Healthcare Reform:Winners and LosersMay 20, 2010
John Boettiger, PrincipalDeloitte Financial Advisory Services LLP [email protected]
Chuck Dowling, Senior Vice President of Regional Operations US [email protected]
Jim Shannon, EVP DevelopmentLHP Hospital [email protected]
Richard Rawson, [email protected]
John R. Boettiger, Jr., CFA, ASA
Principal, Deloitte Financial Advisory Services LLP
ACG Dallas, TX
May 20, 2010
Health Reform 2010:The Patient Protection and Affordable Care Act
Copyright © 2010 Deloitte Development LLC. All rights reserved.3 Deloitte Center for Health Solutions, Health Reform, 04-02-2010
The U.S. health system today: fragmented, sectarianexpensive, complicated, disconnected ($7,681 per capita
BIOTECH
Innovators
Administrators/Watchdogs
Service Providers
Physicians
HCIT
Pharma
Device
Hospitals Outpatien
tFacilities
Insurers
Regulators
Long TermCare
BioTech
Professional Societies/
Special Interests
Accrediting Agencies
DiseaseManagemen
t
Employers
CAM
Media
Academic
Medicine
Consumers
Allied HealthProfessional
s
Disruptors
Copyright © 2010 Deloitte Development LLC. All rights reserved.4 Deloitte Center for Health Solutions, Health Reform, 04-02-2010
UninsuredPercent uninsured by age group
Health care since the Clinton eraThe economy was beginning its downturn
* The Children’s Health Insurance Program, created in 1997, has significantly reduced the number of low-income children who are uninsured.
Sources: Employee Benefit Research Institute estimates of data from the Current Population Survey. Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group. Kaiser Family Foundation/HRET Survey of Employer-Sponsored Health Benefits, 1999–2008, and Kaiser analysis of data from bureau of Labor Statistics.
Health care spendingAs percentage of gross domestic product
Insurance premiumsCumulative growth
Cost of workersAverage monthly worker premium contributions
The New York Times
Copyright © 2010 Deloitte Development LLC. All rights reserved.5 Deloitte Center for Health Solutions, Health Reform, 04-02-2010
Health reform circa 2010 is the convergence of four forces that produced a “new normal”
Health
Reform:Federal
State
Economic downturn• Transformational themes• Burning platforms• Innovations• Trends
Health costs• Medicaid& Medicare
• Employers• Out of pocket
• Indirect
Consumerism & politics
• System value proposition• Costs & satisfaction
• Political mood
Disruptive technologies• Retail medicine• Nanotechnology• Informatics• Personalized Medicine
Copyright © 2010 Deloitte Development LLC. All rights reserved.6 Deloitte Center for Health Solutions, Health Reform, 04-02-2010
I’m OK, you’re not OK!
(excerpt from publicly available document)
Copyright © 2010 Deloitte Development LLC. All rights reserved.7 Deloitte Center for Health Solutions, Health Reform, 04-02-2010
Increased Access
Medicaid expansion
SCHIP expansion
Subsidies for low income households
Long term care expansion (new)
Insurance reforms: pre-existing conditions, lifetime limits, premium reviews, health exchanges
Expansion of community health services & primary care
Three Major Goals
Improved Quality
Comparative effectiveness
Essential benefits: HHS
Electronic health records
Workforce re-design
Delivery system integration
LTC expansion
Connect health & human services
Focus: under-served populations
Overhaul: FDA
Overhaul: CMS
Reduced Costs
Comparative effectiveness
Medical home
Preventive health
Bundled payments
Accountable care organizations
Centers for Innovation
Value-based purchasing
Administrative simplification
Fraud and waste surveillance
Leverage government purchasing power
Independent Medicare Payment Commission
Patient Protection and Affordable Care Act and companion legislation address three big issues…
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“New normal” cross sector implications: sustainability, trust, value keys
Transparency
Cost reduction
Results• Value-based purchasing• Outcomes• Regulatory compliance
• Social responsibility• Parity & fairness• Workforce diversity, training• Supply chain• Health & human services
• Profits & compensation• Business practices• Relationships• Results
• Consumers• Supply chain• Fraud and waste• Variation
Profit with purpose
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The impact of major reforms in PPACA …
MajorReforms
Providers Health Plans
Biotech &Drugs
Medical Devices
Employers States Federal agencies
Comparative Effectiveness
-2 +1 -3 -1 +2 +1 +1
Delivery system reforms(ACOs, EPGs, MH, PN)
-2 +1 -2 -2 +2 -1 +2
Employer Mandates +1 +2 +1 +1 +1 to -2 0 +1
Individual Mandates +1 +1 +1 +1 +1 to -2 + +1
Insurance Regulatory Reforms(Exchanges, MLR, limits, etc)
-1 -3 -1 -1 -1 +1 +1
Medicare payroll taxes -1 -1 -1 -1 -3 -1 +2
Medicare cuts -2 -1 -2 -1 -1 -2 +2
Industry taxes -1 -2 -2 -2 -1 0 0
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Successful organizations will respond proactively to these realitiesSector implications: the new normal (big questions)
HEALTH PLANS
• Margin pressure
• Sector volatility, consolidation
• Tension with providers
• Trust and reputation
• Innovation: financing, delivery
• Informediation
• Buy/sell or innovate?
• Portfolio focus: Retail/employer/ government?
• Build trust or manage resistance?
PROVIDERS• Integration: LTC,
physicians• Clinical redesign with
HIT, teams • Capital scarcity• New competition• Sustainability,
workforce • Risk: outcomes,
compliance• Costs, margin erosion• Contracting: value-
based, outcomes• Survival? Growth?
Enterprise efficiency and effectiveness?
• Capital sourcing and priorities?
LIFE SCIENCES
• Price pressures
• Clinical integration
• Comparative effectiveness
• Consolidation/ collaboration
• Risk management
• Alternative health
• Regulatory compliance
• Better to buy/sell, or expand globally, diversify or lay low?
• What’s the quickest path to commercialization?
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Visit our website to subscribe to our content:www.deloitte.com/CenterforHealthSolutions/subscribe
March 29, 2010 Monday memoHealth reform updateThis week’s headlines (click to jump to article):•Health reform bills pass: What’s ahead?
•Deloitte Tax analysis
•Berwick named CMS head
•Physician fix in limbo
•Food and Drug Administration (FDA) looking at device approval process
•Quotable
•Fact file
•My take
•Subscribe to the Health Care Reform Memo
•Deloitte Center for Health Solutions research
•Deloitte contacts
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Contact informationFor more information, please contact:
John R. Boettiger, Jr., PrincipalDeloitte Financial Advisory Services, [email protected] 713-982-2374
Paul H. Keckley, Ph.D., Executive DirectorDeloitte Center for Health [email protected] 202-220-2150
Isabel Ortiz, Marketing Manager Deloitte Services [email protected] 713-982-2623
For more information on the Center's view of health care in the new administration, please visit: www.deloitte.com/us/healthreform
And visit our website to subscribe to our content:www.deloitte.com/CenterforHealthSolutions/subscribe
Copyright © 2010 Deloitte Development LLC. All rights reserved.Member of Deloitte Touche Tohmatsu
LHP Hospital Group, Inc. May 20, 2010 Presentation to
Challenges Facing America’s Hospitals
Declining reimbursementsUncertainty surrounding healthcare reformIncreasing regulationAccelerating uncompensated careConstraints on capital accessAging plant and equipmentIncreased competition from niche or specialty providers
These challenges are causing a widening divide between “haves” and “have nots”
Number of Community Hospitals,(1) 1988 – 2008
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
(1) All nonfederal, short-term general, and specialty hospitals whose facilities and services are availableto the public.
(2) Data on the number of urban and rural hospitals in 2004 and beyond were collected using coding different from previous years to reflect new Centers for Medicare & Medicaid Services wage area designations.
(2)
All Hospitals
Urban Hospitals
Rural Hospitals
Challenges Facing America’s Hospitals
We’ve lost nearly 500
hospitals since 1988.
Percentage of Hospitals with Negative Total and Operating Margins, 1995 – 2008
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
Negative Operating Margin
Negative Total Margin
Challenges Facing America’s Hospitals
Approximately one third of
hospitals lose money
Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare, and Medicaid, 1988 – 2008
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
(1) Includes Medicaid Disproportionate Share payments.
Challenges Facing America’s Hospitals
Commercial insurers
subsidize govt. payers
Number of Bond Rating Upgrades and Downgrades, Not-for-Profit Health Care(1), 1993 – 2008
Source: Moody’s U.S. Public Finance. Moody’s Not-for-Profit Healthcare 2008 Year End Ratings Monitor. Data released January 2009. (1) Includes stand-alone hospitals, health systems, and human service providers.
Upgrades
Downgrades
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
60
40
20
0
20
40
60
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
60
40
20
0
20
40
60
Challenges Facing America’s Hospitals
Downgrades have consistently
exceeded upgrades
Challenges Facing America’s Hospitals
protect their credit ratings;
stretch their capital spend;
preserve their liquidity.
And at the same time
grow, or at least protect, market share;
remain competitive in plant and equipment;
improve quality;
be opportunistic with regard to development.
These challenges are profoundly impacting hospitals across the board.
Hospitals in all categories are attempting to:
For many, if not most, this means at least considering some form of a joint venture or affiliation option.
LHP Response
LHP was formed as a direct response to these challenges.
Our purpose is to form joint ventures with not-for-profit partners to help community hospitals meet their strategic objectives.
Who is LHP Hospital Group?
A privately-held hospital company based in Plano, Texas
An experienced management teamFormer management team at Triad Hospitals, Inc. 54 hospitals (10 JVs)
Owners with financial and healthcare expertiseCCMP Capital Partners (former private equity arm of JP Morgan Chase)Canada Pension Plan Investment Board
A board with leading not-for-profit healthcare thought leaders
Our View on Health Reform
Likely accretive on average for hospitalsWinners and losersPricing pressureIncentives for coordinating careManaging the unintended consequences
Feels like another round of provider consolidation
Contact Information
If you would like to learn more about LHP Hospital Group please visit our website at www.lhphospitalgroup.com
If you would like to discuss specific points of this presentation or ask further detailed questions, please contact Jim Shannon, Executive Vice President of Development, at 972-943-1705 or by e-mail at [email protected].
Chuck Dowling,US Oncology SVP
Copyright © 2010 US Oncology, Inc. All rights reserved.
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US Oncology: THE largest national oncology network
5
Source: Sloan-Kettering, MD Anderson, and Mayo Clinic
Copyright © 2010 US Oncology, Inc. All rights reserved.
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Reimbursement pressures will intensify Payers are looking to providers to drive quality and value through cost-effective care management
Demand will increase as providers decrease in number
Low utilization of available technology Disciplined capital spend
Our Challenges
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Size and scale Strong brand Clinical depth Care management Productive resources
Technology Employees
Staying ahead of external pressures in the marketplace will require:
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Medical Oncologist – 245 Radiation Oncologist – 58 Gynecologic Oncologist – 16 Urologist – 13 Bone Marrow Transplant – 6 Breast Surgeon – 5 Hospital JV’s – 5 Pediatric Oncologist – 4 Breast Radiologist – 1 Surgical Oncologist - 1
Integration – Consolidation – AccessTexas Oncology’s Answer to Size and Scale
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Built Strong Through Innovation, Quality and Customer Service
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The HR Department for Small Business
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Company
EmploymentRelationship
Human Resource Management
Policies and Practices
Payroll Taxes
Workers' Compensation
Government Compliance
Employee Benefits
Employee
Grow BusinessManage Change
Align PeopleManage Business
Employment Relationship Without Administaff
Employer Liability Management
Training and Development
Employment Administration
Recruiting & Selection
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ServiceAgreement
EmploymentRelationship
Administaff
• Human Resource Management
• Recruiting and Selection
• Policies and Practices
• Payroll Administration
• Payroll Taxes
• Employee Benefits
• Workers’ Compensation
• Employer Liability Management
• Government Compliance
• Training and Development
• Manage Business
• Grow Business
• Manage Change
• Align People
Client Company
Employee
EmploymentRelationship
Employment Relationship With Administaff
35
New Regulations Since 1900
By 1940
FUTAFLSAFICANLRACommon LawCase LawLocal LawsState Laws
By 1980
PDAERISAOSHAADEACRAFUTAFLSAFICANLRACommon LawCase LawLocal LawsState Laws
TodayBy 1900
Common Law Case LawLocal LawsState Laws
The Growing Burden of Employment Regulation
PPACAHCEARAARRAHIREGINAHEARTMHPAEAWRERAPPAAJCAMMAEGTRRAWHCRATRA ’97SBJPAHIPAAMHPANMHPAUSERRAURAFMLAUCA
ADA DFWAIRCATRA ’86 COBRADEFRAREATEFRAPDAERISAOSHAADEACRAFUTAFLSAFICANLRACommon LawCase LawLocal LawsState Laws
Employer Impact of Patient Protection & Affordable Care Act (PPACA)• Signed into law on March 23, 2010• Staggered effective dates through 2018• 2010-2011 Provisions
– Small business tax credit for employers that purchase health insurance for employees
– Increase dependent coverage to age 26– Elimination of lifetime medical plan limits– Elimination of Pre Ex for dependents under age 19– W-2 reporting of aggregate value of health coverage– Recognize elimination of employer tax deduction for retiree drug
subsidy– Section 105 (h) discrimination testing for all fully insured plans
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Employer Impact of PPACA cont’d.• 2013 Provisions
– Increase in Medicare tax rate on high wage employees– FSAs capped at $2,500
• 2014 Provisions– “Pay or Play” provisions for employers
• Must offer qualifying health coverage to full-time employees (30+ hours week)• Qualifying coverage must be affordable• Employer penalties for failure to comply
– States to establish Health Benefit Exchanges for individual and small markets– Elimination of annual limits on benefits– No waiting period over 90 days; employer penalty of $400-$600 per employee if
entry requirement exceeds 30 days
• 2018 Provisions– 40% excise tax on high cost medical plans
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What is the Goal?
Business Goal:
1 + 1 = 3
Employee Goal:
1 + 1 = 1
“Administaff takes care of your people,
so you can take care of your business!”
What are the issues?
• Fast on-boarding of new employees• Risk management (compliance/liability)• Employee morale• Strategic alignment (culture/goals)