1. Key Legislative Provisions 1 Law 111-148: Patient Public Protection and Affordable Care Act Health Care and Education Reconciliation Act of 2010 Status Signed by the President Cost ~ $940B Coverage+ 32 million by 2019 Key Provisions Cost Cutting Market basket update adjustments for productivity reduce reimbursement by $112.6B over 10 years starting in FFY 2010 Medicare and Medicaid DSH payments are reduced by ~$36B over 10 years starting in FFY 2015 Delivery System Reforms Implements value-based purchasing, reduced payments for high volumes of hospital- acquired conditions and readmissions, and pilot programs to test bundled payments, ACOs, and medical homes, saves $13.5B over 10 years Independent Payment Advisory Board Starting in 2015 creates a MedPAC like commission that has Medicare rate setting authority. Not applicable to hospitals until 2019, saves $14.7B over ten years

2. Key Legislative Provisions (cont.) 2 Law 111-148: Patient Protection and Affordable Care Act Health Care and Education Reconciliation Act of 2010 Medicaid Expands Medicaid in 2014 to 133% of FPL, uses a revised definition of income, covers 16 million. Reduces states’ Medicaid disproportionate share hospital (DSH) allotments Tax Exempt Status Includes four new criteria providers must satisfy to retain not-for-profit status. $50K penalty for those who don’t comply.  Conduct community needs assessment every two years and execute against it  Develop, implement and communicate a charity care policy  Limit charges for emergency or other medically necessary care provided to individuals eligible for charity care to the lowest amounts charged to individuals with insurance  Use aggressive collection efforts only after attempts to determine eligibility for charity care have been exhausted Mandates Individual: Mandate begins in 2014. By 2016 penalizes those without insurance the greater of $695 per uninsured adult or 2.5% of income capped at the national average “bronze” plan premium Provides sliding scale subsidies up to 400% of the FPL beginning in 2014 Business: Those with more than 50 FTEs are required to pay a flat fee of $2,000 annually per uncovered FTE receiving eligibility subsidies starting in 2014; the first 30 are subtracted out. Require employers with more than 200 employees to automatically enroll employees into health insurance plans offered by the employer. Employees may opt out of coverage.

3. Key Legislative Provisions (cont.) Law 111-148: Patient Public Protection and Affordable Care Act Health Care and Education Reconciliation Act of 2010 Subsidies Permit states the option to create a Basic Health Plan for uninsured individuals with Incomes between 133-200% FPL who would otherwise be eligible to receive premium subsidies in the Exchange. Premiums: Provide refundable and advanceable premium credits and cost sharing Subsidies to eligible individuals and families with incomes between 133-400% FPL to purchase insurance through the Exchanges. Insurance Market Reform Tax Changes Related to Health Insurance Imposes a tax on individuals without qualifying coverage beginning in 2014 with a minimal penalty. By 2016, the penalty grows to $695 per year or 2.5% of household income. Insurance Cooperatives Consumer Operated and Oriented Plans (Co-OPS) program developed to foster creation of non-profit, member-run health insurance companies. To be eligible to receive funds, an organization must not be an existing health insurer or sponsored by a state or local government, substantially all of its activities must consist of the issuance of qualified health benefit plans in each state in which it is licensed, governance of the organization must be subject to a majority vote of its members, must operate with a strong consumer focus, and any profits must be used to lower premiums, improve benefits, or improve the quality of health care delivered to its members.

4. Key Legislative Provisions (cont.) Law 111-148: Patient Public Protection and Affordable Care Act Health Care and Education Reconciliation Act of 2010 Additional Insurance Market Reforms Create state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which individuals and small businesses with up to 100 employees can purchase qualified coverage. Require the Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. Temporary High-risk pool Beginning in 2010 establishes a temporary national high-risk pool to provide health coverage to individuals with pre-existing medical conditions. U.S. citizens and legal immigrants who have a pre-existing medical condition and who have been uninsured for at least six months will be eligible to enroll in the high-risk pool and receive subsidized premiums. Insurance Exchange Beginning in 2014, states required to establish health insurance exchanges through which individuals and small businesses can purchase qualified private health insurance coverage. A Federal Employee Health Benefit Plan (FEBHP)-like, multi-state health insurance plan will be offered through the exchanges with oversight by the federal Office of Personnel Management. Payment Cuts Medicaid DSH Payment Reduction Reduces DSH payments by $14 billion over 10 years beginning in 2014.

5. Key Legislative Provisions (cont.) Law 111-148: Patient Public Protection and Affordable Care Act Health Care and Education Reconciliation Act of 2010 Medicare DSH Payment Reduction Reduces Medicare DSH payments by $22.1 billion over 10 years beginning in 2014. Market Basket Updates Reduces Medicare IPPS and OPPS reimbursement by $112.6 billion over 10 years by incorporating an productivity adjustment into the update. The productivity adjustment will begin in 2012 and be based on a rolling average of the Bureau of Labor and Statistics estimate of increases in productivity in the overall economy. There will also be a flat adjustment factor that varies year-by-year: 2010 – 2011:.25% 2012 – 2013:.1% 2014:.3% 2015 – 2016:.2% 2017 – 2019:.75% Delivery System Reforms Value-Based Purchasing (VBP) Establishes a VBP program for hospital payments beginning in FY 2013 based on hospitals’ performance in 2012 on measures that are part of the hospital quality reporting program. The program is budget neutral with 1 percent of payments allocated to the program in FY2013, growing over time to 2 percent in 2017 and beyond.

6. Key Legislative Provisions (cont.) Law 111-148: Patient Public Protection and Affordable Care Act Health Care and Education Reconciliation Act of 2010 Readmissions PolicyIn FY 2013, imposes financial penalties on hospitals for so-called “excess” readmissions when compared to “expected” levels of readmissions based on the 30-day readmission measures for heart attack, heart failure and pneumonia that are currently part of the Medicare pay-for reporting program. Excludes critical access hospitals and post-acute care providers. Accountable Care Organizations Beginning in 2012 groups of qualifying providers could form voluntary ACOs. Any savings achieved for the Medicare program would be shared with providers assuming the ACO met quality targets. Imaging ServicesSets the assumed utilization rate at 75 percent for the practice expense portion of advanced diagnostic imaging services. Quality Improvement Malpractice Reform Preference given to states that have developed alternatives in consultation with relevant stakeholders and that have proposals that are likely to enhance patient safety by reducing medical errors and adverse events and are likely to improve access to liability insurance. (Funding appropriated for five years beginning in fiscal year 2011) Award five-year demonstration grants to states to develop, implement, and evaluate alternatives to current tort litigations.

7. Key Legislative Provisions (cont.) Law 111-148: Patient Public Protection and Affordable Care Act Health Care and Education Reconciliation Act of 2010 National Quality Strategy Develop a national quality improvement strategy that includes priorities to improve the delivery of health care services, patient health outcomes, and population health. Create processes for the development of quality measures involving input from multiple stakeholders and for selecting quality measures to be used in reporting to and payment under federal health programs. Primary CareIncrease Medicaid payments in fee-for-service and managed care for primary care services provided by primary care doctors (family medicine, general internal medicine or pediatric medicine) to 100% of the Medicare payment rates for 2013 and 2014. MedicaidCreate new demonstration projects in Medicaid to pay bundled payments for episodes of care that include hospitalizations (effective January 1, 2012 through December 31, 2016); Make global capitated payments to safety net hospital systems (effective fiscal years 2010 through 2012); Allow pediatric medical providers organized as accountable care organizations to share in cost-savings (effective January 1, 2012 through December 31, 2016);

8. Key Legislative Provisions (cont.) Law 111-148: Patient Public Protection and Affordable Care Act Health Care and Education Reconciliation Act of 2010 Quality Improvement Cont. Medicare Bundled Payments Establish a national Medicare pilot program to develop and evaluate paying a bundled payment for acute, inpatient hospital services, physician services, outpatient hospital services, and post-acute care services for an episode of care that begins three days prior to a hospitalization and spans 30 days following discharge. Program will begin by 2013. Long Term Care Skilled Nursing FacilitiesRequire skilled nursing facilities under Medicare and nursing facilities under Medicaid to disclose information regarding ownership, accountability requirements, and expenditures. Publish standardized information on nursing facilities to a website so Medicare enrollees can compare the facilities. (Effective dates vary)