www.bakerdconsulting.com

Healthcare ReformBusiness implications and the

current state of playSession 2

July 1, 2009 1:00 PM EDT

You may listen to the audio online or you may dial:

1-866-642-1665Pass Code 342441

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Agenda

Update on timing and process Overview of key provisions Detailed review Discussion

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Update on timing and processHouse

• Tri-Committee draft and hearings (July)• Tri-Committee markup (July)• Floor (July)

Senate• HELP markup (July)• Finance draft and markup (July)• Floor (July/September)

Conference• Conference Committee and floor (August/September)

If Unsuccessful … • Reconciliation (October)• Medicare Package (December)

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TIMING

Key health reform provisions

Coverage1. Expanded eligibility for sub-populations

The young, the poor, early retirees, small business

2. Pooling mechanisms to ensure access Individual and employer mandates

3. Mandated benefit packages Part D donut hole reforms

4. Market reforms Guaranteed access, cost-share limits, community

rating

5. “Public option” or “Coop Plan”

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COVERAGE

Key health reform provisions (cont.)

Improve Quality1. Coordinated care and medical home models2. Comparative Effectiveness Research3. Prevention Trust Fund

Reduce Cost - Reform the Delivery System1. Payment bundling across episodes of care

(ACE and Care Transitions)2. Aligning provider incentives

(ACOs and Gainshare)3. Value-based purchasing4. Physician payment reform

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QUALITY – DELIVERY SYSTEMS

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Key health reform provisions (cont.)

Sources of Pay-Fors

1. Medicare Advantage Part C Plans ($177 billion)– Capped payment – Competitive bidding

PAYING FOR REFORM

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Key health reform provisions (cont.)

Sources of Pay-Fors (cont.)

2. Pharma ($100 billion)– Donut hole rebates– Medicaid rebates for Part D duals ($75 billion)– “Follow-on Biologics”– Drug importation– Part D price negotiation– 340B expansions

PAYING FOR REFORM

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Key health reform provisions (cont.)

Sources of Pay-Fors (cont.)

3. Devices ($30-50 billion) – High-growth, over-valued” sectors (DME)– Imaging ($6 billion)– End federal preemption

4. Home Health – High-growth, “over-valued” sector– One-yr payment freeze– Accelerate inflation update cuts

PAYING FOR REFORM

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Key health reform provisions (cont.)

Sources of Pay-Fors (cont.)

5. Hospitals ($200 billion)– DSH reimbursement (75% reduction) ($106 billion)– On top of other delivery system reforms

6. Multiple Providers– Share (50%) productivity adjustments ($110 billion)– Not clear on medical liability reform

PAYING FOR REFORM

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Key health reform provisions (cont.)

Sources of Pay-Fors (cont.)

7. Fraud and Abuse – Physician payments (e.g., Physician Payment

Sunshine Act)– Self-referral restrictions (specialty hospital,

imaging, etc.)– Increased funding for OIG and agency fraud efforts

PAYING FOR REFORM

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CER agenda took shape through ARRA; healthcare reform will make it

permanent

April 29, 2009– Senate Finance Committee whitepaper

June 9, 2009– Comparative Effectiveness Research Act of 2009 (Baucus,

Conrad) June 19, 2009

– House Tri-Committee bill June 29, 2009

– Federal Coordinating Council recommendations June 30, 2009

– Institute of Medicine Report July 30, 2009

– Secretary’s Report to Congress

COMPARATIVE EFFECTIVENESS

“Now the Federal Government must make progress and deliver results. . .”

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Structure of CER entity differs but focus of Senate and House versions is similar

Senate proposes non-profit institute for patient-centered

outcomes research Board of Governors

– Includes stakeholder reps Set priorities, carry out agenda

– Contract with Fed Agencies (e.g., AHRQ) or private sector

Comparative clinical effectiveness Advisory panels as needed

– Topics, methods, rare disease Transparency and public comment CER for coverage only if:

– Stakeholder input– Subgroup analysis conducted– GAO report required

Funding through Patient Centered Outcomes Research Trust

House proposes Center within AHRQ

CER Commission – Includes stakeholder reps

“Conduct, support, synthesize research”, set priorities and methods

Consider impact of CER on racial, ethnic minorities, patient subgroups

Set protocols to disseminate results

CER Trust Fund created through Medicare and private payer contributions per beneficiary

COMPARATIVE EFFECTIVENESS

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FCC framework developed to identify priorities for CER

COMPARATIVE EFFECTIVENESS

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COMPARATIVE EFFECTIVENESS

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FCC identified major gaps in existing assets

COMPARATIVE EFFECTIVENESS

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FCC’s key priority is building data infrastructure for short and longer-

term use Data infrastructure requires large,

upfront infusion of cash– Comprehensive databases and research

tools• Build, expand, link longitudinal,

administrative data• Expand high-impact registries (e.g., SEER)• Distributed data networks with EHRs from

practice• FDA and private sector safety data

– Ensure privacy, security

COMPARATIVE EFFECTIVENESS

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COMPARATIVE EFFECTIVENESS

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The IOM urged Congress to “establish a robust CER

enterprise” Develop infrastructure to carry out sustainable CER strategy

Consultative process based on– Condition-level criteria

• Burden of disease, cost, variability– Priority topic

• Gaps in knowledge, results would improve health

– Balanced portfolio of topics to address broad societal needs, including focus on subgroups/rare diseases

– High priority topics included prevention, systems of care, drug, device, surgery, monitoring

COMPARATIVE EFFECTIVENESS

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Listening sessions honed focus of recommendations

1268 research topics proposed– IOM winnowed to 82, then added 18 more to fill

in gaps– Half focus on delivery system– One-third address health disparities, functional

limitations Cardiovascular disease, geriatrics,

neurology, oncology, pediatrics are priorities

COMPARATIVE EFFECTIVENESS

20Source: IOM Report, June 30, 2009

COMPARATIVE EFFECTIVENESS

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IOM presented 100 priorities in quartiles

First quartile priorities included:– Treatment strategies for atrial fibrillation– Impact of upper endoscopy on GERD outcomes– Compare CER results dissemination methods– Effectiveness of biologics for inflammatory

diseases– Screening methods for MRSA – Imaging modalities to diagnose cancer

Next quartiles include important questions, too, but were ranked lower in consensus process

IOM notes priorities will change over time

COMPARATIVE EFFECTIVENESS

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Stakeholders should consider business strategy in light of CER

update Access to decision makers and influencers Evolving, interoperable data systems

– Distributed model may require least new infrastructure development

Opportunity to reframe market space Impact on coverage determination process

– Length, participants, public comment and response Transparency of process

– New reporting/data collection burden Focus on impact of product/service within health

system “Clinical” effectiveness language persists

– Role of economic analysis

COMPARATIVE EFFECTIVENESS

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Senate proposal would give MedPAC regulatory authority

Currently, an independent agency created in 1997 to advise Congress on Medicare program– 17 members with diverse backgrounds appointed by

Comptroller General Medicare Payment and Access Commission would oversee

payment and coverage policy– Determine payment policy, methodology, rates, units and amounts of

payment for all providers and services– Set coverage policy to ensure stable premiums and access– Ensure financial stability of Medicare Program

• Authority/requirement to reduce Program spending by 1.5 percent/year

– Presidential appointment with Senate confirmation– GAO study and annual report required

Current MedPAC Commissioners become Council of Health and Economic Advisors

MEDPAC REFORM

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New oversight for Medicare program

Congressional Joint Committee on Medicare

Demonstration projects moved out of CMS to HHS– Authority to expand demonstrations– Eliminate budget neutrality

requirements

MEDPAC REFORM

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Public OptionPrimary approaches Federal model (Schumer) Coop model (Conrad) Fall-back option (Snowe)

Primary components Financing Provider payment Regulation Participation

PUBLIC OPTION

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Bundling strategies

Primary approaches Across Episodes of Care (ACE Demo) Post-Acute Care (Care Transitions

Demo)

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Bundling strategies

Primary components ACE Demo

– Amount of payment– Payment recipient– Coordinator of care– Measuring results– Transparency

BUNDLING

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Bundling strategies

Primary components Care Transitions Demo

– Amount of payment– Payment recipient– Coordinator of care– Measuring results– Transparency

BUNDLING

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What should you be doing now?

Assume FFS model transitions to payment for quality/efficiency

Focus on your business plan, business model, with 3-year horizon

Consider roles of new decision makers, regulatory authorities– Requirements for annual cuts to Medicare program spend– Five-year review of payment policy, amounts

• Position of product/service within broader delivery system• Impact on quality of care, access• Role for innovation

BUSINESS IMPACT/IMPLICATIONS

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Vince Ventimiglia Senior Vice Presidentvincent.ventimiglia@bakerd.com202-312-7463

Ed Dougherty Senior Vice Presidentedward.dougherty@bakerd.com202-312-7425

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