Overview

1. Overview Strategic Contracting Getting the Business you Desire with Desirable Trading Partners Presented by Patrick Gauthier, Director

2. Explore the Contracting Environment Review Options Discuss Strategy Questions Objectives

3. The New Business Environment

4. Environmental Drivers: Parity Self-insured employers Large group insurance CHIP and Medicaid managed care plans Health Care Reform Medicaid expansion Health Insurance Exchange More managed care Block Grant Integrated application Addresses wrap-around and remaining uninsured Brief Review of Contracting Environment

5. Big Pictures: Now & Then Private Insurance Publicly-Funded Treatment DOI Federal Agencies Employers State Agencies 75% - 90% 10% -25% Brokers Counties and Cities Insurance Corrections & Courts Managed Care Managed Care Health Insurance Exchanges 32+ Million Uninsured Prevention Networks Networks Medicaid Managed Care Plans Housing & Jobs Standards & Science

6. Parity & Scope of Services MHPAEA does not stipulate what specific conditions, disorders or diagnoses must be covered. Parity law does not mandate covered services except to say that parity applies to all six categories of service if it applies to any Parity law does not mandate specific kinds of providers be covered Deciding what conditions, services and providers are eligible for coverage – until we see a Final Rule with clear direction – is left to health plans and State regulators enforcing your State law and regulations.

7. Take a Stand on Scope of Service Covered Conditions Covered Services Covered Providers Medical Necessity Guidelines

8. Where to take it Health plans MCOs MBHOs Employers PPOs and HMOs Dept of Insurance Medicaid Attorney General Governor Legislators

9. Reform & ACOs Q: What is an “accountable care organization”? A: An Accountable Care Organization, also called an “ACO” for short, is an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it. For ACO purposes, “assigned” means those beneficiaries for whom the professionals in the ACO provide the bulk of primary care services. Assignment will be invisible to the beneficiary, and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue to seek services from the physicians and other providers of their choice, whether or not the physician or provider is a part of an ACO.

10. ACO Structure, Governance and Shared Savings IT Infrastructure and Data Management Long-Term Care Home Care & Hospice Public Health Hospital & Rehab Population Health Home Rx & Lab Surgical & Specialty Primary Care Substance Use Disorder Mental Health

11. ACO Functions Leadership Business Operations Compliance Quality Assurance Enrollment Claims Processing Managed Care Customer Service IT & Data Analysis Utilization Mgmt Case Mgmt Provider Relations

12. ACO Goals Promote development of newsystems of care Change provider culture and incentives from fragmented FFS Lower costs while improving population health Measure both quality and financial performance Hold provider systems accountable for both cost and quality of care for assigned patient populations

13. ACO Innovations Minimize “barriers to entry” for patients and providers: Patients attributed, not enrolled No benefit or network restrictions; no lock-in; no prior-auth Flexibility for providers to form different kinds of ACOs Flexible payment model (e.g., can include bundling, Medical Homes) “Bonus only” shared savings “Symmetric risk” shared savings Partial capitation and shared savings Receiving shared savings requires first achieving quality threshold

14. ACO Reimbursement Under the proposed rule, Medicare would continue to pay individual providers and suppliers for specific items and services as it currently does under the fee-for-service payment systems. The proposed rule would require CMS to develop a benchmark for savings to be achieved by each ACO if the ACO is to receive shared savings, or be held liable for losses.

15. ACOs – Two Tracks To provide an entry point for organizations with varied levels of experience with and willingness to take on risk, the proposed rule would allow an ACO to choose one of two program tracks. The first track would allow an ACO to operate on a shared savings only track for the first two years, but would then require the ACO to assume the risk for shared losses in the third year. The second track would allow ACOs to share in savings and risk liability for losses beginning in their first performance year, in return for a higher share of any savings it generates.

16. ACO Q: What forms of organizations may become an ACO? A: The statute specifies the following: ACO professionals (i.e., physicians and hospitals meeting the statutory definition) in group practice arrangements, Networks of individual practices of ACO professionals, Partnerships or joint ventures arrangements between hospitals and ACO professionals, or Hospitals employing ACO professionals. Other Medicare providers and suppliers as determined by the Secretary

17. ACO Q: What are the types of requirements that such an organization will have to meet to participate? A: The statute specifies the following: 1) Have a formal legal structure to receive and distribute shared savings 2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum) 3) Agree to participate in the program for not less than a 3-year period

18. 4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings. 5) Have a leadership and management structure that includes clinical and administrative systems 6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care 7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary. ACO – requirements cont’d

19. ACO Q: How would such an organization qualify for shared savings? A: For each 12-month period, participating ACOs that meet specified quality performance standards will be eligible to receive a share of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below their specified benchmark amount. The benchmark for each ACO will be based on the most recent available three years of per-beneficiary expenditures for Parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO.

20. ACO Q: Will beneficiaries that receive services from a health care professional or provider that is a part of an ACO be required to receive all his/her services from the ACO? A: No. Medicare beneficiaries will continue to be able to choose their health care professionals and other providers

21. ACO Q: When will this program begin? A: January 1, 2012. Agreements will begin for performance periods, to be at least three years, on or after that date.

22. Goals & Objectives Improve Inpatient Care Efficiency Use Lower Cost Treatments Improve Health Outcomes Reduce Adverse Events Improve Management of Complex Cases Hospitals & Specialists Reduce Preventable Readmissions Reduce Preventable ER Visits & Admissions Lower Total Healthcare Costs Use Lowest-Cost Settings and Providers Primary Care Reduce Unnecessary Testing & Referrals Improve Practice Efficiencies Improve Prevention & Early Diagnosis

23. Population Health Management ACOs must develop a process for identifying patients who have complex needs (multiple chronic conditions) or are at high risk of developing such needs and provide them with wellness and prevention programs, disease management, and complex case management, as indicated ACOs must make available or support providers’ use of electronic prescribing, electronic health records systems, registries, and self-management tools MH/SUD providers must be prepared to work in this environment and develop the necessary tools and resources

24. Incentives to Participate in an ACO Identified population/market share Some administrative fees for administrative duties Reliable referral sources within network Common values and objectives (coordination, cooperation, collaboration) Shared information (whole health) Shared savings (financial incentives)

25. Block Grants SAMHSA's proposed changes to the FY 2012/2013 Block Grants seeks to get State behavioral health systems ready for 2014 when more people will be insured through Medicaid or 3rd party insurance. Under this new approach States and territories will have the opportunity to use block grant dollars for prevention, treatment, recovery supports and other services that supplement services covered by Medicaid, Medicare and private insurance.

26. Multiple Chronic Conditions The proportion of Medicaid beneficiaries with disabilities who are diagnosed with three or more chronic conditions ranges between 35% and 45%. The frequency of psychiatric illness among Medicaid beneficiaries with disabilities ranges from 29% to 49%. Psychiatric illness is represented inthree of the top fivemost prevalent pairs of diseases, or dyads, among the highest-cost 5% of Medicaid beneficiaries.

27. The Costof Health Care in America Source: CMS, Office of the Actuary, National Health Statistics Group

28. Reviewing Your Options

29. Self-Insured Plans (ERISA) Traditional Indemnity (fully-insured) Open access, higher coinsurance Managed Care Plans MBHO (carve-out) HMO (network-centric, referral-based) PPO (wider network, medical necessity standards) POS (combines HMO and PPO with coinsurance differentials) Consumer-Directed Health Plans High deductible, catastrophic claims Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA) and Flexible Spending Accounts (FSA) Options are a Function of Market

30. Market ResearchSources of Valuable Information Health Plans and Managed Care Organizations State Department of Insurance AHIP and State Associations of Health Insurance Plans Self-Insured Employers National and Regional Business Group on Health Employers’ Health Coalitions Federal and State Agencies HRSA, SAMHSA, NIDA, DOL, CMS, DOJ web sites

31. Market Segments Commercial Insurance / Public Funding Voluntary / Involuntary Geographic Markets Age Gender Specialty / Generalist / One-Stop Shop Race / Culture / Language Stand-Alone / Integrated / Joint Venture / Partnership Faith-Based

32. Market Segmentation What kinds of markets appeal to your organization? What suits your vision and mission? In what market segments do you have a good reputation? Market share/penetration? In what market segments do you/can you make a reasonable profit?

33. Opportunity Matrix Tool • Rank each according to: • Market Maturity/Longevity • Brand equity or reputation • Revenue share (%) • Share of profits • Qualifications, skills, subject matter expertise and capacity to grow • Weaknesses, competitors and threats • Cost of entry • Legislative/regulatory opportunities

34. New Conversations Hospitals Health Plans and MCOs/MBHOs Primary Care Third-Party Administrators Brokers Networks Employers Other Medical Specialists Others?

35. New Conversations Professional Face-to-face Expressing willingness and interest Demonstrating big picture understanding and prospect of synergies Eager to develop viable, marketable, attractive solutions Promoting new services and potential new business model Clear, distinct, customer value proposition Potential collaborator? Investor? Partner? Buyer? Benefits and advantages more important than features and functions Always Branding

36. Reimbursement and Fee Schedules Variety of Approaches and Methodologies Usual, Customary and Reasonable (UCR) Diagnosis Related Grouping (DRG) Resource-Based Relative Value Scale (RBRVS) Innovations including: Sub-capitation Bundled case rates and episode rates Administrative fees for additional services like Case Management Bonuses for performance Shared savings

37. Definition. Global payments are fixed-fee payments for the care and services that patients might receive in a given span of time such as a month, quarter or year. Global Payments are akin to Case Rates and Episode Rates. Global payments put providers at-risk financially for the occurrence of conditions as well as the management of those conditions. Purpose. Global payments are designed to contain costs and reduce the incidence of unnecessary services, promote integration and coordination of services. Global payments can also feature incentives to improve the quality of care. Global Payment

38. Potential Issues. Global payments might induce providers to cut back on necessary care and to admit/select less expensive patients into their programs. Global payments involve significantly more complex financial management, requiring infrastructure and personnel to manage risk. Small providers may not be able to take on risk due to this complexity and any state regulations concerning financial solvency where risk exists. Global Payment

39. Know your costs and cost structures Know your profit model. At what point can a contract become profitable? Don’t contract at rates lower than your costs if your model doesn’t absolutely demonstrate a reasonable point in time when you become profitable Contracting Imperatives

40. Review contracts from multiple perspectives: Legal Financial Clinical Ethical Practical Operational Strategic Contracting Imperatives

41. What makes your decision to contract “strategic?” The contract reflects your vision, your image of what it is you’re becoming It supports your mission, how it is that you will strive to realize your vision It helps you accomplish organizational goals and objectives Strategic Concerns

42. New market segment Medicaid Self-insured employer Impaired professionals program Gains in % share of the market Competitive advantage Visibility and brand-image New services in the same market Addition of IOP, for example Examples: Strategy

43. New location/geographic expansion New reimbursement methodology Secure funding (sub-capitation for defined population, for example) Joint venture/revenue share Building credibility, loyalty, confidence in a step-wise growth plan Goodwill in the community Examples: Strategy

44. Increased overall revenues Improved profit Admissions Bed-days Transitions in care Integration (vertical and horizontal) Number of payers (diversification) Sustainability of other programs Examples: Goals

45. Service mix (billing codes) Bundling/unbundling services Rate of reimbursement Reimbursement methodology Incentives/Pay-for-Performance Shared Savings Factors and Variables

46. Utilization Management terms and conditions Credentials Preferred Status/Exclusivity Factors and Variables

47. Conduct Market Research Conduct Strategic Planning Gather Intelligence Assess Market Conditions Develop Customer Value Proposition Planning

48. 6. Develop clear sense of what you a) desire, b) want, c) will accept, and d) need 7. Practice concise pitch 8. Develop your allies 9. Talk to the right person 10. Approach with respect and professionalism and tell them what’s in it for them Planning

49. Thank You! Questions? Patrick Gauthier Director 888-898-3280 ext. 802 pgauthier@ahpnet.com