HTH Executive Leadership

1. HTH Executive Leadership Beth Spoto, Spoto & Associates Spoto & Associates, LLC

2. Market Update Spoto & Associates, LLC

3. Medicare 13% • Medicaid 16% • State Health Benefit 7% • Commercial 46% • (52% 4 years ago) • Uninsured 18% Georgia’s Current Population is 9.6 million Spoto Georgia’s Payer Mix & Associates, LLC shpllc.com

4. Commercial Payers Growing Market Share • Medicare Advantage Business • Managed Medicaid Business • Workers Compensation Products • All major payers moving towards statewide presence • New Contracts = New Paper Result: A fewer number of payers are having a growing negotiations advantage as their membership grows Spoto Current Commercial Payer Activity & Associates, LLC shpllc.com

5. Current SHBPPayer Activity State of Georgia Moves Employee Population to 3 payers State Health Benefit Plan Moves from multiple payers to two: United Cigna Each payer must have statewide network with multiple options: HMO / Open Access PPO High Deductible Plan Medicare Advantage Plan Board of Regents Moved to Blue Cross as sole provider with HMO PPO Result: Some payer diversity allows providers more room to negotiate with payers. Spoto & Associates, LLC shpllc.com

6. Retirees moved to Cigna or UHC Medicare Advantage Plans effective 1/1/10 • 4 options offered: 2 UHC & 2 Cigna • All plans are PFFS, therefore, none require a contract provider • To move to MA PPO/HMO for 2011 • Cigna PFFS – discontinues in 2011 State Health Benefit Plan Spoto & Associates, LLC shpllc.com

7. Current MedicaidPayer Activity Georgia Moved to Managed Medicaid in 2006 State gets fixed pricing for population Providers must transition with large part of Medicaid business moving to managed care with up to 4 payers State of Georgia (Administered by HP, moving back to EDS) Wellcare Amerigroup Peach State Spoto & Associates, LLC shpllc.com

8. Providers must deal with managed care tools on hard to manage population • Legislature approves HB1234 to help providers deal with overly aggressive Medicaid CMO tactics • Result: With fixed pricing and low margins, CMO’s are turning to tough managed care tools and pushing hospital negotiations to lower cost Spoto Current CMO’sPayer Activity & Associates, LLC shpllc.com

9. CMO Update Spoto & Associates, LLC • WellCare • Small impact of HB 1234 • Aggressive stance to avoid cost increases • Peach State • Outsourcing therapy network to TRS with caps on daily rates • Requesting take-backs based on adjusted CCR or pricing increases (assumed or actual). • Need to check your letter/computed amounts. • Increasing triage rate shpllc.com

10. Current MA Payer Activity Medicare Advantage Products Flood the Market Push to get Medicare beneficiaries into private plans Original Goal of CMS to have 50% of Medicare members in Medicare Advantage plans within 5 years of implementation Payers pricing Medicare Advantage Premiums to move members into managed products (PPO, HMO) rather than current Private Fee For Service (PFFS) products where the majority currently reside Many MA plans have $0 premiums Spoto & Associates, LLC shpllc.com

11. Current PoliticalPayer Activity • Congressional Changes Current and on the Way • Congress has mandated that Medicare Advantage Plans have contracts with providers by 2011. • President Obama’s administration has promised end to differential paid to Medicare Advantage Plans over traditional plans. • Result: Increased pricing pressure for plans resulting in push for contracts overall and for tougher negotiations with providers. Spoto & Associates, LLC shpllc.com

12. PFFS plans must be contracted by 2011 to continue • Clients received solicitations from many plans recently: • Humana • Aetna • Sterling • United (Secure Horizons) • Amerigroup • Cigna • WellCare • Many solicitations will attempt to add PPO/HMO as well. • Much Confusion with SHBP moving to Cigna/UHC MA Plans • Cigna – No action required, providers will be “deemed” into PFFS • UHC – Opt In for PFFS and Opt Out for PPO/HMO • UHC will allow Medicare Bad Debt; Cigna will not. Medicare Advantage Spoto & Associates, LLC shpllc.com

13. Losing market share in rural areas • Overtaken by UHC in several markets • Big push to complete Open Access products statewide and MA in targeted areas • Moving business to POS product • Increasing patient liability Spoto BCBS & Associates, LLC shpllc.com

14. Plan DesignCurrent Payer Activity Plan Design Continuing to Change Employers push to have employees pick up more of health care cost through Increased Deductibles Plan Design Changes New Products HRA’s HSA’s Wellness Programs Spoto & Associates, LLC shpllc.com

16. 3 Major Initiatives Ongoing • Move to OOPS • Moving to Medicare rates/methodology for PPS hospital • CAH move to Medicare rates/methodology • 12/01/09 • Program administrator Haulted! • Origenally moved from Humana to United 4/2010 • Now delayed until at least 3/2011 due to DOD support of Humana appeal TRICARE Spoto & Associates, LLC shpllc.com

17. Physician SideCurrent Payer Activity • Physician fee schedules continue to decline overall. • UHC • Medicare fee schedules offered at below Medicare rates. • In appropriate CMO accountability applied primary care physicians (i.e. being held accountable for downstream utilization out of their control). Spoto & Associates, LLC shpllc.com

18. Provider Response Current Payer Activity • Results: • Hospitals must have better information on plans to better collect • Hospital must (by default) educate patients about their plan • Hospitals must track performance of plan and understand its impact of hospital financials Spoto & Associates, LLC shpllc.com

19. Managed Care 101 for Executives Spoto & Associates, LLC

20. MCO • Obtain network of preferred providers to entice clients • Save money vs. OON • Forecast expenditures • Regulatory network requirements Provider • Improve volume • Lower patient liability to pursue in some cases • Competition • Community/Political Spoto Reasons to Contract & Associates, LLC shpllc.com

21. Where Hospitals Typically Go Wrong No overall contracting approach or strategy. Allowing one payer to maintain rates so far below the others that they maintain insurmountable market advantage. Allowing one-sided language that allows for changes to rates and language unilaterally. Accepting fixed fee pricing when the payer would accept % off if pushed. Not monitoring contract compliance, payment accuracy, etc. Contracting with wrap networks that provide no volume, yet take discounts. Allowing contracts to become old and not addressing fixed rates for several years. Not including inflation factors. Not keeping all agreements accessible and knowing key terms quickly. Not tracking amendments and other changes.

22. Managed Care: A Strategic Approach Spoto & Associates, LLC • Integrate managed care strategy with growth and physician relations strategies. • Maintain key payer relationships. • Understand/follow payer activity. • Contract Renewal Preparation • Monitor Contract Compliance • Develop On-going List of Contract Issues to Address • Analyze own data • Identify key negotiating points • Create leverage • Establish reimbursement minimums • Go through the effort • Know when to walk away shpllc.com

23. Integrate Managed Care Strategy with Growth Strategy Understand type of volume we are trying to attract. Understand the geographic growth market of the health system and whether the key employers can access the hospital. Review our market share data for whether we are keeping the good payers at home. Track market size and market share. Develop Good working relationships with large employers in area Spoto & Associates, LLC shpllc.com

24. Integrate Managed Care Strategywith Physician Relations Strategy Don’t get pitted against the local physicians Payer strategy-- Divide and conquer. 2 scenarios to avoid: Hospital contracts first without coordinating with physicians- Plan uses that to pressure physicians. Physicians contract first- Plan signs up a few cases who don’t realize local hospital not in network, then everyone pressures hospital. Ensure new products will build local physician network before seriously engaging discussion. Communicate with local physicians. Ensure owned physicians do not contract on the their own. Spoto & Associates, LLC shpllc.com

25. Payer Relationships Develop good relationships with key payers Bring legitimate issues to the table. Don’t whine. Play for the long term vs. beating them up Be “hard” on the issues and “soft”on the people If we want an increase, what are we giving them? If they want something, get something in return! Spoto & Associates, LLC shpllc.com

26. Which payers have direct, local business • Anticipate changes in market momentum. • (i.e. BCBS vs. UHC vs. Others) • Monitor benefit plans- which payers are moving toward high deductible/HSA plans • Who is incentivized to need us and who believes they have a good network without us. • Have process to review new payer plans as patients present ID cards (i.e. tracking who is new to the market) Spoto Understand Payer Activity & Associates, LLC shpllc.com

27. Know Your Own Data Spoto & Associates, LLC • Maintain payer data in accessible format (i.e. Excel or Access) for modeling. Data must be accurate and timely. • If contract is not % of charge based, ensure ability to accurately model. • Avoid contract types that can not be accurately modeled (i.e. physician subcontracting, ER tiering based on ICD-9, ASC groups that do not match Medicare) • Know your denials from individual payers • Understand implications of new or expanded hospital service lines on contracting (i.e. can we gain advantage from area in which payer believes our volume will be low?). shpllc.com

28. Evaluate Contract Performance Prepare contract performance report card for the negotiation Claim turnaround time Payment accuracy Overall denial percentage/types of denials Administrative burden to maintain agreement/ receive payment Spoto & Associates, LLC shpllc.com

29. Obtain Input from Business Office What issues slow down payment that can be addressed contractually? Should we hold the contract hostage for resolution of past claim issues? What vague contract items need to be solidified to improve contract performance? What bundling/grouping issues have reduced payment inappropriately? How else have we lost money on the agreement? Spoto & Associates, LLC

30. Avoid “Mother May I” renegotiations. • Understand competition for market share between payers (i.e. can we pit them against each other?) • Understand our market differentiation. Promote services to payer. • Know own strengths/weaknesses in providing care (usually lack of wide scope of services) • Build support with local physicians and employers. Spoto Create Leverage & Associates, LLC shpllc.com

31. Create Leverage (con’t) Do they need us in the market? What hole do we leave in their network? Are we a strong preferred provider in the region? Will the payer care if we threaten to walk away? Never threaten to term unless we are willing to. Contract on own timeframe, not payer’s. Contract for ALL services (i.e. DME, RHC) at the same time. Spoto & Associates, LLC shpllc.com

32. Language as important as rates. • What is missing from the agreement is at least as important as removing one-sided points included. • Prepare standard listing of key language points. • Be thorough. Don’t just review rate page. • Have “fall back” positioning/language. Include points that are acceptable to give on as well. Spoto Know Key Negotiating Points & Associates, LLC shpllc.com

33. Sample Contracting Points- General/Legal Favorable term period (shorter better usually but longer if we need to lock them in). No changing agreement without mutual signature. No changing rates unilaterally. Limit access to contract to those with direct, local business (i.e. logo on card, provider name in provider directory issued to employee, etc.) Define emergency services and attempt to add language guaranteeing treatment as emergency when EMTALA says we have to treat. Attempt to retain right to appeal to outside third party or go to court. Spoto & Associates, LLC shpllc.com

34. Sample Contracting Points- Operational Define clean claim. Extend time for claim filing (180-360 if obtainable). Limit time for timely payment (15-30 days). Pre-auth equals no denial for lack of medical necessity. Proper eligibility verification equals no denial for lack of coverage (i.e. no retro eligibility denials). Attempt to limit range of services for which pre-authorization can be requested. Retain right to pursue upfront collections. Limit payer timeframe to recoup old payments Spoto & Associates, LLC shpllc.com

35. Sample Contracting Points- Rates If case rates, must use national coding/ grouping guidelines and be maintained timely. No basing any payments on “Usual and Customary” charges. Inflation factors for fixed fees. Eliminate bundling techniques, application of “72 Hour” rule. Retain right to increase hospital charge master and obtain benefit (i.e. avoid “rate neutralization” language). No reducing payment rates if hospital based physicians don’t contract. Charge Master Allownace. Spoto & Associates, LLC shpllc.com

36. Build model to analyze ongoing negotiations • Be aware: Converting from % discount to fixed fees is generally code for “Let’s cut your rates in half……” • Don’t get caught up in reimbursement mechanisms that don’t contribute much to overall contract value • Outliers for Critical Access Hospitals • High Cost Drugs/Implants (unless much volume in those areas) • Remember, case rates equal payer ability to utilize bundling techniques. Attempt to factor in accordingly. • Ensure pricing relative to other equivalent payers. • Determine absolute minimum (don’t share with payer) • Be savvy, ask for more than you expect to get! • Hire An EXPERT! Spoto Rate Negotiations & Associates, LLC shpllc.com

37. Contracting for the Employed Physicians Be sure to consider contracting for all hospital based physicians in the agreement, if possible Community Physicians ER Radiology Other hospital-based physicians Determine if better to contract: With the hospital Individually Under a Group Contract Through an IPA (if possible) Consider impact on both rates and language (i.e. some language items are given regularly in hospital agreements that are tough to get in physician agreements) Spoto & Associates, LLC shpllc.com

38. Payer Contracting • What we are seeing: • Shorter claim filing time frames • Longer claim payment time frames or none at all! • Ability to change contract without signature • Reluctance to do small group contracts (fewer than 10) • Penalities for non contrated HBPs and or includeing payment for HBPs in global hospital payment • “Never Events” language in all types of contracts • Longer terms (3-5 years) Spoto & Associates, LLC shpllc.com

39. Review the language • Model the rates • Consistently communicate with payer rep. • Review the Provider Manual/Pre-Auth list • Visit the payer’s website (view forms, etc) • Have realistic expectations (won’t get done in a week) • Complete credentialing applications, supply supporting credentialing documents. • Keep a copy of everything sent to payer! • Track processing of application and effective date Spoto Execute the Plan & Associates, LLC shpllc.com

40. Post Contracting Update Clear and easy to understand reporting for how payers perform. After initial contracting or renegotiation, verify payment accuracy on first few claims to ensure proper set up. Also, review for other set up/ enrollment issues slowing down payment. Monitor compliance Timely payment Work every denials Timely notifications Keep good, accurate data on the performance of payers Spoto & Associates, LLC shpllc.com

41. An Example of a Win Rural Georgia Critical Access Hospital. One of last holdouts to join major payer network. Local employers screaming at payer to contract hospital. Individual member contacts to payer as well. Local physicians/employers on board with hospital; no collusion but no pressure either. Hospital effectively turning away elective volume vs. taking as out of network Result: % discount arrangement at slightly below other PPO networks; key language points obtained. Spoto & Associates, LLC shpllc.com

42. Another Example of a Win Rural Georgia PPS Hospital. Local prison contract bid out; 3 networks bid for business. All offered rates roughly equal to Medicare. Local hospital key provider in network. Hospital sets single acceptable rate structure and refuses to negotiate. Networks cave in and agree to rates. Result: Very good rates and language obtained. Spoto & Associates, LLC shpllc.com

43. An Example of a Loss Rural GA Hospital. Attempt to renegotiate major payer agreement to which very low case rates under very complicated fee structure previously contracted. No involvement from local employers. Suspect that employers would not be supportive if pricing increased. Local physicians currently contracted with payer. No real issue with payer from their perspective. Termination threatened but not taken seriously. “Mother May I” negotiation Result: Nominal increase to rates obtained along with inflation factor. No language changes won. Spoto & Associates, LLC shpllc.com

44. A Few Points of Caution Sometimes, the best deal is the one not made. Wrap networks. Medicare Advantage products– A matter of timing. Watch out for mergers. Networks will take the lowest rates available. Watch out for major payers demanding move to fixed rates. A great contract that isn’t implemented properly and monitored is worthless. Negotiate today so they won’t push you around tomorrow Spoto & Associates, LLC shpllc.com

45. Mike Scribner Strategic Healthcare Partners 413 West Montgomery Cross Rd Suite 602 Savannah, GA 31406 Office:  (912)691-5711 mscribner@shpllc.com Elizabeth A. Spoto Spoto & Associates, LLC 2869 Elliott Circle, NE Atlanta, GA 30305 Office: (404) 261-3676 Fax: (678) 462-7552 spotoea@att.net Spoto Managed Care Resources & Associates, LLC shpllc.com