Transcript ManagingAmidstCrisis3-15-06 - PLUSweb

2006 PLUS MPL
Symposium
Managing Amidst Crisis
Moderator:
James M. Fasone ARM RPLU
Gallagher Healthcare
2006 PLUS MPL
Symposium
Managing Amidst Crisis
Panelists:
Linda Klute- Tatum LLC
Howard Pearl- Winston & Strawn
Steve Wilson- RLI Corporation
2006 PLUS MPL
Symposium
Managing Amidst Crisis
Session Outline:
Introductory Remarks
Healthcare Industry Overview
Healthcare Leadership Challenges
Regulatory/Legal Climate
Fraud & Abuse
Underwriting Executive Liability Exposures
• “ This is like déjà vu all over again.”
- Yogi Berra
Healthcare Industry
• Market Overview
• Healthcare Industry Challenges



Regulatory environment
Reimbursement issues
Changing Healthcare Landscape
• Healthcare Leadership Challenges

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Market Changes – Specialty Hospitals
Nonprofit Outlook
Provider Relations
Corporate Governance
Health Care Market
Providers – “use of funds”
• Hospitals and systems, professional
services, nursing homes, suppliers,
pharmacy, home health, retail, middlemen
organizations, government administration
Payers and administrators – “source of
funds”
• Insurance companies, HMOs, PPOs,
employer managed plans and coalitions,
Medicare, Medicaid, Medicare and
Medicaid contractors, TPAs, PBMs. Case
management companies, disease
management companies
Related industries
• Senior housing
• Medical malpractice (insurance, captives)
• Research organizations
• RHIOs
• Companies with some healthcare products
National:
• $1.4 trillion in 2007
growing to $4.0 trillion
in 2016
• Outside the above $$$
The Market – Use of
Funds
Other
23%
•
Hospital care
30%
Program
administration
7%
Nursing home
care
7%
Prescription drugs
11%
Physician clinical
services
22%
Other includes
dental services,
other
professional
services, home
healthcare,
DME, over-thecounter
medications
and sundries,
public health
activities,
research and
construction.
Source: Modern Healthcare, “By the Numbers”, December 2005
Healthcare tab will hit $4
trillion in 10 years
Projected Average Annual Spending Increase (2006-2015)
9.0%
8.2%
7.8%
8.0%
7.4%
7.2%
7.1%
7.0%
5.9%
6.0%
5.0%
4.3%
4.0%
3.0%
2.0%
1.0%
0.0%
Prescription
drugs
Home care
Private health Hopsital care Physician and Nursing-home
insurance
clinical
care
services
Durable
medical
equipment
Source: Modern Healthcare, February 27, 2006
Personal Consumption
Data
14.0%
12.1%
12.0%
9.8%
10.0%
10.2%
8.0%
6.0%
4.0%
4.8%
3.8%
2.7%
2.7%
2.0%
ca
re
g
in
M
ed
ic
al
ou
s
Fo
od
H
D
ef
e
ns
e
ive
to
m
ot
y
Au
er
g
En
ng
0.0%
lo
th
i
•
Bureau of
Economic Analysis
– Personal
consumption
figures with the
exception of
national defense.
Overall Healthcare
expenditures are
projected to
account for 15.6%
of the GDP in
2005 according to
CMS.
C
•
Source: Modern Healthcare, “By the Numbers”, December 2005
INDUSTRY CHALLENGES
Health Care Fraud Impact
• Estimated to be $48 to $80 billion nationally
• Or 2-5% of healthcare spending
5%
95%
Healthcare Laws
•
Amended Medicare and Medicaid Patient and Programs Protection Act of 1987 (anti
kickback statute) for referrals
•
EMTALA – emergency medical treatment
•
False Claims Act – claims for services not authorized, upcoding, unbundling lab
tests, double billing, billing for claims not provided, false prescriptions, bills for
services not delivered
•
Civil Monetary Penalties Law – claims known to be false and failure to disclose
information
•
Stark (physician self-referral) to businesses with any ownership interest
•
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
•
Sarbanes Oxley accountability
•
Gain-Sharing physicians sharing in savings/certain reductions in healthcare costs
•
Bio-Terrorism Act
•
In addition to wire fraud, mail fraud, criminal conspiracy, obstruction of justice,
money laundering, antitrust, labor, taxation, intellectual property, environmental and
other laws.
Healthcare Hot Topics
•
•
•
•
•
•
•
•
•
•
•
•
•
•
$36 billion in budget cuts in Medicare/Medicaid
Fraud, corporate compliance, corporate responsibility
Medical errors, patient safety (50% error rate in every aspect of care)
The uninsured and the underinsured – who pays? How to collect?
Deploying technologies and drugs, paying for technologies and drugs
Access to capital
Demand for services, aging population,
Personnel shortages
Aging plants
Malpractice, risk management
Bio-disaster preparedness
Consumerism
Informatics, use of data, artificial intelligence, evidence based medicine
Supply chain efficiencies
Reimbursement Issues are a
Top Concern of Hospital CEOs
• $36 billion in budget cuts in Medicare/Medicaid

All provider types will feel the cuts
• Care for the uninsured

Maintaining a hospitals not-for-profit status
• Illinois looking to increase the amount of charitable care to
maintain NFP status
• Pay for performance


From Medicare to all
Need for standards
• Push for transparent pricing by the Bush Administration
• Bad debt
• Revenue cycle management
Changing Healthcare
Landscape
• Consumerism



Pay for Performance
Cyber crimes
Websites reporting
quality results
• Disaster Planning


Natural disasters
Pandemics
• Physician Issues



Hospital in competition
with Physicians
Malpractice
Shortages
• Access to capital and capital
needs/allocation
• Aging population
• Interoperability
• Bad debt
• Personnel shortages and
expense
• Technology
HEALTHCARE LEADERSHIP CHALLENGES
Nonprofit Outlook
• Areas of Continued Improvement/Opportunity
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

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


Tax status
Accountability/internal controls over financial reporting
Revenue cycle management
Supply chain management
Capital allocation (including IT)
Asset-liability management
Physician Alignment
Access to capital
Medicare and managed care
Source: Fitch Ratings, “2006 Nonprofit Hospitals and Health Care Systems
Outlook”, January 2006
Healthcare Leadership
Challenges
Ranking
Issue
2003
2004
2005
1 Financial changes
73%
71%
67%
2 Personnel shortages
58%
33%
36%
3 Care for the uninsured
26%
36%
35%
4 Physician/hospital relations
26%
32%
33%
5 Quality
17%
18%
23%
6 Patient safety
9%
16%
20%
7 Patient satisfaction
7%
13%
18%
8 Capacity
28%
16%
17%
9 Technology
12%
14%
17%
18%
19%
16%
10 Governmental mandates
Source: ACHE conducted a survey in September 2005 of 9 41 hospital CEOs – 42% responded.
Breakdown of Top Focus
Areas
Rank
Financial Challenges Personnel shortages
Care for the
Uninsured
1 Medicaid
Registered nurses
Medicaid
2 Medicare
Imaging technicians
Underwriting costs
3 Bad debt
Pharmacists
Advocacy for funding
4 Revenue cycle mgmt.
Therapists
5 Managed care
payments
Physicians
– surgical specialists
Provider Relations
•
•
•
•
•
•
Communications
Conflict of Interest Rules
Gain Sharing
Quality
Recruitment and Retention
Physicians serving on the Board of Directors

Compensation issues
• Technology adoption and obsolescence
Corporate Governance
• Increase scrutiny and transparency
• Moving more towards a corporate or enterprise
governance model




Accountability
Operating performance
Goal achievement
More than 50% of the nation’s largest health system has
adopted some components of Sarbanes-Oxley
• Regulatory compliance
• Conflict of interest
• Implementing “Best Practices”
As Shoeless Joe Jackson departed from the Grand
Jury room, a small boy clutched at his sleeve and
tagged along after him.
"Say it ain't so, Joe," he pleaded. "Say it ain't so."
"Yes kid, I'm afraid it is," Jackson replied.
"Well, I never would've thought it," the boy said.
Chicago Herald and Examiner (9/30/1920)
Healthcare Laws
•
Amended Medicare and Medicaid Patient and Programs Protection Act of 1987 (anti
kickback statute) for referrals
•
EMTALA – emergency medical treatment
•
False Claims Act – claims for services not authorized, upcoding, unbundling lab
tests, double billing, billing for claims not provided, false prescriptions, bills for
services not delivered
•
Civil Monetary Penalties Law – claims known to be false and failure to disclose
information
•
Stark (physician self-referral) to businesses with any ownership interest
•
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
•
Sarbanes Oxley accountability
•
Gain-Sharing physicians sharing in savings/certain reductions in healthcare costs
•
Bio-Terrorism Act
•
In addition to wire fraud, mail fraud, criminal conspiracy, obstruction of justice,
money laundering, antitrust, labor, taxation, intellectual property, environmental and
other laws.
Health Care Fraud Impact
• Estimated to be $48 to $80 billion nationally
• Or 2-5% of healthcare spending
5%
95%
High Profile Settlements
Serono, 2005, $1.7 M, Medicaid,
Marketing
TAP Pharmaceutical, 2001, $875
M for a total of 7 health care
crimes
Abbott Labs,
2003, $600 M ,
FDA compliance
HCA
• 2003, $631M for
false claims.
• 2000 and 2001,
$840 Million for
false billing
practices
SmithKline
Beecham,
1997, $325 M,
billing fraud
Fresenius a
German
Corp., $486
M for false
claims and
kick backs.
Gambro Healthcare,
$350 M, Kickback to
Physicians
HealthSouth, $325 M, false
claims, billing practices
National
Medical
Enterprises,
1994, $379
M, Kickbacks
Recent Settlements
• Tenet - $7 million

Medicare outlier payments
• McKesson - $960 million

Accounting practices
• HealthSouth - $445 million

Shareholder settlement
“ When you come to a fork in the road,
you take it.”
• Yogi Berra
D/O Underwriting Exposures
Healthcare
Employment
Discrimination
Wrongful Termination
Sexual Harassment
Credentialing/Privileges
D/O Underwriting Exposures
Healthcare
Regulatory
• Fraud and abuse
• Whistleblower
• CMS Audits
• Compliance with State and Federal Laws
(Stark Laws,etc.)
• Antitrust
• Price Fixing
D/O Underwriting Exposures
Healthcare
• Not-for-Profit Status/Charity Care
• Patient billing
• State mandated levels of charity care (% of
sales)
• Community involvement
• Use of JV’s and for-profit entities to carry out
charitable mission
• Politicians picking up causes for upcoming
election season
• Specialty hospitals
Corporate Governance
Healthcare
• Executive Pay
• IRS and State Atty. General closely
watching pay levels
• Internal Controls
• Appropriate Committees for
Compensation/Internal Audit
Corporate Governance
Healthcare
•
•
•
•
Ethics
Nominating/Finance/Investment/etc…
Conflict of Interest
Board of Directors and its involvement
Managing Technological Change
1,2,3…….15 Strikes
You’re Not Out?!
Executive Compensation
• "I know, but I had a better year than
Hoover."
-- Reported reply when a reporter
objected that the salary Ruth was
demanding ($80,000) was more than
that of President Herbert Hoover's
($75,000).
Consumerism
Managing Amidst Crisis
Questions/Answers