Getting from Here to There

1. Getting from Here to There Eleven Steps to a Provider-Sponsored Health Plan July 31, 2013

2. Today’s discussion Today’s Speaker • Goals: • How do I become a health plan? • Practical tactical steps • Agenda • Why Provider-Sponsored Plans • 11 Steps • Q&A • Speaker • 37 year managed care executive • With Valence since 2004 • Currently VP of Medicaid Operations • Previously • COO of Major Provider Plan with 60,000 lives • Hospital Administrator Joe Cecil VP Of Medicaid Operations, Valence Health

3. Take a Step Back – Why Provider-Sponsored Plans? • Why Should Providers Play? • Waste: 30-40% of all medical expense is waste.1 • Quality:50% of medical care is substandard.2 Provider sponsored plans more efficient and effective.5 • Preventative Disease: 75% of total medical costs are for preventable conditions.3 • Administrative Cost: 31 cents out of every health care dollar goes to administrative cost, not medical care to people.4 • History and What’s Different Now • Financial Imperatives: • Continued Medicaid FFS deterioration • Medicare FFS rates below Medicaid’s by 2020 • Employers less willing to accept cost shifting • FFS penalizes high-value providers • Already insuring employees • Prevalence and Performance • The Fit With Value-Based Care Source: 1) Institute of Medicine reports. 2)New England Journal of Medicine 3) CDC 4) Richard Clarke, Wall Street Journal 5) Commonwealth Fund.

4. Health Plan Fit for Provider-Sponsored Organizations • Mission • Community value • Profit motives • Brand identification • Payer pitfalls

5. 11 Steps to Provider-Sponsored Plans • Assessment / Business Case • New Organization Formation • Plan Design • Provider Network Recruitment and Relations • Medical Management • Operations • Financial Planning and Reporting • Technology Systems • Regulatory Compliance / Community Relations • Expertise and Staff • Health Plan Sales / Broker Relations

6. Assessment and Business Case • Identify the potential network size and types of providers • What other providers would be participating in the plan? How strong is our primary care base? • Will independent payers still be willing to work with the organization? If not, can the organization function without those contracts? • With which patients or in which geographical regions does the provider hold a competitive edge over other systems? • How will the region’s consumers and employers respond to a provider-sponsored plan? • Is there legislation that makes it difficult for provider-sponsored plans? Is there legislation that is supportive? • Does the provider organization have the cash on hand and a bond rating high enough to allow it to set aside the necessary reserves? • Assess local payer reaction • Identify the organization’s market position and local competition • Gauge community receptiveness • Regulatory environment • Costs and financial position

7. Cost Analysis: Illustrative Example Ongoing Financials Startup 1 Assumes 100,000 members 7

8. New Organization Formation • Mission / Vision • Legal Creation – what type of organization? • What type of MCO – HMO, PPO, EPO, etc • Governance – internal, community, hybrid • Arm’s Length Rule

9. Plan Design • Which business lines (Medicare, Medicaid, Commercial, Employees) • Benefit levels • Targeted members • Reinsurance / stop loss • Coverage specifics • Clinical coverage • Administrative philosophy • Limits

10. Provider Recruitment and Relations • Provider network is required to submit for a Certificate of Authority to the Department of Insurance • Map your network by type, location and specialty. • What is owned? What is contracted? Who are friends and allies? • What is missing from your network? • Who is in the marketplace that would contract for missing services? • Map community providers by type, location and specialty • Create contract templates – need legal assistance • Hire seasoned Provider Relations Representatives • Obtain provider commitments on signed contracts • Credentialing processes

11. Provider Recruitment and Relations - #2 • What do you need in order to get providers to sign? • Without a product line, it may be difficult to get signatures from providers outside the system • Provider Manual – they want to know the rules and they want to know that you know what you’re doing • Committee Structure – credibility means physician involvement – inside and outside your sponsoring entity • Authorization and Referral Rules – outside might differ from inside

12. Medical Management Utilization Management • Medical Director • Medical Management Policy • Utilization Management • Case Management • Disease Management • Population Management – gaps in care • Provider Profiling • MIS – best if integrated with administrative systems • HEDIS and quality of care reporting • Pre-certification requirements Case Management Clinical Policy Care Management Quality Management

13. Operations • MIS • Claims Processing • Claims analysts • Audit and recovery • Claims system configuration – rules for payment • Member Customer Services • Information • Complaints • Fulfillment • Provider Customer Services • Provider Relations • Network Management and Contracting

14. Financial Planning and Reporting • Financial analysis • Cash-on-hand requirements • Reserves • Reinsurance/stop loss • Audits • Ongoing reporting • Basic Analysis • Service Utilization • Claim Lag Reporting • IBNR – Incurred But Not Received • Medical Loss Reporting • Provider Profiling

15. Technology and Systems • Claims Processing • EDI • EFT and 835 • Customer Service • Care Management • Data Warehouse • Portals • Authorizations • Provider query for eligibility and claims • Population management

16. Regulatory Compliance and Community Relations • State filing • National Association of Insurance Commissioners (NAIC) • State Department of Insurance • Purchasers • Dealing with CMS or State Medicaid Commissions • Lots of reporting • Micro-management • Sometimes not timely or clear with what they want • Community Relations • Marketing

17. Expertise and Staff • Executive team • Training • Recruitment • Use domain experts not repurposed high performers • Perform internally or outsource? There is no need to reinvent the wheel.

18. Expertise and Staff – What makes sense to outsource? An art not a science Staffing ratios are an estimate. Largely depends on programs.

19. Go to Market Execution • Marketing • Consumer • Employer • Direct Sales • Exchange • Broker Network • Premium Billing

20. Summary • No provider-sponsored plan is cookie cutter, but parts of other’s experiences can be reused • Get the mission and objectives right • Know the market and the providers in the market • Choose partners with integrity and experience if you need help • Don’t be afraid to outsource, but maintain control over your core functions of network, quality and branding • There’s no time like the present

21. Questions ? • Joe Cecil, VP of Medicaid Operations, Valence Health • Information@ValenceHealth.com • www.valencehealth.com