4Paul Keckley Former Executive Director Deloitte Center for Health Solutions
5Ed Wolking Executive Vice President Detroit Regional Chamber
6Handling Change: Challenges and Opportunities for Employers
7David Lansky President and CEO Pacific Business Group on Health
8DRAFT 2 - CBO Presentation Challenges and Opportunities for Employers (and by extension, individuals and employees) Health Care Leaders Forum Detroit Regional Chamber March 12, 2014David Lansky, PhDPresident and CEO
11SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), ; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, (April to April).
12Percentage of All Firms Offering Health Benefits, 1999-2013 *Estimate is statistically different from estimate for the previous year shown (p<.05).NOTE: Estimates presented in this exhibit are based on the sample of both firms that completed the entire survey and those that answered just one question about whether they offer health benefits. The percentage of firms offering health benefits is largely driven by small firms. The large increase in 2010 was primarily driven by a 12 percentage point increase in offering among firms with 3 to 9 workers. In 2011, 48% of firms with 3 to 9 employees offer health benefits, a level more consistent with levels from recent years other than The overall 2011 offer rate is consistent with the long term trend, indicating that the high 2010 offer rate may be an aberration.SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,
13Employers considering “exit” Source:18th Annual Towers Watson/National Business Group on HealthEmployer Survey on Purchasing Value in Health Care (2013)
14Savings by “Best Performing” Employers Source:18th Annual Towers Watson/National Business Group on HealthEmployer Survey on Purchasing Value in Health Care (2013)
15Strategies of “Best Performing” Employers Source:18th Annual Towers Watson/National Business Group on HealthEmployer Survey on Purchasing Value in Health Care (2013)
17Large Employer Strategies Benefit design with strong incentives to consumers:Tiered networksReference pricingCenters of Excellence (travel surgery)Direct contracting:Accountable care organizationsPrimary care networksOn-site clinics with selected networksIntensive outpatient care models (serious chronic illness)Payment reform:Price and quality transparency “value” based paymentsAlignment among private carriers (e.g., bundled payment)Alignment with Congress, Medicare, states (e.g., SGR fix)
18Source: Robinson JC and Brown TT, “Increases in Consumer Cost Sharing Redirect Patient Volumes and Reduce Hospital Prices for Orthopedic Surgery.” Health Affairs 32(8), 2013, pp
19Reference pricing for lower cost services Colonoscopy Cost Per Procedure – Greater SF Bay Area MSA12% increase in use of labs below reference price; 6% increase in low-cost imaging centersDriven by steerage to specific, named providers
21Where we are today…Fading hope that competitive market can work to manage cost, improve qualityPotential of rapid shift to defined contribution, private and public exchanges in next 5-10 yearsConsensus interest in value-based payment, alignment of consumer and provider incentives, greater transparency for informed decisionmakingThe path is clear. Will leadership appear?
23Fast-Changing Relationships: The Road Ahead for Employers
24Moderator: Panelists: Kathleen S. Neal, Director of Integrated Health Care & Disability, Chrysler Group, LLC Former Executive Director Deloitte Center for Health SolutionsPanelists:John Neuberger, Director of Client Partnerships, Quad/GraphicsRandy Vogenberg, Principal, Institute for Integrated Healthcare
25Impacts of Response: The Changing Landscape for Providers
26Carlos Jackson Senior Associate Director, Federal Relations American Hospital Association
27American Hospital Association The Changing Landscape for ProvidersCarlos JacksonAmerican Hospital AssociationMarch 12, 2014
28Wednesday, February 15 Naval Heritage Center 9:30 AM ACA implementationWednesday, February 15 Naval Heritage Center 9:30 AM
29Implementing reform Regulatory Design Insurance reforms High risk poolsMedical loss ratiosMandatesInsurance exchangesIntegrated care optionsBundlingAccountable care organizationsMedical homesCenter for Medicare and Medicaid InnovationValue-based purchasingReadmissionsHospital Transparency Related to Health Costs. (Sec. 1003) Hospitals must report annually and make public a list of hospital charges for items and services, including Medicare severity diagnosis-related groups (MS DRGs). The HHS Secretary will establish the guidelines for public reporting beginning in 2010.29
30CMS quality and accountability initiatives provide additional impetus to hospitals’ integration efforts.Chart 3: Timeline of CMS Value-Driven Payment InitiativesMeaningful Use (HITECH Act)Incentive Payments OnlyUpside/Downside RiskPenalties OnlyNonpaymentAccountable Care Organizations*Bundled Payments for Care Improvement*Readmission Penalties for Low PerformersHospital-Acquired Conditions**Hospital Inpatient Quality Reporting Program (P4R)Hospital Outpatient Quality Reporting Program (P4R)Hospital Value-Based Purchasing Program20082009201020112012201320142015201620172018P4R: Pay-for-reportingHITECH: Health Information Technology for Economic and Clinical Health*Program is voluntary**In 2008, Medicare stopped paying for select hospital-acquired conditions (HAC). In FY 2015, Medicare will begin penalizing hospitals in the top quartile of Medicare HACs .Source: Centers for Medicare & Medicaid Services
31Physicians widely anticipate increased levels of integration with partner hospitals. Chart 5: Percent of Physicians that Believe Physicians and Hospitals are Likely or Very Likely to become More Integrated in the Next 3 Years, by Medical Specialty, 2013Source: Deloitte Center for Health Solutions (2013). Deloitte 2013 Survey of U.S. Physicians.
32Integration helps hospitals gain efficiencies through economies of scale. Chart 6: Economies of Scale with Increasing Patient Population1 patient2 patients4 patientsVariable Costs*Fixed CostsFixed costs, such as medical technologies, are spread across each patient. The more patients that need the technology, the lower the cost per patient.Variable costs, such as labor costs, scale with the number of patients. As the number of patients increases, variable labor costs can decrease over time due to new efficiencies.Source: Bond, R. (2012). American Healthcare Industrial Revolution: Economies of Scale and the Accountable Care Organization (ACO). ACODatabase.com.
33The Concern Behind the Law Unintended Consequences Current legal and regulatory barriers are a deterrent to innovative clinical integration efforts.Chart 7: Legal Barriers to Integrated Care DeliveryLawWhat is Prohibited?The Concern Behind the LawUnintended ConsequencesHow to Address?Antitrust (Sherman Act)Joint negotiations by providers unless ancillary to financial or clinical integration; agreements that give health care provider market powerProviders may enter into agreements that either are nothing more than price-fixing, or which give them market power so they can raise prices above competitive levelsDeters providers from entering into procompetititve, innovative arrangements because they are uncertain about antitrust consequencesAdditional guidance from antitrust enforcers to clarify when arrangements will raise serious issues; guidance is currently available for federally-designated accountable care organizations (ACOs)Ethics in Patient Referral Act (“Stark Law”)Referrals of Medicare patients by physicians for certain designated health services to entities with which the physician has a financial relationship (ownership or compensation)Physicians may have financial incentive to refer patients for unnecessary services or to choose providers based on financial reward and not the patient’s best interestArrangements to improve patient care are banned when payments tied to achievements in quality and efficiency vary based on services ordered instead of tied to hours workedCongress should remove compensation arrangements from the definition of “financial relationships” subject to the law. Arrangement would continue to be regulated by other laws.Anti-kickback LawPayments to induce Medicare or Medicaid patient referrals or ordering covered goods or servicesCreates uncertainty concerning arrangements where physicians are rewarded for treating patients using evidence-based clinical protocolsCongress should create a safe harbor for clinical integration programsCivil Monetary Penalty (CMP)Payments from a hospital that directly or indirectly induce a physician to reduce or limit services to Medicare or Medicaid patientsPhysician may have incentive to reduce the provision of necessary medical servicesAs interpreted by the Office of the Inspector General (OIG), the law prohibits any incentive that may result in a reduction of care, even if the result is an improvement in the quality of careThe CMP law should be changed to make clear it applies only to the reduction or withholding of medically necessary servicesIRS Tax-exempt LawsUse of charitable assets for the private benefit of any individual or entityAssets that are intended for the public benefit are used to benefit any private individual (e.g., a physician)Uncertainty about how IRS will view payments to physicians in a clinical integration program is a significant deterrent to the teamwork needed for clinical integrationIRS should issue guidance providing explicit examples of how it would apply the rules to physician payments in clinical integration programs
36Options for offsets and deficit reduction Hospital Vulnerability ListOptions for offsets and deficit reductionProspective coding offsets ($8 billion)Site neutral payment policiesE&M code/HOPD ($10 billion)66 additional APCs procedures ($9 billion)12 procedures performed in ASCs ($6 billion)Hospital bad-debt reductions ($20 billion)GME reductions ($10 billion)CAH: payment reductions and qualification criteria ($2 billion)Post acute care ($70 billion)IPAB expansion ($4.1+ billion)Medicaid:State provider assessments ($22 billion)Medicaid DSH “rebasing”
37Impact of site neutral payment options Medicare Margins for Hospital Outpatient Department Services and Projected with MedPAC Proposed CutsE&M OnlyE&M and 66E&M, 66 and 12Source: Medicare Payment Advisory Commission, December 2012 meeting materials and June Report to Congress.
38President’s FY 2015 Budget $414 Billion in Medicare and Medicaid Cuts Key hospital provisionsReplace remaining sequestration with other savingsReduce GME by $14.6 billion (proposes $5.23 billion for 13,000 new residency slots through a new competitive GME program)Strengthen IPAB ($12.9 billion)$112 billion in post-acute cuts (site-neutral SNF/IRF, 60% rule, reduces updates)Phase out Medicare bad-debt payments by $30.8 billionRebase Medicaid disproportionate share hospitals in FY 2024 for savings of $3.26 billionCritical Access Hospitals: 101% to 100% and 10 mile designation ($2.4 billion reduction)
40The Two-Midnight RuleCMS will generally consider hospital admissions spanning two midnights as appropriate for payment under the inpatient prospective payment system (PPS).In contrast, hospital stays of less than two midnights will generally be considered outpatient cases, regardless of clinical severity.1
41On the Horizon: What’s Around the Corner for Providers?
42Moderator: Panelists: Laura Appel, Vice President of Federal Policy and Advocacy, Michigan Health & Hospital AssociationPanelists:Gina Buccalo, MD, Chief Medical Officer, Partners in CareCarlos Jackson, Senior Associate Director, Federal Relations, American Hospital AssociationMichael Madden, President and CEO, The Physician Alliance
45Challenges for the Government – The Federal Response
46Tevi Troy President The American Health Policy Institute
47Perspectives of a Healthcare Policy Maker Tevi Troy, PresidentThe American Health Policy Institute
48Perspectives of an insider Policy makers inside government have different perspectives from those in the private sector. They are often equally competent but they're looking at things from a different angle have different bosses and different constituencies to satisfy.In addition they are subject to different rules. The APA governs how regulations are determined and puts the development of regulations in a very tight stricture.
49Perspectives of an insider One of the challenges in developing the website was that policymakers had to use federal contractors, a universe with a high bar to entry, using "cost-plus" reimbursement, and requiring certifications of compliance with OFCCP, acquisition requirements, and other federal standards. It is true that policymakers come with results that differ from one of those in the private sector would have come up with, but much of this stems from the different perspective and the different rules the government imposes, as well as their lack of private sector experience.
50Coping with a Challenging and Uncertain Regulatory Environment Health care faces significant policy challenges.Health care environment rife with regulatory uncertainty.Post-elections/Supreme Court/mandate delay/Shutdown fight, regulatory landscape and employer responses will determine the disposition of the ACA more than Congress in the short term.
52OBAMA ADMINISTRATION’S TOP ISSUES: Healthcare Reform Increasing costs1960: healthcare 5% of GDP2011: healthcare 17.9% of GDP - $2.7 trillion2021 (projected), $4.8 trillion % of GDPGovernment expected to spend $2.4 trillion (50% of healthcare spending)
53US Health Care CostsUS Average annual cost of health care was $8,233 per capita x Japan’s in 2010U.S. households spent 6% of their annual incomes on health costsU.S. performs more expensive diagnostic tests, such as MRI’s and CT’sOn the other hand, the U.S. does not have an excessive number of doctors or hospital beds relative to its populationSimilarly, duration of hospital stays is not above average
542030 Baby Boomer Projections In 2030:The over 65 population will be at 72,091,915(19% of the overall U.S. population) - 40,228,712 million in 2010 (13% of overall U.S. population)Over 21 million will be considered obeseApprox. 14 million will be living with diabetes
55Breakdown of National Health Care Expenditures: 1965-2010 Source: Office of the Actuary of the Center for Medicare and Medicaid Services
56Before Reform Became Law… 5 different committees3 House2 in SenateTwo Houses of CongressHouse FloorSenate FloorConferenceIn SenateReconciliation (51 votes) or Regular Order (60)Presidential Signature
60Analysis of CHT Timeline TypePre-enactmentUpon enact-ment6 months post enact-By Jan 1, 20111 year post enact-1 year post enactment to Jan 31, 2011Jan1, 2012-Dec 31, 2013TotalPercent of totalMedicare7294411342416335Medicaid5342179CHIP1Public health679HHSTaxes1012Insurance2151Long-term care<1IHS6886181503365282275469100321416
61How did we get here? Intense effort to micromanage The Affordable Care Act (ACA) has required almost 20,000 pages of regulations, elaborating on the original 2,700 page law.Can be very specific. Consider Section 4102 of the ACA, which states: "The secretary shall develop oral healthcare components that shall include tooth-level surveillance.”Not necessarily welcome: 51% of doctors percent felt that the law would have a negative impact on their relationships with their patients
62Outlook of the next four years ACA will not be overturned before 2017Implementation challenges greater than expected, but do not change the central dynamic:Democrats will never admit full extent of the law’s shortcomingsRepublicans will never call the law a success even if it works as promisedHow should people judge the law?
63Judging the Law Evaluate the law based on its 3 main goals Universal coverage“Bending the cost curve”The guarantee of the ability to keep current plan
64Promise: Universal Coverage Ranging number of uninsured, between 30 – 47 million peopleMoral imperative to cover peopleMost expansive definitions of the uninsured that President Obama used included both illegal immigrants, as well as individuals, who were already eligible for public assistance, but not partaking in it
65Promise: “Bending the cost curve” President Obama claimed he would reduce premium costs by $2,500 for a family of fourThere is tension between the goal of universal coverage and the effort to bend the cost curve
66Promise: “If you like your health care you can keep it.” Became standard response to the public’s skepticism of the ACAPresident Obama mentioned it nearly every time he spoke of the lawSome sources say he said it hundreds of timesThe promise was to ensure Americans that the law would not affect 85% of Americans that already had health insurance
67Other metrics to evaluate ACA imposes $1.1 trillion in new taxes over the first 10 yearsEmployers are trying to stay under 50 employees, or 30 hr thresholdHealth care market has been one of the only sectors continuing to hire during the recessionIn September 2013 there were more layoffs among health-care providers than in any other industry
68Legislation - GOP Alternative Executive Compensation: A Best Practice and Public Policy OverviewLegislation - GOP AlternativeSenate Republican ProposalKeeps most popular provisions of the ACAGuaranteed issue, coverage of dependents to age 26, no lifetime limitsRepeals more than a dozen ACA taxes and the employer mandateProvides continuous coverage protection for pre-existing conditionsGives tax credits to people who are not employed at large companiesLimits tax exclusion of employer provided health benefits to 65 percent of plan costs.
69American Health Policy Institute Executive Compensation: A Best Practice and Public Policy OverviewAmerican Health Policy InstituteAmerican Health Policy InstituteAHPI is a non-partisan 501 (c)(3) think tank focused on health care policy and the employer-based system.AHPI will be looking at: how the ACA affects employers; what employers are doing about ACA; and policy recommendations.The first study from AHPI will be on employers costs under ACA
70Going forward? Democrats are adamant the law stay in place. Republicans are adamant the law goes.This dynamic means there is no pathway for real improvement of changes during the remainder of the Obama administrationEmployers need to chart a path forward, recognizing that they will get little help from Washington. This requires two steps:Creating health care plans that work for employers and employees within the current structureLaying the groundwork now that will have to come in the future administration
76Units X Price = Cost, right? Quick Quiz: What causes American Health Care to be more expensive than HC in other countries?We uses more stuff, i.e., it’s a units problem, mostly.The stuff we use is higher priced, i.e., it’s a price problem, mostly.Both in roughly equal measure.
80Source:Physician fees and salaries in the US and other countries September 8, 2011 at 2:18 pm Aaron Carroll The Incidental Economist; data from /hlthaff Health Aff September 2011 vol. 30 no. 9
81How did it get this way?Fee for service= accountability for activity, not for outcomesIndustry consolidation for two decades = oligopoly formationThird party payer system: those who use the service and provide the service don’t pay for the service = moral hazard
82Where current reform schemes work UnitsPay for performanceNonpayment for readmissionsBundlesCapitationPricesBenefit design, e.g. reference pricingPrice transparency
83Providing Answers to: Consumers… Businesses… Providers and Facilities… “How much will my knee MRI cost and what are my best options?”“How do I compare to my peers and demonstrate value?”“How does cost, utilization and quality compare between public and private payers?”Businesses…Legislators and Policy Experts…“Which health plan provides the best value providers for our premium?”Providing Answers to:83
84StateStatewide or partial geographic areaStatutory or voluntaryProvides consumer focused reportingCurrently collecting data?Currently doing any kind of public reporting?1. MaineStatewideStatutoryYes2. NH3. VT4. MA5. MD6. KSNo7. UT8. TN9. MNNo (reports are not public)10. Colorado11. Oregon12. WisconsinPartialVoluntary13. Washington State
85Status of state APCDs11 statewide, statutory APCDs, including Colorado, that have collected data. There are two states that have voluntary data for part of the state (WI, WA).Oregon has not issued any reports yet, so that is why the count is often “10 APCDs.”Seven states have issued reports at one time or another. (ME, NH, VT, MA, MD, KS, UT).Five states allow data release: ME, NH, VT, MA, COThree states do consumer focused reporting: ME, NH, MA and soon CO
91Will market forces regulate prices? Motivated purchasers/consumersBenefit design, high deductibleReference pricing strategiesTransparent pricingTransparent and relevant qualityWilling competitorsCenters of excellence strategiesPearlanne, can you turn into a diagram, say four circles that interrelate?
92CMS moving toward greater transparency CMS NEWS Feb. 21, 2014Quality Data Added to Physician Compare WebsitePatients Get More Information to Help Find a Doctor Today, the Centers for Medicare & Medicaid Services (CMS) announced that for the first time, quality measures have been added to Physician Compare, a website that helps consumers search for information about hundreds of thousands of physicians and other health care professionals. The site helps consumers make informed choices about their care.
93What you’d want to make prices real and accurate Paid amounts, not chargesLarge database so results are statistically significantAcuity adjustment methodology that doesn’t penalize providers who take care of sicker patients
94Take HomesWhile we have room to improve on how much HC we use, we’re not that different from others in this regardWhere we do differ is that our prices are much higher for the same servicesWhile much of HC cost containment to date has been focused on lowering utilization (units used), we must focus attention on prices as well
95Take HomesOne of the ways we might get better pricing is more transparencyAPCDs offer the chance to get the biggest datasets availableOligopolies generally oppose transparency, as they are designed to maintain higher prices and to avoid price competition
96Ed Wolking Executive Vice President Detroit Regional Chamber
99Top Hospitals in MICHIGAN - 2013 Recognition for top performing hospitals - Leapfrog Hospital SurveyTop Hospital (hospitals coded as Urban)DMC Detroit Receiving Hospital and University Health CenterMercy Health Saint Mary'sTop Children’s HospitalDMC Children's Hospital Of MichiganTop Rural Hospital (includes Critical Access Hospitals)OSF St. Francis Hospital & Medical GroupSpectrum Health Kelsey Hospital
100Regional Initiatives: Detroit and Michigan-Miles to Go Before We Sleep?
101Moderator: Panelists: Kirk Roy, Vice President, Office of National Health Reform, Blue Cross Blue Shield of MichiganPanelists:Kate Kohn-Parrott, President and CEO, Greater Detroit Area Health CouncilChristopher Priest, Senior Strategy Advisor, Office of the Governor