1. The Financial Logistics of Accountable Care Organizations and Healthcare Reform September, 2011 Jason Cort Chief Operating Officer PNC Healthcare, a part of PNC Financial Services

2. 2 The Goal of Healthcare Reform Accountable Care Organizations Healthcare Payments Administrative Simplification The Role of Financial Services Companies Agenda

3. 3 Improve the health of the population Enhance the patient experience of care Reduce the per capita cost of care The Goal

4. 4 Section 3022 of the Affordable Care Act: Medicare Shared Savings Program To be established no later than 1/1/12 The ACO shall have in place a leadership and management structure that includes clinical and administrative systems… to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care. The ACO shall have a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and suppliers. …in order to achieve the Goal. Accountable Care Organization (ACO) Overview

5. 5 Details to work out The ACO shall have a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and suppliers. –What Legal Structure will you have? Hospital centric employing other professionals? Joint Ventures? Network of professionals Other? –What model will you use? –How will you quantify and measure risk up front? –How will you implement and administer the ACO? –How will you account for and distribute the funds?

6. 6 Fee for Service Bundled Payments Pay for Performance Value-based purchasing Shared Savings How are your organizations going to handle these? How do you plan for them initially? How do you amend them as necessary? Healthcare Payment Structures

7. 7 This is not the first time, and this is not the only industry, where value-based compensation is used. Agree to the parameters up front, and make sure they are measurable. Plan extensively for the infrastructure Align incentives Managing Payments

8. 8 Cash flow management –Complex payment processing for all transaction types –Coordinating electronic payments (EFT) and electronic remittance advices (ERA) for providers –Facilitating distribution based on ACO payment scenarios How can Banks help with ACOs?

9. Administrative Simplification

10. 10 The National Committee on Vital and Health Statistics (NCVHS) is the statutory advisory committee with responsibility for providing recommendations on health information policy and standards to the Secretary of the Department of Health and Human Services (HHS). Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), NCVHS is to advise the Secretary on the adoption of standards and code sets for HIPAA transactions. The Patient Protection and Affordable Care Act (ACA) (Sec. 1104. (g)(3)), enacted on March 23, 2010, calls for NCVHS to assist in the achievement of administrative simplification to “reduce the clerical burden on patients, health care providers, and health plans.” by providing advice and recommendations to the Department of Health and Human Services (HHS) on the development of uniform operating rules for electronic exchange of information not defined by a standard or its implementation specification. Specifically ACA tasks NCVHS to: Administration Simplification Introduction * February 17, 2011 Letter from NCVHS to The Honorable Kathleen Sebelius, Secretary, Department of Health and Human Services

11. 11 1.Advise the Secretary whether a nonprofit entity meets the requirements for operating rules development; 2.Review the operating rules developed and recommended by such nonprofit entity; 3.Determine whether such operating rules represent a consensus view of the health care stakeholders and are consistent with and do not conflict with other existing standards; 4.Evaluate whether such operating rules are consistent with electronic standards adopted for health information technology; and 5.Submit to the Secretary a recommendation as to whether the Secretary should adopt such operating rules. Administrative Simplification Introduction (cont.) * February 17, 2011 Letter from NCVHS to The Honorable Kathleen Sebelius, Secretary, Department of Health and Human Services

12. 12 Administrative Simplification Focus HIPAA Claims-related transactions: Eligibility Inquiry and Response (270/271) Certification (278) Claim Submission (837) Claim Status Inquiry (276/277) Payment/Remittance (835) Current utilization of electronic transactions by type * % Electronic Transactions % Other format Eligibility Verification4060 Claims Submission8515 Claim Status Inquiries4060 Claim Payments1090 Claim Remittance4654 * Source: US Healthcare Efficiency index http://www.ushealthcareindex.com Timeline: The Department of Health and Human Services is required to adopt and regularly update standards, implementation specifications, and operating rules for the electronic exchange and use of health information for the purposes of financial and administrative transactions. These will be created and implemented from 2012 to 2016.

13. 13 Draft Rules have been published and are being voted on by CAQH/ CORE* 1.Draft Phase III CORE ERA Infrastructure (835) Rule 2.Draft Phase III CORE EFT Enrollment Data Rule 3.Draft Phase III CORE ERA Enrollment Data Rule 4.Draft Phase III CORE EFT & ERA Reassociation (CCD+/835) Rule 5.Draft Phase III CORE Uniform Use of CARCs and RARCs (835) Rule; includes Draft CORE-required Code Combinations for CORE-defined Business Scenarios September 2011 Update *Council for Affordable Quality Healthcare/Committee on Operating Rules for Information Exchange

14. 14 Provider – Payer enrollment for EFT Changes to provider systems and processes Reassociation Financial Service Partner Relationship –The NACHA Operating Rules are silent on how this information is provided - providers should contact their banks to arrange for the method and timing of delivery. Administrative Simplification Related Issues

15. 15 Questions

16. 16 Standard Disclosure PNC, PINACLE, Working Cash, ActivePay, Global Trade Excellence, XPACK and Vested Interest are registered marks of The PNC Financial Services Group, Inc.(“PNC”) Midland Loan Services, Enterprise!, CMBS Investor Insight, Portfolio Investor Insight, Borrower Insight, Deal Flow and Shared Servicing are registered marks of PNC Bank, National Association. Banking and lending products and services and bank deposit products and investment and wealth management and fiduciary services are provided by PNC Bank, National Association, a wholly-owned subsidiary of PNC and Member FDIC. Certain fiduciary and agency services are provided by PNC Delaware Trust Company. Equipment financing and leasing products are provided by PNC Equipment Finance, LLC, a wholly-owned subsidiary of PNC Bank, National Association. Aircraft financing is provided by PNC Aviation Finance, a division of PNC Equipment Finance, LLC. Merchant services are provided by PNC Merchant Services Company. Private equity financing is provided by affiliates of PNC Equity Management Corp. Mezzanine financing is provided by PNC Mezzanine Capital Corp. Investment banking and capital markets activities are conducted by PNC through its subsidiaries PNC Bank, National Association, PNC Capital Markets LLC, and Harris Williams LLC. Services such as public finance advisory services, securities underwriting, and securities sales and trading are provided by PNC Capital Markets LLC. Merger and acquisition advisory and related services are provided by Harris Williams LLC. PNC Capital Markets LLC and Harris Williams LLC are registered broker-dealers and members of FINRA and SIPC. Harris Williams & Co. is the trade name under which Harris Williams LLC conducts its business. Foreign exchange and derivative products are obligations of PNC Bank, National Association. Securities products and brokerage services are offered through PNC Investments LLC, a registered broker-dealer and member of FINRA and SIPC. Insurance products and advice may be provided by PNC Insurance Services, LLC. Important Investor Information: Brokerage and insurance products are: Not FDIC Insured. Not Bank Guaranteed. May Lose Value. PNC does not provide legal, tax or accounting advice. PNC does not provide investment advice to Vested Interest plan sponsors or participants. Lending and leasing products and services, including card services, trade finance and merchant services, as well as certain other banking products and services, require credit approval. ©2011 The PNC Financial Services Group, Inc. All rights reserved. 3-23-2011

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