1. 1 What’s Happening Today in Healthcare: Self Pay is Not Going Away Increased in Patient Responsibility JEOPARDY

2. 2 Lyman Sornberger joined Capio Partners in 2008 as their Chief Healthcare Strategy Officer. Prior to joining Capio and forming LGS Health Care (2013), Mr. Sornberger was the Executive Director of Revenue Cycle Management at Cleveland Clinic Health Systems. Mr. Sornberger was also employed at the University of Pittsburgh Medical Center (UPMC) for 22 years in leadership roles for their revenue cycle management groups. Mr. Sornberger has great admiration for both health systems (each with revenues of greater than $6 billion) and highly respects their missions, vision, and strategies. Lyman G. Sornberger Chief Strategy Officer - Capio Partners President & CEO - LGS Healthcare Consulting Presented by:

3. Agenda 3 Overview of Healthcare Topics: Obamacare, Bundled Payments, ICD.10, Consumerism, and Increased Patient Responsibility Potential Impact to Patient, Provider, and Industry and why self pay is growing Test Your Knowledge - Play Jeopardy

4. Obamacare Exchanges Overview 4 Improve Quality 1 Increase Access 2 Improve Price 3

5. Fact 5 11 million adults +2.6 million under the age of 26 -.0.8 million non-payment (assumes 90% will pay) +1.5 million children +0.95 million early expansion TOTAL: 15.25 MILLION GAINED INSURED DUE TO OBAMACARE AS OF DECEMBER 2015 assumes a 6 % drop on a population of 240M adults in the USA* 2014 Final Numbers *www.hhs.gov, www.gallup.com, and casignsup.netwww.gallup.com

6. ACA EXCHANGE Qualified Health Policy (QHP) Enrollments: 6

7. Obamacare Impact to Self Pay 7  Estimated 2M as of 2015 that did not pay their premium  Payers and provider denial processes are inconsistent and engage the patient  Penalty for “no coverage” is weak  Providers closing the door on Marketplace  “Back to the Out of Network denial world and the ED as a Dr’s office”

8. Obamacare Impact to Self Pay 8  75% of healthcare exchanges are in high deductible plans  Silver plan has 30% out of pocket, bronze 40%  “Gone are the days of the peak in collections with tax returns”

9. Bundled Payments in Health Care 9  Final Rule and Responses August 1,2015  IPPS published in the Federal Register, April 20, 2015  Comment Period Ended June,16 2015

10. CMS Releases Comprehensive Care Payment Model 10 Joint Replacement Payment Model-Final Rule Fact Sheet January 2016—aka CCJR Episodic Care with Exclusions Methodology for Pricing Wage Adjustment Variations Data Collections for Outcome Measures Trending

11. CMS Releases Comprehensive Care Payment Model 11 Claims Submission Beneficiary Incentives Gainsharing Audits Appeal Process Overlap with Care Improvement Episodes (BPCI) CMS is discussing the expansion of the Bundled Payment for Care Initiative (BCPI)

12. Bundled Payment Provider and Patient Impact 12 Providers are responding differently to “medically necessary services” and claims denied for readmission Patients are receiving billings for HAC denials Providers are stressing the bundled payments are too difficult to manage operationally and “a bundled payment does not mean a full payment”

13. ICD-10 Overview ICD-10 - 10th revision of the International Statistical Classification of Diseases and Related Health Migrates – ICD-9 five digit numeric codes to seven digits alpha numeric - moves IP procedure codes from 4K to 72K Overall the change for ICD.9 to ICD.10 moves from 18K to 140K code Objectives: Improve quality outcomes, patient safety, public health- disease reporting, accurate reimbursement Impact to: Providers, Payers, and Vendors- what about the patient? 13

14. ICD-10 Facts Crosswalk for ICD-9 to ICD-10 is on average 87% BUT ICD-10 to ICD-9 is less than 1% Two components: Procedure Coding System (PCS) and General Equivalence Mapping (GEM) Reimbursement impacted & three specialties have high indicators: – Cardiology – Neurosurgery – Orthopedics Denials are inconsistent and reflecting increases from 3% to as high as 30% and most related to smaller hospitals unprepared 14

15. ICD-10 and Self Pay 15  Engaging the patient due to:  Improper/inconsistent denial mapping  Volume increases  Provider, payer, and vendor readiness  Delayed reimbursement and aged transfers to collections  Appeals  Is Y2K all over again  Third Party public relation and operational challenges  Poor Patient Relations  AUDITS  Is it premature to know the final outcome Lack of industry partners to support coding, follow-up, denial management & contracting

16. Health Care Consumerism and the Patients Role is Changing 16

17. Health Care Consumerism and the Impact to Health Care 17 Patients have multiple sources to measure healthcare quality and is it too confusing Patients have to pay more for their healthcare-increased cost of care and higher out of pocket Therefore: – Patients will utilize the existing quality and proc information to optimize their outcomes – Patients will become more prudent users of healthcare-when?

18. Health Care Consumerism and the Impact Legally, Financially, and Provider Brand 18 Payment Plans, Loans, 501R, Collection Agencies, Debt Buyers all have Legal, Financial, and Patient Relations Risk CFPB Director Richard Cordray stated “ The Consumer Financial Protection Bureau is taking action to improve credit reporting. Getting medical care should not make your credit report sick.”

19. Health Care Consumerism Options for Providers and Patients 19 Payment Plans-Traditional but Higher Out of Pocket Loans- New Concept-Financial Risk Prompt Pay Discounts-Legal Challenges Interest- Patient Relations Concerns Patient Advocacy-Education Debt Buying-New Millennium Concept

20. 20 Three definitions: 1.True self-pay 2.Under-insured- Balance after insurance 3.Under-insured & True self- pay combined are: Patient Responsibility Patient responsibility outcomes: Paid, Charity, and/or Bad Debt Self-pay Not Going Away!

21. 21 American Hospital Association reported in 2011 that uncompensated care was at 41.1 billion on average it has continued to increase by 8% and expected to double by 2016: 2011--- 41 BILLION TO 72 BILLION IN 2016 OR A 16% INCREASE! 90% of providers note the growth of high-deductible plans among their patients and 75% of them are in healthcare exchanges. Self-pay Not Going Away!

22. 22 Regulators in the industry are: Federal Trade Commission (FTC) Fair Debt Collections Act Consumer Financial Protection Bureau (CFPB) Self Pay Management Best Practices: Loan Programs- recourse Early Out Programs- 501R Letter Series-extended business offices Collection Agency “shared risk model” Debt/Asset Buyers-”unfound cash” Self-pay Not Going Away!

23. 23 FACT  81% of “true” self pay responsibilities are never recovered  55% of the patients financial responsibilities are never recovered  It cost 3X to pursue the patient vs. the payer  Historically hospitals have written off about 3-5% to bad debt and today that number is 7-9% with the majority of it related to the “underinsured” Self-pay Not Going Away!

24. 24 Self-pay Not Going Away!

25. Lyman Sornberger Chief Healthcare Strategy Officer Capio Partners LLC Southern Illinois Chapter HFMA August 20, 2015 25

26. Questions? Feedback! 26

27. Contact 27 Lyman Sornberger Chief Healthcare Strategy Officer lyman.sornberger@capiopartners.com c: 216.337.4472 o. 440.546.0947 www.capiopartners.com