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Presentation for:

Senior Healthcare Economics ManagerTom Szostak

College of Imaging Administrators – May 8, 2015

Emerging Trends in Health ReformThe Affordable Care Act Five Years Later

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Red Letter Day for AirlinesOctober 24, 1978

Airline Deregulation Act

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Thirty-Two Years Later at the College of Imaging Administrators

Spring Assembly

2010

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AGENDA1

• FUNDAMENTALS

2• RETROSPECTIVE REVIEW OF HEALTHCARE CLIMATE

3• RECOVERY ACT OF 2009 & THE AFFORDABLE CARE ACT OF

2010

4• UNDERSTANDING VALUE-BASED HEALTHCARE

5• HEALTHCARE FUTURES

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Defining Places of Service in 2010

Inpatient Hospital – Provides diagnostic, therapeutic, and rehabilitative services under physician supervision for admitted patients

Multi-Specialty or Physician Office (MSO) – Provides routine examinations, diagnosis, and treatment of sickness or injury

Outpatient Hospital – Provides diagnostic, therapeutic, and rehabilitative services that do not require hospitalization

Ambulatory Surgical Center – Freestanding facility where surgical and diagnostic services are provided

Skilled Nursing Facility – Provides inpatient skilled nursing services that do not require hospitalization

Emergency Room Hospital – Emergency diagnosis and treatment of illness or injury

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Redefining Places of Service in 2015

Inpatient Hospital – Provides diagnostic, therapeutic, and rehabilitative services under physician supervision for admitted patientsMulti-Specialty or

Physician Office (MSO) – Provides routine examinations, diagnosis, and treatment of sickness or injury

Outpatient Hospital – Provides diagnostic, therapeutic, and rehabilitative services that do not require hospitalization

Ambulatory Surgical Center – Freestanding facility where surgical and diagnostic services are provided

Skilled Nursing Facility – Provides inpatient skilled nursing services that do not require hospitalization

Emergency Room Hospital – Emergency diagnosis and treatment of illness or injury

Home/Telehealth

services – Web-based and smartphone physician consults

Low Acuity Clinics in Retail

Setting – Flu shots, vaccines, wellness services, minor wounds, and common infections

Freestanding Emergency Room – Limited markets

Urgent Care Clinics

– Low acuity services and minor wounds or broken bones

Understanding Types of Insurance• Government Plans

• Medicare (Parts A, B, C, and D)

• Medicaid• TriCare (Military)

• Self-Insured – Served best for companies over 350 employees

• Commercial Plans• Indemnity• Managed Care (HMOs and

PPOs)

Health Insurance Stakeholders & Market in 2015• Federal, State, and Military Programs

• Medicare• Medicaid• Tricare

• Private Sector• Employer-base market

• Self-funded• Cadillac Tax

• Private health insurance exchanges• 48 million participants expected by 2018

• Health systems selling health plans• Driven by risk-sharing delivery models

• Public Sector• Federal & state-based marketplace• Cooperatives

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AGENDA1

• FUNDAMENTALS

2• RETROSPECTIVE REVIEW OF HEALTHCARE CLIMATE

3• RECOVERY ACT OF 2009 & THE AFFORDABLE CARE ACT OF

2010

4• UNDERSTANDING VALUE-BASED HEALTHCARE

5• HEALTHCARE FUTURES

Pressures on Healthcare in 2010Demographics and Cost

• 3.2 million baby boomers begin to access Medicare in 2011

• Medicare enrollment increases from 44 million to 79 million by 2030

• 52 million Americans will be uninsured in 2010

• National healthcare costs as a percentage of GDP are unsustainable - $4.4T by 2018 or 20%

Estimate of New Enrollees (in Millions)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1946

& 2

011

1948

& 2

013

1950

& 2

015

1952

& 2

017

1954

& 2

019

1956

& 2

021

1958

& 2

023

1960

& 2

025

1962

& 2

027

1964

& 2

028

DOB and Year Eligibility

Estimate ofNew MedicareEnrollees

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And We Continue to Live Even Longer

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 -

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Estimate of New Medicare Enrollees

Estimate of New Medicare Enrollees

20% of U.S. Population will be 65 or older by

2030

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• Aging population – “Boomers”

• Per capita healthcare costs• Expansion of federal

subsidies for health insurance coverage

• Medicaid ACA provisions• Federal subsidies – Tiers based

on 138% above federal poverty level

• Interest on the federal debt• U.S Healthcare sector as %

of GDP• 2011 – 17.3% ($2.7T) or

$8,680/p.c.• 2012 – 17.2% ($2.8T) or

$8,915/p.c.• Projected 2015 costs at $3.2T

Federal Spending Concerns in 2015

Source: CBO Economic Outlook 2015 -2025

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Hospital Challenges in 2010

• Costs exceeding revenue growth• Declining patient volumes • Reimbursement cuts FY’11 – FY’13• Reforms point to Episode Based Payment• Eliminate unprofitable service lines• Reduce risk of costly readmissions • Capital decisions focused on long term clinical

and economic utility (e.g. EMR, vertical integration, service line strategies)

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Hospital Challenges Are No Different in 2015• Costs exceeding revenue growth

• Declining patient volumes • Reimbursement cuts continue (e.g Tax Relief

Act)• Reforms point to Episode Based Payment• Eliminate unprofitable service lines• Reduce risk of costly readmissions • Capital decisions focused on long term clinical

and economic utility (e.g. EMR, vertical integration, service line strategies, physician employment, partnering with health plans)

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AGENDA1

• FUNDAMENTALS

2• RETROSPECTIVE REVIEW OF HEALTHCARE CLIMATE

3• RECOVERY ACT OF 2009 & THE AFFORDABLE CARE ACT OF

2010

4• UNDERSTANDING VALUE-BASED HEALTHCARE

5• HEALTHCARE FUTURES

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American Recovery and Reinvestment Act of 2009Infrastructure for Health Reform

• Healthcare Information Technology for Economic and Clinical Health (HITECH) Title• Electronic Medical Record (EMR) - $28B• Meaningful Use phase one deadline – 2011• 2015 deadline for EMR adoption

• Comparative Effectiveness Research - $1.1B• Prevention and Wellness Programs

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Electronic Medical Record Connects Points of CareEstablishes Foundation for Payment Reform

Clinic APhys. FeeSchedule

Hospital AAcute IPPS

Clinic DPhys. FeeScheduleClinic B

Phys. FeeSchedule

Clinic CPhys. Fee Schedule

Hospital BAcute IPPS

Imaging Center #1HOPPS

Imaging Center #2HOPPS

Long Term Care HospitalLong Term Care PPS

Skilled NursingFacilitySNF PPS

Ambulatory Surgical Center

ASC Payment System

Electronic MedicalRecord

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Electronic Medical Record Connects Points of CareEstablishes Foundation for Payment Reform

Electronic Medical Record

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A Red Letter Day for HealthcareMarch 23, 2010

• Patient Protection and Affordable Care Act (H.R. 3590) and Health Care and Education Reconciliation of 2010 (H.R. 4872) signed into law.

• Medicare Trust insolvency date extends to 2029

• 21.2% physician payment cut – June 1, 2010• Jobs Bill is in a state of flux – extends cut until October 1,

2010• Sustainable Growth Rate formula is a $250B problem

House passed the Senate’s bill and provided reconciliation bill

Health Reform’s Final Detour to the Oval Office in 2010

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Affordable Care Act (ACA) of 2010Tenets of the New Health Economic

Law• Access -

• Potential for 38 million more covered lives*• 92% of Americans would be covered

• Quality – Active purchaser of healthcare services• Volume-based to Value-based• Physician-centric to patient-centric care

• Cost – Making healthcare affordable• Extends life of the HI Trust Fund (Part A) for 13 years

(2030)**• Independent Payment Advisory Board (IPAB) – Delayed

• Contain Medicare cost growth• Mandate board to be functioning Jan. 1, 2014

Sources: CBO – Updated Estimates of Insurance Coverage Provisions of ACA – April 2014* & CBO – The 2014 Long-Term Budget Outlook (July 2014)**

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Timeline of Health Policy and Medicare Rule Making Impacts on Medical Imaging

Advanced imaging

utilization rate (CT & MR)

increases to 75%

Jan. 1, 2014 – CT & MR Equipment

Utilization increases to 90% (Tax Relief

Act ‘13)

2011 2013

2014

Medical Device Tax

on First Sale

Jan. 1, 2013

2015

Physician Office/Center

Accreditation for Advanced Imaging

Jan. 1, 2012

2010 2012

July 2010 – MPPR Increases

from 25% to 50% on TC

Advanced imaging self-referral equipment

ownership rule Jan. 1, 2011

MPPR – Extended to PC on all secondary

studies by 25% - Jan. 1, 2012

New CT Abdomen/Pelvi

s Codes in effect, Jan. 1,

2011

MPPR extended to TC Dx

cardiovascular codes – Jan. 1,

2013

Separate Cost Center reporting for CT, MR,

and DX Cath for hospitals – Impact to OPPS rates, Jan. 1,

2014

Recalibration of CT and MR

procedure weights – Jan. 1, 2014

H.R. 2 - Physician Payment Reform’s Pathway in 2015

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$34.59 $35.13

$37.90

$36.18 $35.98

$34.07 $34.07

$30.15

$28.39

$25.50 $24.67 $25.00

$25.71

$28.22

$36.79 $37.34

$37.90 $37.90 $37.90 $38.09 $38.09

$36.07 $36.87

$33.98 $34.04 $34.02

$35.82 $35.82

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

2003 2004 2005 2006 2007 2008A 2008B 2009 2010 2011 2012 2013 2014 2015A

Rate

Year

Medicare Physician Fee Schedule Conversion FactorHistorical Timeline Through March 31, 2015

CMS Final Rule Conversion Factor Congressional Relief Final Rule

$145 billion cost to taxpayers

Where we were in 2010

Meant to be addressed in 2010, but cost would have been a roadblock for health reform.

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• Eliminates the Sustainable Growth Rate (SGR) Formula• 0.5%/year rate increase from 2016 – 2019• Payment freeze from 2020 -2025 @ 2019 rate

• Replaces SGR with Merit-Based Incentive Payment System (MIPS) or an Alternative Payment Model (APM) program• Providers participation in MIPS

• Value-based in design and measurement• Budget-neutral approach

• APM participation• Providers receiving significant portion of payments via APM

would receive a 5% lump sum payment equal to their Medicare payments

• Incentive payment based on prior year

A Bipartisan/Bicameral Solution in 2015? H.R. 2 – The Medicare Access & CHIP

Reauthorization Act

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AGENDA1

• FUNDAMENTALS

2• RETROSPECTIVE REVIEW OF HEALTHCARE CLIMATE

3• RECOVERY ACT OF 2009 & THE AFFORDABLE CARE ACT OF

2010

4• UNDERSTANDING VALUE-BASED HEALTHCARE

5• HEALTHCARE FUTURES

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Delivery Reforms in New Law - 2010• Pilot program for Episode Based Payment• Phase-out of Fee for Service reimbursements• Pilot program for Accountable Care

Organizations – Coordinate care of patient • Readmission Penalties • Value-Based Purchasing

Quality-Based Reimbursements

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Examples of Healthcare Places of Service

Clinic A

Hospital A

Clinic DClinic B Clinic C

Hospital B

Imaging Center #1

Imaging Center #2

Long Term Care Hospital

Skilled NursingFacility

Ambulatory Surgical Center

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Payment Systems for Place of Service

Clinic APhys. FeeSchedule

Hospital AAcute IPPS

Clinic DPhys. FeeSchedule

Clinic BPhys. FeeSchedule

Clinic CPhys. Fee Schedule

Hospital BAcute IPPS

Imaging Center #1HOPPS

Imaging Center #2HOPPS

Long Term Care HospitalLong Term Care PPS

Skilled NursingFacilitySNF PPS

Ambulatory Surgical Center

ASC Payment System

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One Payment System - (Episode Based Payment)Eliminates Fee for Service

Clinic A

Clinic DClinic B

Clinic C

Imaging Center #1

Imaging Center #2

Long Term Care Hospital

Skilled NursingFacility

Ambulatory Surgical Center

Hospital Episode BasedPayment

Inpatient Rehabilitation

Home Healthcare

Consolidates payment over continuum of care. Ends fragmentation & duplicity

• Shared Savings Program• 3 year participation• Primary care (e.g. GP, IM,

Geriatric, & FP) – 75%• Electronic Health Record

not required• Prospective beneficiary

assignment – 5K minimum• Two Track option – 50/60%• 33 measures/4 domains• Prevention & Wellness• “3 Part Aim”

Accountable Care OrganizationsPilot Program Launch – April 1st and July

1st, 2012

Promotes accountability for a patient population that coordinates care under Medicare Parts A & B.

Encourages investment in infrastructure & redesign of care processes

Part APart BPart B

Part B

Must achieve quality and spending benchmarks

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Episode of Care

Patient Home (Monitoring, Wellness

and prevention)

Access Point (Primary care, Specialist,

Diagnostics, Emergency Dept.)

Service Line Center (Procedure preparation,

post discharge care coordination)

Acute Care (Medical or surgical acute care

services)

Post-acute care (SNF, Long Term Care,

Inpatient Rehab, home health, follow-up PCP

visits)

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Episode of Care Payment Bundling – Redefining Integrated CareRadiology from Profit to Cost Center in 2015

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Model Type

Features

Model #1 – Inpatient Stay Only

Model #2 – Inpatient Stay & Post-discharge Services

Model #3 – Post-discharge Services Only

Model #4 – Inpatient Stay Only

Providers PGP, IPPS acute care facility, health systems, PHO, and conveners of health providers

PGP, IPPS acute care facility, health systems, PHO, and conveners of health providers

PGP, IPPS acute care facility, health systems, PHO, sub-acute care, and conveners of health providers

PGP, IPPS acute care facility, health systems, PHO, and conveners of health providers

Payment of Bundle Discounted IPPS Retrospective comparison – Target versus FFS actual

Retrospective comparison – Target versus FFS actual

Prospectively set payment

Targeted clinical conditions

All MS-DRGs Proposed MS-DRGs by applicant for IP stay

Proposed MS-DRGs by applicant for IP stay

Applicants propose based on MS-DRG IP stay

Types of Services Included in Bundle

Inpatient hospital services

Inpatient, post-acute, related readmissions, and other services defined in bundle

Post-acute, related readmissions, and other services defined in bundle

Inpatient hospital and physician services

Bundled Payments for Care Improvement Initiative

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Response to Opportunities• Promoting clinical and economic value of

technologies:• Dynamic Volume CT for diagnosing acute stroke and post-

intervention follow-up• VL technologies in promoting transradial approach vs.

femoral for cardiac catheterization• Non-contrast MRA for imaging patients with renal

insufficiency and diabetic patient demographic• UL versus NM for myocardial perfusion analysis – Isotope

availability and reduced patient risk• UL musculoskeletal imaging for soft tissue studies versus

MRI.

Technologies must prove clinical utility, economic value and aid in improving outcomes

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Medical Imaging in Value-Based Healthcare

• Imaging must demonstrate value in patient care• Value of imaging in Episode of Care payment model

• Pre-operative planning• Diagnostic workup• Post discharge follow-up care• Used to prevent readmissions

• Value of imaging in an Accountable Care Organization• Where will imaging be provided?• Where will radiologists fit within the model

• Comparative Effectiveness• Evaluate clinical pathways through EHR data collection• Provides a baseline for development of evidence-based

medicine

• Understand who is THE purchaser of healthcare services

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AGENDA1

• FUNDAMENTALS

2• RETROSPECTIVE REVIEW OF HEALTHCARE CLIMATE

3• RECOVERY ACT OF 2009 & THE AFFORDABLE CARE ACT OF

2010

4• UNDERSTANDING VALUE-BASED HEALTHCARE

5• HEALTHCARE FUTURES

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What We Considered in 2010

• Two election cycles (2010 and 2012) prior to 2014• More changes to come?

• Medicare program legislative and regulatory evolution• Diagnosis Related Groups – 1983• Stark anti-referral laws - 1993• Balanced Budget Act of 1997 – (Sustainable Growth

Rate introduced)• Medicare Modernization Act of 2003 – Medicare

Part D• Deficit Reduction Act of 2005• Medicare Improvements for Patients and Providers

Act 2007• Patient Protection and Affordable Care Act - 2010

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“What We Said in 2010”Market Moves Ahead of Federal

Government• Reimbursements will continue to decrease• New payment systems will evolve that are

patient-centric, quality focused• UPMC, Mayo Clinic, Cleveland Clinic,

Geisinger, Intermountain Health, Kaiser, Merit/Sanford, Beth Israel Deaconess and Bon Secours are steps ahead of federal intervention:• Hospitals hiring physicians or acquiring groups• Regional Integrated Delivery Networks emerging• Electronic Medical Records for efficiency and decision

support• Hospitals have financial means to absorb new payment

paradigm

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What to Expect in a Post Reform Market in 2010

• Market Consolidation• Providers - Decision to ‘stand alone” or merge

• Accountable Care Organizations• National players• Regional players – Greater access to capital markets

• Insurance industry mergers, acquisitions, and market exits

• Standardization of care – ½ of all healthcare in US unsupported by evidence based guidelines

• Cost-shifting by employers, insurance companies, and providers – expect to pay more (e.g. baggage, food, drinks, pillows, and blankets)

• Ancillary businesses must adapt to change• Greater personal accountability

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Market Trends – Hospitals in 2015

• Partnering with Payers• Redefining networks• Private label community insurance products• Administrative synergies to leverage operating margins

• Partnering with Low-Acuity Clinics (e.g. Minute Clinics)• Partnering with Physicians (e.g. aligment/employment)• Partnering with Home Health agencies• Consolidation and “right-size”

• Payment models focused on outpatient market• Inpatient volumes declining and admission index higher

acuity• Eliminating unprofitable service lines

• Market pressures from quality, cost, and outcome requirements:• Readmission penalties and poor quality will drive market exits

• Medicaid expansion and non-expansion market impacts

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Market Trends Health Insurance Exchanges in 2015

• Commercial payers dropping providers from contracts• Eliminating high cost providers – 60 day out clause• Narrowing networks to contain costs• Providers challenged Medicare Advantage reductions• Electing to stay in network defaults to HIX

reimbursements

• Health plan benefit requirements• “Ten” essential benefits• Administrative requirements regarding premiums –

85% rule• No benefit denial – pre-existing conditions• Challenged to maintain “affordable” health plan

• Transforming from Payer to Provider (e.g. Highmark)

• Administrative delay for medium-sized employers until 2016

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Market TrendsRetailing Transformation in 2015

• Pricing transparency • NC law – Healthcare Cost Reduction & Transparency Act• All hospitals report prices for the 140 most common

inpatient, surgical and imaging services performed – Effective Jan. 1, 2014

• Payments from Medicare, Medicaid, and top five commercial plans available to patients and providers

• Hospitals must outline charity care policies on state’s website

• Retailing of healthcare – Migration from wholesale• Urgent care market segment• Low-acuity services – CVS local alignment with hospitals

• “Uber-ization” of diagnostics marketplace• Migration to high-deductible health plans

• Employer-based market migration driving shift• Creates demand for price • Lead to retailing of healthcare services

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Remember When They Ruled the Skies?

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…..and Who Rules in 2015?

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