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Our view: Health reform options still on the table (1/25/10)

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  • Small Business Tax Credit:Full credit for employers with 10 or fewer employees & average annual wages of less than $25kSliding scale for employers with fewer than 25 employees & average annual wages of less than $50kLifetime Limits: Not clear if applies to limited benefits such as dental & visionPEX (Pre-Existing Conditions):In 2014, PEX eliminated for everyone regardless of ageRetiree Claims:For partial reimbursement of retiree claims, applies to 55-64 age retirees with claims between $15k-$90k per retiree
  • Restart of Medicare Tax:Tax only restarts for employee, not employerRestarts at $200k for single or $250k for marriedFSA:Reconciliation Act moves to 2013, the PPACA would implement in 2011Pay or Play:Applies to employers with 50 or more employeesCoverage & affordability provisions have separate penaltiesPenalty assessed on all employees of employer, not just affected employee(s)Reconciliation bill would waive penalty on first 30 employees and increase dollar amount of penaltiesHealth Benefit Exchanges:Not intended for individuals with access to employer provided coverageEmployers can get tax deduction for vouchers provided to qualified low income employees to purchase Exchange coverage2018 Excise Tax:Reconciliation Act moves to 2018, the PPACA would implement in 2013Tax imposed on value of coverage in excess of $8,500 for single & $23,000 for family (indexed)Higher dollar threshold to apply to 17 highest cost states
  • When a company grows through a merger or acquisition, they expect the business to improve so that the result is better than each individual company. Therefore, when you add the 2 companies together, 1 + 1 = 3.On the other hand, when you merge 2 groups of employees together, you want the end result to be one unified group of employees or 1+1 = 1!
  • Administaff has helped many clients through the process of growing through mergers and acquisitions. It is common for clients to tell us that they couldn’t have handled the acquisitions without us. Examples: One client was impressed with the speed of on-boarding the new employees. As a result, continuity was maintained and there was significantly less apprehension and unknowns for the new employees. Another client was amazed by how we assisted with the change management for their employees. Their business model calls for the continued acquisition of small Mom & Pop pharmacies where the continued success of the acquired business is heavily reliant upon the existing employees and their relationships with customers.There are 4 main categories of services that we assist with, and I’ll describe each of these in a little more detail.

Our view: Health reform options still on the table (1/25/10) Our view: Health reform options still on the table (1/25/10) Presentation Transcript

  • Healthcare Reform:Winners and LosersMay 20, 2010
    John Boettiger, Principal
    Deloitte Financial Advisory Services LLP
    jboettiger@deloitte.com
    Chuck Dowling, Senior Vice President of Regional Operations
    US Oncology
    Chuck.Dowling@USONCOLOGY.COM
    Jim Shannon, EVP Development
    LHP Hospital Group
    Jim.Shannon@lhphospitalgroup.com
    Richard Rawson, President
    Administaff
    Richard_Rawson@administaff.com
  • Health Reform 2010:The Patient Protection and Affordable Care Act
    John R. Boettiger, Jr., CFA, ASA
    Principal, Deloitte Financial Advisory Services LLP
    ACG
    Dallas, TX
    May 20, 2010
  • The U.S. health system today: fragmented, sectarianexpensive, complicated, disconnected ($7,681 per capita
    Administrators/Watchdogs
    Regulators
    Media
    Professional
    Societies/
    Special Interests
    BIOTECH
    Insurers
    Innovators
    Academic
    Medicine
    Pharma
    BioTech
    Accrediting
    Agencies
    Employers
    HCIT
    Device
    Service Providers
    Disruptors
    Hospitals
    Outpatient
    Facilities
    Long Term
    Care
    Allied Health
    Professionals
    Disease
    Management
    CAM
    Physicians
    Consumers
    View slide
  • Health care since the Clinton era
    The economy was beginning its downturn
    UninsuredPercent uninsured by age group
    Health care spendingAs percentage of gross domestic product
    Insurance premiumsCumulative growth
    Cost of workersAverage monthly worker premium contributions
    * The Children’s Health Insurance Program, created in 1997, has significantly reduced the number of low-income children who are uninsured.
    Sources: Employee Benefit Research Institute estimates of data from the Current Population Survey. Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group. Kaiser Family Foundation/HRET Survey of Employer-Sponsored Health Benefits, 1999–2008, and Kaiser analysis of data from bureau of Labor Statistics.
    The New York Times
    View slide
  • Health reform circa 2010 is the convergence of four forces that produced a “new normal”
    Economic downturn
    • Transformational themes
    • Burning platforms
    • Innovations
    • Trends
    Health costs
    • Medicaid& Medicare
    • Employers
    • Out of pocket
    • Indirect
    Health
    Reform:
    Federal
    State
    Disruptive technologies
    • Retail medicine
    • Nanotechnology
    • Informatics
    • Personalized Medicine
    Consumerism & politics
    • System value proposition
    • Costs & satisfaction
    • Political mood
  • I’m OK, you’re not OK!
    (excerpt from publicly available document)
  • Patient Protection and Affordable Care Act and companion legislation address three big issues…
    Three Major Goals
    Increased Access
    Medicaid expansion
    SCHIP expansion
    Subsidies for low income households
    Long term care expansion (new)
    Insurance reforms: pre-existing conditions, lifetime limits, premium reviews, health exchanges
    Expansion of community health services & primary care
    Improved Quality
    Comparative effectiveness
    Essential benefits: HHS
    Electronic health records
    Workforce re-design
    Delivery system integration
    LTC expansion
    Connect health & human services
    Focus: under-served populations
    Overhaul: FDA
    Overhaul: CMS
    Reduced Costs
    Comparative effectiveness
    Medical home
    Preventive health
    Bundled payments
    Accountable care organizations
    Centers for Innovation
    Value-based purchasing
    Administrative simplification
    Fraud and waste surveillance
    Leverage government purchasing power
    Independent Medicare Payment Commission
  • “New normal” cross sector implications: sustainability, trust, value keys
    Transparency
    • Profits & compensation
    • Business practices
    • Relationships
    • Results
    • Social responsibility
    • Parity & fairness
    • Workforce diversity, training
    • Supply chain
    • Health & human services
    Profit with purpose
    Cost reduction
    • Consumers
    • Supply chain
    • Fraud and waste
    • Variation
    Results
    • Value-based purchasing
    • Outcomes
    • Regulatory compliance
  • The impact of major reforms in PPACA …
  • Sector implications: the new normal (big questions)
    Successful organizations will respond proactively to these realities
    HEALTH PLANS
    • Margin pressure
    • Sector volatility, consolidation
    • Tension with providers
    • Trust and reputation
    • Innovation: financing, delivery
    • Informediation
    • Buy/sell or innovate?
    • Portfolio focus: Retail/employer/ government?
    • Build trust or manage resistance?
    PROVIDERS
    • Integration: LTC, physicians
    • Clinical redesign with HIT, teams
    • Capital scarcity
    • New competition
    • Sustainability, workforce
    • Risk: outcomes, compliance
    • Costs, margin erosion
    • Contracting: value-based, outcomes
    • Survival? Growth? Enterprise efficiency and effectiveness?
    • Capital sourcing and priorities?
    LIFE SCIENCES
    • Price pressures
    • Clinical integration
    • Comparative effectiveness
    • Consolidation/ collaboration
    • Risk management
    • Alternative health
    • Regulatory compliance
    • Better to buy/sell, or expand globally, diversify or lay low?
    • What’s the quickest path to commercialization?
  • March 29, 2010
    Monday memo
    Health reform update
    This week’s headlines (click to jump to article):
    • Health reform bills pass: What’s ahead?
    • Deloitte Tax analysis
    • Berwick named CMS head
    • Physician fix in limbo
    • Food and Drug Administration (FDA) looking at device approval process
    • Quotable
    • Fact file
    • My take
    • Subscribe to the Health Care Reform Memo
    • Deloitte Center for Health Solutions research
    • Deloitte contacts
    Visit our website to subscribe to our content:www.deloitte.com/CenterforHealthSolutions/subscribe
  • Contact information
    For more information, please contact:
    John R. Boettiger, Jr., PrincipalDeloitte Financial Advisory Services, LLPjboettiger@deloitte.com713-982-2374
    Paul H. Keckley, Ph.D., Executive DirectorDeloitte Center for Health Solutionspkeckley@deloitte.com202-220-2150
    Isabel Ortiz, Marketing Manager Deloitte Services LPiortiz@deloitte.com713-982-2623
    For more information on the Center's view of health care in the new administration, please visit: www.deloitte.com/us/healthreform
    And visit our website to subscribe to our content:www.deloitte.com/CenterforHealthSolutions/subscribe
  • Copyright © 2010 Deloitte Development LLC. All rights reserved.Member of Deloitte Touche Tohmatsu
  • LHP Hospital Group, Inc.May 20, 2010 Presentation to
  • Challenges Facing America’s Hospitals
    Declining reimbursements
    Uncertainty surrounding healthcare reform
    Increasing regulation
    Accelerating uncompensated care
    Constraints on capital access
    Aging plant and equipment
    Increased competition from niche or specialty providers
    These challenges are causing a widening divide between “haves” and “have nots”
  • Challenges Facing America’s Hospitals
    Number of Community Hospitals,(1) 1988 – 2008
    We’ve lost nearly 500 hospitals since 1988.
    All Hospitals
    Urban Hospitals
    Rural Hospitals
    (2)
    Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
    (1) All nonfederal, short-term general, and specialty hospitals whose facilities and services are availableto the public.
    (2) Data on the number of urban and rural hospitals in 2004 and beyond were collected using coding different from previous years to reflect new Centers for Medicare & Medicaid Services wage area designations.
  • Challenges Facing America’s Hospitals
    Percentage of Hospitals with Negative Total and Operating Margins, 1995 – 2008
    Approximately one third of hospitals lose money
    Negative Operating Margin
    Negative Total Margin
    Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
  • Challenges Facing America’s Hospitals
    Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare, and Medicaid, 1988 – 2008
    Commercial insurers subsidize govt. payers
    Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
    (1) Includes Medicaid Disproportionate Share payments.
  • Challenges Facing America’s Hospitals
    Number of Bond Rating Upgrades and Downgrades, Not-for-Profit Health Care(1), 1993 – 2008
    Upgrades
    Downgrades
    Source: Moody’s U.S. Public Finance. Moody’s Not-for-Profit Healthcare 2008 Year End Ratings Monitor.
    Data released January 2009.
    (1) Includes stand-alone hospitals, health systems, and human service providers.
    Downgrades have consistently exceeded upgrades
  • Challenges Facing America’s Hospitals
    These challenges are profoundly impacting hospitals across the board.
    Hospitals in all categories are attempting to:
    protect their credit ratings;
    stretch their capital spend;
    preserve their liquidity.
    And at the same time
    grow, or at least protect, market share;
    remain competitive in plant and equipment;
    improve quality;
    be opportunistic with regard to development.
    For many, if not most, this means at least considering some form of a joint venture or affiliation option.
  • LHP Response
    LHP was formed as a direct response to these challenges.
    Our purpose is to form joint ventures with not-for-profit partners to help community hospitals meet their strategic objectives.
  • Who is LHP Hospital Group?
    A privately-held hospital company based in Plano, Texas
    An experienced management team
    Former management team at Triad Hospitals, Inc.
    54 hospitals (10 JVs)
    Owners with financial and healthcare expertise
    CCMP Capital Partners (former private equity arm of JP Morgan Chase)
    Canada Pension Plan Investment Board
    A board with leading not-for-profit healthcare thought leaders
  • Our View on Health Reform
    Likely accretive on average for hospitals
    Winners and losers
    Pricing pressure
    Incentives for coordinating care
    Managing the unintended consequences
    Feels like another round of provider consolidation
  • Contact Information
    If you would like to learn more about
    LHP Hospital Group please visit
    our website at
    www.lhphospitalgroup.com
    If you would like to discuss specific points of this presentation or ask further detailed questions, please contact Jim Shannon, Executive Vice President of Development, at 972-943-1705 or by e-mail at jim.shannon@lhphospitalgroup.com.
  • Chuck Dowling,US Oncology SVP
  • 25
    US Oncology: THE largest national oncology network
    Source: Sloan-Kettering, MD Anderson, and Mayo Clinic
    5
  • 26
    Our Challenges
    Reimbursement pressures will intensify
    Payers are looking to providers to drive quality and value through cost-effective care management
    Demand will increase as providers decrease in number
    Low utilization of available technology
    Disciplined capital spend
  • 27
    Staying ahead of external pressures in the
    marketplace will require:
    • Size and scale
    • Strong brand
    • Clinical depth
    • Care management
    • Productive resources
    • Technology
    • Employees
  • 28
    Integration – Consolidation – AccessTexas Oncology’s Answer to Size and Scale
    Medical Oncologist – 245
    Radiation Oncologist – 58
    Gynecologic Oncologist – 16
    Urologist – 13
    Bone Marrow Transplant – 6
    Breast Surgeon – 5
    Hospital JV’s – 5
    Pediatric Oncologist – 4
    Breast Radiologist – 1
    Surgical Oncologist - 1
  • 29
    Built Strong Through Innovation, Quality and Customer Service
    Healthcare
    Storm
    US Oncology
  • 30
  • 31
    The HR Department for Small Business
  • 32
    Employment Relationship Without Administaff
    Employee Benefits
    Recruiting & Selection
    Employer Liability Management
    Payroll Taxes
    Company
    Manage Business
    Align People
    Employment
    Relationship
    Human Resource Management
    Employment Administration
    Policies and Practices
    Government Compliance
    Employee
    Manage Change
    Grow Business
    Training and Development
    Workers' Compensation
  • 33
    Service
    Agreement
    Administaff
    Employment
    Relationship
    Employment Relationship With Administaff
    • Human Resource Management
    • Recruiting and Selection
    • Policies and Practices
    • Payroll Administration
    • Payroll Taxes
    • Employee Benefits
    • Workers’ Compensation
    • Employer Liability Management
    • Government Compliance
    • Training and Development
    • Manage Business
    • Grow Business
    Client Company
    • Manage Change
    • Align People
    Employment
    Relationship
    Employee
  • 34
    The Growing Burden of Employment Regulation
    New Regulations Since 1900
    PDA
    ERISA
    OSHA
    ADEA
    CRA
    FUTA
    FLSA
    FICA
    NLRA
    Common Law
    Case Law
    Local Laws
    State Laws
    FUTA
    FLSA
    FICA
    NLRA
    Common Law
    Case Law
    Local Laws
    State Laws
    Common Law
    Case Law
    Local Laws
    State Laws
    By1940
    By1980
    Today
    By1900
  • Employer Impact of Patient Protection & Affordable Care Act (PPACA)
    Signed into law on March 23, 2010
    Staggered effective dates through 2018
    2010-2011 Provisions
    Small business tax credit for employers that purchase health insurance for employees
    Increase dependent coverage to age 26
    Elimination of lifetime medical plan limits
    Elimination of Pre Ex for dependents under age 19
    W-2 reporting of aggregate value of health coverage
    Recognize elimination of employer tax deduction for retiree drug subsidy
    Section 105 (h) discrimination testing for all fully insured plans
    35
  • Employer Impact of PPACA cont’d.
    2013 Provisions
    Increase in Medicare tax rate on high wage employees
    FSAs capped at $2,500
    2014 Provisions
    “Pay or Play” provisions for employers
    Must offer qualifying health coverage to full-time employees (30+ hours week)
    Qualifying coverage must be affordable
    Employer penalties for failure to comply
    States to establish Health Benefit Exchanges for individual and small markets
    Elimination of annual limits on benefits
    No waiting period over 90 days; employer penalty of $400-$600 per employee if entry requirement exceeds 30 days
    2018 Provisions
    40% excise tax on high cost medical plans
    36
  • What is the Goal?
    Business Goal:
    1 + 1 = 3
    Employee Goal:
    1 + 1 = 1
    “Administaff takes care of your people,
    so you can take care of your business!”
  • What are the issues?
    Fast on-boarding of new employees
    Risk management (compliance/liability)
    Employee morale
    Strategic alignment (culture/goals)