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

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 polls when they are provided • If you are viewing this webinar in a group  Complete group attendance form with • Title & date of live webinar • Your company name • Your printed name, signature & email address  All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar  Answer polls when they are provided • If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar HEALTH CARE PLAYBOOK – INSIDE ADDITION • Recent Health Care Changes & Trends • Tax Cuts and Jobs Act Impact on Health Care Industry • Emerging Health Care Industry Trends, Challenges & Strategies 2

3/27/2018 INDUSTRY ENVIRONMENT AT A GLANCE Politics/ Health Care Government Competition Spending Regulations Consumerism Patient Care Innovation FEDERAL SPENDING MEDICARE BENEFITS 3

3/27/2018 LEAGUE INFLUENCES – POLITICS & GOVERNMENT Outside Influencers • President of the United States • Democrat & Republican Initiatives • Health & Human Services  Centers for Medicare & Medicaid Services  Office of Inspector General 4

3/27/2018 LEAGUE INFLUENCES – COMPETITION & CONSUMERISM Line of Scrimmage & Downfield • Traditional competitors • New competitors • Patients vs. consumers • Listen to consumers • Watch for drones Tax Cuts and Jobs Act 5

3/27/2018 NEW LEAGUE RULES: TAX CUTS AND JOBS ACT 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CUTS AND JOBS ACT • Unrelated Business Income (UBI)  21% flat corporate tax rate  Corporate alternative minimum tax repealed  NOL deduction 80% taxable income  No entertainment deductions 6

3/27/2018 NEW LEAGUE RULES: TAX CUTS AND JOBS ACT • 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 Effective for tax years beginning after December 31, 2017 Unrelated Business Income Silo income/loss by activity Net operating loss carryforwards prior to January 1, 2018, are not subject to this provision 7

3/27/2018 NEW LEAGUE RULES: TAX CUTS AND JOBS ACT • 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? 8

3/27/2018 Emerging Health Care Industry Trends, Challenges & Strategies EMERGING TRENDS, CHALLENGES & ISSUES 501(r) Consumerism Mergers & & Innovation Acquisitions Health Care Provider Government Information Regulations Technology Alternative- Based Payments 9

3/27/2018 501(R) • 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) • 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 10

3/27/2018 501(R) • 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 WHAT DOCUMENTS SHOULD BE MADE AVAILABLE? • 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) 11

3/27/2018 SAMPLE IRS INFORMATION REQUESTS Provide written documentation Provide the basis for calculating amounts supporting what actions the hospital may charged to patients under the FAP take in the event of nonpayment Provide committee minutes describing the hospital’s actions in regard to widely Describe how the hospital notifies & publicizing the FAP as well as informs patients of the availability of documentation supporting the publicity financial assistance of the plain language summary 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 12

3/27/2018 SAMPLE IRS INFORMATION REQUESTS • 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) LEAGUE LANDSCAPE • Hospital & health systems consolidation  Strong with strong? Moderate? Weak?  Moderate with moderate?  Weak with ? • Insurers with  Insurers  Providers • Physicians with CVS and Aetna Say Merger Will Improve Your  Physicians  Health system Health Care. Can They Deliver?  Insurers • Commercial business with  Insurers  Providers 13

3/27/2018 Current Industry Trends & Market Activity Health Care Services Mergers & Hospital Mergers & Acquisitions Acquisitions Total Transactions by Year Total Transactions by Year 133 133 988 988 935 935 935 935 102 102 100 100 746 746 91 91 87 87 85 85 636 636 79 79 598 598 77 77 562 562 453 453 2010 20 10 20 2011 11 20 2012 12 2013 20 13 20 2014 14 20 2015 15 20 2016 16 2017 20 17 20 2010 10 20 2011 11 20 2012 12 20 2013 13 20 2014 14 20 2015 15 20 2016 16 20 2017 17 Current Industry Trends & Market Activity 2016 Health Care Services Deal Volume 2017 Health Care Services Deal Volume Long-Term Lon Othe Other Long-Term Ca Lon Care Care Car Other Othe 21% 21% 30% 30% 36% 36% 21% 21% 944 944 972 972 Heal Health th Heal Health th Car Care Mana naged C ged Care Car Care Services Service Mana naged C ged Care 2% 2% Services Service Deals Deal 3% 3% Deals Deal Physician Physic ian M Medical al Grou Groups Physician Physic ian M Medical al Grou Groups 17% 17% Rehabili habilitatio tation 13% 13% Rehabili habilitatio tation 4% 4% Hosp spitals itals 5% 5% Hosp spitals itals 10% 10% Behavi vior oral H al Health alth 8% 8% Behavi vior oral H al Health alth 4% 4% 5% 5% Hom Home He Health h & & Ho Hospice Laborato tory ry, MR , MRI, D I, Dialysi ialysis Hom Home He Health h & & Ho Hospice 6% 6% Laborato tory ry, MR , MRI, D I, Dialysi ialysis 4% 4% 5% 5% 6% 6% 14

3/27/2018 INFORMATION TECHNOLOGY • Electronic medical record • Mobile devices • Internet health care • Capital costs  Hardware  Software  Human Technology Care Delivery New Models Incentivizing Big Data & Behavior Change Transparency Analytics Price for Consumerism Care 15

3/27/2018 NEW OFFENSE: ALTERNATIVE-BASED PAYMENTS • Accountable care organizations & bundled payments will continue to evolve • Direct to employer contracts • Value- & outcomes-based payments PAYMENT DRIVES BEHAVIOR 1960 s 1990 s 20 10 + 20 0 0 s Cost-Based Boom Value-Based Fee-for-Service 16