HEALTHCARE REFORM: IMPACT ON RURAL PHYSICIANS AS EMPLOYERS AND PRACTITIONERS Sponsored By

1. HEALTHCARE REFORM: IMPACT ON RURAL PHYSICIANS AS EMPLOYERS AND PRACTITIONERS Sponsored By NORTH MISSISSIPPI PHYSICIANS ASSOCIATION Thursday, May 13, 201012:00 p.m.

2. Health Care Reform: A Big Deal

3. AGENDA • Overview of Health Care Reform Legislation’s Impact on Rural Physicians • Impact on Physician Practice as Employer – Even in Rural Area • Insurance market reforms • Threshold Issues • Reflections on Insurance Market Reforms • Impact on Physician Practice as Health Care Supplier In Rural Area • Governmental payment reforms: Medicare and Medicaid • Entrepreneurial Impact • New delivery models • Revised compliance requirements

4. Overview of Health Care Reform’s Impact on Rural Physicians

5. Overview of Health Care Reform Legislation’s Impact on Rural Physicians • Reform legislation addresses four major areas • Insurance market reforms • Medicare provider cuts • Medicaid expansion • Tax increases • Focus today on areas 1, 2, and 3

6. Impact on Physician Practice as Employer – Even in Rural Area

7. Insurance Market Reforms • CBO estimates reform will increase the percentage of Americans under 65 receiving health care coverage from 83% to 95% by 2016 • Increase accomplished through extensive changes to way employers and individuals acquire and pay for health insurance coverage • Federal government’s jurisdiction over health care coverage provided through employer-based group health plans to significantly expand • States will retain a significant role in the regulation of commercial health care insurance products

8. Insurance Market Reforms (cont’d) • Most U.S. citizens and legal residents must obtain and maintain “minimum essential” health insurance coverage (some exemptions – religious objectors, prison inmates, individuals with income below federal income tax filing threshold, members of Indian tribes, those with hardship waivers and others) • Medicare, Medicaid, SCHIP, TRICARE for Life, veterans’ programs, eligible employer-sponsored plans, plans sold in State individual health insurance markets, and coverage offered by State high-risk pools • New insurance market rules and penalties against employers and individuals who fail to offer or obtain coverage will directly affect all but the smallest employers

9. Insurance Market Reforms • CBO estimates cost of expanding health care coverage will increase federal spending over the next 10 years by $940 billion* • Due to cost of providing and subsidizing the cost of the newly insured. • Cost to be offset by tax penalties against employers and individuals failing to offer or obtain qualifying health care coverage, Medicare spending reductions, health industry fees, and new taxes on high-income households • Offset to yield a net $119 billion reduction in the federal deficit through 2019 • CBO did not include in budgetary effects of PPACA $115 billion in discretionary spending for agency implementation costs and explicit authorizations for grants with and without specified funding levels

10. Threshold Insurance Market Reform Issues • Existing employer-sponsored plans to be grandfathered indefinitely • Amount or type of design changes that will disqualify plan from grandfather benefits not clear • Regulations expected soon

11. Threshold Insurance Market Reform Issues (cont’d) • Changes apply differently to self-insured versus insured plans • ERISA pre-emption of state benefit mandates and remedies will remain • Self-insured plans must implement changes and pay new fees and taxes • Policyholders in insured plans can rely on insurer to implement required changes • Likely will be new fees and taxes in the form of higher premiums

12. Threshold Insurance Market Reform Issues (cont’d) • Reform bills protect rural consumers from discriminatory practices that make coverage unaffordable • Include insurance market reforms that • Prohibit insurance companies from denying coverage based on pre-existing conditions • Protect consumers from high annual out-of-pocket spending • Prohibit charging higher premiums based on gender • These provisions will make health insurance more accessible and affordable for rural residents • Having an insured patient population should assist physicians’ revenues

13. Threshold Insurance Market Reform Issues (cont’d) • Immediate reforms for plan years beginning on or after 9/23/10 (temporary high risk pool, reinsurance program for early retirees, dependent coverage for adult children up to age 26, no lifetime limits or unreasonable annual benefit limits, no pre-existing health conditions for children) • Additional changes in 2011 through 2013

14. Threshold Insurance Market Reform Issues (cont’d) • Bulk of changes in 2014 including: • State health insurance exchanges • Individual mandates • Employer penalties • Taxes on health insurers, pharmacy and DME suppliers • Tax credits for small businesses with 25 or few full-time employees and average wages of less than $50,000 • Expansion of Medicaid eligibility

15. Reflections on Insurance Market Reforms • Pros and cons for physicians from increase in numbers of insureds • Reduces ranks of self-pay individuals requesting services • Likely that many of newly insured will be Medicaid beneficiaries • Determining eligibility may be difficult initially due to numbers being enrolled • States may have difficulty funding coverage once federal supplements expire • Early in process – many sets of regulations will be issued • Unclear what Blue Cross and Blue Shield’s position will be

16. Reflections on Insurance Market Reforms (cont’d) • Employers need to start running numbers as to pay or play • Remember penalties are in after-tax dollars • Insurance rates will likely rise in short term • New taxes on insurers, medical device and drug manufacturers will be passed along to customers/purchasers • Result: pretty rocky road for employers until insurance market stabilizes

17. Impact on Physician Practice as Health Care Supplier in Rural Area

18. Governmental Payment Reforms: Medicare and Medicaid • Provides Bonuses to Reward Primary Care Practitioners – CY 2011-2015 • 10% incentive payment for primary care practitioners practicing in underserved areas • In addition to current bonus for outpatient CAH services • Primary care practitioners include physician, NP, CNS, PA for whom primary care accounted for at least 60% of Medicare allowed charges for period (determined by Secretary)

19. Governmental Payment Reforms: Medicare and Medicaid (cont’d) • Incentive payments for surgeons performing major surgical procedures in Health Professional Shortage Areas - CY 2011-2015 • Same as incentive payment requirements for primary care practitioner incentive payments • Surgical procedures means those for which a 10-day or 90-day global period is used for payment under Medicare FFS

20. Governmental Payment Reforms: Medicare and Medicaid (cont’d) • Medicaid payment rates to increase during 2013 & 2014 • Medicaid payment rates to family medicine physicians, general internists, and pediatricians for evaluation and management services and immunizations raised to Medicare levels • 100% Federal matching for difference between newly mandated rate and States’ rates for primary care under State plan

21. Governmental Payment Reforms: Medicare and Medicaid (cont’d) Medicare Bonus Payments - PQRI • Incentive payments will be extended for voluntary physician participation in the Physician Quality Reporting Initiative (PQRI – 1.0% in 2011 and 0.5% during 2012-2014). • Beginning in 2011, an additional 0.5% incentive payment will be available to physicians who submit data through a qualified Maintenance of Certification Program operated by a specialty body of the American Board of Medical Specialists. • In 2015, physician payments will be reduced by 1.5% for failure to participate in the PQRI. • This penalty will increase to 2.0% in 2016 and subsequent years.

22. Governmental Payment Reforms: Medicare and Medicaid (cont’d) Payments for Imaging Services: • The 2010 Medicare Physician Fee Schedule final rule adopted a 90% utilization rate for certain imaging equipment valued at more than $1 million. • The higher utilization rate was to be phased in over a four-year period starting with 2010 (65% utilization rate for 2010). • The PPACA sets the utilization rate at 75% for 2011 and subsequent years. • CMS indicated that advanced imaging includes CT and MRI services. • Medicare reductions will also be made in payments for sequential images of contiguous body parts.

23. Governmental Payment Reforms: Medicare and Medicaid (cont’d) Extension of Geographic Index Floor and Revisions to the Medicare Fee Schedule • Work portion of MPFS extended through 2010 • Increases practitioner fees in certain rural areas • Requires 50/50 blend of cost of employee wages and rents in different fee schedule areas and national averages • Secretary must make adjustments by January 1, 2012 to ensure accurate geographic adjustments across fee schedule areas

24. Governmental Payment Reforms: Medicare and Medicaid (cont’d) Independent Payment Advisory Board • January 15, 2014 – Board may develop and submit to Congress advisory reports on matters related to Medicare program • 15 members • Report may include recommendations regarding improvements to payment systems (except for proposals to ration care, raise revenues or beneficiary premiums, increase Medicare cost sharing or modifying eligibility criteria) • proposals will take effect unless Congress passes alternative with same level of savings

25. Governmental Payment Reforms: Medicare and Medicaid (cont’d) Misvalued Codes under MPFS • Secretary must periodically identify and adjust relative value units • Must examine codes that have experienced fastest growth or substantial changes in practice expense, codes representing new technologies or services, multiple codes frequently billed in conjunction with furnishing single services, codes associated with low RV and codes not subject to review since implementation of RBRVS; and

26. Governmental Payment Reforms: Medicare and Medicaid (cont’d) • Establishes Teaching Health Centers – 2011 • Will provide payments for primary care residency programs in community-based ambulatory care residency programs in community-based ambulatory care providers • Includes FQHC, RHC, community mental health center, entity receiving funding under Title X of the Public Health Services Act

27. Entreprenurial Impact $%*! no, you can’t!

28. Entreprenurial Impact • Stark Law In-Office Ancillary Services Exception • Exception revised to require referring physician to inform patients that they may obtain specified services from a person other than the referring physician or his/her practice • Applies to: MRI, CT, PET, other designated health services specified by the HHS Secretary • Written list of suppliers who furnish services in the area in which the patient resides must be provided at the time of the referral • Effective January 1, 2010 (actually date law signed by President, March 24)

29. Entreprenurial Impact • Stark Law “Whole Hospital” and Rural Provider Exceptions • Both exceptions narrowed to apply only to physician-owned hospitals that have physician ownership and provider agreements in operation on December 31, 2010 • Must now meet certain other requirements • Hospitals must now report to HHS annually to identify physician owners • Hospitals must have procedures in place to require physician ownership to patients • Ownership and investment cannot be conditioned on referrals from the physician • Limited opportunities for further expansion • HHS will conduct audits beginning November 2011 to determine if hospitals are complying with new revisions to the exceptions.

30. New Delivery Models • Pilot Program for Patient-Centered “Medical Homes” • Rewards rural physicians for coordinating care for patients • Requires coordination of care by a health care professional to help ensure that patients get the right care at the right time • Takes steps to ensure that small and community based practices, such as those predominately in rural America, can successfully participate

31. New Delivery Models • Reform bills establish Community-based Collaborative Care Network Program – 2011 • Supports consortiums of health care providers’ coordination and integration of health care services for low-income uninsured and underinsured populations

32. Accountable Care Organizations: Shared Savings

33. Accountable Care Organizations: Shared Savings • By January 2012, HHS will establish shared savings program to coordinate care under Medicare Parts A & B, promote accountability for a patient population, encourage investment in infrastructure, care processes • Groups of providers/suppliers meeting certain criteria to work together to manage/coordinate care for Medicare FFS beneficiaries through ACO • Hospitals • Physicians and physician networks (also NPs, CNSs,PAs) • Partnerships or joint ventures between hospitals/physicians • Shared governance – formal legal structure (may be contractual)

34. Accountable Care Organizations: Shared Savings • Accountable for quality, cost, overall care of Medicare FFS beneficiaries • Beneficiaries assigned to ACO – at least 5,000 • Must be sufficient PCPs to care for assigned beneficiaries • Processes to promote evidence-based medicine • Must have individualized care plans • Other requirements

35. Accountable Care Organizations: Shared Savings • Shared savings • If meet quality performance standards AND • ACO meets “benchmark” for shared savings • Eligibility based on estimated average per capita Medicare expenditures under the ACO for Medicare FFS beneficiaries’ Part A & B services (adjusted for beneficiary characteristics) being at least a certain number of percentage points below the “applicable benchmark” (the methodology for calculating this is in the reform law) • Benchmark involves most recent 3 years of per-beneficiary expense for Parts A & B of beneficiaries assigned to ACO • Other payment methods may be used • ACOs participating in similar arrangements with other payors may be given preference

36. Other New Models • Pediatric accountable care organizations (ACOs) – Medicaid demonstration project – 2012-2016 • Incentive payments (as in Medicare ACOs) for saving in excess of annual minimum level of savings established by the Secretary

37. Support for Community Health Centers • Supports Community Health Centers in Rural Areas • Increases funding by $11 billion for community health centers and National Health Services Corps for five years, effective 2011 • Establishes new programs to support school-based health centers and nurse-managed health clinics • Maintains the current requirement that rural areas receive special consideration for distribution of funds.

38. Revised Compliance Requirements • Stark Law Self-Disclosure Protocol • Within six months, HHS must develop and implement a disclosure protocol for actual and potential Stark violations in collaboration with the OIG. • Secretary now has authority to reduce the amount due for a Stark violation by considering: • the nature/extent of the improper/illegal practice • the timeliness of self-disclosure • the cooperation in providing additional information related to the disclosure

39. Revised Compliance Requirements • Mandatory Compliance Program for All Providers • HHS Secretary authorized to require as a condition of enrollment in the Medicare program that classes of providers and suppliers implement compliance programs • Secretary has discretion to dictate the timelines for implementation of compliance programs, as well as the types of providers and suppliers who will be required to adopt compliance programs • Law directs the Secretary to develop core elements of compliance programs for each class of provider or supplier required by the Secretary to adopt them • RAC Program Expansion to Medicaid • Effective December 31, 2010, States must establish contracts with one or more RAC contractors • Will identify underpayments and overpayments and recoup overpayments

40. Revised Compliance Requirements • Requirement to Refund Overpayments • Return Medicare overpayments within 60 days of identification of the overpayment is now an obligation under the False Claims Act • Providers or suppliers who fail to return an overpayment within 60 days of identification will be guilty of False Claims Act violations • The 60 day period commences when a person “knows” of the overpayment • Claims for payment submitted in violation of the AKS can constitute grounds for False Claims Act lawsuits • This clarification codifies the long -standing practice of bootstrapping False Claims Act claims onto AKS violations

41. THANK YOU!!! Dinetia M. Newman Balch & Bingham LLP 401 East Capitol Street, Suite 200 Jackson, MS 39201 Telephone: (601) 965-8169 Email: dnewman@balch.com