The Dbriefs Technology Executive series presents:
Enabling U.S.
Healthcare Reform:
IT’s Prominent Role
Chris Smith, Principal, Deloitte Consulting LLP
Dave Biel, Principal, Deloitte Consulting LLP
October 7, 2010
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Today’s agenda
• Setting context
• Industry response to date
• Recommended implementation strategies
• Key takeaways
• Q&A session
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Poll question #1
What is your relationship to the industry?
• Provider
• Health Plan
• Life Sciences Organization
• Government
• Employer
• Not Applicable
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Health reform is now reality
• The Patient Protection and Affordable Care Act (PPACA) contains
sweeping measures featuring expanded coverage, industry insurance
reforms, and delivery system reforms
• Passage of the PPACA caps a period of intense health care policy
debate and will result in substantial changes to the health care industry
• Health Care Reform Legislation dramatically increased the disruption
and change that organizations must absorb
• Across the health care industry, there will be winners and losers
• We believe our clients must evaluate bold plays and potential business
model changes in order to be viable in the new health care landscape
Mar 2010Jan 2009
ICD-10
and HIPAA
5010
Feb 2009
American
Recovery and
Reinvestment Act
Patient Protection and Affordable
Care Act & Health Care and
Education Reconciliation Act of 2010
Reform Regulation Passage Timeline…
1
Copyright © 2010 Deloitte Development LLC. All rights reserved.
PPACA/HCERA must be viewed in the context of ongoing, system-wide transformation (and disruption)
Reforms
State-based Reforms New Clinical Coding Standards
(ICD-10)
Private
Employer
Initiatives And more . . .
Health and Education
Reconciliation Act of 2010
American Recovery and
Reinvestment Act
and HITECH Act
Patient Protection and
Affordable Care Act
Children’s Health Insurance
Program Reauthorization Act
(CHIPRA)
Previous Federal Reform Efforts
Ongoing Regulatory Changes2
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Health
Reform
Reform presents challenges and opportunities for each sector of the health care system
Taxes & Fees• Industry excise taxes
• High income Medicare tax
increases
Delivery System Reform
• “Pay-for-quality” delivery system
reforms
Medicaid Reform• Medicaid and CHIP expansion for
additional 16M uninsured
Medicare Reform• $500B in cuts
• Elimination of Part D donut hole
Commercial Ins Reform • Health insurance exchanges
• Member-run co-ops
• No pre-existing conditions
Pharma / Life Sciences
Reform• Prescription drug rebates
• Expanded 340B covered entities
Prevention & Wellness • Changes to coverage/
reimbursement
Coverage Mandates• Individual mandate
• Expansion of commercial coverageAdministrative Reform
• Admin standardization
• Reporting requirements
• Quality & transparency
3
Copyright © 2010 Deloitte Development LLC. All rights reserved.
If you think this doesn’t impact you, think again –the Employer View
For those participants who are in other industries, reform includes provisions that
will impact and may change employer’s health insurance benefits strategies.
Employers COULD…
• … be driven from self insured coverage to a fully-insured coverage model if mandates such
as essential benefits limit their ability to design their own plans and manage risk
• … gravitate to lesser benefits that would not result in penalties being triggered
• … opt for reduced cost of penalty and may drop coverage at higher rates than larger
employers (mostly applies to smaller employers)
• … look to reject anything they see as health plans passing through industry fee taxes
• … limit the level of benefit change until there is a better understanding of grandfathering
provisions that may have substantial influence on the health care choices made by large
employers
Mandates to keep your eye on….
Reinsurance for
Early Retirees
Cadillac TaxChanges to
Benefit Design
Wellness
Incentives
Tax Deduction for
Part D Subsidy
Eliminated
Reporting of
Coverage (W2)
Appeals Process
Pay or Play
Penalty Potential
Deadline
Extensions
4
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Poll question #2
What do you think is the greatest challenge in
adopting the health care reform?
• Understanding the legislation
• Knowing what to do first
• Planning for the unknowns in the legislation
• Integrating Reform change to current investments
• Don't know
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Industry response
• Building reaction strategies to Health Care Reform can be difficult because…
‒ Although some mandates are well defined, many others are not
‒ Multiple mandates are hitting health care organizations at the same time
‒ Change needs are converging on the same set of business and technical capabilities
• With that in mind, we’ve seen some trends in how companies across all
sectors have responded…
‒ The industry seems “stuck” in planning mode
‒ Even with mandates that are well defined, stakeholders have not been able make the
amount of progress that is needed.
‒ Some organizations have initially “hedged” on starting change
• this puts them at risk for missing deadlines, facing substantial penalties, and potential risk of
business.
5
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Case and point
Across multiple health care sectors, the complications that are stalling industry response is
most notable when you evaluate (1) 5010 / ICD-10 & Admin Simplification and (2) State
Based Health Insurance Exchanges.
5010 / ICD-10 &
Admin
Simplification
The Federal Government through the Centers for
Medicare and Medicaid Services (CMS) is driving
the healthcare industry to upgrade diagnosis and
procedure coding standards by October 1, 2013
Legislation also mandates that health plans
standardize and automate health administration in
order to improve efficiency, quality, and interactions
with providers
Mandate Description Impacted Sectors
Health Plan
Provider
Government
State Based
Health Insurance
Exchanges
The Affordable Care Act will establish exchanges as
the new online distribution channel for the individual
and small group market.
By 2014, states shall establish an Exchange that
facilitates the purchase of coverage for individuals
and small employers; States can establish
exchanges in geographically distinct markets and/or
participate in regional exchanges
Health Plan
Government
6
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Current State of Industry Alignment Toward ICD-10/5010
Assessing Planning Remediating
5010
ICD-10
5010
ICD-10
5010
ICD-10
Providers
Health Plans
State
Government
We believe this change alone is more substantial to the industry than any change in recent
history including initial HIPAA, Y2K, and NPI and yet the industry is lagging behind the
recommended schedule.
Expected progress vs. actual progress
7
5010 / ICD-10 Industry Readiness (Case #1)
*The information presented on this slide is representative of Deloitte’s experience/research.
Copyright © 2010 Deloitte Development LLC. All rights reserved.
5010
And when you factor in Admin Simplification, it is clear that organizations are or will be in a crisis of strategy (Case #1)
Today 2013-2014 2015 Beyond• The scope of remediation is
growing
• Cost is higher than anticipated
• Simplification of processing
needs are increasing
• Number of competing
initiatives is growing
5010/ICD-10 “crowds out”
other priorities
Mandates are “Immoveable Objects”
Admin Cost will Rise
in Near-Term
• Organizations are assuming
admin cost will decrease
• But, there actually will be an
increase operating costs
‒ Claims ops
‒ Clinical ops
‒ Provider service ops
‒ Infrastructure costs
‒ etc . . .
Admin Simplification
Requires Another Major
Capital Expenditure
• Administrative Simplification
will force another round of
invasive core platform changes
• Current delays have a
cascading impact in rising cost
for Administrative
Simplification
Untenable Scenario due to
Implementation Costs
Administrative
Simplification
8*The information presented on this slide is representative of Deloitte’s experience/research.
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Layering IT Complexity - Health Exchange (Case #2)
• States establish an American Health Benefit Exchange
and a Small Business Health Options Program (SHOP)
Exchange
• States have the option to merge the Health Benefit and
SHOP Exchange
• Federal government may establish and operate the
Exchange if the State is not ready
2017+
• Funding available to States
to establish Exchanges
• Open enrollment periods
defined
2010 2011 2012 2013 2014 2015 2016
• Funding for States to
establish Exchanges
expire
• States may allow large groups
(100+) to purchase insurance
through an Exchange
Although not required until 2014, the need around defining the requirements for the
Exchanges has already begun.
9
• Temporary high risk insurance
pools
• National website to compare
plan options with standard ways
of describing benefits
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Impact of Insurance Exchanges (Case #2)
Individual
Non-standard plan
subscribers
Large Group (>100)
Small Group (<100)
Individual
Existing Medicare, Medicaid
Uninsured - Govt. Program
Eligible
HIEs mandates would
result in a shift of
operating model for a
large % of subscribers
requiring:
• Standardized product
offerings
• Transparent business
models
• Real-time automation
driven process controls
• Modification to existing
channels
Implications
Exchange impacted components
Current constituents / channels
Implementation of Insurance Exchange to support Health Care Coverage Expansion will
require substantial change to the state government and the health plan segments.
Small Group (<100)
Individual
Health Plan
Sales &
Marketing
Pricing &
Underwriting
Enrollment
Channels
Government
Brokers &
Sales Reps
Direct
(Consumer
Portals)
Insurance
Exchange
Admin Simplification
Convergence
10
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Poll question #3
What has been the largest struggle for IT organizations
supporting reform mandates?
• Grasping the complexity to formulate a clear strategy
• Securing funding a resources for high-priority reform
initiatives
• Mobilizing approved initiatives
• Don't know
Recommended
Implementation Strategies:How should Health Care organizations
structure themselves to be successful?
Copyright © 2010 Deloitte Development LLC. All rights reserved.
While 2014 will see many of the most dramatic changes, many changes have
earlier – or later – effective dates.
Health reform will unfold in phases
Early Groundwork
• Legislation enacted
• Early implementation
& effective dates
• Rulemaking and
policy development
• Preparations for 2014
2010 - 2013 2014 2015 +
Market Transition Market Expansion
• Significant coverage
expansion
• Delivery system
innovations proliferate
• Insurance market
shakeout
• Continued rulemaking
• Significant market
changes: Major exchanges
and market reforms go live
• Ongoing rulemaking
• Policy and legislative “fixes”
and refinements
11
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Health care organizations need to rise to the challenge
We believe that….
• Most organizations lack consistency in performance and quality of IT delivery
• It’s only through a fundamental shift in approach across the industry that true change will happen
• Changes to how IT Planning and Delivery is executed is required…
1. Establish Federated Operating Models that are flexible and can
adapt quickly to changing needs
2. Address scoping and delivery in an iterative approach
3. Create Competency Centers to establish consistency and to
propagate learning's, key concepts, processes
4. Invest in enterprise solution and consolidate when possible
5. Increase focus on stakeholder communication within and outside of
your organization
12
Copyright © 2010 Deloitte Development LLC. All rights reserved.
1. Federated program operating structure
A multi-layered program operating structure enables leadership across different levels,
which can be critical to the success of highly complex initiatives.
Initiative B
Initiative A
Executive SponsorshipLevel 4
Level 3ICD-10 Program Panel
Level 2
Level 1
Initiative C
Initiative D
Leadership
Advisory Committee
Steering Committee Architecture Review
Board (ARB)
Program Panel
Business Design
Review Board (BDRB)
Enterprise TeamsLocation, Functional, Mandate
Specific Teams
External
Affairs
Program
Portfolio
Mgmt
Bus
Readiness
Tech
ReadinessStrategy
Organizations will require a model that can structure and integrate multiple
simultaneous changes13
Copyright © 2010 Deloitte Development LLC. All rights reserved.
2. Scope and delivery – Start threads that are irrefutable
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Organization should mobilize on core reform activities, adding in additional functions
when enterprise consolidation effort establishes the target solution.
Iterative
upgrade
Iterative
upgrade
Iterative
upgrade
Irrefutable
Truths
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Tier 1: Must-Do
Fully fund and
start these now
Tier 3: Ancillary
SolutionsTier 2: Strategic
Enterprise
Solutions
…
…
14
Copyright © 2010 Deloitte Development LLC. All rights reserved.
3. Using centers of excellence: ICD-10 Case Example Initiatives with far-reaching impacts to critical functions and multiple geographic regions should pursue
COEs to create a “source of truth” across the program. For example, a provider or payer organization
should consider a Code Set Translation COE as part of ICD-10 remediation
Integration
Compliance
Code Set Translation
Mapping
Financial Outcome Analysis
Code Set Analytics/ Simulation
• Provides expertise
• Establishes a governance model
• Defines standards and metrics
• Adds value through:
‒ Reduction in requirements cycle time
‒ Reduction in development and
Integration costs
‒ Increases in operational efficiency
‒ Increases in project success rate
‒ Ensuring compliance
COE Importance COE Core Capabilities
15
Copyright © 2010 Deloitte Development LLC. All rights reserved.
4. Invest in enterprise solutions and consolidation
Early movers who already
have taken a significant lead
on complexity reduction are
ideally situated to manage
reform impacts.
Organizations who mobilize
effectively can begin to
reduce complexity, cost and
risk in implementing reform
change.
Organizations that delay
efforts will be forced to
address the most
comprehensive change to
the broadest set of impact
areas further increasing
overall risk.
Pro
du
ct
Co
re
Op
era
tio
ns
Fin
an
ce
Investing in simplifying organizational infrastructure can allow for more strategic
investment for HCR and reduce overall cost and risk associated with change.
Current state
segmented infrastructureStrategic streamlined
enterprise solutions
16
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Frequent and clear communication will be required to resolve some of the complex
coordination activities between industry stakeholders.
5. Collaboration is about communication
Providers
State
GovernmentVendors
Health
Plans
PBMs
CMS
Clearing-
housesPayers
Communication
17
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Poll question #4
Which of recommended strategies will be most critical for
health care organizations to successfully navigate Health
Care Reform?
• Federated Operating Model
• Agile Governance
• Centers of Excellence
• Platform Consolidation
• Collaboration & Communication
• Don’t Know
Copyright © 2010 Deloitte Development LLC. All rights reserved.
Key Takeaways
IT is a core component of enabling health care reform changes
Technology needs to engage across the organization and drive inevitable change
Establish a federated delivery structure so reform change can be executed in
parallel
Business as usual and delays in execution will lead to a crisis in strategy
18
Copyright © 2010 Deloitte Development LLC. All rights reserved.
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Plug-and-Play Solutions: Making Post-Merger Integration SOA Much Faster and Smoother
Copyright © 2010 Deloitte Development LLC. All rights reserved.
David Biel
Principal, Deloitte Consulting LLP
Chris Smith
Principal, Deloitte Consulting LLP
Contact info
Copyright © 2010 Deloitte Development LLC. All rights reserved.
This presentation contains general information only and is based on the experiences and
research of Deloitte practitioners. Deloitte is not, by means of this presentation, rendering
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substitute for such professional advice or services, nor should it be used as a basis for any
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relies on this presentation.
Copyright © 2010 Deloitte Development LLC. All rights reserved.
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