Payer Market Trends Contracting Implications

1. Payer Market Trends Contracting Implications Frederick Memorial Healthcare System

2. Consumer Directed Health Plans • Consumer stakeholder - High Deductible, low premium insurance combined with Tax Advantaged spending or savings account • HSA and HRA employer tax advantages • HSA – Operates like IRA, employee and employer can fund, employee vested, portable • HRA – Employer funds as incurred, no vesting, rolls over • May include wellness incentives • Lower premiums, deductible credits • Decision making tools • 25-30% health plans CDHP by 2010 ?

3. Consumer Directed Health Plans • How did we get here? • Insurance Premiums & healthcare cost outpace increases in income • Rise in number of employers not offering benefits • Institute of Medicine 2001 study identified need to redesign payment to encourage change • 3 Principles – incentives to decrease errors and waste, increase accountability through consumer transparency • CDHP attractive to legislators, employers and employees

4. CDHP Implications • Concerns • Patients delaying care, will CDHP cause higher cost in long term? Impact to Physician performance ratings. • HMO risk pool losing healthy population • Providers unprepared for increase self pay collections • Rise in medical credit debt • Transparency of healthplan denials – patient confusion • 3-fold increase in Accounts Receivable

5. CDHP Implications • IT solutions – • Payer branded debit card access to FSA/HRA/HSA • Payer acting as creditor pays provider 100%, charges patient prime rate interest, UHC Exante Bank, AETNA Bank of America, BCBS Blue Healthcare Bank, CIGNA E-pass card • Credit card company HSAs (Wachovia, BBT, Bank of America, pay provider 100%, interest rates vary) • Ingenix link to practice mgmt system • Future – Real time POS transactions like pharmacies

6. Be prepared • Financial Counselors • Pre-visit financial counseling – staff educated regarding contracted rates, cost estimates, multiple payment options • Up front collection of copay, deductible and coinsurance • Protocols for patients with insufficient income • How to respond if patient wants discount off contracted rate? • Simple measures such as financial penalty for nonpayment at time of service, prime rate interest • OIG limitation on accepting < Medicare rate • Consider available IT solutions i.e.: Ingenix example • Update Bank merchant services • Quality and service value story beyond cost

7. Pay for Performance • Medicare taking lead • Hospitals – FY05-07 P4P, Oct 2008 non-payment for errors, Present on Admission (lower payment for hospital acquired illness/infection), HCAHPS • HCAHPS – Patient perspective survey, failure to report results in loss of 2% annual payment update in FY08 • Physician Quality Reporting Initiative, 74 indicators – select min. of 3, report on patients in the category, 1.5% bonus • Data available to patients on CMS web site • Medicare progression - pay to report, pay to perform, non-payment for errors and poor performance

8. Commercial Payer P4P • Health plan P4P programsin Frederick County • Payer Tools – • Efficiency – ETGs and Marketbasket System • Ingenix comparison to evidence based guidelines for 25 conditions • Bridges to Excellence - NCQA, HEDIS • Credentials - ABIM certification • Hospital comparison tools: Leapfrog, # patients treated, complications, mortality, LOS, AHRQ, JCAHO, CMS, cost data FMH

9. Bridges to Excellencewww.bridgestoexcellence.org • National employer/provider coalition • Institute of Medicine 2001 study decrease errors and waste, increase accountability by increasing transparency to consumer • BTE standards for outpatient performance • NCQA – Diabetes, Stroke and Physician Practice Connections – monitoring & management systems, standing orders, evidence based treatment. • BTE employers paid $4.7 million to 1600 providers since 2006 • Carefirst reimburses MDs cost of NCQA, United 20% discount

10. Frederick Payer P4P Incentives – • CIGNA financial • United administrative • AETNA financial and deselection • Carefirst new program in 2008 • All refer to BTE/NCQA for future programs • Renegotiation impact

11. P4P & CDHP Alignment • CDHP members have financial incentives to review P4P information • Be aware – practice rating and peer rating • Leverage strong performance

12. Contracting Challenges • Consumer Directed Health Plans – • Capitation – monitor utilization and volume of patients • Risk for collection – should belong to health plan • Cost of billing administration • Differential rates by product • Watch for contracts that disallow up front collection • Pay for Performance – • Payer must pay 100% of contracted fee schedule • Require disclosure of impact of your rating, product deselection • Payment for record copies • Leverage good performance

13. Legislative Watch • Medicare physician rate reduction • Study Maryland Payer Market – MD 25%ile of states for reimbursement • CDHP – force payers to be creditor • CDHP - prompt pay protections gone • P4P costs – IT and other expenses • Network adequacy standards - Medicaid • Non-par payment rate formula and acceptance of non-par assignment • Act - Educate your Delegation!

14. More information • Pay for Performance – www.hhs.gov/valuedriven/ www.hospitalcompare.hhs.gov www.leapfroggroup.org www.bridgestoexcellence.org www.ncqa.org,programs, physician recognition www.unitedhealthcareonline.com, clinical resources, performance measurement www.aetna.com, doing business with AETNA, healthcare transparency

15. Contracting Resources • AMA www.ama-assn.org/ • MedChi www.medchi.org • MGMA www.mgmamd.org/ • HFMA www.hfma.org/ • HCPro www.hcpro.com/ • Physicians Practice Pearls newsletter, www.physicianspractice.com/ • FMH – Jennifer Teeter, 240-566-3337,jteeter@fmh.org