1. Healthcare Reform and the New Administration: The First 90 Days Leadership Training Conference Tuesday, April 21, 2009 11:15 am -12:00 pm

2. 2 Session Presenter Richard L. Clarke, DHA, FHFMA President & CEO HFMA

3. 3 Learning Objectives Identify the direction of key healthcare reform proposals in Washington Understand the implications of these proposals for the healthcare industry Identify specific reform issues that could affect your chapter’s strategic planning

4. 4 Key Healthcare Reform Players Administration Kathleen Sebelius – HHS Secretary Nominee Nancy-Ann DeParle – Director, White House Office of Health Reform Peter Orszag – Director, OMB Senate Sen. Max Baucus – Chair, Senate Finance Sen. Edward Kennedy – Chair, Senate Health, Education, Labor & Pensions Sen. Chuck Grassley – Ranking Member, Senate Finance House Rep. Pete Stark – Chair, Health Subcommittee, Ways & Means Rep. Henry Waxman – Chair, Commerce & Energy

5. 5 What Has Happened So Far? SCHIP Reauthorization American Recovery and Reinvestment Act of 2009 (ARRA) Increased Medicaid Support Subsidization of COBRA Healthcare IT Funding Comparative Effectiveness Research Proposed Budget for FY2010 $630 Billion Healthcare Reform “Reserve Fund” Medicare Fee-for-Service → Bundled Payment ($26 billion over 10 years) Pay-for Performance for Acute Inpatient Services ($12 billion over 10 years)

6. 6 Measures Under Consideration Public Insurance Plan Option Employer “Play or Pay” Requirements Individual Coverage Mandates Mandatory Charity Care Minimums

7. 7 Projected Growth, Current PolicyRevenue Growth with Path Policies Expenditure (trillions) Total Nat’l Health ExpenditurePhysician & other professional HospitalAll other The Big Picture: A Perspective on Reform Costs & Savings Estimates by The Lewin Group for The Commonwealth Fund’s Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, February 2009.

8. 8 The Big Picture: A Perspective on Reform Costs & Savings Affordable Coverage for All: Ensuring Access and Providing a Foundation for System Reform Net costs of insurance expansion–$94 billion Reduced administrative costs–$337 billion Payment Reform: Aligning Incentives to Enhance Value Enhancing payment for primary care–$71 billion Encouraging adoption of the medical home model–$175 billion Bundled payment for acute care episodes–$301 billion Correcting price signals–$464 billion Improving Quality and Health Outcomes: Investing in Infrastructure and Public Health Policies to Aim Higher Accelerating the spread and use of HIT–$261 billion Center for Comparative Effectiveness–$634 billion Reducing tobacco use –$255 billion Reducing obesity–$406 billion Total Net Impact on National Health Expenditures, 2010–2020–$2,998 billion Estimates by The Lewin Group for The Commonwealth Fund’s Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, February 2009.

9. 9 The Big Picture: Another View Conclusions of the CBO’s Analysis of Health Reform Proposals (Dec. 2008) Adjusting insurance market to reduce use of minimally beneficial treatments would likely require higher enrollee cost sharing or tighter management of enrollees’ care. Wider health IT adoption or more preventive medical care would generate either modest cost reductions or increases in healthcare spending within a 10-year budgetary time frame. Reducing the level or slowing the growth of healthcare spending would require substantial changes in payment incentives to providers.

10. 10 Where Are Hospitals Today? More than half of hospitals report negative total margins.

11. 11 Where Are Hospitals Today? Patient revenue has declined for almost half of hospitals.

12. 12 Where Are Hospitals Today? Over 60% of hospitals report negative charity care and bad debt impacts.

13. 13 Issues to Watch: Charity Care IRS Exempt Organizations Hospital Study (Feb. 2009) Average percentage of total revenues spent on community benefit = 9% Unevenly distributed:  9% of hospitals reported 60% of aggregate community benefit expenditures  14% of hospitals reported 63% of aggregated uncompensated care expenditures Senator Grassley’s response: “The Treasury Department could do a lot of good...by reestablishing...charity care requirements, and if it looks like that can’t get done, then Congress will have to step in.”

14. 14 Issues to Watch: ARRA “Meaningful” users of HIT will receive additional payments from Medicare… Percentage of HIT Medicare Share Payments Received Based on When Eligible …while non-adopters will have their Medicare market basket update reduced Percentage of Market Basket Update Received by Non-Adopters 2010 - 2013 201420152016 Eligible in: 201520162017 Source: HFMA, “Analysis of the SCHIP Bill and ARRA,” www.hfma.org/library/

15. 15 Issues to Watch: Public Health Plan The Cost and Coverage Impacts of a Public Plan (The Lewin Group, April 2009) If plan open to all individuals and employers, reimbursing at Medicare rates, hospital total margins fall $36 billion (4.6% of net revenues) in 2010. If plan excludes large employers, reimbursing at Medicare rates, hospital margins increase by $11.3 billion in 2010. Physician net incomes decline under both scenarios.

16. 16 Impact of Public Plan Source: Lewin Group, The Cost and Coverage Impacts of a Public Plan, April 2009

17. 17 Where HFMA Stands: Healthcare Reform Accurate Reporting of Charity Care/Community Benefit P&P Board Statement 15, cited by IRS as guide in all representations regarding charity care Public Disclosure of Financial and Operating Information P&P Board Statement 18, cited by SEC as “market practice” for healthcare industry disclosures Transparency of Healthcare Costs PATIENT FRIENDLY BILLING® Project Payment Reform

18. 18 Where HFMA Stands: Payment Reform Basic Principles of Payment Reform Quality Alignment Fairness Simplification Societal Benefit

19. 19 Where HFMA Stands: Payment Reform Source: HFMA, Healthcare Payment Reform: From Principles to Action (2008)

20. 20 Where HFMA Stands: Payment Reform – Next Steps HFMA is identifying best practice changes that providers can use to adapt to the incentives provided by healthcare reform Developed a compendium of payment reform demonstration projects Surveying participants involved in these projects Organization structure changes Physician integration Investment in financial operations Budgeting / modeling Researching alternate physician alignment models

21. 21 Where HFMA Stands www.hfma.org/paymentreform

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