Healthcare Reform and the New Administration:

The First 90 Days

Leadership Training Conference

Tuesday, April 21, 2009

11:15 am -12:00 pm

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Session Presenter

Richard L. Clarke, DHA, FHFMA

President & CEO

HFMA

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Learning Objectives

• Identify the direction of key healthcare reform proposals in Washington

• Understand the implications of these proposals for the healthcare industry

• Identify specific reform issues that could affect your chapter’s strategic planning

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Key Healthcare Reform Players

• Administration• Kathleen Sebelius – HHS Secretary Nominee• Nancy-Ann DeParle – Director, White House Office of Health Reform• Peter Orszag – Director, OMB

• Senate• Sen. Max Baucus – Chair, Senate Finance • Sen. Edward Kennedy – Chair, Senate Health, Education, Labor & Pensions • Sen. Chuck Grassley – Ranking Member, Senate Finance

• House• Rep. Pete Stark – Chair, Health Subcommittee, Ways & Means• Rep. Henry Waxman – Chair, Commerce & Energy

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What Has Happened So Far?

• SCHIP Reauthorization• American Recovery and Reinvestment Act of 2009 (ARRA)

• Increased Medicaid Support• Subsidization of COBRA• Healthcare IT Funding• Comparative Effectiveness Research

• Proposed Budget for FY2010• $630 Billion Healthcare Reform “Reserve Fund”• Medicare Fee-for-Service → Bundled Payment ($26 billion over 10 years)• Pay-for Performance for Acute Inpatient Services ($12 billion over 10

years)

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Measures Under Consideration

• Public Insurance Plan Option• Employer “Play or Pay” Requirements• Individual Coverage Mandates• Mandatory Charity Care Minimums

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$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$4.6

$1.1

$1.4

$2.1$2.5

$0.7

$0.8

$1.0

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$5.2

$1.3

$1.6

$2.3

$2.5

$0.7

$0.8

$1.0

Projected Growth, Current Policy Revenue Growth with Path Policies

Expenditure (trillions) Expenditure (trillions)

Total Nat’l Health Expenditure

Physician & other professional

HospitalAll other

The Big Picture: A Perspective onReform Costs & Savings

Estimates by The Lewin Group for The Commonwealth Fund’s Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, February 2009.

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The Big Picture: A Perspective on Reform Costs & Savings

Affordable Coverage for All: Ensuring Access and Providing a Foundation for System Reform• Net costs of insurance expansion –$94 billion• Reduced administrative costs –$337 billion

Payment Reform: Aligning Incentives to Enhance Value• Enhancing payment for primary care –$71 billion• Encouraging adoption of the medical home model –$175 billion• Bundled payment for acute care episodes –$301 billion• Correcting price signals –$464 billion

Improving Quality and Health Outcomes: Investing in Infrastructureand Public Health Policies to Aim Higher

• Accelerating the spread and use of HIT –$261 billion• Center for Comparative Effectiveness –$634 billion• Reducing tobacco use –$255 billion• Reducing obesity –$406 billion

Total Net Impact on National Health Expenditures, 2010–2020 –$2,998 billion

Estimates by The Lewin Group for The Commonwealth Fund’s Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, February 2009.

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The Big Picture: Another View• Conclusions of the CBO’s Analysis of Health Reform Proposals (Dec.

2008)

• Adjusting insurance market to reduce use of minimally beneficial treatments would likely require higher enrollee cost sharing or tighter management of enrollees’ care.

• Wider health IT adoption or more preventive medical care would generate either modest cost reductions or increases in healthcare spending within a 10-year budgetary time frame.

• Reducing the level or slowing the growth of healthcare spending would require substantial changes in payment incentives to providers.

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Where Are Hospitals Today?More than half of hospitals report negative total margins.

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Where Are Hospitals Today?Patient revenue has declined for almost half of hospitals.

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Where Are Hospitals Today?Over 60% of hospitals report negative charity care and bad debt impacts.

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Issues to Watch: Charity Care

• IRS Exempt Organizations Hospital Study (Feb. 2009)• Average percentage of total revenues spent on community benefit = 9%• Unevenly distributed:

9% of hospitals reported 60% of aggregate community benefit expenditures

14% of hospitals reported 63% of aggregated uncompensated care expenditures

• Senator Grassley’s response: “The Treasury Department could do a lot of good. . .by reestablishing. . .charity care requirements, and if it looks like that can’t get done, then Congress will have to step in.”

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Issues to Watch: ARRA

0%

25%

50%

75%

100%

Year 1 Year 2 Year 3 Year 4

“Meaningful” users of HIT will receive additional payments from Medicare…

Percentage of HIT Medicare Share Payments Received Based on When Eligible

…while non-adopters will have their Medicare market basket update reduced

75%

50%

25%

0%

25%

50%

75%

100%

Percentage of Market Basket Update Received by Non-Adopters

2010 - 2013

2014 2015 2016Eligible in:

2015 2016 2017

Source: HFMA, “Analysis of the SCHIP Bill and ARRA,” www.hfma.org/library/

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Issues to Watch: Public Health Plan

• The Cost and Coverage Impacts of a Public Plan (The Lewin Group, April 2009)

• If plan open to all individuals and employers, reimbursing at Medicare rates, hospital total margins fall $36 billion (4.6% of net revenues) in 2010.

• If plan excludes large employers, reimbursing at Medicare rates, hospital margins increase by $11.3 billion in 2010.

• Physician net incomes decline under both scenarios.

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Impact of Public Plan

Source: Lewin Group, The Cost and Coverage Impacts of a Public Plan, April 2009

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Where HFMA Stands: Healthcare Reform

• Accurate Reporting of Charity Care/Community Benefit• P&P Board Statement 15, cited by IRS as guide in all

representations regarding charity care• Public Disclosure of Financial and Operating Information

• P&P Board Statement 18, cited by SEC as “market practice” for healthcare industry disclosures

• Transparency of Healthcare Costs• PATIENT FRIENDLY BILLING® Project

• Payment Reform

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Where HFMA Stands:Payment Reform

• Basic Principles of Payment Reform• Quality• Alignment• Fairness• Simplification• Societal Benefit

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Where HFMA Stands:Payment Reform

Source: HFMA, Healthcare Payment Reform: From Principles to Action (2008)

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Where HFMA Stands:Payment Reform – Next Steps

HFMA is identifying best practice changes that providers can use to adapt to the incentives provided by healthcare reform

• Developed a compendium of payment reform demonstration projects

• Surveying participants involved in these projects• Organization structure changes• Physician integration• Investment in financial operations• Budgeting / modeling

• Researching alternate physician alignment models

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Where HFMA Stands

www.hfma.org/paymentreform

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