Healthcare Reform and the Impact on Healthcare Manufacturers
Linda Rouse O’NeillVice President, Government Affairs
March 5, 2013
Agenda
Sequestration and Healthcare Status of Reform
Medicaid and Insurance Exchanges Provider Impact
Other Key Provisions Federal Gift Disclosure
Lesser Known Provisions Opportunities in Uncertain Times
Sequestration and Healthcare
The fiscal cliff impacted healthcare in multiple ways
2% budget sequestration – Every year until 2021 Congress postponed cuts until March 1, 2013
Medicare - $123 billion total
Elements of the Cliff
Sequestration
Physician Pay Cut
2001/2003 Tax Cuts
Tax Extenders
Payroll Tax Holiday
Alternative Minimum Tax
Feb-March Showdown
Mid-Feb Debt Limit
Mid-Feb POTUS State of the Union Address
Mid-Feb President’s Budget Goes to Congress
March 1 2% Budget Sequestration Kicks In
March 27 Federal Funding Appropriations Expire
Sequestration projected to cut $123 billion in Medicare provider payments from 2013 to 2021
CBO projects a gradual increase in Medicare reductions
Congress delayed start date from January 1 to March 1, 2013
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Healthcare budget biopsy
Programs Impacted by Sequestration 2013 Cuts
Medicare $11 billion
Maternal and Child Health Block Grant $42 million
AIDS Drug Assistance Program $73 million
HIV Preventions and Testing $26 million
Breast and Cervical Cancer Testing $12 million
Childhood Immunization Grants $14 million
Public Health Emergency Preparedness Grants $48 million
Medicaid is exempt, but public health programs are not. This list is not a comprehensive list of programs impacted by the budget sequestration.
Status of Reform
Status of the main provisions
Insurance Programs/Funding
Individual Mandate – 2014 Accountable Care Organizations – In Effect
?? Medicaid Expansion – 2014 Centers for Medicare and Medicaid Innovation – In Effect
Health Insurance Exchanges - 2014
CLASS Act for Long-Term Care Insurance – On Hold
Employer Mandate - 2014 Independent Payment Advisory Board – No Nominations Yet
Guaranteed Coverage for Pre-existing Conditions - 2014
Comparative Effectiveness Research (PCORI) – In Effect
Premium Tax Credits - 2014 Medicare Provider Cuts – 2012
Ban on Coverage Limits – In Effect
Medical Device Tax - 2013
Reform hinges on insured population
Medicaid: Breaking down the SCOTUS decision
Federal government cannot penalize states that do not expand Medicaid eligibility 11 million as opposed to 16 million eligible individuals
Medicaid coverage expansion will unfold one-third at a time
33% States that expand in 2014
33% States that delay coverage expansion until 2015
33% States that delay longer than one year
Source: Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision. Congressional Budget Office. July 2012.
Increased patient load Providers adopting “medical homes” to
coordinate care Potential impact on healthcare workforce
(i.e., exacerbate shortages)
Expanded benchmark benefits package = increased market access to products and services ACA lists ten broad categories of “essential
health benefits” that will be mandatory cover under Medicaid
Medicaid must provide preventive services with no cost-sharing
Expectations for 2014
Status of ReformProvider Impact
Emphasis on quality
Skin in the game
Reduced costs
MandatoryComing to a market near you!
Value-based purchasing Readmissions policy
Infection policies
Voluntary Accountable care
organizations (ACOs) Bundled payment pilot
program
Payment Drivers are Changing
Value-based Purchasing (VBP) Rewards Quality
Value-based Purchasing1
Hospital Medicare reimbursement will be tied to performance on process measures, outcomes for certain clinical conditions, and patient experience measures.
More than 3,000 hospitals are required to participate2
1% of Medicare hospital reimbursement is tied to VBP in the first year, equivalent to $850 million.Four quality measures will be added October 1, 2013 (FY2014).Now, more than ever, hospitals need help maximizing their reimbursement
1 Centers for Medicare and Medicaid Services (CMS). www.cms.gov/hospital-value-based-purchasing/.2 CMS. FY2013 Program: Frequently Asked Questions about Hospital VBP. March 9, 2012.
The Carrots and Sticks Approach
Hospitals can earn back more than their 1% share in FY2013, or they can lose out on
the 1% share by not meeting performance benchmarks.
By 2016, 2% of hospital Medicare pay will be tied to VBP.
Measure Domains Total Measures
FY2013 • 12 Clinical Process of Care
• 8 Patient Experience of Care (Hospital Consumer
Assessment of Healthcare Providers and Systems –
HCAHPS)
20
FY2014 • 12 Clinical Process of Care
• 9 Patient Experience of Care (Hospital Consumer
Assessment of Healthcare Providers and Systems –
HCAHPS)
• 3 Mortality
24
CMS will assess each hospital’s improvement from the baseline period performance to the performance period.
Hospital readmissions reduction program is underway
Hospital payments reduced for excess readmission rates within 30 days of discharge: Heart attack, heart failure, and
pneumonia FY2013-14, up to 2% across-the-board
cut/FY2015 up to 3%
More than 2000 hospitals are being penalized in FY2013 Performance based on July 2, 2008 –
June 30, 2011 readmissions Reducing preventable readmissions;
encourage acute and post-acute provider collaboration
Readmissions reduction - $280 million in 2013
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Hospitals hit hardest in New Jersey, New York, D.C., Arkansas, Kentucky, Mississippi, Illinois, and Massachusetts
Safety-net hospitals hit harder than others Highly recognized institutions are on the list:
Hackensack University Medical Center North Shore University Hospital Beth Israel Deaconess Medical Center A teaching hospital of Harvard Medical School Massachusetts General Hospital
Source: Rau, Jordan. “Medicare To Penalize 2,217 Hospitals For Excess Readmissions.” Kaiser Health News. August 13, 2012.
NO END-GAME FOR HACs
1% cut across-the-board to hospitals in the top quartile of national infection rates (infections and rates are to be determined in regulatory rulemaking process)
Begins in 2015; (no sunset date) Projected to save $1.4 billion over 10 years HHS required to submit a
report to Congress with regard to establishing a HAC policy in post-acute settings
MULTIPLE PENALTIES = 1 CONDITION*
* This table is meant to provide a snapshot of HAC/HAI only. Details on all the HAI quality measures, which include specific surgeries and patient safety indicators that affect market basket updates and value-based purchasing payments for hospitals, can be found on the Centers for Medicare and Medicaid Services (CMS) Web site at www.cms.gov.
** Value-based purchasing is in effect as of FY2013; CMS may adopt HACs measures as early as FY2015.*** CMS has not yet proposed regulations to implement infection policies included in healthcare reform.
Hospital-acquired Conditions Medicare (not eligible for higher
payment)
Value-based purchasing
1% cut per health reform policy
Medicaid preventable conditions
(not eligible for higher payment)
(FY2008) (FY2013)** (FY 2015)*** (July 1, 2012)
Catheter associated UTI X ? ? X
Surgical site infections X ? ? X
Vascular cath-assoc infection X ? ? X
Foreign object retained after surgery X ? X
Air embolism X ? X
Blood incompatibility X ? X
Pressure ulcer stages III or IV X ? X
Falls and trauma X ? X
DVT/PE after hip/knee replacement X ? X
Manifestations of poor glycemic control X ? X
Ventilator associated pneumonia ? ?
MRSA ? ?
Clostridium difficile ? ?
Central line assoc. blood stream infection X (New-FY2013) X (New-FY2013)
Hospital payment tied to performance
% of hospital pay tied to performance
ACO amount is unknown and depends on physician participation/ pay model
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Groups of healthcare providers who contract with a payer to work together to coordinate care, meet
performance benchmarks on quality measures, and reduce overall cost to provide care.
Specifically ACO providers agree to work together to:
What is an ACO?
Coordinate patient care
Share in achieved cost savings
Perform well on quality measures
Reduce spending
Each ACO is unique
221- Medicare Shared Savings
Program
32 - Pioneer ACO Demo
PRIVATE SECTOR ACOS
FEDERAL ACO PROGRAMS
6 - Physician Group Practice Demo Advanced Payment
Model ACOs
Healthcare Providers
Insurers
The framework, or rules, for each ACO depends on the “payer”
Other Key Provisions
Gift disclosure final rule
Covered devices are those requiring premarket (510k) or pre-notification approval from FDA. Covered drugs are those requiring a prescription.
If sales of covered products are more than 10 percent of total (gross) revenue, then company must report on gifts and transfers of value related to all products it sells.
If sales of covered products are less than 10 percent of revenue then a distributor must only report on payments or transfers associated with the sale of covered products.
Distributors must now comply with federal gift disclosure reporting
requirements if they “Hold title” to covered products.
Gift disclosure final rule
What is in?
Payments, whether cash or in kind transfers, to all covered recipients including: compensation; food, entertainment or gifts; travel; consulting fees; honoraria; research funding or grants; education or conference funding; physician ownership or investment interests including stock and stock options; royalties or licenses; and charitable contributions.
What is out?
Small payments or gifts of $10 or less would not need to be reported unless the total annual payment amount to any covered recipient exceeds $100.
Also: educational materials that directly benefit the patient (anatomical models, wall charts, etc.), product samples for patient use, in-kind items used in the provision of charity care, discounts and rebates.
Key dates around the corner
Key dates:
August 1, 2013: Data collection begins. March 31, 2014: Required data must be submitted to CMS for
August 1 through December 31, 2013. September 30, 2014: CMS publicly posts information.
■ House and Senate bipartisan repeal legislation:
Reps. Paulsen (R-MN) and Kind (D-WI)
Senators Hatch (R-UT) and Klobuchar (D-MN)
Possible delay – Led by Senate Democrats?
4 Democrats on repeal bill
More House Democrats cosponsoring repeal this year
Device Tax – chances of repeal?
Lesser Known Measures to Watch
Long-term services and supports help older adults and people with disabilities accomplish everyday tasks (e.g., bathing, getting dressed, fixing meals, and managing a home).
Four provisions to incentivize states to shift long-term services and supports spending toward non-institutional care.
State Balancing Incentive Payments Program Money Follows the Person Rebalancing Demonstration Community First Choice Option Home and Community-Based Services State Plan Option
Home and community-based LTC options
■ The Patient-Centered Outcomes Research Institute is tasked with overseeing comparative effectiveness research (CER)
■ CER will impact provider decisions about treatment options
■ Research findings will Guide provider best practices Drive new product development Influence reimbursement decisions Encourage the cessation of some current treatment options
CER and the PCORI
Bundled payments – another step away from
FFS
Pilot project where payments are bundled for acute inpatient, physician, outpatient, post-acute services
2 Payment Types, 4 Models: paid by condition 500 healthcare organizations participating
January 1, 2013, national voluntary
pilot program begins
HHS report to Congress on
program - 2015
HHS report to Congress on final results of program, as
well as a plan for expansion - 2016
Opportunities in Uncertain Times
Opportunity #1: Tie your marketing to specific quality measures. For example…
Patient experience Patients’ ratings of doctors, how well they communicate and educate
Care coordination and patient safety COPD, congestive heart failure EHR implementation by primary care providers Screening for risk of falls
Preventive health Flu and pneumonia vaccination rates Colorectal cancer screening Blood pressure screening
Caring for at-risk populations Diabetes control (SEVERAL measures) Blood pressure control
Many opportunities are also tied to otherhealthcare reform provisions
Reducing readmissions Preventing infections Mortality measures Patient satisfaction Safety and risk management
Opportunity #2: Adapt sales approaches for a centralized, standardized world
Offer evidence-based clinical data Be prepared to deal with value analysis teams Support providers’ standardization goals
Opportunity #3: Talk about savingmoney in broader terms
Providers won’t succeed if they cut spending in one area only to add costs in another
Show customers why spending for your products or services will reduce system-wide costs
Selling in healthcare is changing fast
Yesterday/Today Today/Tomorrow
Selling to the hospitalConsulting w/ Value Analysis Teams
National, Multi-Source GPO Contracts Local, Single-Source Contracts Market Specificity Multi-Market Strategies & IDNS Cost-plus Separate Logistics Fee Price Selling Total Cost to Own Free Access to Clinicians Vendor Credentialing Clinician Demand Formularies Emphasis on Unit Price Emphasis on Outcomes