HEALTH CARE REFORM:

1. HEALTH CARE REFORM: MANAGEMENT ACADEMY South Carolina Hospital Association Columbia, SC May 15, 2013 James Bentley, Ph.D. Silver Spring, Maryland

2. Presentation • Nomenclature • Legal status and responses • Reform Framework • Coverage • Quality • Affordability

3. Nomenclature • March 23: Patient Protection and Affordable Care Act (PPACA) • March 30: Health Care and Education Reconciliation Act of 2010 • Common Usage: Affordable Care Act (ACA) to refer to both acts combined

4. Supreme Court Decision • The Individual Mandate stands because the penalty for lacking coverage imposed by the Federal Government is a tax. • State participation in the Medicaid expansion is optional.

5. Health Reform Objectives:Balancing Priorities Coverage (too few) Quality Affordability (too variable) (too expensive)

6. Coverage Provisions • About 94% covered if all states expand Medicaid • Coverage mandate to create a stable insurance pool • Insurance exchanges for purchasing by individuals and small businesses • Medicaid expansions for persons at or below 133% of poverty threshold • Subsidies for persons between 134% and 400% of poverty threshold

7. Coverage Levels

8. Coverage Timeline • October 1, 2013 • Health Insurance Exchanges Operational • January 1, 2014 • Coverage expansions effective

9. Coverage Uncertainities • How many people will elect to pay the penalty for not obtaining coverage? • How many insurers will offer products through the insurance exchanges? • Which level of coverage will individuals and employers select: bronze, silver, gold, or platinum? • Will individuals find the initial insurance exchanges easy to use? • Will employers offering group coverage continue that practice or will they discontinue their policies and recommend employees purchase individual policies through the insurance exchanges.

10. A Massachusetts's Lesson:Coverage requires Access Physician payment: to increase primary care access • Medicare: • Primary care: Family Medicine, Internal Medicine, Pediatrics, Nurse Practitioners, Clinical Nurse Specialists, Physicians’ Assistants • 60% of services in selected E&M codes • 10% bonus for E&M services • 2011 through 2015 • General Surgeons in HPSAs • Medicaid: Primary care • Pay at least Medicare rates for primary care • 2013 and 2014

11. Hospital Strategies: Coverage • Create alternatives to the ED for primary care access • Primary care networks within community • Federally qualified health centers (FQHC) • Rural Health Clinics • Urgent care option to ED within the hospital • Coordinate care with all patient sources • Community physicians • FQHCs and Rural Health Clinics • Free Clinics

12. Quality Provisions • Incentives for adopting best practices • Penalize high readmission rates • Competing against your own case mix • Base = 2010-2012 • Penalize hospital-acquired conditions • Competing against all hospitals: 25% penalized • Base = 2012-2014 • Financial incentives for coordinating care • Bundled care pilots • Accountable Care Organization pilots • Requires 5,000 Medicare patients minimum • Improve the evidence base of medicine • Comparative effectiveness research • Practice variation research

13. Hospital Strategies:Quality #1 • Identify the current system of care • Who are your clinical partners? • What are today’s care patterns? • Are all the necessary components included? • Assess partners’ performance • Clinically • Resources used (financially) • Redesign the current system of care if necessary • To improve quality • To restrain costs

14. Hospital StrategiesQuality #2 • Make evidence-based practice routine • Create the essential infrastructure • Selection process for protocols/guidelines • Updating process for protocols/guidelines • Routine communication of protocols/guidelines • Create a process for the “off-protocol case” • What documentation for atypical patient • How share learning?

15. Hospital StrategiesQuality #3 • Be able to coordinate care as efficiently as the best in your area. • Develop capability to manage care across settings/ practices

16. Health Reform:Payment Reductions • Delivery system payment • Medicare incentives to conserve resources • Productivity offset to annual update • Started at- 0.25% in 2010, rises to -0.75% in 2019 • Value-based purchasing • Starts at -1% in 2013, rises to -2% in 2017 • Readmission penalty • Starts at -1% in 2013, rises to -3% in 2015 • Hospital acquired condition penalty • A constant -1% • Medicare and Medicaid: Decreased DSH payments • Smaller payment differentials in private sector likely • Physician payment • No permanent fix to fee update

17. Hospital Strategies:Payment • PPS hospitals: Avoid the payment penalties • Lower the hospital’s cost structure • Project multi-year trend lines • PPS stretch goal: Breakeven at Medicare’s price • Share diagnostic and treatment information to reduce duplication of ancillary services for patients • Especially important for bundled payment and ACOs

18. Impacting the Medicare Update Base: Prior-year rate Plus market-basket update Minus productivity offset Minus Value Based Purchasing Minus excess readmission Minus hospital acquired conditions Plus shared savings of improved efficiency • Bundled payment • Accountable Care Organizations Equals Actual change in payment

19. Closing Comments • Three keys • Quality of Care • Efficiency of Care • Coordination across continuum • Think of yourself as part of a health system • Not an individual hospital, nursing home, or home health agency. • Conserve capital to invest in a “new business model.” • Assure that the quality and efficiency of care in your system are competitive with the best in your area.