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- 1. Health Reform and Key Health Industries: Implications,
Challenges, and OpportunitiesMay 28, 2010
Kip Piper, MA, FACHE
Senior Counselor
2. Briefing Agenda
Hospitals and Health Systems
Opportunities
Challenges
Implications
Health Insurers / Health Plans
Opportunities
Challenges
Implications
Physicians and Clinics
Opportunities
Challenges
Implications
Pharma and Biotech Industries
Opportunities
Challenges
Implications
Medical Technology Industry
Opportunities
Challenges
Implications
2
3. Hospitals and Health Systems
3
4. Hospitals:Opportunities
- Substantial decrease in bad debt as Medicaid and new subsidized Exchange plans expand coverage to ~32 million (net).
5. Around 2014-2018, significant increase in volume,
particularly for elective procedures.Pent-up demand from newly
insured. 6. Short-term bargaining power as insurers try to secure
adequate capacity for 32 million new enrollees. 7. New payment
methods create major opportunities Bundled payment, global fees,
Accountable Care Organizations. 8. Tapping $10 billion for Medicare
/ Medicaid demonstrations.New Center for Medicare and Medicaid
Innovation (CMI) at CMS. 9. Protection against increased
competition from physician-owned hospitals.4
10. Hospitals:Challenges
- About $155 billion in payment cuts Lower cost updates in Medicare, reduction in Medicare and Medicaid payments for uncompensated care.
11. Major increase in Medicaid volume.Medicaid is typically
lowest payor. 12. Increasing financial pressure to move away from
traditional revenue optimization model to operational efficiency.
13. Major new, expanding compliance risks.More audits, etc. 14.
Coverage expansion raises questions about need uncompensated care
payments and other special Medicaid financing. 15. Public hospitals
may lose patient volume as newly insured trade-up to newer, better
facilities. 16. Lower payments from commercial and Medicaid plans
likely in long range.Insurers far less likely to cross subsidize
Medicare and Medicaid.5
17. Hospitals:Implications
- Medicare and Medicaid margins will remain tight.More budget-driven payment cuts highly likely.
18. Rate pressure from health insurers, as the insurers face
tougher competition, lower profits and increase market power via
consolidation, enrollment. 19. About 42% of uninsured will remain
uninsured.Not solution to costs of unauthorized immigrants. 20.
Significant consolidation likely.Of hospitals, health systems,
physician group practices.Hospitals buying or partnering with
physician groups. 21. Significant pressure on increasing operating
efficiency, reducing readmissions and infection rates. 22. Heavy
interest in demos, new payment methods, and delivery system
reforms.Major advantages to early adopters. 6
23. Health Insurers / Health Plans
7
24. Health Insurers:Opportunities
- Medicaid expansion to ~16 million enrollees:
25. 25% increase in Medicaid market, 50%+ in many states. 26.
Likely 75%+ will enroll in Medicaid health plans under contract
with states. 27. New Health Insurance Exchange market, with ~26
million enrollees (16 million newly covered). 28. New opportunities
in specialized markets: 29. $300 billion+ Medicare-Medicaid dual
eligibles market 30. $170 billion long-term care market 31. Federal
support to create co-op health plans $6 billion. 32. New $5 billion
temporary federal high-risk pool. 33. Savings potential from
comparative effectiveness research, new provider payment models,
biosimilars, and electronic health records. 34. More uniform
insurance regulatory framework across US. 8
35. HEALTH INSURERS:Challenges
- Significant new federal and state regulations.Added complexity, major compliance risks.
36. New federal taxes $70 billion. 37. Requirement on Medical
Loss Ratios mandate limiting amount of premiums available for
marketing, administration, profit.Minimum MLR of 85% or 80%. 38. In
Medicare Advantage market, lower payments and fewer enrollees or
slow growth. 39. Traditionally profitably individual and small
group markets will shrink dramatically as Exchanges
begin.Employer-sponsored market will also shrink.At least 10
million, likely far more due to crowd out. 40. Newly insured likely
challenging to serve. 41. Covering patients with pre-existing
conditions will be costly. 42. New provider payment methods,
delivery reforms favor providers over plans.9
43. HEALTH INSURERS:Implications
- Overall net increase in premium revenue due to 32 million new enrollees in Medicaid and subsidized Exchange plans.
44. Significant pressure on profit margins due to combination of
factors:floor on medical spending, Medicare Advantage cuts, loss of
profitable segments. 45. With pressure on profit margins and need
to grow revenue, insurers will consolidate and look for ways to
grow in untapped markets (dual eligibles). 46. Federal and state
government continue to grow as the dominate customer more need to
understand, navigate, influence, comply with government. 10
47. Physicians and Clinics
11
48. PHYSICIANS AND CLINICS:Opportunities
- In Medicare, 10% bonus payment to primary care physicians from 2011 through 2015.
49. In Medicaid, Medicaid primary care physicians paid minimum
of 100% of Medicare rates in 2013 and 2014. 50. More federal
funding for community health centers: $10 billion. 51. New payment
methods and delivery reforms empower high-performing
providers.Major opportunities via new pilots and demos in Medicare
and Medicaid. 52. Easier access to patient records, easier to
coordinate and track care.12
53. PHYSICIANS AND CLINICS:Challenges
- Increased demand for services.Primary care capacity inadequate to handle 32 million newly insured.
54. Unless Congress acts, Medicare will cut physician rates by
21.3% on June 1. 55. Cost of another extension of current rates
will cost about $98 billion or more.Permanent fix to Medicare doc
rate problem will cost minimum of $275 billion. 56. Implementation
of EHRs, meaningful use, and new workflow. 57. Pressure to follow
evidenced-based medicine, improve safety and efficiency. 58. New
Value Index will adjust Medicare payments on the physicians
relative cost and quality. 59. Continued increase in quality
measurement and reporting, with payment penalties for not
reporting.13
60. PHYSICIANS AND CLINICS:Implications
- Short-term, increased bargaining power as insurers seek capacity to serve newly insured.
61. Government programs will continue to grow as dominate payor.
62. Low rates.Medicare rate problem continue for years.Payment
rates unlikely to keep up with costs.Increases for primary care may
come from cuts to specialty rates. 63. Physician practices will see
increased competition from health systems, retail health clinics,
federally subsidized community health centers. 64. Small practices
will become increasingly difficult to operate, financially
unviable.Pressure to consolidate and partner. 65. Continued
decrease in market influence, autonomy. 14
66. Pharma / Biotech Industry
15
67. PHARMA & BIOTECH:Opportunities
- Newly insured will likely increase demand for drugs and biologics.Lower demand for patient assistance programs.
68. New pathway for biosimilars.Opportunity for some
manufacturers, hit for others. 69. New policies promoting
prevention, chronic care management, medication management. 70.
Center for Medicare and Medicaid Innovation, demos, pilots
opportunities to influence, partner. 71. Increased use of HIT may
increase compliance and thus volume of certain drugs.New data may
decrease cost of clinical trials. 72. Market opportunities for
makers of value drugs drugs adding value, not merely novel.16
73. PHARMA & BIOTECH:Challenges
- Lower profit margins in two biggest US markets Medicare and Medicaid:
74. Mandatory 50% discounts in Medicare donut hole $32 billion
cost. 75. Minimum Medicaid rebate of 23%, up from 15%. 76.
Mandatory rebates extended to Medicaid health plans 77. 25%
increase in Medicaid market. 78. New federal fees on manufacturers
$27 billion over 10 years.Tighter profits. 79. Comparative
effectiveness research! 80. New payment methods will change roles,
incentives for physicians and hospitals. 81. New pathway for
biosimilars.Long-range hit to brand biologics. 82. Increased
compliance risks.17
83. PHARMA & BIOTECH:Implications
- Increase in volume in 2014-2019 from newly insured, patient protections.
84. Lower profit margins for many brand products. 85. Higher
proportion of business from public programs with all the associated
implications. 86. Significant pressure from comparative
effectiveness research and value-based benefit designs.Must
incorporate into clinical trial design, market strategy. 87.
Biosimilars will have impact but will roll out over several
years.Payors will be eager to use biosimilars. 88. Imperative to
leverage, adapt to new policy environment payment reforms, delivery
reforms. 89. States will increase as legislative battle ground. 90.
Extension of Medicaid-style rebates to Medicare Part D likely
inevitable.18
91. Medical Technology Industry
19
92. MEDICAL TECHNOLOGY:Opportunities
- Like other industries, a volume increase is likely as newly insured are enrolled in Medicaid and Exchange plans.Also from coverage of pre-existing conditions.
93. Emphasis on prevention and chronic care management likely to
increase demand for screening, testing. 94. PPACA reflects strong
federal interest in technologies, e.g., to support seniors and the
disabled in their homes, reduce readmissions, support medical
homes. 95. Opportunities to leverage an array of new initiatives to
demonstrate the value of technologies Medicare and Medicaid demos,
Accountable Care Organizations. 96. Major expansion of federal
funding for Medicaid home-based care for seniors and disabled need
for home monitoring, etc.$20+ billion. 97. Increase use of HIT will
likely drive further investments in medical technologies, need for
clinical support systems, and technology at point of care.20
98. MEDICAL TECHNOLOGY:Challenges
- New federal excise tax will hurt profitability 2.3% tax.
99. Likely consolidation of hospitals / health systems and
health insurers will change market dynamics. 100. Comparative
effectiveness research.Increased number of technology
assessments.Mix of opportunities and risks depending on evidence
and offerings. 101. New payment methods will dramatically change
roles, incentives for physicians and hospitals. 102. Larger portion
of market covered by public programs with tight budgets and a
penchant for regulation.21
103. MEDICAL TECHNOLOGY:Implications
- Increase in volume in 2014-2019, especially for screenings, elective procedures for newly insured.
104. Pressure on margins from mix of new federal tax, higher
public payor mix, and consolidation of health systems and health
insurers. 105. Influence of comparative effectiveness research and
value-based benefit designs will grow. 106. Imperative to leverage,
adapt to new policy environment payment reforms, delivery reforms,
Medicare and Medicaid demos, interest in episodes of care and
reducing readmissions, increasing hospital operating
efficiency.22
107. www.TogoRun.net