ALMOST Everything You Need To Know About the Affordable Care Act

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<ul><li><p>Everything You Need to Know</p><p>About the Affordable Care Act</p><p>Greater Memphis ChamberBreakfast Presented by Small Business Council</p><p>Patrick Pilch, MBAManaging Director, BDO Consulting, LLC. October 17, 2013</p></li><li><p>Key Issues</p><p>Page 2</p><p>Revenue Cycle</p><p>Urgent Care Clinics</p><p>Affordable Care Act</p><p>Health Benefits</p><p>Cost Reports</p><p>Claims</p><p>Health Exchanges</p><p>Em</p><p>plo</p><p>yer </p><p>Mandate</p><p>Pri</p><p>vacy</p><p>Data Patient-Centric4Rs</p><p>Com</p><p>pliance</p><p>Alignm</p><p>ent</p><p>Bundled Payments</p><p>Cadillac Tax Capit</p><p>ati</p><p>on</p><p>Providers</p><p>Hospitals</p><p>RiskConsumer</p><p>Physicians</p><p>Electronic Health Records</p><p>Accounta</p><p>ble</p><p> Care</p><p> Org</p><p>aniz</p><p>ati</p><p>on</p><p>ICD-10</p><p>Managed Care Organizations</p><p>Medicare</p><p>Medic</p><p>aid</p><p>Commercial </p><p>RISK</p><p>PHYSICIANS</p><p>Dis</p><p>pro</p><p>po</p><p>rtio</p><p>nate</p><p> Sh</p><p>are</p><p>Uninsured</p><p>FQ</p><p>HC</p><p>Chro</p><p>nic</p><p> Care</p><p>Payers</p><p>Insu</p><p>rance</p><p>Reimbursement</p><p>Population Health</p><p>Aging </p><p>Population</p><p>Tele</p><p>healt</p><p>h</p></li><li><p>Page 3</p></li><li><p>Healthcare Key Market Drivers</p><p>Page 4</p><p>Aging Population Rise of Chronic Diseases and Associated Costs</p><p>Popula</p><p>tion i</p><p>n M</p><p>illions</p><p>Year</p><p>Popula</p><p>tion i</p><p>n M</p><p>illions</p><p>Year</p><p>CAGR = 3%</p><p>CAGR = 1%</p><p>Popula</p><p>tion i</p><p>n P</p><p>erc</p><p>enta</p><p>ge</p><p>Year</p><p>2.4% Increase</p><p>$108 </p><p>Billion</p><p>$300 </p><p>Billion</p><p>Projected Cost for Chronic Diseases for Top Six States ($B) </p><p>2003 2023</p><p> CA FL TX</p><p> NY OH PA</p></li><li><p>Page 5</p></li><li><p>In the Press</p><p>Page 6</p></li><li><p>Federal Budget 2012 The Real Issues</p><p>Page 7</p><p>Source of Funds</p><p>Taxes $2.6T or 16.5% GDP</p><p>Borrowing $1.1T or 7% GDP</p><p>All tax revenue consumed by four items:</p><p>$900B Federal health spending</p><p>$781B Social security</p><p>$676B Defense</p><p>$224B Interest</p><p>$ 2.6T</p><p>Everything else ($1.1T) funded by borrowings </p></li><li><p>Federal Spending - Healthcare</p><p>Page 8</p><p>Federal Spending 2011 2022</p><p>Medicare Enrollees 48M 66M</p><p>Medicare 554 1,000</p><p>Medicaid (Federal Share) 240 605</p><p>Affordable Care Act (ACA) Non M/M 24 161</p><p>Pentagon/VA/NIH/Other 150 220</p><p>Total $968B $1,986B</p><p>Source: CBO</p><p>Approximate CAGR of 7%</p></li><li><p>Federal Budget 2022 </p><p>***Assuming Current Economic Growth</p><p>Page 9</p><p>Source of Funds</p><p>Taxes $2.6T or 16.5% GDP</p><p>Borrowing $2.2T or 14% GDP</p><p>All tax revenue consumed by two items:</p><p>$1,900B Federal health spending</p><p>$850B Social security (assumes 5 to 5.5% GDP)</p><p>$2.75T</p><p>Everything else ($2.2T) funded by borrowings including defense and </p><p>interest</p></li><li><p>WHAT ARE THE IMPLICATIONS?</p></li><li><p>Pricing Power at Risk</p><p> Drugs ($260B) and devices ($85B) represent 13% of healthcare spending</p><p> Margins are 50% higher than other industrialized countries</p><p> Ripe for targeting</p><p> Managed Medicaid/Medicare, ACOs </p><p> Advanced data analytics and purchasing algorithms comparing price</p><p> Price opacity, a cornerstone of profitability, yielding to clarity and falling margins</p><p> Employers negotiation power driving costs out through greater transparency</p><p>Page 11</p></li><li><p>Behavioral and Relationships Change</p><p> Defined benefits to defined contribution</p><p> Out of pocket costs will increase</p><p> Changes in consumer behavior</p><p> Change in employer/employee relationships</p><p>Page 12</p></li><li><p>Behavioral and Relationships Change</p><p> Defined benefits to defined contribution</p><p> Out of pocket costs are going to increase</p><p> Employees will need to take charge of their healthcare more</p><p>Page 13</p></li><li><p>Behavioral and Relationships Change</p><p> Employees become Healthcare Consumers</p><p>What did you pay?</p><p> What did you get?</p><p>What was your experience like?</p><p> Social media/reviews become very important</p><p> Change in strategy retention and recruitment of Healthcare Consumers and Clinicians </p><p> Experience can make or break reputation/brand and challenge the social contract between Employer/ Employee</p><p>Page 14</p></li><li><p>Behavioral and Relationships Change What are other drivers of change in the Employer/ Employee Relationship</p><p> Employer Mandate </p><p>- Individual Mandate</p><p> Cadillac Tax (Begins January 1, 2018)</p><p>- Non-deductible excise tax</p><p> 40% above $10,200 for self only/ $27,500 for more than self only</p><p> Affects large employers and unions</p><p> Implications:</p><p>- Changing business models </p><p>- Risk Sharing among Payers, Employers and Employees</p><p>- Outcomes and Negotiating Power of Employers</p><p>- Trust Factor</p><p>Page 15</p></li><li><p>Waste, Fraud and Abuse Targets</p><p> $1 Trillion in the next two decades in the ACA (Source: 2012 White House Budget Message)</p><p> Whistleblower Protection Act is further codified in the ACA</p><p> Other areas are in the financial industry are targeted</p><p> Data analytics will become extremely important </p><p> Know your outcomes, your data, your numbers, your processes and employees</p><p>Page 16</p></li><li><p>What to do?</p><p> Prepare</p><p> Protect</p><p> Plan</p><p> In some cases, transform</p><p>Page 17</p></li><li><p>Thank you</p><p>Page 18</p></li><li><p>Jeff Walraven</p><p>Memphis Assurance Managing Partner</p><p>+1 901-680-7611 (Direct) +1 901-680-7600 (Main)</p><p>+1 615-618-7377 (Mobile)</p><p>jwalraven@bdo.com</p><p>Patrick Pilch</p><p>Managing Director</p><p>BDO Consulting, LLC</p><p>Healthcare Advisory Leader</p><p>+1 212-885-8006 (Direct) </p><p>ppilch@bdo.com</p><p>Page 19</p></li></ul>