Managed Care for ASCs

Managed Care for ASCs David Cordova Director, Managed Care Finance Outpatient/Physician Services Tenet Healthcare Corporation Gary Scott Davis, P.A. Partner McDermott Will & Emery LLP

The Coming Storm (Photo By Jonathan Knight )

Negotiation Strategy Source: Scott Adams. Dilbert.com. September 16, 2007.

Today s Discussion Topics Narrow Networks Out of Network ACA Exchanges Hospital Affiliations New Delivery Models Changing Reimbursement 4

Narrow Networks Narrow, Tailored, Tiered and High performance are often used inter-changeably to describe benefit plans with lower premiums than those charged for traditional open access networks Proponents: the network is predicated on both quality and cost indicators Opponents: the composition of these networks are based solely on price/cost

Narrow Networks Getting a seat at the table Telling your story more importantly getting it heard What is your value proposition Clarity, Resolve, Strategy, Story, Discipline (Revive) Can you prove your quality How do you compare with your competitors Getting end users to care about your inclusion Are you going to bend the cost curve Are you going to raise the quality bar

Narrow Networks Impact on the ASC Industry

Out of Network Payors still challenging Aetna sued New Jersey ASC for damages and treble damages based upon fraudulent and excessive billing Allegations ASC and its physician owners knowingly referred patients even though non-par Overpayment of $10M resulting from regularly submitting false and fraudulent claims which misrepresent and inflate the actual charges of out of network services. ASC and physicians assured patients that they would have no obligations for inappropriately charged out of network costs

Out of Network Payors still challenging Cigna suing NJ ASC for $6.6M Claim represents amount paid for 1400 claims for which patients were not billed co-pay/deductible amounts Cigna alleged practice drives up claim costs and constitutes deceptive and fraudulent insurance practices ASC sees suit as a negotiating strategy by Cigna as it was filed while the parties were engaged in settlement discussions relating to overdue and unpaid claims

Out of Network Other tactics and strategies Pressure on physicians Benefit plan design changes Patient engagement and steerage to in network facilities Physician required to obtain Member Advance Notice regarding options to obtain services in network Pricing portals and transparency

Out of Network Impact on the ASC Industry

ACA Exchanges Provides a structured marketplace for the sale and purchase of health insurance Fundamental purpose of the exchanges is to facilitate the offer and purchase of health insurance However, nothing prohibits qualified individuals, qualified employers, and insurance carriers from participating in the health insurance market outside of exchanges

ACA Exchanges Qualified individuals and small businesses can purchase private health insurance through exchanges Issuers selling health insurance plans through an exchange have to follow certain rules

ACA Exchanges Offered plans generally provide comprehensive coverage and meet all applicable private market reforms specified in ACA Coverage for essential health benefits Subject to certain limits on cost-sharing, including outof-pocket costs Meet one of four levels of plan generosity based on actuarial value HMO options predominate More difficult to do out of network due to lock-in

ACA Exchanges Impact on the ASC Industry

Hospital Affiliations and Antitrust The Lift An informal industry term used to describe the enhanced revenue an ASC achieves by partnering with a health system, hospital, or another entity capable of delivering higher reimbursement on commercial contracts

Hospital Affiliations and Antitrust The Lift and Antitrust Can an ASC that is not wholly owned by a hospital get the lift? Does the lift raise antitrust issues because the prices payors will pay post-closing are higher? How does today s antitrust enforcement climate in healthcare this strategy?

Hospital Affiliations and Antitrust Effective Control - independent (acting by itself, and without having to obtain any other entity or individual's consent or approval) ability to exercise overall effective control over the economic side of the business, as evidenced by: the right to approve a majority of the governing board of JV, coupled with simple majority voting requirements at the JV level reserved powers over material decisions of the business

Hospital Affiliations and Antitrust The majority of the JV governing board is not necessarily dispositive as long as: no action can be taken that the Hospital does not approve deadlock can ultimately be broken by Hospital

Hospital Affiliations and Antitrust Joint approval is permissible with respect to: any debt of the JV entity requiring the guarantee of a member any sale of all or substantially all of the assets of the JV entity any change in the basic organization or operation of the JV entity any merger or consolidation of the JV entity

Hospital Affiliations and Antitrust Joint approval is permissible with respect to: any sale in a single transaction or series of transactions to the same buyer of over 30% of the fair market value of the assets of the JV entity any amendment of the JV entity governing documents any requirement for additional capital contributions from the members any dilution of the interests of the members

Hospital Affiliations and Antitrust The Value of the Lift : Declining viability of out of network strategy Lack of opportunity to grow case volume and negotiating leverage with commercial payers The risks of achieving and maintaining the lift Effect on ASC s current contracts? Is the lift guaranteed? Ready rates? Sustainability of lift Term length of contracts? Payers put a stop to the arbitrage?

Hospital Affiliations Impact on the ASC Industry

Who Moved My Cheese: Emergence of New Delivery Model Accountable Care Organizations Groups of doctors, hospitals, and other health care providers voluntarily coming together to focus on providing coordinated high quality care to a defined population of patients The goal: ensuring patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors If successful at raising the quality bar and bending the cost curve often participate in shared savings

Who Moved My Cheese: Emergence of New Delivery Model Clinically Integrated Networks An organization focused on the active and on-going program to evaluate and modify the practice patterns of all participating providers and which creates a high degree of interdependence and cooperation among those providers to control costs and achieve quality

Who Moved My Cheese: Emergence of New Delivery Model Who is Your Primary Client/Customer Third Party Payor Physician Patient

Who Moved My Cheese: Emergence of New Delivery Model Impact on the ASC Industry

Now Your See It, Now Your Don t: The Changing Reimbursement Landscape Bundled Payments Combines reimbursement for multiple providers into a single, comprehensive payment covering all of the services involved in a patient s care Aims to: control cost integrate care improve the patient care experience improve outcomes (American Hospital Association)

Now Your See, Now Your Don t: The Changing Reimbursement Landscape Value Based Purchasing: System designed to: lever third party payor market power to promote quality and value of health care services not simply focused on negotiating price discounts enables buyers to hold providers accountable for both cost and quality of care brings together information on the quality of health care, including patient outcomes and health status, with data on the cost of care focused on managing the use of the health care system to reduce inappropriate care and to identify and reward the bestperforming providers.

Now Your See, Now Your Don t: The Changing Reimbursement Landscape Value-Based Benefit Design The use of plan incentives to encourage insured adoption of one or more of the following: appropriate use of high value services adoption of healthy lifestyles use of high performance providers who adhere to evidencebased treatment guidelines

Now Your See, Now Your Don t: The Changing Reimbursement Landscape Value-Based Insurance Design Patients copayments based on the relative value of the clinical intervention (not costs) to align insurance incentives (co-pays, deductibles, etc.) with the goals of consumer health behavior The principle tenets are: medical services differ in the clinical benefit achieved the value of a specific intervention likely varies across patient groups National Business Coalition on Health

Now Your See, Now Your Don t: The Changing Reimbursement Landscape Regency Healthcare (New York) Cash based, global discount program Payment upfront Knee, shoulder, elbow, hand, foot, ankle and spinal procedures included Prices listed on Internet Anesthesia included but post-surgical rehab and physical therapy is excluded No hidden fees or expenses as compared to a hospital

Now Your See, Now Your Don t: The Changing Reimbursement Landscape Impact on the ASC Industry

The End: Managed Care for ASCs

Managed Care for ASCs David Cordova Director, Managed Care Finance Outpatient/Physician Services Tenet Healthcare Corporation Gary Scott Davis, P.A. Partner McDermott Will & Emery LLP