23 October 2012

Midwest Edition
Calendar
November 15-16
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Michigan Has A $1 Billion Question
It Could Save Millions Per Year Expanding Medicaid
In the months since the U.S. Supreme Court ruled that states have the option of participating in Medicaid expansion as part of the Affordable Care Act, think tanks and consultants have been providing numbers and recommendations to assist lawmakers in their decision. One of the most recent tools is a new report from the Center for Healthcare Research & Transformation from the University of Michigan that found the state would save almost $1 billion through 2023 if it fully expanded Medicaid coverage per the ACA provisions. “We thought at the outset that it would be a good value because the federal government is picking up so much of cost,” said Marianne Udow-Phillips, CHRT’s director. “But we didn’t know that it would produce this much savings.” Almost 2 million Michigan residents are currently enrolled in Medicaid, according to the report. Another 1.2 million would be eligible in 2014 – approximately half of whom are now uninsured. But not everyone who is eligible will apply for coverage. The study’s authors estimated that 289,000 people would be covered in 2014 and 620,000 more than are currently enrolled by 2020. The group began working on the report after the Supreme Court’s decision to help policymakers use facts to make their decisions, Udow-Phillips said. In order to tabulate the cost or savings from expansion, Udow-Phillips said they had to know a handful of things, (some of which remain projections). First, researchers had to gure how many would be enrolled in the program – this includes assumptions about who would be eligible, how many are currently eligible but not enrolled, and how many might enroll in 2014. They also had to calculate what the costs would be. While many may focus on gross cost, Udow-Phillips said it’s more important to look at the net cost of expansion, which includes new revenue generated for the state. Almost 2 million Michigan residents are currently enrolled in Medicaid, according to the report. Another 1.2 million would be eligible in 2014; approximately half of whom are now uninsured. But not everyone who is eligible applies for coverage. The study authors estimated that 289,000 people would be covered in 2014 and 620,000 more than are currently enrolled by 2020. Medicaid currently matches funds differently in each state based on a formula using the state’s per capita income. That ranges from 50% to 73%. Michigan’s federal match is 66%. Under the ACA, the federal
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December 4-5
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December 13
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WEBINAR
E-Mail info@payersandproviders.com with the details of your event, or call (877) 248-2360, ext. 3. It will be published in the Calendar section, space permitting.

Thursday, October 25, 2012

Noon, CDT

MEDICAID EXPANSION: 2014 AND BEYOND
Please join Lucien Wulsin, Executive Director of the Insure the Uninsured Project, and Elizabeth Benson Forer, CEO of the Venice Family Clinic, to discuss the challenges of Medi-Cal expansion under the ACA.

http://www.healthwebsummit.com/pp102512.htm a HealthcareWebSummit Event co-sponsored by PAYERS & PROVIDERS

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Payers & Providers
Top Placement... Bottomless Potential

NEWS
Michigan Medicaid (Continued from Page One)
government will begin with a 100% match for new enrollees for three years. That number will drop to 90% in 2020 and beyond. The report found that the state would save money through 2020 (a total of $1.17 billion). In 2020, when the federal match is 90%, the state would see a net annual cost growing to $52 million by 2023. The state will save money through provider taxes, eliminating the adult benet waiver program; reduction in non-Medicaid mental health benets; reductions in prisoner inpatient medical services; and saving in state employee healthcare costs. These costs and savings among to $983 million through 2023. “I hope people get that there is tremendous value in several ways,” Udow-Phillips said. She added there is the nancial value because the state now pays for services that would be covered under federal dollars. Moreover, having more people covered will reduce uncompensated care, which trickles down to employers and people paying for private insurance. Udow-Phillips also noted the value of the coverage. In 2020, when the federal coverage is reduced, it will still only cost the state $83 per person, per year for Medicaid coverage. Udow-Phillips said she thinks other states would see similar numbers if they looked at all costs and savings related to the expansion, particular during the 10-year period they analyzed. “Even when it moves down to 90-10, we think it will be a good deal for the states even

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In Brief
Trinity, Catholic Healthcare East Announce Preliminary Merger Plans
Michigan-based Trinity Health has signed a letter of intent to merge with Pennsylvania-based Catholic Healthcare East, potentially creating a powerhouse of a Catholic hospital network. Under the terms of the currently non-binding deal, Trinity CEO Joseph R. Swedish would become chief of the merged organization. CHE Chief Executive Officer would serve as executive vice president. Consolidating the two systems would create an entity operating 82 hospitals in 21 states with 87,000 employees, inrcluding more than 4,000 physicians. Annual revenue would be more than $13 billion a year. “Trinity Health and Catholic Health East are strong Catholic health care systems that share a Gospel-based mission and an unyielding commitment to care for people who are poor and underserved," said Trinity Health Chair Sister Mary Mollison. “This consolidation advances the vision of congregations of Sisters that founded these health care ministries, addresses the changing health care environment and takes a bold next step for Catholic healthcare." Both sides noted that the merger is preliminary, and that a definitive agreement and completion date would be announced during the first quarter of 2013. “To serve people best in today's healthcare environment, health systems must have ready

if they have a slightly different picture,” she said. “We published this to help our state, but we also want others to look at our methodology.” At this point, however, the numbers on the cost of expansion vary so broadly that it may be difcult of policymakers to determine what it will really look like for their respective states. Milliman Inc. has been hired by a handful of states to try and determine the cost of expansion. A report for the state of Indiana found that should the state not expand through 2020, it would incur $611.7 million in expense through enrollment of those already eligible and other factors; if it expands to 100% of the federal poverty level, it would cost $1.7 billion; and if it fully expands, it would cost $2.5 billion. Studies from Milliman and The Center for Health Policy at University of Nebraska Medical Center have shown that costs will range from $140 million to $766 million should teh Cornhusker State expand its program. The Congressional Budget Ofce has estimated that states will only increase costs by about 3% from what they would have paid without expansion. And the Urban Institute estimates that states will save somewhere between $26 billion and $52 billion through 2019. Jeremy Engdahl-Johnson, spokesperson for Milliman, said the issue really should be looked at on a state-by-state basis. He said there are so many differences, including coverage levels and underwriting, for each state that it’s almost impossible to make a sweeping statement that expansion would be good or bad overall. – TAMMY WORTH

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Continued on Page 3

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Payers & Providers
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NEWS

Page 3

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Ascension Health Forms A GPO
Part of a Trend Toward Hospital-Based Suppliers
St. Louis-based Ascension Health Alliance has become one of the most recent provider organizations to create its own group purchasing organization. Though providers still hold a small share of the GPO market, consolidation in general may be the direction the industry is heading. Resource and Supply Management Group, the supply-chain operation for Ascension’s wholly-owned subsidiary, will offer the service. The GPO will provide services to Health Ministries of Ascension as well as other health systems. The purpose of a GPO is to use purchase volume and commitment of sales to negotiate discounts from manufacturers, distributors and other vendors. Membership in a GPO is voluntary, but most hospitals participate in at least one. Curtis Rooney, president of the Health Industry Group Purchasing Association, said that most hospitals belong to two to four GPOs on average and many still negotiate “off contract” with suppliers. Rooney said GPOs yield savings of approximately $36 to $38 billion annually. Rooney said GPOs also provide a host of other services like custom contracting, clinical evaluation and standardization, technology assessment, data benchmarking and market research. GPOs make money by charging vendors an administrative fee. Some also charge hospitals a participation fee and/or administrative fees that are placed into an account each time they purchase through a contract. Once administrative costs are covered, what remains in the account is returned to the providers. “As participants of the GPO, the ministries of Ascension Health will see immediate benets such as lower costs on purchased services, capital and professional services,” said Robert J. Henkel, president and CEO of Ascension Health, said in a prepared statement. “Longer term, the GPO demonstrates our commitment to transform healthcare by 2020.” Hospital-owned GPOs have begun popping up around the country, said Larry McComber, senior vice president of strategic services at Novation, an Irving, Texas-base GPO that provides services to more than 65,000 members including VHA Inc., United Healthcare and Provista, LLC. This is likely happening because they want more direct control over their purchasing activity, he said. National organizations like Novation have voluntary participation in their contracts. To attract hospitals to the contracts, they have to provide the greatest value. They are able to do this because of the sheer volume of participants, McComber said. Hospital-owned GPOs are able to glean savings by making a commitment to a supplier. Their volume may be smaller, but they are able to commit to a supplier that the group will use their products or services, he said. “I think it will happen here and there, but I don’t think it will be a mass movement,” McComber said of hospital-owned GPOs. He added that hospitals would have to seriously look at the costs of creating a GPO. They will often nd that it’s more economical to take part in a national one instead of creating their own infrastructure. But he does contend that there is a strong movement for consolidation in the industry as a result of the Affordable Care Act. In the past ve years or so, he said he has seen local systems work together, even within a national GPO, to negotiate deals. These regional supply networks might work together to standardize some of their supplies, then go to their GPO and request they negotiate contracts for that group. – TAMMY WORTH

In Brief
access to resources and ideas across the broad spectrum of care, and this consolidation would help us achieve that goal with an exceptional national network,” Swedish said. “We are excited about the benefits our combined organizations will bring to people and communities nationwide.”

UnitedHealth, Nebraska 4-H Enter Into Alliance To Promote Healthier Eating

Minnesota-based UnitedHealthcare has entered into an alliance with the Nebraska 4-H to help adolescents nd rising rates of obesity. The partnership, called Eat4Health, will send out 4-H members as “youth ambassadors” to spread the message of healthy living and eating to other young Nebraskans. The program is being administered by the University of Nebraska-Lincoln Extension Service, which provides 4-H programs to all 93 of Nebraska’s counties. UnitedHealth has launched similar programs in Florida, Mississippi and Texas. It has presented $30,000 in seed money to start each program, including the new one in Nebraska. About one-third of the nation’s teenagers are considered overweight or obese. According to data from the U.S. Centers for Disease Control and Prevention, about 28% of Nebraskans are at least overweight. “We are fortunate to be able to join with the young people of 4-H in the Eat4-Health program to help make a difference in the lives of so many families in Nebraska,” said Kathy Mallatt, president of UnitedHealthcare Community Plan of Nebraska.

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Payers & Providers

OPINION

Page 4

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The Runaround We Really Don’t Need
Providers Must Engage More Directly With Consumers
My wife and I recently celebrated our third department. I was put on hold, and after several wedding anniversary. As a treat, my wife's long minutes of annoying background music, a mom offered to watch our 5-month-old son so rather bland recorded voice came on the line we could have a night away. And although we and explained that call volumes were unusually were nervous about being away from him for high and that I would need to leave a message the rst time, it was great knowing that he was and that someone would get back to me within being well taken care of. 24 hours with an answer to my question. Not To celebrate, we drove to Milwaukee the answer I was looking for. from Chicago and stayed at a hotel we had The point of this story is to underscore the been dying to visit. We also need for the healthcare ate in the hotel's fancy industry to make sure that, steakhouse, which was while concentrating on their quite amazing, if pricier own efciency and quality than we expected. The next issues in the wake of morning, we went back to healthcare reform, if they the same restaurant and don't help consumers also had an even more increase their efciencies in extravagant brunch, which the process they are missing set us back $30 each—the a terric opportunity to most we have ever paid for positively impact their cash breakfast. ow. In short, a healthcare When we checked consumer who has to wait out and paid the bill, it was around for months to pay a a bit more than we had bill is much more likely to By budgeted for, and I knew that when I have issues meeting and managing John got home I would have to look at what their obligations. we had set aside for the trip and make Why can't the process work more Thomas sure I kept our personal books like my anniversary trip to Milwaukee? balanced. We checked in, we enjoyed the In June, I had a very different kind of services, we checked out, we received a bill and experience paying for services rendered. On we paid a bill. If that process actually existed in June 6, I went to have my annual physical. I healthcare, patients would be able to paid a $15 copay, but I also had blood work understand, prepare for and pay their bills much done, and when I walked out of the ofce, I more proactively. had no idea how much I was going to be It's sort of like the nancial equivalent of obligated to pay for those tests. preventive medicine. If a patient gets a bill in a I used my online health insurance site to timely fashion, it's more likely the bill can be monitor how those blood test bills were paid in a timely fashion, money goes into the updated. My plan ended up being billed hospital's bank account more quickly, the $1,130 for the lab work. The plan negotiated a accounts receivable department gets a boost, discount of $647.49 (how they arrived at that and it reduces the possibility that a dreaded gure, I have no idea), and my plan paid bottom-line-killing collection agency ever has to $386.01. That left me to foot a bill of $96.50. get involved. If a person's own healthcare issues My appointment was more than four can deteriorate quickly without the proper months ago. I have yet to receive the bill. timely medical attention, then the same can also To gure out what was going on with be said to be true about a person's nancial the delay, I called my insurance carrier. They condition. said that all they do is negotiate the price of the bill. To nd out why I had not received it in John Thomas is the chief of editorial more than four months, I had to contact the operations for Modern Healthcare magazine. billing department at the hospital where the lab work was done. Op-ed submissions of up to 600 words are They gave me the number and actually welcomed. Please e-mail proposals to transferred me to the hospital's billing editor@payersandproviders.com

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Payers & Providers

MARKETPLACE/EMPLOYMENT

Page 5

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