the dbriefs technology executive series presents: enabling ... · the dbriefs technology executive...

The Dbriefs Technology Executive series presents:

Enabling U.S.

Healthcare Reform:

IT’s Prominent Role

Chris Smith, Principal, Deloitte Consulting LLP

Dave Biel, Principal, Deloitte Consulting LLP

October 7, 2010

Copyright © 2010 Deloitte Development LLC. All rights reserved.

Today’s agenda

• Setting context

• Industry response to date

• Recommended implementation strategies

• Key takeaways

• Q&A session

Setting Context:Overview of Health Care Reform Mandates


Poll question #1

What is your relationship to the industry?

• Provider

• Health Plan

• Life Sciences Organization

• Government

• Employer

• Not Applicable


Health reform is now reality

• The Patient Protection and Affordable Care Act (PPACA) contains

sweeping measures featuring expanded coverage, industry insurance

reforms, and delivery system reforms

• Passage of the PPACA caps a period of intense health care policy

debate and will result in substantial changes to the health care industry

• Health Care Reform Legislation dramatically increased the disruption

and change that organizations must absorb

• Across the health care industry, there will be winners and losers

• We believe our clients must evaluate bold plays and potential business

model changes in order to be viable in the new health care landscape

Mar 2010Jan 2009

ICD-10

and HIPAA

5010

Feb 2009

American

Recovery and

Reinvestment Act

Patient Protection and Affordable

Care Act & Health Care and

Education Reconciliation Act of 2010

Reform Regulation Passage Timeline…

1


PPACA/HCERA must be viewed in the context of ongoing, system-wide transformation (and disruption)

Reforms

State-based Reforms New Clinical Coding Standards

(ICD-10)

Private

Employer

Initiatives And more . . .

Health and Education

Reconciliation Act of 2010

American Recovery and

Reinvestment Act

and HITECH Act

Patient Protection and

Affordable Care Act

Children’s Health Insurance

Program Reauthorization Act

(CHIPRA)

Previous Federal Reform Efforts

Ongoing Regulatory Changes2


Health

Reform

Reform presents challenges and opportunities for each sector of the health care system

Taxes & Fees• Industry excise taxes

• High income Medicare tax

increases

Delivery System Reform

• “Pay-for-quality” delivery system

reforms

Medicaid Reform• Medicaid and CHIP expansion for

additional 16M uninsured

Medicare Reform• $500B in cuts

• Elimination of Part D donut hole

Commercial Ins Reform • Health insurance exchanges

• Member-run co-ops

• No pre-existing conditions

Pharma / Life Sciences

Reform• Prescription drug rebates

• Expanded 340B covered entities

Prevention & Wellness • Changes to coverage/

reimbursement

Coverage Mandates• Individual mandate

• Expansion of commercial coverageAdministrative Reform

• Admin standardization

• Reporting requirements

• Quality & transparency

3


If you think this doesn’t impact you, think again –the Employer View

For those participants who are in other industries, reform includes provisions that

will impact and may change employer’s health insurance benefits strategies.

Employers COULD…

• … be driven from self insured coverage to a fully-insured coverage model if mandates such

as essential benefits limit their ability to design their own plans and manage risk

• … gravitate to lesser benefits that would not result in penalties being triggered

• … opt for reduced cost of penalty and may drop coverage at higher rates than larger

employers (mostly applies to smaller employers)

• … look to reject anything they see as health plans passing through industry fee taxes

• … limit the level of benefit change until there is a better understanding of grandfathering

provisions that may have substantial influence on the health care choices made by large

employers

Mandates to keep your eye on….

Reinsurance for

Early Retirees

Cadillac TaxChanges to

Benefit Design

Wellness

Incentives

Tax Deduction for

Part D Subsidy

Eliminated

Reporting of

Coverage (W2)

Appeals Process

Pay or Play

Penalty Potential

Deadline

Extensions

4


Poll question #2

What do you think is the greatest challenge in

adopting the health care reform?

• Understanding the legislation

• Knowing what to do first

• Planning for the unknowns in the legislation

• Integrating Reform change to current investments

• Don't know

Industry Response to Date:How has the Health Care industry responded to the challenges ahead?


Industry response

• Building reaction strategies to Health Care Reform can be difficult because…

‒ Although some mandates are well defined, many others are not

‒ Multiple mandates are hitting health care organizations at the same time

‒ Change needs are converging on the same set of business and technical capabilities

• With that in mind, we’ve seen some trends in how companies across all

sectors have responded…

‒ The industry seems “stuck” in planning mode

‒ Even with mandates that are well defined, stakeholders have not been able make the

amount of progress that is needed.

‒ Some organizations have initially “hedged” on starting change

• this puts them at risk for missing deadlines, facing substantial penalties, and potential risk of

business.

5


Case and point

Across multiple health care sectors, the complications that are stalling industry response is

most notable when you evaluate (1) 5010 / ICD-10 & Admin Simplification and (2) State

Based Health Insurance Exchanges.

5010 / ICD-10 &

Admin

Simplification

The Federal Government through the Centers for

Medicare and Medicaid Services (CMS) is driving

the healthcare industry to upgrade diagnosis and

procedure coding standards by October 1, 2013

Legislation also mandates that health plans

standardize and automate health administration in

order to improve efficiency, quality, and interactions

with providers

Mandate Description Impacted Sectors

Health Plan

Provider

Government

State Based

Health Insurance

Exchanges

The Affordable Care Act will establish exchanges as

the new online distribution channel for the individual

and small group market.

By 2014, states shall establish an Exchange that

facilitates the purchase of coverage for individuals

and small employers; States can establish

exchanges in geographically distinct markets and/or

participate in regional exchanges

Health Plan

Government

6


Current State of Industry Alignment Toward ICD-10/5010

Assessing Planning Remediating

5010

ICD-10

5010

ICD-10

5010

ICD-10

Providers

Health Plans

State

Government

We believe this change alone is more substantial to the industry than any change in recent

history including initial HIPAA, Y2K, and NPI and yet the industry is lagging behind the

recommended schedule.

Expected progress vs. actual progress

7

5010 / ICD-10 Industry Readiness (Case #1)

*The information presented on this slide is representative of Deloitte’s experience/research.


5010

And when you factor in Admin Simplification, it is clear that organizations are or will be in a crisis of strategy (Case #1)

Today 2013-2014 2015 Beyond• The scope of remediation is

growing

• Cost is higher than anticipated

• Simplification of processing

needs are increasing

• Number of competing

initiatives is growing

5010/ICD-10 “crowds out”

other priorities

Mandates are “Immoveable Objects”

Admin Cost will Rise

in Near-Term

• Organizations are assuming

admin cost will decrease

• But, there actually will be an

increase operating costs

‒ Claims ops

‒ Clinical ops

‒ Provider service ops

‒ Infrastructure costs

‒ etc . . .

Admin Simplification

Requires Another Major

Capital Expenditure

• Administrative Simplification

will force another round of

invasive core platform changes

• Current delays have a

cascading impact in rising cost

for Administrative

Simplification

Untenable Scenario due to

Implementation Costs

Administrative

Simplification

8*The information presented on this slide is representative of Deloitte’s experience/research.


Layering IT Complexity - Health Exchange (Case #2)

• States establish an American Health Benefit Exchange

and a Small Business Health Options Program (SHOP)

Exchange

• States have the option to merge the Health Benefit and

SHOP Exchange

• Federal government may establish and operate the

Exchange if the State is not ready

2017+

• Funding available to States

to establish Exchanges

• Open enrollment periods

defined

2010 2011 2012 2013 2014 2015 2016

• Funding for States to

establish Exchanges

expire

• States may allow large groups

(100+) to purchase insurance

through an Exchange

Although not required until 2014, the need around defining the requirements for the

Exchanges has already begun.

9

• Temporary high risk insurance

pools

• National website to compare

plan options with standard ways

of describing benefits


Impact of Insurance Exchanges (Case #2)

Individual

Non-standard plan

subscribers

Large Group (>100)

Small Group (<100)

Individual

Existing Medicare, Medicaid

Uninsured - Govt. Program

Eligible

HIEs mandates would

result in a shift of

operating model for a

large % of subscribers

requiring:

• Standardized product

offerings

• Transparent business

models

• Real-time automation

driven process controls

• Modification to existing

channels

Implications

Exchange impacted components

Current constituents / channels

Implementation of Insurance Exchange to support Health Care Coverage Expansion will

require substantial change to the state government and the health plan segments.

Small Group (<100)

Individual

Health Plan

Sales &

Marketing

Pricing &

Underwriting

Enrollment

Channels

Government

Brokers &

Sales Reps

Direct

(Consumer

Portals)

Insurance

Exchange

Admin Simplification

Convergence

10


Poll question #3

What has been the largest struggle for IT organizations

supporting reform mandates?

• Grasping the complexity to formulate a clear strategy

• Securing funding a resources for high-priority reform

initiatives

• Mobilizing approved initiatives

• Don't know

Recommended

Implementation Strategies:How should Health Care organizations

structure themselves to be successful?


While 2014 will see many of the most dramatic changes, many changes have

earlier – or later – effective dates.

Health reform will unfold in phases

Early Groundwork

• Legislation enacted

• Early implementation

& effective dates

• Rulemaking and

policy development

• Preparations for 2014

2010 - 2013 2014 2015 +

Market Transition Market Expansion

• Significant coverage

expansion

• Delivery system

innovations proliferate

• Insurance market

shakeout

• Continued rulemaking

• Significant market

changes: Major exchanges

and market reforms go live

• Ongoing rulemaking

• Policy and legislative “fixes”

and refinements

11


Health care organizations need to rise to the challenge

We believe that….

• Most organizations lack consistency in performance and quality of IT delivery

• It’s only through a fundamental shift in approach across the industry that true change will happen

• Changes to how IT Planning and Delivery is executed is required…

1. Establish Federated Operating Models that are flexible and can

adapt quickly to changing needs

2. Address scoping and delivery in an iterative approach

3. Create Competency Centers to establish consistency and to

propagate learning's, key concepts, processes

4. Invest in enterprise solution and consolidate when possible

5. Increase focus on stakeholder communication within and outside of

your organization

12


1. Federated program operating structure

A multi-layered program operating structure enables leadership across different levels,

which can be critical to the success of highly complex initiatives.

Initiative B

Initiative A

Executive SponsorshipLevel 4

Level 3ICD-10 Program Panel

Level 2

Level 1

Initiative C

Initiative D

Leadership

Advisory Committee

Steering Committee Architecture Review

Board (ARB)

Program Panel

Business Design

Review Board (BDRB)

Enterprise TeamsLocation, Functional, Mandate

Specific Teams

External

Affairs

Program

Portfolio

Mgmt

Bus

Readiness

Tech

ReadinessStrategy

Organizations will require a model that can structure and integrate multiple

simultaneous changes13


2. Scope and delivery – Start threads that are irrefutable

…

…

…

…

…

…

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

Organization should mobilize on core reform activities, adding in additional functions

when enterprise consolidation effort establishes the target solution.

Iterative

upgrade

Iterative

upgrade

Iterative

upgrade

Irrefutable

Truths

. .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

Tier 1: Must-Do

Fully fund and

start these now

Tier 3: Ancillary

SolutionsTier 2: Strategic

Enterprise

Solutions

…

…

14


3. Using centers of excellence: ICD-10 Case Example Initiatives with far-reaching impacts to critical functions and multiple geographic regions should pursue

COEs to create a “source of truth” across the program. For example, a provider or payer organization

should consider a Code Set Translation COE as part of ICD-10 remediation

Integration

Compliance

Code Set Translation

Mapping

Financial Outcome Analysis

Code Set Analytics/ Simulation

• Provides expertise

• Establishes a governance model

• Defines standards and metrics

• Adds value through:

‒ Reduction in requirements cycle time

‒ Reduction in development and

Integration costs

‒ Increases in operational efficiency

‒ Increases in project success rate

‒ Ensuring compliance

COE Importance COE Core Capabilities

15


4. Invest in enterprise solutions and consolidation

Early movers who already

have taken a significant lead

on complexity reduction are

ideally situated to manage

reform impacts.

Organizations who mobilize

effectively can begin to

reduce complexity, cost and

risk in implementing reform

change.

Organizations that delay

efforts will be forced to

address the most

comprehensive change to

the broadest set of impact

areas further increasing

overall risk.

Pro

du

ct

Co

re

Op

era

tio

ns

Fin

an

ce

Investing in simplifying organizational infrastructure can allow for more strategic

investment for HCR and reduce overall cost and risk associated with change.

Current state

segmented infrastructureStrategic streamlined

enterprise solutions

16


Frequent and clear communication will be required to resolve some of the complex

coordination activities between industry stakeholders.

5. Collaboration is about communication

Providers

State

GovernmentVendors

Health

Plans

PBMs

CMS

Clearing-

housesPayers

Communication

17


Poll question #4

Which of recommended strategies will be most critical for

health care organizations to successfully navigate Health

Care Reform?

• Federated Operating Model

• Agile Governance

• Centers of Excellence

• Platform Consolidation

• Collaboration & Communication

• Don’t Know

Key takeaways


Key Takeaways

IT is a core component of enabling health care reform changes

Technology needs to engage across the organization and drive inevitable change

Establish a federated delivery structure so reform change can be executed in

parallel

Business as usual and delays in execution will lead to a crisis in strategy

18

Question and answer


Thank you for joining

today’s webcast.

To request CPE credit,

click the link below.

Join us November 4th at 2 PM ET as our Technology Executive series presents:

Plug-and-Play Solutions: Making Post-Merger Integration SOA Much Faster and Smoother


David Biel

Principal, Deloitte Consulting LLP

[email protected]

Chris Smith

Principal, Deloitte Consulting LLP

[email protected]

Contact info

mailto:[email protected]

mailto:[email protected]


This presentation contains general information only and is based on the experiences and

research of Deloitte practitioners. Deloitte is not, by means of this presentation, rendering

business, financial, investment, or other professional advice or services. This presentation is not a

substitute for such professional advice or services, nor should it be used as a basis for any

decision or action that may affect your business. Before making any decision or taking any action

that may affect your business, you should consult a qualified professional advisor. Deloitte, its

affiliates, and related entities shall not be responsible for any loss sustained by any person who

relies on this presentation.


About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited

by guarantee, and its network of member firms, each of which is a legally separate and

independent entity. Please see www.deloitte.com/about for a detailed description of the legal

structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see

www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and

its subsidiaries.

http://www.deloitte.com/about

http://www.deloitte.com/us/about

the dbriefs technology executive series presents: enabling ... · the dbriefs technology executive...

Documents