Mha powerpoint presentation 3

The Mississippi Hospital Association

Preparing for Healthcare Reform

September 30, 2010Hilton Hotel

Jackson, Mississippi

http://www.mshfma.org/site/epage/6465_331.htm





http://www.mhanet.org/


Impact on Employer Armin J. Moeller, Jr.

Balch & Bingham LLP









Group Health Plan/Insurance Reforms

• Apply to group health plans and health insurance issuers offering group or individual coverage

• Amends FLSA to prohibit employer from discharging/discriminating against employee who receives tax credit/cost sharing subsidy.

• Most reforms effective for plan years beginning on/after September 23, 2010 or after

• January 1, 2014 – Second major wave of reforms effective

3


Insurance Market Reforms

• How do reforms work?– Increase numbers of insureds by changing way

employers and individuals acquire and pay for health insurance coverage

– Significantly expand federal government’s jurisdiction over health care coverage provided through employer-based group health plans

– States still have major role in the regulation of commercial health care insurance products

4


Insurance Market Reforms

• How do reforms work?– Require mandatory “minimum essential” health insurance

coverage for U.S. citizens and legal residents (effective 2014)

• Some exemptions – religious objectors, prison inmates, individuals with income below federal income tax filing threshold, members of Indian tribes, those with hardship waivers and others

– Coverage through Medicare, Medicaid, SCHIP, TRICARE for Life, veterans’ programs, eligible employer-sponsored plans, plans sold in State individual health insurance markets, and coverage offered by State high-risk pools

– New rules for insurance market and penalties against employers (even the smallest) and individuals failing to offer or obtain coverage

5


Threshold Insurance Market Reform Issues

• Existing employer-sponsored plans to be grandfathered indefinitely– Amount or type of design

changes that will disqualify plan from grandfather benefits becoming more clear

– More regulations expected soon

6


Grandfathered Plans• Means a plan in effect on March 23, 2010• Ways to lose grandfathered status

– Eliminate all or substantially all benefits to diagnose/treat particular condition

– Increase coinsurance % by any amount above level set on March 23, 2010

– Increase deductible/out-of-pocket maximum by more than medical inflation plus 15% (as measured form March 23, 2010)

– Increase copayment for any service by more than greater of $5 (adjusted for inflation) or medical inflation plus 15% (as measured from March 23, 2010)

– Decrease contribution rate toward cost of any tier coverage by more than 4% below contribution rate on March 23, 2010

7


Grandfathered Plans (cont.)

• Requirements allowed with grandfathering or required to maintain grandfathered status– Plan materials must include notice of grandfathering– Plan may add new employees after March 23, 2010– Plan may transfer employees from one plan to another

(as long as bona fide employment-based reason)– Plan may choose to later give up grandfathered status– Some transition rules made before 3/23/10 apply

8


Provisions Applicable To Grandfathered Plans

• Effective for first plan year starting on or after September 23, 2010 (January 1, 2011 for CY plans)– No lifetime limits on essential benefits (defined by regulation)– Annual limits on essential benefits subject to restriction

(defined by regulation)– No pre-existing condition exclusions for children under 19– Plans covering children must extend coverage through age 25

regardless of student, tax dependence or marital status (no requirement to cover children)

– Employers with more than 200 full-time employees offering health care coverage must auto-enroll new employees in plan; employees must be able to opt out of coverage

– Once in force, insurance coverage may not be rescinded except for fraud or intentional misrepresentation

9


Provisions Applicable to Grandfathered Plans (cont’d)

• Effective for first plan year starting on/after September 23, 2010 (January 1, 2011 for CY plans)– Benefits summary to plan participants in

paper/electronic form (SPD + “uniform explanation of coverage”)

– W-2 reporting of aggregate value of employer-sponsored coverage

– OTC drugs: no reimbursement (except insulin) by health FSA without prescription

– Fees to finance patient-centered outcomes research fund ($1 fee times average number of plan members; annual adjusted)

10


Provisions Applicable to Plans NOT Grandfathered

• Effective for first plan year starting on or after September 23, 2010 (January 1, 2011 for CY plans)

• IRS “Highly Compensated” Nondiscrimination rules: eligibility, coverage and benefits

• Preventative Care: for certain immunizations and screenings with no cost sharing

• Expanded Appeals Process: including external review (allows presenting evidence, testimony; coverage continues during claims process)

• Emergency Services: provided without prior certification; out-of-network expenses under same cost structure as in-network emergency services

• Provider Choice: if allowed, must allow selection of pediatrician as PCP or OB/GYN as PCP

• Annual Report: to Secretary of HHS regarding quality/wellness programs

11


SMALL EMPLOYER TAX CREDIT(2010-2013)

• Applicable to small employers (25 FTEs or fewer) with average annual wages of less than $50,000– Tax credit for 35% of health care coverage cost (non-

elective contributions that employer makes); 25% for t/e employers

• Employer must subsidize at least 50% of employee premiums

• 50% Credit Is Available for Tax Years 2014-2015 (35% for t/e employers)

12


2013 CALENDAR YEAR CHANGES

• $2,500 cap on annual employee pre-tax contributions to FSA

• Additional Medicare payroll tax on higher-income taxpayers

• Hire-date/annual enrollment distribution of standardized summary of plan benefits and coverage

• Mandatory employee notice of rights to health insurance exchange subsidy (Including “Free Choice Voucher”)

13


2014 CALENDAR YEAR CHANGES

• No pre-existing conditions exclusions or limitations (all plans)

• No coverage waiting period greater than 90 days (all plans)

• Taxes on health insurers, pharmacy and DME suppliers

14


Provisions Applicable If Plan Is Not Grandfathered

Effective for first plan year starting on/after January 1, 2014• Cost sharing limits: cannot exceed out-of-pocket limits applicable

to high-deductible plans• Clinical trials: must cover items/services typically covered if

provided to participant in approved clinical trial• Discrimination based on health status: no rules for eligibility to

enroll based on health status, medical condition, receipt of health care, medical history, claims experience, genetic information, evidence of insurability, disability or other health-related factor

• Discrimination in premiums: no premium increase based on health related factor; same premium as for similarly situated enrollee

• Discrimination against health care providers: if provider is acting within scope of provider’s license and willing to accept plans’ payment rates

• Guaranteed Renewability: both individual and group market; OK to restrict to open /special enrollment periods

15


2014 CALENDAR YEAR CHANGES• Health insurance exchanges

– List of Qualified Plans becomes available through either state/federal Administrator

– Four Levels of Plans Based on Actuarial Value Between 60-90%– Exchange Plans Must Offer Essential Benefits

• Exchange-Based Subsidy Eligibility:– Household incomes between 100-400% FPL ($88K for Family of Four)– Ineligible for government healthcare– Employer sponsored plan fails to pay at least 60% of actuarial value

and premium exceeds 9.5% of annual household income • Exchange-Based Employer Penalties

– Employers with 50 FTEs or more incur $2,000 (annually) per employee (after first 30) for failure to offer “minimum essential coverage” to all FTEs/dependents if ONE receives a subsidy through an Exchange

– Employers with 50 FTEs or more incur $3,000 annual tax for each employee who opts for Exchange due to “Unaffordable Minimum Essential Coverage”

• Means premiums exceeding 9.5% of household income or plan has actuarial value of less than 60%

– Note: Mercer study says 38% of employees will meet this threshold 16


2014 HEALTH INSURANCE EXCHANGE – Free Choice Voucher Eligibility

• Employer paid • Household income less than 400% of FPL ($43,200-

individual) ($88,200 – family of four)• Eligible if required to pay between 8% and 9.8% of

household income for coverage• Voucher amount = $ cost of coverage under

employer-based plan• Vouchers are:

– Deductible by employers– Excluded from employee’s income– Apply to all employers, regardless of size

17


2014 Employer Reporting Duties

• If 5O FTEs, then:– Declaration that employer does or does not

offer minimum essential coverage to FTEs/dependents

– Disclosure of coverage waiting period length– Disclosure of information on lowest-cost

option in each enrollment category– Disclosure of number and names of

employees receiving health care coverage

18


Expansion of Medicaid Eligibility - 2014

• Expanded for working adults with income in excess of 133% of FPL ($14,404 individual/$29,326 family of four in 2009)

• Employees Medicaid eligible, not eligible for Exchange-based subsidies (therefore no employer penalties)

19


Consequences• Very large employers may drop employer-sponsored coverage• CBO estimates that employers dropping coverage would

substitute wages for premium benefits• Employees would buy coverage from the Exchange, where

reimbursement rates will be lower than with employer group plans (not going well in MA)

• 2010 average cost for family of 4 is $18k; $10k funded by employer

• Near-term cost shifting to employers– Increase dependent coverage age– No cost sharing on preventive services– Elimination of lifetime and annual limits– Prohibit pre-existing exclusion for children

• Other insurance reforms will result in increased premiums• Credits expire when premiums will likely escalate 20


Penalty Avoidance

• 1/3 of employers may face penalties because coverage offered is “unaffordable”

• How employers may avoid penalties– Increase contribution to premiums– Reduce workers’ share of premiums, but increase

co-pay or deductible– Offer a plan with less generous coverage– Charge lower premiums/share to workers with

lower wages• Many employers may eliminate full-time low paid

workers

21


Reflections on Insurance Market Reforms

• Still early in process – many sets of regulations will be issued

• Unclear what Blue Cross & Blue Shield’s position will be

• Employers should start running numbers as to pay or play

– Remember penalties are in after-tax dollars

• Insurance rates will likely rise in short term

• New taxes on insurers, medical device and drug manufacturers will be passed along to customers/purchasers

• Massachusetts Experience

• Result: pretty rocky road for employers until insurance market stabilizes

22



Hospitals as ProvidersGenie Stark Thomas

Balch & Bingham LLP









HOSPITALS AS HEALTHCARE PROVIDERS

• Recurring themes:– Decrease cost/ bend the cost curve

• Improve efficiency and productivity• Eliminate waste, fraud, abuse

– Increase coverage• Cover more people and focus on prevention

– Quality• Continuums of care, communication and

integration

24



• Medicare Payment Reforms: Market basket rate reductions

– Market basket rate reductions for hospitals, hospices, home health, long-term care, inpatient rehab, and other providers subject to prospective payment systems

– Section 3401 mandates reductions of up to 1% per year through FY 2019

25



• Medicare Payment Reforms: DSH reductions

– DSH payments reduced as the number of uninsured patients is reduced

– Beginning in FY 2014, a subsection (d) hospital will be paid 25% of the DSH payment it would otherwise receive

26



• Medicare Payment Reforms: IPAB created

– 15-member Independent Payment Advisory Board is established

– Tasked with developing proposals to reduce per-capita Medicare spending if spending increases exceed inflation-adjusted thresholds

– IPAB proposals must be implemented by HHS unless Congress passes and alternative set of reductions that meet savings targets

27



• Medicare Payment Reforms: Payment reductions for avoidable readmissions

– Beginning in 2013, Medicare payments will be decreased by the product of the base operating DRG payment amount for the discharge and the hospital’s FY adjustment factor for avoidable readmissions

– Reduction amounts will be computed differently for Medicare-dependent small rural hospitals and sole community hospitals

28



• Medicare Payment Reforms: Productivity adjustments

– Beginning in 2011, ASCs, DME suppliers, ESRD facilities and clinical labs will be subject to productivity adjustments

– Most adjustments will be incorporated into market basket updates (i.e., hospitals in 2012)

– Adjustments will be incorporated into annual updates for clinical labs (2011), SNFs and LTACHs (2012), hospices (2013), and HHA (2015)

29



• Medicare Payment Reforms: Post-acute

care bundling

– National pilot program on payment bundling for integrated care created

– Covers care starting 3 days prior to admission through 30 days following discharge

– Participating entities receive bundled payments; payment procedures will be established during the pilot program

30



• Medicare Payment Reforms: Payment adjustments for HHAs, SNFs, and hospice

– HHA adjustments begin in 2013 with a 4 year phase-in; reductions are limited to 3.5% annually

– Hospice adjustments go into effect 10/2013, and effective in 2014, a quality reporting program will be established

– SNF PPS will be altered as well, with delays in RUG-IV implementation and changes to the lookback period (Section 10325)

31



• Medicare Payment Reforms: Value-based purchasing programs

– VBP program for hospitals will be implemented in 2013 and will apply to payments for discharges on/after 10/1/2012

– For incentive payments for discharges on/after 10/1/2014, efficiency measures will be included

– HHS must develop and submit a program for SNFs, HHAs, and ASCs by 10/2011 and take into account all dimensions of quality and efficiency

– Physicians are not exempt; a modifier will be established that provides for differential payment based on quality of care furnished compared to cost. This will be phased in starting 1/1/2015.

32



• Medicare Payment Reforms: Graduate Medical Education

– $230M has been appropriated for FY 2011-2015– Payments for direct and indirect expenses will be available

to qualified teaching health centers listed as sponsoring institutions of approved GME and residency training programs

– An annual report is required and must include (a) types of primary care approved training programs; (b) number of approved training positions for residents; (c) number of residents who completed training at the end of the academic year and care for vulnerable populations in underserved areas

33



• Medicaid Payment Reforms: Adjustments for Health Care-Acquired Conditions and DSH Reductions

– Health care-acquired conditions are conditions that could be identified by a secondary diagnostic code; federal payments to states for medical assistance may not be used to pay for HCAC

– HHS must identify current state practices preventing payment for HCAC and apply those to Medicaid through regulations effective 7/1/2011

– Aggregate reductions in Medicaid DSH payments for all states will be reduced by $18.1B from 2014-2020

34



• Medicaid Payment Reforms: Increased Payments for Primary Care Services

– Increases Medicaid payment for primary care services furnished in 2013 and 2014 by a physician with a primary specialty designation of family medicine, general internal medicine, or pediatric medicine to 100% of the payment rate that applies to such services and physician under Medicare

35



• Medicaid Payment Reforms: Demonstration Projects

– Global Payment Demonstration Project (FY 2010-2012): up to 5 states will adjust the payments made to an eligible safety net hospital system or network from a FFS payment structure to a global capitated payment model

– Bundled Payments Demonstration Project (1/1/2012-12/31/2016): to be conducted in 8 states to evaluate the use of bundled payments for provision of integrated care for Medicaid beneficiary

36



• Medicaid Payment Reforms: RAC expansion into Medicaid

– States must contract with RAC by 12/31/2010

– HHS and CMS will coordinate expansion– Purpose: identify over and underpayments

made by Medicaid and to recoup overpayments

37



• Medicaid Payment Reforms: Medicaid Eligibility Expansion

– Expansion of Medicaid coverage to virtually all adults whose income is at or below 133% of FPL as of 2014

– Initially, federal payments will supplement state shortfalls in funding

38



• New Delivery Models: Accountable Care Organizations

– Must be established not later than 1/1/2012– ACOs are Medicare Parts A & B shared savings

programs that group providers and suppliers together to manage and coordinate care for Medicare beneficiaries.

– ACOs must meet specific quality standards and allow for shared governance, have a separate legal existence, include sufficient primary care physicians to serve the assigned beneficiaries.

39



• New Delivery Models: Accountable Care Organizations, cont.

– Each ACO must service at least 5,000 beneficiaries, identify processes to promote evidence-based medicine, quality and cost measure reporting, and coordinate care through a variety of technologies

– Payment may be based on multiple methodologies, including estimated average per capita Medicare expenditures by the ACO for FFS beneficiaries, a partial capitated payment, or a different model to be developed by the Secretary

40



• New Delivery Models: Medical Homes

– Community-based, interdisciplinary teams to support primary care physicians within a specific hospital service area

– Payments: grants or capitated payments to providers via contract

– Entities must submit a plan for 3 year financial sustainability, incorporate prevention initiatives and insure that a team is provided to treat the chronically ill

41



• New Quality Reporting Requirements

– Within 2 years, reporting and quality reporting requirements must be developed

– Physician quality reporting changes-must submit data starting in 2015 or face payment reductions

– Quality reporting by 2012 is part of “meaningful use”

– LTACHs, hospices, inpatient rehab hospitals, and pysch hospitals must submit quality data by 2014 or face penalties

42



• Electronic Health Records and Incentives

– Technically part of ARRA, but healthcare reform builds on EHRs as a platform/ foundation for further reform

– Policy priorities include improving quality, safety, efficiency, reducing health disparities, and improving care coordination. Measures for meaningful use reflect these priorities

– Incentives for hospitals begin FY 2011 (i.e., 10/2010) for those who achieve “meaningful use” and penalties begin in 2015 for those who do not

43



• New Fraud, Waste and Abuse Enforcement Tools: Changes to Stark Law

– Revised in-office ancillary services exception– Revisions to “whole hospital” and “rural provider”

exceptions– Revisions limit physician ownership expansion

after 12/31/2010, increase patient disclosure of ownership, and increase reporting to HHS of ownership

– HHS will begin conducting audits in 11/2011

44



• New Fraud, Waste and Abuse Enforcement Tools: AKS, FCA, CMP Changes

– Revised AKS so that a person need not have actual knowledge that the conduct was prohibited

– Stark disclosure protocol required to be developed (released 9/2010)

– Changes to FCA--refunding an overpayment within 60 days of its identification is an obligation, and failure to do so is a FCA violation; also, claims submitted in violation of AKS = grounds for FCA violation

– Expansion of CMP law 45



• New Fraud, Waste and Abuse Enforcement Tools: Other Compliance Tools

– Increased funding for enforcement efforts: $250M phased in over 2011-2016

– Mandatory compliance programs as a condition of enrollment in Medicare, Medicaid and CHIP

– Increased exclusion authority– Suspension of payments based on “credible

allegations of fraud”

46



Hospitals as Charities Marsha Dieckman, CPA

HORNE LLP









Hospitals as Charities Outline

• Spotlight on Tax-Exempt Orgs

• Good Governance

• Board Independence

• New Requirements for Tax-Exempt Hospitals48


A historical perspective on “the spotlight” on Tax-Exempt Organizations

• Congress– Senator Grassley (R-Iowa) lead Senate Finance Committee to reform

• Internal Revenue Service– They just keep talking and the focus is not shifting away from NFPs

• Exempt Org Sector– Many exempt org watchdogs are keeping theirs eyes on the ball

• Media – ACORN, Haiti relief groups, the list goes on

• Healthcare Reform- takes it to a whole new level49


So why should all of this matter to tax-exempt hospitals?

• IRS has said that good governance is evidence of an organization that is obeying the laws and living up to its charitable purpose

• 501(c )(3) public charities are being scrutinized and that means you

• The IRS’ Strategic Plan for Fiscal Years 2009-2013 outlines a specific focus on Hospitals and Universities

• Health Care Reform has taken it to a new level… (to be continued)

• Your organization’s tax-exempt status could be at stake!!

50


TIPS for Good Governance• Board should be active, independent (more on that

later) and engaged

• Organization’s policies should be-– Written– Enforced– Consistently reviewed– Examples- Conflict of Interest; Document Retention; Whistleblower

• Write a policy and consider using outside sources for determining executive compensation. Have decisions approved by the independent Board, substantiate and document the decisions.– Rebuttable presumption of reasonableness shifts burden to IRS

51


TIPS for Good Governance• Independent Board should review the Form 990

prior to filing– Not required, but really shows good governance– Form 990 currently only asks if “provided” a copy “prior to filing”

• Use reasonable efforts to obtain family and business relationship information from Board members, Officers and Key employees– Annual questionnaires are useful – Collect responses and then determine what information, if any,

should be disclosed

• Contemporaneously document, document, document

52


Who is considered “Independent”?A majority of independent board members is considered “the

gold standard”.

A Board member is considered independent if all three apply-

• Member was not compensated as an Officer/Director/Key employee by the organization (or a related organization)– Religious exception if member has take a bona fide vow of

poverty

• Member did not receive other payments > $10,000 from the organization (or a related organization), other than for Board compensation or reimbursement of expenses

• Member (or family member) was not involved in a material financial transaction with the organization

53


NEW REQUIREMENTS FORTAX-EXEMPT HOSPITALS UNDER PPACA

• Section 501(c)(3)

• Benefits

• Requires charitable purpose

• Community benefit standard since 1969

• No sanctions under present law, other than revocation

54


Section 9007 of PPACA

• Adds IRC Section 501(r)

– A 501(c)(3) hospital will not be treated as such, unless it:

• meets the community health needs assessment requirements

• meets the financial assistance policy requirements

• meets the requirements on charges

• meets the billing and collection requirements

55


Application (IRC Section 501(r)(2))

• In general– to an organization which operates a facility which is required by a State

to be licensed as a hospital

– to any other organization which the Secretary determines has the provision of hospital care as its principal tax-exempt function or purpose

• Organizations with more than 1 facility– must meet the requirements separately with respect to each such facility

– the organization shall not be exempt with respect to any facility for which such requirements are not separately met

56


Community Health Needs Assessment

• IRC Section 501 (r)(3)

– An organization must conduct a “community health needs assessment”:• every three years• adopt an implementation strategy to meet the identified community health

needs

– “Community health needs assessment” takes into account input from:• persons who represent the broad interests of the community served by the

hospital facility• includes those with special knowledge of or expertise in public health and is

made widely available to the public

57


Written Financial Assistance Policy (IRC 501 (r)(4))

• Must include– eligibility criteria, whether is care free or discounted

– basis for calculating amounts charged to patients

– method for applying for financial assistance

– if no separate billing and collections policy, the organization’s actions for nonpayment, including collections action and reporting to credit agencies

– measures to widely publicize the policy within the community to be served

– include a written emergency care policy

58


Limitation On Charges (IRC Section 501(r)(5))

• Organization must

– limit amounts charged for emergency/medically necessary care provided to those eligible under the financial assistance policy to not more than the lowest amounts charged to individuals who have insurance covering such care

– prohibits the use of gross charges

59


Billing & Collection Requirements (IRC Section 501(r)(6))

• Organization may not engage in extraordinary collection actions before making a reasonable efforts to determine whether the individual is eligible under the financial assistance policy

60


New IRC SEC. 4959

• Excise Taxes on Failures by Charitable Hospitals

– if a hospital organization to which section 501(r) applies, fails to meet the requirement of section 501(r)(3) for any taxable year, there is imposed a tax equal to $50,000 per year of failure

61


Reporting & Disclosure (IRC Section 6033(b)(15))

• Mandatory review by Secretary of Treasury

– at least once every 3 years, of the community benefit activities (currently Schedule H, Form 990) of each hospital to which IRC 501(r) applies

– information reported should include the community health needs identified, how they are being addressed, and if not give the reasons

• The audited financial statements of the organization must be included with the Form 990

62


Effective Dates (PPACA Section 9007(f))

• Section 9007 (except as provided below) applies to taxable years beginning after the date of the enactment

• Community health needs assessment applies to taxable years beginning after the date, which is 2 years after the date of the enactment

• Excise tax applies to failures occurring after the date of the enactment of this act

63



Strategic OpportunitiesDavid A. Williams, CPA

HORNE LLP





Health Care Delivery System ReformPayment Reforms Aimed at Improving the Delivery System

Red

uce P

reventab

le

Read

mis

sion

s

Valu

e-Based

P

urch

asin

g

Bu

nd

led P

aymen

ts

Acco

un

table C

are O

rgan

ization

s

Man

ag

e Rad

iolo

gy

B

ene

fits

Improve Quality Reduce Costs

Increase Health Care “Value”

Electronic Health RecordsPrerequisite

Tactics

The Goal

3.

2.

1.

65


A Roadmap to ReformMost of President Obama’s Ambitious Health Care Goals Depend on Bending the

Cost Curve

Source:

1) http://www.whitehouse.gov/issues/health_care/

Catalyst Primary Outcome

Secondary Outcome

Tertiary Outcome

Causal Relationship Between the President’s Health Care Goals

Assure Affordable Coverage

Reduce Cost

Growth

Invest in Prevention and

Wellness

Improve Safety and

Patient Care

Maintain Coverage During Job Transitions

End Barriers for Pre-Existing

Conditions

Protect Families from

Medical Bankruptcy

Guarantee Choice of Docs

and Health Plans

66


Selected Provisions• Administrative Simplification

– Moving to standardized processes by evaluation of systems every 3 years using input from the National Committee on Vital Statistics, the Health Information Technology Policy Committee, the Health Information Standards Committee, standard setting organizations and stakeholders -Public Health Services Act Sec. 399HH(a)), as added by Act Sec. 3011 of the Patient Protection and Affordable Care Act (P.L. 111-148)).

• Delivery System Changes– Bundling – beginning 2013 pilots thru 2015 (Social Security Act Sec. 1866D, as added

by Act Sec. 3023 of the Patient Protection and Affordable Care Act (P.L. 111-148)).– Readmissions – 2013 penalties for “excessive re-admissions” (SSA Sec. 1886(q)(3),

as added by Act Sec. 3025 of the Affordable Care Act).– Hospital acquired conditions -Act Sec. 2702 – Accountable Care Organizations – 2012, allows hospitals and physicians to provide

leadership in voluntary ACOs. Some savings to be shared Section 3022 of the Patient Protection and Affordable Care Act (P.L. 111-148) adds Social Security Act Sec. 1899

– Innovation Center – 2011 creates a Center for Medicare and Medicaid Innovation designed to improve quality and reduce program expenditures- Section 3021 of the Patient Protection and Affordable Care Act (P.L. 111-148) amends Title XI of the Social Security Act by adding the new SSA Sec. 1115A

67


Global PaymentsThe Legislation Will Include Expanded Bundled Payment Demonstration Projects

Proposed Bundled Payment System:

Current Payment Methodology:1:

2:

- 3 Days Admit Discharge + 7 days + 14 days + 19 days + 30 days

MS-DRG Pmt Physician Fee Schedule

Home Health PPS Episode

Readmission:MS-DRG Pmt

+ 27 days

30 Day Episode of Care

Sample Inpatient Stay

MAC

MS-DRG + Avg. PAC Cost – “Efficiencies”

Hospital Negotiated Pmts

Payment

68


Selected Provisions• Independent Payment Advisory Board (IPAB) Section 3403 of the Patient

Protection and Affordable Care Act (P.L. 111-148) – Binding payment recommendations on Medicare and non-binding on

private insurers payments to providers– Exclusion such as hospitals (except CAH) until 2019

• 340B drug program extended Act Sec. 7101(a) of the Patient Protection and Affordable Care Act (P.L. 111-148), amending Public Health Service Act Sec. 340B(a)(4) by adding subparagraphs (M) through (O)

• Market basket update adjustments -Affordable Care Act Sec. 3401• RAC expansion -Affordable Care Act Sec. 6411

• Graduate Medical Education – no reductions in IME payments but re-distributes 65 percent of unused residency to primary care and surgeons SSA Sec. 1886(h)(8)(B), as added by Act Sec. 5503(a)(4) of the Affordable Care Act

69


Something To Think About• Be proactive, explore how to make the new

legislation work in your organization

• Ignoring the delivery and payment system changes will be detrimental

• Most importantly, understand totally where your revenue comes from and how this will change

• Tax Exemption

70


Financially Positive or Negative for Health Care Providers

• Modeling– Market Basket Update– DSH-UPL– Hospital Acquired Conditions– Physician Payment Revisions– Contracts with other payers

71


Being Proactive

• Model impacts of Medicare and Medicaid

• Estimate income/ volume levels of “new patients”

• Evaluate service lines

• Evaluate costs– Direct care– Support

72


Know the Margins – The Driving Forces

73


Model of Governmental Payers

74


Non Governmental Payers• Impact of Health Insurance Exchanges on

traditional insurance

• Impact of family coverage and shifts to employers

• Impact of “pay the penalty” under or uninsured

• Remember – “bend the cost curve”

75


Being Proactive

• Model impacts of Medicare and Medicaid




76


Reviewing Service lines

• Outpatient Rehabilitation Services – Primarily two services – Occupational & Speech Therapy

• Determined the payer mix was unable to sustain the current level of expense.

• Due to the competition and availability in the service area, the Hospital elected to discontinue service.

• Net increase to contribution margin $600,000 annually.

77


Being Proactive• Model impacts of Medicare and Medicaid




78


Analysis of Costs

• The Cost structure– Direct patient care– Components of Overhead

• Identified areas for cost savings– Invested in premier database to benchmark both cost and quality– Expended Information Technology funds for capturing data and

developing standardized processes

79


Labor Costs• Productivity standard which was an integration of

standards established by a proprietary database and adapted Hospital’s culture

• Review of standards began with a bi-weekly process which was historical and reactionary.

• Moved to a daily matrix which was successful due to the step transition (key – moving from reactionary to integrated)

• Savings as a result of the intense use of standards1. FTE’s decreased from 4.5 to 3.9 per adjusted occupied bed2. Reduction of salary costs of $6.8 million

• Other considerations including freezing merit increases and elimination of contract staffing

80


Purchased Services• Retirement Plan – hospital operated under

a defined benefit– “Freeze” implemented with alternative retirement plan– With matching mechanism through 403(b) savings of $700k

annually.

• Real estate and other rental agreements– Negotiated through consolidations and space eliminations

resulted in $270k savings

• Management of professional services– Hired a director for key areas including IOP, BIO Med, Rehab

and Housekeeping - savings of $1million81


Quality & Efficiency• Chief Medical Officer established a work

group to evaluate the clinical effectiveness of the following programs:– Cardiology– Pediatrics– Orthopedics– Behavioral Health– Women’s Health Services – including Nursery– General Medical – Surgical

82


Key Finding • Length of Stay – too high

• With 60% of total expense representing labor costs, the Hospital began an intense review of daily activities and labor hours

• Greatest opportunity – Review standards and protocols for delivery of patient care– Intensified use of Hospitalist program– Indexed length of stay @ 100% of standard

83


Other Considerations• Mindset review of expense

– Formulary review of Pharmacy - $200k– Courier alignment with outpatient - $175k– Benefit plan sync with industry - $1.5 mil

• Overall – Everything is matched up with –– Board Policy and Mission– Rating Agency – Capital Access– Budget constraints

84


Thank You!!!Armin J. Moeller, Jr.Balch & Bingham LLP401 East Capitol StreetSuite 200Jackson, MS [email protected]

Genie Stark ThomasBalch & Bingham LLP401 East Capitol StreetSuite 200Jackson, MS [email protected]

D. Collier Graham, Jr.Wise Carter Child & Caraway, P.C.401 East Capitol StreetHeritage Building, Suite 600Jackson, MS [email protected]

David A. Williams, CPAHORNE LLP1020 Highland Colony Parkway, Suite 400Ridgeland, MS [email protected]

Marsha Dieckman, CPA1020 Highland Colony Parkway, Suite 400Ridgeland, MS [email protected]

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Preparing for Healthcare Reform

