Healthcare Reform:What’s Ahead and What’s Your Plan?

Blair Childs, Senior Vice President, Public Affairs

March 15, 2011

• 2,500 hospitals, 72,000 non-acute sites

• Nation’s largest clinical/operational/supply chain comparative databases

• $36 billion in annual spend

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• Award winning programs addressing environmentally sustainable sourcing

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Cost ReductionCost Reduction Quality Improvement

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Risk Mitigation

Risk Mitigation

Execution EngineExecution Engine

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AdvocacyAdvocacy

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Today’s discussion

• The environment :– “D, D & D” and the healthcare imperative

• The big power shift – Implications and priorities: 2011 – 2012– Will healthcare reform be repealed?

• Health reform implementation– Timeline and general direction

• Where is this headed and what should you do?

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The Environment: Worry

• ~9% unemployment• 2010 - Federal spending 24% of GDP (highest since WWII)

– Tax revenues 15% of GDP

• 2001 Debt = 33% of GDP; 2010 Debt = 62% of GDP• If remain on current course:

– Deficit remains high through decade and debt will increase to 90% of GDP by 2020

– 2025 - all Federal revenues will only cover interest payments, Medicare, Medicaid, SS

– 2035 - debt will outstrip entire economy

The big deficit driver is healthcare, even w/o reform

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Debt as a percent of GDP: Deficit Commission

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President’s National Commission on Fiscal Responsibility and Reform

• Final recommendations received at least 11 of 18 votes– $4 trillion in deficit reduction through 2020– Limit federal health spending to GDP+1% after 2020

Exceeding the targets would trigger action by the President and Congress– Fix Medicare doc payments (SGR) and pay for it by:

Cutting payments to doctors, other health providers, and drug companies Reduce excess payments to hospitals for GME Cut Medicare payments for bad debts

Increasing cost-sharing in Medicare Passing legal reform

– Expand cost-containment demonstration and pilot projects by 2015– Eliminate provider (hospital) carve-outs from IPAB

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Election implications

• 2012 • Jobs and deficit • Healthcare focus: costs

– Transparency– Pay for value (not volume); Test and scale: Innovation Center– Medical malpractice reform

• Implementation, oversight & investigations• Coverage expansion?• Republicans well positioned, but could flip again

– 2012 Senate (23D/10R); Redistricting (195 R; 49 D;92 split;92 Comm), economy, jobs, Tea Party

– Open seats: Bingaman (NM); Lieberman (CT), Conrad (ND), Kyl (AZ), Hutchinson (TX), Webb (VA); Akaka (HI) – (5Ds – 2Rs)

We are not going back to the way things were.Best to proceed as though no change has occurred.

Partisan Control of Legislatures 2011

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Presidential reelection and unemployment

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10

Largest State Budget Shortfalls on Record

*Reported to dateSource: Center on Budget and Policy Priorities survey, revised December 2010.

11

State Deficits for FY 2011

ALCA CT DE GA IA IL KS LA M

E MI

MO NC NH

NM NY OK PA SC TN UT VA WI

WY

8.3

36.6

21.621.6

28.9

1.7

11.5

20.2

26.2

12

18.9

3.4

41.5

9.4 8.7 8.8

12.5

9.6

34.7

14.4

9.2

26

9.4

16.1

30.3

9.6

24.1

38.3

6.2

54

15.3

11.3

14.8

32.4

15.613.9

25.6

8.8 9.810.2

14.6

30.2

8.8

21.623.9

3.6

10.3

Percentage shortfall in state and D.C. budgets for fiscal year 2011.

*California based on remaining 2010 shortfall and projected 2011 budget; Oregon has a two-year budget. Source: Center on Budget and Policy Priorities | cbpp.org

The overarching strategic umbrella of healthcare reform

Cuts to Existing FFS System• Market basket reductions• DHS cuts• Nonpayment for anything

preventable or unnecessary

Disrupt Existing System• Bundled Payments• Innovation Center • Demonstrations• ACOs

Track 1 Track 2

• Winners and losers

• Accountability & transparency

• People-centered primary care

• E-health and other innovations

• New focus on population health and social determinants

• Risk-based, value-driven reimbursement (P4P)

• Cost reductions

• Quality across the continuum and focus on transitions

• Smaller hospitals with more intensive care

• New roles of public and private sector (partnerships?)

Future state

Intensivecare

Non-Acute/specialty care

Primary & preventative care

TODAY1766

Intensive care

Non-Acute/specialty care

Primary & preventative care

TOMORROW

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Payment reform across the payment silos

Jan Feb March April May June July Aug Sep Oct Nov Dec

Hospital value-based purchasing (Proposed)

1/7/11

Program integrity -additional provider

screening (Final)

1/21/11

Annual inpatient update

+ Readmission reduction program

(Proposed )

Medicaid HACs

(Proposed)

Accountable care

organizations(Proposed)

Exchange(Proposed)

Annual Inpatient update +

Readmission reduction program

(Final

Transparency reports (PPSA) (Procedures)

Target dates for release of proposed and final regulations in 2011 implementing provisions of the Affordable Care Act (these are fluid and

likely to move)

Long-term and CLASS

Act(Proposed)

Uniform explanation of

benefits, coverage, definitions (Proposed)

Accountable care

organizations(Final)

State Innovation –

Review & approval process

(Proposed)

Regulations implementing reform: 2011

Hospital value-based purchasing

(Final)

Annual outpatient

update(Proposed)

Annual outpatient

update(Final)

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Proposed Inpatient Value-Based Purchasing Rule

• Rewards for achievement or improvement

• Budget neutral payment changes begin October 1, 2012 by reducing base operating payments for each discharge by– 1% in FY 2013, – 1.25% in FY 2014, – 1.5% in FY 2015, – 1.75% in FY 2016, and– 2% in FY 2017.

• Quality measures from Hospital Compare measure set – 25 measures (17 process/8 HCAHPS dimensions) in FY 13, and– Adds 20 measures (3 mortality, 8 HACs, and 9 IQI/PSIs) in FY 14

Simulated Impact of CMS VBP Proposed Rule

 

Number of

Hospitals

Total Base Operating

DRG Payments

2011($ millions)

1% Base Operating

DRG Payments($ millions)

Net VBP Payment ($ millions)

All 3,222 86,457 865 0.0

Urban 2,305 76,514 765 +0.7

Rural 917 9,943 99 -0.7

Large Urban DSH 1763 61,741 617 -13.5

Major Teaching 242 17,426 174 -6.5Premier members:

HQID 201 7,960 80 +6.8

Non-HQID 984 30,061 301 -19.8

QUEST members 143 6,424 3.2 +3.5

non-QUEST members 992 29,658 297 -15.918

Announcement of IC and Patient Safety Initiative

• Announcement anticipated early April• Expected to lay out priorities and process for Innovation

Center• Public/private, HAC/readmissions reduction effort to help

hospitals before 6% payment tied to these measures• Pledge by hospitals, consumers, business, to support• Unclear on measurement system and incentive program

structure. $1.5B tied to program. • Goal: 40% reduction in HACs by 2013 and 20% reduction

in readmissions. • Opportunity for organizations and hospitals to work with

hospitals to improve performance.

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Collaboratives drive top performance

Process Improvement(Evidence-Based

Care)

Systematic improvement (Inpatient value) Population total value

Payer Partners

► Insurers

► Employers

► States

► CMS

2.0

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A representative sample of U.S. hospitals

QUEST charter members include urban/rural, large/small and teaching/non-teaching facilities across 31 states

WA

IL

WI

LA

AR

MO

IA

MN

TX

OK

KS

NE

SD

NDMT

WY

CO

NM

ID

UT

AZ

NV

CA

ORMA

RICT

NJDEMD

SC

NC

VAWV

PA

VTNH

ME

FL

GAALMS

TN

KY

MI

OHIN

DCMO

NY

Bed size ranges:22% - 150 beds or less

29% - 151-300 beds25% - 301-450 beds

24% - 451 or more beds

70% Disproportionate

share

33% Safety Net38% teaching

14% rural

Year 1 18 Months Year 2 30 months

Lives saved 8,043 14,649 22,164 25,235

Dollars saved $577M $1.036B $2.13B $2.85B

Patients receiving EBC 24,818 41,130 43,741 63,094

QUEST collaborative driving improvementsYear 1 – 30 month results

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Evidence-Based Care

Mortality Cost of Care

25% 25%

50%

71%

49%

59%

94%

68% 71%

% of Hosptials in the QUEST Top Performacne Threshold (TPT)

Baseline

Year 1

Year 2

Baseline Year 1 Year 2

6

33

76

# Hospitals Achieving QUEST TPT in all 3

Dimensions

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Payor Partners

► Insurers

► CMS

► Employers

► States

ACO model: Six core components

A group of providers willing and capable of accepting accountability for the total cost and quality of care for a defined population.

Core Components

• People Centered

• Health Home

• High-Value Network

• Population Health

• ACO Leadership

• Payor Partnerships

Building accountability through collaboratives

Implementation Collaborative

• Ready to begin implementing

• Executive sponsorship & participation

• Payer partner participation and transparency

• Physician network & sufficient population base (5,000 equivalent Medicare lives)

• Transparency and acceptance of common cost/quality metrics (QUEST, HEDIS, others)

• Population health data infrastructure (EHR, HIE, Payer)

• Participation in work groups and meetings

• ACO contracting vehicle (legal entity)

Readiness Collaborative

• Willingness to implement in the future

• Participation in learning Webinars

• Gap analysis to pinpoint focus areas

• Participation in learning networks

• Participation in meetings with ACO Implementation Collaborative

• Preparation to collect population-based measures

• Milestones to keep on track to join the ACO Implementation Collaborative

Collaborative participants

Bundled payment for single episode of care

Bundled payment for chronic care

Clinically integrated PHO

Employed and independent physicians

Employed physicians only

Varying degrees of integration

Less integrated More integrated

Payor partners

Employers

IBM

Caterpillar

UNITE HERE Local 54 representing:

• Trump Entertainment Resorts, Inc.

• Harrah’s Entertainment

• Hilton Hotels Corp.

• MGM Mirage

Provider-Sponsored Plans Private Plans

Anthem/WellPoint Cigna Blue Cross Plans Coventry HealthSpring/Bravo Medica United Aetna BCBS MT HMSA Horizon BCBS New West BCBS MA

Government Payors

GeisingerPresbyterian New MexicoBaystateSummaBillings Clinic

CMSState Medicaid plansS-CHIP plansVA

Components and Capabilities

People Centered FoundationA. Involve People in Decisions that Affect their Health Care B. Provide People with Easy Access to Health Care C. Activate Individuals to Take Responsibility for their Own Health D. Regularly Assess and Address Individuals' and Population's Needs E. Measure and Improve the Experience of People within the ACO Population

Health HomeA. Deliver People Centered Primary CareB. Optimize Chronic, Acute and Preventative CareC. Manage Population Segments to Optimize Health StatusD. Coordinate Care Across ContinuumE. Health Home Value Care Systems F. Drive Continuous Improvement in Practice Population OutcomesG. Develop New Care Models to Improve Specific Clinical Conditions Across the Spectrum of Care

High Value NetworkA. Deliver High Value Specialist CareB. Deliver High Value Outpatient Facility ServicesC. Deliver High Value Inpatient ServicesD. Deliver High Value Post-Acute Care E. Integrate and Coordinate Care Across the SpectrumF. Drive Continuous Improvement in ACO Population Outcomes G. Develop New Care Models to Improve Specific Clinical Conditions Across the Spectrum of Care

Population Health Data Management

A. Capture and Analyze Data from Multiple SourcesB. Applications and Systems that Enable Population Health ManagementC. Information Exchanges and Communication Pathways for ACO Patients & Participants

ACO LeadershipA. Use Reimbursement to Align ACO Participants with ACO ObjectivesB. Provide ACO Wide Results Reports to all ParticipantsC. Communicate Consistently and Routinely to all ParticipantsD. Provide Strategic Management of ACO EntityE. Manage ACO as a Combined Physician Hospital EntityF. Provide Centralized Medical Management FunctionsG. Report on and Facilitate Management of Total Medical CostH. Manage Intra-ACO Transfer Prices / Costs I. Manage Financial Performance of ACOJ. Oversee Triple Aim Outcomes for Entire Population K. Effectively Manage the Operational Transitions Required to Create an ACO L. Develop an Organizational Culture Consistent with an ACO SystemM. Train Physicians and Other Leaders in Leadership Development in Order to Foster Effective Leadership in a New ACO System N. Enable ACO Contracting O. Evaluate, Analyze, Establish Appropriate Legal StructureP. Educate and Appropriately Manage Interactions Across and Between ACO PartiesQ. Impact and Monitor ACO Regulatory and Legislative Environment

Payor PartnershipA. Negotiate and Manage ACO Contract with Payer Partners B. Design aligning incentive systems for ACO members that may be administered by Payer PartnerC. Collaborate with Payer Partners to Manage Population Experience

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Planning imperatives

• Maximize efficiency and through-put• Align with physicians • Evidence based decision-making

– Where you stand on elements of reform– Comparative effectiveness research– Quality and outcomes measures

• Embrace transparency• Look to national comparisons• Increased federal regulatory burden• Continual changes

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