Healthcare Reform and the Impact on Healthcare Manufacturers

Linda Rouse O’NeillVice President, Government Affairs

March 5, 2013

Agenda

Sequestration and Healthcare Status of Reform

Medicaid and Insurance Exchanges Provider Impact

Other Key Provisions Federal Gift Disclosure

Lesser Known Provisions Opportunities in Uncertain Times

Sequestration and Healthcare

The fiscal cliff impacted healthcare in multiple ways

2% budget sequestration – Every year until 2021 Congress postponed cuts until March 1, 2013

Medicare - $123 billion total

Elements of the Cliff

Sequestration

Physician Pay Cut

2001/2003 Tax Cuts

Tax Extenders

Payroll Tax Holiday

Alternative Minimum Tax

Feb-March Showdown

Mid-Feb Debt Limit

Mid-Feb POTUS State of the Union Address

Mid-Feb President’s Budget Goes to Congress

March 1 2% Budget Sequestration Kicks In

March 27 Federal Funding Appropriations Expire

Sequestration projected to cut $123 billion in Medicare provider payments from 2013 to 2021

CBO projects a gradual increase in Medicare reductions

Congress delayed start date from January 1 to March 1, 2013

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Healthcare budget biopsy

Programs Impacted by Sequestration 2013 Cuts

Medicare $11 billion

Maternal and Child Health Block Grant $42 million

AIDS Drug Assistance Program $73 million

HIV Preventions and Testing $26 million

Breast and Cervical Cancer Testing $12 million

Childhood Immunization Grants $14 million

Public Health Emergency Preparedness Grants $48 million

Medicaid is exempt, but public health programs are not. This list is not a comprehensive list of programs impacted by the budget sequestration.

Status of Reform

Status of the main provisions

Insurance Programs/Funding

Individual Mandate – 2014 Accountable Care Organizations – In Effect

?? Medicaid Expansion – 2014 Centers for Medicare and Medicaid Innovation – In Effect

Health Insurance Exchanges - 2014

CLASS Act for Long-Term Care Insurance – On Hold

Employer Mandate - 2014 Independent Payment Advisory Board – No Nominations Yet

Guaranteed Coverage for Pre-existing Conditions - 2014

Comparative Effectiveness Research (PCORI) – In Effect

Premium Tax Credits - 2014 Medicare Provider Cuts – 2012

Ban on Coverage Limits – In Effect

Medical Device Tax - 2013

Reform hinges on insured population

Medicaid: Breaking down the SCOTUS decision

Federal government cannot penalize states that do not expand Medicaid eligibility 11 million as opposed to 16 million eligible individuals

Medicaid coverage expansion will unfold one-third at a time

33% States that expand in 2014

33% States that delay coverage expansion until 2015

33% States that delay longer than one year

Source: Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision. Congressional Budget Office. July 2012.

Increased patient load Providers adopting “medical homes” to

coordinate care Potential impact on healthcare workforce

(i.e., exacerbate shortages)

Expanded benchmark benefits package = increased market access to products and services ACA lists ten broad categories of “essential

health benefits” that will be mandatory cover under Medicaid

Medicaid must provide preventive services with no cost-sharing

Expectations for 2014

Status of ReformProvider Impact

Emphasis on quality

Skin in the game

Reduced costs

MandatoryComing to a market near you!

Value-based purchasing Readmissions policy

Infection policies

Voluntary Accountable care

organizations (ACOs) Bundled payment pilot

program

Payment Drivers are Changing

Value-based Purchasing (VBP) Rewards Quality

Value-based Purchasing1

Hospital Medicare reimbursement will be tied to performance on process measures, outcomes for certain clinical conditions, and patient experience measures.

More than 3,000 hospitals are required to participate2

1% of Medicare hospital reimbursement is tied to VBP in the first year, equivalent to $850 million.Four quality measures will be added October 1, 2013 (FY2014).Now, more than ever, hospitals need help maximizing their reimbursement

1 Centers for Medicare and Medicaid Services (CMS). www.cms.gov/hospital-value-based-purchasing/.2 CMS. FY2013 Program: Frequently Asked Questions about Hospital VBP. March 9, 2012.

The Carrots and Sticks Approach

Hospitals can earn back more than their 1% share in FY2013, or they can lose out on

the 1% share by not meeting performance benchmarks.

By 2016, 2% of hospital Medicare pay will be tied to VBP.

Measure Domains Total Measures

FY2013 • 12 Clinical Process of Care

• 8 Patient Experience of Care (Hospital Consumer

Assessment of Healthcare Providers and Systems –

HCAHPS)

20

FY2014 • 12 Clinical Process of Care

• 9 Patient Experience of Care (Hospital Consumer

Assessment of Healthcare Providers and Systems –

HCAHPS)

• 3 Mortality

24

CMS will assess each hospital’s improvement from the baseline period performance to the performance period.

Hospital readmissions reduction program is underway

Hospital payments reduced for excess readmission rates within 30 days of discharge: Heart attack, heart failure, and

pneumonia FY2013-14, up to 2% across-the-board

cut/FY2015 up to 3%

More than 2000 hospitals are being penalized in FY2013 Performance based on July 2, 2008 –

June 30, 2011 readmissions Reducing preventable readmissions;

encourage acute and post-acute provider collaboration

Readmissions reduction - $280 million in 2013

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Hospitals hit hardest in New Jersey, New York, D.C., Arkansas, Kentucky, Mississippi, Illinois, and Massachusetts

Safety-net hospitals hit harder than others Highly recognized institutions are on the list:

Hackensack University Medical Center North Shore University Hospital Beth Israel Deaconess Medical Center A teaching hospital of Harvard Medical School Massachusetts General Hospital

Source: Rau, Jordan. “Medicare To Penalize 2,217 Hospitals For Excess Readmissions.” Kaiser Health News. August 13, 2012.

NO END-GAME FOR HACs

1% cut across-the-board to hospitals in the top quartile of national infection rates (infections and rates are to be determined in regulatory rulemaking process)

Begins in 2015; (no sunset date) Projected to save $1.4 billion over 10 years HHS required to submit a

report to Congress with regard to establishing a HAC policy in post-acute settings

MULTIPLE PENALTIES = 1 CONDITION*

* This table is meant to provide a snapshot of HAC/HAI only. Details on all the HAI quality measures, which include specific surgeries and patient safety indicators that affect market basket updates and value-based purchasing payments for hospitals, can be found on the Centers for Medicare and Medicaid Services (CMS) Web site at www.cms.gov.

** Value-based purchasing is in effect as of FY2013; CMS may adopt HACs measures as early as FY2015.*** CMS has not yet proposed regulations to implement infection policies included in healthcare reform.

Hospital-acquired Conditions Medicare (not eligible for higher

payment)

Value-based purchasing

1% cut per health reform policy

Medicaid preventable conditions

(not eligible for higher payment)

(FY2008) (FY2013)** (FY 2015)*** (July 1, 2012)

Catheter associated UTI X ? ? X

Surgical site infections X ? ? X

Vascular cath-assoc infection X ? ? X

Foreign object retained after surgery X ? X

Air embolism X ? X

Blood incompatibility X ? X

Pressure ulcer stages III or IV X ? X

Falls and trauma X ? X

DVT/PE after hip/knee replacement X ? X

Manifestations of poor glycemic control X ? X

Ventilator associated pneumonia ? ?

MRSA ? ?

Clostridium difficile ? ?

Central line assoc. blood stream infection X (New-FY2013) X (New-FY2013)

Hospital payment tied to performance

% of hospital pay tied to performance

ACO amount is unknown and depends on physician participation/ pay model

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Groups of healthcare providers who contract with a payer to work together to coordinate care, meet

performance benchmarks on quality measures, and reduce overall cost to provide care.

Specifically ACO providers agree to work together to:

What is an ACO?

Coordinate patient care

Share in achieved cost savings

Perform well on quality measures

Reduce spending

Each ACO is unique

221- Medicare Shared Savings

Program

32 - Pioneer ACO Demo

PRIVATE SECTOR ACOS

FEDERAL ACO PROGRAMS

6 - Physician Group Practice Demo Advanced Payment

Model ACOs

Healthcare Providers

Insurers

The framework, or rules, for each ACO depends on the “payer”

Other Key Provisions

Gift disclosure final rule

Covered devices are those requiring premarket (510k) or pre-notification approval from FDA. Covered drugs are those requiring a prescription.

If sales of covered products are more than 10 percent of total (gross) revenue, then company must report on gifts and transfers of value related to all products it sells.

If sales of covered products are less than 10 percent of revenue then a distributor must only report on payments or transfers associated with the sale of covered products.

Distributors must now comply with federal gift disclosure reporting

requirements if they “Hold title” to covered products.

Gift disclosure final rule

What is in?

Payments, whether cash or in kind transfers, to all covered recipients including: compensation; food, entertainment or gifts; travel; consulting fees; honoraria; research funding or grants; education or conference funding; physician ownership or investment interests including stock and stock options; royalties or licenses; and charitable contributions.

What is out?

Small payments or gifts of $10 or less would not need to be reported unless the total annual payment amount to any covered recipient exceeds $100.

Also: educational materials that directly benefit the patient (anatomical models, wall charts, etc.), product samples for patient use, in-kind items used in the provision of charity care, discounts and rebates.

Key dates around the corner

Key dates:

August 1, 2013: Data collection begins. March 31, 2014: Required data must be submitted to CMS for

August 1 through December 31, 2013. September 30, 2014: CMS publicly posts information.

■ House and Senate bipartisan repeal legislation:

Reps. Paulsen (R-MN) and Kind (D-WI)

Senators Hatch (R-UT) and Klobuchar (D-MN)

Possible delay – Led by Senate Democrats?

4 Democrats on repeal bill

More House Democrats cosponsoring repeal this year

Device Tax – chances of repeal?

Lesser Known Measures to Watch

Long-term services and supports help older adults and people with disabilities accomplish everyday tasks (e.g., bathing, getting dressed, fixing meals, and managing a home).

Four provisions to incentivize states to shift long-term services and supports spending toward non-institutional care.

State Balancing Incentive Payments Program Money Follows the Person Rebalancing Demonstration Community First Choice Option Home and Community-Based Services State Plan Option

 

Home and community-based LTC options

■ The Patient-Centered Outcomes Research Institute is tasked with overseeing comparative effectiveness research (CER)

■ CER will impact provider decisions about treatment options

■ Research findings will Guide provider best practices Drive new product development Influence reimbursement decisions Encourage the cessation of some current treatment options

CER and the PCORI

Bundled payments – another step away from

FFS

Pilot project where payments are bundled for acute inpatient, physician, outpatient, post-acute services

2 Payment Types, 4 Models: paid by condition 500 healthcare organizations participating

January 1, 2013, national voluntary

pilot program begins

HHS report to Congress on

program - 2015

HHS report to Congress on final results of program, as

well as a plan for expansion - 2016

Opportunities in Uncertain Times

Opportunity #1: Tie your marketing to specific quality measures. For example…

Patient experience Patients’ ratings of doctors, how well they communicate and educate

Care coordination and patient safety COPD, congestive heart failure EHR implementation by primary care providers Screening for risk of falls

Preventive health Flu and pneumonia vaccination rates Colorectal cancer screening Blood pressure screening

Caring for at-risk populations Diabetes control (SEVERAL measures) Blood pressure control

Many opportunities are also tied to otherhealthcare reform provisions

Reducing readmissions Preventing infections Mortality measures Patient satisfaction Safety and risk management

Opportunity #2: Adapt sales approaches for a centralized, standardized world

Offer evidence-based clinical data Be prepared to deal with value analysis teams Support providers’ standardization goals

Opportunity #3: Talk about savingmoney in broader terms

Providers won’t succeed if they cut spending in one area only to add costs in another

Show customers why spending for your products or services will reduce system-wide costs

Selling in healthcare is changing fast

Yesterday/Today Today/Tomorrow

Selling to the hospitalConsulting w/ Value Analysis Teams

National, Multi-Source GPO Contracts Local, Single-Source Contracts Market Specificity Multi-Market Strategies & IDNS Cost-plus Separate Logistics Fee Price Selling Total Cost to Own Free Access to Clinicians Vendor Credentialing Clinician Demand Formularies Emphasis on Unit Price Emphasis on Outcomes

QUESTIONS?

Linda Rouse O’NeillVice President, Government Affairs

rouse@hida.org