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In Search of an Accountable Care Organization
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Post-Healthcare Reform Strategies for Hospitals and Health Systems
MHA Fall Governance Leadership ConferenceOctober 24, 2010
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Today’s Speakers
Peggy TighePartner,Strategic Health Care
Matt WeekleyLeader,Healthcare PracticePlante & Moran
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THIS ISN’T NEW – BEEN THERE, DONE THAT THE BENEFITS
AND RISKS WILL EBB
AND FLOW
THERE ARE POTENTIAL
OPPORTUNITIES AS WELL
1 2 3
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DEMOCRATS’ CERTAINTY DEMOCRATS PASS HCR =
DEMOCRATS
KEEP HOUSE AND SENATE MAJORITIES
WIN RE-ELECTION
REPUBLICANS’ CERTAINTYDEMOCRATS PASS HCR =
DEMOCRATS
LOSE HOUSE AND SENATE MAJORITIES
LOSE RE-ELECTION
Politics
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House Democrats 255Republicans 177Independents 0Vacancies 3Majority Needed 218
Senate Democrats 57Republicans 41Independents 2Majority 51Super Majority 60
Congress Now
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Pollsters’ Predictions
Senate
Total races 37
Lean, likely, solid D 8Lean, likely, solid R 21Toss ups 8
Republican net gain 7-9 (48-50 likely)
10 flip = R majority Majority 51 57 D, 2 I, 41 R
Source: Cook Political Report, 10/5
House
Total races 435
Lean, likely, solid D 190Lean, likely, solid R 198Toss-ups 47
Republican net gain 40-45 (219+ likely)
39 flip = R Majority Majority 218 255 D, 2 I, 178 R
Source: Cook Political Report, 10/5
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Voters’ Views by Party
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Key Factors Influencing the Elections
WIFM/Voter Turnout• Healthcare Reform
• Support or no? About 50-50 • Who do you trust… Democrats or Republicans?
October 2010 46 38August 2008 56 29
Kaiser Family Poll, Oct. 3Anti-incumbent
“Public approval of Congress now sits at 18 percent, lower than it has been in any prior midterm election year since Gallup started polling public approval of Congress in 1974.” USA Today/Gallup Poll, Sept. 13-16
Fundraising• DNC record month – September, $16m, 80 percent from small donors• RNC – Downplaying taking over House
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Progressives, Shrinking Middle, Tea Party
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Congress/White House in 2011
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Healthcare Reform Repeal Efforts
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Repeal or No Repeal
Procedure• Bill passed not meant to be law• Severability clause• Individual mandate• Commerce clause constitution• Supreme Court review
Politics• House and Senate in Republican control• Senate filibuster rule• Repeal all, which parts, de-funding PPACA• White House VETO• Governor’s role• 2/3 majority in both House (290) and Senate (67) to override
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MI 2010 Election Landscape (Cook Report, 10-13-2010)
HOUSE15 total seats current breakdown – 8 Dems – 7 GOP
Solid D RacesMI-5 – Rep. Dale Kildee (D) v. John Kupiec (R)MI-12 – Rep. Sandy Levin (D) v. Don Volaric (R) insurance agency ownerMI-13 – State Senator Hansen Clarke (D) v. John Hauler (R)
[Kilpatrick lost in Dem primary]MI-14 – Rep. John Conyers (D) v. Don Ukrainec (R)MI-15 – Rep. John Dingell (D) v. Dr. Rob Steele (R)
Leans DMI-9 – Rep. Gary Peters (D) v. Rocky Raczkowski (R)
Toss UpsMI-7 – Rep. Mark Schauer (D) v. former Rep. Tim Walberg (R)
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Top 15 things to pay attention to in HC reform
The Financial
Five
The Operation
s Five
The Quality Five
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The Financial Impact Top Five
1. IMPACT - Know the impact healthcare reform will have on your hospital
2. EXCHANGES - Prepare for negotiations with exchanges by knowing cost of providing services
3. PROFITABILITY - Develop systems to monitor profitability by payers and service lines
4. UNINSURED - Understand that expanded insurance coverage does not mean the elimination of uncompensated care and implement systems for pre-collections of patient coinsurance and deductibles
5. COST - Control the cost side of the equation vigorously
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Hospitals will contribute $155 billion in savings over 10 years through
• Reduced payment updates
• Decreases in Medicaid and Medicare disproportionate share payments
• Financial penalties
Financial Impact
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Financial Impact: Will these changes decrease U.S. healthcare expenditures?
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Financial Impact
2009 2019 -
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Uninsured
Exchange
Commercial
Medicaid / SCHIP
Medicare Advan-tage
Medicare
Projected overall 10 year population growth of 0% and growth of Age 65+ of 0%
REAL HOSPITAL EXAMPLE
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Financial Impact
REAL HOSPITAL EXAMPLE
(30,000,000)
(20,000,000)
(10,000,000)
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
Projected impact from payer mix and growth - 2019
Medicare Medicare Advantage Medicaid / SCHIP Commercial Exchange Uninsured Bad Debt / Charity
In 2019 Total Impact from Payor Mix Changes and Growth $17,807,981
Assuming Exchanges reim-burse at 90% of Commer-
cial reimbursement
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Financial Impact
REAL HOSPITAL EXAMPLE
Series1
(20,000,000) (15,000,000) (10,000,000) (5,000,000) -
(927,447)
-
(16,473,073)
(5,781,415)
Changes from legislation - Medicare
Health Professional Shortage BonusImpact of Section 1105 Market Basket Ad-justmentImpact of Section 3401 Medicare Productivty Ad-justmentImpact of Inflation - Mkt Basket IncreasesImpact of DSH Adjustment
In 2019 Total Impact from Changes to Medicare Program $-23,181,935
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Financial Impact
REAL HOSPITAL EXAMPLE
Series1
(3,500,000) (3,000,000) (2,500,000) (2,000,000) (1,500,000) (1,000,000) (500,000) -
(172,553)
-
(3,064,850)
(1,075,644)
Changes from legislation - Medicare Advantage
Health Professional Shortage BonusImpact of Section 1105 Market Basket Ad-justmentImpact of Section 3401 Medicare Productivty Ad-justmentImpact of Inflation - Mkt Basket IncreasesImpact of DSH Adjustment
In 2019 Total Impact from Changes in Medicare Advantage Program $-4,313,048
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Financial Impact
REAL HOSPITAL EXAMPLE
(30,000,000)
(20,000,000)
(10,000,000)
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
Projected impact by payer - 2019
Medicare Medicare Advantage Medicaid / SCHIP Commercial Exchange Uninsured Bad Debt / Charity
Grand Total Impact from Health Reform $-9,687,002
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Financial Impact
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (12,000,000)
(10,000,000)
(8,000,000)
(6,000,000)
(4,000,000)
(2,000,000)
-
(658,404) (1,132,344)
(3,779,949)
(6,441,154)
(3,368,812)
(1,999,874) (1,773,497) (2,083,295)
(5,970,870)
(9,687,002)
Grand total – Ten-year impact from health care reform – ($36,895,201)
REAL HOSPITAL EXAMPLE
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Financial Impact
Series1
(2,500,000) (2,000,000) (1,500,000) (1,000,000) (500,000) -
(2,130,166)
(1,420,111)
Other health reform issues that have potential exposure to risk
Re-Admission Rates
Hospital-Acquired Condi-tions
Value-Based Purchasing
REAL HOSPITAL EXAMPLE
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Financial Opportunities Under Healthcare Reform
• Expanded 340b pharmacy program to critical access hospitals and other prospective pay hospitals
• Expansion of Medicare low-volume add-on for federal fiscal year 2011 and 2012 for providers with under 1,600 Medicare discharges
• $400 million in additional reimbursement for federal fiscal year 2011 and 2012 for provider in counties with lowest cost per Medicare beneficiary
• Various grants and pilot programs • Medicaid payment to primary care physicians must at
least equal Medicare rates for 2013 and 2014
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The Operations Top Five
1. STRUCTURE - Accountable care organizations
2. ALIGNMENT - Integration between providers
3. DELIVERY - Seamless delivery of services
4. TECHNOLOGY - Electronic health records
5. MEASUREMENT – Monitor/report efficiency and effectiveness
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Structure - Accountable Care Organizations
• An ACO is generally defined as a local network of providers that manage the full continuum of care for patients for which they are responsible.
• According to the Patient Protection and Accountable Care Act of 2010 (PPACA), provider groups must include primary care physicians and are required to participate for a minimum of three years.
• PCPs will be integral to the medical home model and will be responsible for care coordination
• Challenges of an ACO include developing an acceptable savings formula for participants while addressing quality issues
• Standards will broadly be grouped in the following categories: outcomes, patient care, utilization and post-acute care
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Alignment: Integration Between Providers
• Which hospital/physician integration model makes sense? • Employment• Joint Venture• Other
• How can economic incentives be aligned between the hospital and physicians?
• What information systems are in place to support alignment efforts?
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Service Delivery Across the Continuum
• Do care management protocols span patient settings, i.e., acute, rehabilitation, home care, etc.?
• Do all care settings share mutual goals and objectives?
• Are information systems integrated to manage patients across a care continuum?
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Technology: Electronic Health Records
• Can the system provide a standard platform for the sharing of patient information between providers?
• Can the provider satisfy the “meaningful use requirements?
• Are capital dollars available to purchase systems in order to create an electronic record?
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Measurement of Efficiency and Effectiveness
• How are operations improvement gains measured and monitored?
• What processes and systems are in place to identify operational improvement opportunities?• Cost Accounting/Decision Support?• Labor Productivity reports• Executive Dashboard
• How and to whom are improvement activities reported?
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In Summary: Operations Strategies
1. Educate your organization on the appropriate model
2. Develop the strategy to align and integrate providers
3. Eliminate the silos between care settings
4. Optimize technology
5. Measure and monitor important metrics
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The Quality Top Five
1. Independent Payment Advisory Board
2. (Medicare) Hospital Value-Based Purchasing Program
3. Re-admissions
4. Healthcare Associated Infections (HACs)
5. Accountable Care Organizations
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Quality: Independent Payment Advisory Board
• Power to affect payments to providers and suppliers in years where spending exceeds growth targets
• Unlike MedPAC, IPAB’s recommendations will be implemented unless congress intervenes with alternative proposals (but not before 2014)
• Hospitals and hospices are exempt from proposals to reduce spending in those sectors (until 2020)
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Quality: (Medicare) Hospital Value-Based Purchasing
• Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) based on quality measures that hospitals currently report in pay for reporting program
• Secretary will add infection rates and efficiency as program matures
• Hospitals that meet, exceed or improve toward quality threshold could get back more than their withholding
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Quality: Readmissions
• Penalties for discharges on or after October 1, 2012 at hospitals with higher-than-expected rates of readmission for a selected set of high-volume, high-spending procedures
• New CRS Report: Potential to improve quality of care for Medicare patients with chronic conditions
• Savings MAY BE CONSIDERABLE, but it DEPENDS on “effectiveness of the design and implementation of proposals to reduce (readmissions).”
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Quality: Healthcare Associated Infections (HACs)
• Hospitals in the top quartile, nationally, for HAC rates will begin to receive a 1 percent payment penalty starting in FY2014
• HAC rates will be published for the public on Hospital Compare in 2012
• Secretary of HHS will study expanding the HAC policy to LTACHs, IRFS, outpatient departments, SNFs, ASCs and clinics
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Quality: Accountable Care Organizations
• Voluntary• Requirements to be an ACO…
• Accountable for overall care of Medicare beneficiaries, • Adequate participation of primary care physicians, • Define processes to promote evidence-based medicine, • Report on quality and costs, • And Coordinate care.
• Frenzy to organize, opportunity exists but regulations remain “on the way.”
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• Rural Community Hospital Demonstration Program
• Demos and Pilot Projects• Disproportionate Share
Payments• Hospital Acquired Conditions• Hospital Readmissions• Independent Payment
Advisory Board• Productivity and Market
Basket Adjustments• Rural Health Policy Changes• Quality Reporting and P4P• Medicaid and Medicare Drug
Coverage• Medicare Physician
Payments/SGR• Accountable Care
Organizations
• Medicaid and CHIP• Graduate Medical Education• Insurance Exchanges & Co-
Ops• Grandfathered, Self-Insured
Plans• Community Benefit• Durable Medical Equipment• Wellness Provisions• Health IT and Meaningful Use• Commissioned and Ready
Reserve Corps• CMS Innovation Center• Elder Care Provisions• Pharmaceutical Industry
Reform• Grant Opportunities• Stakeholder Input
Opportunities
PROVIDER IMPACT SUMMARIES @ WWW.STRATEGICHEALTHCARE.NET
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Summary: Top 15 Health Care Reform Strategies
The Financial Five1. Know the impact healthcare reform will have on your
hospital2. Prepare for negotiations with exchanges by knowing cost of
providing services3. Develop systems to monitor profitability by payers and
service lines4. Understand that expanded insurance coverage does not
mean the elimination of uncompensated care and implement systems for pre-collections of patient coinsurance and deductibles
5. Control the cost side of the equation vigorously
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Summary: Top 15 Health Care Reform Strategies
The Operations Five1. Educate your organization on the appropriate model 2. Develop the strategy to align and integrate providers3. Eliminate the silos between care settings4. Optimize technology5. Measure and monitor important metrics
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Summary: Top 15 Health Care Reform Strategies
The Quality Five
1. IPAB - Remain diligent in opposition to Independent Payment Advisory Board
2. RHQDAPU - Revisit key quality measures and prepare for additional measures
3. RE-ADMINS - Analyze established re-admissions criteria and expect penalties if you don’t measure up
4. HACs - Healthcare associated infections – see #3 and expect more
5. ACOs – Be one, join one, know the impact
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Questions
Peggy Tighe, Esq.Partner,Strategic Health Care1120 G Street, NWSuite 1000Washington, DC20005202/[email protected]
Matt Weekley, CPALeader,Healthcare PracticePlante & Moran65 E. State St.Columbus, OH 43215614/[email protected]