Health Care Reform and the Impact on Gastroenterology

1. Health Care Reform and the Impact on Gastroenterology George J. Brown, M.D., FACP President & CEO Legacy Health

2. Discussion • Legacy Health • Why “this time” is different • Oregon experiment • Hospital / Health System financial pressure • The “win-win”

3. Legacy Health

4. Legacy by The Numbers • $1.4 billion revenue • 4.1% operating margin • A+ credit rating • Market share = 27% • Medicaid market share = 35% • Charity care and bad debt = $186 million

5. Legacy Medical Group Growth and Expansion East & West

6. Why Things Are Different This Time

7. Medicare & Medicaid Spending Billions Medicare & Medicaid Spending U.S. Nondefense Discretionary Spending

8. Health expenditures projected to reach almost $5 trillion (with a “t”) by 2021 Source: Centers for Medicare & Medicaid Services, Office of the Actuary National Health Expenditures (in billions)

9. Projected Annual Growth 2006-2021 of Health Expenditures by Funding Source Health expenditures projected to outpace GDP growth; Medicaid grows with Affordable Care Act Source: Centers for Medicare & Medicaid Services, Office of the Actuary US GDP Nat’l Health Expenditures

10. Oregon Experiment

11. Oregon’s Long Term Budget

12. Cutting Oregon Medicaid to Balance the Budget: • $735 million • The total cuts needed across ALL 160 state agencies to balance the state budget • $698 million • Total cuts to the OHA budget • 95% • Percentage of allstate agency cuts that will come from the OHA budget • 88% • Percentage of all OHA cuts that will come from the Medicaid Budget • 84 % • Percentage of ALL state agency cuts being born by Medicaid

13. The Meaning of the Numbers • 42% • The percentage of all state agency cuts that will come from hospitals • 19% • The cuts to the OHA budget for providers in year 1 of the biennium • 34% • The cuts to the OHA budget for providers in year 1 and 2 of the biennium • This is an additional 15% cut after year one • The projected savings after transformation in year one is a savings to the state, not passed to providers.

14. Challenge #1 Providers: Break the Cost Curve

15. Necessity is the Mother of Invention

16. Federal government forecasts 5.4% per capita growth rates. Oregon has committed to lower growth to 3.4% annually. CCOs would achieve savings of $3.4 billion during 2014-2019 relative to the OMB forecast.

17. Waiver calls for per enrollee spending to decline from 5.4 to 3.4 percent

18. 09/2012 Budget Estimates 2013-15 2015-17 2011-13 2017-19 Two Gaps (in millions): 1) Unreformed trend & waiver maximum and 2)Waiver maximum & expenditures supported by existing revenue

20. 09/2012 Budget Estimates 2011-13 Two Gaps (in millions): 1) Unreformed trend & waiver maximum and 2)Waiver maximum & expenditures supported by existing revenue

21. Next Steps for Oregon Begin to use redesigned delivery system platform for other state contracts: Public Employees Benefit Board Oregon Educators Benefit Board Redesigned delivery system to be core component of health insurance exchange and an opportunity for private sector to participate

22. Pressures on Health Systems Capital Market Dynamics Community Benefit Definition Healthcare Reform Debt Ceiling Pressures Availability of Capital to For-Profits Federal Budget Deficit IRS Scrutiny State Budget Deficits

24. Breaking the Curve Traditional Approaches New Approaches Chronic disease management Comprehensive care and prevention Alternative payments for quality and outcomes Electronic health records New care teams, innovation Bundled payments Capitation • Cut people from care • Cut provider rates • Cut services

25. Changing Healthcare Delivery

28. IndividualsPayorsEmployersGovernment Health Care $

31. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

32. Better OutcomesHealthier PopulationsLower CostsBetter ExperiencesorBusiness Goes Away

35. “Failure to change makes you perfectly poised for a future that no longer exists.” - Eric Hoffer