Patient Protection and Affordable Act (Pub.Law.No.111-148): Challenges and Opportunities for AMCs

1. Patient Protection and Affordable Act(Pub.Law.No.111-148): Challenges and Opportunities for AMCs Sibu P. Saha, MD, MBA Professor of Surgery University of KY

2. Educational Goals • Review the rationale and historical background of healthcare reform • “Obama Care”: What is in it? • AMCs: Challenges and Opportunities • Is Fee-For-service DEAD? • Preparing for the Future!

3. Why Do We Need Healthcare Reform? We are Broke $$!!

4. National Health Expenditures per Capita, 1990-2016 $12,782 (2016) $7,498 (2007) $2,813 (1990) Note: Figures from 1990 through 2005 represent historical data; data from 2006-2016 are projected. Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (Historical data from NHE summary including share of GDP, CY 1960-2005, file nhegdp05.zip; Projected data from NHE Projections 2006-2016, Forecast summary and selected tables, file proj2006.pdf).

5. 3.7% 2.6% Increases in Health Insurance Premiums Compared to Other Indicators, 1988-2007 *Estimate is statistically different from estimate for the previous year shown (p<0.05). No statistical tests are conducted for years prior to 1999. Note: Data on premium increases reflect the cost of health insurance premiums for a family of four. The average premium increase is weighted by covered workers. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2007; KPMG Survey of Employer-Sponsored Health Benefits, 1993, 1996; The Health Insurance Association of America (HIAA), 1988, 1989, 1990; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1988-2007; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1988-2007 (April to April).

6. Composition of Federal Spending 1966 1986 2006

7. 40% of this budget is borrowed money!

8. Saving our Future requires tough choices … ”our single largest domestic policy challenge is healthcare.” The truth is, our nation’s healthcare system is in critical condition. It’s plagued by growing gaps in coverage, soaring costs, and below average outcomes for an industrialized nation on basic measures like error rates, infant mortality, and life expectancy.” Today! The Honorable David M. Walker Comptroller General of the USA Slide 8

9. Historical Background

10. President Nixon • 1973 – Health Maintenance Organization Act • Created rules for firms wishing to be designated “federally” qualified HMOs • Requires firms that offer HMOs to offer a federally qualified plan. • When President Nixon signs the bill, he says, "This legislation will enable the federal government to help demonstrate the feasibility of the HMO concept over the next 5 years."

11. President Carter • Carter: Ted Kennedy killed healthcare

12. President Reagan • 1988 – Medicare Catastrophic Coverage Act • Short-lived piece of legislation singed into law by President Reagan • It was repealed the following year amidst widespread public dissatisfaction

13. COBRA-1985 • 1985 – The Consolidated Omnibus Budget Reconciliation Act (COBRA) • Amended the Employee Retirement Income Security Act of 1974 (ERISA) • Gave some employees the ability to continue health insurance coverage after leaving employment.

14. President Bush 41 Can you tell me what he was saying? Healthcare was not one of his priorities!

15. President Clinton’s Healthcare Reform Bill Clinton made health care reform one of the highest priorities of his administration. He asked the First Lady to chair the Task Force on National Health Care Reform.

16. President Bill Clinton 1996 - Health Insurance Portability and Accountability Act Becomes LawHIPAA sets national nondiscrimination and portability standards for individual health insurance coverage, HMOs, and group health plans. The image shows President Bill Clinton signing the bill. Senators Nancy Kassebaum and Edward Kennedy, who co-sponsored the bill, are among the observers.

17. President Clinton 1997 - CHIP and Medicare +Choice EstablishedThe Balanced Budget Act funds the Children's Health Insurance Program (CHIP), a state-run program designed to make sure all children have health coverage. The BBA also gives Medicare beneficiaries the freedom to enroll in private health programs, including HMOs and PPOs. The image shows the logo for Utah's CHIP program.

18. President George W Bush • 2003 - Medicare Modernization Act • Establishes Part D drug benefit • Establishes HSAs • Renames Medicare + Choice program to Medicare Advantage • Increases payment rates to Medicare Advantage plans

19. President Obama-2010 Patient Protection and Affordable Act(Pub.Law.No.111-148): • Bending the Curve: Will that happen?

20. DATA WATCH:Consumer Price Index for Medical Care up 124% Since 1990

21. 1990’s • Expansion of Managed Care • Mergers and Acquisitions • Capitation that failed • Change in Payment Methods • Second Opinion

22. CMS Efforts in Cost Control • DRG • RBRVS –Resource Based relative-value scale • RVU’S • Other Methods Regulation ----- Competition ------ Collaboration

23. “Obama Care”: What is in it? • Coverage and Choice • Affordability • Shared Responsibility • Controlling Costs • Prevention and Wellness • Workforce Investments

24. Coverage and Choice • A Health Insurance Exchange • A Public health insurance option • Guaranteed coverage and insurance market reforms • Essential benefits

25. Affordability • Provides sliding scale affordability credits • Caps annual out-of-pocket spending • Increased competition • Expands Medicaid • Improves Medicare

26. Shared Responsibility • Individual responsibility • Employer responsibility • Assistance for small employers • Government responsibility

27. Prevention and Wellness • Expansion of Community Health Centers; • Prohibition of cost-sharing for preventive services; • Creation of community-based programs to deliver prevention and wellness services; • A focus on community-based programs and new data collection efforts to better identify and address racial, ethnic, regional and other disparities • Funds to strengthen state, local, tribal and territorial public health departments and programs

28. Workforce investments • Increased funding for the National Health Service Corp. • More training of primary care doctors and an expansion of the pipeline of individuals going into health professions, including primary care, nursing and public health; • Greater support for workforce diversity • Expansion of scholarships and loans for individuals in needed professions and shortage areas; • Encouragement of training of primary care physicians by taking steps to increase physician training outside the hospital, where most primary care is delivered, and redistributes unfilled graduate medical education residency slots for purposes of training more primary care physicians. The proposal also improves accountability for graduate medical education funding to ensure that physicians are trained with the skills needed to practice health care in the 21st century

29. Controlling costs • Modernization and improvement of Medicare • Innovation and delivery reform through the public health insurance option • Improving payment accuracy and eliminating overpayments • Preventing waste, fraud and abuse • Administrative simplification

30. Healthcare Reform Timeline 2010 – 2011 • Insurance companies barred from dropping people from coverage when they get sick, ending the practice of rescission. Lifetime coverage limits eliminated and annual limits restricted • Young adults able to stay on their parents’ health plans until age 26. • Insurance companies cannot deny group or new individual coverage to children under age 19 due to a pre-existing condition. • Others

31. Healthcare Reform Timeline cont. Effective 2011 • Medicare provides 10% bonus payments to primary care physicians and general surgeons • A new program under the Medicaid plan for the poor goes into effect in October that allows states to offer home and community based care for the disabled that might otherwise require institutional care. • Others

32. Healthcare Reform Timeline cont Effective 2012 • An incentive program is established in Medicare for acute care hospitals to improve quality outcomes. • The CMS, which oversees the government programs, begins tracking hospital readmission rates and puts in place financial incentives to reduce preventable admissions. • Others

33. Healthcare Reform Timeline cont Effective 2013 • A national pilot program is established for Medicare on payment bundling to encourage doctors, hospitals and other care providers to better coordinate patient care. • Others

34. Healthcare Reform Timeline cont. Effective 2014 • Most people required to obtain health insurance coverage or pay a tax if they don’t. • Health plans no longer can exclude people from coverage due to pre-existing conditions. • Health insurance companies begin paying a fee based on their market share. • Others

35. Healthcare Reform Timeline cont. Effective 2015 • Medicare creates a physician payment program aimed at rewarding quality of care rather than volume of services.

36. Healthcare Reform Timeline cont. Effective 2018 • An excise tax on high cost employer-provided plans is imposed. The first $27,500 of a family plan and $10,200 for individual coverage is exempt from the tax. Higher levels are set for plans covering retirees and people in high risk professions.

37. Will It Bend the Curve? • Doubtful! • CBO Report • Cost of this reform is $940 billion over ten years • Will reduce the deficit by $143 billion over the first ten years • Reduce the deficit by $1.2 trillion dollars in the second ten years • Provide coverage for 30 million uninsured people.

39. Unnecessary Care? “Fee for Service promotes overutilization.” Supply creates demand

40. New Methods of Payments • 4 New Ways Doctors Will Get Paid • Accountable Care Organizations – fee-for service method but can split savings with Medicare if you reach certain quality benchmarks • Global Payments • Bundled Payments • Prometheus Payment – fee-for service method debited against a predetermined case rate.

41. Simply cutting Dr’s Fee will not bend the curve • Moral hazard • Lifestyle -Drugs and Alcohol -Obesity and Type II Diabetes -Smoking

42. AMCs Challenges and Opportunities • Facts: • 131 U.S. Medical Schools • 400 AMCs • 5815 AHA Registered Hospitals • Provide nearly half of all clinical care for underinsured and indigent patients • Operate 47% of organ transplant centers • 60% of Level I Trauma Centers • Provide 60% of Burn Beds “Politics and Power”

43. End of Life Care • Case Report: • This 69 years old man was transferred to our hospital with a • diagnosis of “bleeding tumor” of the right lung. He had tracheostomy • and was on a ventilator.

44. Charges and Net Revenue MR # 017679697 had an MSDRG of 166 and a principal diagnosis of 162.3 Malignant Neoplasm Upper/Lobe Lung and a principal procedure 33.27 Closed Endo Lung Biopsy. The FY 2010 and FY 2011 cases had the same MSDRG, principal diagnosis and principal procedure as the case analyzed.

45. Charges and Net Revenue by Payor

47. AMCs Challenges and Opportunities • High costs (AMCs support expensive technology, education and research) • Decreasing revenue and outside funding • Costs of regulation • Competition from Community Hospitals • Costs of caring for homeless, disabled, mentally ill and substance abusers • Titanic bureaucracy • Service

48. Cost of New Capacity • Typical cost of new capacity -Inpatient beds - $1M in capital and $250K-800K annual operating expense -Operating rooms - $2 – 7Million, $250K+ annual operating expense -Major imaging (CT,MRI,PET/CT, etc.) – approx. $1M+ -Cardiac Catheterization Lab – approx.$2M • Nursing and other provider shortages?

49. Challenges and Opportunities • Great in Rescue Intervention but not as well in elective care • Delay in Delivery of Timely Care • Slow in Adapting Hospitality Approach to Healthcare • Dealing with Perception

50. Perception is reality!