and resolution of issues. • Transparency - Improves provider transparency by setting minimum standards for the individuals conducting the reviews and improving performance measurement. • Ensure continued access to medically necessary therapy through improvements to current system

43. Reform Proposal (long-term) • Require development of alternative payment models for Part B Therapy (3-5 years) to transition from fee-for-service to value-based payment system • Adopt alternative payment for Part B therapy (5-7 years)

44. Questions?