Health Care Reform and Your AR

1. Health Care Reform and Your AR Keystone Patient Accounts Management Association May 15, 2013 HBCS 2013

2. Jeff Porter – Member of Illinois AAHAM Presented by: HBCS HBCS 2013

3. Healthcare Reform Summary 1 3 4 5 What to Do? Agenda 6 7 Don’t Forget the Patient …And Finally… Aging Population Financial Impact 2 HIE’s and The Cost of Healthcare HBCS 2013

4. Healthcare Reform Summary

5. Health Care Reform – March 23, 2012 • 2,300 pages of text • $938B cost to implement over next decade* • 95% of Americans expected to have coverage *per Congressional Budget Office HBCS 2013

6. Goal of Healthcare Reform Provide universal healthcare • Take coverage to 95%, by adding apprx 48mm uninsured Reduce healthcare costs • 18% of GDP • Per service Improve healthcare delivery system and patient safety How are you doing preparing for this? HBCS 2013

7. Patient Protection and Affordable Care Act: March 23, 2012 • Medicare payments becoming value based pricing • Reimbursement tied to performance indicators • Fee for quality replaces fee for service • Began October 1, 2012 • Creation of state based HIE (not in IL?) • Prices based on federal poverty level scale • Three tiered plans set by price: gold, silver, or bronze coverage • Effective January 1, 2014 • Expands Medicaid Coverage • Eligibility based on higher % FPL • Most likely will reduce payments as Medicaid moves to VBP • Effective January 1, 2014 ….<9 months • No insurance denials for preexisting conditions • Development of a high risk pool subsidized by the government • Insurance becomes required for all • Tax penalty if decline insurance … who will opt out? • Effective January 1, 2014 Health Care Reform Recap HBCS 2013

8. Aging Population

9. Adults 65+ Population Soars Administration on Aging 2012 HBCS 2013 9

10. Medicare changes will be felt system wide Sequestration – March 1, 2013: 2% Cuts Medicare payments tied to quality of care Treatment will now be reimbursed by quality of service, not fee for service Private Payers and HIE’s expected to follow suit • Quality of service based on Medicare Advantage 5 star model • Readmission rates will be key 30% of Medicare reimbursement scored by patient satisfaction If you have patients in your hospital, your entire staff is on stage • Wait times • Pain Management • Communication: “How can I help?” “Have I answered all of your questions?” • Noise level in treatment rooms and hospital rooms • Quality of facility • Satisfaction with results of healthcare • Billing and collections Medicare Reform Impact on Hospitals HBCS 2013

11. Medicare to Become an Even Bigger Piece • Medicare reimbursement falls per patient, yet overall this segment of your revenue will grow and remain the largest revenue source (in 2011, the first baby boomers turned 65) • 40.4 million seniors in 2010 • 50.6 million seniors estimated by 2020 • 30k people retiring weekly – for next 20 years • Private payers will morph into Health Insurance Exchanges • Self pay classification will fall due to creation of Health Insurance Exchange, yet will not be eliminated • Unemployed still cannot afford any type of healthcare • Tax penalty less than the cost of any insurance • Ultimately end up with four categories: Medicare/Medicaid, HIE, • Self Pay and Charity Care HBCS 2013 11 11 11

12. Becker’s Hospital Review 65% patients rate their healthcare experience 9 out of 10, leaving 35% “who don’t” Of those 35%, say 40% revenue is attributable to Medicare For a $200mm hospital, then almost $30mm of your revenue could be in jeopardy… $200mm x 40% Medicare x 35% “who don’t” = $28mm Sample Numbers HBCS 2013

13. Financial Impact

14. Medicare changes • Medicare services will rise based on local senior population • Revenue will reflect value based on reimbursements • Estimate what the net effect will be on your Medicare revenue • Example: 40.9% in 2011 to 44.8% in 2014 Medicaid • Expanded participation with Reform, yet lower fees expected • Example of overall reduction of revenue 17.9% in 2011 to 17% in 2014 Health Insurance Exchanges • Example: none in 2011 to 7.5% in 2014 Self Pay … will it fall (or rise) – this is debatable • May fall due to Health Insurance Exchanges • Example: 4.9% in 2011% to 3.5% in 2014 Reform Changes and Your Hospital Revenue HBCS 2013

15. Estimated Payer Mix in 2014 One Hospital’s Perspective - $65mm Revenue Decrease HBCS 2013 15 15

16. Project Your Payer Mix The Way We’ve Always Done Things (What Now?) HBCS 2013 16 16 16 16

17. HIE’s and The Cost of Healthcare

18. Health Insurance Exchanges Must purchase insurance as of 2014 or pay tax penalty based upon Federal Poverty Level • Average tax penalty estimated to be $1,200 in 2014 • Penalty less than cost of insurance – opt out? (and still use your ED for primary care*) • If insurance price is 9.5% of individual’s AGI, then it’s “affordable” Leads to creation of Healthcare Insurance Exchanges • Web based selection and purchasing similar to travel web sites • Insurance rates set by FPL • Three tiers of plans based on coverage: gold, silver, bronze • Insurance payers will look to new Medicare rates *See 1/23/13 Patient Friendly e-Bulletin for methods of directing non-urgent ED patients to most appropriate cost care-setting Reform’s Mandatory Insurance HBCS 2013 18

19. What Will Employers Do? • Companies asking… • Cost? • Which employees have • to be covered? • Ramifications if certain • employees not covered? HBCS 2013

20. Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 2000-2010 • Every Year Since 2000: • Premiums increased between 3 - 13% • Earnings increased between 2 - 4% • Workers’ contribution: inflation = 5.4x • Workers’ contribution: earnings = 4.1x Notes: Health insurance premiums and worker contributions are for family premiums based on a family of four. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2011. Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2011 (April to April). HBCS 2013

21. Hospital Margins Continue to Fall • 750 hospitals studied for 6 years • Hospitals included: major teaching; teaching; large, medium and small community • All hospitals in the study had margins between 2.9% and 6.8% • Major teaching hospitals had the highest profit margins • Medium community hospitals struggled the most Source: Thompson Reuters Action Database 2012 HBCS 2013

22. Cost of U.S. Healthcare 17.9% of U.S. GDP was spent on healthcare in 2010 Healthcare is of growing importance on U.S. economy – S&P Dow Jones Indices replaced Kraft Foods with UnitedHealthcare Pressure to bring down healthcare costs as a result of an aging population Extra spending isn’t resulting in longer life expectancies in U.S. Just the Facts… Source: Reuters, September 23, 2012 HBCS 2013

23. Currently averaging $8,525 US Healthcare Costs Per Capita HBCS 2013

24. What to Do?

25. What Does It All Mean to You? Industry • Stress from the unknown • Increased burden on patient • Higher deductibles / co-pays Financial • Increasing cost to collect • Cost shift to front-end focus • Costly technology Business Office • Need to do more with less • New billing requirements/carriers • Large shift/volumes to balance after insurance • Costly hiring, training, re-hiring • Reporting, processes Technology • Multiple systems / platforms • System conversions • Data is not information (analytics, dashboards, scorecards, KPI) Typical Challenges… HBCS 2013

26. Factors You Are Faced With… Identify cost to collect (↓AR, ↑Cash) Opportunity costs: what is going untouched? Any low-hanging fruit? Staffing, training, turnover, re-training Tools: Charity Care / Scoring / Segmenting Workflow technology to handle volume and increase efficiencies Reporting requirements What’s Your Best Path to Meet the Challenges? HBCS 2013

27. Patient-Friendly Collections: In-House Versus Outsourced Sept 17, 2012 HFMA Patient Friendly Billing e-Bulletin Cleveland Clinic and Integris Collecting patient $ is a delicate balance Must be patient-friendly/centered Patients do not distinguish between excellent care and collection post-service (must be seamless) http://www.hfma.org/Publications/E-Bulletins/Patient-Friendly-Billing/Archives/2012/September/Patient-Friendly-Collections--In-House-Versus-Outsourced/ What Is HFMA Saying? Buy or Build: Same Issues and Goals HBCS 2013

28. Taking the Right Approach in Outsourcing August 2012 – hfm Magazine What Else Is HFMA Saying? Strategies behind outsourcing: • Seizing improvement opportunities • Remedying staffing inefficiencies • Servicing noncore areas of hospital operations • Accessing the latest clinical and business technologies • Taking advantage of the benefits of outsourcing specialization • Seizing investment opportunities • Finding the right partner: • Seamless integration • Deep and current experience • Broad capacity • Patient-centered orientation • Cost considerations • The right monitoring tools • Running a pilot • Systematic monitoring HBCS 2013

29. Crossroad: Buy or Build? (Where Are You?) HBCS 2013

30. Continuously Measure A/R Outcomes - Scorecard HBCS 2013 30

31. Developing and Keeping Top Revenue Cycle Talent Healthcare Finance Strategies – October 17, 2012 Demonstrate that accountability starts at the top (you!) Culture that prioritizes the revenue cycle – provide a clear vision for achieving high performance Reward those that excel – link advancement opportunity to achievement of revenue cycle goals Specific, measurable, attainable, relevant, timely Incentive payments to those that meet certain KPIs Top 5 Takeaways from HFMA’s 2012 MAP Award Winners (High Performance in Revenue Cycle) HFMA MAP Takeaways HBCS 2013

32. Don’t Forget the Patient!

33. The patient (aka, your #1 asset) is still experiencing… Shift to high-deductible consumer directed health plans (2009 = 7%; 2013 proj. 19% (2012 = 17%). Avg. $1,200 vs. $2,400 deductible). Source: National Business Group on Health, October 2012 Increased out-of-pocket maximums Increased share of premium costs Cutting back / delaying medical care Despite Health Care Reform and Its Unknown Implications HBCS 2013

34. Is This a Patient-Centric Approach?! HBCS 2013

35. Courtesy, Compassion and Respect When making any contact with the patient – smile (on the phone too!) This may be the first time a patient has received a phone call from you or your outsource partner Accurate patient information (including your understanding of patient’s ability to pay) is a key to collecting payment What’s Required? HBCS 2013

36. “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” -Sam Walton, Founder of Wal-Mart Who’s the Boss?! HBCS 2013

37. …And Finally…

38. Identify all high margin (or any margin) procedures Look at any procedures that are profitable at your hospital • Break down to CPT codes • Examine what makes those procedures profitable • Insurance, cost of equipment, labor costs? Duplicate success in procedures involving illnesses with projected growth Physician Alignment (3/6/13 HFMA’s Healthcare Finance Strategies)… • 4 Steps … 1) engage physician leaders as partners 2) employing specialists of choice 3) improving care coordination 4) measuring the results Maximize Self Pay Collections Now What? HBCS 2013 38

39. Individual health will drive personal cost Healthy lifestyle contract with employer or insurance company Health Plan assessment including… • Blood pressure • Body Mass Index • Cardiac health • Detrimental personal consumption (smoking, alcohol) Motivating Americans to be healthier will = COST CONTROL A Look Ahead HBCS 2013

40. Moving to a very different model – quality based reimbursement vs. fee for service Reduced Reimbursement Self Pay problems remain Consumer Driven, Market Driven Less Employees? Physician shortage – Primary care Less Utilization? Quality? Forced to cut costs – fewer employees Prevention and Wellness Impact Summary HBCS 2013

41. What Will Make You Great 5 Things to Remember… • Conviction • Must be all-in • Flexibility and Nimbleness • No crystal ball in healthcare…stay loose • Calm Demeanor • Staff is going to be looking at you • Say “we can work this out” often • Willingness to understand clinical perspective • Quality, patient satisfaction, and safety depends on it • Ability to think long term • Redirect frustration with long term focus • Sense of humor - makes people more comfortable, more trusting, more willing Studies have shown that one of the most significant factors leading to successful change is how leaders manage people. And studies have also shown that failure can most likely be contributed to our natural reluctance to change. Change is the only way to slow or reverse the financial pressures on hospitals and we are all going to have to begin providing value based products rather that relying on volume based products. HBCS 2013 41 41

42. Forecast/Model – Now! Examine Service Lines Community Education – Prevention & Wellness Physician Partnering Must Cut Costs Staff Training & Education Leadership Strategy for Self Pay Quality Measurements Clinical Efficiency Action/Takeaways HBCS 2013

43. Who Moved My Cheese? Just Ask Jack “An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” - Jack Welch, Former Chairman of General Electric HBCS 2013

44. Thank You! Jeff Porter porterj@hbcs.org 847-571-5286 www.hbcs.org