Update on Healthcare Finance
and Reform

William J. Fulkerson, M.D.
Executive Vice President, DUHS
January 24, 2014
Agenda
• 
• 
• 
• 
• 
• 

National Health Expenditures
North Carolina Environmental Scan
Federal Budget Implications
Healt...
National Health Expenditures 2012
•  Increased 3.7%
–  Total = $2.8 trillion
–  $8915/person
•  As a share of the economy,...
National Health Expenditures 2012
•  Physician and Clinical Services spending increased 4.6%
compared to 4.1% in 2011
–  N...
• 
• 
• 
• 
• 
• 

National Health Expenditures
North Carolina Environmental Scan
Federal Budget Implications
Healthcare R...
Even before the bulk of the legislation is enacted, the
Accountable Care Act has already brought changes to the
health car...
Discharges per 1,000 population

The growing North Carolina population has masked
the inpatient decline, but the rate of i...
Inpatient volume declines are offset by increasing observation
patients, resulting in an overall 2.7% volume increase over...
Hospitals are planning for reimbursement declines as DSH payments
are reduced and payment rates are cut

Source: www.hhs.g...
Inpatient payor mix is shifting away from Private payors
to an increasing portion of Medicare and Medicaid.
Coupled with d...
Decreasing reimbursement, volume declines, and payment shifts
are expediting consolidating of the hospital market.

Hospit...
ThereHospitals:	
  Mountains independent acute care hospitals remaining
are few
Independent	
  Hospitals:	
  Piedmont
Inde...
• 
• 
• 
• 
• 
• 

National Health Expenditures
North Carolina Environmental Scan
Federal Budget Implications
Healthcare R...
What is sequestration?
•  Budget Control Act of 2011
–  Aimed to reduce the federal budget over ten years
(FY 2012 through...
What is sequestration?
•  The FY2013 sequestration was the first of a series of
automatic spending reductions under the Bu...
Current state of sequestration
•  Medicare:
– 2% cap on cuts ($11 billion in 2013)
– $146 billion over 12 years, with $51....
Federal issues: The “doc fix”
•  The December budget deal incorporated a three-month
extension of the Sustainable Growth R...
• 
• 
• 
• 
• 
• 

National Health Expenditures
North Carolina Environmental Scan
Federal Budget Implications
Healthcare R...
Over 1.3 million North Carolinians are uninsured and eligible for
insurance through the Marketplace, but the variety of pl...
Federal issues: ACA implementation
•  On January 14, the Obama Administration announced that
2.2 million people have enrol...
• 
• 
• 
• 
• 
• 

National Health Expenditures
North Carolina Environmental Scan
Federal Budget Implications
Healthcare R...
NCGA Issues: Medicaid
•  Medicaid Expansion
–  NC General Assembly Leadership continues to reject
calls for Medicaid expan...
NCGA Issues: Medicaid Reform
•  First Medicaid Reform Advisory Group hearing held December 5,
where DHHS officials detaile...
NCGA Issues: Hospital Transparency
•  NC House Bill 834, passed in 2013, addresses transparency
issues applicable to hospi...
NCGA Issues: Hospital Transparency
•  Reporting of amount charged to uninsured
– 
– 
– 
– 
– 

Net of 501(r) discount
Aver...
• 
• 
• 
• 
• 
• 

National Health Expenditures
North Carolina Environmental Scan
Federal Budget Implications
Healthcare R...
Issues to Watch in 2014
•  Additional changes to the ACA implementation
–  Further delay in the employer mandate, small
bu...
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EP Summit 2014: Update on Health Care Finance and Reform

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EP Summit 2014: Update on Health Care Finance and Reform

  1. 1. Update on Healthcare Finance and Reform William J. Fulkerson, M.D. Executive Vice President, DUHS January 24, 2014
  2. 2. Agenda •  •  •  •  •  •  National Health Expenditures North Carolina Environmental Scan Federal Budget Implications Healthcare Reform North Carolina Government Activities Issues to Watch All Rights Reserved, Duke Medicine 2007
  3. 3. National Health Expenditures 2012 •  Increased 3.7% –  Total = $2.8 trillion –  $8915/person •  As a share of the economy, decreased from 17.3% in 2011 to 17.2% in 2012 while the GDP rose 1% faster than healthcare at 4.6% •  Hospital spending increased 4.9% to $882.3 billion compared to 3.5% growth in 2011 –  Price and non-price factors such as use and intensity of services All Rights Reserved, Duke Medicine 2007
  4. 4. National Health Expenditures 2012 •  Physician and Clinical Services spending increased 4.6% compared to 4.1% in 2011 –  Non-price factors accelerated •  Prescription Drugs grew 0.4% to $263.3 billion compared to 2.5% growth in 2011 –  Blockbuster drugs lost patent protection in late 2011 and in 2012 •  Lipitor, Plavix, Singulair, Tricor to name a few •  Medicare spending grew 4.8% down from 5.0% in 2011 •  Medicaid spending grew 3.3% up from 2.4% growth in 2011 •  Out of pocket spending grew 3.8% up from 3.5% in 2011 reflecting higher cost-sharing All Rights Reserved, Duke Medicine 2007
  5. 5. •  •  •  •  •  •  National Health Expenditures North Carolina Environmental Scan Federal Budget Implications Healthcare Reform North Carolina Government Activities Issues to Watch All Rights Reserved, Duke Medicine 2007
  6. 6. Even before the bulk of the legislation is enacted, the Accountable Care Act has already brought changes to the health care environment in North Carolina Inpatient volume declines Negative operating margins Observation volume increases Hospital consolidation Declining reimbursements According to the North Carolina Hospital Association, 1/3 of hospitals operate in the red and 1/3 have operating margins between 0 – 5%. ACO partnerships 6 All Rights Reserved, Duke Medicine 2007
  7. 7. Discharges per 1,000 population The growing North Carolina population has masked the inpatient decline, but the rate of inpatient utilization fell nearly 8% since 2008. 7.8% 7 All Rights Reserved, Duke Medicine 2007 Source: Truven Health
  8. 8. Inpatient volume declines are offset by increasing observation patients, resulting in an overall 2.7% volume increase over the past year. 1.2% 1,377,596 2.7% 1,393,786 1,431,083 2010 2012 Population 9,345,823 9,476,534 9,608,371 Per 1,000 Rate All Rights Reserved, Duke Medicine 2007 2011 147.40 147.08 148.94 Source: Annual State Medical Facility Plans and Hospital License Renewal 8 Applications, Census Note: Per 1,000 rate is combined discharges and OBs per 1,000 population
  9. 9. Hospitals are planning for reimbursement declines as DSH payments are reduced and payment rates are cut Source: www.hhs.gov, US Department of Health & Human Services 9 All Rights Reserved, Duke Medicine 2007
  10. 10. Inpatient payor mix is shifting away from Private payors to an increasing portion of Medicare and Medicaid. Coupled with declining volumes, this resulted in a decrease of nearly 26,000 private pay discharges over the past 5 years. Inpatient Discharges, NC Hospitals, FFY 2008 – 2012 10 Source: Truven Health All Rights Reserved, Duke Medicine 2007
  11. 11. Decreasing reimbursement, volume declines, and payment shifts are expediting consolidating of the hospital market. Hospital Changes FFY 2013 •  Cone Health managed by CHS starting October 2012 •  Central Harnett Hospital (managed by WakeMed) opened January 2013 •  High Point Regional managed by UNC Health System in March 2013 Duke  University  Health  S in May 2013 •  Caldwell Memorial managed by UNC Health Systemystem Hospital County #  of  Beds •  Alamance Regional joined Cone Health in May 2013 Duke  Raleigh  Hospital Wake 186 Anticipated Hospital Changesegional  2014 Duke  R FFY Hospital Durham 316 •  Vidant Health closing Pungo University  Hospital Duke   Hospital Durham 924 •  Johnston Health joining UNC Health System •  Wilson Memorial joining DLP •  Rutherford Hospital joining DLP •  MedWest Swain, MedWest Haywood, and MedWest joining DLP 11 Notes: All Rights Reserved, Duke Medicine 2007
  12. 12. ThereHospitals:  Mountains independent acute care hospitals remaining are few Independent  Hospitals:  Piedmont Independent   Hospital County #  of  Beds Partner Alleghany  Memorial  Hospital Alleghany 41 QHR Hugh  Chatham  Memorial  Hospital Hospitals:  Mountains 81 Alliant Surry Independent   MedWest  Harris Jackson 86 Partner Hospital County #  of  Beds CHS* MedWest  Haywood Hospital Haywood 153 CHS* Alleghany  Memorial   Alleghany 41 QHR MedWest  Swain emorial  Hospital Swain 48 CHS* Hugh  Chatham  M Surry 81 Alliant Northern  Hospital  of  Surry  County Surry 100 QHR MedWest  Harris Jackson 86 CHS* Park  Ridge  Health Henderson 62 CHS* MedWest  Haywood Haywood 153 Park  Ridge MedWest  Swain Swain 48 CHS* Northern  Hospital  of  Surry  County Surry 100 QHR Park  Ridge  Health Henderson 62 Park  Ridge Independent  Hospitals:  Coastal  Plains Hospital County #  of  Beds Partner CarolinaEast  Medical  Center Craven 307 Carteret  General  Hospital Carteret 135 Halifax  Regional  Medical  Center Halifax 184 J.  Arthur  Dosher  Memorial  Hospital Brunswick 36 Lenoir  Memorial  Hospital Lenoir 218 Martin  General  Hospital Martin 49 Nash  General  Hopital Nash 270 Onslow  Memorial  Hospital Onslow 162 Our  Community  Hospital Halifax 20 Sampson  Regional  Medical  Center Sampson 116 Southeastern  Regional  Medical  Center Robeson 292 Washington  County  Hospital Washington 49 HMC/CAH Wayne  Memorial  H 2007 Wayne 255 All Rights Reserved, Duke Medicineospital Hospital Catawba  V alley  Medical  Center Gaston  Memorial  Hospital Granville  Health  System Iredell  Memorial  Hospital Morehead  Memorial  Hospital North  Carolina  Specialty  Hospital Pioneer  Community  Hospital  of  Stokes Randolph  Hospital Yadkin  V alley  Community  Hospital County #  of  Beds Catawba 200 Gaston 372 Granville 62 Iredell 199 Rockingham 108 Durham 18 Stokes 53 Randolph 145 Yadkin 22 Partner QHR National  Surg Pioneer HMC/CAH 12
  13. 13. •  •  •  •  •  •  National Health Expenditures North Carolina Environmental Scan Federal Budget Implications Healthcare Reform North Carolina Government Activities Issues to Watch All Rights Reserved, Duke Medicine 2007
  14. 14. What is sequestration? •  Budget Control Act of 2011 –  Aimed to reduce the federal budget over ten years (FY 2012 through FY 2021) –  Implemented budget sequestration, which are the automatic, across-the-board budget cuts to federal programs and spending; split cuts evenly between defense and non-defense spending –  mandated a 2% cut in Medicare provider payments •  The sequester was designed to be equally unpalatable to both parties in order to serve as an impetus for both sides to compromise on reducing the federal deficit. Page 14 All Rights Reserved, Duke Medicine 2007
  15. 15. What is sequestration? •  The FY2013 sequestration was the first of a series of automatic spending reductions under the Budget Control Act. –  Across-the-board cuts of $85.3 billion in FY 2013 funding took effect on March 1, 2013 •  The FY2014 sequestration originally required cuts of $109 billion evenly split between defense and non-defense spending. –  A budget deal enacted in December 2013 reduced the FY2014 sequester (i.e., bolstered discretionary spending) by $45 billion. –  The deal also extended the 2% cut to Medicare providers for two additional years, 2022 and 2023, achieve deficit savings. Page 15 All Rights Reserved, Duke Medicine 2007
  16. 16. Current state of sequestration •  Medicare: – 2% cap on cuts ($11 billion in 2013) – $146 billion over 12 years, with $51.8 billion direct to hospitals •  Medicaid: Exempt from cuts •  NIH: FY2012 budget of $30.6 billion; reduced by sequestration to a program level of $29.3 billion in FY13 (President’s FY14 request: $31.3 billion; FY14 Budget Deal: $29.9 billion) Page 16 All Rights Reserved, Duke Medicine 2007
  17. 17. Federal issues: The “doc fix” •  The December budget deal incorporated a three-month extension of the Sustainable Growth Rate (SGR) formula for Medicare payments to health care providers •  The deal prevented a 20.1% cut in reimbursements for providers treating Medicare patients and replaced it with a 0.5 percent increase until April 1, 2014. •  Committees of jurisdiction in the House and in the Senate have approved bipartisan legislation to repeal the SGR and replace it with a quality-based fee-for-service payment system •  Combines PQRS, Value-Based Payment Modifier and Meaningful Use programs •  Neither proposal includes an offset to pay for the cost of repealing the SGR, estimated at $139.1 billion over 10 years. •  Repeal legislation will likely pass before the March 31 expiration of the current SGR patch; it may not include a pay-for. Page 17 All Rights Reserved, Duke Medicine 2007
  18. 18. •  •  •  •  •  •  National Health Expenditures North Carolina Environmental Scan Federal Budget Implications Healthcare Reform North Carolina Government Activities Issues to Watch All Rights Reserved, Duke Medicine 2007
  19. 19. Over 1.3 million North Carolinians are uninsured and eligible for insurance through the Marketplace, but the variety of plans is limited. •  •  73% have a full-time worker in the family 37% are 19-34 years old BCBSNC and Coventry Health Care of the Carolinas are offering plans through the exchange –  BCBSNC selling 26 policies in all 100 counties –  Coventry selling 25 policies in 39 counties (>60% of the population), including a Duke-cobranded product Ø  Co-pay for the Duke-Coventry product is lower than the BCBS options Source: www.hhs.gov, US Department of Health & Human Services, www.healthcare.gov 19 All Rights Reserved, Duke Medicine 2007
  20. 20. Federal issues: ACA implementation •  On January 14, the Obama Administration announced that 2.2 million people have enrolled in health insurance via the marketplaces. Of those, 11% were previously uninsured. •  In North Carolina: –  175,515 completed an application for coverage –  107,778 individuals selected a marketplace plan; •  70% chose Silver plan level •  89% eligible to receive subsidy –  31,279 individuals were assessed eligible for Medicaid/CHIP by the federally-facilitated marketplace in NC –  Of those who selected a plan, 23% are ages 18-34 •  NC had the fifth highest number of people who selected a marketplace plan, behind CA, NY, FL, and TX. Page 20 All Rights Reserved, Duke Medicine 2007
  21. 21. •  •  •  •  •  •  National Health Expenditures North Carolina Environmental Scan Federal Budget Implications Healthcare Reform North Carolina Government Activities Issues to Watch All Rights Reserved, Duke Medicine 2007
  22. 22. NCGA Issues: Medicaid •  Medicaid Expansion –  NC General Assembly Leadership continues to reject calls for Medicaid expansion, most recently when Governor Pat McCrory dismissed a special legislative session request in October. •  Medicaid Reform –  The Medicaid Reform Advisory Group was created in November 2013 to draft and deliver a reform proposal to the General Assembly by March 2014. –  Its membership includes: Dennis Barry (Guilford), Peggy Terhune (Randolph), Dr. Richard Gilbert (Mecklenburg), Rep. Nelson Dollar (R-Wake) and Sen. Louis Pate (RWayne). Page 22 All Rights Reserved, Duke Medicine 2007
  23. 23. NCGA Issues: Medicaid Reform •  First Medicaid Reform Advisory Group hearing held December 5, where DHHS officials detailed a reform plan that aims to: –  Develop a model for regional contracting (6-7 total) based on health care usage patterns –  Avoid interregional movement of Medicaid dollars –  Exclude MH/DD/SA services –  Include progression over time to more risk transfer –  Provide opportunities for homegrown provider-sponsored networks and established MCOs –  Consider measures to preserve existing safety net supplements –  Include provisions for transparency, quality assurance and performance metrics. •  Second meeting held January 15; opportunity for public comment Page 23 All Rights Reserved, Duke Medicine 2007
  24. 24. NCGA Issues: Hospital Transparency •  NC House Bill 834, passed in 2013, addresses transparency issues applicable to hospitals and ASCs •  The 100 “most frequently reported” DRGs and 20 “most common” outpatient surgical and imaging procedures must be reported to the Medical Care Commission (MCC), including: –  –  –  –  –  Amount charged to uninsured patient and amount received Amount paid by Medicare and Medicaid Range and average payment for 5 private insurance plans Quarterly reporting beginning mid to late 2014. DUHS AVP Stuart Smith serves on the MCC Advisory Group •  MCC will identify procedures and DRGs based on a state-wide data set. It also will decide on releasing the data on an individual or group basis. Page 24 All Rights Reserved, Duke Medicine 2007
  25. 25. NCGA Issues: Hospital Transparency •  Reporting of amount charged to uninsured –  –  –  –  –  Net of 501(r) discount Average of charge to all patients Facility option of reporting fiscal or calendar year Facilities report median and range Report only on DRGs/CPTs with sufficient volume •  Hospitals must connect to the NC Health Information Exchange (HIE) and provide clinical information on Medicaid patients. –  NC HIE recently requested a mandatory connection fee •  Transparency bill mandates fair billing and collection practices –  No duplicative charging or charging for procedures not received (target is outpatient radiology services); itemized bills All Rights Reserved, Duke Medicine 2007 Page 25
  26. 26. •  •  •  •  •  •  National Health Expenditures North Carolina Environmental Scan Federal Budget Implications Healthcare Reform North Carolina Government Activities Issues to Watch All Rights Reserved, Duke Medicine 2007
  27. 27. Issues to Watch in 2014 •  Additional changes to the ACA implementation –  Further delay in the employer mandate, small business insurance exchange –  SCOTUS hearing and ruling on birth control coverage and faith-based employers •  Federal debt ceiling •  Medicaid Reform Advisory Group activities •  NC HIE – connection fee All Rights Reserved, Duke Medicine 2007

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