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)

    1. 1. Healthcare Reform: Winners and Losers May 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
    2. 2. John R. Boettiger, Jr., CFA, ASA Principal, Deloitte Financial Advisory Services LLP ACG Dallas, TX May 20, 2010 Health Reform 2010: The Patient Protection and Affordable Care Act
    3. 3. Copyright © 2010 Deloitte Development LLC. All rights reserved.2 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 The U.S. health system today: fragmented, sectarian expensive, complicated, disconnected ($7,681 per capita BIOTECH Innovators Administrators/Watchdogs Service Providers Physicians HCIT Pharma Device Hospitals Outpatient Facilities Insurers Regulators Long Term Care BioTech Professional Societies/ Special Interests Accrediting Agencies Disease Management Employers CAM Media Academic Medicine Consumers Allied Health Professionals Disruptors
    4. 4. Copyright © 2010 Deloitte Development LLC. All rights reserved.3 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 Uninsured Percent uninsured by age group Health care since the Clinton era The economy was beginning its downturn * 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. Health care spending As percentage of gross domestic product Insurance premiums Cumulative growth Cost of workers Average monthly worker premium contributions The New York Times
    5. 5. Copyright © 2010 Deloitte Development LLC. All rights reserved.4 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 Health reform circa 2010 is the convergence of four forces that produced a “new normal” Health Reform: Federal State Economic downturn • Transformational themes • Burning platforms • Innovations • Trends Health costs • Medicaid& Medicare • Employers • Out of pocket • Indirect Consumerism & politics • System value proposition • Costs & satisfaction • Political mood Disruptive technologies • Retail medicine • Nanotechnology • Informatics • Personalized Medicine
    6. 6. Copyright © 2010 Deloitte Development LLC. All rights reserved.5 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 I’m OK, you’re not OK! (excerpt from publicly available document)
    7. 7. Copyright © 2010 Deloitte Development LLC. All rights reserved.6 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 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 Three Major Goals 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 Patient Protection and Affordable Care Act and companion legislation address three big issues…
    8. 8. Copyright © 2010 Deloitte Development LLC. All rights reserved.7 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 “New normal” cross sector implications: sustainability, trust, value keys Transparency Cost reduction Results • Value-based purchasing • Outcomes • Regulatory compliance • Social responsibility • Parity & fairness • Workforce diversity, training • Supply chain • Health & human services • Profits & compensation • Business practices • Relationships • Results • Consumers • Supply chain • Fraud and waste • Variation Profit with purpose
    9. 9. Copyright © 2010 Deloitte Development LLC. All rights reserved.8 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 The impact of major reforms in PPACA … Major Reforms Providers Health Plans Biotech & Drugs Medical Devices Employers States Federal agencies Comparative Effectiveness -2 +1 -3 -1 +2 +1 +1 Delivery system reforms (ACOs, EPGs, MH, PN) -2 +1 -2 -2 +2 -1 +2 Employer Mandates +1 +2 +1 +1 +1 to -2 0 +1 Individual Mandates +1 +1 +1 +1 +1 to -2 + +1 Insurance Regulatory Reforms (Exchanges, MLR, limits, etc) -1 -3 -1 -1 -1 +1 +1 Medicare payroll taxes -1 -1 -1 -1 -3 -1 +2 Medicare cuts -2 -1 -2 -1 -1 -2 +2 Industry taxes -1 -2 -2 -2 -1 0 0
    10. 10. Copyright © 2010 Deloitte Development LLC. All rights reserved.9 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 Successful organizations will respond proactively to these realities Sector implications: the new normal (big questions) 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?
    11. 11. Copyright © 2010 Deloitte Development LLC. All rights reserved.10 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 Visit our website to subscribe to our content: www.deloitte.com/CenterforHealthSolutions/subscribe 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
    12. 12. Copyright © 2010 Deloitte Development LLC. All rights reserved.11 Deloitte Center for Health Solutions, Health Reform, 04-02-2010 Contact information For more information, please contact: John R. Boettiger, Jr., Principal Deloitte Financial Advisory Services, LLP jboettiger@deloitte.com 713-982-2374 Paul H. Keckley, Ph.D., Executive Director Deloitte Center for Health Solutions pkeckley@deloitte.com 202-220-2150 Isabel Ortiz, Marketing Manager Deloitte Services LP iortiz@deloitte.com 713-982-2623 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
    13. 13. Copyright © 2010 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu
    14. 14. LHP Hospital Group, Inc. May 20, 2010 Presentation to
    15. 15. 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”
    16. 16. Number of Community Hospitals,(1) 1988 – 2008 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 available to 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. (2) All Hospitals Urban Hospitals Rural Hospitals Challenges Facing America’s Hospitals We’ve lost nearly 500 hospitals since 1988.
    17. 17. Percentage of Hospitals with Negative Total and Operating Margins, 1995 – 2008 Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals. Negative Operating Margin Negative Total Margin Challenges Facing America’s Hospitals Approximately one third of hospitals lose money
    18. 18. Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare, and Medicaid, 1988 – 2008 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 Commercial insurers subsidize govt. payers
    19. 19. Number of Bond Rating Upgrades and Downgrades, Not- for-Profit Health Care(1), 1993 – 2008 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. Upgrades Downgrades 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 60 40 20 0 20 40 60 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 60 40 20 0 20 40 60 Challenges Facing America’s Hospitals Downgrades have consistently exceeded upgrades
    20. 20. Challenges Facing America’s Hospitals 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. These challenges are profoundly impacting hospitals across the board. Hospitals in all categories are attempting to: For many, if not most, this means at least considering some form of a joint venture or affiliation option.
    21. 21. 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.
    22. 22. 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
    23. 23. 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
    24. 24. 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.
    25. 25. Chuck Dowling, US Oncology SVP
    26. 26. Copyright © 2010 US Oncology, Inc. All rights reserved. 25 US Oncology: THE largest national oncology network 5 Source: Sloan-Kettering, MD Anderson, and Mayo Clinic
    27. 27. Copyright © 2010 US Oncology, Inc. All rights reserved. 26  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 Our Challenges
    28. 28. Copyright © 2010 US Oncology, Inc. All rights reserved. 27  Size and scale  Strong brand  Clinical depth  Care management  Productive resources  Technology  Employees Staying ahead of external pressures in the marketplace will require:
    29. 29. Copyright © 2010 US Oncology, Inc. All rights reserved. 28  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 Integration – Consolidation – Access Texas Oncology’s Answer to Size and Scale
    30. 30. Copyright © 2010 US Oncology, Inc. All rights reserved. 29 Built Strong Through Innovation, Quality and Customer Service
    31. 31. 30
    32. 32. 31 The HR Department for Small Business
    33. 33. 32 Company Employment Relationship Employee Employment Relationship Without Administaff
    34. 34. 33 Service Agreement Employment Relationship 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 • Manage Change • Align People Client Company Employee Employment Relationship Employment Relationship With Administaff
    35. 35. 34 New Regulations Since 1900 By 1940 FUTA FLSA FICA NLRA Common Law Case Law Local Laws State Laws By 1980 PDA ERISA OSHA ADEA CRA FUTA FLSA FICA NLRA Common Law Case Law Local Laws State Laws TodayBy 1900 Common Law Case Law Local Laws State Laws The Growing Burden of Employment Regulation PPACA HCEARA ARRA HIRE GINA HEART MHPAEA WRERA PPA AJCA MMA EGTRRA WHCRA TRA ’97 SBJPA HIPAA MHPA NMHPA USERRA URA FMLA UCA ADA DFWA IRCA TRA ’86 COBRA DEFRA REA TEFRA PDA ERISA OSHA ADEA CRA FUTA FLSA FICA NLRA Common Law Case Law Local Laws State Laws
    36. 36. 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
    37. 37. 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
    38. 38. 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!”
    39. 39. What are the issues? • Fast on-boarding of new employees • Risk management (compliance/liability) • Employee morale • Strategic alignment (culture/goals)

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