How are Health Organizations getting ready for Healthcare Reform?

1. How are Health Organizations getting ready for Healthcare Reform? Dan Wakeman, President / CEO ProMedica St. Luke’s Hospital October 20, 2011 Kidney Foundation of NW Ohio Symposium

2. Patient Protection and Affordable Care Act (PPACA) • Signed into law on March 23, 2010. • Some of the reasons behind the passage of PPACA? • U.S. tops the list of industrialized countries when it comes to healthcare spending per capita. • The extra spending has not translated into better/ higher quality care. • Approximately 50 million Americans are without health insurance at any given time. • The American healthcare model—with volume as the pursuit—is not sustainable.

3. Key Elements of Health Care Reform • Expanding coverage • Provides coverage to 32 million uninsured by 2019 • Health insurance exchanges. • Financing Reform • Cuts hospital payments by $155 billion over 10 years • Quality and Safety • Increases penalties for certain hospital-acquired conditions and preventable readmissions. • Establishes research priorities for studying the clinical effectiveness of various medical treatments.

4. Key Elements of Health Care Reform (cont.) • Reforming the Healthcare Delivery System • Ties payments to quality improvements through new payment models. • Building the Workforce • Funding for the enhancement of primary care • Regulatory Oversight • Extends Recovery Audit Contractor (RAC) program. • Extends provisions to reduce waste, fraud and abuse.

5. Key Elements of Health Care Reform (cont.) • Wellness and Prevention • Provides $12.9 billion to establish a Prevention and Public Health Fund over 10 years. • Increases access to preventive services. • In non-government, employer-sponsored plans, there has already been a movement toward consumer-directed health plans. • Higher deductibles so insured people have more “skin in the game.” • Focus on wellness and prevention

6. 4 key healthcare reform aspects took hold on September 23, 2010 • Eliminated lifetime limits on the dollar amount of care covered. Annual limits will be phased out. • Now prohibits insurance companies from dropping policy holders because of illness. • Now prohibits insurers from denying coverage to children because of pre-existing conditions. • Now enables parents to buy coverage for adult children through age 26. *As reported in the Blade, September 23, 2010

7. In summary, the whole healthcare industry is about to be turned upside down. • Healthcare providers now get paid when people are sick, when we do something to a patient. • Quality is not rewarded, but how much we do is rewarded. • In the future system, healthcare providers will get financially rewarded for keeping people well, and quality will matter a great deal, not how much we do.

8. 2011 Inpatient Volume by Payer Class Source: The Advisory Board Company, 2011

9. 2016 Projected Inpatient Volume by Payer Class: Dan Wakeman’s Best Guess Projection based on Insurance Exchange Effect

10. A Shift from “Volume to Value” • Medicare and Medicaid continue to ratchet down provider payments. • Most hospitals cannot (and will not) make a margin on their Medicare, Medicaid, and other government-regulated patients. • Hospitals and healthcare systems will either find a way to deliver healthcare with less money or will go out of business.

11. What does this all mean for hospitals and healthcare organizations? • Fee-for-service will become less prevalent, while value-based and bundled/ episodic payments will increase. • Medicare/ Medicaid reimbursement will continue to decline. • Physician procedural income will decline, and physician employment and integration with hospitals will increase.

12. What does this all mean…? (cont.) • Individual and family insurance will replace commercial group insurance as risk moves from employer/ insurance company to patient and provider. • Information and communication technology will become even more important. • Patients will be managed across the continuum of care, not in silos.

13. Healthcare Moving From Place-Centric… …in which patients and their families must coordinate services and navigate between programs and sites of care on their own… Ambulatory Center Rehab Skilled Nursing Facility Physician Office Home Health Agency

14. To Patient Centric…

15. St. Luke’s is well positioned for this new era of healthcare • St. Luke’s performs well in its acute hospital role as part of the continuum of care: high quality measures, low costs, great medical staff relations, excellent location and access. • What St. Luke’s lacked, it addressed by joining the ProMedica system: access to capital (especially for I.T.), ability to take on risk, and greater capacity for efficiency improvements.

16. Renewed focus for St. Luke’s? • Excel at the “patient handoff.” • Effectively receive patients. • Effectively coordinate the discharge/ transfer of patients. • Information technology is the key element for this renewed focus.

17. The great unknown? • Significant emphasis on deficit reduction: How will this affect healthcare? • 2012 Election • The devil is in the details: Many of the healthcare rules have yet to be written.

18. Will healthcare reform be repealed? • The House of Representatives is now controlled by Republicans. • House voted (245 to189) on Jan. 19th to repeal the 2010 Patient Protection and Affordable Health Care Act. • Legal challenges by many states Attorneys General, including Ohio. Challenges are making their way through the Courts. • Reform might be scaled back a bit, but it will keep moving forward.

19. Massachusetts: A microcosm of federal health care reform and shift to quality/ value • Started in 2006. Included an insurance connector. By mid-2008, just 2.5% of state residents lacked insurance coverage, down from 10% in 2006. • Unintended consequences included increased healthcare costs and significant demand for physicians / providers especially primary care. • A new model emerged to reward primary care / providers for coordination of care, quality improvement, and cost containment : the Medical Home Model.

20. Medical Home Model: Team-based Approach For a set payment, primary care physicians and extenders (nurse practioners and physician assistants) will… • Increase preventive care • Coordinate care and site transitions (e.g., from hospital to home health, rehab, or nursing home) • Decrease unnecessary specialist and hospital utilization • Expand disease management • Ensure home follow-up • Desired result? Higher quality care for less money. Medical Homes will be rewarded for keeping its members healthy.

21. Other Changes with Physicians? • Will want physicians to work at the top of their licenses. • Shared medical appointments with other patients that have the same chronic condition(s). • Phone calls, internet, and email will replace some face-to-face visits.

22. Federal healthcare reform is one of the reasons St. Luke’s sought a partner like ProMedica • Hospitals, like St. Luke’s, need a large partner in order to gain access to needed physicians, other healthcare professionals, information systems, post-acute care services, and an insurance-like product that can take on the risk/ management of an upfront payment, but be responsible for, and able to deliver, needed healthcare.

23. St. Luke’s will finally get rewarded for what it has done well all along: high quality and service at low costs.

24. Q & A