How the Affordable Care Act Is Changing Healthcare What You Can Do to Thrive in the New Environment

How the Affordable Care Act Is Changing Healthcare What You Can Do to Thrive in the New Environment David N. Gans MSHA, FACMPE, Senior Fellow, Industry Affairs MGMA-ACMPE

Disclosure No financial relationships

The ACA Exists What Will Happen Next? The future ain't what it used to be. Yogi Berra Baseball Hall of Fame Player, Coach, and Manager

Learning Objectives This session will provide you with the knowledge to: Describe how the Patient Protection and Affordable Care Act will impact patient demand and change who has health insurance Provide examples of strategies a practice can employ to increase revenue or lower operating costs in the post health reform environment Describe what you should do now to prepare your practice for a future healthcare environment of accountable care and value based pricing for services

Learning Objective 1: Describe how the Patient Protection and Affordable Care Act will impact patient demand and change who has health insurance What Will The Future Healthcare Environment Look Like? 5

Healthcare Costs Will Continue To Be A Significant Portion Of Federal Spending Budgeted Federal Spending for FY2012 4% 24% 22% Source: usgovernmentspending.com 12% 2% 3% 1% 5% 22% 6% Welfare Protection Transportation General Government Other Spending Interest Pensions Health Care Education Defense

Practice Costs And Inflation Will Increase More Than Medicare Payment

There Will Be A Severe Shortage Of Providers Projections for All Physicians, 2010-2025 Supply Demand Shortage 2010 709,700 723,400 13,700 2015 735,600 798,500 62,900 2020 759,800 851,300 91,500 2025 785,400 916,000 130,600 32 million Americans will acquire health care coverage under the ACA 36 percent growth in the number of Americans over age 65 Nearly one-third of all physicians are expected to retire in the next decade while medical schools will expand by 7,000 graduates every year The shortage is in both primary primary care and specialists, including a 2015 shortfall of 33,100 cardiologists, oncologists, and emergency medicine doctors Physician Shortages to Worsen Without Increases in Residency Training, AAMC Center for Workforce Studies https://www.aamc.org/download/150584/data/physician_shortages_factsheet.pdf

Women Will Be A Greater Proportion Of The Workforce Women have surpassed men in terms of completing secondary and post-secondary education 2009 high school dropout rates were 9.1% for males and 7.0% for females In 2016/2017, women are projected to earn 64.2% of Associate's degrees, 59.9% of Bachelor's degrees, 62.9% of Master's degrees, and 55.5% of Doctorates Access to health care services and health insurance are critical benefits for women The mother generally controls health care for the family Employers wanting to retain and attract skilled employees will look at health insurance as a necessity As more women have health insurance, demand for primary care services will exceed current levels National Center for Education Statistics: http://nces.ed.gov/programs/digest/d07/tables/dt07_258.asp

The Post-ACA Environment Total healthcare costs will continue to increase, but at a reduce rate of change Revising the Sustainable Growth Rate (SGR) formula is important but will have unintended consequences The percent of patients with Medicare and Medicaid will increase The shortage of primary care and specialty providers will get worse Businesses will accommodate the needs of a larger female workforce Each of these will impact physicians and provide an opportunity for organizations who are prepared to act

Learning Objective 1: Describe how the Patient Protection and Affordable Care Act will impact patient demand and change who has health insurance What Can We Expect When The Accountable Care Act Is Fully Implemented? 11

Key ACA Provisions Implemented In 2013 Medicare/Medicaid Payment Parity: Payment for E&M services to Medicaid patients will be raised to match Medicare reimbursement for primary care physicians. Federal funds allocated to states to cover the additional costs Payment Bundling: National pilot program established by HHS on payment bundling for integrated care State health insurance exchanges established: State level exchanges will enroll individuals and small business and sell health insurance policies that take effect in January 2014

Key ACA Provisions Implemented In 2014 Guaranteed Insurance issue: Insurers will be prohibited from discriminating against or charging higher rates for any individuals based on pre-existing medical conditions and are prohibited from establishing annual spending caps. Expand Medicaid eligibility: With the approval of the state, individuals with income up to 133% of the poverty line qualify for Medicaid coverage, including adults without dependent children Mandatory insurance: The IRS will impose a tax penalty on legal residents who do not have a qualifying health insurance plan (Employers with more than 50 employees who do not offer health insurance to their full-time workers will receive a deferral of the fine until 2015) Health Claims Attachments: HHS will publish the final rule establishing a transaction standard for health claims attachments

Objectives Of The Affordable Care Act

Improving Access Will Increases Demand For Healthcare Services In 2014 who has health insurance will change: Medicaid and CHIP will have 22 million more enrollees 8 million previous purchasers of individual insurance will qualify for Medicaid and drop their current insurance coverage insurance coverage Individuals and small businesses purchasing policies through insurance exchanges will increase commercial insurance coverage by 16 million beneficiaries Safety net providers will do well with increased payment and unlimited patients Private practice doctors will have the opportunity to limit new patients to higher paying insurers

CMS And Commercial Insurers Will Experiment With New Payment Methods CMS will test innovative payment and service delivery models Patient Centered Medical Home (PCMH) Accountable Care Organization (ACO) Administrative costs for electronic claims transmission will decrease due to standardized communications protocols Commercial insurers will initiate their own PCMH and ACO programs by creating narrow panel products Commercial insurers and CMS will test value based payment methodologies of shared savings, global payment, and bundled payment

CMS And Private Insurers Will Emphasize Quality CMS will award five-year demonstration grants to states to develop, implement, and evaluate alternatives to current tort litigations Medicare Shared Savings ACOs and the commercial insurance equivalents will mandate reporting of key patient experience and quality metrics CMS will fine hospitals for excess readmissions The CMS Patient-Centered Outcomes Research Institute will publish reports on the clinical effectiveness of medical treatments HITECH ACT meaningful use criteria for EHRs will encourage e-communication of clinical data between hospitals, primary care doctors, and specialists

Payment Incentives Will Change How Physicians Practice CMS will conduct national Medicare pilot programs to bundle payment for acute inpatient hospital services, outpatient hospital, post-acute care and physician services Accountable Care Organizations will share in the cost savings they achieve for the Medicare program Medicaid payments for primary care services provided by primary care doctors will increase to 100% of the Medicare payment rates in 2013 and 2014 Medicare will pay a 10% bonus to primary care physicians and general surgeons practicing in health professional shortage areas from 2011 through 2015

Massachusetts Is The Model For What Will Happen After The ACA Is Implemented Health Care in Massachusetts: Key Indicators, May 2011 Edition http://www.mass.gov/eohhs/docs/dhcfp/r/pubs/11/2011-keyindicators-may.pdf

Massachusetts Is The Model For What Will Happen After Health Care in Massachusetts: Key Indicators, May 2011 Edition http://www.mass.gov/eohhs/docs/dhcfp/r/pubs/11/2011-key-indicators-may.pdf

Learning Objective 2: Provide examples of strategies a practice can employ to increase revenue or lower operating costs in the post health reform environment Strategies To Reduce The Cost Of Employee Health Insurance 22

Purchase Health Insurance For Employees At A Health Insurance Exchange Small businesses (less than 100 employees) can purchase health insurance for employees in a state Health Insurance Exchange Purchase will have lower administrative costs due to pooling risk and low or nonexistent broker fees Limits on basing insurance rating on employees health status or gender may lower premiums for many practices Plans will be offered in four comparable tiers ranging from bronze to platinum with limited out of pocket expenses Plans must abide by strict regulations on policy rescission

Drop Group Health Insurance Coverage And Subsidize Employee Insurance Purchases Health Insurance Exchanges will be structured specifically for individuals to purchase insurance HIE staff will assist individual identify a policy that meets their needs On-line comparison of different health plans Identify eligibility for tax credits for private insurance Identify eligibility for Medicaid or Children s Health Insurance Program (CHIP) Employers can subsidize individuals purchase insurance through a Health Savings Account program

Tax Credits May Be Available For Some Employers Employers with fewer than 25 FTE employees and provide health insurance, may qualify for a tax credit of up to 50% in 2014 to offset the cost of insurance Average annual wages of employees must be less than $50,000, and the employer must pay at least half of the insurance premiums A sole proprietor, a partner in a partnership, a shareholder owning more than 2 percent of an S corporation, and any owner of more than 5 percent of other businesses is not considered an employee for purposes of the credit

Learning Objective 2: Provide examples of strategies a practice can employ to increase revenue or lower operating costs in the post health reform environment Strategies To Increase Payment From Government Payers 26

Medicaid-Medicare Parity Section 1202 of the Patient Protection and Affordable Care Act (ACA) raises Medicaid payments for specified primary care services to Medicare levels for specific primary care services furnished by: Practicing physicians who self-attest that they are board certified with a specialty designation of family medicine, general internal medicine and pediatric medicine or advanced practice clinicians when the services are furnished under a physician s personal supervision Each state requires physicians to follow a unique attestation process in order to be eligible for the enhanced payment in the Medicaid program The American Academy of Family Physicians reports that there are only six states at this point where primary-care physicians are receiving enhanced Medicaid managed-care

Assess Insurance Payers Payment Levels And Performance Benchmark commercial and government payer contracts to identify which payers have the best performance Use benchmark information to rebalance payer mix through participation contracts and accepting new patients For each insurance payer, determine: Total accounts receivable (gross charges) Total collections Total adjustments (gross charges minus collections) Gross collection ratio (collections / total gross charges Percent of total practice gross charges (to determine market share) Mean payment per total RVU Mean days from billing to payment Percent of rejected claims or with adjusted payment Evaluate payers and specific products since different products can have different payment levels

Using Performance Metrics To Analyze Payer Contracts Payer Total Charges Commercial Fee-for Service Payer Analysis Total Work RVUs Percent of Total Gross Charge Mean $ per Total RVU Mean Days from Billing to Payment Percent of Claims with Adjusted Payment Payer A $2,153,249 41,892 13.4% $51.40 16.5 3.2% Payer B $755,244 12,357 4.7% $61.12 14.6 3.6% Payer C $3,390,564 73,357 21.1% $46.22 18.0 4.5% Payer D $1,092,694 20,973 6.8% $52.10 12.8 2.1% ------------ ------------ ------------ ------------ Average 11.5% $52.71 15.5 3.4%

Rebalance Payer Mix Through Participation Contracts And Accepting New Patients Commercial Fee-for Service Payer Analysis Payer Percent of Total Gross Charge Current Revenue Revised Payer Mix Revised Revenue Payer A 13.4% $1,356,547 16.5% $2,125,034 Payer B 4.7% $475,804 10.0% $2,646,215 Payer C 21.1% $2,136,055 14.0% $873,662 Payer D 6.8% $688,397 5.5% $471,622 ------------ ------------ ------------ ------------ Total 46.0% $4,656,803 46.0% $6,116,532

Learning Objective 2: Provide examples of strategies a practice can employ to increase revenue or lower operating costs in the post health reform environment Leverage Micro Market Dominance To Increase Payment From Commercial Insurance Contracts 32

Micro Markets May Provide An Economic Advantage For Some Practices With increased number of patients with health insurance and a shortage of providers, there will be a perfect storm of overwhelming demand and limited resources Micro markets will exist that will enable practices to negotiate better payment levels from commercial insurance payers who want to have a broad provider panel in a geographic area This exists today in many rural locales

Doctors In Rural Areas Have Equal Or Better Compensation Than Their City Peers

Payment Levels In Rural Areas Are Often Greater Than In Urban Settings

Learning Objective 3: Describe what you should do now to prepare your practice for a future healthcare environment of accountable care and value based pricing for services What Medical Practices Need To Do To Succeed In The Post Affordable Care Act Environment 36

The Successful Practice Must Balance Value And Costs Both financial and non-financial metrics are needed Payment and quality incentives should be the basis for quantifiable metrics Quality Satisfaction Revenue The practice s information system will need to aggregate data from multiple sources and time periods

Managing The Health Of A Population Will Be Critical To Success Employ a care team of physicians, nurse practitioners, nutritionists, patient educators, therapists, and mental health counselors Address patient lifestyle, nutrition, activity, and mental health as well as medical conditions Employ early intervention to provide direct patient feedback, improve health status, and reduce the total cost of care Improve patient access with extended hours, nurse call centers, and e-mail communications Engage patients and care givers to assume responsibility for their own care

Readiness For Episode Of Care Payment Source: MGMA 2011 Evolving Healthcare Environment: Status and Readiness Report

Readiness For Global Payment Source: MGMA 2011 Evolving Healthcare Environment: Status and Readiness Report

Optimizing Operations For One Payment System May Lower Profitability In Another Increasing the volume of patient services increases profits in fee-for-service payment, but increases costs without an increase in revenue under global payment / capitation Different payment methodologies have different information needs Collecting and analyzing data for multiple payment systems increase management information costs Different payment methods have different incentives for utilization of professional services, inpatient care, and ancillary services Health systems of physicians and hospitals need to recognize how different payment systems impact the system s various components Optimizing practice performance for one type of payment may lower profitability in other payment methods

Avoid The Dead Zone Of Lower Revenue, Higher Cost And Minimal Profit

Successful Practices Have Different Information Needs To succeed in a value based payment environment a practice needs to: Know its revenue and costs Know what it costs the insurer Have optimized its use of technology to increase efficiency, understand patient populations, improve revenue, engage patients, and improve clinical processes Know its quality Be patient centered Have established relationships with other providers, hospitals, and payer

Medical Groups With The Right Stuff Will Succeed The post environment of accountable care will reward practices who have: Lower utilization Better quality Better patient satisfaction Better patient outcomes Lower cost to the insurer These are the same factors that will enable a practice to thrive in Fee-for-Service payment Good management will make the difference

Who Will Succeed In The Future Healthcare Environment? It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. Charles Darwin It is not necessary to change. Survival is not mandatory. W. Edwards Deming We are confronted with insurmountable opportunities. Walt Kelly

Are There Any Questions? David N. Gans, MSHA, FACMPE Senior Fellow Industry Affairs MGMA-ACMPE dgans@mgma.com (303) 799-1111 x 1270

About MGMA-ACMPE MGMA-ACMPE is the premier membership association for professional administrators and leaders of medical group practices. MGMA-ACMPE was created in 2011 when members of the Medical Group Management Association (founded in 1926), and its credentialing body, the American College of Medical Practice Executives (founded in 1956) voted to merge organizations MGMA-ACMPE members are among the leading experts in the business of medicine Members are from practices of all sizes, types, structures, and specialties Practice managers of all levels from students to CEOs We leverage the power of our affiliate and local chapters to extend our reach and build on our collective voice

Biographical Summary Mr. Gans is a national authority on medical practice operations and health systems for MGMA-ACMPE (formally known as the Medical Group Management Association). He is an educational speaker for the Association, authors a monthly column in the Association journal and serves MGMA-ACMPE members as a resource on all areas of medical group practice management. His work addresses issues of importance to medical practice executives including: Patient safety and quality Administrative simplification, cost efficiency, and the dissemination of best practices Application of information technology Preparing for health care reform and a transformed health delivery system.. Mr. Gans received his Bachelor of Arts degree in Government from the University of Notre Dame, a Masters of Science degree in Education from the University of Southern California, and a Master of Science in Health Administration degree from the University of Colorado. Mr. Gans is retired from the United States Army Medical Service Corps in the grade of Colonel, U.S. Army Reserve and is a Certified Medical Practice Executive and a Fellow in the American College of Medical Practice Executives. Address: MGMA-ACMPE, 104 Inverness Terrace East, Englewood, CO 80112 Phone: (303) 799-1111, ext. 1270 E-mail: dgans@mgma.org