1. HFMA – Physician Perspective on Key Issues April 5, 2013

2. Who is the NCMS?  13,000 physician (MD & DO), physician assistants (PA) and medical students  Approximately 30 staff  Government Affairs  Member Services  Specialty Society Management  Foundation  Practice Viability Consulting

3. THE ISSUES

4. Engagement on Two Fronts  “Substantial” Medicaid System Reform  No Expansion  Future of CCNC  Payer issues and preparation for full implementation of ACA  Changes to medical regulation.  Federally-Run Health Benefit Exchanges or “Marketplaces”  Value-based payment models and opportunities to share savings. State RegulationFederal Regulation

5. Demand for healthcare services and the costs of those services continues to grow, driven by: – Aging population – Declining health status – Technology and general medical cost inflation Increasing costs (18% of GDP growing at a 6.5% trend) Increasing costs (18% of GDP growing at a 6.5% trend) Shrinking funds (Limit of 14% of GDP) Shrinking funds (Limit of 14% of GDP) Supply of funding across all sources has reached a constraint point: – Medicare to be insolvent between 2017 and 2024 – State Medicaid budgets heavily limited – Aversion to increased taxes or debt to fund healthcare – Employers bailing out of offering coverage due Supply v. Demand Credit: Grace Terrell, MD, CEO Cornerstone Healthcare

6. Value Destruction From FFS Reimbursement Models Employers Higher premiums Decreased ability/ willingness to provide high-quality benefits to employees Beneficiaries Increased cost for poorer benefits Disappearing employer coverage Society Declining health status Greater proportion of dollars going to healthcare Physicians Constantly declining FFS payment rates Inability to fund development of coordinated, evidence- based care models Patients Inability to effectively navigate the system Poor health outcomes Reduced satisfaction and engagement Payers Increasing cost leading to higher premiums and payment cuts Declining member satisfaction and increased attrition FFS Challenges Credit: Grace Terrell, MD, CEO Cornerstone Healthcare

7. New Competencies for Success  Business Development  Care Coordination  Clinical Performance Management  Effectiveness Analysis  Financial and Clinical Risk Management  Patient Engagement  Patient Safety  Physician Development and Training  Value-Based Contracting Credit: Grace Terrell, MD, CEO Cornerstone Healthcare

8. Opportunities for Clinical Integration Credit: Grace Terrell, MD, CEO Cornerstone Healthcare

9. Care coordination payments P4PBundled paymentsShared savingsGlobal payments PMPM payments designed to compensate for currently unpaid services (e-visits, home visits, care coordinating activities, etc.) Paid to Primary Care Medical Homes and Condition Mgmt. Models Physicians bonused to reach health management targets (quality, outcomes, cost, utilization, etc.) Hospitals bonused to reach utilization and quality targets Delivery systems penalized for 30 day readmissions and acquired conditions Medicare pays ACE rates on 29 conditions Hospitals and MDs together receive bundled payments for defined procedures Joint contracting organizations associated with delivery systems receive bundles to manage entire episodes of care CMS introduces one-sided and two- sided Shared Savings program Private payers introduce budgeted gain-sharing programs Includes upside only (gain-share) and upside- downside (risk- share) models Subset of delivery system could receive partial capitation Delivery system targets global compensation associated with defined population Full population management capabilities necessary Increasing Provider Risk and Overall Value Creation Greater Risk = Greater Rewards Credit: Grace Terrell, MD, CEO Cornerstone Healthcare

10. Leadership in Medicine

11. Where Do Physicians Fit In?  Leadership in value-based health care models providing real savings to patients and payers, both private and public.  National model in Community Care of North Carolina, a foundation for Medicaid reform?  Leadership in health-care teams and medical homes to provide coordinated individual care that leads to overall health of populations.

12. Challenges  Physician shortages and the maintenance of patient safety standards.  Integration of primary care and specialty services including mental health.  An unknown future of regulation and reform at two levels – state and federal.  Inability to assume risk and access capital.  Physician employment.  Patient engagement/responsibility.

13. Director of Health Policy North Carolina Medical Society awhited@ncmedsoc.org Amy Whited