CPA.net

Second Edition of the Guide to Healthcare Valuation

AHLA/BVR’s Guide to Healthcare Valuation is now available. The Guide, edited by Mark Dietrich, is co-published by the American Health Lawyers Association and Business Valuation Resources. http://cpa.net/?page_id=427

Upcoming Healthcare Reform Seminars

Healthcare Reform - The Inside Scoop: What it Means to You, Your Small Business and Individual Clients.

On October 20, I will be reprising my half-day Seminar on the Healthcare Reform legislation for the Michigan Association of CPAs, which has been updated to reflect the barrage of tax announcements and insurance regulations that have been issued since the presentation was first given in June. The venue is the Baronette Renaissance in Novi.

The Massachusetts Society of CPAs will run the Reform Seminar again on October 25 at the Crowne Plaza in Natick. A third presentation will take place in Stockbridge on January 21, 2011 at the Red Lion Inn. 

This highly successful program offers attendees not only an update on tax issues but the unique perspective of a tax practitioner and healthcare industry consultant with extensive experience in negotiating insurance contracts on behalf of healthcare providers.  Learn about how health insurance actually works and why the Reform legislation promises to drive up the cost of insurance for small businesses dramatically, even as it increases the out of pocket costs for individuals.

Program materials will include the Chapter on the Reform legislation from my new Guide to Healthcare Valuation, co-published by the American Health Lawyers Association and Business Valuation Resources.

Center for Studying Health System Change: Boston Report

In a report released September 2, 2010 - that I have been awaiting since 2007 - the Center for Studying Health System Change confirms what many observers including myself have independently determined about the Reform in Massachusetts that was used as the Model for the Federal Reform: 1) Massachusetts is an anomaly of limited relevance to the Nation - which itself is a series of anomalies.  Academic Medical Center dominance along with specialist concentration and the highest per capita concentration of physicians in the country are at the  core of that limited relevance as is a high per capita income; 2) the cost inflation in the small group insurance market as a result of merging that market with the individual market has been nearly DOUBLE that anticipated - and I would maintain from my personal experience that it is closer to FIVE times the level indicated in the HSC report; 3)  Hospitals - the BIG winners in Massachusetts' Reform and again in the federal Reform - are driving the Cost Explosion Train; 4) reading between the lines, lack of Antitrust Reform, the threat of which was much ballyhooed during the purported debate on Federal Reform, has led to the ability of the provider community to raise rates willy-nilly (a technical term) which the Health Plans estimate contribute to 50% of the cost increase trend. The problem originates with the McCarran-Ferguson Act exemption for insurers, which led to provider consolidation in the 1990s and 2000's and the collapse of price competition; 5) MA Attorney General Martha Coakley - the victim of Senator Scott Brown's Senate Campaign - exposed the pricing anomalies in an incredibly detailed February, 2010 Report with data that only a government official with subpoena power or an experienced healthcare consultant could have obtained.

The mess created by 4 years of Reform in Massachusetts - which includes high unemployment unrelated to the Recession -  finally required remedial action by the Executive and legislative branches in the last 6 months. Facing likely defeat in his reelection bid, the governor instructed his insurance commissioner to deny rate increases in the merged small group market of 10% to 30%, which were partially allowed in settlements reached between June and August. The legislature voted to permit small business to form purchasing cooperatives - or association health plans, which were banned by the state in 1996! - this past July.

Read the Report here http://www.hschange.org/CONTENT/1145/

Read about the nonpartisan Center for Studying Health System here: http://www.hschange.org/index.cgi?file=about which is funded by the Robert Woods Johnson Foundation.

Sometimes, the Truth hurts.

Seminar and Conference Appearances Update

I'll be speaking on Monday August 2 in Washington DC for CPA Associates Intl at their annual valuation conference on Medical Practice Valuation in the post-Reform era and on the incorrect use of the Cost Approach in valuing practices.

I'll be speaking at the BVR Divorce Summit in Chicago on September 14 on Reform's impact on the Valuation of Medical Practices.

I'll also be speaking at the Michigan Association of CPAs 2010 Specialized Business Valuation Workshop & Simulcast on Tuesday, October 19, 2010 at the Ford Motor Company Conference & Events Center in Dearborn. The following day - on October 20 - I will be reprising my half-day Seminar on the Healthcare Reform legislation for the Michigan Association, which will be updated to reflect the barrage of regulations that have been issued since June.

The Massachusetts Society has me asked me to present the Seminar on the Healthcare Reform again and that will take place on October 25 at a location to be announced, likely Framingham or Natick.

I'll be presenting two sessions at the AICPA National Healthcare Industry Conference in Vegas this November. One session will deal with antitrust issues in transactions and negotiations between physicians, hospitals and networks, with a focus on the new Accountable Care Organizations (ACOs) as well as what can and cannot be shared with respect to fees and how it is accomplished. My co-speaker will be healthcare antitrust attorney Jim Reeder of Vinson and Elkins' Houston office. The second session with my friend and colleague Tim Smith of Healthcare Appraisers will deal with Fair Market Value issues in healthcare valuation and compensation, again with a focus on ACO and other integration transactions. Time permitting, I hope to introduce a new Primary Care Compensation Model I am developing for the ACO market.

Finally - for now - I'll be speaking at the AICPA National Valuation Conference in Washington DC.  I'll be sharing the session with my friend and colleague Carol Carden of Pershing Yoakley, who is also Chair of this year's Conference. The topic is Factors in Forecasting Cash Flow and Estimating Cost of Capital in Healthcare and will be based upon our joint paper in the June 2010 issue of Business Valuation Update.

Healthcare Reform Seminars, June 4 and 10, 2010

I'll be leading a 4 hour seminar on the Healthcare Reform legislation, sponsored by the Mass Society of CPAs, on June 4. For location and registration information, visit www.mscpaonline.org.  This post contains links to various sources of additional information that attendees or others may find interesting.

After spending something north of 40 hours in the past several weeks studying the legislation and learned commentaries thereon, coupled with north of 30 years working in the industry, I feel ready for this undertaking.(!)

My BLOG Posts on Reform before the legislation passed are located here
http://cpanet.typepad.com/cpanet/healthcare-reform/#tp
On Medicare Advantage
http://cpanet.typepad.com/cpanet/2009/09/a-closer-look-at-medicare-advantage.html
On self-insuring employers - a MUST read!
http://cpanet.typepad.com/cpanet/2009/07/self-insurance-vs-health-insurance.html

Additional Sources of Information:

CBO letter to Congressman Lewis stating that "discretionary" costs in the range of $115 billion necessary to administer the Reform legislation were not included in the scoring of the legislation. This will increase the deficit and eliminate any claimed reduction in same.
http://www.cbo.gov/ftpdocs/114xx/doc11490/LewisLtr_HR3590.pdf

American Medical Association study of insurer market concentration http://www.ama-assn.org/amednews/2010/03/08/bil20308.htm, http://www.southernstudies.org/AMA%202007.pdf

Centers for Medicare and Medicaid 2009 Statistics containing detaled infromation about Medicare recipients, physicians, etc.
http://www.cms.gov/ResearchGenInfo/02_CMSStatistics.asp

Barclays Capital Managed Care Industry Analyst Joshua Raskin, one of most insightful individuals on Health Insurance and Medicare Advantage. Reports are available through brokerages such as Fidelity.

Health Affairs podcast of a webinar they did with four former CMS officials, including Bruce Vladek, Tom Scully and Gail Walensky, on CMS and Reform
http://www.healthaffairs.org/issue_briefings/2010_04_09_cms/2010_04_09_cms.php

FTC/DOJ July 2004 White Paper on Anti-Trust issues in the Healthcare Industry.
http://www.ftc.gov/reports/healthcare/040723healthcarerpt.pdf

Tax Foundation Analysis: Health Care Reform: How Much Does It Redistribute Income?
http://www.taxfoundation.org/files/ff222.pdf

Law Firm Sonnenschein Summary, with an excellent topical summary of affected areas.
http://www.sonnenschein.com/docs/Health_Care_Reform_Side-by-Side.pdf

Kaiser Family Foundation on Reform, perhaps the best summaries of all non-tax aspects of the legislation.
http://healthreform.kff.org/ (generally)
The Best Summary!
http://www.kff.org/healthreform/upload/8061.pdf

Kaiser Family Foundation Subsidy Calculator where you can determine the government subsidy to individuals to purchase insurance
http://healthreform.kff.org/Subsidycalculator.aspx

Kaiser Family/Alliance for Health Reform Podcast on Private Insurance Changes, a superbly done summary of what the insurance reforms really mean.
http://www.kff.org/healthreform/ahr043010video.cfm

Controlling Health Care Spending in Massachusetts: An Analysis of Options
http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/09/control_health_care_spending_rand_08-07-09.pdf

Benefits firm Hewitt Associates' announcement of the results of their survey of companies taking advantage of a $5 billion Early Retiree Reinsurance Program in the Reform legislation to pay the cost of early retirees age 55-64.
http://www.hewittassociates.com/Intl/NA/en-US/AboutHewitt/Newsroom/PressReleaseDetail.aspx?cid=8475

Extract of the Reform legislation on the 10% Primary Care Bonus to be paid by Medicare for the 5 years 2011-2015 on defined E&M codes (99201-99215,99304-99340,99341-99340) and other related extracts.
http://www.stfm.org/Sec%205501-%20Primary%20Care%20Bonus%20Payment1.doc
http://www.stfm.org/advocacy/issues/reform.cfm

Discussion of the temporary increase in Primary Care payments for Medicaid patients to Medicare rates in 2013 and 2014.
http://www.kaiserhealthnews.org/Stories/2010/April/06/Medicaid-Expansion-And-Payment-Increase-Causes-Mixed-Feelings-For-MDs.aspx

AICPA Webinar: Healthcare Reform - What Does It Mean For Business

I will be posting additional resources here for the May 12 webinar

CBO letter to Congressman Lewis stating that "discretionary" costs in the range of $115 billion necessary to administer the Reform legislation were not included in the scoring of the legislation. This will increase the deficit and eliminate any claimed reduction in same.
http://www.cbo.gov/ftpdocs/114xx/doc11490/LewisLtr_HR3590.pdf

American Medical Association study of insurer market concentration http://www.ama-assn.org/amednews/2010/03/08/bil20308.htm, http://www.southernstudies.org/AMA%202007.pdf

Centers for Medicare and Medicaid 2009 Statistics containing detaled infromation about Medicare recipients, physicians, etc.
http://www.cms.gov/ResearchGenInfo/02_CMSStatistics.asp

Barclays Capital Managed Care Industry Analyst Joshua Raskin, one of most insightful individuals on Health Insurance and Medicare Advantage. Reports are available through brokerages such as Fidelity.

Health Affairs podcast of a webinar they did with four former CMS officials, including Bruce Vladek, Tom Scully and Gail Walensky, on CMS and Reform
http://www.healthaffairs.org/issue_briefings/2010_04_09_cms/2010_04_09_cms.php

FTC/DOJ July 2004 White Paper on Anti-Trust issues in the Healthcare Industry.
http://www.ftc.gov/reports/healthcare/040723healthcarerpt.pdf

Tax Foundation Analysis: Health Care Reform: How Much Does It Redistribute Income?
http://www.taxfoundation.org/files/ff222.pdf

AICPA Healthcare Reform Webinar May 12

I'll be one of the three panelists on the American Institute of CPAs national webinar on the Healthcare Reform legislation on May 12. We'll be looking at the historical backdrop for the legislation, new benefit requirements, impact on healthcare providers, impact on small business and CPAs advising them, and the array of new taxes required to fund the legislation.  Meanwhile, let me say that the Kaiser Family Foundation website has a wonderful collection of white papers analyzing various aspects of the legislation.  Also, Health Affairs has a podcast of a webinar they did with four former CMS officials, including Bruce Vladek, Tom Scully and Gail Walensky, on CMS and Reform - fascinating.

http://www.healthaffairs.org/issue_briefings/2010_04_09_cms/2010_04_09_cms.php

Health Affairs Article on Medicare Spending

The article Prices Don't Drive Regional Medicare Spending Variations published online at Health Affairs might be better titled Isolating the Effect of Price and Utilization on Medicare Spending Variations but whatever you call it, it is fascinating reading. It seems to call into question many of the conclusions one might draw from looking at raw Medicare spending data. If anyone can find the link to the Online Appendix mentioned in the article as being available in a 'link to the right of the online version,' please let me know.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.2009.0609v1?rss=1

Healthcare Reform: Biting the Bullet

Seems as though Massachusetts has once again fired the Shot Heard 'Round the World - or, at least, 'Round the USA. Cooler minds seems to be prevailing for the moment in Washington and the rush to judgment on "Reform" has slowed to a crawl.

Its a little too early to gauge the ultimate result - that seems to have been the case for many months now - but any draconian risk assessments can be laid to rest for the moment. One thing that may or may not be fixed this year (or ever) is the Sustainable Growth Rate or SGR formula that has dogged physician reimbursement for many years; elimination was part of the Reform deal. As of now, this leaves us where we have been, with growth rates in the 2% to 3% range overall for physicians when calculating cap rates.

Never count your chickens before they hatch.

Compromise

Well, it is difficult to believe that we are about to confront an historic vote on the revamping of the health insurance market in the United States. As I noted in an earlier post, "Where Ignorance is Bliss, 'Tis Folly to be Wise," but that notwithstanding, I will decline to refer to the pending legislation as "Reform."

As a long-time student of American History, I paused (or staggered, breathless, as if punched in the groin) when I heard the backroom deal with Senator Nelson termed the "Nebraska Compromise." This called to mind the "Missouri Compromise," a political solution to a decidely difficult (or, rather, dismally sad) flaw in the American System having to do with Slavery back in 1820. I won't belabor the description of the 1820 Compromise, except to state that it allowed Slavery to continue and utlimately led to the War Between the States and the loss of half a million American lives and the destruction of the state of Virginia, home to George Washington, Thomas Jefferson, James Madison and James Monroe - to say nothing of Thomas Payne and George Patton.

Perhaps more telling about the Legislative Process in 1820 and today is Majority Leader Harry Reid's statement about his magnificent Compromise:

"One way we were able to [secure 60 votes]... was that we had to deal with the art of compromise..."  "That's what legislation is all about; it's the art of compromise...This legislation is no different than the defense bill we just spent $600 billion dollars on. It's no different than any other piece of legislation...I don't know if there's a senator who doesn't have something in this bill that's important to them. And if they don't have something in it that's important to them, then it's doesn't speak well for them."

I wonder whether the "Gentlemen" from Nevada and Nebraska are students of American History? Legislation may be about Compromise, but the nature of that Compromise is driven by the honor of the men and women who negotiate it. Nothing can be sadder - or more disparaging of our democracy -  than the preservation of slavery for an extra 45 years, but the Nebraska Compromise, if it survives, will nonetheless be a lasting stain on our legislative process.