What’s Happening in the Healthcare Industry?

David C. Salsberry, Executive Vice President/CFOJPS Health NetworkAugust 14, 2012

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Healthcare Industry Discussion Outline

•Nationwide…….Accountable Care Act

• In Texas……1115 Waiver

•Hot Topics in the Healthcare Industry……

•Where do we go from here….2

ACA Supreme Court Ruling

Expansion Coercive

PenaltyCoercive

Expansion Constitutional

GinsburgSotomayor

RobertsBreyerKagan

ScaliaThomasKennedy

Alito

Remedy: No Loss of Existing Funds

Individual Mandate vs Medicaid Expansion

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The New “Status Quo”

• Most of ACA remains in place

Exchanges

Insurance Reforms

Delivery System Reforms

Payment Changes

Revenue Raisers

Etc.

• The foundation of the ACA’s affordable coverage is now unstable

• Repositioning of power between the federal government and the states

• No change to ACA provisions that assumed Medicaid coverage would occur without further legislative action

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Pre-Decision:Congress’ Underlying Premise

• Individual Mandate + Subsidies • Medicaid DSH cuts

• Medicare DSH cuts

• Other provider payment cuts

• Mandatory Medicaid Expansion

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Post Decision:Raw Deal for Hospitals

• Individual Mandate + Subsidies

• Medicaid DSH cuts• Medicare DSH cuts• Other provider

payment cuts

• Medicaid Expansion Optional

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Medicaid DSH Reductions

Year Reduction

2014 $500 million

2015 $600 million

2016 $600 million

2017 $1.8 billion

2018 $5 billion

2019 $5.6 billion

2020 $4 billion

2021 $4 billion

2014

2015

2016

2017

2018

2019

2020

2021

-$6,000,000,000

-$5,000,000,000

-$4,000,000,000

-$3,000,000,000

-$2,000,000,000

-$1,000,000,000

$0

Millions

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Pre-Decision Post Decision

Medicaid

Uninsured

Coverage Expansion in an Opt-Out State

100%

133%

400%

Residual Uninsured

- Undocumented immigrants

- Those exempted from mandate/penalty

- Those paying penalty

Citizens/Legal Immigrants

New Immigrants

New Immigrants

Citizens/Legal Immigrants

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New Congressional Budget Office Estimates

• “Optional” expansion saves Federal Government $84 billion over 10 years (largely from fewer people covered)

• Only 1/3 of states will expand fully

• In the aggregate, 3 million people will not be covered due to SCOTUS

• 6-10 million fewer covered people than estimated in 2010. 9

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Options for states that opt out of the ACA’s Medicaid expansion?

• Why would a state want to opt out?• Financial Risk• Concerns about the current system – Tom Suehs article

• Can states opt out of the ACA’s Medicaid expansion?• Yes

• CMS looking for incentives for states to participate• Impact on states’ ability to negotiate with CMS

• Can states opt to implement the expansion for some period of years and then opt out?• National Association of Public Hospitals believes so• Impact on FMAP unclear for DSH and Waiver payments• States might also delay expansion

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A Weary Populous?

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Can a GOP-Controlled Congress Repeal the ACA?

• Reconciliation• Needs only 51 votes• Not subject to filibuster• Any items without a fiscal impact subject to a

point of order (60 votes needed to overcome)• Used to adopt the ACA

• Subject to Presidential veto

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What does this mean for Texas Health Systems?

• Significant federal funding is at stake• ACA Reimbursement cuts• DSH Program

• Take a proactive role in encouraging Texas to adopt the Medicaid expansion

• Watch for the impact on:• remaining uninsured • employers

• Closely monitor the impact of political movements at the national level and the development of policies and program rules at the federal level

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1115 Waiver

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Why Did Texas Adopt a Waiver?

• Texas Medicaid budget shortfall

• Managed care imperative

• Collateral damage – elimination of UPL

• CMS desire to move away from UPL programs and fund pay for performance• Increased access• Quality of care• Outcomes for a population

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• Transform current health care delivery system• Become more transparent, accountable and ready to serve existing

Medicaid beneficiaries, new Medicaid beneficiaries, and uncompensated care patients

• Enable the state to achieve Managed Care Goal and preserve funding for uncompensated care

• Overall goals • Expand risk-based managed care statewide • Support development and/or maintenance of a coordinated care

delivery system through RHPs• Improve outcomes while containing costs • Protect and/or leverage financing to improve and prepare

infrastructure for newly insured populations • Transition to quality-based payment system across all providers • Provide a mechanism for investments in delivery system reform

1115 Waiver Basics Paper

Waiver Purpose

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Key Constructs of the 1115a Waiver

• Regional Health Partnership (RHP)• Payment program bringing providers and others together to look

at the health of a population• New relationships• Care coordination component• At the same time preserves governing authority of participants

• Roles• Anchor Entity• IGT Entities• Provider Participants• Collaborative Stakeholders• CMS/HHSC

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• Funding • How are funds generated?

• Intergovernmental Transfer (IGTs) – generating federal matching funds (.42 cents of IGT returns $1.00 dollar of total funds)

• How are funds paid?• 2 Pools – Uncompensated Care (UC) and Delivery System Redesign

Incentive Pool (DSRIP)

• Opportunity for patient care innovation• Increased care coordination and collaboration for a given region’s

health outcomes• Work in process – CMS/HHSC has provided only a shell program

with many details to follow

• Participation is voluntary and not tied to ACA

Key Constructs - continued

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RHP Principles

RHPs are formed around the hospitals that used to receive Upper Payment Level (UPL) payments and one of these would serve as an

anchor.

Anchors serve as the single point of contact, coordinate RHP activities, and serve administrative functions.

The anchor does not make decisions regarding other entities’ funds.

Develop plans to address local delivery system concerns with a focus on improved access, quality, cost-effectiveness, and coordination.

RHP regions should reflect delivery systems and geographic proximity.

UC and DSRIP pools are dependent on RHP plan participation.

Waiver funds still go directly to hospitals (not to counties) and “performing providers”.

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RHP Principles• Anchors will bring RHP participants and stakeholders together to develop plans

for public input and review.

• Participants with match funds will select incentive projects and identify hospitals to receive payments based on incentive projects.

• Participating hospitals will report performance metrics and receive waiver incentive payments if metrics are reached.

• RHPs shall provide opportunities for public input in plan development and review.

• HHSC is seeking broad local plan engagement including:• County medical associations and/or societies• Local government partners• Other key stakeholders

• RHP Plans include: • Regional health assessments• Participating local public entities• Identification of hospitals receiving incentives and yearly performance measures • Incentive projects by DSRIP categories

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Medicaid 1115(a) Demonstration – Regional Health Collaborative

Public Hospital Board of Managers

JPS DSRIP CommitteeChair – Public Hospital CEOMembers – Hospital CFO, CMO, COO SVP- Population Health, VP – Planning, VP – Academic Affairs, VP - HTS

Anchor Entity-Single point of contact for RHP,-Coordinate regional needs assessments, projects, and investments under the DSRIP, -Direct and financially support RHP-Provide funding and conduit for inter-governmental transfers (“IGT”) and funding distribution to Participating Providers,-Facilitate measurement and reporting of Plan outcomes and metrics, -Facilitate public forums, meetings and communications,-Assemble and submission of Plan to State and CMS for approval,-Communicate state and federal Waiver guidelines to Participating Providers and Collaborative Stakeholders.

Regional Health Collaborative Steering Committee

Participating Providers criteria:-The entity provides health care to Medicaid and uncompensated care patients in the plan region,-Commitment to build relationships and collaboration among RHP members,-Identify availability of funds and community resources necessary to support RHP programs and projects,-Enable additional cost offloads to support RHP and financial draws. The roles and responsibilities include:-Actively collaborate and provide meaningful participation in determination and completion of Plan,-Estimate IGT contribution over next 4 years and fund IGT obligations,-Commit to the measurement and reporting of project and program outcomes, -Identify and recruit stakeholders and providers in its communities who may enhance the effectiveness of the Plan.

Performing Providers

Regional Collaborative CommitteesEstablished by RHP to effectuate the intent of the programs and projects, and provide input to the development and review of Plans. Includes: Planning, Finance,Quality/Clinical, & Elected Officials

Collaborative Stakeholders

- Collaborative Stakeholders are those with an interest and ability to enhance the effectiveness of the Waiver projects and programs. - Collaborative Stakeholders may include County Public Health Departments, Educational Institutions, County /local government, etc.- Collaborative Stakeholders may provide unique services (transplant network, burn unit, poison control, etc.) or established community engagement, among other things.- Collaborative Stakeholders may provide important insight and perspective into community needs and healthcare challenges.

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DFW RHP’s By County

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1115 Waiver

1) Uncompensated Care Pool

Distributions made based on Hospital Inpatient and

Outpatient uncompensated care

2) Incentive DSRIP Pool

Delivery System Redesign Incentive Pool

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Potential UC and DSRIP FundsUC Total * DSRIP Total * Region 10 DSRIP **

Waiver Year 1 (DY1) $3.7 B .5 B $48.7 M

Waiver Year 2 (DY2) $3.9 B $2.3 B $224.1 M

Waiver Year 3 (DY3) $3.5 B $2.7 B $259.7 M

Waiver Year 4 (DY4) $3.3 B $2.9 B $277.8 M

Waiver Year 5 (DY5) $3.1 B $3.1 B $302.0 M

Total $17.6 B $11.4 B $1.1 B

* Statewide totals approved in the 1115 Waiver

** Preliminary estimates provided in draft funding mechanics and protocol distributed June 29, 2012

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1115 Waiver2) Incentive DSRIP Pool

(Delivery System Redesign Incentive Pool)

Category 1 – Infrastructure Development – Delivery system transformation with investments in people, places, processes, and technology

Category 2 – Program Innovation and Redesign – Includes the piloting, testing, and replicating of innovative care models

Category 3 – Quality Improvement – Requires hospitals to achieve improvement in four of 7-10 hospital specific interventions

Category 4 – Population Focused Improvement – Requires hospitals to report on a predetermined set of measures across four domains: 1) the patient’s experience; 2) preventative health; 3) care coordination; and 4) health outcomes of at-risk populations

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Related Cat. 1&2

Intervention

Cat. 1 Intervention

Cat. 2 Intervention

Cat. 1 Intervention

Cat. 2 Intervention

Cat. 3 Project

Area

Cat. 3 Intervention

Cat. 3 Intervention

Related Cat. 1&2

Intervention

Cat. 1 Intervention

Cat. 2 Intervention

Cat. 1 Intervention

Cat. 2 Intervention

Cat. 3 Project

Area

Cat. 3 Intervention

Cat. 3 Intervention

Project Area

Project Area

Project Area

Project Area

Project Area

Quality Improvement

InitiativesCategory 1-3

Allocation

DSRIP Funding Framework

Statewide Allocation

Region/ Provider

Allocation

Reporting Based

RequirementsCategory 4 Allocation

Quality Improvement Initiatives

Category 1-3 Allocation

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RHP Plan - Milestones

March 31May 31

April 30

July 31June 30

September 30

August 31

October 31

February 29

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March 31, 2012State provides general projects and quality measures to be addressed in each RHP DSRIP.

September 1, 2012State provides RHP regions and DSRIP payment protocols

September 1, 2012RHP Draft Plans

September 1, 2012RHP Draft Plans

October 31, 2012Final RHP Plans due to HHSC

Public comment on Plan –September, 2012

-Identify participation providers-Engage planning resources-Conduct preliminary planning session

-roles/responsibilities-deliverables-timeline

March 31, 2012

Plan development/collaboration

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Hot Topics in the Healthcare Industry…….

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Current Industry Challenges• Workforce Availability and Engagement

• IT Investment - Electronic Medical Records

• Developing More Effective Models of Care:• Family Medical Home Model (FMHM)• Accountable Care Organizations (ACO)

• Financial Management• Pay for Performance• Cost Reduction – movement away from “best practices” approach

to using Lean and Six Sigma approaches • Balance Sheet Management• Financial Reporting – reclassification of bad debt

• Industry Uncertainty

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Where do we go from here….

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4 Phases of Change

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Thoughts on Leadership in Healthcare

• We have to unlearn many things that no longer apply and take on new perspectives that are unfamiliar

• Those who will have the greatest success will be those who stay nimble and keep those around them in the game

• Understand…………every truly great accomplishment begins with the impossible

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