CAHs the ACA and Beyond John T. Supplitt, Senior Director AHA Section for Small or Rural Hospitals

1. 10th Mid-South CAH Conference • CAHs the ACA and Beyond • John T. Supplitt, Senior Director • AHA Section for Small or Rural Hospitals

2. Agenda • Political Environment • Funding the Federal Government • Regulatory policy • Routine and other rulemaking • ACA implementation • Rural hospital advocacy agenda

3. Political Environment

4. December 31, 2012 • “We Were Warned” • Moratorium on Medicare physician cuts expire • Payroll tax cut expires • Bush tax cuts expire • Sequester scheduled to kick-in • Debt ceiling will need to be extended, AGAIN

5. Old Vulnerabilities • Piling On Rural • CBO “options” document - $62B in savings if eliminate CAH, MDH, SCH • Biden Group/Rep. Cantor - $14B to reform rural hospitals • House Ways and Means “options” document – references CBO options • Pres. Obama proposal to “supercommittee” • Reduce CAHs payment of 101% of costs to 100% • Prohibit CAH designation for those CAHs that are less then 10 miles from nearest hospital • MedPAC principles

6. HR 3630 Middle Class Tax Relief & Job Creation Act of 2011

7. New Vulnerabilities • Reductions in payments to hospitals for assistance to low-income Medicare beneficiaries (bad debt); • Reductions in payments for evaluation and management services provided in hospital outpatient departments; • Extending the current cap on exceptions process to therapy services provided in hospital outpatient departments; • Weakening prohibition on the establishment of new physician-owned specialty hospitals, and relaxing the restrictions for growth; and • Providing the CMS with new authority to make additional across-the-board cuts to Medicare inpatient hospital rates through the use of retrospective coding adjustments

8. 2012 Congressional Calendar You are here.

9. Funding the Federal Government

10. House FY 2013 Budget • Eliminate for one year the 2% defense and domestic discretionary spending cuts sequestered under the Budget Control Act • Retain 2% Medicare cuts – sequesters $6 B over 10 years • Transition Medicare to a premium support program in 2023 • Convert Medicaid into a block grant program – reducing federal spending $5 B in FY 2013 and $810 B over 10 years • Rescind individual subsidies and Medicaid expansions in the ACA, but keep $500 billion in Medicare cuts • Increase the Medicare retirement age by two months per year until it reaches 67 • Combine Medicare Parts A and B • Increase means testing for Parts B and D.

11. President’s 2013 Budget • Reductions to Medicare payments: • Bad debt. • Indirect Medical Education (IME). • Rural providers. • Post-acute care. • Independent Payment Advisory Board • Reductions to Medicaid payments: • Medicaid provider taxes. • Medicaid payment formulas. • Medicaid DSH payments.

12. President’s 2013 Budget Annual Appropriations

13. Continuing Resolution

15. Regulatory Policy

16. Regulatory Policy Update On Our (CAH) Radar • Medicare Conditions of Participation • OPPS Proposed Rule and Direct Supervision • ICD-10 • HUD 242 Financing • Drug Shortage • MedPAC • MBQUIP • ACA Implementation

17. Medicare CoPs • Final Rule • Governance and Medical Staff • CAH Services • Elimination of Paperwork • Outpatient Services

18. Direct Supervision • Advisory Panel on Hospital Outpatient Payment • Renames the APC panel • Expands membership to CAHs and SR hospital • Amends the charter to address supervision Extends through CY 2012 its enforcement moratorium on the direct supervision policy for outpatient therapeutic services provided in CAHs and in small and rural hospitals with 100 or fewer beds.

19. Direct Supervision • February 27-28: Supervision Panel Met • Recommended 27 HCPCS codes be downgraded to general supervision • Next meeting of the HOP Panel: August 27-29 • Must identify HCPCS codes that clinical staff can justify revising from direct to general • Formal presentations, limited to 5 minutes per individual or organization, • Oral comments, which will be limited to 1 minute for each individual and a total of 3 minutes per organization

20. ICD-10 In the proposed rule, CMS indicates that it considered other options before proposing a one-year delay. They included: 1. retaining the October 1, 2013 date; 2. maintaining the date for ICD-10-PCS only, but delaying ICD-10-CM for diagnosis codes only; 3. forgoing ICD-10 altogether and wait for ICD-11; and 4. mandating a uniform delay for ICD-10-CM and ICD-10-PCS.

21. HUD Section 242 Department of Housing and Urban Development’s (HUD) proposed increase to its multifamily and health care mortgage insurance premiums (MIP) as announced in the referenced Federal Register notice.

22. Drug Shortage Survey Results • 820 hospitals responded • 99% reported a shortage • Nearly half reported >21 drugs in shortage. • 82% of hospitals report that they have delayed treatment • 7 in 10 hospitals reported treating patients with less effective drugs • 77% rarely or never receive advance notification of shortage

23. Shortage Dynamics • Common Factors Behind Shortages • Product quality/manufacturing problems • Not enough manufacturing capacity • Discontinuation of products • Problems with or shortages of raw materials or components • Increase in demand due to another shortage • Loss of manufacturing site • Industry consolidation (fewer firms making these products) • Generally not economically attractive ECONOMIC ANALYSIS OF THE CAUSES OF DRUG SHORTAGES – HHS, ASPE October 2011 The current class-wide shortages in the industry appears to be a consequence of a substantial expansion in the scope and volume of products produced by the industry that has occurred over a short period of time, without a corresponding expansion in manufacturing capacity.

24. MedPAC Rural Report Principles for Rural Access • Fewer physicians, but patient satisfaction equivalent • Consumption of services is equal – ergo access is equal • Quality is similar, but mortality and process measures are worse • Payment is adequate for Home Health, SNF, Hospice, inpatient rehab, and hospitals

25. MedPAC Rural Report Principles for Rural Quality • Quality of care in rural and urban areas should be equal for non-emergency services rural providers choose to deliver • Quality of emergency care may differ between rural and urban areas due to limitations of small rural hospitals and the necessity to treat the patient at the rural facility • All providers should be evaluated on all the services they provide and the data should be publicly reported

26. MedPAC Rural Report Principles for Rural Payment Adjustments • Target providers that are the sole source of care • Payments should be empirically justified • Low-volume adjustments should be tied to total volume • Don’t duplicate adjustments • Maintain incentives for cost control

27. MBQIP and Partnership for Patients • Benefits of Participating in MBQIP • Engage in quality improvement initiatives • Improves patient care across a broad population • Improves hospital services, administration and operations • Allows for clear benchmarking and the identification of best practice CAHs • Receive technical assistance regarding cutting edge quality improvement tools and models • Prepare CAHs for the future where CAHs will likely have to report measures • Fulfills the Quality Improvement portion of Flex Grant

28. ACA Implementation Requirements for Tax-Exempt Hospitals The ACA added section 501(r) that includes additional requirements that a hospital ORGANIZATION must meet to qualify for tax exemption under section 501(c)(3) in tax years beginning after March 23, 2010. Financial Assistance Policy/Emergency Medical Care Billing and Collection Limitation on Charges Community Health Needs Assessment

29. ACA Implementation Community Health Needs Assessment • Definition of a Hospital Organization • Hospital Organizations with Multiple Hospitals • Documentation of a CHNA • How and When a CHNA is Conducted • Community Served by a Hospital • Persons Representing the Broad Interests of the Community • Making a CHNA Widely Available to the Public • CHNA Implementation Strategy • How and When a CHNA Strategy is Adopted • $50K Excise Tax on Failure to Meet Requirements • Reporting Requirements

30. ACA Implementation Medicare Shared Savings Program • ACOs will continued to be paid based on FFS • They can receive a “shared savings” payment if: actual spending is below a benchmark • CMS offers two options: • Advance Payment Model • Pioneer ACOs • “One-Sided” Model • Years 1 & 2: shared savings only • Year 3: shared savings & losses • Minimum Savings Rate: 2.0%-3.9% • Shared savings: 50:50 (bonus cap of 7.5%; loss cap of 5%) • Able to share the first dollar savings • “Two-Sided” Model • Years 1-3: shared savings or losses • Minimum Savings Rate: 2.0% • Shared savings: 60:40 (bonus cap 10%; loss cap of 5% Y1, 7.5% Y2, 10% Y3) • Able to share first dollar savings

31. ACA Implementation 2 VBP Demonstrations for Certain Excluded Hospitals • Critical Access Hospitals • Hospitals with a small number of cases or quality measures • Test innovative methods of measuring and rewarding quality and efficient health care • Begin by March 23, 2012; 3-year period • Budget neutral • Number of sites to be selected by the Secretary • No more than 18 months after demo, report to Congress on recommendations to establish permanent program

32. Rural Hospital Advocacy Agenda

33. 2012 Rural Advocacy Agenda • Extend Expiring Provisions • R-HoPE • Provider Taxes • Direct Supervision for Outpatient Services • The 340B Drug Discount Pricing • Repealing the IPAB • Reauthorizing Conrad-30 • Drug Shortages • The Rural Hospital Access Act

34. Medicare Extenders Key Hospital Provisions

35. R-HoPE • “Sense of the Senate/Congress” • Extend the outpatient hold harmless through 2013 • Increase the lo-vol adjustment to 2000 discharges in 2012 • Extend cost-based reimbursement for rural outpatient labs • Eliminate isolation test for CAH-based ambulance services • Introduce capital infrastructure revolving loan program • Extend the billing for the technical component of physician pathology services • Reimburse CAHs for CRNA on-call services

36. Provider Taxes Rural Hospital Protection Act Sam Graves (R-MO) an Ron Kind (D-WI) The Rural Hospital Protection Act (H.R. 1398) would ensure that the full cost of certain provider taxes are considered allowable costs for purposes of Medicare reimbursements to critical access hospitals (CAHs).

37. Direct Supervision • Protecting Access to Rural Therapy Services Act • Sen. Jerry Moran (R-KS) • adopts a default standard of general supervision for outpatient therapeutic services • establishes a advisory panel of clinicians to set up an exceptions process for those services that would require higher level of supervision • establishes a special rule for CAHs based upon Medicare CoPs • revises the definition of “direct supervision” to allow for telemedicine, telephone or other technology • puts in place a hold harmless from civil or criminal action back to 2001

38. 340B Program Improvement Act Reps. McMorris Rodgers (R-WA), Rush (D-IL) and Emerson (R-MO)

39. Repealing the IPAB

40. Reauthorizing Conrad 30

41. The Rural Hospital Access Act 943 The Rural Hospital Access Act(S.2620) (H.R. 5943) Sens. Schumer(D-NY) and Grassley(R-IA) Reps. Reed (R-NY) and Welch (D-VT) Would extend the MDH program and the low-volume adjustment for one year to September 10, 2013.

42. SCOTUS

43. We Care…We Vote Objectives • Impact congressional elections • Educate public and candidates on key issues in preparation for deficit reduction debate • Why are health costs rising? • What are we doing about it? • What more can be done? • Good citizenship…and highlighting hospitals as voters (big employers) ™

44. Join Partnership for Action The Partnership for Action brings members of the hospital and health system family together, with their state hospital association and the AHA, to educate elected officials in Congress. Join us to help make it clear that the decisions legislators make in Washington, DC, have important implications back home.

45. Questions and Discussion

46. Contact Information John Supplitt Senior Director AHA Section for Small or Rural Hospitals Chicago, IL 312-422-3306 jsupplitt@aha.org