Sandy Baruah President and CEO Detroit Regional Chamber

2. Sandy BaruahPresident and CEODetroit Regional Chamber

3. Health Care In Transition:The Big Picture

4. Paul KeckleyFormer Executive DirectorDeloitte Center for Health Solutions

5. Ed WolkingExecutive Vice PresidentDetroit Regional Chamber

6. Handling Change: Challenges and Opportunities for Employers

7. David LanskyPresident and CEOPacific Business Group on Health

8. David Lansky, PhD President and CEO Challenges and Opportunities for Employers (and by extension, individuals and employees)2014 Health Care Leaders ForumDetroit Regional ChamberMarch 12, 2014

9. PBGH Members Apple Facebook Google Hewlett Packard Microsoft Oracle ….

10. Value of our $3 trillion system

11. SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2013. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2013; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2013 (April to April).

12. Percentage of All Firms Offering Health Benefits, 1999-2013 *Estimate is statistically different from estimate for the previous year shown (p<.05). NOTE: Estimates presented in this exhibit are based on the sample of both firms that completed the entire survey and those that answered just one question about whether they offer health benefits. The percentage of firms offering health benefits is largely driven by small firms. The large increase in 2010 was primarily driven by a 12 percentage point increase in offering among firms with 3 to 9 workers. In 2011, 48% of firms with 3 to 9 employees offer health benefits, a level more consistent with levels from recent years other than 2010. The overall 2011 offer rate is consistent with the long term trend, indicating that the high 2010 offer rate may be an aberration. SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2013.

13. Employers considering “exit” Source: 18th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care (2013)

14. Savings by “Best Performing” Employers Source: 18th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care (2013)

15. Strategies of “Best Performing” Employers Source: 18th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care (2013)

16. Strategies to Improve System Performance

17. Large Employer Strategies Benefit designwith strong incentives to consumers: • Tiered networks • Reference pricing • Centers of Excellence (travel surgery) Direct contracting: • Accountable care organizations • Primary care networks • On-site clinics with selected networks • Intensive outpatient care models (serious chronic illness) Payment reform: • Price and quality transparency  “value” based payments • Alignment among private carriers (e.g., bundled payment) • Alignment with Congress, Medicare, states (e.g., SGR fix)

18. Source: Robinson JC and Brown TT, “Increases in Consumer Cost Sharing Redirect Patient Volumes and Reduce Hospital Prices for Orthopedic Surgery.” Health Affairs 32(8), 2013, pp. 1392-1397.

19. Reference pricing forlower cost services Colonoscopy Cost Per Procedure – Greater SF Bay Area MSA • 12% increase in use of labs below reference price; 6% increase in low-cost imaging centers • Driven by steerage to specific, named providers

21. Where we are today… Fading hope that competitive market can work to manage cost, improve quality Potential of rapid shift to defined contribution, private and public exchanges in next 5-10 years Consensus interest in value-based payment, alignment of consumer and provider incentives, greater transparency for informed decisionmaking The path is clear. Will leadership appear?

23. Fast-Changing Relationships: The Road Ahead for Employers

24. Moderator: • Kathleen S. Neal, Director of Integrated Health Care & Disability, Chrysler Group, LLCFormer Executive DirectorDeloitte Center for Health Solutions • Panelists: • John Neuberger, Director of Client Partnerships, Quad/Graphics • Randy Vogenberg, Principal, Institute for Integrated Healthcare

25. Impacts of Response: The Changing Landscape for Providers

26. Carlos JacksonSenior Associate Director, Federal RelationsAmerican Hospital Association

27. The Changing Landscape for Providers Carlos Jackson American Hospital Association March 12, 2014

28. ACA implementation Wednesday, February 15Naval Heritage Center9:30 AM

29. Implementing reform • Insurance reforms • High risk pools • Medical loss ratios • Mandates • Insurance exchanges • Integrated care options • Bundling • Accountable care organizations • Medical homes • Center for Medicare and Medicaid Innovation • Value-based purchasing • Readmissions Regulatory Design

30. CMS quality and accountability initiatives provide additional impetus to hospitals’ integration efforts. Chart 3: Timeline of CMS Value-Driven Payment Initiatives • Meaningful Use (HITECH Act) Incentive Payments Only Upside/Downside Risk Penalties Only Nonpayment Accountable Care Organizations* • Bundled Payments for Care Improvement* Readmission Penalties for Low Performers Hospital-Acquired Conditions** Hospital Inpatient Quality Reporting Program (P4R) Hospital Outpatient Quality Reporting Program (P4R) Hospital Value-Based Purchasing Program 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 P4R: Pay-for-reporting HITECH: Health Information Technology for Economic and Clinical Health *Program is voluntary **In 2008, Medicare stopped paying for select hospital-acquired conditions (HAC). In FY 2015, Medicare will begin penalizing hospitals in the top quartile of Medicare HACs . Source: Centers for Medicare & Medicaid Services

31. Physicians widely anticipate increased levels of integration with partner hospitals. Chart 5: Percent of Physicians that Believe Physicians and Hospitals are Likely or Very Likely to become More Integrated in the Next 3 Years, by Medical Specialty, 2013 Source: Deloitte Center for Health Solutions (2013). Deloitte 2013 Survey of U.S. Physicians.

32. Integration helps hospitals gain efficiencies through economies of scale. Chart 6: Economies of Scale with Increasing Patient Population Fixed Costs Variable Costs* Fixed costs,such as medical technologies,are spread across each patient. The more patients that need the technology, the lower the cost per patient. Variable costs, such as labor costs, scale with the number of patients. As the number of patients increases, variable labor costs can decrease over time due to new efficiencies. 2 patients 4 patients 1 patient Source: Bond, R. (2012). American Healthcare Industrial Revolution: Economies of Scale and the Accountable Care Organization (ACO). ACODatabase.com.

33. Current legal and regulatory barriers are a deterrent to innovative clinical integration efforts. Chart 7: Legal Barriers to Integrated Care Delivery

34. Hospital Squeeze • Labor • Life-saving technology/Rx • Older, sicker patients • Redundant regulation • Liability insurance • Info technology • Emergency readiness • Government payment • Private payor pressure • New care delivery models • Rising uninsured

36. Hospital Vulnerability List Options for offsets and deficit reduction • Prospective coding offsets ($8 billion) • Site neutral payment policies • E&M code/HOPD ($10 billion) • 66 additional APCs procedures ($9 billion) • 12 procedures performed in ASCs ($6 billion) • Hospital bad-debt reductions ($20 billion) • GME reductions ($10 billion) • CAH: payment reductions and qualification criteria ($2 billion) • Post acute care ($70 billion) • IPAB expansion ($4.1+ billion) • Medicaid: • State provider assessments ($22 billion) • Medicaid DSH “rebasing”

37. Impact of site neutral payment options Medicare Margins for Hospital Outpatient Department Services 2007-2011 and Projected with MedPAC Proposed Cuts E&M Only E&M and 66 E&M, 66 and 12 Source: Medicare Payment Advisory Commission, December 2012 meeting materials and June Report to Congress.

38. President’s FY 2015 Budget Key hospital provisions • Replace remaining sequestration with other savings • Reduce GME by $14.6 billion (proposes $5.23 billion for 13,000 new residency slots through a new competitive GME program) • Strengthen IPAB ($12.9 billion) • $112 billion in post-acute cuts (site-neutral SNF/IRF, 60% rule, reduces updates) • Phase out Medicare bad-debt payments by $30.8 billion • Rebase Medicaid disproportionate share hospitals in FY 2024 for savings of $3.26 billion • Critical Access Hospitals: 101% to 100% and 10 mile designation ($2.4 billion reduction) $414 Billion in Medicare and Medicaid Cuts

40. The Two-Midnight Rule • CMS will generally consider hospital admissions spanning two midnights as appropriate for payment under the inpatient prospective payment system (PPS). • In contrast, hospital stays of less than two midnights will generally be considered outpatient cases, regardless of clinical severity. 1

41. On the Horizon:What’s Around the Corner for Providers?

42. Moderator: • Laura Appel, Vice President of Federal Policy and Advocacy, Michigan Health & Hospital Association • Panelists: • Gina Buccalo, MD, Chief Medical Officer, Partners in Care • Carlos Jackson, Senior Associate Director, Federal Relations, American Hospital Association • Michael Madden, President and CEO, The Physician Alliance

43. Lunch and Networking

45. Challenges for the Government – The Federal Response

46. Tevi TroyPresidentThe American Health Policy Institute

47. Perspectives of a Healthcare Policy Maker Tevi Troy, President The American Health Policy Institute

48. Perspectives of an insider • Policy makers inside government have different perspectives from those in the private sector.  • They are often equally competent but they're looking at things from a different angle have different bosses and different constituencies to satisfy. • In addition they are subject to different rules. The APA governs how regulations are determined and puts the development of regulations in a very tight stricture.

49. Perspectives of an insider • One of the challenges in developing the website was that policymakers had to use federal contractors, a universe with a high bar to entry, using "cost-plus" reimbursement, and requiring certifications of compliance with OFCCP, acquisition requirements, and other federal standards.  • It is true that policymakers come with results that differ from one of those in the private sector would have come up with, but much of this stems from the different perspective and the different rules the government imposes, as well as their lack of private sector experience.

50. Coping with a Challenging and Uncertain Regulatory Environment • Health care faces significant policy challenges. • Health care environment rife with regulatory uncertainty. • Post-elections/Supreme Court/mandate delay/Shutdown fight, regulatory landscape and employer responses will determine the disposition of the ACA more than Congress in the short term.