HEALTH CARE REFORM: MANAGEMENT ACADEMY South Carolina Hospital Association Columbia, SC May 15, 2013 James Bentley, Ph.D. Silver Spring, Maryland

Presentation Nomenclature Legal status and responses Reform Framework –Coverage –Quality –Affordability

Nomenclature March 23: Patient Protection and Affordable Care Act (PPACA) March 30: Health Care and Education Reconciliation Act of 2010 Common Usage: Affordable Care Act (ACA) to refer to both acts combined

Supreme Court Decision The Individual Mandate stands because the penalty for lacking coverage imposed by the Federal Government is a tax. State participation in the Medicaid expansion is optional.

Health Reform Objectives: Balancing Priorities Coverage (too few) Quality Affordability (too variable)(too expensive)

Coverage Provisions About 94% covered if all states expand Medicaid Coverage mandate to create a stable insurance pool Insurance exchanges for purchasing by individuals and small businesses Medicaid expansions for persons at or below 133% of poverty threshold Subsidies for persons between 134% and 400% of poverty threshold

Coverage Levels Plan% Actuarial Value Bronze60 Silver70 Gold80 Platinum90

Coverage Timeline October 1, 2013 –Health Insurance Exchanges Operational January 1, 2014 –Coverage expansions effective

Coverage Uncertainities How many people will elect to pay the penalty for not obtaining coverage? How many insurers will offer products through the insurance exchanges? Which level of coverage will individuals and employers select: bronze, silver, gold, or platinum? Will individuals find the initial insurance exchanges easy to use? Will employers offering group coverage continue that practice or will they discontinue their policies and recommend employees purchase individual policies through the insurance exchanges.

A Massachusetts's Lesson: Coverage requires Access Physician payment: to increase primary care access –Medicare: Primary care: Family Medicine, Internal Medicine, Pediatrics, Nurse Practitioners, Clinical Nurse Specialists, Physicians’ Assistants 60% of services in selected E&M codes –10% bonus for E&M services –2011 through 2015 General Surgeons in HPSAs –Medicaid: Primary care Pay at least Medicare rates for primary care 2013 and 2014

Hospital Strategies: Coverage Create alternatives to the ED for primary care access –Primary care networks within community –Federally qualified health centers (FQHC) –Rural Health Clinics –Urgent care option to ED within the hospital Coordinate care with all patient sources –Community physicians –FQHCs and Rural Health Clinics –Free Clinics

Quality Provisions Incentives for adopting best practices –Penalize high readmission rates Competing against your own case mix Base = –Penalize hospital-acquired conditions Competing against all hospitals: 25% penalized Base = Financial incentives for coordinating care –Bundled care pilots –Accountable Care Organization pilots Requires 5,000 Medicare patients minimum Improve the evidence base of medicine –Comparative effectiveness research –Practice variation research

Hospital Strategies: Quality #1 Identify the current system of care –Who are your clinical partners? What are today’s care patterns? Are all the necessary components included? Assess partners’ performance –Clinically –Resources used (financially) Redesign the current system of care if necessary –To improve quality –To restrain costs

Hospital Strategies Quality #2 Make evidence-based practice routine –Create the essential infrastructure Selection process for protocols/guidelines Updating process for protocols/guidelines Routine communication of protocols/guidelines –Create a process for the “off-protocol case” What documentation for atypical patient How share learning?

Hospital Strategies Quality #3 Be able to coordinate care as efficiently as the best in your area. Develop capability to manage care across settings/ practices

Health Reform: Payment Reductions Delivery system payment –Medicare incentives to conserve resources Productivity offset to annual update –Started at- 0.25% in 2010, rises to -0.75% in 2019 Value-based purchasing –Starts at -1% in 2013, rises to -2% in 2017 Readmission penalty –Starts at -1% in 2013, rises to -3% in 2015 Hospital acquired condition penalty –A constant -1% –Medicare and Medicaid: Decreased DSH payments –Smaller payment differentials in private sector likely Physician payment –No permanent fix to fee update

Hospital Strategies: Payment PPS hospitals: Avoid the payment penalties Lower the hospital’s cost structure –Project multi-year trend lines –PPS stretch goal: Breakeven at Medicare’s price Share diagnostic and treatment information to reduce duplication of ancillary services for patients –Especially important for bundled payment and ACOs

Impacting the Medicare Update Base: Prior-year rate Plus market-basket update Minus productivity offset Minus Value Based Purchasing Minus excess readmission Minus hospital acquired conditions Plus shared savings of improved efficiency Bundled payment Accountable Care Organizations Equals Actual change in payment

Closing Comments Three keys Quality of Care Efficiency of Care Coordination across continuum Think of yourself as part of a health system –Not an individual hospital, nursing home, or home health agency. Conserve capital to invest in a “new business model.” Assure that the quality and efficiency of care in your system are competitive with the best in your area.