Greater Memphis Chamber Breakfast Presented by Small Business Council Keynote Speaker Patrick Pilch, MBA Managing Director, BDO Consulting, LLC. Presented October 17, 2013

1. Everything You Need to Know
About the Affordable Care Act
Greater Memphis Chamber
Breakfast Presented by Small Business Council
Patrick Pilch, MBA
Managing Director, BDO Consulting, LLC.
October 17, 2013

2. Bundled Payments
Managed Care Organizations
Revenue Cycle
Cost Reports
Health Exchanges Consumer Payers
Physicians
Claims
Reimbursement
Population Health
Chronic Care
Cadillac Tax
4Rs
PHYSICIANS
Providers
Insurance
Commercial
RISK
FQHC
Health Benefits
Telehealth
Privacy
Hospitals
Medicare
Electronic Health Records
Disproportionate Share
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Patient-Centric
Uninsured
Alignment
Medicaid
Compliance
Data
Risk
Aging
Population
Urgent Care Clinics
Employer Mandate
ICD-10
Accountable Care Organization
Affordable Care Act
Capitation
Key Issues

3. Page 3

4. Healthcare Key Market Drivers
Aging Population
Rise of Chronic Diseases and Associated Costs
Population in Millions
Projected Cost for Chronic Diseases for Top Six States ($B)
CAGR = 1%
• CA
• FL
• TX
• NY
• OH
• PA
Population in Millions
Year
CAGR = 3%
$300
Billion
Population in Percentage
Year
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2.4% Increase
$108
Billion
2003
Year
2023

5. Page 5

6. In the Press
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7. Federal Budget 2012 – The Real Issues
Source of Funds
Taxes
$2.6T or 16.5% GDP
Borrowing
$1.1T or 7% GDP
All tax revenue consumed by four items:
$900B Federal health spending
$781B Social security
$676B Defense
$224B Interest
$ 2.6T
Everything else ($1.1T) funded by borrowings
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8. Federal Spending - Healthcare
Federal Spending
2011
2022
Medicare Enrollees
48M
66M
Medicare
554
1,000
Medicaid (Federal Share)
240
605
24
161
150
220
$968B
$1,986B
Affordable Care Act (ACA) Non M/M
Pentagon/VA/NIH/Other
Total
Approximate CAGR of 7%
Source: CBO
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9. Federal Budget 2022
***Assuming Current Economic Growth
Source of Funds
Taxes
$2.6T or 16.5% GDP
Borrowing
$2.2T or 14% GDP
All tax revenue consumed by two items:
$1,900B Federal health spending
$850B Social security (assumes 5 to 5.5% GDP)
$2.75T
Everything else ($2.2T) funded by borrowings including defense and
interest
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10. WHAT ARE THE IMPLICATIONS?

11. Pricing Power at Risk
• Drugs ($260B) and devices ($85B) represent 13% of healthcare spending
— Margins are 50% higher than other industrialized countries
— Ripe for targeting
• Managed Medicaid/Medicare, ACO’s
— Advanced data analytics and purchasing algorithms comparing price
• Price opacity, a cornerstone of profitability, yielding to clarity
and falling margins
• Employers’ negotiation power driving costs
out through greater transparency
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12. Behavioral and Relationships Change
 Defined
benefits to defined contribution
 Out of pocket costs will increase
 Changes in consumer behavior
 Change in employer/employee relationships
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13. Behavioral and Relationships Change
 Defined benefits to defined contribution
 Out of pocket costs are going to increase
 Employees will need to take charge of their
healthcare more
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14. Behavioral and Relationships Change
• Employees become “Healthcare Consumers”
—“What did you pay?”
— “What did you get?”
—“What was your experience like?”
• Social media/reviews become very important
• Change in strategy retention and recruitment of “Healthcare
Consumers” and Clinicians
• Experience can make or break reputation/brand and
challenge the social contract between Employer/ Employee
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15. Behavioral and Relationships Change
 What are other drivers of change in the Employer/ Employee Relationship
― Employer Mandate
- Individual Mandate
― Cadillac Tax (Begins January 1, 2018)
- Non-deductible excise tax
• 40% above $10,200 for self only/ $27,500 for more than self only
• Affects large employers and unions
― Implications:
- Changing business models
- Risk Sharing among Payers, Employers and Employees
- Outcomes and Negotiating Power of Employers
- Trust Factor
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16. Waste, Fraud and Abuse Targets
 $1 Trillion in the next two decades in the ACA (Source:
2012 White House Budget Message)
 Whistleblower Protection Act is further codified in the
ACA
 Other areas are in the financial industry are targeted
 Data analytics will become extremely important
 Know your outcomes, your data, your numbers, your
processes and employees
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17. What to do?
 Prepare
 Protect
 Plan
 In some cases, transform
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18. Thank you
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19. Jeff Walraven
Memphis Assurance Managing Partner
+1 901-680-7611 (Direct) +1 901-680-7600 (Main)
+1 615-618-7377 (Mobile)
jwalraven@bdo.com
Patrick Pilch
Managing Director
BDO Consulting, LLC
Healthcare Advisory Leader
+1 212-885-8006 (Direct)
ppilch@bdo.com
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