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Preparation for Health Care Reform. Adam Anolik Director of Finance Strong Memorial Hospital & Highland Hospital March 1, 2013. Agenda. Background on University of Rochester Medical Center Medicare and Medicaid Status Health Care Reform and URMC Responses NYS Health Insurance Exchange

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Preparation for Health Care Reform


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    1. Preparation for Health Care Reform Adam Anolik Director of Finance Strong Memorial Hospital & Highland Hospital March 1, 2013

    2. Agenda • Background on University of Rochester Medical Center • Medicare and Medicaid Status • Health Care Reform and URMC Responses • NYS Health Insurance Exchange • Population Health Management • Accountable Health Partners • Affiliations and Collaborations

    3. Background on University of Rochester Medical Center

    4. The University of Rochester Medical Center is a $2 billion integrated academic medical center comprised of: • The School of Medicine and Dentistry • University of Rochester Medical Faculty Group (~1000 providers) • Strong Memorial Hospital • Golisano Children's Hospital • Highland Hospital • FF Thompson Health Services • James P. Wilmot Cancer Center • Pluta Cancer Center • School of Nursing • Eastman Institute for Oral Health • Visiting Nurse Service (Home Health) • Highlands at Pittsford and Highlands at Brighton (Long-Term Care) URMC 1

    5. Calendar Year 2012Selected Statistical Information

    6. Strong Memorial HospitalNet Revenue by Payor

    7. Medicare and Medicaid Status

    8. Medicare Update • In a word – CHAOTIC • Health Care Reform – Accountability Care Act (ACA) marches on: • Tremendous payment reductions to providers to pay for cost. • Federal Budget Crisis • Even more tremendous cuts being proposed on top of ACA to help balance budget. • Sequestration adds another 2% cut or $6M per year for URMC hospitals alone • Alternative to sequestration may be worse for academic medical centers depending on whether reductions are targeted to specific areas (ie, Graduate Medical Education funding)

    9. Medicaid Update Not as chaotic as Medicare discussions, but no less daunting in terms of potential additional reductions for providers • Governor’s Proposed 2013-2014 budget continues all cuts implemented in the last two years: • 2% across the board • No inflation adjustment (trend factor) • Proposed to permanently eliminate trend factor • Continuation of Medicaid Global Spending Cap • In addition to the reductions noted above the proposed budget includes the following important provisions: • Continues work of the Medicaid Redesign Team (MRT) in a variety of innovation programs, including Patient-Centered Medical Homes • Establishes New York Health Benefit Exchange which, one implemented, is expected to cover one million additional NYS residents • According to New York Medicaid Director Jason Helgerson, the goal of the budget is “to minimize financial chaos for hospitals, while trying to incentivize and support moves toward patient-centered and evidence-based care.”

    10. Health Care Reform

    11. Federal Health Care ReformRecent Developments • In June 2012, the US Supreme Court upheld the law by a 5 to 4 vote • Chief Justice Roberts voted with the majority • President Obama’s re-election in November likely to quiet the calls for repeal of the law; focus has shifted to implementation issues • Will States elect to expand Medicaid programs? Incremental costs will be fully covered by the Federal Government for three years, then 90% covered thereafter • Development of State Insurance Exchanges by January 1, 2014

    12. 7

    13. Accountability: Quality and CostCharting the Path of Payment Reform Continuum of Payment Models Total Cost Accountability Episodic Cost Accountability Shared Savings Traditional Fee-for-Service Bundled Payments Partial Risk Full Risk Pay-for-Performance Shared Savings Minimal Savings Potential for Health Plans and Customers Substantial Source: The Advisory Board Company: Accountable Care Forum-Briefing for Health Plan Executives 8

    14. NYS Health Exchange • Part of Health Reform • Equivalent to a Priceline.com used to purchase health insurance • Will be available to small employers (<50) and individuals January 1, 2014. • Minimum set of benefits: 4 different “metal” levels of coverage – Platinum, Gold, Silver and Bronze. • Higher metal level generally means lower out of pocket costs • Silver level expected to be the most popular • Depending on income, individuals may receive premium subsidy from Federal Government (per ACA) • Providers may be faced with multiple challenges: • Providers can expect to have to contract with new insurers entering the marketplace • Insurers may try to use smaller provider networks • Increase in self-pay receivables due to out of pocket costs under new plans

    15. Population Health Management • Insurers, government payers (Medicare, Medicaid) employers increasingly interested in engaging the health care system in a different way – based on value, not volume. • Population Health Management aligns payment with management of the health needs of populations. A population could be: • an employer • patients of a primary care physician network • based on an insurance product • Provider networks take responsibility to improve quality and efficiency for a population of patients, rather than focusing on fee-for-service revenue.

    16. Bending the Cost Curve: Shared Savings Example • Hypothetic employer spends $150,000,000 per year on healthcare • Projected annual rise in costs of 6% = $159,000,000 • Employer contracts with integrated network of providers, providing incentives to patients to stay in network, and offering providers financial incentives to reduce cost and improve quality • Providers enact specific performance improvement efforts, e.g., • Disease management programs (CHF, DM, COPD) • Reduced readmissions • Pharmacy management for therapeutic substitutions • Patient-Centered Medical Homes continuum • Decrease expected rise in costs to 4%= $156,000,000 • Savings of $3,000,000 to be shared providers based on agreed upon metrics (i.e. quality, productivity)

    17. Accountable Health Partners Intent Bring together community and faculty physicians, hospitals, and other affiliated providers to develop a clinically integrated, for-profit care model, with aligned financial incentives, to improve population health, coordination of care and efficient use of resources.

    18. Initial AHP Membership • Initial hospital membership: Strong, Highland, Thompson (other hospitals may join over time) • Initial physician membership: URMC employed physicians, and private physicians at HH, SMH, and FF Thompson (other physicians may join over time) • Total number of initial physician participants estimated at 1,200 to 1,500 • URMFG: approximately 1000 • Independent: approximately 200-500 • Membership is non-exclusive. Hospitals and physicians can join other networks but all members of a practice must participate

    19. Affiliation vs Collaboration Affiliation • Governance Control • Board & CEO appointment • Reserved Powers • Fewer contracts Collaboration • Independence • Contract for every service • Limitations on what we can legally provide Both affiliations and collaborations serve to establish and strengthen relationships with hospitals and physicians that enable contiguous population management throughout the region