1. www.nebraskahospitals.org Legislative Briefing Bruce R. Rieker, J.D. Vice President, Advocacy April 24, 2014

2. www.nebraskahospitals.org 2

3. 3 Nebraska’s Hospitals Below the surface – 90 hospitals – 41,000 employees – 11,000 patients daily – $4.9 billion in net patient revenues – $1.1 billion in community benefits and bad debt – 1.8 million Nebraskans – 220,000 uninsured 3

4. www.nebraskahospitals.org 4 Nebraska’s Hospitals 2012 Community Benefits$1.1 B – Charity care$109 M – Unpaid cost of Medicare $341 M – Unpaid cost of Medicaid$167 M – Bad debt$247 M – Subsidized care, cash, in-kind$204 M

5. www.nebraskahospitals.org 5 Legislation State – Medicaid expansion – Telemedicine – Prescription drug monitoring – Integrated practice agreements for NPs – Medical liability – Taxes 5

6. www.nebraskahospitals.org 6 Medicaid Expansion LB 887 – Wellness in Nebraska (WIN) Act – Failed to overcome filibuster – Economy depends on system that works for all – Individuals and families earning lowest incomes cannot get help in Marketplace – Only opportunity for those 19-64 who earn less than 133% of FPL $14,856/individual and $30,675/family of four 6

7. www.nebraskahospitals.org 7 Nebraskans by FPL Source: Kaiser Family Foundation. Note: Nebraska Total Population 1,809,700

8. www.nebraskahospitals.org 8 Non-elderly Uninsured

9. www.nebraskahospitals.org 9 Wellness in Nebraska Fiscal sense – $2.3 billion of federal funds to improve health of Nebraskans through 2020 $360 million per year $990,000 per day – State’s costs for next six years is $16 million Economic activity of $2.3 billion would more than offset costs – General Fund revenue estimated at $107 million 9

10. www.nebraskahospitals.org 10 Wellness in Nebraska Direct spending offsets – Disability programs -- $53 M – Prescription drugs for low-income individuals who are HIV positive or have AIDS -- $5.25 M – Behavioral health services -- $14 M – Comprehensive Health Insurance Program (CHIP) --$46 M – Inmates of correctional facilities -- $4 M 10

11. www.nebraskahospitals.org 11 Wellness in Nebraska Utilizes private insurance marketplace – 100-133% of FPL $11,170 to $14,856 for individuals $23,050 to $30,576 for families of four – Private insurance through Marketplace or employer sponsored coverage – Private coverage could result in broader provider network 11

12. www.nebraskahospitals.org 12 Wellness in Nebraska Personal responsibility – Requires contribution of two percent of income May be waived if engaged in wellness activities such as yearly exams, screenings and immunizations Helps individuals engage in own health care decisions that can lead to better health care outcomes – Copays for inappropriate use of ER 12

13. www.nebraskahospitals.org 13 Wellness in Nebraska Innovation improves health and health system – Ensures connection to primary care physician and patient-centered medical home Provides necessary preventive care, manages chronic conditions and reduces trips to ER and admissions – Utilizes new payment design strategies that reward use of efficient and effective treatment models that decrease costs and improve health 13

14. www.nebraskahospitals.org 14 Wellness in Nebraska Bridges coverage gap – Currently no avenue to health insurance for those with incomes below 100% of FPL who are not eligible for existing Medicaid program Not eligible for tax credits through the Marketplace – More than 54,000 uninsured adults would gain coverage 14

15. www.nebraskahospitals.org 15 Wellness in Nebraska Saves lives – New England Journal of Medicine study comparing mortality rates for insured and uninsured – For every 176 adults covered by expanded Medicaid, one death per year would be prevented – At least 500 deaths per year in Nebraska would be prevented 15

16. www.nebraskahospitals.org 16 Wellness in Nebraska Proponents – Maximizes 100% federal funding – Strengthens private marketplace – Supports employer provided insurance participants – Delivery reform and innovation – Legislative action required if federal funding drops below 90% 16

17. www.nebraskahospitals.org 17 Wellness in Nebraska Opponents – Money better used elsewhere – Lack capacity – Feds cannot meet obligation – Other states experienced higher ER utilization – Removes incentives for change – Better to direct them to marketplace – Philosophically opposed 17

18. www.nebraskahospitals.org 18 Transparency LB 76 - Health Care Transparency Act – Signed into law – Requires Director of Insurance to appoint Health Care Data Base Advisory Committee Make recommendations regarding the creation and implementation of Health Care Data Base Provide tool for objective analysis of costs and quality, promote transparency 18

19. www.nebraskahospitals.org 19 Medicaid Managed LTC LB 854 – Prohibits issuance of a LTC Request For Proposal before Sept. 1, 2015 – Signed into law – Health care professionals affected by proposed Medicaid Managed Long Term Services and Supports (MLTSS) project concerned with unreasonable timeline – Proposed May 2014 deadline for RFP did not allow sufficient time to clearly understand plan and provide meaningful input 19

20. www.nebraskahospitals.org 20 Medical Liability LB 893 – Changes amount recoverable under Nebraska Hospital-Medical Liability Act – Signed into law – Current limit is $1.75 million per occurrence – Increased amount to $2 million after Dec. 31, 2014 – Another bill, LB 862, proposed increase to $2.5 million – Judiciary Committee advanced LB 893 to General File with amendment to increase cap to $2.25 million – Amended into LB 961 20

21. www.nebraskahospitals.org 21 Psychology Interns LB 901 – Psychology internships through Behavioral Health Education Center – Signed into law – Funding for five doctoral-level psychology internships in first year with increase to ten by third year – Placed in communities where presence will improve access in rural and underserved areas 21

22. www.nebraskahospitals.org 22 Appropriations LB 905 – Mid-biennium budget adjustments – Law notwithstanding governor’s veto $150,000 to Rural Health Provider Incentive Program $1.5 million for six FQHCs $212,000 for tuition for EMS responder training $1.8 million for pediatric cancer research at UNMC $10 million for behavioral health aid 22

23. www.nebraskahospitals.org 23 Nurse Practitioners LB 916 – Eliminate integrated practice agreements for nurse practitioners – Signed into law – Requires all NPs to submit a transition-to- practice agreement (TPA) or evidence of 2,000 hours of practice completed under TPA or similar agreement – NPs intending to be supervising providers must submit evidence of 10,000 hours of practice completed under TPA or similar arrangement 23

24. www.nebraskahospitals.org 24 Prescription Monitoring LB 1072 – Prescription Drug Monitoring – Signed into law – Requires Board of Pharmacy to establish program to monitor prescribing and dispensing of substances that demonstrate potential for abuse 24

25. www.nebraskahospitals.org 25 Telemedicine LB 1078 – Amend Nebraska Telehealth Act – On General File – Clarifies that physician, PA, NP and pharmacist may establish patient relationship in person or with real-time, two-way electronic video conference – Reimbursement shall, at a minimum, be same rate as Medicaid rate for comparable in person consultation and shall not depend on distance between patient and practitioner 25

26. www.nebraskahospitals.org 26 Interim Studies LR 422 – Develop recommendations towards transformation of state’s health care system LR 559 – Examine issues surrounding Medicaid Reform Council LR 565 – Evaluate benefits of adding antidepressant, antipsychotic, and anticonvulsant drugs to Medicaid PDL LR 575 – Examine issues relative to in-home personal services 26

27. www.nebraskahospitals.org 27 Interim Studies LR 576 – Evaluate status of EHRs and HIEs LR 580 – Examine reforms of behavioral health LR 592 – Behavioral health workforce development LR 596 – Evaluate “Physician Orders for Life- Sustaining Treatment” and “Out-of-Hospital DNR” protocols LR 601 – Examine impacts of implementing, and failing to implement, Medicaid expansion 27

28. www.nebraskahospitals.org 28 Fiscal Landscape National Debt – $16.7 trillion Nearly $53,000 per citizen Nation’s Budget – Income $2.17 T – Spending $3.82 T ($1.65 T)

29. www.nebraskahospitals.org 29 Political Landscape Congress – Senate 53 Democrats 45 Republicans 2 Independents – House of Representatives 232 Republicans 201 Democrats 2 vacancies

30. www.nebraskahospitals.org 30 Affordable Care Act Delivery System Changes – Health information technology requirements – Insurance exchanges – Value-based purchasing programs – Bundled payments – Accountable care organizations – Population health – Reimbursement reductions and penalties

31. www.nebraskahospitals.org 31 Congress and CMS Medicare reductions – Nebraska hospitals Negative 11.9 percent margin for Medicare Incurring cuts over $1.3 B through 2022 Additional cuts of $1.6 B over ten years under consideration Profound impact on access and subsidized care

32. www.nebraskahospitals.org 32 Medicare Cuts Existing legislative cuts – ACA: $856 million Update factor cuts Quality-based payment reforms (VBP, readmissions & HACs) Medicare DSH cuts – Sequestration: $271 million 2% reduction authorized by Budget Control Act

33. www.nebraskahospitals.org 33 Medicare Cuts Existing legislative cuts – Bad debt: $2.8 million Reduced to 65% Middle Class Tax Relief and Job Creation Act – Coding adjustments: $65 million Retrospective adjustments over four years American Taxpayer Relief Act

34. www.nebraskahospitals.org 34 Medicare Cuts Existing regulatory cuts – Coding adjustments $114 million Inpatient: 1.9% in 2013 Home health: 1.32% in 2013

35. www.nebraskahospitals.org 35 Medicare Cuts Under consideration – Outpatient/physician E/M services $38 million (H.R. 3630) – Outpatient/physician outpatient services 66 Ambulatory Payment Classifications (APCs) $81 million (MedPAC) – Outpatient/ASC outpatient services 12 APCs $46 million (MedPAC)

36. www.nebraskahospitals.org 36 Medicare Cuts Under consideration – Indirect medical education: $193 million Cuts payments by more than 50% by reducing reimbursement from 5.47% to 2.2% (Simpson- Bowles) – Direct medical education: $36 million Limits reimbursement to 120% of average salary paid to residents in 2010, updated annually (Simpson-Bowles)

37. www.nebraskahospitals.org 37 Medicare Cuts Under consideration – Bad debt payments: $17 million Eliminate bad debt payments (Simpson-Bowles) – SCH program: $284 million Eliminate sole community hospital program (CBO) – CAH payments: $918 million Eliminate permanent exemption from distance requirement for hospitals with “necessary provider” designation (OIG)

38. www.nebraskahospitals.org 38 Federal Legislation H.R. 3698: Two Midnight Rule Delay Act – Delays enforcement of two-midnight rule until October 1, 2014 S. 183 / H.R. 2053: Hospital Payment Fairness Act – Addresses wage index manipulation in Massachusetts S. 1012 / H.R. 1250: Medicare Audit Improvement Act – Improves Medicare RAC program

39. www.nebraskahospitals.org 39 Federal Legislation S. 1143 / H.R. 2801: Protecting Access to Rural Therapy Services Act – Improves physician supervision requirements Adopts default standard of general supervision Defines direct supervision for CAHs consistent with CAH conditions of participation (30 minutes) Holds hospitals harmless retroactively back to 2001 H.R. 3769: Delays enforcement of physician supervision requirements for CAHs – Representative Smith

40. www.nebraskahospitals.org 40 Current Trends Physicians Accepting fewer publicly insured patients Fewer than 75% accept new patients with Medicare and Medicaid 8% aged 18-64 were told within last 12 months that physician was no longer accepting their coverage 6% were told physician would not accept them as new patients

41. www.nebraskahospitals.org 41 Hospital Outlook Increasingly negative view for nonprofits Nonprofit hospitals continue to see declines in volumes, revenue growth. – Moody’s Investor Service 2012 may have been “high water mark” – Fitch Moody’s predicts slow revenue growth, confirms negative outlook – Advisory Board Daily Briefing In states that say no to Medicaid, hospitals worry about “death by 1,000 cuts” – Advisory Board

42. www.nebraskahospitals.org 42 Hospital Outlook Nonprofits at tipping point – Ever-decreasing ability to offset charges and negative trends – Weakening revenues Smaller annual payment increases Weaker commercial increases Flat-to-declining inpatient volumes Source: HFMA

43. www.nhanet.org 43 Hospital Outlook Strong, vulnerable, fragile and scared – Declining volumes and reimbursements – No clear business model – Inconsistent data being published – Safety through mergers and alliances

44. www.nhanet.org 44 Continuing Concerns Access – Physicians limiting government business – Narrow networks – Critical but unprofitable High quality – Recruiting best physicians and nurses – Less capital for replacement and new technology Workforce – Age, health and recruitment

45. www.nhanet.org 45 Future of Medicaid Broad premises – Delivery will be based on some form of population health management – Hospitals have opportunity to lead system redesign Primary drivers – Transition of state agencies from welfare providers to active purchasers of services – Convergence between Medicaid and commercial insurance

46. www.nhanet.org 46 Future of Medicaid Needs and opportunities – Encourage state policies that allow formation and success of provider-led models – Enhance success of expansion efforts with innovative approaches that integrate Medicaid with commercial insurance markets – Support efforts to develop innovative, payer solutions for addressing needs of medically frail, dually eligible, and complex chronic beneficiaries

47. www.nhanet.org 47 Future of Medicaid Hospital implications – Purchasing strategies will require more risk through performance-based contracting – Convergence of Medicaid and employer- sponsored insurance will lead to a seamless coverage continuum – Prospect of direct contracting between Medicaid and provider systems may create opportunities for delivery of dedicated services to beneficiaries – Not all hospitals are capable of developing or participating

48. www.nhanet.org 48 Drivers of Change Macroeconomics – Recession left people without jobs and insurance – Federal and state budget issues Pressures from payers Difficult to raise financing for capital projects

49. www.nhanet.org 49 Drivers of Change Demands from aging population – Physician recruitment – More advanced services – More ER visits from uninsured Affordable Care Act – More covered lives – More Medicaid and Medicare payers – All providers affected by marketplace

50. www.nhanet.org 50 Reform Based Competency Success factors in reform environment – Viable infrastructure for employing physicians Recruitment and retention, including specialists Leverage primary care network Align physician capacity with market demand – Competitive facilities and equipment – Low cost – Initiatives for care management, IT and clinical integration

51. www.nhanet.org 51 Care Coordination Physician integration – Recognize forces affecting physicians – Hospital or system capabilities and infrastructure – Well defined strategic financial plan with sufficient resources and performance targets – Ensure strong physician participation, leadership and governance

52. www.nhanet.org 52 Care Coordination Physician integration – Use technology to connect – Ensure objective assessment of readiness for value-based care transformation – Use disciplined, integrated approach to practice acquisition and employment – Manage to achieve goals and performance standards

53. www.nhanet.org 53 Care Coordination Current environment – Electronic health record system implementation – Primary market populations defined – Status of capitated activity – Population health management infrastructure (i.e. insurance products, provider network, care management, etc.) – Wellness infrastructure

54. www.nhanet.org 54 Care Coordination Future considerations – Electronic health records actively mined for best practice applications and hub for population management – Population management will likely drive care coordination needs (i.e. patient centered medical homes, bundled payment models, etc.)

55. www.nhanet.org 55 Care Coordination Quality and patient satisfaction – Focus of reform is quality, value and outcomes – Shift from volume-based and cost-based models to value-based patient centered models – Quality and outcomes that currently impact reimbursement for PPS hospitals could eventually impact CAHs

56. www.nhanet.org 56 Advocacy Contact sport – If we are not at the table, we are probably on the menu. – Have to be present to win. – Engage, educate and empower. – Hold them accountable!

57. www.nhanet.org 57 Questions? Thank you. Bruce R. Rieker, J.D. Vice President, Advocacy brieker@nebraskahospitals.org