1. A Framework for Health Reform
September 2010

2. PPACA H.R. 3590
CBO: $940 billion over 10 yrs
Estimated Federal Deficit Reduction: $138 billion over 10 yrs
94% of American lives covered
Spans 2,409 pages
Funding Sources Benefits
Taxes & Fees ̴ $416B Coverage ̴ $794B
• Excise tax on high cost insurance plans • Immediate access for pre-existing conditions
• Individual mandate • Exchange subsidies & spending
• Employer responsibility • Medicaid expansion
• Medicare tax on high income individuals • Part D “Doughnut Hole”
• Pharmacy tax • Increased health insurance regulation
• Device tax • Community health centers
• Business-related taxes Efficiency ̴ $146B
• Health-related fees • Strengthening quality infrastructure
• Fraud prevention measures
Reductions & Spending Cuts • Low cost/high quality in Medicare Advantage
• Medicare provider reductions ̴ $572B • CMS innovation center
• Reported LTC CLASS savings reduction ($48B)

3. Two Underlying Assumptions
1. The federal deficit cannot grow forever.
2. The United States has neither the political
will nor the economic capacity to resolve this
issue through benefit cuts or new taxes.

4. Health Reform Framework
CORE THEMES: Federalization, Risk Allocation, and Value Driven Integration
INFLUENCERS STRUCTURAL SHIFTS EVOLVING
MODELS
Government
Increased Regulation and More Federal Control Corporate
Legislation
Regulation Integrated
Deficit Spending Tiered System of Access Health systems
Market Reapportionment of Wealth and Risk Collaborative
ECONOMIC: Network integration
Health care spending
Flow of capital
Reordering of Insurance Markets
Regulatory
DEMOGRAPHIC:
Aging Information Transparency Single payer system
National Health
TECHNOLOGICAL: Reimbursement Design
Standards
EMR/HIT adoption
Delivery Models
CONSUMERISM:
Accountability
Utilization Smart Medicine

5. Evolving Models
Corporate Network Collaborative Network Regulatory Network
E.g. Cleveland Clinic, Mayo Clinic, E.g. Accountable Care Organizations, E.g. Government Regulated Utility
Geisinger, Intermountain Medical Homes
Employer Facility
Payer Facility
Physician Federal Government
Rx Other New Entity ASO
ASO ASO ASO
Rx
Rx
Physician
Physician Facility
Patient Patient Patient

6. Structural Shifts
Federalization
1. Increased Regulation and More Federal Control
The federal government usurps state regulatory authority, methodically restricting private sector autonomy and
profitability.
2. Tiered System of Access
Decreasing government reimbursements and significantly expanded coverage changes patient access to care.
3. Reapportionment of Wealth and Risk
Risk Allocation
Funding for new entitlements is extracted from industry and individuals. Risk gradually shifts from rate payers to tax payers
and from insurers to providers.
4. Reordering of Insurance Markets
Three dominant and distinct payer markets emerge: large employers, exchanges and Government.
5. Information Transparency
Consumers, employers, and the government demand new information and benefit designs that maximize “value”.
6. Reimbursement Design
Fee-for-service payment will be converted to payment based on value.
Integration
7. Delivery Models
Cost pressures drive providers to coordinate care while utilizing more efficient locations, personnel, and technologies.
8. Smart Medicine
Genetic information and comparative effectiveness research combine with information technology to empower providers
and patients.

7. Structural Shifts: Federalization
FEDERALIZATION
From To
Increased Regulation State Federal
and More Federal Legislation Regulation
Shifts in state Control Food or airline Utility
coordination of
care, payment,
technology,
and consumer
engagement Tiered System of Ration by $$ Ration by Waiting Times & $$
Access Primary Care Shortage Major Primary Care Shortage

8. Structural Shifts: Risk
From To
RISK Insurer Provider
Reapportionment of
Wealth and Risk Rate Payers Tax Payers
Industry & Individuals Government
Shifts in
regulation, Individual/Small Group Exchanges
business Reordering of Self-insured Self-insured or Dumping
model, and Insurance Markets Medicaid: Disabled/children Medicaid: Families, Childless
individual adults
Numerous MA Plans Fewer MA Plan Choice
responsibility
Quality Silent Quality Ratings
Information
Blind Purchaser Informed Purchaser
Transparency
High premium/low Low premium/High
deductible deductible with HSA

9. Structural Shifts: Integration
From To
INTEGRATION Uniform Procedures Personalized Medicine
Smart Medicine Best Guess/Habits Comparative Effectiveness
Paper Records Electronic Health Records
Blind Follower Empowered Patient (PHRs)
Reg Apprvl: New & Safe Reg Apprvl: Cost-effective
Shifts in state
coordination of Silos (mainframes) Care Coordination
care, payment,
Delivery Models Emergency Rooms Urgent Care Sites
technology, Hospital Inpatient Outpatient Services
and consumer Doctor’s Office Retail Clinic/Home-based
engagement Physician Physician’s Assistant
Fee-for-Service payments Bundled Care
Reimbursement
Design FFS rate pressures Gainsharing for in-network
“Reasonable and Necessary” Comparative Effectiveness

10. A Framework for Shift Analysis
STRUCTURALSHIFTS
Left Center
With market forces largely Market and government
silent, government forces forces combine to hasten
are driving change profound transformation
What is the catalyst
for movement?
GOVERNMENT INFLUENCE
How fast is it
moving?
Where is it taking
Right us?
Irrespective of
government involvement,
market forces move
incrementally forward
MARKET INFLUENCE

11. Shift Analysis (2010-2013)
STRUCTURALSHIFTS
Left
With market Center
forces largely Market and
silent, government government forces
forces are driving combine to hasten
change profound
GOVERNMENT INFLUENCE
Increased Regulation transformation
and More Federal
Control
Reordering of
Insurance Markets
Tiered System
of Access
Right
Irrespective of
Smart Medicine government
involvement ,
Reapportionment Reimbursement
of Wealth and Design market forces
Risk move
Delivery Models incrementally
forward
Information Transparency
MARKET INFLUENCE

12. Shift Analysis (2013-2018)
STRUCTURALSHIFTS
Increased Regulation Reordering of
Left and More Federal Insurance Markets
With market Control Center
Tiered System
forces largely of Access
Market and
silent, government Reapportionment
of Wealth and
government forces
forces are driving Risk Delivery Models combine to hasten
change profound
GOVERNMENT INFLUENCE
Reimbursement transformation
Design Smart Medicine
Information
Transparency
Right
Irrespective of
government
involvement ,
market forces
move
incrementally
forward
MARKET INFLUENCE

13. Leavitt Partners, LLC
Salt Lake City Office Washington DC Office
299 South Main Street 1776 I Street, NW
Suite #2400 9th Floor
Salt Lake City, UT 84111 Washington, DC 20006
Phone: (801) 656-9716
www.leavittpartners.com