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1w w w. He a l t h c a r e R e f o r m Ma g a z i n e . c o m

National Healthcare Reform Magazine

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w w w. He a l t h c a r e R e f o r m Ma g a z i n e . c o m

ONE Location

2011 Employer Healthcare CongressFour Leading Healthcare Conferences

One Exhibit Hall, 4x the TrafficShared Exhibit Hall, Networking

Lunches & Networking Receptions

N a t i o n a l H e a l t h c a r e R e f o r m C o n f e r e n c ewww.healthcarereformconference.com • Info@healthcarereformconference • 561.204.3676

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Learn The Ins and Outs Of Healthcare Reform, Because it’s Here To Stay!by Andrea Balogh

17 Darwinism Effect Survival of the Fittest for EmployeeBenefits Consultantsby David Goldfarb

14 Medical Discount Networka Viable Alternativeby Barbara Lewis

32 ICD-10 Benefits for Healthcare Providersby Manish Nachnani

Copyright © 2011 Healthcare Reform. All rights reserved. Healthcare Reform Magazine is published monthly by. Material in this publication may not be reproduced in any way without express permission from Healthcare Reform Magazine. Requests for permission may be directed to [email protected]. Healthcare Reform Magazine is in no way responsible for the content of our advertisers or authors.

08 The Changing Faceof Healthcareby Arthur Tacchino, J.D.

20 The What, Why and How ofMedical Loss Ratioby Deepak Padmanabhan

A ‘Boon’ for Consumers May be‘Bane’ for Brokers & Producersby John Ryan

36 ACO – PANACEA OR PLACEBO?by Mark Troutman

41 PHARMA REFORM&WORLD TRADEby Melvin J. Howard

TOP MUST-HAVES IN YOUR EMR BUDGET AND WAYS TOFINANCE THEMby Renee Flis

47 AFFORDABLE HEALTH BENEFITS A THING OF THE PAST?by Richard Fuchs

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HEALTHCARE REFORM STARTS WITH YOUby Theresa Healy,

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Health Care Reform andthe Role of Wellnessby Kevin Wildenhaus

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24EDITORIAL

Editor-in-Chief

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PRODUCTIONGraphic Designer Tercy U. Toussaint

For any questions regarding advertising, permissions/reprints, or other general inquiries, please contact:

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Jonathan Edelheit

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LETTER FROM THE EDITOR2011- A New Road Lies Ahead

As we enter the New Year many of us are eager to leave behind the troublesome and complicated tribulations that 2010 brought. This past year has been one of the most difficult years for employers, insurance companies, agents and other healthcare and health insur-ance industry stakeholders. Healthcare reform has been a wild and bumpy roller coaster ride that has yet to stop. It seemed everyone was forced to stop in their tracks, and put on hold new initiatives and innovative programs to focus on understanding what healthcare

reform meant and the implications it would have on their enterprise, learning not only how it would affect them, but how they would need to comply with it. Just when every-one started feeling comfortable and felt like they had a good grasp of healthcare reform and its provisions, the republicans swept in with a huge win in the fall elections, win-ning the House and reducing the Democratic majority in the Senate. With Republicans vowing to cut off funding for healthcare reform and its implementation, and one Federal Court striking down the individual mandate, no one knows when or better yet, how this roller coaster will really end.

Unfortunately, one negative effect of healthcare reform is that it has caused insurers, employers and agents to sit back and wait. It is now time for action. Employers and insurers need to start implementing those new programs they had previously set aside for the last year and start putting them into place so that they can reduce their health-care costs and make healthcare consumers more price/quality conscious. A focus should be put on corporate wellness and health and wellness initiatives, valued based ben-efits design, consumer driven plans, and innovative new pharmacy and specialty drug programs. Voluntary Benefits will be the lifeline that keeps many insurance agents in business as insurers eliminate their commissions or reduce them to unsustainable lev-els. Employers will turn toward self funding their healthcare benefits as a way to lower healthcare costs. It’s a year of ACTION and the New Year is a time that marks resolu-tions and plans for a fresh new start!

As the government gets more organized and develops better infrastructure to deal with healthcare reform, hopefully they will provide more insight and guidance and in a much more timely fashion going forward. 2011 will be a very interesting year. There will be challenges, but along with challenges come opportunities and new paths to venture on. I wish everyone a very successful year.

Jonathan Edelheit



Learn the Ins and Outs of HealthcareReform, Because it’s Here to Stay!

By Andrea Balogh

Some of you may be thinking, “Democrats lost control of the House, so I can stop worrying about healthcare reform, it will

be repealed.”I need to get one point straight: The PPACA is President Obama’s signature piece of legislation. It is his legacy. It will not be repealed, at least not immediately and not completely. As expected, healthcare reform (along with the economy) dominated the November mid-term election. Many Republicans campaigned aggressively; with the promise of “repealing and replacing” the healthcare reform law and

they scored some stunning victories. With their new majority in the House, there is no doubt that Republicans will push forward with their promise to undo the PPACA. However, even if Republicans manage to introduce a bill to repeal PPACA that could withstand a filibuster in the Senate, the chance of any such bill withstanding a Presidential veto is slim. Currently, Republicans do not have the majority in both chambers of Congress that is required to override a Presidential veto. Between now and 2012, it seems likely that Republicans will target certain provisions of the law for piecemeal elimination. Early targets include the W-2 reporting requirement, recently postponed until 2012, and the new 1099 reporting

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requirements. Other initiatives will be focused on anything that would slow or disrupt the Administration’s preparations for 2014, which is when the most far-reaching provisions of the law will begin. Republicans promise that over the next two years, they will deny any additional funding that President Obama requests for healthcare reform implementation. As evidenced in 1995, President Bill Clinton and the majority-Republican Congress were not able to agree on a budget and this standoff ultimately led to a federal government

shutdown. The Congressional Budget Office has estimated that over the next ten years, the administrative costs of healthcare reform implementation could run anywhere between $5 billion to $10 billion each for the Internal Revenue Service and the Department of Health and Human Services. The President and Democrats in Congress have vowed to push back at any attempts which could cause a funding battle. As a result, the Republican majority in the House will usher in frequent oversight hearings, which will be aimed at laying



the groundwork for a broad-based public repudiation of the law. This act could give Republicans the political momentum to overturn the healthcare reform law, provided they can re-take the presidency in 2012. There are a lot of “ifs” and “maybes” between now and 2014. It is likely that, for the next two-plus years, the PPACA will be with us. For now, what is it that employers need to do?In Two Words: Get Educated. Learn The Fundamentals of Healthcare Reform.

Political commentators are fond of saying that the President “front-loaded healthcare reform with all the goodies that were designed to take effect right before the mid-term elections.” However, what does that really mean to employers? What are these goodies?

They are:

1. Dependent coverage must be extended to all children until age 26, regardless of marital or student status, or financial dependency.

2. Pre-existing condition exclusions or limitations may not be applied to anyone under age 19.

3. There are no lifetime limits on essential health benefits and only restricted annual limits on essential health benefits between now and 2014.

4. Coverage may only be rescinded in the instance of member fraud.

Not only do the above provisions cost the government nothing, everyone is in favor of them, Democrats and Republicans alike. In fact, in 3,000 pages of PPACA legislation, these four provisions are about the only things that no one

disagrees on. Simply put, they are here to stay. For compliant healthcare benefits plans, the main four necessary plan changes must be implemented no later than your first plan year after September 23, 2010. As the PPACA continues to evolve, the best thing to do is to remain informed of upcoming developments, to ensure your plans continue to be in compliance.

About the Author:

Andrea Balogh is the Executive Vice President and General Counsel for Meritain Health, the country’s largest private health services company, offering employers comprehensive, integrated wellness and cost management services. To successfully control healthcare and health benefit costs, today’s employers need fully integrated, end-to-end solutions to their health benefit requirements. Meritain Health’s client service approach includes customized plan designs, high touch plan management and a strong focus on wellness and education.

Meritain Health History and Operations

Meritain Health has been exceeding the expectations of clients for more than 30 years. With more than 2,000 benefits management clients, 130 payer clients and over 1.4 million members in all 50 states, Meritain Health is the largest private health services company in the country. A top Consumer-Directed Health Plan provider, Meritain Health serves clients and members through its dedicated 1,445 employees across 12 principal locations. For more information, visit www.meritain.com.

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The Changing Face of Healthcare: Understanding the Medical Loss Ratio

By Arthur Tacchino, J.D.

The Affordable Care Act created a new regulation designed to bring down the cost of healthcare through the use of a new medical loss ratio

standard. This is an extremely complex regulation and this article will spell out what it actually required of the various parties it regulates. Essentially, this is a new reporting and rebate requirement for health insurance issuers. Generally speaking, insurance issuers will be required to submit reports for the large group, small group, and individual markets in each state the

issuer does business. In each market, a medical loss ratio standard is set. For individual and small group markets (groups of 100 or fewer employees), issuers must spend 80 percent of premiums on “medical care”. In large group markets (groups of 101 or more employees), issuers must spend 85 percent of premiums on “medical care”. If the medical loss ratio standards are not met for any market, issuers must rebate premiums to all plan enrollees on a pro rata basis. The regulation allows the Secretary of HHS to adjust the MLR standards for a state’s individual market if it is likely that the MLR standard will destabilize that market. Under the MLR regulation, HHS also may impose civil monetary penalties on



noncompliant health insurance issuers. It is also important to note that States can set higher MLR Standards for their markets than required by these regulations. The term “medical care” was at the heart of the MLR debate. The National Association of Insurance Commissioners (NAIC) was charged with creating uniform definitions of activities reported under this requirement and standardized methodologies for calculating the medical loss ratio. HHS has adopted the NAIC’s final MLR regulations. These new regulations apply to health insurance

issuers offering group or individual health insurance coverage. The regulations create special rules for expatriate plans, “mini-med plans”, and newer plans due to their special circumstances.

Issuer’s Reporting Requirements

The MLR regulations require issuers to submit an annual report to the Secretary of HHS for each plan year (note that plan year is defined as a MLR reporting year). The report must contain information related to earned premiums and expenditures in various categories, including:

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• Reimbursements paid for clinical services provided to enrollees,

• Activities that improve healthcare quality, and • All other non-claims costs, including an

explanation of the nature of such costs, but excluding federal and state taxes and licensing or regulatory fees.

This report also must include information regarding any rebates to plan enrollee’s that the issuer was required to make because of failure to meet the MLR standards. These reports give a level of transparency that is unprecedented. HHS will post these reports on a website where consumers can see how their premium dollars are being spent. The due date of this new reporting requirement will be the June 1st that follows the MLR reporting year. This means that for the 2011 MLR reporting year, reports must be submitted to the Secretary by June 1, 2012. This allows issuers to report claims for services provided during the MLR reporting year that are processed and paid in the three months following the end of the MLR reporting year. It also gives issuers another two months to compile and submit the

required data.

Activities that Improve Health Care Quality

One of the main questions arising from the MLR debate was: “What is included in the “activities that improve healthcare quality” portion of the medical loss ratio?” Parties from both sides lobbied for various definitions of the equation that would favor either the insurance issuers or the consumers. In the end, most observers agree that consumers defeated the issuers in the fight. The final MLR regulation allows non-claims expenses incurred by a health issuer to be counted as a quality improvement activity only if the activity meets all of the following requirements. The activity must be: • Designed to improve health quality;• Designed to increase the likelihood of desired

health outcomes in ways that can be objectively measured and that produce verifiable results and achievements;

• Directed toward individual enrollees, for the benefit of specified segments of enrollees, or



provide health improvements to the population beyond those enrolled in coverage (as long as no additional costs are incurred due to the non-enrollees); and

• Grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized professional medical associations, accreditation bodies, government agencies or other nationally recognized health care quality organizations.

Generally, any health information technology expenditure that clearly improves healthcare, prevents hospital readmissions, improves patient safety, reduces errors, or promotes health activities and wellness will also be classified as a quality improvement activity.

Activities that are NOT to be reported as quality improvement activities are:

• Those activities designed primarily to control or contain costs;

• Concurrent and retrospective Utilization Review;

• Fraud Prevention Activities; • Development, execution, and management of

a provider network;• Provider credentialing; • Marketing expenses;• Costs associated with calculating/administering

individual enrollee or employee incentives;• Clinical data collection without any subsequent

data analysis;• Establishment and/or maintenance of a claims

adjudication system; and• 24-hour customer service/or health care

professional hotline addressing non-clinical member questions

It is important to note, that despite a strong attempt

by brokers and agents, commissions were excluded from this category of “activities that improve healthcare quality”, essentially excluding them from the medical care portion of the equation. This will greatly impact how agent and broker compensation will be structured and paid by insurance issuers. It will likely mean downsizing of agents and brokers by insurance companies purely due to fee structure and budgetary concerns.

“Special Circumstance” Plan’s Reporting Requirements

As previously mentioned, the MLR regulations also created separate reporting requirements for so-called “special circumstance” plans. These plans include expatriate plans, “mini-med” plans, and newer experience plans.

Expatriate Plans & “Mini-med” Plans

Expatriate plans generally cover employees working outside their country of citizenship, and employees working outside the employer’s country of domicile. “Mini-med” plans often cover the same types of medical services as comprehensive medical plans but have unusually low annual benefit limits. Due to these plans’ special circumstances, issuers of these plans will report their experience separately from the other markets. Reporting will be on a quarterly basis, and the medical loss ratio calculation of claims and quality-improving activities is multiplied by a factor of two, to add credibility to the ratio. This special separate reporting requirement will last only in 2011 at which time HHS will determine what is appropriate for 2012.

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Newer Experience

Due to unique circumstances for plans with newer experience, issuers can defer both the premium and claims experience, as well as the life-years, for policies first issued after the start of the MLR reporting period (after January 1, 2011) to the next MLR reporting year. That is, if these policies account for more than half of the issuer’s experience in a market segment for an individual state. This rule was created to alleviate the issue of unpredictable claims.

Calculating and Providing the Rebate Calculating the MLR and rebate employs a complex equation developed by the NAIC. Insurance issuers will be responsible to make this calculation. The calculation allows issuers to apply credibility

adjustments to partially credible groups. A credibility adjustment modifies the reported MLR of an issuer by adding reliability to an otherwise unreliable statistic. Partially credible groups are those that have between 1,000 and 75,000 life years. A life year is the number of member months divided by 12. Groups with 75,000 life years are considered fully credible and will not be allowed to make a credibility adjustment. Groups with 1,000 or fewer life years are not credible and therefore are not required to rebate premiums to plan enrollees.

Rebating Premium if MLR Standard is not Met

The MLR regulations require that if the medical loss ratio standard is not met for a market, premium rebates must be made to plan enrollees. Notice of rebates to enrollees is required only if



issuers have not met the MLR standard. The rebate paid to each enrollee is based on the earned premium paid by (or on behalf of) the enrollee, minus taxes and other permissible adjustments taken by the issuer. Rebates are made on a pro rata basis. There are special rules for de minimis rebates, unclaimed rebates, and situations where rebates may force an issuer into insolvency. Rebates must be made annually and paid by the August 1st following the MLR reporting year, which means the first rebates are due by August 1, 2012. Issuers can choose the form of rebate for current employees, but not for former employees. For former employees, issuers must disburse checks to enrollees. For current employees, the issuer can disburse rebates as either a premium credit or a cash lump sum. This lets the issuer decide which form is less of an administrative burden.

Simplified Example of Rebate Calculation:

Assume a plan has 200 participants. Each participant pays $9,000 dollars each in premiums (we assume participants pay equal amounts, even though that is generally not true). The total premiums would be $1,800,000. Since this plan is in the large group market, it would be subject to the 85 percent MLR standard (we assume this plan is fully credible, but a credibility adjustment could make this much more complicated). That means that $1,530,000 (85% of $1.8 million) must be spent on medical care, as defined by the NAIC. Now, assume the issuer only spends $1,200,000 for the plan year on medical care. This means that $330,000 ($1,530,000 - $1,200,000) must be rebated to plan enrollees. Since plan enrollees paid equal amounts of premiums, they would each receive a rebate of $1,650 ($330,000 divided by 200 plan participants). Note that rebates are paid on a pro rata basis, so enrollees that pay higher premiums are entitled to higher rebates.

Impact of MLR Regulations:

This example should give a taste of how important this regulation is to both issuers and consumers. It will radically change how insurance issuers operate in the industry. This article has been an overview of the basic requirements of this complex new regulation. MLR regulations will subject issuers to greater transparency and complex spending requirements. The practical effect of this regulation on health insurance issuers will be a squeeze on their business. Some issuers are already operating at a high level and will have no problem satisfying these new spending requirements. Others will struggle to meet these new MLR standards. We will likely see several insurance issuers merge to streamline their business models and adapt to these new requirements. Only time will tell what effect the new MLR requirements will have on health insurance issuers, agents, and brokers in the healthcare industry.

About the Author:

Arthur Tacchino is an Assistant Professor of Health Insurance at The American College. Arthur received his J.D. from Widener School of Law and his B.S. of Economics from Susquehanna University. Arthur is currently designing courses for The American College’s new premier healthcare designation, the Chartered Healthcare Consultant™ (ChHC™). Professionals who want to learn more about the MLR and other aspects of healthcare reform can reserve a place in the ten-week webinar course Essentials of Healthcare Reform by visiting TheAmericanCollege.edu/healthcare. The courses of the ChHC™ curriculum provide a competitive advantage for benefits consultants and other industry leaders who want to differentiate themselves in the complex new world of healthcare reform.

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By Barbara Lewis, Founder & CEO of Choice Living and Wellness

Obamacare is a frightening word for employers and many Americans. Whether that is a fair

assessment or not, a massive change in the way that we budget for our homes, our lives is about to take effect, and the frustrating thing for many people is that it is going to take place whether we want it or not. Moreover, a lot of us just feel more vulnerable than we ever have.

Many of us felt that this downturn in the economy would be a tough one, one that might last two or three years. Well, here we are, four years into an economic contraction unlike anything anyone has seen in our lifetimes with no end in sight and potentially devastating new insurance costs are at

our doorstep. When a business is clinging to life it may not take much to finish it; no matter how effective that business has been for clients, no matter how economical, no matter how smart, no matter how important they are to the community and their customers. Many of us are wondering whether the changes in health care that were meant to help, may prove to be the body blow that proves fatal to our businesses.

I don’t know how much Health Care Reform is going to cost my business. I have yet to hear a

Medical Discount Network a Viable Alternative

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single business person say with certainty that they know with any degree of accuracy how much health care reform is going to cost them but I can promise you this; our segment of the industry, the discount health network, can add a degree of flexibility and make the changes in Health Care Reform substantially less costly for a large number of patients.

In 2010, it may very well be that, with increases in the cost of a company’s health insurance plans, top executives may respond by electing to reduce their costs by opting for a higher deductible policy. If that is the case, the medical discount card industry can take the sting out of those increased deductibles.

In America in 2010, anyone who is unemployed is facing a meltdown if they get sick or face any emergency health care need. Americans are losing homes, life savings, college funds they have scrimped for and saved over decades when they become ill. By using a medical discount group, the unemployed and their family members do have a way to immediately get discounted heath care, whether they are on an expensive COBRA or are simply uninsured.

As for the rest of us, the portion of the public that has health care, but finds that we want procedures or options that our policies simply will not cover, you are going to see that our approach can support you especially with Vision and Dental services. When it comes to elective procedures such as cosmetic surgery, we offer a negotiated rate. When it comes to cutting-edge procedures not covered by insurers, we offer a negotiated rate. Bariatric procedures are among the most successful approaches for weight loss, which is America’s biggest health care challenge. In some cases, patients will be covered by their insurance, many will not. For those members who will not be provided coverage by their traditional insurance, we offer a fixed, negotiated lower cost for the exact same procedure. The savings can amount to thousands of dollars. Finally, health care has some exciting

developments in the area of wellness. As an example, we now can “drill down” to analyze the microscopic lives in our bloodstream that course through our veins ‘up close and personal,’ in their own neighborhood. Live blood scans allow physicians to determine the quality of your blood, the relative aging of white blood cells as well as check for early signs of disease. These types of screenings are typically denied coverage, but spending a few dollars now to determine the relative health of a patient’s blood could motivate them to change their diet or exercise regimen. It could protect their health and save a significant number of financial headaches, and health expense in the near and long term. The same goes for a long list of other procedures, such as life scans which look at the flow through the carotid artery to determine the risk of heart attack and stroke.

The old saying that ‘what is old is new and what is new is old’ rings true here. Medical discount cards have traditionally been the approach for the uninsured or underinsured to try to cope with increasing health care costs. With some fundamental changes and billing procedures that are far more predictable and attractive for members and providers alike, a Medical Discount Network may be one of the few viable alternatives to dealing with the expected constraints and cost increases of President Obama’s Health Care Reform.

About the Author

Barbara Lewis, Founder and CEO of Choice Living Health & Wellness, has turned her focus to providing new products and solutions for the health care industry. With the launch of Choice Living, Lewis’ efforts to build an industry-changing network of health care providers founded on mutually beneficial relationships between doctors and patients have come to fruition through her strategic relationships with major employers, unions, associations and brokers. Visit www.ChoiceLiving.com to learn more.



By David Goldfarb

PPACA (Patient Protection and Affordable Care Act), known by most in and out of the industry as “ObamaCare”

is no longer something that agents can hope will not happen --- it is here, it has begun, and it is reality. In fact, the media reported last week that Democrats are preparing to launch a multi-million dollar advertising campaign to encourage public support for the legislation and those who helped pass it. If you are a health insurance agent or an employee benefits consultant and you are unfamiliar with PPACA and all of its underlying provisions you have one of two choices --- either raise the white flag or begin studying health care reform NOW so you can properly educate and advise your clients in the right direction. PPACA will have (or already has had) myriads of implications

on the group health insurance plan your clients have in place today. The reality in almost every type of business is that massive change equals massive opportunity. Those who are well-versed, well-staffed, and are forward-thinking will succeed and those who cannot accept the realties associated with PPACA will fade --- and fade quickly. The health insurance agents or employee benefits consultants are “The First Victims of Health Care Reform” according to an article released

Darwinism EffectSurvival of the Fittest for Employee Benefits Consultants

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on August 26th 2010. In fact, “The First Victims of Health Care Reform” is the actual title of the article. Below are three small excerpts from the article:

“Insurance agents and brokers and small insurance companies are among those who may have to scramble to stay afloat over the next few years. This is partly by design and partly an unintended consequence of a new law that is so sweeping, it will affect nearly every corner of an industry that accounts for one-sixth of the U.S. economy.”

“Agents and brokers are so concerned they will be viewed as redundant under the new law that they successfully lobbied to get state insurance commissioners to publicly acknowledge their importance.”

“Agents and brokers are also worried about the future for another reason: a vital part of their current role, sales and marketing, could be made redundant thanks to the new state insurance exchanges that will go online by 2014.”

Once again, if you are an agent (or broker or consultant) and you haven’t already made the necessary changes (internally as it relates to your business model and externally as it relates to communicating to and providing proper guidance to your clients) you are quickly running out of time. If you are an agent that has traditionally “shopped the market” for your clients every year, assisted your clients with open enrollments, and assisted your clients with their renewals, you need to change gears immediately. The successful agent realized several years ago that it goes way beyond simply providing the lowest rates. With today’s hazy economic climate coupled with the unprecedented changes associated with PPACA, employers need much more than an agent to help them “shop the

market.” The successful “agent” will be much of a “consultant” --- the insurance plans with the lowest rates will likely not the most appropriate choice for the employer. The successful benefits consultant will provide employers with analytical recommendations based on claims usage and employee behavior. The successful benefits consultant will be providing service on a year-round basis, not simply at the three month window that revolves around a renewal date. The successful benefits consultant will invest in technology and outside resources to truly provide their clients with the best solutions to their unique situations. The successful benefits consultant has likely already incorporated some form of consumer-



driven healthcare to their clients’ benefits package --- consumer-driven health plans (CDHPs) are the future --- the traditional $500 deductible PPO plan is becoming less and less common among organizations offering a benefits program. If you are in this industry and you haven’t revised your business plan yet to align with PPACA, I can promise you that the clock is ticking and it is just a matter of time before other agents, the “successful benefits consultants,” will be calling on and enlightening your clients --- do not put all of your eggs in one basket, especially if the one basket is loyalty.

About the Author David Goldfarb is the owner and operator of DSG Benefits Group, LLC, an independent boutique employee benefits brokerage and consulting firm specializing in innovative benefit plan designs providing services to hundreds of clients nationally. Over the last decade David has developed the ability to understand an employer’s specific needs and develop an appropriate, tailored benefits package. DSG encourages its clients to integrate a heavy emphasis on consumerism and wellness into their benefits package. The firm strongly believes that year-round employee education and access to health care information are core components of a successful employee benefit plan. The firm prides itself on bringing innovation, value, and responsiveness to the complex world of insurance and employee benefits. David’s broad market knowledge, coupled with strong carrier relationships allows him to tailor a program that is competitively priced and meets his clients’ individual needs. Mr. Goldfarb is an active member in several industry associations such as DAHU, TAHU, NAHU, NAIFA, NAABC, AHIP, SHRM,

IFEBP, NCPA, and The Heartland Institute. He has also received numerous awards, including the National Association of Health Underwriters’ “Golden Eagle Award,” the highest recognition bestowed upon an individual who has demonstrated professional excellence in health and disability income insurance. 2010 was the seventh consecutive year for David to win this award. In 2010, David also qualified for the Million Dollar Round Table’s (MDRT) most distinguished membership level, Top of the Table. This is an exclusive forum for the world’s most successful insurance and financial services professionals that represents less than 1% of the MDRT international membership. David has been featured in the Dallas Morning News for his progressive strategies in helping lower overhead costs for nonprofit organizations, allowing them to enhance funding for actual programming. He has also contributed to publications for MSNBC and Texas CEO Magazine. David has been a featured speaker for other professional associations such as CPAmerica International, where he has shared his knowledge with other professionals to them with their clients. Outside of his involvement in industry associations, David is also active in his community, especially with nonprofit organizations. He is a charter member of the TACA Corporate Council as well as an active member of The Center for Nonprofit Management. Additionally, his firm is a corporate patron for several local Arts organizations such as the Dallas Symphony Orchestra, Dallas Summer Musicals, The Dallas Opera, Dallas Children’s Theater, Dallas Black Dance Theatre, The Women’s Museum, and several others. Mr. Goldfarb is a graduate of the University of Texas, Austin and currently resides in Dallas, Texas with his wife Kerri.

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By Deepak Padmanabhan

On November 22, 2010, The Department of Health and Human Services (HHS) released the interim final regulation (IFR) regarding medical loss ratio (MLR)

implementation for health insurance issuers. HHS has adopted the MLR recommendations by the National Association of Insurance Commissioners (NAIC). This IFR will form part of Section 2718 of the Public Health Service (PHS) Act through MLR provision which is related to bringing down the cost of health care coverage and ensuring that consumers receive value for their premium payments. The MLR regulations of the Affordable Care Act (ACA) will be effective from January 1, 2011.

The MLR measures the amount of premium insurers spent for medical care. MLR was of greater interest for investors, as insurers with lower MLR had lower expenditures and higher profits. IFR requires insurers to meet minimum MLR of 80 percent in the small group (1 – 100 employees) / individual market and 85 percent in the large group market (greater than 101 employees). Failure to meet the minimum MLR requirements will result in insurers paying rebates to their customers. The interim rule does not apply to self-insured plans. The IFR establishes rules for greater transparency and accountability by providing consumers details regarding how their premium dollars are spent on medical care, quality improvement activities and administrative expenses.

The What, Why and How of Medical Loss Ratio



This article will provide an overview of the major MLR provisions and its impact.

Reporting Mandates

The IFR requires insurers to submit a report to HHS for each plan year with the information regarding total earned premiums, total reimbursement for clinical services, total spending on activities that improve healthcare quality and non-claim costs excluding federal state taxes and fees. The report needs to be submitted by June 1st of each year and the first report needs to be submitted in 2012. The insurer must submit a report for each state in which it is licensed to issue health insurance coverage. The HHS report must include the description of the methods used to allocate expenses such as incurred claims, quality improvement activities, federal and state taxes and other non-claim costs.

Activities that Improve HealthCare Quality

The quality improvement activities conducted by an issuer must meet the following goals:

• Improve health outcomes including increasing the likelihood of desired outcomes compared to a baseline and reduce health disparities among specified populations

• Prevent hospital readmissions• Improve patient safety and reduce medical

errors, lower infection and mortality rates• Increase wellness and promote health

activities• Support meaningful use of Health IT

consistent with ARRA

Examples of Quality Improvement Activities Include:

• Effective case management, care co-ordination and disease management initiatives through medical homes

• Patient-centered education and counseling• Comprehensive discharge planning• Prospective prescription drug utilization

review

Activities designed primarily to control or contain costs are not quality improvement activities and hence they are excluded from medical costs. The following activities will be considered as administrative costs for MLR calculation

• HIPAA and ICD-10 implementation and administration costs

• Retrospective and concurrent utilization review

• Amount spent on fraud prevention activities which is more than the recovered incurred claim

• Costs related to executing provider contracts and establishing provider networks

• Provider credentialing• Marketing expenses• Agent Commissions

Medical Loss Ratio Calculation

A health plan issuer must aggregate data by state and line of business. Starting from 2011, MLR is calculated over a three year period if the plan’s experience is partially credible. MLR is partially credible if it based on the experience of more than

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1000 members and lesser than 75000 members. State insurance commissioners could request a waiver of the 80 percent MLR requirement if there is a likelihood of the destabilization of the individual market which could result in fewer choices for consumers

MLR = Incurred Claims + Quality Improvement Measures __________________________________ Premium Revenue (Federal & State Taxes + Licensing and Regulatory Fees)

Rebates

For each MLR reporting year, if the minimum MLR percentage is not met as per the IFR, the issuer must provide a rebate to each enrollee who paid premium for healthcare coverage. Rebate for each MLR reporting year = (Total Premium Paid by Enrollee - Federal & State Taxes - Licensing & Regulatory Fees) X (Minimum MLR* – Health Plan Issuer’s MLR)

Minimum MLR is 85 percent in the large group market and 80 percent in the small group/individual market

The rebate needs to be paid by August 1 following the end of the MLR reporting year. A late payment interest will be applicable if the issuer fails to pay the rebate on time. The rebates could be paid through premium credit, lump-sum check or reimbursement to the account used to pay the premium. The issuer need not individually calculate rebates if it is less than $5 per enrollee. The issuer must submit a report to the Secretary of HHS with information regarding the number of enrollees who received the rebate and the amount of rebates provided. Issuers with fewer than

1000 members (non-credible) are not required to pay rebates. Issuers can also delay payment of rebates until the new entrants attain a full year’s experience.

Mini-Med & Expatriate Plans

Expatriate Plans generally cover employees working outside their country of citizenship. These plans result in higher percentage of administrative costs in relation to premiums because of the administrative costs related to identifying and credentialing providers worldwide, processing claims in various languages and billing procedures and the inability to provide quality improvement activities outside United States. Policies issued by non-US insurers for services rendered outside of the U.S. are not subject to IFR. Expatriate policies that are issued by U.S. domestic insurance companies on forms approved by a state insurance department are covered by the interim final rule. The experience of an insurer’s expatriate policies is to be reported separately from other coverage and the calculation of claims and quality improving activities is to be multiplied by a factor of two. Insurance companies that offer expatriate plans will be required to report to HHS on a quarterly basis in 2011. A “mini-med” plan refers to a policy offered by an insurer that has a total of $250,000 or less in annual limits. The administrative expenses for mini med plans are higher because of high turnover rates which also result in lower claim costs. Because of the lower annual limits these plans are less likely to spend much on quality improving activities. The mini-med issuers, for policies that have a total of $250,000 or less in annual limits, will be permitted to apply an adjustment to their reported experience



to address the unusual expense and premium structure of these plans. The calculation of claims and quality improving activities is to be multiplied by a factor of two. Insurance companies that offer mini-med plans will be required to report to HHS on a quarterly basis in 2011. About 75 Million Americans are covered by this rule. As per HHS estimates, 30 percent of the enrollees in the individual market will receive an average rebate of $164 for 2011. About $3 billion will be paid as rebates by insurers in all markets over the 2011 – 2013 period.

MLR mandates will require health plans to ponder over profitability through administrative cost cutting. MLR regulations will result in lower margin and reduced market share. Major projects like 5010 and ICD-10 might face funding issues as it will not be part of MLR calculation. Some insurers might focus on premium increases, but competition and rating regulations will limit them. Insurers will have to look at restructure their commission schedules to attain the minimum MLR. Few insurers have informed brokers regarding reduced commissions. Payers should start evaluating their accounting for quality improvement and medical care related activities. The IFR includes provisions to improve the insurer efficiency through greater transparency and accountability, quality improvement activities and reduced administrative expenses. ACA emphasizes the role of Health IT to improve the quality of care. EHR and ICD-10 implementation will enable better research and disease management. Health IT can help health plans standardize, simplify and automate processes for administrative transactions and thereby help insurers attain the minimum MLR.

About the Author

Deepak Padmanabhan works as a Lead Business Analyst in the Health IT field. His areas of interests include Health Reforms, ICD-10, HIPAA 5010 and Health Innovations. He is a certified Project Management Professional (PMP) and Fellow, Academy of Healthcare Management (FAHM).

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By John Ryan

On Oct. 21, the National Association of Insurance Commissioners (NAIC) adopted a model regulation concerning the calculation of medical loss ratios

(MLR) under the Patient Protection and Affordable Care Act (PPACA). The model was submitted to

Kathleen Sebelius, secretary of Health and Human Services (HHS), for final review and certification. A final declaration is expected in the next few weeks. The model regulation provides that starting Jan. 1, 2011, an MLR of 80 percent is applied to the individual and small group market (100 and under lives) and an MLR of 85 percent is applied to large group plans. If health insurance plan issuers do not

A ‘Boon’ for Consumers May be ‘Bane’ for Brokers & Producers

NAIC Adopts Medical Loss Ratio Model Regulation



NAIC Adopts Medical Loss Ratio Model Regulation

meet these MLR requirements, they will be required to make a rebate payment to policyholders. The regulation is designed to help consumers get good value for their health insurance premium dollar. It’s estimated that more than 20 percent of consumers who purchase coverage in the individual market today are in plans that spend more than 30 cents of every premium dollar on administrative costs. An additional 25 percent of consumers in this market are in plans that spend between 25 and 30 cents of every premium dollar on administrative costs. In 2011, under the new rules, estimates indicate that up to 9 million Americans could be eligible for rebates starting in 2012 worth up to $1.4 billion. Average rebates per person could total $164 in the individual market.

Insurer Reporting Requirements Beginning in 2011, insurance companies that issue policies to individuals, small employers and large employers will have to report the following information in each state it does business:

Total earned premiums.Total reimbursement for clinical services.Total spending on activities to improve quality.Total spending on all other non-claims costs

excluding federal and State taxes and fees.

Insurance agents and producers have expressed concern about how the NAIC would classify insurance commissions under the MLR formula. The NAIC kept agent commissions under the administrative expense category, instead of recommending that commissions be treated as a pass-through cost, due to concern that the NAIC did not have legal authority to make such a

recommendation. But the issue isn’t settled. The NAIC created an executive committee subgroup to work with HHS officials on the issue of producer compensation in recognition of the important role that brokers play. The good news, according to Jessica Waltman, senior vice president of government affairs for the National Association of Health Underwriters, is that “the ball is still moving forward.”

Medical Expenses vs. Administrative Expenses

The PPACA requires the MLR calculation to include only two categories of medical expenses (with everything else being deemed an administrative expense): (1) incurred claims and (2) quality improvement (QI) expenses. The model regulation defines quality improvement expenses as “expenses other than those billed or allocated by a provider for care delivery (i.e., clinical or claims costs), for all plan activities that are designed to improve health care quality and increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements.” The NAIC also stated that quality improvement expenses “should be grounded inevidence-based medicine, widely accepted best clinical practices or criteria issued by recognized professional medical societies, accreditation bodies, government agencies, or other nationally recognized health care quality organizations. Quality improvement expenses should not be designed primarily to control or contain cost, although they may have cost reducing or cost neutral benefits as long as the primary focus is to improve quality.

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Quality Improvement Expenses

The NAIC standards include five categories of quality improvement expenses: 1. Improvement in Health Outcomes Case management Care coordination and chronic disease

management Making/verifying appointments Medication and care compliance initiatives Programs to support shared decision-making

with patients, their families and the patient’s representative

Reminding insured of physician appointment, lab tests or other appropriate contact with specific providers

Providing coaching or other support to encourage compliance with evidence-based medicine

Use of the medical homes model

2. Activities Design to Prevent Hospital Readmission Discharge planning Arranging and managing transitions from one

setting to another (such as hospital discharge to home or to a rehabilitation center)

Activities to promote the sharing of medical records with all clinical providers participating in patient’s care

3. Activities to Improve Patient Safety and Reduce Medical Errors Identification and use of best clinical practices Utilization review to identify potential adverse

drug interactions Quality reporting for activities that improve

patient safety and reduce medical errors

4. Wellness and Health Promotion Activities Wellness assessment and coaching programs to

achieve measurable improvements Educate individuals about effective means

for dealing with specific chronic disease or condition

Certain rewards and incentive programs (including reductions to co-pay) if rewards and incentive programs are not already reflected in premium or claims

5. Health Information Technology (HIT) Expenses for Quality Improvements



HIT expenditures used to accomplish activities in the first four categories

Expenses related to monitoring, measuring or reporting clinical effectiveness, including reporting and analysis costs related to maintaining accreditation, or costs for public reporting of quality of care

HIT expenses for advancing the ability to efficiently communicate clinical or medical information to determine patient status, avoid harmful drug interactions or direct appropriate care.

Administrative Expenses Excluded as QI Expenses

The NAIC also identified the following to be excluded as quality improvement expenses (and thus constituted as administrative expenses): All retrospective and concurrent utilization

review Fraud prevention activities The cost of developing and executing provider

contracts and fees associated with establishing or managing a provider network

Provider credentialing Marketing expenses Most accreditation fees Costs associated with calculating and

administering individual enrollee or employee incentives.

(Note: This summary does not include an exhaustive list of services approved by the NAIC as quality improvement expenses, which can be found in the model regulation. It is important to note that the list of excluded expenses includes a catch-all for any

activity not expressly listed as a quality improvement expense.)

Benefits providers and managers are advised to watch for the final regulations to be released by HHS and for any additional information disclosed by the executive committee subgroup on broker compensations.

About the Author

John Ryan is president of Baybenefits Insurance Services, a member of NFP Benefits Partners, a national corporate benefits organization with more than 175 offices across the country and more than 2,000 benefits professionals, representing over 40,000 corporate clients of all sizes throughout every industry. The information for this article was compiled with the assistance of NFP Benefits Partners.

John has an extensive background in client service, sales and management, both as an employee and entrepreneur. He understands the demands of running a business, which makes him the perfect strategic partner for businesses of every size. He has consistently been recognized as one of the Top 50 Producers by Kaiser Permanente, Anthem, Blue Shield and Delta Dental, and is a board member and legislative chair for the Golden Gate Association of Health Underwriters.

For more information, visit Baybenefits at www.baybenefits.com, or contact John Ryan at 415-273-2211.

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By Kevin Wildenhaus, Ph.D.

In 1735, Benjamin Franklin published a letter in The Pennsylvania Gazette, offering his now famous axiom, “An Ounce of Prevention is worth a Pound

of Cure.” He was speaking at the time to fire safety, but his message today rings as loud as a five-alarm bell regarding American health care: wellness and prevention work more efficiently and cost-effectively toward a solution than does any attempt

to quench a dire situation later. With his letter, Franklin launched a wellness and prevention program of his own aimed at managing and containing one of the critical health and safety issues of his day. Franklin personally coached a group of men on effective use of equipment and appropriate actions to be taken at every fire. The brigade met monthly to discuss fire prevention, and eventually spawned other fire-safety groups. To foster a sense of personal accountability, homeowners were mandated to have leather fire-fighting buckets in their houses. Franklin’s

Health Care Reform andthe Role of Wellness and Prevention



integrated coaching technique continues to impact us today: fire safety is second nature in our culture. As today’s policy makers continue to hammer out the specifics of health care reform, it is already apparent that wellness and prevention programs are viewed as an area of importance. Many individuals engage in lifestyle behaviors that lead to poor health, such as poor diet, physical inactivity, and inadequate management of chronic health conditions. By focusing on wellness and prevention, individuals may improve their overall health which can lead to reduced health care costs. Currently, chronic illness is estimated to affect 138 million Americans, a figure estimated to rise to 164 million by 2025. With the large number of people being diagnosed with a new chronic condition each day, the emerging clinical and economic burdens are not sustainable, and traditional disease management resources may not be robust enough to handle this increasing demand.

Bringing the Science Know-How and the Technology Together

Digital Health Coaching in the 21st century offers the benefits of tailored coaching to wellness and prevention programs just as Ben Franklin did for fire safety. The personalized, scalable nature of Digital Health Coaching features can provide productivity savings and positive return on investment (ROI). Due to the availability of modern science and technology, primary prevention targeting healthy individuals, identification and management support of preventable health risks (including education and support for chronic disease) and improved management of high-cost chronic disease through tertiary prevention are all not only possible, but imperative. For health plans and employers, Digital Health Coaching harnesses current innovations and technology and combines them with advanced

behavioral science to aid individuals in making better health choices. The programs are highly personalized, scalable to a population of any size, available 24/7, confidential, and cost-effective to deliver. For the individual, Digital Health Coaching emulates a live health coaching or counseling session. With personalized action plans, interactive guidance, and support tools, participants can change their behaviors and learn the skills they need to help manage their own health. These coaching programs begin with questions about the participant’s unique personal situation, motivation, self-confidence and perceived barriers to success with changing the behavior or managing a condition or health issue. The programs create specific personal action plans tailored to each participant based on her or his responses. Digital Health Coaching plans leverage multi-disciplinary clinical expertise in the area of the participant’s focus (from lifestyle issues like weight management and insomnia to health issues such as diabetes and chronic pain), as well as evidence-based behavioral change models designed to target and motivate personal engagement and behavior change. Finally, participants receive personalized tools and resources to help them achieve specific goals. Numerous research studies have been conducted on Digital Health Coaching. In a 2008 study, Highmark Blue Cross Blue Shield and HealthMedia, Inc. conducted research focused on health plan members who participated in a foundational, online coaching program designed to teach participants the skills they need to help manage many chronic conditions. Among the reported results, within one year of providing the online program, hospital admissions among participants decreased 30 percent and there was an 8% reduction in estimated health care expenditures.

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Participation Planning Strategy

To be more effective, Digital Health Coaching solutions should be combined with a comprehensive participation strategy designed to address the distinct needs of each organization and its employees. An organization should create customized communications tools – focused on its unique population health initiatives – to improve participation in Digital Health Coaching programs, as well as other wellness and prevention programs and services being offered. Customizable communication tools can include letters, newsletters, email content and posters. For example, one health system creatively reached out to its own employees by incorporating the power of story into its communications plans, by using personal staff member videos to motivate other employees to actively participate in their own health management. Following this initiative, one out of every four employees on average completed at least one Digital Health Coaching program for wellness, behavioral health, or disease management each year. With Digital Health Coaching programs, an organization is able to create custom communications targeting individual participants. The advanced technology behind Digital Health Coaching enables the programs to analyze HRA data, claims data, personal health records, and electronic medical records in order to identify participants who have an epidemiological need and are ready for change. Based on the findings, customized communications can be created for each individual participant. These participants then receive unique messaging based on their self-reported stage of change, motivation, self-confidence, perceived barriers, and demographics. Through e-mail, direct mail, or Interactive Voice Response (IVR), these messages direct participants to effective behavior change programs at appropriate times to enhance behavior change outcomes.

Outcomes Demonstrate Success and Projected Productivity Savings

The Digital Health Coaching solution provides an opportunity to collect aggregated de-identified health data. Self-reported data on personal health history, weight, biometrics such as HDL and LDL, exercise, nutrition, mental health, and a myriad of important data points can be used to influence the design of a wellness and prevention program. Validated methods are used to measure outcomes including claims-based studies, randomized control trials, time 1 / time 2 comparisons, and self-reported outcomes. An analysis of self-reported data collected



from program participants in August 2010 demonstrates positive outcomes as well as estimated productivity savings. The following data, from a sample of 18 Digital Health Coaching programs, shows self-reported outcomes at six months after starting the program. For productivity savings estimates, WPAI questionnaire was utilized using a 40-hour work week and $50,000 average annual salary.

Weight Management57% reported losing weight (N = 19,690)28% reporting a BMI of 30+ at baseline reported losing at least 5% of their body weight (N = 4,608)$465 estimated productivity savings per participant per year (N = 15,012)

Sleep Improvement37-minute average reported increase in sleep time (N = 2,760)25% reported reduction in fatigue levels (N = 2,717)$2,840 estimated productivity savings per participant per year (N = 1,730)

Diabetes ManagementAverage reported A1C levels dropped from 7.23 to 6.78 (N = 788)90% said they were able to better manage their diabetes (N = 788)$2,500 estimated productivity savings per participant per year (N = 505)

Smoking Cessation59% reported that they quit smoking (N = 3,608)81% of those who reported quitting, said they had high confidence that they would remain non-smoking (N = 2,909)

Depression Symptoms Management39% reported decrease in average CES-D scores

(N = 2,253)5.25% average increase in the confidence to manage depression (N = 2,173)$2,770 estimated productivity savings (N = 1,572)

Other Digital Health Coaching programs have also demonstrated positive outcomes.

Progressive, Comprehensive Approach

In this article, we identified the value of Digital Health Coaching; it is effective, scalable to entire populations, and works seamlessly across wellness, behavioral health, and traditional disease management by offering a holistic solution for each individual. In addition, it offers confidential, convenient, and consistent delivery of high-quality coaching to each individual. Finally, the technology behind Digital Health Coaching provides the ability to measure outcomes with meticulous detail utilizing analytical reporting.

Whether you’re talking fire safety and prevention in the days of Benjamin Franklin or innovative health care solutions in the 21st Century that use Digital Health Coaching, one ounce of prevention is worth a pound of cure, indeed.

About the Author

Kevin Wildenhaus, Ph.D., is Director of Behavioral Science & Data Analytics at HealthMedia, a Johnson & Johnson company and part of the Wellness and Prevention business. Dr. Wildenhaus is a clinical psychologist specializing in health behavior change and practical, effective health intervention programs. He completed his doctorate from Wayne State University, with a major in clinical psychology and a minor in industrial & organizational psychology.

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By Manish Nachnani

ICD-10 brings several benefit opportunities for healthcare providers across multiple categories which include Reimbursement, Information

Technology, Clinical Coding, Quality Measurement, Monitoring & Performance, and Relationship Opportunities.

Reimbursement

The shifting from ICD-9 to ICD-10 code sets will benefit the healthcare provider in the form of more accurate payments for new procedures, fewer rejected claims, fewer improper reimbursement claims and greater efficiency in the billing and reimbursement process. The increased auto adjudication of claims due to increased granularity of ICD-10 code will help in reduced number of claims being investigated or rejected due to insufficient information. ICD-10 will solve the problems caused due to lack of detailed information contained in the diagnosis and procedure code assignment. Fewer rejected claims will reduce the amount of rework for providers leading to an efficient reimbursement process which in turn will lower the provider administrative costs.

A reduced claims cycle coupled with lowered administrative costs will help the providers shift the excess resources in improving patient care. ICD-10’s improved precision in documentation of clinical care will greatly improve the likelihood of submitting accurate claims the first time around and receiving reimbursement for a range of procedures. As a result, there is a reduction in adverse impacts to provider revenue cycle. The ICD-9 code set has now been exhausted and new codes cannot be added which limits the ability to code innovative procedures. Treatment techniques and methods have evolved over time. The limitation on expanding ICD-9-CM is the reason why few new procedures have been approved. Not all advanced treatments can be coded using ICD-9 accurately. With ICD-10-PCS, the number of procedures for which new codes are likely to be granted will rise. If many more separate procedures can be coded, a differentiation between the simple and complex procedures will be possible.

Healthcare IT

A significant amount of assessment, remediation planning and effort will be required to prepare for the ICD-10 implementation. However, ICD-10 opens up opportunities for

ICD-10Benefits for Healthcare Providers



healthcare providers in the form of Legacy Modernization, and adopting new technology.For example, SNOMED-CT and its integration with EHR Implementation can be achieved while migrating to ICD-10. ICD-10 remediation is also being looked upon progressively to make necessary framework so that future upgrades are swift, (example making support for ICD-11 migration.) These are some of the key initiatives that are not justified from ROI perspective but will have lasting effects.

Will Y2K problems ever occur again? No, because IT systems are capable to handle Y2K changes now. But will ICD-11 transition cause concern? NO - if ICD-10 transition is done thoughtfully and with innovative approach and YES if done from compliance perspective. But the basic difference lies in the fact that Y2K was IT impact while ICD-10 is both a business and IT impact, which is a reason of concern and what makes the impact huge. ICD-10 is a good opportunity to phase out aging and inflexible systems or to modernize legacy systems. Consolidation of redundant applications and code sets on to a single enterprise-wide platform is the need of the hour. Moreover this gives an opportunity to look for new platforms and vendor solutions which can be used across the enterprise. Many companies have grown via acquisitions and mergers and hence have multiple claims adjudication systems and multiple instances of various systems doing the same function. This will make ICD-10 impact more dreadful if remediation has to be made because it has to be done on several systems, which make IT budgets sky rocket, when there are conflicting priorities in terms of meaningful use , such as EMRs. The shift to ICD-10 will help the healthcare providers assess whether the current

platform will be able to accommodate the new opportunities that ICD-10 brings to the table or whether it will be cost effective to align the legacy platform to the new business model. Reduction of operational costs, risks and improved productivity is achievable through an increased and efficient spending in IT infrastructure. Key concerns for the CIO is allocating budgets, because ICD-10 is not a paid mandate at first and secondly it doesn’t give clear ROI in short-term. It’s a long term process.

Clinical Coding Opportunities ICD-10 changes are broadly being looked upon as coding changes; why is biggest myth . Although it has significant impact on coding, the impact is far reaching in the business processes and IT infrastructure. Coders will code in ICD-10 which is a simpler method. Planning for productivity loss by proper training will ensure a smooth transition for coders. The new code set helps in improved population identification & severity stratification due to ICD-10, and specificity enhances

34



disease and case management, as well as wellness programs. Utilization management can be improved by application of IC D-10 codes which leads to increased efficiency in the exchange of patient profile information, treatments across the care process and hospital resource management. Improved reimbursement rates due to appropriate payments of new procedures, and fewer miscoded and rejected claims due to greater specificity in ICD-10 codes. Accurate incentive payments for Pay for Performance schemes and in general accurate claims payment will help both providers and payers. ICD-10 codes will help in reducing documentation due to its granularity. There will be improved clinical documentation and coding accuracy to enhance the assessment and monitoring of patient safety and quality indicators, as well as compliance with third-party payer coding and billing rules and regulations. ICD-10 provides detailed data for medical management interventions. It helps in the precision of pre-authorization process and also enhances the ability of Electronic Health Records to fullest extent.The shift to ICD-10 codes will increase the auto-adjudication of claims. This helps the providers lower the administrative costs, reduce the manual review of rejected claims and improve the revenue cycle.

Improved Patient Care

ICD-10-CM and -PCS offer greater detail and increased ability to accommodate new technologies and procedures. The codes have the potential to provide better data for evaluating and improving the quality of patient care. For example, data captured by the code sets could be used in more meaningful ways to better understand complications, design clinically robust algorithms, and track care outcomes.

Increasing the detail and better depicting

severity will help clarify the connection between a provider’s performance and the patient’s condition. In addition, ICD-10-CM greatly expands the codes for medical complications and medical safety issues. Complete, accurate, and up-to-date procedure codes will improve data on the outcomes, efficacy, and costs of new medical technology and ensure fair reimbursement policies for the use of this technology.

Person health records (PHR) can go to a greater level of understanding and description with detailed levels of information present in coding. The patients’ understanding of the disease / diagnosis would increase awareness which eventually leads to better care.

Expanded detail will help payers and providers more easily identify patients in need of disease management and more effectively tailor these programs. Adoption of ICD-10-CM would also facilitate international comparisons of quality of care and the sharing of best practices globally. ICD-10-CM is more effective at capturing public health diseases than ICD-9-CM. It is more specific and fully captures more of the nationally reportable public health diseases and also enables international sharing of these details.

Monitoring and Performance

The upgrade to ICD-10 offers provider’s better data in support of their efforts to improve performance, create efficiencies, and contain costs. ICD-10’s increased specificity offers providers the potential for considerable cost savings through more accurate trend and cost analysis. It will improve providers’ ability to monitor service and resource utilization, analyze healthcare costs, monitor outcomes, and measure performance. Greater detail on procedure types will allow providers to evaluate their own performance relative to their peers.



Providers can use this information to reallocate resources and promote themselves to patients and referring physicians. Providers can expect a reduced need for supporting documentation under ICD-10. The lack of sufficient detail in current code assignments has led to increased requirements for documentation to support claims. ICD-10-CM and -PCS codes are expected to reduce that need. Furthermore, if planned correctly, ICD-10 can act as a catalyst in achieving meaningful use and enabling interchange and interpretability of data.

Relationship Opportunities

ICD-10 upgrade provides healthcare providers a unique opportunity to improve relations with providers and vendors. Providers can partner up with payers for coding improvements. Both payers and providers could collaborate and streamline reimbursement processes and thereby improve revenue stream and satisfaction. Providers can gain expertise in outcomes reporting and leverage for quality and pay for performance schemes.

Motivation to Leverage the Benefits

ICD-10 changes are being looked upon as a compliance activity and not as an opportunity to leverage benefits, primarily because it is an unpaid mandate and has come at a time when there are multiple conflicting priorities. Providers need to link Benefits to Provider Success factors. These success factors can be the differentiator and help providers maintain or gain leadership position. An example of this would be:• Detailed information of ICD-10 codes will

help providers improve quality of patient

care.• The detailed code sets makes it easy for

patients to understand the disease coupled with improved information in EHR and PHR, which leads to better patient relationship.

• Accurate payments, lower rejection rates, reduced administration cost and improved revenue cycle directly link to better financials, a key success factor for evaluating investments to be made for ICD-10.

• Detailed ICD-10 code sets and better use of EMR leads to greater patient safety.

• ICD-10 can act as a catalyst for implementing meaningful use because of its detailed information.

Key strategy to adopt ICD-10 for leveraging its true benefits, providers would identify the success factors they are striving for in the marketplace and link the ICD-10 benefits .This serves as the motivation for implementing and accepting ICD-10 changes and creates positive environment of change and acceptance of ICD-10.

All these benefits will materialize if the approach towards ICD-10 is based on collaboration and innovation and is not a pragmatic approach which focuses on just being compliant with the mandate. ICD-10 compliance gives multiple options to leverage the mandate and create valuable opportunities for the entire provider and payer community. Collaboration & innovation will be the key to successful ICD-10 compliance.

Manish Nachnani has over 6 years of experience and works as a Lead System Analyst in the Health IT field. His areas of expertise include ICD-10 Impact Assessment and Remediation, HIPAA 5010 with interest in m-Health, e-Health, Health 2.0 and Health Innovations.

36



By Mark Troutman

It’s important to be held accountable for results. Accountable Care Organizations (ACOs) are one of the few new ideas where it is believed that the new healthcare reform legislation “bends the cost curve” in the right direction (downward). Sections 3021 and 3022 of the Patient Protection and Accountable Care Act of 2010 (PPACA) create ACO initiatives. ACOs will be able to apply for participation in a Medicare Shared Savings Program. The intent is to improve the quality of care and reduce costs by changing the incentives for providing healthcare services to Medicare members. Are ACOs a panacea, are they an attempt to take advantage of providers via capitation, or are they something in the middle?

An ACO is a group of providers, which may include primary care physicians, specialists, ancillary services providers and hospitals, who agree to be held accountable for the cost and quality of healthcare delivered to a defined population of Medicare beneficiaries. The ACO model allows for the physicians and hospitals to lead both the practice of medicine and the cost containment process rather than have those processes be led by payers. In essence, the ACO itself will tell doctors how to practice medicine and deliver care as opposed to having payers determine what providers will or will not do based upon the payers’ reimbursement decisions. Criteria for participation as an ACO are established by the Centers for Medicare and Medicaid

ACO – Panacea or Placebo?



Services (CMS) in Section 3022(b) (2) of the PPACA regulations. The criteria outlines the requirements needed to create an environment for success as an ACO, such as the proper number and type of medical professionals and the clinical, management and administrative resources needed to support the delivery of care in an integrated setting. In essence, the criteria are designed to ensure that the ACO is ready, willing and able to perform in the desired fashion. ACOs must be in place by October 2011 to be considered for approval in 2012. CMS has already said it will designate only a limited number of ACOs in a given territory in an attempt to create competition to bring down Medicare costs. Anecdotal evidence indicates that many provider entities are considering the development of ACOs. This will spur a growth industry of consultants and vendors to support the development and management of ACOs. Unfortunately, there still is much to be clarified in the PPACA regulations and much work to be done, such as determining how shared savings payments will be calculated and what quality performance standards will be implemented by the Department of Health and Human Services (HHS) to promote this form of managed, integrated healthcare. Initially, ACOs will be paid on a “fee-for-service” basis by Medicare. ACOs will be eligible to receive additional payments if the ACOs meet the quality performance standards and achieve savings, to be defined in the HHS regulations. ACOs as provider organizations hold the promise of changing the way care is delivered, from a fragmented system to a coordinated care model. The focus will be on practicing evidence-based medicine designed to improve patient outcomes and patient satisfaction. Fee-for-service systems promote paying for volume, rather than paying for quality outcomes.

Alternatives to fee-for-service reimbursement include bundled payments and

capitation. Under capitation, providers are paid a set dollar amount for assuming the financial risk for the provision of a predetermined set of healthcare services to a defined population. In the late 1980s and 1990s, capitation was popular among HMOs as a means of controlling utilization and reducing costs. Providers rushed into capitation agreements with major payers, such as the Blues, United, CIGNA, Aetna, PacifiCare and Health Net. They accepted capitation for commercial, Medicare and/or Medicaid programs, believing that they could make money on the “spread” between the capitation rates they were being paid and the cost of providing care. Many provider entities capitated by these payers failed because their delivery systems weren’t integrated, they didn’t fully comprehend what risk they were assuming, and they were not able to manage care effectively. Some of those who were able to manage risk appropriately ended up having capitation arrangements terminated as anti-managed care, anti-HMO market sentiment reached its peak. Consumers were arguing for more choice versus the limited-access models afforded by HMOs at the expense of cost control. Capitation also became widely disliked by physicians, some of whom saw it as an attempt by payers merely to shift financial risk to providers rather than treat them like partners.

New and Different

Reasons provider capitation via ACOs could produce better results than the last time capitation was prominent include the following:

(1) There are more established standards of best practices in medicine. Expanded healthcare information technology capabilities exist to support physicians to maximize best practices and implement electronic health records. The current financial and operational independence of providers can lead to lack of coordinated care and increased costs due to

ACO – Panacea or Placebo?

38



unnecessary or duplicate tests and visits.

(2) Integrated delivery systems of physicians and hospitals are now more fully integrated. There has been more experience and success with “bundled” payments. The current economics of healthcare are promoting more consolidation among physicians and hospitals, creating larger provider entities capable of delivering more integrated care.

(3) There will be more trust and collaboration between the health plan payer and the providers. Many physician-hospital organizations failed in the 1990s due to the financial constraints associated with improper capitation and inability to manage risk. They didn’t have the requisite skills and capabilities needed to succeed in a risk-taking environment despite their appetite for risk and there was no feeling of partnership between payer and provider. There is more provider-payer collaboration with the new round of experimentation.

(4) The capitation models will offer appropriate risk-adjusted capitation rates with an emphasis on quality outcomes and evidence-based medicine. Because of healthcare reform, providers and the general populace are more focused on evidence-based medicine and the elimination of unnecessary services as means to control costs and increase quality. Capitation payments will also be adjusted for age, gender and health status – a more fine-tuned approach to delivering a population-for-risk management to an ACO. Providers will have an appropriate incentive to manage care, but not under or over managed care. In prior experiences, providers were not the drivers of the arrangement, but rather the recipients. Now, providers are in the driver’s seat and the focus of change.

(5) Providers have learned from the past. Providers will be more knowledgeable purchasers of risk. They will treat capitation as a business, hire appropriate business professionals, and develop management systems and support to manage the risk they assume.

(6) There will be an incentive for payers to capitate providers in the new PPACA environment because capitation provides a means to lock in claim costs, and, therefore, meet the minimum loss ratios as required by law at the 80-85% minimum loss ratio level. ACOs that successfully manage care will benefit financially from the savings they achieve. With risk comes reward if handled properly.

(7) Management service organizations (MSOs) exist to assist providers in managing capitation contracts. MSOs are organizations under contract with the providers to perform administrative, clerical and claims processing functions. These and other entities handle and support the medical management and administration of risk.

(8) The ACO movement is supported by the largest payer, the U.S. government. New state and federal legislation is in full support of health reform and the pressure to control costs in the PPACA expansion will promote the new directions described above.

Bundled Payment Alternatives

Bundled payments are an additional healthcare reform strategy to reduce healthcare costs through more focus on outcomes, rather than the number of services. Under bundled payments, providers are paid one time for a set of services, rather than for



each service individually. The approach promotes integration, continuity and quality of care. Examples include the Geisinger Health System’s ProvenCare for coronary artery bypass graft surgery, which is designed to promote best practices in addition to enhanced patient engagement. Bundled payments have demonstrated success at reducing complications and readmissions. Provisions for bundled payments are included in PPACA through a national Medicare pilot program starting in 2013.

States such as Minnesota, Ohio and Pennsylvania are looking at bundled payments for Medicaid as well. The number of Medicaid recipients is expected to increase by more than 40% from 2010 to 2019, so hospitals must learn to operate successfully on Medicare and Medicaid rates, regardless of the direction they take. Traditionally, Medicaid reimbursement has not been

adequate to cover all hospital costs, so hospitals need to address their fixed costs. Many expect over time that provider contracts will move to more bundled payments for commercial, Medicare and Medicaid plans.

Bundled payments are an episode-based form of capitation. A provider entity assumes all risk for medical services related to a given episode of care. These transactions typically occur for items such as cardiac and orthopedic procedures with well-defined treatment patterns. The payment methodology is similar to DRG reimbursement. There is less risk for providers under such bundled payments, as they are enduring capitation-like risk for a given episode of care, not for the full spectrum of care for an enrollee over the entire coverage period.

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Who can successfully play this new ACO game? Larger, more integrated provider systems have more resources to manage capitation risk and a better ability to predict costs given a larger capitated population. Therefore, there may be some increase in merger and acquisition activity among provider groups to achieve the economies of scale necessary for global capitation and bundled payment opportunities in healthcare reform. However, just because providers are integrated and larger doesn’t automatically make them better.

To minimize catastrophic risk, providers will consider purchase of provider excess-of-loss insurance coverage. Health plans such as HMOs and insurers can support ACOs by offering capitation arrangements with optional provider excess-of-loss coverage. The health plan may retain the risk for selected catastrophic services, such as transplants, out-of-area emergencies and referrals, or it could provide reinsurance to the capitated providers for those items with the same result. Alternatively, providers may look to their payers as partners to help them design and negotiate coverage with an external provider excess insurance company for catastrophic claims to protect the capitation payments paid to the provider. The health plan may also be in a position to provide consultative medical management to its delegated provider groups and/or assist with the review and contracting for MSO vendors and the evaluation of the ACO’s medical management policies and procedures.

Health plans have always been distribution channels and administrative arms for provider entities (especially provider-owned HMOs). This will create a collaborative win-win partnership rather than an adversarial win-lose proposition, which the previous capitation environment created in many instances between payers and providers.

In conclusion:

Cynics may simply look at ACOs as another attempt to restructure the healthcare delivery system by shifting risk to unsuspecting providers and promoting underutilization. However, many believe that ACOs bring the potential for a new, positive transformation in the healthcare delivery system.

As with most healthcare reform issues associated with PPACA, many questions remain. Many health systems will establish ACOs to capitalize on the new opportunities presented by healthcare reform. With capitation and/or bundled payments to ACOs, quality of healthcare should improve due to payment linkage to outcomes. ACOs can become a reminder that more is not always better, let alone cost-effective.

Summit Re conducted a survey on healthcare reform issues with its client base. The survey confirmed that there is strong interest in a variety of risk arrangements with providers such as ACOs as a way to reduce cost by controlling utilization, reducing leakage to high cost, out-of-network providers and improving quality of care for enrollees.

About the Author

Mark Troutman is president of Summit Reinsurance Services, Inc. (www.summit-re.com), a reinsurance intermediary providing medical excess coverage to insurance carriers and health plans on behalf of Swiss Re and to employer stop loss purchasers on behalf of Companion Life Insurance Company and Swiss Re. He can be reached at ([email protected]).



By Melvin J. Howard

There is an industry that in the past has been more profitable than the commercial banking sector. Can you guess which one? It has been the pharmaceutical industry. You can’t have meaningful health care reform without pharma

reform. From the never-ending search for the elusive “Blockbuster Drug”, to the ongoing need for more increasing shelf space, we have allowed the capital markets and the patented medicine model to dominate decision-making when it comes to our health care. The pursuit of finding remedies for the human illness is a noble cause and one that has made life bearable

and some diseases curable. But if we continue with this same model unchecked it may very well end how the capital markets work as we know it, giving them an incurable disease that could be terminal. Capital that flows into drug research and development is obsessed with a couple of issues that are mostly monetary in nature. The industry is failing to notice something far more menacing just over the horizon. The global HIV/AIDS crisis, already striking at the very thing the capital markets need to survive market players. As the epidemic rips into Africa, China, and India, will the U.S. be able to continue its low level support for this crisis of the developing world? Or will the threat to the labor force of our major trading partners provide the shock necessary to remind us

PHARMA REFORM&WORLD TRADE

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that illness prevention and cure is a social service that does not fit well into the confines of 20 to 30 year patent monopolies. Will the exponential growth of HIV/AIDS in Eastern Europe and the former Soviet states, right on the doorstep of the European Union, wake up the rest of the West to the need to either act now, or risk losing their global marketplace? There are many arguments both for and against the patent model for pharmaceutical development; I shall touch on just a few. As in most industries, the capital markets drive the classic predator-prey dynamics; the pharmaceutical sector is no different. As the fictional character of Gordon Gecko of Wall Street fame said, “You either eat or you get eaten!” Let’s go back to 1995 when much of the mega-merger business in the pharmaceutical industry was just getting underway;

• Glaxo Holdings gobbled up Wellcome Plc to form Glaxo-Wellcome

• Novartis was formed out of the merger of Ciba-Geigy and Sandoz

• 1998 saw the creation of Aventis out of the fusion of smaller drug companies

• AstraZeneca from Astra and Zeneca• Pharmacia & Upjohn scooped up Monsanto,

the controversial agribusiness • In 1999 Pfizer swallowed Warner-Lambert

Glaxo-Wellcome• Smith-Kline-Beecham were fused together

to form GlaxoSmithKline in 2000.• Pfizer and Pharmacia then announced their

merger, to outsize GlaxoSmithKline, to become the biggest kid on the block.

There are still more rumours of even bigger mergers yet to come.

The pharmaceutical industry of today started in the late 1800s when it became possible to mass-produce compounds such as morphine and cocaine.

By the early twentieth century drugs and compounds were patented by various companies to protect their discoveries. A patent on a branded drug or chemical gives the company a monopoly on sales of that chemical for a specified period, enabling them to set high prices in the absence of competition. The argument for patent protection is that it enables the developer to recover their investment in R&D plus a profit, hence providing incentive to private industry to find new cures. However, in order for the company to lure customers into buying such a high priced product, they also need to spend a lot of money on advertising and marketing to convince people that its products are the best. Today, the brand name drug companies look nothing like their chemical ancestors of the 1800s. New products require large investments in R&D and take a long time to bring to market. The drug giants are dependent on patents, marketing and branding to make a profit. Consequently, the pharmaceutical sector has more in common with the movie industry than with any public service provider. A new drug must become a profitable “Blockbuster”, or it will not be worth the cost of development. In contrast, generic drug companies spend comparatively little on R&D and advertising, existing primarily to compete for market share based on price once a patent on a brand name drug has expired. Once such a patent expires, generic companies can copy the drug and can afford to sell it at a lower price since they don’t have as much R&D and advertising costs to recoup. After successes and record high profit levels throughout the 1990s, all is not well in the pharma world of blockbuster remedies. The looming patent expires, resulting in competition from generic companies, a drug R&D pipeline that is drying up, and angry governments, corporations, consumers and managed-care companies tired of high drug prices. With health reform there are calls to reform the pharmaceutical industry throughout the U.S.



These common enemies are forcing all these unions amongst the drug giants who hope that consolidation will allow them to do more of their two favourite things at lower cost. These two things are (1) Advertise and (2) Produce Blockbusters. The future dangers to the general public of all this consolidation is even higher drug prices and more seriously, the lowered ability of the pharmaceutical sector to respond to real illnesses, which are not getting much attention. The latter is reflected not only in the untreated epidemics haunting the developing world, but even here in the U.S., with increasing reports of shortages of basic medicines and vaccines at many hospitals. These problems are all compounded by the fact that drug companies are fighting every way they can to counter the ‘Attack of the Generics’.

The Miracle Drug

Miracle drugs and pervasive drug advertising has been a part of the American diet for both the body and the mind for over a hundred and fifty years.

After more than 30 years of pressure for food and drug safety laws, the year 1906 finally ushered in the landmark Pure Food and Drug Act, amid shocking disclosures of the use of poisonous food additives and cure-all claims for worthless and dangerous patent medicines. In 1927 the Food and Drug Administration (FDA) was formed as the regulatory arm of the government charged with enforcing food and drug law. The pharmaceuticals lost their battle against an overhaul in drug regulation in 1937, after a drug known as the Elixir or Sulfanilamide killed over a 100 people, including many children. This paved the way for the passage of the 1938 Food, Drug and Cosmetic Act, which, among other things, required new drugs to be shown safe before they could be marketed. The Thalidomide scare of the early 1950s put pressure on Congress to further strengthen

drug regulation. Still, the brand-name companies continued to prosper because they could set whatever price they wanted on patented drugs.

The year was 1984 when pharmaceutical companies first started seeing trouble on the way, with the passage of the landmark Hatch-Waxman Act. Prior to this, generic drug companies had to perform the same rigorous testing on generic drugs that the companies with the initial patent had to perform. This made competition from generics virtually a non-issue because the investment required to get regulatory approval could only reasonably be recovered where the producer could charge a sufficiently high price for the drug once approved. In practice, this meant that the pre-Hatch-Waxman regulatory structure was heavily biased in favor of the companies with drug patents - that is, the brand name drug companies.

The 1984 Drug Price Competition and Patent Term Restoration Act (often referred to as the Hatch-Waxman Act) changed the drug competition landscape drastically by lowering the regulatory hurdles for generic companies. It said that rather than the generic companies performing all the safety tests, the original company with the patent carried out, just had to show that the generic drug was chemically the same as the original drug, which had already been

44



tested. Finally, there was a feasible economic model for the generic industry. Once a patent expired on a drug, they could replicate and sell that drug for a lower cost and still make a profit, because their initial costs to get the drug to market were now much lower.

That part of the 1984 law sounds pretty good for the consumer right? But wait. This is one of the oldest tricks in the book! Create a law that looks pretty good to the general public, but with some twists and turns that are not obvious until many years later when the law did more harm than good. I currently experience this personally with our NAFTA Chapter 11 challenge against the Government of Canada. This Trojan horse was allowed into the 1984 regulatory regime. There were a number of methods for the brand-name companies to fight the generics:

1. Extension of patent protection to make up for time lost in the FDA regulatory approval process (hence the term “Patent Restoration”).

2. Ability to get multiple patents on drugs covering not only the chemical itself, but also all kinds of preparation methods and techniques, making it harder for the generics to prove they had the same drug. These patents could be staggered, such that when the patent on the main chemical expired yet the patents on various methods and techniques were still in force. This equals wide-ranging abilities to challenge generic companies in the courts for patent infringement.

These are back door methods available to keep patents going from a major strategy used by the brand-name companies to ward off the threat from generics. It is these very loopholes that coalitions such as “Business for Affordable Medicine” and many congressional representatives were trying to close.

The World Trade Organization and associated revisions to international trade law further strengthened patent protection of pharmaceuticals. Then, starting in about 1994, the brand name companies launched into exponential growth by way of direct-to-consumer advertising of prescription drugs for reasons that probably have to do with increasing pressure from generic competition and managed-care companies. Meanwhile, in some industrialized nations, provisions of universal healthcare mean that drug prices are largely controlled by those corresponding governments. Drug companies in those countries have not been allowed such freedom to either set prices for patented drugs or to advertise directly to the consumer. Consequently the U.S. consumer ends up not only paying for the privilege of being advertised to by the drug companies at home in the U.S., but also subsidize lower drug costs abroad where prices are regulated by those corresponding governments. Put all these factors together and there’s little mystery as to why prescription drug costs are spiralling out of control in this country.

About The Author

Melvin J. Howard is Principal of the Howard Group a family office that specialize in Foundations, Trusts, Limited Partnerships, Private Equity, Capital Markets, and Health Care Trade Issues. We are registered federal lobbyist that pursues economic and international public policy initiatives on behalf of U.S. companies with interest abroad, more specifically international global health and trade issues. He can be reached at Melvin J. Howard [email protected] [email protected]



By Renee Flis

If you’re like many, chances are you are either 1) building a roadmap for EMR or 2) satisfied with pilot results and wondering how to accelerate rollout in 2011. In both scenarios, the budgeting process for EMR is complex because it

requires a mix of software, hardware and professional services to minimize disruption of your business and maximize return on your investment. The “always-on” workforce is high-maintenance and you must plan for special resources to support them.

A short list of must-haves in an EMR budget includes:• Project management • Process evaluation and optimization • Clinical experts to apply data to improve

outcomes • Hardware, software, networks, wireless • Interfaces and integrations • Implementation, training • Maintenance, support • Security, disaster recovery, business

continuity • Servers, storage, backup • Executive decision making tools • Communication

Top Must-Haves InYour EMR BudgetAnd Ways To Finance Them

46



We’re seeing several creative ways to finance EMR programs.

1. Ask your vendors about payment plans and what can be paid for upfront vs. what can be broken into monthly payments?

2. How far can you push the limit of converting capital to fixed and predictable, yet scalable operating expenses?

3. What components are in place related to hardware, software, and services? Are you really maximizing what you can get out of your current clinical system? Could new training drive higher return on assets and efficiencies?

4. Are state incentives or grants available?

The Center for Health IT recommends “getting detailed information about products and services included in the offer/contract”. It may seem like splitting hairs, but it is useful to have outlined in writing every detail that is included.” Also, ask about what’s not included as there is a wide range of variance.

This white paper offers more insight into building, budgeting, and financing your EMR program: White paper – The Countdown to EHR and Outcome-Based Care

About the Author

Renee’ offers 10 years of consultative experience in skilled nursing, assisted living, hospital, and travel healthcare environments. CxO-level executives depend on Renee to drive results in both strong and volatile markets. Renee is an expert in developing, facilitating, and executing strategic business plans from an entrepreneurial leadership perspective. As a post- acute change agent and certified outcomes educator, she helps providers prepare for 2014 and the outcomes-driven world of Accountable Care Organizations to come.

Over the years Renee has helped dozens of providers shift their strategic direction to a paperless, outcome-driven business model. She helps create competitive advantage through improved outcomes reporting, to drive up market share from referring hospitals.

Industry Association Memberships• AHCA – American Healthcare Association• AHCA I/O – American Healthcare

Association, Independent Owners• AAHSA – American Association of Homes

& Services for the Aging• ALFA – Assisted Living Federation of

America

Education • Bachelor of Science Degree – University of

Wisconsin Stout• Certified Dementia Care Specialist –

Wisconsin Alzheimer’s Association & NWTC

Professional Affiliations • VCPI - Client Connections• White House & Healthcare Reform

Resource Groups• Healthcare Executives Network



By Richard Fuchs

In today’s radically changing healthcare industry, individuals and small employers have an almost impossible task of securing affordable

healthcare. Everyone including small employers is receiving increases of 6 to 20% in their monthly premiums and a corresponding reduction in the benefits. In addition, individual and small group restrictions are increasing to the point where many small groups can no longer qualify for the traditional major medical programs. To further complicate the problem over the

past 5 years, the cost of health insurance benefits have been passed on to the individual thru increased deductibles, elimination of employer paid dependent coverage, and decreases in the benefits included in many employer paid plans. Individuals and employers are at a cross roads as to what to do given new government regulations and escalating health care costs. Many employers, large and small, are considering dropping health insurance benefits and either paying the employee a certain amount of money per month to obtain individual insurance or not providing any type of benefit assistance. Fortunately there are alternatives to be

AFFORDABLE HEALTH BENEFITS A Thing of the Past?

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considered when trying to solve this problem of obtaining affordable health benefits for both the small employer and the individual.

Choices That Can Be Made

1. Employers continue to pay the increasing high premiums if the cost can be passed on to the organizations customer.

2. Cancel the insurance plans and pay the employees a benefit allotment each month.

3. Cancel the insurance plans and inform the employees to obtain individual coverage if they can obtain the coverage or if they can afford to obtain the coverage.

4. Pay the employees a monthly stipend to cover some or all the cost of individual insurance.

5. Chose an insurance plan that is not a major medical plan but a limited insurance plan that provides limited coverage for the major medical needs; hospital, doctor visits, labs, etc.

The individual is really restricted in the choices that can be made. The problems that must be considered when obtaining individual health insurance:

1. Review the offerings of the State Insurance Programs (future exchanges) offered in the individual’s home state. These plans tend to be very expensive and many people cannot afford the monthly premium.

2. Review individual major medical plans offered by different carriers recognizing that such limitations as age and health status can be a big obstacle in obtaining affordable plans.

3. Obtain an individual limited insurance plan for the individual and family that cover most of the major expenses associated with health care;

hospital, doctor visits, lab tests, etc. There are few or no restrictions on these plans such as age or health problems. These plans must be selected with the understanding that they do not provide the amount of coverage of most major medical plans but do offer protection from extreme financial losses. But, as the name implies, the plans pay specific amounts For specific procedures or visits. For example, $70.00 for a doctor visits. Organizations utilize these types of plans to provide coverage for many of



their employees.

4. The small employer and the individual should research several reputable discount medical programs that are promoted in the marketplace offering discounts on such services as physician and hospital visits, dental procedures, prescriptions, and vision needs that should be incorporated into an affordable, individual health plan. Discounts from 10 to 60% can be achieved when using these programs and some offer assistance in negotiating expenses with hospitals, doctors and dentist. Recently Forbes Magazine published an article comparing dental discount programs with dental insurance and stated that the discount programs were often more cost affective.

No Easy Answer

The bottom line is there are no easy answers to the problem of securing affordable health benefits. A person must do a personal healthcare assessment including such important things as income level, job security, age, and health status. The starting point must be “how am I” and “how much can I afford to pay per month”, and “how much risk can I afford to take”. Of course, if there is a spouse or family the assessment must include those family members. The next step, if a person can afford it, is to establish not only a health benefits plan and budget but to establish a certain amount per month to place in a health savings account or sometimes referred to as an HSA. This can be a formal HSA or an individual savings account and that decision will depend on a person’s income and tax levels. The final step for the individual is to do the research necessary to understand the various plans and the various components associated with different types of plans being offered in the marketplace and what will be offered in the next several years. The

days of the employer picking the plan and paying for the plan is quickly evaporating. The individual will have to take charge of his or her health and health benefits and not rely on just the employer to provide the best alternative. The small employer must make the identical assessment as the individual but include such things as impact on the workforce, turnover of employees, and the impact on production and customer service. As we all know, the healthcare industry is changing rapidly and everyone must become personally responsible for researching, planning and implementing their own health plan to protect their health and well being. The first questions everyone should ask any healthcare provider is, “how much does it cost” and “is it a necessary test or procedure”. Then, “THE CHOICE IS REALLY YOURS!”

About the Author

Strategic Franchise Services (SFS) is marketing organization selling both health and life insurance products and services to individuals, small businesses, and associations. SFS is part of a national health care consulting organization, Strategic HealthCare Initiatives (SHI) based in Dallas, TX. Additional information about these two organizations can be found at www.strathealthcare.com and www.healthcaresavers4u.com and a corporate blog at www.healthsavers4u.com Richard Fuchs is the President and co-founder of Strategic Franchise Services. He has over 20 years of management experience in a Fortune 100 company and has started an owned several small business including Strategic Franchise Services. Mr. Fuchs is a published author who wrote and marketed three national training video based training programs utilized by many government organizations and major corporations.

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By Theresa Healy, RN

Enough of the rhetoric. It’s time to cut to the chase and talk about how reform starts with you. I think it was Ghandi who said, “Be the change you want to see in the world”.

So we can talk and talk about what needs to happen, and agree and criticize that the government is out of touch with the general population. But all this talk isn’t getting us healthier. Unless you have lived in a box for the last 5 years, you have to be aware that as a nation we are living with more chronic disease and conditions that, believe it or not people consider “normal”. What and who designate anything as normal, and what parameters do they use to measure that? It is a very simple and yet complicated situation. The more we grow and develop new technology for diagnosing illness, the more the costs increase. The more we utilize a disjointed system of care, the more we become a product of

pills and surgeries that end up compounding the problem. The more we allow the medical providers and insurance companies to dictate our treatments, and costs, the more we remain pawns in a broken system. The more we ignore, as consumers, the statistics and research that tells us we need to change our lifestyles, the less likely a solution will be forthcoming. What is meant by stating this is a simple solution? Industrialization of our food, has stripped it of its nutrition. Our bodies function at a cellular level, and those cells need specific nutrition in the form of vitamins, minerals, and water to function properly. Without these nutrients, the cells suffer damage, and replicate at that level which causes them to decrease in their efficiency, and disease sets in. in order for our body to function as optimally as possible, it needs more fruits and vegetables, nuts seeds and whole grains. We get these from real whole foods that grow without interference in nature. This is simple. Why is it also complicated? Between the use

Healthcare Reform Starts With You



Healthcare Reform Starts With Youof pesticides, herbicides, and chemicals, and the over use of corn, wheat, and soy, the food supply is being governed by those who really don’t see the connection. We need to eat the food in its most natural state in order for our bodies to assimilate and utilize the nutrients properly. It’s complicated because food is not seen as medicine, and therefore, nutrition or natural therapies are not “covered’ by health insurance companies. It’s complicated because despite years of research and unimaginable amounts of dollars spent, we continue to get sick, and no one seems to want to admit that what we are doing is wrong. It is not working and we need to take drastic measures to change the outcomes. Pharmaceuticals and disjointed care (specialization) have and is the mainstay of healthcare. What if, instead of taking a statin drug to lower your cholesterol (these are known to cause heart attacks and more) you eat some walnuts, and fruits and vegetables (which help balance out your cholesterol), or decrease the amount of red meat you eat, which is known to increase cholesterol. Does the doctor prescribing the medication ever explain how to lower your cholesterol or reverse your Diabetes through eating a plant based diet? My guess is no. The point of this article is that we as consumers can participate in healthcare reform, by starting with our selves. We can let the food companies know how we feel through our wallets. What you buy, and spend money on is the key for their understanding what we want and how we want it. The supplementation industry is a multibillion dollar industry, and this speaks volumes,

that people know they need more than what their food is giving to them. We need our farmers to start farming again, free from chemicals, and genetically modified seeds. We need to speak through our wallets and take baby steps in our own lives to make the changes that will decrease your risk of having to participate in chronic illnesses that are NOT nor should be NORMAL! One step in Healthcare reform should equal using the money designated for research for medicine, to distribute to farmers to grow healthy vibrant food! This can be our medicine!

About the Author

Theresa has been a Registered Nurse for more than 25 years, with experience in Pediatrics, emergency medicine, and trauma. She always knew, she would be a nurse, in order to fulfill her purpose of being of service. She loved it, and was passionate about it. In 1990, with the emergence of her own health challenges, her path took an unexpected turn. She met a nutrition counselor. Using food as medicine, and experiencing the benefits of eating fresh whole foods she realized there was a void, in our health care system’s approach to health! Why isn’t nutrition a component of everyone’s goal for health? Her question was laughed at by most of her colleagues. Theresa is Certified as a Health Counselor from the Institute for Integrative Nutrition, and Columbia University, in New York City. She also has Certification as a Colon Hydrotherapist, specializing in cleansing and detoxification and a Chelation and IV therapy Technician. Add to that, her Registered Nurse credentials; the result is a recipe for healing. Theresa’s passion continues to be of service and guiding people to be happy and healthy through food and lifestyle. She believes that health and well-being depends upon both good nutrition and healthy lifestyle. She LOVES her work and lives in gratitude every day for the opportunity to combine both her passion for food and her medical knowledge into a program for well being.

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