1. Measuring Progress on Administrative Simplification and Driving Change: The U.S. Healthcare Efficiency Index® 1 Greater FL Buccaneer Chapter of AAHAM & FL HFMA Summer Session August 13, 2010

2. The Landscape: What’s Driving Healthcare Policy Today?  41 states face FY 2010 budget shortfalls with a total gap of $196 million (Kaiser Commission on Medicaid and the Uninsured, February 2010)  Medicare Trust Fund Reserves projected to be exhausted by 2029* (2010 Annual Report, Social Security and Medicare Board of Trustees – *Revised from 2017 based on passage of healthcare reform)  By 2019, national healthcare spending expected to reach $4.5 trillion, representing 19.3% of the GDP (CMS National Health Expenditure Projections 2009-2019) Shrinking State and Federal Budgets Explosive Healthcare Spending 2

3. March 21, 2010 YEA 219 NAY 212 3

4. Congress Enacts Healthcare Reform in Historic Vote: PPACA H.R. 3590 Patient Protection and Affordable Health Care Act (PPACA) + H.R. 4872 Health Care & Education Affordability Reconciliation Act Costs $1 trillion over a decade Expands coverage to 16 million Americans Individual & employer mandates Tax credits for small employers & subsidies for individuals Increase in tax for higher- income households Annual fees on pharmaceutical manufacturers Excise tax on medical devices Excise tax on high-cost insurance plans Fees on health insurance sector Fiscal Impact 4

5. Basic Provisions: Insurance Reforms Prohibits insurance companies from denying coverage to individuals with preexisting conditions (effective immediately for children and applies to all individuals beginning in 2014) Expanding Medicare’s drug benefit by phasing out the “doughnut hole” in that benefit $250 rebate to help fill Medicare Part D (2010) 50% discount for brand drugs to help fill Medicare Part D (2011) Prohibits lifetime caps on health insurance coverage Requires health plans to allow young adults, up to age 26, to remain on their parents’ insurance policy Requires medical loss ratio of 85% for large group plans and 80% for individual and small group plans 5

6. Basic Provisions: Insurance Reforms Temporary retiree reinsurance program for employers providing health insurance to retirees over age 55 through 2014 Establishment of national process for reviewing of health plan premiums and increases Restructuring Medicare Advantage payments in 2011 Provider Accountable Care Organizations (ACOs) can share in Medicare cost savings from meeting quality thresholds Bonus payments to high-quality Medicare Advantage plans Reduce Medicare Disproportionate Share Hospital (DSH) payments Reduce state Medicaid DSH allotments Excise tax on employer health plans that exceed $10,200 in value for individuals and $27,500 for families (by 2018) 6

7. Individual health insurance mandate by 2014 for most US residents; penalties for individuals who do not obtain insurance Employer coverage mandate by 2014; penalties for employers that do not offer health insurance Expands Medicaid to cover individuals with income less than 133 percent of the federal poverty level, or $29, 327 for a family of four Establishes 50 health insurance exchanges, administered by states, through which, small businesses and individuals without employer sponsored insurance coverage could buy coverage Subsidies for premiums and cost sharing through the new insurance exchanges Tax credits to small businesses to make coverage more affordable 10% Medicare bonus for primary care physicians in shortage areas Basic Provisions: Access to Coverage 7

8. Basic Provisions: Fraud, Waste & Abuse Streamlining procedures for Medicare prepayment reviews CMS ‐ IRS data match to help identify offenders Increasing funding for the Health Care Fraud and Abuse Control Fund by $250 million over the next decade 90 ‐ day period of enhanced oversight for initial claims of DME suppliers 8

9. Beyond the Headlines: Administrative Simplification Provisions Speeds HHS adoption of uniform standards for electronic transactions between plans and providers under the Health Insurance Portability and Accountability Act (HIPAA) – adds electronic funds transfer (EFT) as a required transaction type Adoption of a single set of Operating Rules for each specified HIPAA transaction Rules must be consensus-based and reflect the necessary business rules affecting health plans and health care providers Rules to be developed by a “qualified nonprofit entity” Establishes a process for regularly updating the standards and operating rules for electronic transactions Requires health plans to certify compliance or face financial penalties from Treasury (by 2014) 9

10. Requires Secretary to issue final rule to establish national Health Plan Identifier (HPID) based on input from NCVHS to be effective no later than October 2012 Other standards to be considered by Secretary (Sec 10109) Application and enrollment process Auto and worker’s compensation transactions Standardized forms for financial audits Claim edits Publication of timeliness of payment rules ICD-10 Crosswalks – Calls for the ICD–9–CM Coordination and Maintenance Committee to meet before January 2011 (first meeting is September 15) to receive stakeholder input on ICD-10 crosswalk (GEMS) Secretary shall make appropriate revisions and post on CMS website Any revised crosswalk shall be treated as a code set for which a standard has been adopted by the Secretary Beyond the Headlines: Administrative Simplification Provisions 10

11. Healthcare Reform Over the Next 5 Years 2010 Coverage for children up to age 26 End lifetime coverage limits Tax credits for small employers Temporary reinsurance program for retirees over55 Medical loss ratio of 85% for large group and 80% for individual/small group National process for reviewing premium increases $250 rebate to help fill Medicare Part D “doughnut hole” Patient-Centered Outcomes Research Institute Workforce Advisory Committee 2011 Medical malpractice 5-year demonstration grants End cost-sharing for Medicare preventive care 50% discount for brand drugs to help fill Medicare Part D “doughnut hole” 10% Medicare bonus for primary care physicians in shortage areas Restructuring Medicare Advantage payments Medicaid state option to create medical home for certain enrollees $11 billion for community health centers and National Health Service Corps Annual fees on pharmaceutical manufacturers 2012 Provider Accountable Care Organizations (ACOs) can share in Medicare cost savings Reduce Medicare payments to hospitals for preventable hospital readmissions Bonus payments to high-quality Medicare Advantage plans Reduce rebates for Medicare Advantage plans Require enhanced data collection and reporting on special populations 2013 Adopt single set of operating rules for Administrative Simplification Electronic funds transfer (EFT) rules released Increased Medicaid payments for primary care Increased taxes on earnings over $200K for individuals and $250K for married couples 3.8% tax on unearned income for high-wage earners Excise tax on medical devices 2014 Mandated EFT payments Rules for electronic premium payments and referral certifications and authorizations Individual coverage mandate Employer coverage mandate State insurance exchanges Credits and cost sharing subsidies for individuals Expand Medicaid to 133% of Federal Poverty Level Reduce Medicare DSH payments Reduce state Medicaid DSH allotments Fees on health insurance sector 11

12. 85% 15% Cost of Care = $2 T Admin Costs = $360 B Total U.S. Healthcare Spend = $2.4 Trillion 4% on Prevention Where does the money go? 12

13. U.S. Healthcare Efficiency Index ® Launched December 2008 13 Purpose Create an industry forum for monitoring business efficiency in healthcare Vision Raise awareness of potential savings and reframe the national dialogue on health reform Goals Establish single national reference Track progress across the industry Remove barriers Take costs out of healthcare ushealthcareindex.com Phase 1 Findings Based on Industry Data

14. 14 Practical Savings Today: Measuring Progress Through the US Healthcare Efficiency Index™

15. Independent Advisory Council 15

16. Every quarter contributors enter data at the secure, password protected Index website EDI Savings Avg. Monthly Volumes % of Volumes in EDI Data goes directly to independent statisticians Data is scrubbed and de-identified Aggregated metrics are extrapolated Independent, 3 rd Party Statisticians Phase 2: Data Collection, Extrapolation and Reporting 16

17. National Data Collection Center 17

18. 2010 National Progress Report on Healthcare Efficiency: Key Learnings Continued progress on adoption of electronic medical claims – current rate of 85% (10% increase over the Phase 1 findings) Adoption of electronic remittance advice transactions is also higher – current rate of 46% compared to 26% in Phase 1 Lines are blurring between manual and electronic processing Costs must be removed at the system level to avoid perpetual cost shifts Transparency on costs is vital to the nation’s economy Efficiency is a journey, not a destination: continue to drive transaction value 18

19. One Example: e-Payment Offers Immediate Opportunities to Save… 19 Stopping paper checks could save up to $11 billion a year in healthcare waste

20. Index Development and Implementation Phase 1: Industry data 5 basic transactions Phase 2: Primary data collection “National Progress Report on Healthcare Efficiency” (April 2010) Phase 3: Expansion: Pharmacy Index With Vanderbilt Center for Better Health Phase 4: Expansion: Dental Index 20

21. The Road Ahead Regulatory process will be long and difficult – 4,321 references to the “Secretary Shall” in the 900 page reform bill – each of which will require regulation Also expect ongoing efforts to amend the bill; initial “repeal and replace” rhetoric has been dialed back, but still expect significant amendments – particularly if House leadership swings Republican in Fall Over 20 states are filing challenges to the constitutionality of the individual mandate But, Administrative Simplification provisions are supported by both parties and will likely be placed higher on the priority list for implementation funding since they reduce costs; the same is true for fraud, waste and abuse provisions 21

22. Questions? Susanne Powell Director, Government Affairs spowell@emdeon.com