1. Polsinelli PC. In California, Polsinelli LLP Affordable Assisted Living Coalition August 12, 2014 Supportive Living Managed Care Update

2. real challenges. real answers. sm © 2012 Polsinelli Shughart PC Faculty Matthew J. Murer Polsinelli PC 312-873-3603 773-259-9381 (cell) MMurer@Polsinelli.com Kathryn M. Stalmack Polsinelli PC 312-873-3608 312-330-0734 (cell) KStalmack@Polsinelli.com

3. real challenges. real answers. sm Overview  Where are we now  SB741 - new rights and obligations  Key contracting terms for MCOs  Overview of litigation  Contracting Issues  Positioning yourself for the future  Practical problems and challenges

4. real challenges. real answers. sm The really big issue  The money!  $$$$$$$$$$ © 2012 Polsinelli Shughart PC

5. real challenges. real answers. sm Total Enrollment Figures for Integrated Care Program - All Current Counties with Enrollment Health PlansJune 2014May 2014June 2013 Aetna Better Health Inc29,57825,57917,819 IlliniCare Health Plan Inc29,80326,84917,978 Community Care Alliance of Illinois 8,7045,5350 Meridian Health Plan Inc8,7327,7030 Molina Healthcare of ILL5,2255,2700 Health Alliance Connect5,2995,1470 My Health Care Coordination (CCE) 1,2941,2910 Precedence (CCE)9028930 Blue Cross/Blue Shield of Illinois 3,3282,2010 Cigna HealthSpring of Illinois 1,1167690 Humana Health Plan6413380 Be Well (CCE)1,6735410 EntireCare (CCE)1,7972810 Together4Health (CCE)1,7548290 Total99,84683,22635,797

6. real challenges. real answers. sm Enrollment Figures for Integrated Care Program - Suburban Cook and the Collar Counties Health PlansJune 2014May 2014June 2013 Aetna Better Health Inc 17,12917,21417,819 IlliniCare Health Plan Inc 17,94118,10617,978 Humana Health Plan2060 Meridian Health Plan62440 Blue Cross/Blue Shield of Illinois 68420 Cigna HealthSpring of Illinois 26170 Community Care Alliance of Illinois 164960 Total35,41035,52535,797

7. real challenges. real answers. sm Enrollment Figures for Integrated Care Program - Rockford Region Health PlansJune 2014May 2014 Aetna Better Health Inc1,3751,374 IlliniCare Health Plan Inc 1,4871,505 Community Care Alliance of Illinois 1,4631,476 Total4,3254,355

8. real challenges. real answers. sm Enrollment Figures for Integrated Care Program - Central Illinois Region Health PlansJune 2014May 2014 Meridian Health Plan Inc 1,5281,480 Molina Healthcare of ILL 3,2133,198 Health Alliance Medical Plan 5,2995,147 My Health Care Coordination 1,2941,291 Total11,33411,116

9. real challenges. real answers. sm Enrollment Figures for Integrated Care Program - Metro East Region Health PlansJune 2014May 2014 Meridian Health Plan Inc 4,7534,806 Molina Healthcare of ILL 2,0122,072 Total6,7656,878

10. real challenges. real answers. sm Enrollment Figures for Integrated Care Program - Quad Cities Region Health PlansJune 2014May 2014 IlliniCare Health Plan Inc. 598594 Precedence CCE902893 Total1,5001,487

11. real challenges. real answers. sm Enrollment Figures for Integrated Care Program - City of Chicago Health PlansJune 2014May 2014 Aetna Better Health Inc11,0746,991 Blue Cross/Blue Shield of Illinois 3,2602,159 Cigna HealthSpring of Illinois 1,090752 Community Care Alliance of Illinois 7,0773,963 Humana Health Plan621332 IlliniCare Health Plan Inc9,7776,644 Meridian Health Plan Inc2,3891,373 Be Well (CCE)1,673541 EntireCare (CCE)1,797281 Together4Health (CCE)1,754829 Total40,51223,865

12. real challenges. real answers. sm Total Enrollment Figures for Participating Voluntary MCOs Health PlansJune 2014May 2014June 2013 Meridian Health Plan 31,23931,15513,625 Family Health Network 90,78691,30187,591 Harmony Health Plan 128,730131,907140,076 Total250,755254,363241,292

13. real challenges. real answers. sm Total Enrollment Figures for Primary Care Case Management Health PlansJune 2014May 2014June 2013 Illinois Health Connect 1,703,9491,690,4821,763,057 Total1,703,9491,690,4821,763,057

14. real challenges. real answers. sm Enrollment Within the Medicare Medicaid Alignment Initiative Health PlansJune 2014May 2014 Aetna Better Health Inc2,987295 Blue Cross/Blue Shield of Illinois 4,7721,149 Cigna HealthSpring of Illinois 3,235342 Humana Health Plan3,205314 IlliniCare Health Plan Inc397170 Meridian Health Plan Inc2,584117 Health Alliance1,531378 Molina Healthcare75066 Total19,4612,831

15. real challenges. real answers. sm SB741  First legislative adjustment in the new era of Illinois managed care  Implementation of the ICP and MMAI programs highlight the concept of unintended consequences.  Two key elements to managed care – negotiated rates and case management.

16. real challenges. real answers. sm SB 741  Passed into law June 16, 2014  Medicare – Medicaid Alignment Nursing Home Residents’ Managed Care Rights Law.  Legislative finding that the Illinois residents residing in nursing homes are entitled to: –Quality health care regardless of payor; –Receive medically necessary care; –A simple appeal process; –The right to make decisions about their care and where they receive it.

17. real challenges. real answers. sm SB 741  MCOs must allow all SNFs to contract with it.  Either party can limit the contract to existing residents.  Limits the basis for terminating the contract to quality standards or material breach of contract.  Provides for transition period and respect of care plan that is in place.

18. real challenges. real answers. sm SB 741  MCOs must have a method for receiving prior approval requests 24 hours/day, 7 days / week.  Additional guaranteed appeal procedures.  Requires 30 day written notice for changes to contract.  Providers given the right to terminate the contract on 90-days notice without cause.

19. real challenges. real answers. sm Litigation  Westside Center for Independent Living v. California Department of Health Care Services – Filed July 2, 2014  Filed by a variety of providers including physicians, SNFs, beneficiaries.  Challenges the validity of California’s Medicaid Managed Care Program and dual eligible program.

20. real challenges. real answers. sm Litigation  Notice violates state law because it was not written at a 6 th grade level.  Notice is misleading because it places a precondition on the beneficiary to retain traditional Medicare rights.  Violates beneficiaries’ due process rights given their disabilities.  Case was just filed. Long road ahead.

21. real challenges. real answers. sm © 2012 Polsinelli Shughart PC Contract  A written expression of the two parties’ agreement.  A documented meeting of the minds.  The best deal that the parties could agree to.

22. real challenges. real answers. sm © 2012 Polsinelli Shughart PC Contract Negotiations  Negotiating power is a function of wants, needs, supply and demand.  In a negotiation, the party with the scarcer resource has a significant advantage.  The leverage that one party has in negotiations can change over time.

23. real challenges. real answers. sm © 2012 Polsinelli Shughart PC Contract Negotiations  Managed Care Organizations (MCOs) are trying to sign up as many providers as possible.  MCOs have significant leverage because of the mandatory nature of the program.  MCOs have a long tradition of being difficult to negotiate with.  Nobody wants to be left out. The only “games” in town.

24. real challenges. real answers. sm © 2012 Polsinelli Shughart PC Key Terms  Reimbursement (Pay)  Term  Termination  Definition of services  Reconciling claim disputes  Utilization review

25. real challenges. real answers. sm © 2012 Polsinelli Shughart PC Basic contract premise  Provider discounts rates  In exchange for:  Payer steerage of members to provider  Sounds simple BUT:  Multiple externalities and payer policies can change deal  Contracts must anticipate and prevent payer ability to: –Pay other than contract rates –Steer patients away from provider

26. real challenges. real answers. sm © 2012 Polsinelli Shughart PC Top wish list 1.No non-contractual discounts 2.No other entities can access this contract’s discount 3.No negative steerage of members 4.No unilateral changes to contract 5.Payment made, and made quickly 6.Under/overpayments resolved fairly 7.Eligibility risk falls on payer

27. real challenges. real answers. sm © 2012 Polsinelli Shughart PC 1. No non-contractual discounts  No tiering of provider (e.g., provider is labeled lower quality or made higher cost)  No benefit plan changes to contract rates –Allowed amounts –Patient share increase  No repricing (TPAs, repricers)  No discounts related to affiliated entity deals  Contract controls over all other documents  All payors (Administrative Services Clients (“ASO”) clients) must honor rates  Claims must be paid at in-network levels

28. real challenges. real answers. sm © 2012 Polsinelli Shughart PC 2. No other entities can access rates  Contract rates cannot be “leased”  Payer affiliates must be listed, Provider has right to agree to inclusion of new affiliates  No third party beneficiaries to agreement  Rates confidential, even on payer websites

29. real challenges. real answers. sm © 2012 Polsinelli Shughart PC 3. No negative steerage of members  Cannot direct patients to competitor facilities for economic advantage or leverage  Product mix must remain the same as expected  Volume expectations specified  Negative steerage penalties

30. real challenges. real answers. sm © 2012 Polsinelli Shughart PC 4. No unilateral changes to contract by payer  Amendments must be mutual, in writing  Rates cannot be unilaterally changed by payer  Payer policies cannot change terms of agreement  ASO clients cannot change terms of agreement

31. real challenges. real answers. sm © 2012 Polsinelli Shughart PC 5. Payment made, made quickly  Payment within 30 days, or as legally required (state law overlay)  Interest automatically assessed on late payment  If ASO client doesn’t fund account, payer will allow Provider direct action against payer, at higher rates

32. real challenges. real answers. sm © 2012 Polsinelli Shughart PC 6. Under/overpayments resolved  No offsets by either party  Prompt resolution of overpayments – process specified  Payer must request refunds within 1 year  State law overlay

33. real challenges. real answers. sm © 2012 Polsinelli Shughart PC 7. Eligibility risk falls on payers  Payer must give 12-month authorizations prior to treatment  Retro term of member liability falls on payer for specified period (90 days)  Retro new eligibility must be paid for by payer

34. real challenges. real answers. sm Conceptual Problems  Post acute provders have long been largely ignored by managed care.  Contracts are often physician or hospital contracts with a few words changed. © 2012 Polsinelli Shughart PC

35. real challenges. real answers. sm Conceptual Problems  References to inapplicable requirements persist: –Joint Commission Accreditation –Physician Staff Privileges –Facility based physicians –Medical staff membership © 2012 Polsinelli Shughart PC

36. real challenges. real answers. sm Other Issues  “Covered Services” not adequately defined.  Notification of emergency care and government requests.  “impose other sanctions”  Use of terms like “inadequate” or “insufficient” and other fuzzy standards.  Inconsistencies among the various documents. © 2012 Polsinelli Shughart PC

37. real challenges. real answers. sm Other Issues  Who is responsible for incorrect eligibility determinations?  Understanding affirmative reporting requirements – adverse events, insurance.  Who pays for copies?  Recoupments without notice?  Acceptance of beneficiaries © 2012 Polsinelli Shughart PC

38. real challenges. real answers. sm © 2012 Polsinelli Shughart PC Beyond the contract  The relationship will evolve.  Competitive rate pressure is coming.  “Quality indicators” will become a significant factor.  The landscape will look very different in 5 years.

39. real challenges. real answers. sm The Future  What is your narrative? –Best? Best what? –Cheapest?  Who are your partners?  Who is your competition?  What does your data look like?  MCOs don’t make money on Medicaid?

40. real challenges. real answers. sm Focus on Financial Alignment  Goal of financial alignment models – Reduce costs for State and Federal governments by:  Minimizing cost-shifting  Aligning incentives between Medicare and Medicaid  Supporting the best possible health and functional outcomes for enrollees.

41. real challenges. real answers. sm Focus on Financial Alignment  Twenty-six states submitted proposals to implement alignment models  Seven states have entered Memorandum of Understanding with CMS to participate –California, Illinois, Massachusetts, New York, Ohio, Virginia, Washington  Illinois’ program = Medicare-Medicaid Alignment Initiative (MMAI)

42. real challenges. real answers. sm Overview of MMAI  Capitated Model Payment –MCOs will receive a capitation rate per member per month  Determined by CMS and Illinois  Based on baseline spending in Medicare & Medicaid and anticipated savings from integration and improved care management  Risk-adjusted for the population of each MCO –CMS will pay Medicare portion, Illinois will pay Medicaid separately

43. real challenges. real answers. sm Overview of MMAI  Capitated Model Payment (cont.) –Proposed Incentive Pool Payment Methodology  Portion of capitation rate withheld each month – Year 1 = 1% – Year 2 = 2% – Year 3 = 3%  MCO can recoup the amount withheld based on achievement of certain pay-for-performance metrics

44. real challenges. real answers. sm Overview of MMAI  CMS funds and manages evaluation of Illinois MMAI –RTI International is contractor –Will measure quality  Beneficiary overall experience of care  Care coordination  Care transitions  Support of community living

45. real challenges. real answers. sm Overview of MMAI  Who is eligible? Individuals who... –Are seniors & persons with disabilities –Entitled to Medicare Part A benefits –Enrolled under Medicare Parts B and D –Receive full Medicaid benefits  Who is excluded? Individuals who…. –Are under 21 years old –Receive developmental disability services in an institution or through a HCBS waiver –Are in spend-down –Are enrolled in partial benefit programs –Have comprehensive Third Party Insurance

46. real challenges. real answers. sm Overview of MMAI  What services are covered? –Full array of Medicare benefits  Includes inpatient, outpatient, hospice, DME, skilled nursing, home health, pharmacy –Full array of Medicaid benefits  Includes behavioral health, long-term institutional and community-based long-term services and supports –Supplemental services optional and determined by each MCO  During transition period, beneficiaries can continue to see current providers and maintain current course of treatment for 180 days.

47. real challenges. real answers. sm Overview of MMAI  Eight MCOs selected across two regions –Greater Chicago Region (Yellow) –Central Illinois Region (Blue)  Over 135,000 potential enrollees Figure source: HFS, Illinois’ Medicare-Medicaid Alignment Initiative (MMAI), available at http://www2.illinois.gov/hfs/SiteCollectionDocuments/CC_Webinar041813.pdf http://www2.illinois.gov/hfs/SiteCollectionDocuments/CC_Webinar041813.pdf

48. real challenges. real answers. sm Overview of MMAI  Greater Chicago Region MCOs 1.Aetna Better Health 2.IlliniCare Health Plan 3.Meridian Health Plan of Illinois 4.HealthSpring of Tennessee d/b/a HealthSpring of Illinois 5.Humana Health Plan 6.Health Care Service Corporation d/b/a Blue Cross/Blue Shield of Illinois  Central Illinois Region MCOs 1.Molina Healthcare of Illinois 2.Health Alliance Medical Plans

49. real challenges. real answers. sm Polsinelli provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship. Polsinelli is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements. © 2013 Polsinelli PC. In California, Polsinelli LLP. Polsinelli is a registered mark of Polsinelli PC