1. AHA Advocacy Agenda Allied Hospital Associations’ Accounting & Financial Specialists (A 2 HA) 2013 Spring Meeting March 18, 2013

2. AHA Advocacy Agenda LEGISLATIVE Political Landscape Fiscal Cliffs Sequestration Message, Plan, Strategy REGULATORY Medicare Medicaid Exchanges EHR Incentive Program 340 B GPO Exclusion

3. Political landscape Washington’s continued fiscal war Divided government:  In the past: compromise  Today: paralysis and dysfunction  Parties dominated by the “wings”  No middle

4. Congress was LESS popular than: Root canals NFL replacement refs Head lice Colonoscopies Washington political pundits Traffic jams Cockroaches Donald Trump Genghis Khan

5. Congress was LESS popular than: Root canals NFL replacement refs Head lice Colonoscopies Washington political pundits Traffic jams Cockroaches Donald Trump Genghis Khan

6. January 2 st Deal February 4th Deal

7. Fiscal Cliff #1 Medicare physician fix…until end of the year ($25 billion) Medicare hospital extensions ($5 billion)  Offsets  Retrospective hospital coding ($10.5 billion)  Medicaid DSH rebasing ($4.2 billion) Sequester delayed  No hospital offset American Taxpayer Relief Act

8. Fiscal Cliff #2: No Budget No Pay Act of 2013 Passed House and Senate Supported by President Key provisions  Suspends debt-limit extension until May 18  Real date: late July  Pass a budget resolution by April 15…or pay docked  House Budget Resolution  Rep. Paul Ryan (R-WI)  Must balance over 10 years  Senate Budget Resolution  Sen. Patty Murray (D-WA)

9. 2013 Sequester Cuts

10. Sequester Implications for Hospitals Current policy  Medicaid benefits and provider payments exempt  Medicare:  “Protected” status  Real cuts to providers  Discretionary programs significantly cut

11. Potential Risks in Sequester Debate Sequester for defense (and other discretionary programs) STOPPED BUT, Medicare sequester for provider and insurer payments continue Replacement savings from entitlement programs…ON TOP OF SEQUESTER

12. Sequester avoidance Is there the political will to act now? How long a delay? What are the elements of a “replacement savings package?” $120 billion Key Questions

13. Same options as before Same options as before Prospective coding offsets ($8 billion) E&M code/HOPD ($7 billion)…and other site neutral payment options Hospital bad-debt reductions ($20 billion) Post acute care update reductions ($42 billion) CAH: payment reductions and qualification criteria ($2 billion) GME reductions ($10 billion) IPAB expansion Medicaid: –State provider assessments ($22 billion) Hospital payment reductions

14. Outlook Less likely for now  Grand bargain  Permanent Medicare physician fix  Tax reform More likely for now  Temporary patches

15. Deficit Reduction Enacted So Far (2013-22)

16. Hospitals have faced repeated cuts to payment since 2010 1 Bad debt and Medicaid DSH cuts included in Middle Class Tax Relief and Job Creation Act of 2012 and additional DSH cuts for 2022 in the American Taxpayer Relief Act of 2012 (ATRA); 3-day window cut included in American Jobs and Closing Tax Loopholes Act of 2010; estimate of excess CMS MS-DRG coding cut based on hospital analysis and includes additional amounts cut in 2014-2017 in the ATRA; sequestration amount estimated from CBO Medicare Baseline. Other provisions of the ATRA including extension of low volume adjustment, extension of Medicare Dependent Hospital Program and the adjustment to payment for certain radiology services net out to zero and are not shown. Impact of Hospital Cuts Since FY 2010 1 Billions of Dollars $250 billion

17. Our message Theme: access Key points ‒ Challenges you face ‒ Hospitals increasing value…performance improvement

19. Douglas W. Elmendorf of the Congressional Budget Office said health spending growth continued at its lowest rate in decades.

21. Our plan and strategy Legislative ALERT Advocacy alliances in place Advocacy Days  February 13  February 26 MEDPAC Studies and reports Advertising Focus on the Senate www.aha.org/Alliances

22. Regulatory Agenda Medicare CoPs Medicare IPPS –Inpatient payment update, Medicare DSH, patient status State Insurance Exchanges Medicaid Expansion Medicaid DSH EHR Incentive Program Update 340B Drug Pricing Program and GPO Prohibition

23. Medicare CoPs February 7: CMS Issues proposed rule Focuses largely on burden reduction Affects selected Medicare requirements for:  Hospitals and CAHs  FQHCs and RHCs  Ambulatory Surgery Centers (ASCs)  Transplant Centers; Organ Procurement Orgs  Long-term care facilities (LTCs)  Intermediate care facilities for individuals who are intellectually disabled (ICF/IID)  Laboratories Comments due April 8th..

24. New CoP Proposals Governing Board: CMS proposes to rescind requirement that the governing board must have at least one medical staff member. Instead, governing boards would be required to have twice-yearly consultations with medical staff. Multi-hospital systems with a single governing board would need to consult with each hospital in the system.

25. New CoP Proposals Medical Staff: Each hospital must have its own distinct medical staff. This would preclude multi-hospital systems with multiple hospital CCNs from having unified medical staffs. CMS should not tell hospitals how to construct their relationships with the medical staff. Very important for members to weigh in: Those with unified medical staffs Those who anticipate this may be important for a more integrated care system for the future

26. New CoP Proposals Among Other Proposed Changes: Outpatient Services: CMS would clarify who may order outpatient services. CAH Services: CMS proposes to remove requirements related to the development of patient care policies and on-site physician presence. Dietetic Services: Qualified dieticians would be able to order patient diets under the hospital CoPs. See our recent Regulatory Advisory for a full list of the proposed changes.

27. IPPS Hospital Rulemaking Inpatient PPS Proposed Rule (April/May) Coding offset Market basket productivity cuts Medicare DSH Patient status Possible Issues HACs Proposal to shift select LTCH patients to ICUs

28. ADJUSTMENT EXPECTED Inflation rate (hospital market-basket) + 2.8% ATRA coding adjustment- 2.4% PPACA reduction - 0.3% PPACA productivity adjustment- 0.7% NET UPDATE FACTOR - 0.6% Expected Update for FY 2014 Note: This does not account for the -2.0 percent Sequester

29. 75% 25% Pool of funds using “old” formula method New pool of funds Size based on decrease in non-elderly uninsured Distribution based on hospital’s share of national uncompensated care for all Medicare DSH hospitals Medicare DSH ACA Provision Policy Issues for New Pool Distribution: 1.Definition of Uninsured 2.Definition of Uncompensated Care

30. Allied Advisory Committee On Health Care Implementation MEDICARE DSH Principles 1.Medicare DSH should continue. 2.Definition of uninsured should be inclusive. 3.Hospital uncompensated care data should be the best available, most current and updated periodically. 4.Hospital uncompensated care should include bad debt, charity, government payment shortfalls from Medicaid, and non-Medicaid state and local government programs. 5.If ACA promised coverage is not realized, Medicare DSH funding reductions should be restored.

31. Patient Status Inpatient versus outpatient observation status has implications for Medicare payment and coverage Decision to admit a patient requires the expert judgment of treating physician Recent actions by RACs, MACs, DOJ and whistleblowers are “second-guessing” the treating physician’s judgment

32. Patient Status CY 2013 OPPS proposed rule: CMS requested public input on ways to improve Medicare policy on patient status 1.Establish time-based admission policies, 2.Adopt more specific clinical criteria and measures for inpatient admission 3.Use prior authorization 4.Explore changes in payment policy CY 2013 OPPS Final Rule: CMS thanked Stakeholders for their comments. Proposal likely in FY 2014 Inpatient PPS rule

33. ACA Insurance Reforms and Medicaid Coverage Expansions Implementation of ACA insurance reforms are moving fast New AHA Member Advisory Today’s Update –Insurance Marketplaces (Exchanges) –State Decisions on Medicaid Expans ion

34. State Decisions on Health Insurance Exchanges Dark Blue = State-Based (18 States ) Red = Federal-Based (26 States) White = State and Federal Partnership (7 States) Source: Kaiser State Health Facts Updated 2/15/13

35. Where States Are Regarding Medicaid Expansion Dark Blue = Expanding (17 States), Light Blue = Leaning Toward Expansion (9 States), White = Undecided (4 States), Pink = Leaning Against Expansion (8 States), Red = Not Expanding (13 States) Source: Politico Pro Exchange Medicaid Watch 2/26/13

36. Medicaid DSH ACA Provisions Federal Medicaid DSH funds reduced beginning in FY 2014 States grouped by: 1.High DSH 2.Low DSH 3.1115 Waiver Expansion States DSH payment reductions and distribution based on: 1.A state’s percentage of remaining uninsured; or 2.whether a state targets DSH payments to hospitals serving a high volume of Medicaid inpatients and hospitals that have high levels of uncompensated care (excluding bad debt).

37. Allied Advisory Committee On Health Care Implementation MEDICAID DSH Principles 1.Medicaid DSH should continue. 2.Definition of uninsured should be inclusive. 3.State flexibility in design of Medicaid DSH program. 4.State flexibility in how states raise Medicaid DSH funds. 5.If ACA promised coverage is not realized Medicaid DSH funding reductions should be restored.

38. EHR Update: Incentives Paid by Quarter ( in Billions) FY 2012 Total paid to date: $10.7 billion Source: CMS data thru December 2012 © 2012 American Hospital Association

39. EHR Update: Incentive Programs © 2012 American Hospital Association At the end of December 2012: About 40% of all hospitals had successfully attested to meaningful use and received a Medicare incentive (2,134 hospitals) Among CAHs, the share was less than 25% (314 CAHs) 106,000 physicians had met meaningful use To receive maximum Medicare incentives: –PPS hospitals must first attest to meaningful use for FY 2013 –CAH hospitals must first attest for FY 2012 Source: CMS data through December 2012 8

40. EHR Update:Timelines for Meaningful Use Policy Stage 1 rules currently effective Stage 2 begins on October 1, 2013 Preliminary work underway on Stage 3 All hospitals will have to upgrade to “2014 Edition EHR” in FY 2014, regardless of stage Concerns: –Ensuring widespread adoption –Vendor capacity, readiness, costs –Lack of real interoperability –Quality reporting via EHR still a challenge –Interaction with ICD-10 and health reform

41. 340B Drug Pricing Program and GPO Exclusion HRSA issues 340B Program Notice on “Clarifying Guidance” on GPO Prohibition February 7 Statutory GPO Prohibition applies 340B Hospitals that are DSH, Children’s or free standing cancer Feb 7 340B Notice addresses:  Inventory Management Systems using Replenishment Models  No GPO for onsite clinics or pharmacies (could apply to employee pharmacies)  Compliance Date April 7, 2013

42. 340B Drug Pricing Program and GPO Exclusion AHA Advocacy Action:  March 7 call with HRSA and HRSA Prime Vendor Program –Apexus  March 15 Meeting with HRSA OPA Leadership  March 20 Call with AHA 340B Alliance  Exploring other strategies

43. AHA Advocacy Agenda Allied Hospital Associations’ Accounting & Financial Specialists (A 2 HA) 2013 Spring Meeting March 18, 2013