The Changing Payor Landscape Michael Rabin, VP, Managed Care and Business Operations Transitions of Care Community Coalition June 30, 2016

Agenda Oncology ACA Medi-Cal Expansion Health Benefit Exchange – Covered California HMO Capitation – Limited Knox-Keene Employers Narrow Networks New Payment Models M&A Activity What Does This Mean to Providers?

Cancer

Oncology

Affordable Care Act (ACA) On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (ACA). Along with the Health Care and Education Reconciliation Act of 2010, the law put in place comprehensive health insurance reforms. Medical Loss Ratio Adult Dependent Coverage to 26 Coverage of Preventive Care No Annual Limits on Policies Medicaid for Childless Adults Established Health Exchanges

May 2016 – 10.3 million enrollees Medi-Cal Expansion Moved to 133% of FPL in 2014 In California, growth from 7.5 million Medi-Cal beneficiaries to approximately 9.5 million May 2016 – 10.3 million enrollees Most beneficiaries transitioned from fee for service to Medi-Cal managed care

Health Benefit Exchange – Covered California

Covered California Must offer same premiums for same product inside exchange and outside exchange Major plans in Exchange Kaiser Anthem Blue Cross Blue Shield of CA Health Net United Healthcare Oscar Health Notable plans absent Cigna Aetna

Covered California Enrollment began October 1, 2013 and became effective January 1, 2014. 1.4 million enrollees in 2014 35% attrition rate for 2015 1% net enrollment increase in 2015 1.57 million enrollees in 2016 Subsidies and tax credits for individuals at 133 FPL to 400 FPL Penalty/tax 2014: the greater, $95 or 1% of income NTE $2,448 2015: the greater, $325 or 2% of income NTE $2,484 2016: the greater,$695 or 2.5% of income NTE $2,676

HMOs –Resurgence of Capitation Health Maintenance Organization (HMO) Assigned Primary Care Physician (PCP)/medical group Assigned hospital Authorization needed for services outside of network No out of network benefits without an authorization Capitation – a model by which a health plan passes health care premium to medical group and/or hospital and these entities take on the risk of health care services for a group of members.

HMO Capitation $$ Premium Paid $$ Health Plan Medical Group Hospital Financial Risk Health Plan Keep 20% 40% of premium 40% of premium Medical Group Hospital $$ Surplus/Deficit is split

HMO Capitation – Limited Knox-Keene License $$ Premium Paid $$ DaVita HealthCare Partners (519K) Heritage Provider Network (534K) PrimeCare (206K) Source: DMHC 2015 Data Financial Risk Health Plan Keep 20% 80% of premium Limited Knox-Keene Medical Group $$ Keeps Surplus/Deficit

Employers Trend moving from fully insured to self-insured Increasing employee responsibility Premium Out of pocket Establishing narrow networks Boeing (Memorial Care) Lowe’s (Cleveland Clinic) Home Depot (Mayo Clinic)

Employer Sponsored Coverage

Employers Self Insuring

Narrow Network Products Exclusive Provider Organization (EPO) Limited access PPO Members can receive services from a network of provider/hospitals No benefits for services outside of the network Tiered networks Typically a PPO plan which tiers providers based upon cost Out of pocket expense greater for higher cost providers (tier) Ex: Higher cost provider tier, 30% coinsurance; lower cost provider tier, 10% coinsurance

New Payment Models from Payors CMS On January 30, 2015, HHS Secretary Sylvia Matthew Burwell announced goals for new payment models 30% of payments to alternative payment models (bundled payments and ACOs) by the end of 2016 and 50% by end of 2018 80% of FFS payments tied to quality by end of 2016 and 90% by end of 2018 AIM/Anthem Pathways $350/month to follow oncology pathways CalPERS/Anthem– Reference pricing for hip and knee ACOs- Medicare and commercial insurers

Mergers and Acquisitions Payors Anthem Blue Cross – Cigna Blue Shield of CA – Care 1st Health Net – Centene Aetna – Humana Optum – PrimeCare & Monarch Providers UCLA has more than 150 community offices and Santa Monica Hospital Providence – St. Johns and St. Joseph Hospital System Cedars-Sinai – Angeles Clinic and Tower

What Does This Mean for Providers? Fee for Service Model will become obsolete Providers will take on financial risk Bundled payment Capitation Increased competition among payors and provider Increased M&A activity Opportunity New payment models

What Does This Mean for Providers? Partnering (medical groups/IPAs, health plans, employers, other providers) Care coordination Efficiency More administrative costs Increased investment in technology Focus on quality and outcomes

Questions ?