Healthcare Reform: What’s Ahead and What’s Your Plan?

1. Healthcare Reform:What’s Ahead and What’s Your Plan? Blair Childs, Senior Vice President, Public Affairs March 15, 2011

2. The Premier performance improvement allianceHarnessing the power of collaboration • 2,500 hospitals, 72,000 non-acute sites • Nation’s largest clinical/operational/supply chain comparative databases • $36 billion in annual spend • Malcolm Baldrige National Quality Award • Three time recipient of Ethisphere’s Most Ethical Companies award • Award winning programs addressing environmentally sustainable sourcing Owners Affiliates Cost Reduction Quality Improvement Risk Mitigation Advocacy Execution Engine

3. Today’s discussion • The environment : • “D, D & D” and the healthcare imperative • The big power shift • Implications and priorities: 2011 – 2012 • Will healthcare reform be repealed? • Health reform implementation • Timeline and general direction • Where is this headed and what should you do?

4. The Environment: Worry • ~9% unemployment • 2010 - Federal spending 24% of GDP (highest since WWII) • Tax revenues 15% of GDP • 2001 Debt = 33% of GDP; 2010 Debt = 62% of GDP • If remain on current course: • Deficit remains high through decade and debt will increase to 90% of GDP by 2020 • 2025 - all Federal revenues will only cover interest payments, Medicare, Medicaid, SS • 2035 - debt will outstrip entire economy The big deficit driver is healthcare, even w/o reform

5. Debt as a percent of GDP: Deficit Commission

6. President’s National Commission on Fiscal Responsibility and Reform • Final recommendations received at least 11 of 18 votes • $4 trillion in deficit reduction through 2020 • Limit federal health spending to GDP+1% after 2020 • Exceeding the targets would trigger action by the President and Congress • Fix Medicare doc payments (SGR) and pay for it by: • Cutting payments to doctors, other health providers, and drug companies • Reduce excess payments to hospitals for GME • Cut Medicare payments for bad debts • Increasing cost-sharing in Medicare • Passing legal reform • Expand cost-containment demonstration and pilot projects by 2015 • Eliminate provider (hospital) carve-outs from IPAB

7. Election implications • 2012 • Jobs and deficit • Healthcare focus: costs • Transparency • Pay for value (not volume); Test and scale: Innovation Center • Medical malpractice reform • Implementation, oversight & investigations • Coverage expansion? • Republicans well positioned, but could flip again • 2012 Senate (23D/10R); Redistricting (195 R; 49 D;92 split;92 Comm), economy, jobs, Tea Party • Open seats: Bingaman (NM); Lieberman (CT), Conrad (ND), Kyl (AZ), Hutchinson (TX), Webb (VA); Akaka (HI) – (5Ds – 2Rs) We are not going back to the way things were. Best to proceed as though no change has occurred.

8. Partisan Control of Legislatures 2011

9. Presidential reelection and unemployment

10. Largest State Budget Shortfalls on Record *Reported to date Source: Center on Budget and Policy Priorities survey, revised December 2010.

11. State Deficits for FY 2011 *California based on remaining 2010 shortfall and projected 2011 budget; Oregon has a two-year budget. Source: Center on Budget and Policy Priorities | cbpp.org

12. The overarching strategic umbrella of healthcare reform Track 1 Track 2 • Cuts to Existing FFS System • Market basket reductions • DHS cuts • Nonpayment for anything preventable or unnecessary • Disrupt Existing System • Bundled Payments • Innovation Center • Demonstrations • ACOs

14. Future state Intensive care TOMORROW Non-Acute/ specialty care Primary & preventative care Primary & preventative care Non-Acute/ specialty care 1766 TODAY Intensive care Winners and losers Accountability & transparency People-centered primary care E-health and other innovations New focus on population health and social determinants Risk-based, value-driven reimbursement (P4P) Cost reductions Quality across the continuum and focus on transitions Smaller hospitals with more intensive care New roles of public and private sector (partnerships?)

15. Payment reform across the payment silos

16. Regulations implementing reform: 2011 Annual inpatient update + Readmission reduction program (Proposed ) Uniform explanation of benefits, coverage, definitions (Proposed) Hospital value-based purchasing (Proposed) 1/7/11 Long-term and CLASS Act (Proposed) Annual outpatient update (Final) Accountable care organizations (Final) Annual outpatient update (Proposed) Medicaid HACs (Proposed) Jan Feb March April May June July Aug Sep Oct Nov Dec State Innovation – Review & approval process (Proposed) Program integrity -additional provider screening (Final) 1/21/11 Accountable care organizations (Proposed) Hospital value-based purchasing (Final) Annual Inpatient update + Readmission reduction program (Final Transparency reports (PPSA) (Procedures) Exchange (Proposed) Target dates for release of proposed and final regulations in 2011 implementing provisions of the Affordable Care Act (these are fluid and likely to move)

17. Proposed Inpatient Value-Based Purchasing Rule • Rewards for achievement or improvement • Budget neutral payment changes begin October 1, 2012 by reducing base operating payments for each discharge by • 1% in FY 2013, • 1.25% in FY 2014, • 1.5% in FY 2015, • 1.75% in FY 2016, and • 2% in FY 2017. • Quality measures from Hospital Compare measure set • 25 measures (17 process/8 HCAHPS dimensions) in FY 13, and • Adds 20 measures (3 mortality, 8 HACs, and 9 IQI/PSIs) in FY 14

18. Simulated Impact of CMS VBP Proposed Rule

19. Announcement of IC and Patient Safety Initiative • Announcement anticipated early April • Expected to lay out priorities and process for Innovation Center • Public/private, HAC/readmissions reduction effort to help hospitals before 6% payment tied to these measures • Pledge by hospitals, consumers, business, to support • Unclear on measurement system and incentive program structure. $1.5B tied to program. • Goal: 40% reduction in HACs by 2013 and 20% reduction in readmissions. • Opportunity for organizations and hospitals to work with hospitals to improve performance.

20. Collaboratives drive top performance Systematic improvement (Inpatient value) Population total value 2.0 Process Improvement(Evidence-Based Care)

21. A representative sample of U.S. hospitals QUEST charter members include urban/rural, large/small and teaching/non-teaching facilities across 31 states 70% Disproportionate share 33% Safety Net • Bed size ranges: • 22% - 150 beds or less • 29% - 151-300 beds • 25% - 301-450 beds • 24% - 451 or more beds 38% teaching 14% rural

22. QUEST collaborative driving improvementsYear 1 – 30 month results 21

23. ACO model: Six core components A group of providers willing and capable of accepting accountability for the total cost and quality of care for a defined population. • Core Components • People Centered • Health Home • High-Value Network • Population Health • ACO Leadership • Payor Partnerships • PayorPartners • Insurers • CMS • Employers • States

24. Building accountability through collaboratives Willingness to implement in the future Participation in learning Webinars Gap analysis to pinpoint focus areas Participation in learning networks Participation in meetings with ACO Implementation Collaborative Preparation to collect population-based measures Milestones to keep on track to join the ACO Implementation Collaborative Readiness Collaborative Implementation Collaborative • Ready to begin implementing • Executive sponsorship & participation • Payer partner participation and transparency • Physician network & sufficient population base (5,000 equivalent Medicare lives) • Transparency and acceptance of common cost/quality metrics (QUEST, HEDIS, others) • Population health data infrastructure (EHR, HIE, Payer) • Participation in work groups and meetings • ACO contracting vehicle (legal entity)

25. Collaborative participants

26. Varying degrees of integration Less integrated More integrated

27. Payor partners Provider-Sponsored Plans Private Plans • Anthem/WellPoint Cigna • Blue Cross Plans Coventry • HealthSpring/Bravo Medica • United Aetna • BCBS MT HMSA • Horizon BCBS New West • BCBS MA Geisinger Presbyterian New Mexico Baystate Summa Billings Clinic Employers Government Payors • IBM • Caterpillar • UNITE HERE Local 54 representing: • Trump Entertainment Resorts, Inc. • Harrah’s Entertainment • Hilton Hotels Corp. • MGM Mirage CMS State Medicaid plans S-CHIP plans VA

28. Components and Capabilities

29. Where is this all headed? Federal budget will continue to pressure healthcare cost reduction • Keeping healthcare spending at the center of the political debate Reform in some form is here to stay • But, there will be 10 years of fixes and adjustments Reforms will reduce hospital volume & make winners and losers • Readmission and HAC penalties, efficiency measures, bundled payment, ACOs, demos 2013 - watershed year; 2011 unclear ACOs and IC will remain priority and grow in importance • ACOs will roll out on at least two tracks • Rule design will be critical State issues and focus provides an opportunity and could be future

30. Planning imperatives • Maximize efficiency and through-put • Align with physicians • Evidence based decision-making • Where you stand on elements of reform • Comparative effectiveness research • Quality and outcomes measures • Embrace transparency • Look to national comparisons • Increased federal regulatory burden • Continual changes