Quality/Cost Imperative

Healthcare 2015 ACA Implementation – Divided Congress – More Litigation – Federal Subsidies Origination Clause – Continued Changes in the Law – More Litigation – Federal Medicaid Expansion – Payment Reforms – Cost Containment – Coverage Expa sion – Above $200 Billion in Healthcare Costs– Exchanges– Policy Implications KL: Needs more balance, the smaller photos should be bigger Full speed ahead on implementation, which will be daunting Divided Congress = few/no significant changes Likely more litigation Contraception, Federal exchange subsidies, Origination clause, Others? Continual tweaking to the law Major action (Medicaid expansion, payment reforms, exchanges, cost containment…) at the state level Coverage expansion continues to be an area of change: Delay in implementation? Changes in subsidies, Medicaid expansion, etc… Healthcare is even more central to Federal activity – more than $200 billion Policy has enormous impact and ongoing regulatory and payment reforms

Financial imperative Unsustainable Healthcare Spending Based on projections by Peter Orzag at the Office of Management and Budget (OMB), we are on an unsustainable path for healthcare spending. Based on a study by the Congressional Budget Office, if we continue on this path tax rates will have to increase for the top bracket (around 35%) to 92% in 2050 in order to solely fund healthcare spending. Source: CBO

Financial imperative 1% KL: Redo this – take the text off the top. Recolor this too. Here is another outlook. As you can see, currently the revenues from taxes cover all non-discretionary spending. 1% SOURCE: Data from the Government Accountability Office The Federal Government’s Long-Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office assumptions. Compiled by PGPF. NOTE: Baseline interest rate is assumed to be 5.0 percent. © Peter G. Peterson Foundation

Future of Medicare To further compound the issue. Enrollment in Medicare is going to boom. With the baby boomers coming into the system, CMS estimates it will receive on average 10,000 new beneficiaries a day. Source: 2012 Annual Report of the Boards of Trustees for the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds

Digitization of health care

Operating from a source of truth Disparate systems Accurate data Analyze, trend, insight Affect change Visual of optimal world, you have to get to one, drop of water visual

Data Challenges – How Many Ways Can You Say “3M”? THREEM is my Favorite

Discovery with confidence Identifying potential opportunities Price parity Contract compliance Benchmarking Validation Engaging key stakeholders Driving decisions Visual uncover, discover, analyze THEN validation  affecting change, providing context, data to back it up = magnifying glass or better

Art of managing the middle game Volume-based Value-based Cuts to Existing FFS System Cuts to Medicare 30 Day readmissions penalty Market basket reductions Bad debt cuts Nonpayment for anything preventable or unnecessary Disrupt Existing System Bundled payments Innovation Center Demonstrations ACOs KL: Volume and Value and the picture need to be bigger, everything else in the background DL: Text from original slide: Cuts to Existing FFS System Market basket reductions Bad debt cuts Nonpayment for anything preventable or unnecessary Disrupt Existing System Bundled Payments Innovation Center Demonstrations ACOs Congress hedged its bets in crafting the reform legislation. Created opportunity to experiment with models that would disrupt the existing system such a bundled payments across clinical conditions as well as ACOs that could be led by hospitals, payers, or providers. But if these experiments are not sufficient to bend cost curve, then legislation has mechanisms to continue to cut payments in the existing system, including the creation of an Independent Payment Advisory Board. This means our providers will have a foot in both camps. They are going to live in a fee for service world while they also try to innovate and reinvent the care delivery model. DG from original slide: Track 1 Cuts to Medicare FFS System 30 day readmissions penalty Penalty = 5x readmissions payment Value based purchasing FY-15 - Efficiency measure: total spending 3 days prior/30 days post Care coordination measures Private Payors and Medicaid Bundled payment: 2016? Track 2 MSSP Pioneer Flexible design; retro & prospective attribution State/Federal duals demo State partnership; eased enrolling Medical home demo; new CMMI Primary Care Initiative Reducing readmissions from nursing homes demo Bundled payment demos 10

Key questions to ask Right stuff, right price, right quantity, Payment Transparency Resource Utilization EBP Leading Practices Right stuff, right price, right quantity, right place, right way, right time? Can you operate on Medicare margins? Are you tracking and reporting, by DRG? Are your physicians and clinicians accustomed to making data driven decisions based on evidence based practice? Do you have real time data and resources to understand how you map industry leading practice? Payment Question Transperency Resource Utilization Evidence Based Practice Leading Practices DG: Kathy – I need a little more to go on to add photos here. What are M/C margins? Are the questions correct?

How do you navigate the quality/cost maze? Or I can use the graphic from the strategic initiatives deck – I like the coloring of this one better. Still looking for a better graphic. Also need a bit more info on what text should be added.

Carole Gilroy, RN, MSN, MBA Contact us Carole Gilroy, RN, MSN, MBA VP, Service Lead Cost Management 717.377.0291 Carole_gilroy@premierinc.com