Healthcare Reform and the Impact on Healthcare Manufacturers


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A renowned expert on health care and health care law, Linda Rouse O’Neill, Vice President of Government Affairs at HIDA shared this presentation at AORN's 60th Annual Congress in early March 2013. These slides provide an overview of the current (and future) state of health care in the U.S. including the sequestration, the Affordable Health Care Act, and other pressing issues that affect the health care industry.

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Healthcare Reform and the Impact on Healthcare Manufacturers

  1. 1. Healthcare Reform and the Impact on Healthcare Manufacturers Linda Rouse O’Neill Vice President, Government Affairs March 5, 2013
  2. 2. 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
  3. 3. Sequestration and Healthcare
  4. 4. 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 Feb-March Showdown Sequestration Mid-Feb Debt Limit Mid-Feb POTUS State of the Physician Pay Cut Union Address 2001/2003 Tax Cuts Mid-Feb President’s Budget Goes to Congress Tax Extenders March 1 2% Budget Sequestration Payroll Tax Holiday Kicks In March 27 Federal Funding Alternative Minimum Tax Appropriations Expire
  5. 5. 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 © 2012 Copyright Health Industry Distributors Association. All rights reserved.
  6. 6. 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.
  7. 7. Status of Reform
  8. 8. 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 -  CLASS Act for Long-Term Care 2014 Insurance – On Hold Employer Mandate - 2014  Independent Payment Advisory Board – No Nominations Yet Guaranteed Coverage for Pre-  Comparative Effectiveness existing Conditions - 2014 Research (PCORI) – In Effect Premium Tax Credits - 2014  Medicare Provider Cuts – 2012 Ban on Coverage Limits – In  Medical Device Tax - 2013 Effect
  9. 9. Reform hinges on insured population
  10. 10. 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 yearSource: Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision. Congressional Budget Office. July 2012.
  11. 11. Expectations for 2014 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
  12. 12. Status of ReformProvider Impact
  13. 13. Payment Drivers are Changing Mandatory  Emphasis on Coming to a market near you! quality  Value-based purchasing  Readmissions policy  Skin in the game  Infection policies  Reduced costs Voluntary  Accountable care organizations (ACOs)  Bundled payment pilot program
  14. 14. Value-based Purchasing (VBP)Rewards QualityValue-based Purchasing1Hospital Medicare reimbursement will be tied to performance on processmeasures, outcomes for certain clinical conditions, and patient experiencemeasures.More than 3,000 hospitals are requiredto participate21% of Medicare hospital reimbursement is tiedto VBP in the first year, equivalent to $850 million.Four quality measures will be addedOctober 1, 2013 (FY2014).Now, more than ever, hospitals need helpmaximizing their reimbursement 1 Centers for Medicare and Medicaid Services (CMS). 2 CMS. FY2013 Program: Frequently Asked Questions about Hospital VBP. March 9, 2012.
  15. 15. 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 20 • 8 Patient Experience of Care (Hospital Consumer Assessment of Healthcare Providers and Systems – HCAHPS) FY2014 • 12 Clinical Process of Care 24 • 9 Patient Experience of Care (Hospital Consumer Assessment of Healthcare Providers and Systems – HCAHPS) • 3 Mortality CMS will assess each hospital’s improvement from the baseline period performance to the performance period.
  16. 16. Hospital readmissions reduction program isunderway 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
  17. 17. Readmissions reduction - $280 million in 2013  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 HospitalSource: Rau, Jordan. “Medicare To Penalize 2,217 Hospitals For Excess Readmissions.”Kaiser Health News. August 13, 2012. © 2012 Copyright Health Industry Distributors Association. All rights reserved.
  18. 18. 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
  19. 19. MULTIPLE PENALTIES = 1 CONDITION*Hospital-acquired Conditions Medicare Value-based 1% cut per health Medicaid preventable (not eligible for higher purchasing reform policy conditions payment) (not eligible for higher payment) (FY2008) (FY2013)** (FY 2015)*** (July 1, 2012)Catheter associated UTI X ? ? XSurgical site infections X ? ? XVascular cath-assoc infection X ? ? XForeign object retained after surgery X ? XAir embolism X ? XBlood incompatibility X ? XPressure ulcer stages III or IV X ? XFalls and trauma X ? XDVT/PE after hip/knee replacement X ? XManifestations of poor glycemic control X ? XVentilator associated pneumonia ? ?MRSA ? ?Clostridium difficile ? ?Central line assoc. blood stream infection X (New-FY2013) X (New-FY2013) * 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 ** 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.
  20. 20. Hospital payment tied to performance % of hospital pay tied to performance ACO amount is unknown and depends on physician participation/ pay model © 2012 Copyright Health Industry Distributors Association. All rights reserved.
  21. 21. What is an ACO?Groups of healthcare providers who contract with a payer to work together to coordinate care, meetperformance benchmarks on quality measures, and reduce overall cost to provide care.Specifically ACO providers agree to work together to: Perform wellCoordinate Reduce Share in achieved on qualitypatient care spending cost savings measures
  22. 22. Each ACO is unique FEDERAL ACO PRIVATE SECTOR PROGRAMS ACOS Healthcare 32 - Pioneer 221- Medicare Providers ACO Demo Shared Savings Program Insurers 6 - Physician Group Practice Demo Advanced Payment Model ACOsThe framework, or rules, for each ACO depends on the “payer”
  23. 23. Other Key Provisions
  24. 24. 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.
  25. 25. Gift disclosure final ruleWhat 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.
  26. 26. 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.
  27. 27. Device Tax – chances of repeal? ■ 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
  28. 28. Lesser Known Measures to Watch
  29. 29. Home and community-based LTC options 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  
  30. 30. CER and the PCORI■ 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
  31. 31. Bundled payments – another step away fromFFS 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, HHS report to Congress on HHS report to Congress on national voluntary final results of program, as pilot program program - 2015 well as a plan for expansion - begins 2016
  32. 32. Opportunities in Uncertain Times
  33. 33. Opportunity #1: Tie your marketing to specificquality 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
  34. 34. Many opportunities are also tied to otherhealthcare reform provisions Reducing readmissions Preventing infections Mortality measures Patient satisfaction Safety and risk management
  35. 35. Opportunity #2: Adapt sales approaches for acentralized, standardized world Offer evidence-based clinical data Be prepared to deal with value analysis teams Support providers’ standardization goals
  36. 36. 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
  37. 37. Selling in healthcare is changing fast Yesterday/Today Today/Tomorrow Consulting w/ Value AnalysisSelling to the hospital TeamsNational, Multi-Source GPOContracts Local, Single-Source ContractsMarket Specificity Multi-Market Strategies & IDNSCost-plus Separate Logistics FeePrice Selling Total Cost to OwnFree Access to Clinicians Vendor CredentialingClinician Demand FormulariesEmphasis on Unit Price Emphasis on Outcomes
  38. 38. QUESTIONS? Linda Rouse O’NeillVice President, Government Affairs