“COMING TO YOUR LIFE SOON… AN ACO”

2. “COMING TO YOUR LIFE SOON…AN ACO” T. Watson Jernigan, MD MA Chairman and Professor Department of Obstetrics and Gynecology Associate Dean of Clinical Affairs

3. Disclosure Statement of Financial Interest DO NOT have a financial interest/arrangement or affiliation with one or more organizations that could be perceived as a real or apparent conflict of interest in the context of the subject of this presentation.

4. To describe the development of the present health care system • To demonstrate an understanding of the Triple Aim in the ongoing Health Care Reform • To understand the passage of the Patient Protection and Affordable Care Act • To appreciate the impact of the ANEW Accountable Care Organization on health care in the Tri Cities starting July 2012 OBJECTIVES

6. Prior to the creation of Johns Hopkins University and subsequent medical school, the health care of American Citizens was unregulated by any governmental agency. • Following the Flexner Report of 1910, the regulation of graduate medical education commenced, but not the health care received by individual patients. • Though the AMA was established in 1840s, there was no oversight to physician-patient compensation until the creation of Medicare/Medicaid. HISTORY OF HEALTH CARE

7. During the 1920s, there was no insurance available for costs of hospitalization • Most families financed hospital bills out of current income and past savings • In Dallas, Texas, Baylor University Hospital administrator, Dr. Justin Ford Kimball, thought something should be done ORIGIN OF “THE BLUES”

8. Dr. Kimball decided to proceed with something new • He contracted with the Dallas Schoolteachers Union for a prepayment plan for hospitalization costs • 1,250 schoolteachers joined a prepayment plan of $.50/month • For this plan, they were entitled to receive 21 days of semiprivate room (including use of the OR and various ancillary tests including anesthesia) ORIGIN OF “THE BLUES”

10. August 4, 1935, Social Security was signed but the bill did not include any health insurance • Originally, the bill had a provision for a “Social Insurance Board” to authorize a study of health insurance • President Roosevelt indicated “that health insurance should not be injected into the debate at this point, nor should the final report on health be made public as long as the social security bill was still on legislative hill.” FDR AND SOCIAL SECURITY

12. With the start of world conflict in 1939, the GNP of America rose from $91 billion to $211 billion • Unemployment for the nation dropped from 17.2% in 1939 to 1.2% in 1944 • Personal income after taxes for American workers rose from $70 billion to $147 billion WORLD WAR AND HEALTH CARE

13. During the war years, the wages of laborers and prices for goods were frozen by the War Labor Board • To supplement the workers pay, employers began paying their health insurance premiums • On October 23, 1943, the IRS declared that employees would not be taxed on health care premiums paid on their behalf by their employers WORLD WAR AND HEALTH CARE

14. With the ruling, the IRS made the health care benefits tax free • The War Labor Board permitted management and labor to negotiate changes in employment benefits including prepaid health insurance • In essence, a dollar contributed to health insurance from employers reduced the employer’s federal income tax but did not increase the employee’s taxes WORLD WAR AND HEALTH CARE

15. In 1900, the life expectancy of an American citizen was 47; by 1965, it was age 70 • Total population was 197 million in USA; of which 19 million was now older than 65 • 108 million Americans had no insurance for drug costs (61.0%) and 24 million had no hospital insurance (13.3%) LYNDON BAINES JOHNSON

18. During the State of the Union Address in 1965, President Johnson informed the American public that the anticipated cost of the first year of Medicare would be $900 million • The actual cost of the first year of Medicare for covering 20 million Americans was $4.5 BILLION in 1965 dollars SOCIAL SECURITY AMENDMENTS OF 1965

19. HEALTH MAINTENANCE ORGANIZATION (HMO) ACT OF 1973 • HMO Act mandated employers with 25 or more employees to also offer a federally qualified HMO plan if they offered group health insurance to their staff. • Law provided governmental subsidies to HMOs. 1965-2009

20. Concept of HMOs was to provide quality services to patients at lower cost with an emphasis on PCP to direct and to manage the care of the patient (“Gatekeeper”) • During 1980s and 1990s, preventive care visits were not usually covered by employers’ standard health insurance plans. • Hospital side of care: Big emphasis on control of number of hospital days 1965-2009

21. Alternatives to HMOs: Preferred Provider Organization (PPO) and Point of Service (POS) • PPO offers limited preventive care coverage and requires small copayments BUT can see any MD they choose. • POS is a plan to offer managed care at a reasonable price with limited network benefits which providing some choices to patients. 1965-2009

22. 1983 United States Government introduced Prospective Payment Systems (PPS) for Medicare hospitalizations. • PPS in essence was the establishment of Diagnosis Related Groups (DRGs). • Concept of DRGs was that hospital was paid a flat rate for the specific DRG regardless of the actual costs provided. 1965-2009

23. 1989 Congress passed the Omnibus Budget Reconciliation Act of 1989. • A portion of that act in 1992 Medicare introduced the Resource-Based Relative Value Scale (RBRVUs). • Work RVUs have become the basis for physician productivity and thus physician compensation in some models. 1965-2009

25. It was estimated that 45-46 million American Citizens were without Health Care and were either uninsured or underinsured • 20% of American women of childbearing age (15-44) were uninsured • 18% of the 95.3 American women age 18-64 were uninsured REALITY OF 2009

27. United States Health Care expenditures represented 17% of GDP (Gross Domestic Product) • Cost of Medicare alone was placed at $500 billion and Medicaid was $361.8 billion (figures from 2010) JANUARY 20,2009

28. U.S.A. ranked in the World Rankings: • 31st in overall life expectancy • 28th in male healthy life expectancy • 29th in female healthy life expectancy • 36th in infant mortality REALITY OF 2009

30. IMPROVING THE INDIVIDUAL EXPERIENCE OF CARE • IMPROVING THE HEALTH OF POPULATIONS • REDUCING THE PER CAPITA COSTS OF CARE FOR POPULATIONS TRIPLE AIM: CARE, HEALTH, AND COST

31. Hospital resources to be decreased going forward: • Change from Fee For Service to Pay For Performance Reimbursement plan • Aging Population • Increased life span with Chronic Illness HOSPITAL RESPONSE TO CHANGES

32. Standardized pharmacy formularies • Bulk Value Purchasing through cooperatives such as Premier Collaborative Group • Standardization of evidence-based protocols especially for antibiotics • Electronic health records to facilitate electronic submission of bills • CPOE (Computerized Physician Order Entry) with standardized protocols HOSPITAL RESPONSE TO CHANGES

33. For all your days prepare And meet them ever alike: When you are the anvil, bear— When you are the hammer, strike. Edwin Markham “PREPAREDNESS”

34. Health Care Exchanges mandated by the act which forces uninsured citizens to obtain health care insurance • Employer Health Care requirement extended to smaller businesses • Preexisting Conditions no longer allowed as exclusionary • Children under the age of 26 may remain on their parent’s health care insurance • Development of an organization to care for the health of the entire patient population PPACA 2010

35. Though passed in 2009 and signed into law in 2010, the PPACA does not take hold until January 1, 2014 • No more pre-existing conditions • More patients will be eligible for Medicaid….if state governments enact legislation to approve • “Working poor” will be eligible for subsidies to help pay for health insurance PPACA

36. Small employers may or may not opt to continue health insurance benefit for their employees due to expense • State will have to create Health Care Exchanges to create expansion of Medicaid…these exchanges need to be up and running by 2013 PPACA

39. The PPACA outlines a new organization that will be held accountable for the health care of a population • The focus will be on not just the health of the single patient in the physician’s office but rather the entire population of the region • This organization can be made of a single physician group; multiple physician groups; or a hospital with multiple physician groups HOSPITAL/PHYSICIAN INTEGRATION

40. June 2010 Mountain States Health Alliance initiated meetings with medical staff to hear about changes in Health System Economics • In December 2010 they proceeded with another meeting entitled “Toward Accountable Care” • During 2011 two developments: creation of Mountain States-owned insurance corporation, Crestpoint which rolled out July 1 and initiation of discussions regarding an ACO “ANEW ACCOUNTABLE CARE”

41. By end of 2011, Mountain States was ready to proceed with an ACO • There are ongoing discussions between Mountain States and other entities (MEAC; HMG; and SOFHA) concerning the details of the ACO • Mountain States submitted a request for establishment of an ACO…called ANEW Accountable Care Organization for initiation 2012 • They have also applied for MSSP with the CMS (Center for Medicare and Medicaid Services) starting July 2012 “ANEW ACCOUNTABLE CARE”

45. 32 MILLION: Projected number of newly insured Americans • 27 MILLION: Projected number of Americans remaining uninsured • 16 MILLION: Projected number of new Medicaid Beneficiaries • $619 BILLION: Estimated 10-year cost for Medicaid Expansion July 2012

46. 3.1 MILLION: Number of young adults who have stayed on their parents’ health plan under the PPACA • 5.3 MILLION: Number of seniors and people with disabilities who have saved $3.7 billion on prescription drugs JULY 2012

47. 105 MILLION: Number of American who no longer have a lifetime limit on their insurance coverage • 4 MILLION: Estimated number of American who no longer will receive health insurance from their employers as a result of the law JULY 2012

49. Fee-For-Service (FFS): The payment for services rendered. The structure encourages the use of more services, more procedures, and overall higher health care costs. • Medicare Shared Savings Program (MSSP): The qualifying ACOs will be eligible for additional reimbursement as a result of a percentage of savings they realize through attainment of certain quality and savings threshold. DEFINITIONS

50. Accountable Care Organization (ACO): An ACO is a n integrated healthcare delivery system that contracts to provide a full continuum of services to a defined patient population with specific reimbursement (financial) incentives established for meeting both quality and expense/cost targets. DEFINITIONS