healthcare reform webinar

8/11/2019 Healthcare Reform Webinar

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December 7, 2010

Martha BeardManaging DirectorJ.P. Morgan Treasury ServicesHealthcare Industry Segment Executive

H E A L T H C A R E R E F O R M I M P A C T S

Ecosystem of Change for Providers

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Legislative landscape

Market feedback, trends and challenges

Assess and prepare

Overview

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The Ecosystem of Change for Healthcare Providers


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Legislative Landscape

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Administrative Reform: PPACA & HITECH*

Expansion of HIPAA: Section 1104 of PPACA modifies the 1996 HIPAA law to include

previously unaddressed administrative transactions

Creation of HITECH: Specifies responsibilities for Financial Institutions handling PHI

Detailed requirements for security and breach notifications of health information

HIPAA security rule for physical and technical safeguards to apply to BusinessAssociates (e.g., Receivables, Payables, Image Deposits)

Formalizes contractual requirements for Business Associate arrangements

Security

RelatedRequirements

Heightened security requirements for Business Associate groups

Increases the regulatory oversight of Health and Human Services (HHS)

More diligence required on breach reporting. Must provide HHS with an annual

report required on certain health-related breaches

New

Regulatory

Oversight

HHS must be notified of any breach of over 500 records and will publish thisinformation on its web site.

State Attorney Generals have new enforcement powers on behalf of individuals inthe instance of a privacy breach. Financial penalties cover costs of covering abreach and attorney fees.

New Risk

Management

Requirements

*PPACA: Patient Protection and Affordable Care Act

HITECH: Health Information Technology for Economic and Clinical Health


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Administrative Simplification Timeline*

Healthcare EFTs added to HIPAA

Transaction Set

Operating rules for eligibility verification and

claim status transactions

Unique Health Plan Identifier requirement

Operating rules for EFTs and HC payment

and remittance advice transactions

Operating rules for claims, enrollment anddisenrollment in plans, plan premium

payments, and referral certification and

authorization

HIPAA 5010 Compliance

Medicare payments must be electronic

Standard for EFT

Standard and operating rules for claims

attachments

2010 2011 2012 2013 2014 2015 2016

March

January

October

January

January

January

January

January

July

July

July

January

January

January

* The Patient Protection and Affordable Care Act (P.L.111-148)

Title 1, Section 1104; Center for Medicare and Medicaid Services

Plan certification: Eligibility for health plan,

claim status, EFT, HC payment and

remittance advice

Plan certification: claims, enrollment and

disenrollment in plans, plan premium

payments, and referral certification and

authorization

AprilDecember

December

Adoption Date

Effecti ve Date

Key Penalty


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Potential Congressional outcomes3:

Defunding the new health law

Repealing portions of the law

State leaders may consider:

Implementing insurance exchanges

Reforming Medicaid

Forming state measures and/or filing

lawsuits relating to parts of the health law

Republicans gained (net):

House majority (242 Republicans, 191 Democrats,and 2 seats not yet projected)1

6 Senate seats (47 Republicans and 53 Democrats)1

6 Governors seats (29 Republicans, 20 Democrats,

and 1 Independent) 2

11 State Legislatu res (25 Republican, 16 Democratic,

7 Divided, and 2 Nonpartisan/Undecided) 2


Potential Impact of 2010 Mid-Term Elections

= High

Propensity Indicator:1 CNN.com

2 National Conference of StateLegislatures www.ncsl.org

3 HIMSS Webinar November 5, 2010

4As determined by J.P. MorganHealthcare using: 2010 mid-term

election results of state leadership,key state measures and/or lawsuits

filed opposing healthcare reform, and

action(s) taken towards implementinginsurance exchanges and/or

healthcare reform

5 Sources: StateVote 2010, National

Conference of State Legislatures,National Health Law Program

Propensity to Implement Healthcare Reform4,5

= Medium

= Medium Low

= Low


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Market Feedback, Trends

and Challenges

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Market Feedback, Trends and Challenges

Topics Discussed with Financial Managers

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Interpretation of the billand policy environment

Assessment of operationaland financial readiness

Resources andneeded expertise


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Key Challenges Centered Around Four Areas

Business

Model

Revenue

Mix

Operational

Requirements

Capital

Expenditures


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Key Challenges

Capital for investments required as a result of reform, with

uncertain ROI

Meaningful use of EHR and ability to report on quality measures

Penalties by 2015 if meaningful use has not been reached

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OperationalRequirements

BusinessModel

RevenueMix

Capital

Expenditures


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Revenue

Mix

Operational

RequirementsBusiness

Model

CapitalExpenditures

Quality of care standards

Uncertainty on establishment of accountable care

organizations (ACOs)

- Impact on reimbursement

-Ability to compete in the market effectively

- Draw for new patients

Service and care bundling

Patient mix (increasing individual coverage: demographics)

Streamlining systems: judicious vs. opportunistic investments

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Key Challenges


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BusinessModel

Operational

Requirements

CapitalExpenditures

Revenue

Mix

Shift in sources of revenue and changes in payer mix

Increase in government funded coverage

New coverage through State Insurance Exchanges Changes in coverage by employers

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Key Challenges


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Reform may have unintended consequences, which when coupled with the currenteconomic environment, can pose financial and operational challenges


Implications of Administrative Simplification

Reform wil l likely have unintended

consequences

Scarcity of expert resources to lead

projects and effect change

Certainty of capital market valuation

of hospitals

Shift in payer mix and new, untested

revenue streams, exacerbating

dependence on cross-subsidies

Irrespective of reform, operating margins

and the economic downturn have

adversely impacted balance sheets

Uncertainty of Medicaid and Medicarereimbursement funding changes

Continued low interest rate environment

will strain investment income

Adverse implications to debt ratings

Uncertainty and challenging macroeconomics exacerbate a difficult environment


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Assess and Prepare

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Assess and Prepare

Coming Full Circle: From Reform to Action

Impacts &Opportunities of

Reform

Building a Preparedness Plan

GoGreen

EnhanceSecurity

& ReduceFraud

ImproveAudit

Controls

ManageTradingPartners

OptimizePayment

Flows

Administrative Simplification

Political Considerations


Business Model

Operational Requirements

Revenue Mix

Capital Expenditures

Challenges


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Assess and Prepare

Reform is Driving Key Business Themes

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ACTION

While challenging, healthcare reform will impact key administrative processes.

Consider actions that wil l drive business improvements and free capital for investment

Go

Green

EnhanceSecurity

& ReduceFraud

Oversight,

compliance and

contract services

ImproveAudit

Controls

Dynamic and

accessible reporting

and data/funds

management

Improve payment and

data flows among

industry players to

reduce costs and

improve compliance

ManageTradingPartners

OptimizePayment

Flows

Flexible payment

processes, improved

reporting, and

control led expenses

Operating and cos t

efficiencies via payment

and administrative

simplificationVALUE


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How Your Banking Partner Can Help

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Prepare for Reform

Your banking partner can help you succeed in the new post-reform environment and help

streamline administrative processes through innovative treasury solutions.

Serve as Industry Thought Leaders

As the market leading ACH originator, J.P. Morgan is partnering with NACHA, the electronic

payments network, to support the processing of healthcare payments and to actively develop a

next-generation industry solution.

Manage PHI; Adopt HITECH with vigilance

As a registered covered entity, J.P. Morgan will continue to develop optimal security

controls to address industry requirements for managing and processing protected health

information (PHI).

Optimize Treasury Structures

As business models change, your bank can help you consolidate and improve transparency of

funds, reduce costs and free up investment capital.


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Questions?


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