Navigating the Path to Value

Transcription

1 Navigating the Path to Value Strategies in Margin Management and Cost Reduction Maine HFMA Spring Symposium April 23 rd, 2018 Tushar Pandey, VP Decision Support Strata Decision Technology 1

2 Our Time Together. Introduction to Strata Decision State of the Industry New Value Equation Understanding and React to Change Negotiations Understanding the impact of Change Medicare Break Even Managed Care = Margins, not just Reimbursement New Approaches to Reimbursement Episode Design Mythbusters! More is better? Doc, Let s talk! Revenue is just half the battle! Redesign your topline 2

3 Yesterday Tomorrow 3

4 Yesterday Today 4

5 Two baskets and a new business model Drive Volume Drive Value 5

6 The OLD math Success =Quantity 6

7 The NEW math Value = Quality Cost 7

8 But You need to maintain a margin to fuel your mission 8

9 State of Managed Care Value Based Care is here to stay accept & embrace Fee for Service reimbursement continues to become more complex Uneven playing field for payors & providers - unfair negotiations Focus on both sides of the margin equation to survive Accurate Cost Information severely lacking to make decisions 9

10 Strata Overview 10

11 The Strata Integrated Suite of Solutions Continuous Improvement Financial Planning Eliminates variation, waste and inefficiency on an on-going basis PERFORM PLAN Delivers advanced modeling, planning and budgeting controls Physician Variation Quality Variation Staffing to Demand Productivity Cost Improvement Tracking ANALYZE Long Range Financial Plan Rolling Forecast Operating Budgeting Advanced Planning Decision Support Provides true costs and margins across continuum of care ranked #1 in KLAS Management Reporting Capital Planning Equipment Replacement Cost Accounting Contract Analytics Episode Analytics Advanced Reporting and Analytics Strategic Pricing 11

12 Our Family ~ 200 healthcare delivery systems and 1,000+ hospitals including many of the most influential in the U.S. ~90% of the cost accounting selections in the last 5 years have gone to Strata 12

13 Evolution of Reimbursement 13

14 Does this apply to you? 3 Common Examples Providers are going into contract negotiations without truly understanding how changes in net revenue will affect their bottom line With uncertainty in the future of Medicaid, being able to model potential changes to reimbursement will become even more important As the aging population is increasing there is need to benchmark commercial payors to Medicare reimbursement 14

15 Breakeven Analysis Provides a benchmark to measure commercial payors against Shift in payor mix due to aging population Evaluate performance of key service lines Identify focus for cost reduction 15

16 Current State Medicare Breakeven 16

17 Compare Traditional v Non Traditional 17

18 Similarly, Getting Ahead of Medicaid? Why? Shifts in APR DRG weights can have a drastic affect on reimbursement depending on volumes of patient populations and case types Be Proactive! 18

19 Medicaid Reimbursement Analysis 19

20 Repeal & Replace Uncertainty in the future of the Affordable Care Act Signs point to decrease in Medicaid funding Increase in uncompensated care and bad debt Increase in self pay 20

21 Contract Negotiations 21

22 Why? Annual Contract Escalators Change in Term Methodology Per Diem vs. DRG HCD/Implant % Stop-Loss Change in payor mix 22

23 Change in Terms 23

24 Rate Increase 24

25 HMO vs PPO 25

26 Payor Mix Shift 26

27 Embracing Value Based Care 27

28 Central Ohio s Only Academic Health Center 7 Hospitals, 1,321 Beds 9 Multispecialty Centers NCI -Comprehensive Cancer Center 35+ Affiliate Hospitals & Clinics 7 Health Sciences Colleges on a Single Campus 28

29 The Driving Force MANDATORY Free Standing Cancer Hospital University Hospital The James Need the ability to REACTIVE Need the ability to PROACTIVE 29

30 What are Alternative Payment Models? 30

31 Common episode payment models Prospective episode Payment is fixed for time period of episode May include carve outs (chemo, devices, etc.) Retrospective episode (AKA Shared Savings Model) OCM, BPCI and SIM are examples Historical payment for episode is calculated Actual payment under current payment system is compared to historical Savings from historical rates may be split between payer and provider Either model may be total cost of care (all settings) or limited to particular setting(s) 31

32 Why prepare for Payment Reform Now? Payment reform pressure in managed care negotiations Desire to influence forthcoming payment models Payors may look to existing models as a starting point Questionable design & Uncertainty of government programs Focused on ability to administer, not clinical relevance Need to ensure incentives are aligned on both sides Desire for payment predictability if/when going at risk (Health Plans) 32

33 Episode-based Payments The Basics Episodes of care set a fixed payment amount for care for a particular set of patients or portion of the population over a fixed time frame Drivers: Patient Attribution Time frame Day 0 or trigger event: determines a patient is included in the episode population Look back: timeframe included in episode prior to trigger event; likely includes diagnostic procedures and events leading up to trigger event Duration: amount of time from trigger event to end of episode Carve outs (services in/out of episode scope) 33

34 Episode Design Considerations Trigger Event Duration Shorter episodes vs Longer episodes? Variation Patient-based not in provider s control (age, comorbidities, stage, etc.) Technical in provider s control (treatment protocol, chemotherapy choice) 34

35 Medicaid Breast Cancer Surgery Episode Trigger: Breast cancer surgery (IP or OP) CPTs with selected diagnosis codes Duration: begins 30 days prior to trigger and ends 30 days after discharge Principal Accountable Provider clinician or group performing the breast biopsy Included services Pre-trigger all diagnostic work up (mammogram, genetic testing, fine needle aspiration) Pre-op prep all E&M visits, anesthesia included Procedure including medical and drug spend Post trigger surgical pathology, medication management, complications, MRI Excluded procedures related to staging (lymph node biopsy), reconstruction, radiation therapy 35

36 OSU Lumpectomy Malignant Episode Trigger: Lumpectomy CPTs with selected cancer diagnosis codes Duration: begins at trigger and ends 180 days after discharge Principal Accountable Provider OSU clinician or group performing the lumpectomy Included services Procedure lumpectomy and breast cancer diagnosis Excluded patients without breast cancer diagnosis, mastectomy or reconstruction within episode, second lumpectomy within episode, medications, chemotherapy, unrelated services including ED, observation and inpatient services, services outside of OSU 36

37 Episode Design Steps: You re not in it alone Analytics Data cleaning and preparation Eligibility criteria Trigger rules Building the episode Analytics with Clinical Input Finance Validity testing Risk adjustment logic Pricing the base services Implementation Managed Care Measure Performance 37

38 Commercial Bundled Episode Exploration Service Line/Business Leader Identify service lines suitable for episode-level treatment plans Set goals on percentage of volume under bundled arrangements Financial Data Analyst/Decision Support Identify specific product lines to analyze for episode suitability Analyze sources of controllable and uncontrollable variation for historic patient episodes Develop proposals for variation reduction plans and bundled episode terms to mitigate variation Discuss findings with clinical team to verify clinical relevance of proposals Managed Care Contracting Determine acceptable bundle price based on terms and margin requirements Run pricing scenarios based on changes to proposed terms, volume growth assumptions Iterative negotiation with payor on terms, additional volume expectations, and price Finalize contract 38

39 Episode Performance Management Service Line/Business Leader Develop scorecard metrics to measure performance of each episode Determine ideal care pathway for each patient cohort eligible for bundle and align physicians and staff Select and initiate cost improvement projects relevant to episode Specify primary measures of care pathway compliance and cost management Financial Data Analyst/Decision Support Calculate performance of each episode on all relevant metrics monthly Communicate red/green performance status to operational team and service line leadership Measure impact of agreed-upon cost improvement initiatives Operational Team Identify patients eligible for bundle throughout the episode (including pretrigger) to optimize care plan Monitor daily progress of patients through posttrigger window to ensure compliance with ideal care plan Analyze causes of unfavorable quality or outcome metrics and propose improvement initiatives 39

40 Value Equation Quality 80% Cost 134% Quality Indicators Achieve 80% or more of Quality Targets Achieve 50-79% of Quality Targets Achieve less than 50% of Quality Targets Cost Indicators Cost less than or equal to 125% of Medicare reimbursement Cost is between % of Medicare reimbursement Cost is over 150% of Medicare reimbursement 40

41 Time for another episode of 41

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43 Myth: More Services = More Profitability and Better Patient Care 43

44 Healthcare has Changed but Perceptions still Remain What s Changed? Reimbursement Methods Low(No) Margins Competition Consumerism Price Transparency Patient Populations Yet Inside: If we do more, we ll get paid more! The Revenue Cycle Complex!!?? Outside : If I have more treatment, I must be getting better care. 44

45 Where the Confusion on Cost Begins The Need in Healthcare Price What the patient paid? Provider Patient Payor Charge What the hospital charged? Reimbursement What the hospital charged? Which one are we talking Cost How much did a patient s care cost the hospital? about? 45

46 The State of the Market SIGNIFICANT MARKET OPPORTUNITY FOR COST ANALYTICS SOLUTIONS The absence of accurate cost information in health care is nothing short of astounding The existing systems are wholly inadequate Decision Support Market Penetration Less than 10% of health systems have an advanced cost accounting solution 10% 30% Michael Porter Professor Harvard Business School Healthcare organizations are flying blind in deciding how to improve processes and redesign care 9% 51% Understanding true costs will finally allow clinicians to work with administrators to improve the value of care Source: Harvard Business Review, The Strategy That Will Fix Healthcare (October 2013) Advanced Decision Support Legacy Decision Support Self-Developed No System Source: HIMSS Analytics, Company Analysis 46

47 First you need to understand the true cost of care! Revenue Expense Alignment Clinical & Financial EHR Consolidate Cost Components & Assign Variability GL Payroll Decision Support Allocate Overhead Expenses Attribute costs to Patients & Activities Layer Topside Adjustment & Patient Specific Costs Report 47

48 Cost Accounting it s not just one Advancing Cost thing Accounting TD-ABC TIME DRIVEN - ABC HIGH ACQUISITION COST True Cost of Care COST STUDIES ABC ACTIVITY BASED COSTING COST ACCURACY PATIENT LEVEL CCR STANDARD COSTS % MARKUP LOW RCC EASY EASE OF IMPLEMENTATION & MAINTENANCE HARD ORGANIZATIONAL IMPACT (Contracting, Cost, Profitability) 48

49 Cost Accounting across the Continuum 49

50 Supply Based Costing Cost varies by: Manufacturers Site of implant Time of purchase 50

51 Advanced Pharmacy Costing Cost varies significantly by patient Status Location Bundling of Charge Codes 150% AWP Patient receives Drug A Cost at market-reported rate (WAC) 100% 100% WAC at non-340b eligible clinic (WAC w/ discounts) 92% during inpatient admission (GPO) 90% at 340B-eligible outpatient dialysis clinic (340B) 0.02% 50% 0% Drug A Drug B WAC w/ discounts GPO 51

52 What about Labor? Data Driven Approach (Expand your procedure master ) Procedure Master/Events Supply Codes Activity Codes NDCs Clinical Activities Beyond Patient Care Cost Studies Timestamps 52

53 Workflow Events and Timestamps 2017 Epic Systems Corporation. Confidential. 53

54 Output 54

55 Would You Grow This Service? Variable Cost Per Case ABC + Supply Acquisition Cost TRUE COST $17,960 Medicare Payment $15,200 Margin -$2,760 RVU + Average Supply Cost $14,840 $3,120 $15,200 $360 RCC Labor & Supplies $13,800 $1,040 $15,200 $1,400 55

56 Would You Take 110% of Medicare in Exchange for More Volume? Variable Cost Per Case ABC + Acquisition Cost TRUE COST $17,960 Medicare Payment $16,720 Margin -$1,240 RVU + Average Cost $14,840 $3,120 $16,720 $1,880 RCC $13,800 $1,040 $16,720 $2,920 56

57 Story of 2 Patients Steve John Age: 65 No Pre-existing conditions Cost: $9,000 Total Knee Replacement Age: 65 No Pre-existing conditions Cost: $36,000 Total Knee Replacement 57

58 What do you think is the most likely cause of the variation in cost? A. Physician Variation in choice of supplies & implants B. More expensive staffing/labor used in Surgery C. Preventable harm leading to increased utilization/los D. Other CONFIDENTIAL 58

59 Quality Impacts Costs: Directly and Indirectly QVIs can also be used to analyze readmissions rates based on adverse events that occur during the inpatient stay. This assists with prioritizing quality initiatives based on the likelihood a patient will readmit

60 Improved Quality, Improved Margin.less Readmission Penalty offset by Readmitted case Revenue $30,000 $25,000 $12k $17k $6k $11k $-66k Penalty $20,000 $15,000 $10,000 $3.5k $2k $+18k Readmit Revenue $5,000 $0 QVI Non-QVI QVI Non-QVI QVI Non-QVI Avg. Maximum QVI Cost Avg. Total Cost Avg. Net Revenue New Knowledge the more we do the less we make... Source: Internal Yale New Haven Health analysis 60 60

61 Bringing Together Quality and Cost Data More services = more profitability and better care? 61 61

62 MYTHBUSTERS: Healthcare Edition Myth 1 More Services = More Profitability and Better Patient Care Reason Accurate Costing & Quality Variation has a HUGE impact on understanding Cost of Care 62 62

63 MYTHBUSTERS: Healthcare Edition Polling Question Myth 2 Physicians don t know and don t care about costs. 63

64 Do you share cost data with Physicians? A. No Are you crazy? B. We embed cost data within order sets C. We perform cost based case reviews with Physicians D. We ve selectively made cost information available for Physicians such as Lab costs E. Other 64 64

65 Cost Information in the Hands of Physicians is a Major Opportunity Time Frame: December 2012 and March 2013 Participants: 503 MDs at orthopedic departments at Duke, Harvard, the University of Maryland, Mayo, the University of Pennsylvania, Stanford, and Washington U Approach: Orthopedic physicians were asked to estimate the costs of 13 commonly used orthopedic devices. Estimates within 20% of actual cost were considered correct. Results: Physicians correctly estimated the cost of the device only 21 % of the time. However, more than 80% of all respondents indicated that cost should be moderately, very, or extremely important in the device selection process. 2 Survey Finds Few Orthopedic Surgeons Know the Costs of the Devices They Implant, Health Affairs, January

66 With the Right Data Physicians are Ready to Engage PHYSICIANS AT SIX MAJOR HEALTHCARE SYSTEMS WERE ASKED TO ESTIMATE THE COST OF 13 COMMONLY USED ORTHOPEDIC DEVICES (ESTIMATES WITHIN 20% OF ACTUAL COSTS WERE CONSIDERED CORRECT) 1 Physicians don t know ~20% Only 1 in 5 MDs could correctly estimate the cost for common orthopedic devices but do care about cost >80% Over 8 of 10 MDs would consider cost as a key criteria in the selection of a medical device n =503 MDs at orthopedic departments at Duke, Harvard, University of Maryland, Mayo, University of Pennsylvania, Stanford, and Washington University 1 Survey Finds Few Orthopedic Surgeons Know the Costs of the Devices They Implant, Health Affairs, January

67 NUDGE! 67

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69 Using your EHR to bend the cost curve Phase 1 available now (Epic 2017) HB & PB workflows and reports Uses cost loaded into Resolute from Strata (or other sources) 2017 Epic Systems Corporation. Confidential. 69

70 Expose Cost to your Epic users to impact behavior Phase 2 in Epic 2018: Expose relative cost to providers at time or ordering! 2017 Epic Systems Corporation. Confidential. 70

71 Nudging Your Clinicians! Controlling Costs With Computer-Based Decision Support Leonard S. Feldman, MD; et al JAMA Intern Med. 2013;():1-2. Presented MDs cost information on lab tests at the point of care via computer z ~10% reduction in test volume ($400,000+ in savings) Surgical Vampires and Rising Health Care Expenditure: Reducing the Cost of Daily Phlebotomy Elizabeth Stuebing, MD, MPH; Tom Miner, MD Arch Surg. 2011;146(5): A weekly announcement to surgical house staff and attending physicians of dollar amount charged to nonintensive care unit patients for lab services during prior week > 25% reduction in dollars charged/ patient/day for routine blood work 71

72 MYTHBUSTERS: Healthcare Edition Myth 2 Physicians don t know and don t care about costs. Reason Physicians have the largest impact on cost of care and are willing to make a difference 72

73 The Evolvement of Reimbursement GONE ARE THE DAYS.Questions? 73