Innovation and Risk: Bringing the Future of Payment Reform into Focus

1. Innovation and Risk:Bringing the Future of Payment Reform into Focus HFMA Idaho Chapter 2014 Winter Conference January 15-17, 2014

2. Discussion Overview • Payment Reform: A Market in Transition • Innovation Payment Models • Regulatory Environment & Transitioning Traditional Fee for Service to VBP

3. Payment Reform: A Market in Transition

4. True Reform Will Require Disruptive Innovation* Simplifying Technology Low Cost Business Models Value Network Regulations & Standards That Facilitate Change * Source: “The Innovator’s Prescription” by Clayton M. Christensen

5. Supreme Court Examines Constitutionality U.S. Supreme Court Ruling: June 28, 2012

6. The Foundation: Value-Based Payment Value Based Payment: “a reform initiative whereby health care providers will receive payment for service based on their performance or the potential outcomes of the service” Tying payment to performance is perhaps the most significant aspect of health care reform. The de facto definition of “value” in health care reform is the intersection of lower cost and improved quality. Providers who can lower costs and deliver quality will be measured as “value-based providers” Lower Cost Value Improved Quality

7. Where Payment Reform is Happening* * Source: Americas Health Insurance Plans (AHIP) accessed via web on 9/3/13 at: http://www.ahip.org/searchResults.aspx?searchtext=payment reform activity

8. A New Competitive Landscape: Health Plans Gaining Market Control 30+ states have insurance markets dominated by a single insurance company (Median market share held by the largest insurance carrier in each state was 54%)

9. A New Competitive Landscape:Increasing Control = Greater Contract Leverage • Increase in Average Annual Deductibles 2008 to 2011: • In-Network Increase: • Individual Coverage: 17.2% to $587 • Family Coverage: 12.4% to $1,317 • Out-of-Network Increase: • Individual Coverage: 27.5% to $1,084 • Family Coverage: 30.9% to $2,591 • Increase in Average Annual Co-Insurance: • In-Network Remained Constant: • Physicians $20 • Hospitals 20% • Out-of-Network Increased: • Physicians: From median of 30% to 40% • Hospitals: From 35% to 40% • Paying at “Medicare like rates” vs. “usual and customary rates” *Source: “Out-of-Network Care Adds to Health Expenses” by Michelle Andrews and Kaiser Health News dated April 16, 2012 summarizing data from HR consultant Mercer’s Annual Survey of Employer Sponsored Health Plans

10. 2014 Market Transitions to Monitor • Transitioning commercial contracting • More “stiff arming” especially for smaller providers • On-going provider operational challenges • Revenue cycle issues • Profitability continues to be squeezed • Charge capture issues • Exchange related impacts • Glitch continuation? • Reimbursement implications • “Surprise” narrow networks ? • Increased demand for medical services • Reprieves from mandates – how long will they last? • Consumer impact – choice & out-of-pocket costs • Escalation in ruthless competition • Formation of narrow networks impacting market share

11. Trading Price for Volume on the Public Exchanges Expect Lower Provider Payment Rates, Less Patient Choice Source: Mathews AW and Kamp J, “Another Big Step in Reshaping HealthCare,” Wall Street Journal, February 28, 2013, available at: www.online.wsj.com; Hancock J, “Aetna Cuts Predictions for Obamacare Enrollment,” Kaiser Health News, April 30, 2013, available at: www.capsules.kaiserhealthnews.org; Health Care Advisory Board interviews and analysis. Pseudonym. Anticipated Provider Reimbursement Rates for Exchange Plans Aetna’s Planned Reduction in Exchange Network Size 25%-50% reduction in exchange network size, compared to networks for typical commercial products WellPoint Inc. Between Medicare and Medicaid rates Catholic Health Initiatives Modest discounts from commercial rates Millern Medical Center1 20% below commercial rates Meyers Health1 10% above Medicare rates Case in Brief: Aetna Inc. • Health insurer planning to sell narrow network exchange products in 14 states • Searching for providers agreeing to lower rates in narrow network products • Plans for rates to fall closer to Medicare than commercial reimbursement Tenet Healthcare Up to 10% below commercial rates Meriwether Hospital1 5% below commercial rates

12. Walmart Eying the Health Care Industry Moving Beyond Basic Retail Clinics Source: The Advisory Board Holmes TJ, “The Diffusion of Wal-Mart and Economics of Density,” May, 2006; Zimmerman A and Hudson K, “Managing Wal-Mart: How U.S.-Store Chief Hopes to Fix Wal-Mart,” The Wall Street Journal, April 17, 2006, available at: www.wsj.com; Aboraya A, “Wal-Mart Plans to Offer Primary Care in 5-7 Years,” Orlando Business Journal, January 11, 2013, available at: www.bizjournals.com/orlando; Aboraya A, “Exclusive: Wal-Mart Exploring Private Health Insurance Exchange for Small Biz,” Orlando Business Journal, January 11, 2013, available at: www.bizjournals.com/orlando; Health Care Advisory Board interviews and analysis. Scope of Services ” Potential Evolution of Health Care Products Basic Retail Clinic Full Primary Care Health Insurance Exchange “That’s where we’re going now: full primary care services in five to seven years.” Vice President Health and Wellness Payer Relations 4,600+ 4.2 miles 33% Median distance between a residence and Walmart Estimated portion of the US population that visits Walmart every week Number of Walmart stores in the United States

13. Beyond Walmart Walgreens Aims to Become the Premier Health Destination Source: The Advisory Board JapsenB, “How Flu Shorts Became Big Sales Booster for Walgreen, CVS,” Forbes, February 8, 2013, available at: www.forbes.com; “Take Care Clinics at Select Walgreens Expand Service Offerings,” Reuters, May 31, 2012, available at: www.reuters.com; Murphy T, “Drugstore Clinics Expand Care into Chronic Illness,” The Salt Lake Tribune, April 4, 2013, available at: www.sltrib.com, Walgreens, “Company Overview,” available at: www.walgreens.com; Health Care Advisory Board interviews and analysis. ” 2013: Launches three ACOs; begins diagnosing and managing chronic disease 2009: Launches flu vaccine campaign Simple Acute Services Vaccinations and Physicals Chronic Disease Monitoring Chronic Disease Diagnosis and Management 2007: Acquires Take Care Health Systems 2012: Offers three new chronic disease tests Case in Brief: Walgreen Co. Not Just a Drugstore • Largest drug retail chain in the United States, with 372 Take Care Clinics • In April 2013, became first retail clinic to offer diagnosis and treatment of chronic diseases “Our vision is to become ‘My Walgreens’ for everyone in America by transforming the traditional drugstore into a health and daily living destination...” Walgreen Co. Overview

14. Innovation Payment Models

15. Payment Reform Models Focus:Behavior-Intensive Diseases w/Deferred Consequences Diseases with Immediate Consequences Strong: Immediate Consequences Myopia Chronic Back Pain Psoriasis Infertility Hypothyroidism GERD Crohn’s Disease Allergies Celiac Disease Ulcerative Colitis Multiple Sclerosis Depression Sickle Cell Anemia Epilepsy HIV Type I Diabetes Behavior dependent diseases Technology Dependent Diseases Motivation to Comply With Best Known Therapy Parkinson Asthma Congestive Heart Failure Cystic Fibrosis Crushing costs of caring for chronically ill are in this quadrant: diabetes, asthma, tobacco, obesity, CHF, affect tens of millions of people each. Coronary Artery Disease Type II Diabetes Chronic Hepatitis B Schizophrenia Osteoporosis Alzheimer’s Cerebrovascular Disease Hypertension Weak: Deferred Consequences Bipolar Disorder Obesity Hyperlipidemia Diseaseswith deferred consequences Addictions Minimal Extensive Degree to Which Behavior Change is Required Source: “The Innovator’s Prescription” by Clayton M. Christensen

16. Chronic Conditions Drive Medicare Spending* Zero or 1 condition 2 or 3 conditions Zero or 1 condition 4 to 5 conditions 2 or 3 conditions 4 to 5 conditions 6 or more conditions 6 or more conditions * Source: MedPAC March 2013 Report to Congress Figure 1-5

17. CMS Defined Innovation Models * • Primary Care Transformation • Comprehensive Primary Care Initiative • FQHC Advance Primary Care Practice Demonstration • Graduate Nurse Education Demonstration • Independence at Home Demonstration • Multi-Payer Advanced Primary Care Practice • Accountable Care • Medicare Shared Savings Program • Medicare Advanced Payment ACO • Pioneer ACO • Comprehensive ESRD Care Initiative (LI/App.) • Bundled Payment for Care Improvement • Models 1 through 4 * Arising as a result of Affordable Care Act (ACA), and excluding programs in effect prior to ACA.

18. CMS Defined Innovation Models * • Initiatives to Accelerate Testing & Development of New Models • Health Innovation Awards • State Innovation Models • Initiatives to Speed Adoption of New Models • Community Based Care Transitions Programs • Innovation Advisors Program • Million Hearts • Partnerships for Patients • Medicaid & CHIP Initiatives • Emergency Psychiatric Demonstration • Incentives for Prevention of Chronic Diseases Model • Strong Start for Mothers & Newborns Initiative • Reduce Early Elective Deliveries • Enhanced Prenatal Care Models • Medicare-Medicaid Enrollees Initiatives • Financial Alignment Incentives • Reduce Avoidable Hospitalizations Among Nursing Facility Residents * Arising as a result of Affordable Care Act (ACA), and excluding programs in effect prior to ACA.

19. Medicare Accountable Care Organizations Providers eligible to form an ACO: • ACO professionals in group practice • Networks of individual practices of ACO professionals; • Partnerships and joint ventures between hospitals and ACO Professionals; • Hospitals employing ACO professionals • Critical Access Hospitals under Method II • Federally Qualified Health Centers • Rural Health Centers • Cannot include providers participating in other shared savings programs or demos or the Independence at Home pilot. ACO professionals : • Physicians • Nurse Practitioners • Physician Assistants • Clinical Nurse Specialists Other eligible ACO participants • Skilled Nursing Facilities • Home Health Care • Hospice • Comprehensive outpatient rehabilitation facility

20. ACOs Continue to Grow • On December 23rd CMS announced that 123 new organizations will join the Medicare ACO program effective January 1, 2014 • ACO enrollment has evolved and continued to grow since it was launched in April 2012: • April 2012 initial: 27 organizations • July 2012: 89 additional organizations • January 2013: 106 additional organizations • December 2011: 32 Pioneer ACOs, w/~ 23 remaining • Total ACO participation • Over 360 organizations • More than 5.3 million beneficiaries • More than 50% of ACOs led by physician groups, with < 10,000 beneficiaries

21. ACO Results to Date * • Pioneer ACO First Year Results: • Cost Reduction/Shared Savings: • Cost growth rate for 669,000 beneficiaries .3% vs. .8% • 13 participants generated gross savings of $87.6 million • 2 participants generated losses of approximately $4 million • Quality Metrics • 100% successfully reported quality measures • Overall performed better for all 15 clinical quality measures • 25 of 32 generated lower risk-adjusted readmissions rates • Median rate for blood pressure control for beneficiaries with diabetes was 69% vs. 55% • Median rate for LDL cholesterol control for patients with diabetes was 57% vs. 48% • CMS expects MSSP results later in year * Source: CMS “Pioneer Accountable Care Organizations succeed in improving care, lowering costs” July 16, 2013

22. 9 Pioneer ACOs departing the Program • Prime Care Medical Network Inc.: San Bernadino and Riverside counties, CA • University of Michigan Faculty Group Practice: southeastern Michigan • Physician Health Partners LLC: Denver, CO • Seton Health Alliance: Austin,TX and surrounding counties • Plus : North Texas Specialty Physicians and Texas Health Resources • Healthcare Partners Nevada ACO LLC: Clark and Nye counties • Healthcare Partners California ACO LLC: Los Angeles and Orange counties • JSA Care Partners LLC: Orlando, Tampa Bay and surrounding south Florida • Presbyterian Healthcare Services: central New Mexico (opted out of all Medicare ACO models) • Seven who achieved no savings are transitioning instead to the Medicare Shared Savings program • Two are opting to discontinue the Medicare ACO model altogether.

23. CMS Bundled Payment Initiatives: BPCI Models • Model 1 – Acute Care Hospital Stay Only (Retrospective): 3 participants representing 32 organizations • Model 2 –Acute Care Hospital Stay + Post Acute Care Episode (retrospective): 55 participants representing 192 organizations. • Model 3 – Post Acute Care Only (Retrospective): 14 participants representing 165 organizations • Model 4 – Acute Care Hospital Stay Only (Prospective): 37 participants representing 75 organizations Timeline January – July 2013: No-risk prep period. July 2013: Risk Bearing Implementation Period Source: The Advisory Board: “What are BPCI participants bundling?” by Rob Lazerow dated February 1, 2013

24. Medicare’s Largest Payment Innovation Program • BPCI1 Participation by State • More than 450 Providers Participating in BPCI1

25. BCPI Participants Favoring Longer Episodes Participation by Model Type Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis. Hospital Inpatient Services Hospital and Physician Inpatient and Post-Discharge Services Post-Discharge Services Hospital and Physician Inpatient Services

26. CMS Bundled Payments Initiatives: What is Being Bundled? Source: The Advisory Board: “What are BPCI participants bundling?” by Rob Lazerow dated February 1, 2013

27. Bundled Payments:Understanding Bundle Characteristics Bundle Risk: Approximately 51% of total bundle costs occurred post-discharge! CONFIDENTIAL: Subject to CMS Data Use Agreement #22626

28. Bundled Payments:The Post Acute Care Path and Impact on Bundle Acute Stay Discharge CONFIDENTIAL: Subject to CMS Data Use Agreement #22626

29. Commercial Insurance BPI Activity: Large Employers Cardiovascular & Spine Services Bundles • Payer: Walmart • Six Participating Providers: • Virginia Mason Medical Center, Seattle, WA • Mayo Clinic, Scottsdale, AZ , Rochester, MN & Jacksonville, FL • Scott & White Memorial Hospital, Temple, TX • Mercy Hospital, Springfield, MO • Cleveland Clinic, Cleveland, OH • Geisinger, Danville, PA • Description: Beginning January 2013 1.1 million employees eligible for consultation and care for certain cardiac & Spine procedures at no additional cost. Walmart will cover cost of travel, lodging, and food for patient and one caregiver. • Payer: PepsiCo • Participating Providers: John Hopkins, Baltimore, MD • Description: Starting 12/11 began waiving deductibles & co-insurance for employees who receive cardiac and complex joint replacement surgery at John Hopkins. • Payer: Lowes • Participating Providers: Cleveland Clinic, Cleveland, OH • Description: Contract for heart surgery program; will waive $500 deductible, out-of-pocket costs, airfare, hotel and living expenses. Source: The Advisory Board “Commercial Bundled Payment Tracker” accessed via web on 4/12/13 at: http://www.advisory.com/Research/Health-Care-Advisory-Board/Resources/2013/Commercial-Bundled-Payment-Tracker#lightbox/0/

30. CMS Primary Care Transformation • Comprehensive Primary Care Initiative • Multi-payer initiative fostering collaboration between public and private health care payers. • 497 primary care practices covering 7 states • Includes 2,347 providers serving an estimated 315,000 Medicare Beneficiaries • Independence at Home Demonstration • Tests the effectiveness of delivering comprehensive primary care services to Medicare beneficiaries with multiple chronic conditions at home. • Providers who succeed in reducing costs and meeting designated quality measures will receive an incentive payment. • Participants announced in April 2012 and include 15 different practices in 12 different states

31. CMS Primary Care Transformation • Multi-Payer Advanced Primary Care Practice • CMS participating in 8 states with multi-payer reform initiatives already being conducted in states. • Demonstration focuses in on if advanced primary care practice will reduce unjustified utilization and expenditures, improve safety, effectiveness and timeliness and efficiency of health care services. • Monthly care management fee is paid to cover care coordination, improved access, patient education, and other services to support chronically ill patients. • FQHC Advanced Primary Care Practice • A three-year demonstration program designed to evaluate the effect of advanced primary care practice model (commonly referred to PCMH) in improving care, promoting health, and reducing cost of care to Medicare beneficiaries served by FQHCs. • 493 participating FQHCs will be paid a monthly care management fee of $6.00 (paid quarterly) per eligible beneficiary attributed to their practice. • Fee is in addition to the usual all-inclusive payment rate currently received.

32. Patient Centered Medical Home – Demonstration Project Overview * • Project Objectives: • Identify and eliminate “gaps” in care • Reduction of health risk factors and enhancement of quality of life • Focused Clinical Conditions: • Asthma • Coronary Artery Disease • Hyperlipidemia • Hypertension • Adult/Adolescent/Childhood Immunizations • COPD • Diabetes • Anxiety/Depression • Breast/Cervical/Colorectal Cancer Screenings • Vital & Others * Source: BCBSMT Presentation at MT HFMA on PCMH Demonstration Project Results Fall, 2011

33. Patient Centered Medical Home: Demonstration Project Incentive Plan* • Structure Incentives Based on Outcomes • Participation Amount • Quality Outcome Amount • Patient Satisfaction • TCOC Amount • Incentive s for Both Improving & Achieving Targets • Additional Payment Incentives • $200 PMPY for Care Management of Chronic Conditions • $100 PMPY for Care Management of Preventive Conditions • Potential Savings • Reduced ER visits • Preventable Admissions & Re-Admissions • Improved Health Status • Increased Productivity, Employee Morale & Reduced Absenteeism * Source: BCBSMT Presentation at MT HFMA on PCMH Demonstration Project Results Fall, 2011

34. Patient Centered Medical Home: Demonstration Project Outcomes*

35. CMS Centers for Medicare & Medicaid Innovation (CMMI): State Innovation Models Initiative • Provides up to $300 million to support the development and testing of state-based delivery system transformation models for multi-payer payment and health care delivery system. • Three types of awards: • Model Testing Awards: • Six states received over $250 million to implement their State Health Care Innovation Plans. • Model Pre-Testing Awards: • Three states received just over $4 million to continue developing State Health Care Innovation Plans which will be submitted to CMS within six months from date of award. • Model Design Awards: • 16 states received almost $32 million to be used to develop a State Health Care Innovation Plan, including application for an anticipated second round of Model Testing awards. • States that received the Model Design Award have six months to submit their plan to CMS.

36. State Innovation Model Initiatives

37. CMS Centers for Medicare & Medicaid Innovation (CMMI): State Innovation Models Initiative • Model Design Award Recipient: Idaho $3 million • Project will result in a plan that will serve as the blueprint for integrating Idaho’s patient-centered medical homes and move the state towards an accountable care, integrated & sustainable delivery and payment system • Multi-payer and multi-organizational • Medicaid, Blue Cross, Regence BlueShield, Idaho Primary Care Association, Idaho Hospital Association, Idaho Legislature & Governor’s office; etc. • Project will address needed resources to enhance communication and coordination of care across the health continuum • Identify opportunities to improve patient care management through patient-centered medical homes • Create mechanisms to link the local health care system through partnerships with hospitals, primary care providers and county health & social service agencies

38. CMS Centers for Medicare & Medicaid Innovation (CMMI): State Innovation Models Initiative • Model Testing Award Recipient: Oregon $45 million • The Oregon Coordinated Care Model (CCM) is aimed at realigning health care payment and incentives so state employees, Medicare beneficiaries, and those purchasing coverage through Oregon Health Insurance Exchange have high quality, low cost sustainable coverage options. • CCM will focus on integrating and coordinating physical, behavioral, and oral health care and align incentives across medical and long-term care. • Testing will be driven through Oregon’s Coordinated Care Organizations (CCOs) which are risk-bearing, community based entities governed by a partnership among providers, community members and entities taking financial risk for the cost of health care. • CCOs have flexibility to institute their own payment and delivery reforms aimed at achieving best possible outcomes and are accountable for the health care care of populations they serve. • CCOs will transform payment to a fully-capitated payment model increasingly based on outcomes.

39. CMS Centers for Medicare & Medicaid Innovation (CMMI): Idaho Innovation Activity • Health Care Innovation Awards: • Intermountain Health Care • Geographic Reach: Idaho, Utah • Funding Amount: $9.7 Million • Est. 3 Year Savings: $67 Million • Project Summary: Test new care delivery & payment model using an IT-based simulation of human physiology, clinical events, and health care systems to forecast which interventions will be most effective in reducing a persons risk, provide risk stratification metrics for individual patients, and project benefits for specific interventions. • St. Luke’s Regional Medical Center, LTD • Geographic Reach: Idaho, Nevada, Oregon • Funding Amount: $11.8 Million • Est. 3 Year Savings: $12.6 Million • Project Summary: Establish remote ICU monitoring & care management in certain portions of rural Idaho and eastern Oregon, with overall goal of early identification of patients with specialized needs, improved care coordination, standardized practices, increase access & reduce ICU days.

40. CMS Centers for Medicare & Medicaid Innovation (CMMI): Idaho Innovation Activity • Health Care Innovation Awards (cont’d): • Trustees of Dartmouth College • Geographic Reach: CA, CO, ID, IA, ME, MA, MI, MN, NW, NJ, NY, OR, TX, UT, VT, WA • Funding Amount: $26.2 Million • Est. 3 Year Savings: $64 Million • Project Summary: Collaboration with 15 large health systems across country to hire Patient and Friendly Activators (PFAs) who are trained to work with patients with multiple chronic conditions to assist them with effective decision making in their care choices. • University of North Texas Health Science Center • Geographic Reach: 35 states, including ID, CO, MV, OR, & WA in the west and PNW • Funding Amount: $7.3 Million • Est. 3 Year Savings: $9.7 Million • Project Summary: Through partnership with Brookdale Senior Living (BSL) will expand and test BSL’s Transitions of Care Program which is based on an evidenced-based assessment tool called “Reduce Acute Care Transfers” for residents living in independent living, assisted living, and dementia specific facilities initially in Texas & Florida, but expanding to other states during the grant period.

41. Federally Qualified Health Center (FQHC) Demonstration Idaho Participants • Adams County Health Center (Council) • Family Medicine Health Center (Boise) • Health West (Pocatello) • Kaniksu Health Services (Bonners Ferry) • Terry Reilly – Nampa Clinic (Nampa) 3 year demonstration Help Medicare beneficiaries manage chronic conditions and provide coordinated care Receive $6 monthly care management fee for each eligible Medicare beneficiary Achieve Level 3 patient-centered medical home recognition

42. Regulatory Environment &Transitioning Traditional FFS Payment to VBP

43. Influencers of Hospital Medicare Reimbursement Patient Protection & Affordable Care Act (PPACA) March 2010 American Taxpayer Relief Act January 2013 MedPAC & OIG 2013 Reports • New formula for DSH payments. • Established requirements for pay-for-performance initiatives • “Payment equalization across sites of service” • Elimination of CAH designation for 849 of 1,329 CAHs • President Obama’s September 2011 budget • CAH swingbed reimbursement vs. skilled nursing facilities • Rural Health Clinic (RHC) designation and rules compliance • Extending CMS’s authority to recoup “excess payments” related to transition to MS-DRGs from FFYE 2014 – FFYE 2017 • $11 billion in “exchange” for SGR fix CMS Annual Updates • ACA implementation • Value-Based-Payment • Readmissions • DSH Implementation

44. MedPAC Pushing EqualizationPayment Pressures: “Good Ole Days” At Risk “Last year we made a recommendation to equalize payment rates for office visits provided in hospital outpatient departments and physician offices. We will continue to analyze opportunities for applying this principle to other services and sectors, such as sectors that provide post-acute care.” MedPAC 2013 Report to Congress

45. Emergence of Payment Equalization? • OPPS & PFS Final Rules • Both rules have proposals for collection of new data from hospitals differentiating OP services provided in “off-campus provider-based clinics”. • PFS Proposed Rule – not final, but being analyzed • Proposed implementation of a cap on certain physician services (~200 codes) provided in an office setting that would limit payment to be equal to HOPD or ASC • OPPS Proposed/Final Rule • Collapsing HOPD clinic & ED visits codes (ED change not adopted) • One code for HOPD clinic visits • Type A & Type B for ED visits

46. OIG Report: Most CAHs Would Not Be…….. • Report issued in August 2013 • Concluded nearly two-thirds (849 of 1,329) of CAHs do not meet the federal distance requirements • Obtained CAH designation through states declaring “necessary providers” or “NP” • OIG recommended the following: • CMS seek legislative approval to remove NP designation • Seek legislative authority to revise CAH Conditions of Participation to include alternative location-related requirements • Ensure it periodically assess CAHs compliance • Ensures consistency in application of “mountainous terrain” • OIG estimated, based on 2011 data, decertification would have save Medicare and beneficiaries $449 million

47. OIG Report: Most CAHs Would Not Be…….. • Other topics discussed in OIG’s report: • President Obama’s “2011 Plan for Economic Growth and Deficit Reduction”: • Reduce CAH reimbursement to 100% of costs, estimated savings $1.4 billion over 10 years • Decertify CAHs fewer than 10 miles from another hospital, estimated savings $690 million over 10 years • OIG Report on Rural Health Clinic (RHCs) Compliance • Numerous RHCs not compliant with requirements of being located in rural and underserved areas • Requirements do not effectively prevent RHC participation in areas with existing health care providers • OIG conducting nationwide study of CAH swing-bed services • Comparing reimbursement for same level of care obtained in skilled nursing facilities for 2005-2010

48. Bipartisan Budget Act of 2013 & Pathway for SGR Reform Amendment • Signed into law December 26, 2013 • Avoids a second round of sequestration cuts • Medicaid provisions: • Officially recognizes Medicaid as “payer of last resort” • Allows states to delay or avoid paying certain claims • Additional time to collect medical child support payments when health insurance is available through a “non-custodial” parent • Extends Transitional Medical Assistance (TMA) program through 3/31/14 • Provides financial assistance to low-income families retain Medicaid coverage as they transition from welfare to work • Repeals Medicaid DSH reductions for 2014 and delays 2015 cuts by one year • $500 million in 2014 – now repealed • $600 million in 2015 – deferred to 2016 • Rebases 2023 Medicaid DSH allotment based on 2022 allotment

49. Bipartisan Budget Act of 2013 & Pathway for SGR Reform Amendment • Temporarily avoids scheduled physician cuts • Deferred until April 1, 2014 • Instead of 20+% reduction, .5% increase • Conversion factor will be $35.8228 • Extends other provisions of ACA & ATRA through March 31, 2014: • Physician work geographic adjustment floor of 1.0 • Therapy caps on HOPD therapy services, as well as exceptions request process to those caps • Ground ambulance add-on payments • 2% for trips originating in urban areas • 3% for trip originating in rural areas • Increase over base rate of ~ 22.6% for trips originating in “super rural” areas • Medicare IP hospital low volume adjustment (retro active to 10/1/13) • Medicare Dependent Hospital program (retro active to 10/1/13)

50. More SGR Legislation Being Introduced Source: The Advisory Board Company