Are You Ready For Risk-Based Reimbursement? How To Assess Readiness & Negotiate Contracts

Transcription

1 Are You Ready For Risk-Based Reimbursement? How To Assess Readiness & Negotiate Contracts The 2017 OPEN MINDS Executive Leadership Retreat Wednesday, September 27, 2017 John F. Talbot, Ph.D., Chief Strategy Officer, Jefferson Center for Mental Health, and Advisory Board Member, OPEN MINDS Lincoln Square, Gettysburg, Pennsylvania Phone: info@openminds.com

2 Agenda I. Value Based Reimbursement II. III. IV. Critical Elements for Success Contracting in Value Based Reimbursement Models Leadership In A Time Of Value-Based Care Questions & Discussion 2

3 I. Value-Based Reimbursement

4 What Is Value-Based Reimbursement? Paying for quality, taking clinical markers into account, and ultimately producing better population-based outcomes 4

5 Payer Performance Expectations Are Rising There are many initiatives by payers to measure and report on contract and operational performance 5

6 More Performance Measurement Is Leading To More Value-Based Purchasing Increase transparency of performance Increase pressure for improvement Facilitate consumer-directed care Link professional, service provider organization, and care manager reimbursement to desired performance Improved access to care Increase care integration and coordination Person-centered planning and recovery focus Control costs of care Financial incentives to help consumers become and remain healthy for longer periods of time Increase lower-cost interventions for not yet seriously ill population Reduce unnecessary use of high-cost services 6 6

7 The Business Model Transition Payer Policy = Pay For Cost Or Volume Payer Policy = Pay For Value What is paid for is good for the consumer -- and doing more is the business model A revolution in performance management required Giving the consumer (and their payer) what they want and need is the business model 7 A very disruptive change realigning financing and service delivery for 17% of the economy Good outcome at low cost conveniently

8 Optum Provider Contracting Changes 8 8

9 The Evolving Contracting Relationship Across The Continuum Of Payment Models Vendor Partner Fee-For Service Performance based contracting Bundled & Episodic Payments Shared Savings Shared Risk Capitation Capitation + Performance Based Contracting Compensation Continuum 9

10 II. Critical Elements for Successful Contracting In Value Based Reimbursement Models

11 Fee-For-Service 11

12 Fee-For-Service Model Features Risk Factors: Controlling Cost Per Unit Of Service Provider paid an established fee for a defined service Clearly defined package of services to be provided Quality standards can be established for defined services Fee schedule an issue Varying degrees of management Wages of direct care staff Overhead/administrative costs Staff productivity Volume of consumers served Length of stay/average visits per case Acuity/service needs of consumers 12 12

13 Critical Elements For Successful FFS Contracting Understand the business model Ensure you have all of the required competencies in place Do your homework about the payer Find the right contact Presence in your market Payer contracting strategy with providers tiers? Rates Contract requirements Build a relationship with your customer understand what matters to her/him Avoid commodity positioning 13 Successful performance in FFS contracting will help you move into risk-based contracting

14 Fee-For-Service Business Model The more you bill the more you make. Required competencies Target costing Productivity Revenue cycle management Credentialing Documentation Data systems to track all of the above 14

15 Target Costing Pricing method to reengineer the cost of a service to hit a specific target market rate Determines the maximum cost for a service that can be incurred to earn the required profit margin at market rate Traditional cost-plus pricing calculates cost of producing a service and adds the desired margin to determine the price 15 Why is target costing important? Because as we move to a more customerdriven competitive market, our customers (both payers and consumers) don't care about our costs to deliver a service. They only care about the rate we charge and how that rate (and the other attributes of the service, called the value equation) compares to our competition.

16 Target Costing Construct Customer Needs (Services, Features, Pricing) Competitor Analysis (Services, Features, Pricing) Target Market Position & Market Price 16 Target Cost 16

17 Target Costing Survival Zone 17 17

18 Productivity: Common Models Eat what you kill Clinician is only paid for time that she/he delivers billable services Percentage of billable time This common model uses a percentage of the maximum hours per year as a personal productivity requirement Should be linked with number of billable hours required to achieve to cover the target cost Staff can get paid bonuses for productivity that exceed the target and may have penalties for falling below the target The team model In this model, you set a productivity target is set for a team of clinical staff, rather than for the individuals Peer pressure to ensure that each individual member pull her/his own weight 18

19 Revenue Cycle Management Revenue Cycle Management is defined as (administrative) tasks associated with getting payment for services rendered Three Tasks Admissions Collections Billing 19

20 Admissions Benefits verification Authorization Required clinician credentials Coordination of benefits Co-pays Policies for all of the above Data tracking of the above key elements Other? 20

21 Billing Timely, accurate documentation QA checks for data entry accuracy Timely electronic submission Policies for all of the above Data tracking of the above key elements Other 21

22 Collections Co-pays Follow-up for billings submitted Policies for all of the above Data tracking of the above key elements Other 22

23 Pay For Performance

24 Pay for Performance (P4P) With FFS Model Features Risk Factors A payment system that offers financial rewards or penalties on top of existing fee-for-service payments for meeting or failing to meet specific performance measures Two models Bonus Provider is paid for achieving target performance measures No bonus payment if performance measures are not met Withhold A percentage of provider reimbursement is withheld If performance measures are met, provider is paid either all or a portion of what is withheld No payment if performance measures are not met Same as fee for service Must be able to track progress towards achieving performance measures 24

25 Critical Elements For Successful FFS Coupled With P4P Contracting Understand the business model Ensure you have all of the required competencies in place You should have a an ongoing relationship with your customer You should understand why the customer has chosen the performance measures Ideally, you can influence the performance measures, and the measurement process 25

26 P4P Contracting Specifics Review contract for clear operational definition of measures, including how measured, and by whom Review contract for clear operational definitions for determining penalty/bonus/gain-share Request any baseline data for measures, if available Hold harmless phase Review contract for process for resolving disputes over tracking of measures 26

27 Fee For Service Coupled With Pay For Performance Business Model The more you bill the more you make. And, achieve all performance targets 27

28 Pay For Performance Coupled With Fee For Service Business Model Required Competencies FFS Competencies Target costing Productivity Revenue cycle management Credentialing Documentation Pay for Performance Leading indicators for performance measures Processes to quickly address variance (root cause analysis) Budgeting Data systems to track all of the above 28

29 Performance Tracking Indicators Lagging Indicator Concurrent Indicator Leading Indicator 29

30 Root Cause Analysis Tool to understand what is causing variance A root cause removing it from a process will prevent the final undesirable event from occurring A causal factor affects the outcome, but is not a root cause. While removing a causal factor can benefit an outcome, it does not prevent the reoccurrence of the undesirable outcome Uses tools such as flow charting a process, and measuring impacts of changes 30

31 Budgeting The most conservative approach: do not include achieving all performance measures in revenue projections The least conservative approach: include achieving all performance measures in revenue projections What are the advantages and disadvantages of each? 31

32 Case Rates, Episode- Based Payments, Or Bundled Payment Rates 32

33 Case Rates, Episode-Based Payments, Or Bundled Payment Rates Model Features Payment of a flat amount for a defined group of procedures and services Per treatment episode Per time period Based on Diagnosis Assignment of a patient to a given type of treatment Other patient characteristics Risk Factors Definition of the package of consumer services over a specific time period Risk of controlling cost per case: a function of both # of units used and cost per unit of service 33

34 Critical Elements For Successful Case Rates, Episode-Based Payments, Or Bundled Payment Rates Contracting Understand the business model You must understand the financial. operational and data components of the model you are contracting for Ensure you have all of the required competencies in place You should have a an ongoing partnership relationship with your customer You should understand why the customer has chosen these kinds of contracting models Ideally, you can influence the development of these models as a partner 34

35 Case Rates, Episode-Based Payments, Or Bundled Payment Rates Contracting Specifics Review contract for clear operational definition of the case rate, episode or bundle Review contract for clear operational definitions of the payment mode Review contract for process for resolving disputes over tracking of measures 35

36 Case Rates, Episode-Based Payments, Or Bundled Payment Rates Business Model Ensure that you can provide the defined services within the defined episode, and within the defined payment so that you make your desired margin. 36

37 Required Competencies for Case Rates, Episode- Based Payments, Or Bundled Payment Rates Financial skills Data Clinical staff competencies 37

38 Necessary Financial Expertise and Experience Case rates, episode-based payments, or bundled payments are very different models than FFS It is critical that your financial team includes someone with proven expertise and experience with these models If these contracts are a significant part of your overall revenue, then your CFO must have proven experience and expertise with these types of contracts There is an element of financial risk with these models experience and expertise is critical, along with reserves to fund the risk Financial input into contracting is critical for case rates, episode-based payments, or bundled payments models 38

39 Data Case rates, episode-based payments, or bundled payments have very different data requirements than FFS It is critical that your data/it team includes someone with proven expertise and experience If these contracts are a significant part of your overall revenue, then your CFO must have proven experience and expertise with these types of contracts Data input into contracting is critical for case rates, episode-based payments, or bundled payments models Leading indicators 39

40 Clinical Staff Competencies Case rates, episode-based payments, or bundled payments are different models than FFS It is critical that clinical leadership supports these models A clinical leader with experience in these models ideal Training for clinical staff who will be working in these models is crucial 40

41 Capitation

42 Capitation Model Features Risk Factors An entity (health plan or provider organization) is paid a contracted rate for each member assigned, referred to as "permember-per-month" (PMPM) rate regardless of the number or nature of services provided Contractual rates are usually adjusted for age, gender, illness, and regional differences In Sub-capitation, responsibility and risk move from plan to provider Consumer utilization Provider payments and facility costs Program design and control issues Benefit plan coverage provisions (Psychological testing, marriage counseling, smoking cessation, court ordered services, sexual dysfunction treatment, obesity/weight reduction, Alzheimer's, ADD, personal growth, etc.) 42

43 Critical Elements For Successful Capitation Contracting Understand the business model Ensure you have all of the required competencies in place You should have a partnership relationship with your customer You should understand why the customer has chosen a capitation contracting model Ideally, you should be a partner with the customer in the design of the capitation model Capitation contracts are very complex You need legal counsel with experience with these contracts You may need to retain a consultant with experience with capitation contracts 43

44 Capitation Contracting Specifics Review contract for clear operational definition of how the capitation rates are developed Review contract for process for resolving any disputes 44

45 Capitation Business Model Manage the care of the defined population, meeting clinical outcomes, and keeping costs within the capitation rate. 45

46 Required Competencies For Capitation Contracts Financial skills Data Clinical staff competencies 46

47 Necessary Financial Expertise & Experience Capitation contracts require significant specialized financial expertise It is critical that your CFO has proven expertise and experience with capitation There is significant financial risk with capitation experience and expertise is critical, along with reserves to fund the risk Financial input into contracting is critical for capitation Your CFO must have the required technical expertise, must be strategic, and needs excellent communication skills 47

48 Data Case rates, episode-based payments, or bundled payments have very different data requirements than FFS It is critical that your CIO has proven expertise and experience with capitation Data input into contracting is critical for case rates, episode-based payments, or bundled payments models Leading indicators 48

49 Clinical Staff Competencies In a capitation model, staff are both providing and managing care Clinical leadership must support this model A clinical leader with capitation experience is critical Training for clinical staff is critical 49

50 The Future? 50

51 Magellan P4P & Alternative Reimbursement Current State Provider Incentives Pay-for- Performance (P4P), Reward for Quality (R4Q) Performance Incentive Funds Alternative Payment Arrangements Case Rates Episode of Care Reimbursement Monthly Global Budget Payments Sub-Capitation / Risk arrangement 51 26

52 Integrated Physical & Behavioral Health Contracting Shared Savings for physical health care costs Rocky Mountain Health Plans PRIME model Assuming full risk for all the health care costs of a population 52

53 III. Leadership In A Time Of Value-Based Care

54 All C Level Managers Must Have Transformational & Transactional Leadership Skills Transactional Strong understanding of the business models Data-driven Supports the requirements of the business model Sets clear expectations Transformational Vision Strategic thinker Excellent communication skills both inside and outside the organization Strong collaboration across Departments 54

55 All Middle Managers Must Also Have Transformational & Transactional Leadership Skills Transactional Transformational Strong understanding of the business models Data-driven Supports the requirements of the business model Sets clear expectations Monitors performance targets Lead the process to analyze the root cause of variance from performance standards Supports the Organizational Vision and Strategy Takes ownership for performance in her/his department program Models accountability 55

56 When Planning For The Future, Keep In Mind Environment drives strategy... Strategy drives structure... Systems support structure... To Paraphrase Peter Drucker 56

57 Questions & Discussion

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