THE HEALTH CARE PLAYBOOK Strategies for the 2018 Season March 28, - - PDF document

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THE HEALTH CARE PLAYBOOK Strategies for the 2018 Season March 28, - - PDF document

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3/27/2018 THE HEALTH CARE PLAYBOOK Strategies for the 2018 Season March 28, 2018 Michael J. Engle Joseph M. Watt Partner Partner mengle@bkd.com jwatt@bkd.com 1 3/27/2018 TO RECEIVE CPE CREDIT Participate in entire webinar Answer

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THE HEALTH CARE PLAYBOOK

Strategies for the 2018 Season

Joseph M. Watt Partner jwatt@bkd.com Michael J. Engle Partner mengle@bkd.com March 28, 2018

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TO RECEIVE CPE CREDIT

  • Recent Health Care Changes

& Trends

  • Tax Cuts and Jobs Act Impact
  • n Health Care Industry
  • Emerging Health Care

Industry Trends, Challenges & Strategies

HEALTH CARE PLAYBOOK – INSIDE ADDITION

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Health Care Spending Politics/ Government Regulations Competition Consumerism Patient Care Innovation

INDUSTRY ENVIRONMENT AT A GLANCE FEDERAL SPENDING MEDICARE BENEFITS

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Outside Influencers

LEAGUE INFLUENCES – POLITICS & GOVERNMENT

  • President of the United States
  • Democrat & Republican

Initiatives

  • Health & Human Services
  • Centers for Medicare & Medicaid

Services

  • Office of Inspector General
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Line of Scrimmage & Downfield

LEAGUE INFLUENCES – COMPETITION & CONSUMERISM

  • Traditional competitors
  • New competitors
  • Patients vs. consumers
  • Listen to consumers
  • Watch for drones

Tax Cuts and Jobs Act

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Excise Tax on Executive Compensation in Excess of $1M

  • Follows corporate rate (21%)
  • Five highest-paid employees
  • Excludes professional medical services
  • Parachute payments greater than three times the five-year salary

average

  • Includes nonqualified deferred compensation from ineligible deferred

compensation when there is not substantial risk of forfeiture (457(f))

  • Taxable compensation

NEW LEAGUE RULES: TAX CUTS AND JOBS ACT

  • Unrelated Business Income (UBI)
  • 21% flat corporate tax rate
  • Corporate alternative minimum

tax repealed

  • NOL deduction 80% taxable

income

  • No entertainment deductions

NEW LEAGUE RULES: TAX CUTS AND JOBS ACT

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  • Unrelated Business Income
  • UBI increased for certain fringe benefits
  • Qualified transportation fringe benefit
  • Employer-provided parking
  • Transit passes
  • On-premises athletic facility

NEW LEAGUE RULES: TAX CUTS AND JOBS ACT

Unrelated Business Income Silo income/loss by activity Effective for tax years beginning after December 31, 2017 Net operating loss carryforwards prior to January 1, 2018, are not subject to this provision

NEW LEAGUE RULES: TAX CUTS AND JOBS ACT

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  • Repeal of advance refunding

bonds

  • Refunding bonds that are issued

more than 90 days before redemption

  • Interest subject to tax on advance

refunding

  • Increase the cost of debt

NEW LEAGUE RULES: TAX CUTS AND JOBS ACT

  • Charitable Contributions
  • Increase in standard deduction
  • Increase estate tax exclusion to

$10M

Decrease in charitable contributions?

NEW LEAGUE RULES: TAX CUTS AND JOBS ACT

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Emerging Health Care Industry Trends, Challenges & Strategies EMERGING TRENDS, CHALLENGES & ISSUES

Health Care Provider

501(r) Mergers & Acquisitions Information Technology Alternative- Based Payments Government Regulations Consumerism & Innovation

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  • Oversight required by the ACA
  • IRS required to review Schedule H of every hospital once every three

years

  • As of 9/30/16, the IRS had completed 968 reviews & referred 363 of

those hospitals for examination (more than 37%); reasons include

  • Lack of a community health needs assessment (CHNA)
  • No financial assistance policy or emergency medical policy
  • Noncompliance with billing & collection requirements
  • In our experience, this trend has continued

501(R) 501(R)

  • What is triggering the examinations?
  • Missing documents (or documents too

difficult to find) on hospitals’ websites

  • CHNA
  • Financial assistance policy (FAP) & related

documents

  • Billing & collection information
  • Schedule H red flags
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  • On 8/4/17, a redacted adverse determination letter

was posted by the IRS at https://www.irs.gov/pub/irs- wd/201731014.pdf

  • Hospital was a “dual status” hospital & not required to

file Form 990

  • Revoked for failure to conduct a CHNA
  • Hospital management stated they really did not need

501(c)(3) status

  • Letter does not specify how many years of the

$50,000 excise tax the hospital was responsible for

501(R)

  • Complete FAP
  • AGB information
  • Provider list
  • Financial assistance application
  • Plain language summary of the FAP
  • Billing & collection information
  • Translations if required
  • Current & one prior CHNA
  • Implementation strategy (either on the website or attached to Form

990)

WHAT DOCUMENTS SHOULD BE MADE AVAILABLE?

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3/27/2018 12 Provide the basis for calculating amounts charged to patients under the FAP Provide written documentation supporting what actions the hospital may take in the event of nonpayment Provide committee minutes describing the hospital’s actions in regard to widely publicizing the FAP as well as documentation supporting the publicity

  • f the plain language summary

Describe how the hospital notifies & informs patients of the availability of financial assistance

SAMPLE IRS INFORMATION REQUESTS

  • Provide a sample application & instructions for applying for

financial assistance

  • Provide a copy of any translated documents. Also, describe the

methodology used to ensure that any limited English proficiency (LEP) populations served by the hospital organization have access to these translated documents

  • Provide a copy of the resolution from the authorized body of the

hospital facility that establishes the date the emergency medical care policy (EMCP) was adopted

SAMPLE IRS INFORMATION REQUESTS

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  • Provide a representative patient billing

statement

  • Please make available for interview a

person with knowledge of the hospital’s billing & collection practices

  • Please provide copies of any complaints,

including legal complaints, in which a patient alleged that the hospital either failed to follow its FAP or did not comply with the requirements of 501(r)(4)

SAMPLE IRS INFORMATION REQUESTS

  • Hospital & health systems consolidation
  • Strong with strong? Moderate? Weak?
  • Moderate with moderate?
  • Weak with ?
  • Insurers with
  • Insurers
  • Providers
  • Physicians with
  • Physicians
  • Health system
  • Insurers
  • Commercial business with
  • Insurers
  • Providers

LEAGUE LANDSCAPE

CVS and Aetna Say Merger Will Improve Your Health Care. Can They Deliver?

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Current Industry Trends & Market Activity

453 453 562 562 636 636 598 598 746 746 935 935 935 935 988 988 20 2010 10 20 2011 11 20 2012 12 20 2013 13 20 2014 14 20 2015 15 20 2016 16 20 2017 17

Health Care Services Mergers & Acquisitions Total Transactions by Year

77 77 85 85 100 100 87 87 133 133 102 102 91 91 79 79 20 2010 10 20 2011 11 20 2012 12 20 2013 13 20 2014 14 20 2015 15 20 2016 16 20 2017 17

Hospital Mergers & Acquisitions Total Transactions by Year

Lon Long-Term Ca Care 30% 30% Othe Other 21% 21% Physic Physician ian M Medical al Grou Groups 17% 17% Hosp spitals itals 8% 8% Hom Home He Health h & & Ho Hospice 5% 5% Laborato tory ry, MR , MRI, D I, Dialysi ialysis 6% 6% Behavi vior

  • ral H

al Health alth 5% 5% Rehabili habilitatio tation 5% 5% Mana naged C ged Care 3% 3%

2017 Health Care Services Deal Volume

972 972 Heal Health th Car Care Service Services Deal Deals Lon Long-Term Car Care 36% 36% Othe Other 21% 21% Physic Physician ian M Medical al Grou Groups 13% 13% Hosp spitals itals 10% 10% Hom Home He Health h & & Ho Hospice 6% 6% Laborato tory ry, MR , MRI, D I, Dialysi ialysis 4% 4% Behavi vior

  • ral H

al Health alth 4% 4% Rehabili habilitatio tation 4% 4% Mana naged C ged Care 2% 2%

2016 Health Care Services Deal Volume

944 944 Heal Health th Car Care Service Services Deal Deals

Current Industry Trends & Market Activity

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  • Electronic medical record
  • Mobile devices
  • Internet health care
  • Capital costs
  • Hardware
  • Software
  • Human

INFORMATION TECHNOLOGY

Technology

Big Data & Analytics Transparency Care Delivery New Models Incentivizing Behavior Change Price for Care Consumerism

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NEW OFFENSE: ALTERNATIVE-BASED PAYMENTS

  • Accountable care organizations &

bundled payments will continue to evolve

  • Direct to employer contracts
  • Value- & outcomes-based

payments

1960 s Cost-Based 1990 s Fee-for-Service 20 0 0 s Boom 20 10 + Value-Based

PAYMENT DRIVES BEHAVIOR

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  • Fee for service vs. pay for performance
  • Operating in two payment environments
  • Decreased federal health care program

payments

  • Medicare DSH/Charity Care payments –

Worksheet S-10

  • 340B discount pricing

DEFENSE: GOVERNMENT REGULATIONS

Drug costs – largest expense expected to grow

  • Drugs purchased under 340B priced at average sales price – 22.5%

Effective January 1, 2018

  • No requirement to report use of savings
  • Clear intent of program not defined
  • HRSA lacks regulatory authority to clarify program requirements
  • Growing trend toward prescribing more expensive drugs to Medicare Part B patients

House Energy & Commerce Report

DEFENSE: 340B DRUG DISCOUNT PROGRAM

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“ ”

“He played about the way I would have thought; you talk about a baptism in this league. They bring the ranch; they blitz and they blitz and they blitz, and it paid dividends. We were sacked six times today. It’s pretty hard to be efficient when that happens.”

Marty Schottenheimer – Former Kansas City Chiefs Football Head Coach

  • Consumerism & innovation are here to

stay

  • Could be a disruptor to traditional care
  • Amazon, Berkshire Hathaway, JP Morgan
  • Patients are paying attention to cost &

quality

  • Patients want convenience & timely

service

  • Mobile device care

BLITZ: CONSUMERISM & INNOVATION

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  • Futbol or football?
  • Innovation may be used to

solve problems

  • Innovative partners – choose

strategically

  • Big & small innovations
  • Let the millennials loose

BLITZ: CONSUMERISM & INNOVATION

“ ”

“Champions are champions not because they do anything extraordinary but because they do the

  • rdinary things better than anyone else.”

Chuck Noll – Former Pittsburgh Steelers Head Coach & Four-Time Super Bowl Championships

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  • Embrace health care industry

changes

  • Call the audible – Be the

innovator

  • Understand what your

competition looks like

  • Consumerism is here to stay
  • Listen to your patients

CHAMPIONS OF HEALTH CARE

QUESTIONS?

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CPE CREDIT

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THANK YOU!

FOR MORE INFORMATION Michael J. Engle, Partner mengle@bkd.com 816.701.0264 Joseph M. Watt, Partner jwatt@bkd.com 816.701.0246