ACO Technical Assistance: Finances and Infrastructure for Value Based Payment Readiness. June 2, 2017

Transcription

1 ACO Technical Assistance: Finances and Infrastructure for Value Based Payment Readiness June 2, 2017

2 Agenda 9:30 10:00 Time Topic Facilitator 10:00 11:00 Welcome and Introductions Review of the VBP TA Series and Goals for Today Overview of VBP, Drivers of Revenue and Financial Dilemma Ellen Hafer, Mass League Peter Epp 11:00 12:30 Defining the Tasks; Defining the Responsibilities Lisa Whittemore 12:30 1:30 LUNCH 1:30 3:00 Detailed Walkthrough of the Financial Model Peter Epp 3:00 3:30 Wrap Up and Implications for Next Steps Peter Epp; Lisa Whittemore 2

3 Agenda Goals for Today Overview of VBP, Drivers of Revenue and Financial Dilemma Defining the Tasks; Defining the Responsibilities Detailed Walkthrough of the Financial Model Wrap Up and Implications for Next Steps 3

4 Four-Part Series on Value Based Payment Readiness: Overview Overview of Readiness Roadmap: How to Succeed in New Environment Setting the tone for change Review of roadmap Building the pyramid: risk stratification Elements for Success Finances and Infrastructure: Negotiation strategies Funds flow, infrastructure investments and levels of risk Quality and incentive model Elements for Success Population Management: Empanelment/engagement Enrollment Best practices to achieve quality, outcomes improvements Health risk assessments and follow-up Elements for Success: ACO Risk Stratification and Coding for Improvement Coding in new MassHealth environment Approaches to risk stratification for financial and quality improvements Role of social determinants 4

5 Goals for Today Develop knowledge and capacity at CHCs for financial management in the Value Based Payment context Bring together financial, administrative and clinical leaders to think about shared accountability Build knowledge of choices related to service delivery, member supports and associated costs Build skills and awareness for negotiations with ACOs and MCOs 5

6 Agenda Goals for Today Overview of VBP, Drivers of Revenue and Financial Dilemma Defining the Tasks; Defining the Responsibilities Detailed Walkthrough of the Financial Model Wrap Up and Implications for Next Steps 6

7 Introduction Fee-for-service Value Based Payment To prepare for payment reform, health centers must: Improve cost efficiencies today and revenue cycle management Create positive operating margins Generate reserves Create business processes and reporting necessary for success in the future Health centers require a financial modeling process that: Manages current financial performance of baseline operations AND Layers on top the financial impact of Value Based Payment (VBP) 7

8 Improving the Current Baseline Financial Performance Due to the peaks-and-valleys in the timing of VBP payments and their uncertainties, health centers current baseline operations need to exhibit positive operating performance The current budget model, and its underlying drivers, need to be managed to enhance revenue and create cost efficiencies Operating Revenue: Measure uncompensated care versus grant subsidies Enhance net patient services revenue per visit: Payor mix of visits Bad debt % (collection rates) Coding Provider productivity 8

9 Improving the Current Baseline Financial Performance Operating Expenses: The following variables impact the all-inclusive cost per visit and must be managed to improve financial performance: Salary levels, benefit packages and staffing mix Support staff ratios (direct care versus patient support) Amount of enabling and ancillary services Administrative/overhead infrastructure Provider productivity/clinician capacity $ 1,542,100 10,000 visits = $ per visit Capital Link s Performance Evaluations Profiles provide noteworthy benchmarks for identifying cost efficiency opportunities! 9

10 Improving the Current Baseline Financial Performance Below are selected financial metrics from Capital Link s Performance Evaluation Profile, displaying the Massachusetts 50 th percentiles (medians) Days Cash on Hand Current Ratio 2.5:1 2.3:1 2.3:1 Capital Link s Performance Evaluations Profiles provide noteworthy benchmarks for identifying cost efficiency opportunities! Net Patient Revenue per Visit $ 140 $ 146 $ 152 Operating Revenue per Visit $ 213 $ 226 $ 264 Operating Expense per Visit $ 224 $ 225 $ 251 Operating Margin (0.4%) 0.4% 0.4% Physician Productivity 2,824 2,596 2,398 Mid-level Productivity 2,226 2,155 1,922 10

11 Quality Incentive Payments VBP Arrangements The 3-Legged Stool VBP arrangements contain a hybrid of several different payment methodologies to incentivize and tie together desired behaviors Care Coordination The key components of VBP arrangements include: Base Compensation Models Fee-for-service Partial capitation Care Coordination Fee PMPM Quality Incentive Payments Global Payments/Budgets Surplus-sharing/Risk-sharing Global capitation 11

12 VBP Arrangements Preparation for VBP requires an understanding of the key metrics that drives each payment methodology Quality and risk-adjusting embedded through-out Payment Model Base Compensation Care Coordination Quality Incentive Payments Global Budgets/Payment Key Metric Move from per visit to per patient (capitation) New core competencies and cost Measuring performance metrics Monitoring the total health care spend (and quality) 12

13 VBP Quality Metrics & Incentive Payments Value-inspired metrics, of late, revolve around the following areas: Patient quality measures Process measures Population health metrics Patient satisfaction measures Access Efficiency Measurement and payment thresholds include - Event based Population based Maintenance Improvement 13

14 VBP Quality Metrics & Incentive Payments Understand metrics being measured Discussion of metrics selected Calculation of the metric (including data elements) Identify benchmarks Evaluate current performance and anticipated future performance Project revenue based on anticipated performance and benchmarks Fixed payment per measure for improvement Fixed payment per measure for maintenance Incremental bonus based on movement of metric Composite scoring across multiple metrics Amount of surplus-sharing/risk-sharing payments earned 14

15 VBP Quality Metrics & Incentive Payments Types and how payment determined Type of Payment Formula to Earn Payment Examples Fixed amount paid for improvement of metric Fixed amount paid for maintenance of metric Incremental bonus based on size of movement in metric Composite scoring across multiple metrics Improvement of metric from one quartile to another Maintain metric that currently exceeds the specific percentile Amount of payment increases incrementally based on size of % change Negotiated set of metrics assigned points; % earned based on number of points scored versus total points available Various HEDIS measures Various HEDIS measures Reduction in urgent/nonemergent ER use Numerous HEDIS measures defined that, as a group, determine payment 15

16 VBP Quality Metrics & Incentive Payments Sample Efficiency Metrics (TennCare s PCMH Demo): 16

17 VBP Quality Metrics & Incentive Payments Sample Quality Metrics (TennCare s PCMH Demo): 17

18 VBP Quality Metrics & Incentive Payments Example of composite scoring formula Analysis of metric Measure Current Actual Year One Year Two Improve % Metric Improve % Metric Comprehensive Diabetes Care (#1) 40.00% 25% 50.00% 15% 57.50% Comparison to benchmark (1 point for meeting benchmark) Projected Score Measure Benchmark (Threshold) Year One Year Two Comprehensive Diabetes Care (#1) 50%

19 VBP Quality Metrics & Incentive Payments Example of composite scoring formula (continued) Composite scoring and amount of payment Year One Year Two Total Actual Points all measures 3 5 Total Available Points (10 metrics) % of Total Attained 30% 50% Maximum QIP Pool Available $ 500,000 $ 500,000 Total Projected QIP Payment $ 125,000 $ 250,000 Some payors may set a minimum score before QIP payments will be made Quality scores may also impact potential surplus-sharing distributions 19

20 VBP - Global Budgets/Payments Example Calculation of Surplus-Sharing/Risk-Sharing Amounts: Actual Expense vs. Benchmark Scenario A Scenario B Actual Expenses: Fee for Service $42,500,000 $47,500,000 Capitation (Health Center) $5,000,000 $4,000,000 Total Actual Expense $47,500,000 $51,500,000 Target Spend/Benchmark $50,000,000 $50,000,000 Surplus/(Loss) $2,500,000 ($1,500,000) Shared-Surplus Arrangement (50%) $1,250,000 N/A Risk-Sharing Arrangement (60% upside; 30% downside) $1,500,000 ($450,000) 20

21 VBP Surplus/Risk-Sharing Example revenue projection $ PMPM # of Member Months Total Amount Targeted Spend/Benchmark $ ,000 $50,000,000 Actual Spend (Projected) $ ,000 $47,500,000 Projected Surplus (Deficit) $25.00 $2,500,000 Surplus-Sharing % 50% Amount Available for Distribution $1,250,000 Quality Score 75% Adjusted Distribution for Quality Score $937,500 21

22 Surplus/Risk-Sharing Key Considerations Key items which impact success: Panel formation Enrollment Attribution Development of overall budget Utilization assumption based (bottom up) Paid Claims Historic baseline or revenue based (top down) Medical Loss Ratio Protections against outliers Stop Loss Carve-Outs Risk Corridors Reserves Quality modifiers/adjusters 22

23 New York Total Cost of Care Benchmarking Guideline 23

24 Budget/Benchmark Setting Setting a Budget Target (using historical claims data): Service Description Expected Utilization Unit Cost Cost Per Patient Per Year Inpatient Care 1 $3,000 per discharge $ 3,000 Emergency Room 5 $300 per visit 1,500 Specialty Care 2 $250 per visit 500 Primary Care 2 $100 per visit 200 Behavioral Health Care 1 $100 per visit 100 Laboratory 8 $25 per lab test 200 Radiology 2 $100 per xray 200 Pharmacy 12 $25 per script 300 TOTAL Per Member per Year TOTAL Per Member per Month ($6,000 / 12 months) Differs based on Health Condition of Patient $6,000 PMPY $500 PMPM What factors can be impacted to reduce the Total Cost of Care? 24

25 Case Study: MCO Surplus Sharing Baseline (Target) Calculation (1/1/ /31/2013) Type of Service Admits/ Visits A/V per 1000 Amount Paid Cost per A/V PMPM Inpatient $2,817,435 $7,826 $ O/P Facility ED 2,381 1,117 $494,354 $208 $19.33 O/P Facility Surgery $145,548 $1,842 $5.69 O/P Facility Other 5,599 2,628 $1,104,074 $197 $43.18 O/P Facility Subtotal 8,059 3,782 $1,743,976 $216 $68.20 Professional Primary Care 4,423 2,076 $55,774 $13 $2.18 Professional Specialty Care 15,346 7,202 $1,606,835 $105 $62.84 Dental 1, $0 $0 $0.00 Vision $0 $0 $0.00 Prescription 31,233 14,658 $2,264,304 $72.50 $88.50 Other Services (e.g., Home Health) $0 $0 $0.00 Grand Total 62,321 29,247 $8,488,323 $331.96

26 Case Study: MCO Surplus Sharing Surplus Calculation (1/1/ /31/2014) Change from Baseline experience Type of Service Admits/ Visits A/V per 1000 Amount Paid Cost per A/V PMPM Inpatient $2,057,460 $8,296 $83.64 O/P Facility ED 1, $429,540 $222 $17.46 O/P Facility Surgery $83,045 $1,661 $3.38 O/P Facility Other 6,904 3,368 $955,824 $138 $38.85 O/P Facility Subtotal 8,888 4,336 $1,468,209 $165 $59.69 Professional Primary Care 3,246 1,583 $39,256 $12 $1.60 Professional Specialty Care 14,962 7,299 $1,307,260 $87 $53.14 Dental 1, $0 $0 $0.00 Vision $0 $0 $0.00 Prescription 30,928 15,087 $1,932,026 $62 $78.54 Other Services (e.g., Home Health) 0 0 $0 $0 $0.00 Grand Total $6,804,411 $276.60

27 Using Third-Party Claims Data Analyze the high cost and high utilizing members Combine Claims data files Determine the Total Cost of Care by patient and PMPM Determine Total Cost of Care for patients with like conditions (e.g., all diabetic patients regardless of comorbidities) Stratify the high cost/high utilizing members and develop plans to better manage care and reduce the Total Spend Clinical interventions to manage utilization Outreach efforts/patient engagement Specialty referral practices and high cost specialists Link to EHR/PMS, ED Use and High Risk Member Reports Analyze systemic anomalies Physician practice patterns cost and outcomes Specialty referral practices and high cost/low quality specialists Care locations 27

28 VBP New Core Competencies Improved coding and clinical documentation Traditional coding (claims) Enhanced coding and documentation (EHR) Social determinants of health Managing patient centered care (per patient) Data analytics (including business intelligence) Care management/delivery HIT/HIE Partnerships and collaboration MCO contracting Financial management systems 28

29 Care Coordination Fees One of the foundational elements of most, if not all, VBP arrangements is the need for effective care coordination and management Third party payors are sometimes including care coordination fees in their VBP arrangements, however health centers need to sell the value of the care coordination proposal Stand-alone fee PMPM Advance against future shared-savings distributions Development of a proposed care coordination fee: What services are required? What services should be provided at the health center sites versus reside at the ACO/IPA level? How to cost-out care coordination services? 29

30 Care Coordination Services What care coordination/management services are required to be successful under VBP? Service Type Health Center ACO/IPA Care Managers Care Management Central Support and Technology Data Analytics Technology and Support * May be provided by the ACO/IPA * Health Informatics * Quality Improvement Others?????? 30

31 Care Coordination Costs Health Center Example calculation of cost of care coordination services Total cost and PMPM Service Type 31 Costing Methodology Cost Estimate Care Managers (blended staffing) 4.00 FTE X $60,000 $ 240,000 Quality Improvement 1.00 FTE X $75,000 75,000 Health Informatics 1.00 FTE X $75,000 75,000 Support Staff 1.00 FTE X $30,000 30,000 Care Management/Data Analytics Technology Solutions Covered by ACO/IPA (charged to the center?) Others TBD??? TOTAL ANNUAL COSTS $ 420,000 Number of Member Months 10,000 members X 12 mos. 120,000 COST PMPM $ 3.50???

32 Care Coordination Costs ACO Example calculation of cost of care coordination services Total cost and PMPM Service Type 32 Costing Methodology Cost Estimate Care Management Central Support 2.00 FTE X $60,000 $ 120,000 Support Staff 1.00 FTE X $30,000 30,000 Others TBD??? Overhead 15% of direct costs 22,500 Care Managers Paid directly to centers??? Care Management Technology Solution $3.00 PMPM 3,600,000 TOTAL ANNUAL COSTS $ 3,772,500 Number of Member Months 100,000 members X 12 mos. 1,200,000 COST PMPM $ 3.14

33 Why Form an ACO/IPA? Share infrastructure and realize cost efficiencies Quality improvements through sharing of best practices Pool resources to attract talent Expansion of geographic reach/market share Pool members to spread insurance risk in VBP arrangements and improve bargaining position with third party payors Expansion of service offerings and improve care coordination Improved access to capital resources (e.g. DSRIP) 33

34 Funds Flow Within the ACO/IPA MassHealth / MCOs DSRIP Incentive Payments ACOs Hospitals Physicians FQHCs LTC Providers 34

35 Funds Flow Within the ACO/IPA ACO/IPAs cash flow projections What services will the ACO/IPA provide on behalf of its members? Reserves? Working capital VBP reserve requirements What revenue sources are available to the ACO/IPA to defray the cash needs? Distribution methodology of quality incentive/vbp surplus payments to members Payments to ACO/IPA members Pass-through of care coordination/quality incentive payments Surplus-sharing/Risk-sharing allocations Attributed lives Quality scores Participation and engagement Other 35

36 Overview ACO Distribution Methodologies Distribution methodologies developed often change over time as experience with VBP matures In developing a distribution methodology, the following hierarchy is often utilized 1 st Investment in reserves 2 nd Repayment of capital 3 rd Performance incentive payments Investment in Reserves setting aside cash for future investments, maintenance of minimum cash balances and/or establishment of reserves for VBP arrangements Repayment of Capital based on Board decision-making, additional paid-in capital may be repaid In its entirety before performance incentive payments begin OR In pre-defined amounts over a specific period of time 36

37 Performance Incentive Payments Distribution Methodologies Example of Separate Pools each with its own, distinct distribution methodology Total Pool Allocation % s between pools may change over time (e.g. weighted heavier to participation in earlier years as VBP capacity is built, transitioning to performance as VBP experience increases) Distribution of participation pool (e.g. 20%) X % Allocated to Participation Pool X Attributed Members as % of Total X Participation Score = Participation Payment Distribution of performance pool (e.g. 80%) Total Pool X % Allocated to Performance Pool X Attributed Members as % of Total X Quality Score = Performance Payment Additional Decision Point How to address undistributed funds 37

38 Performance Incentive Payments Distribution Methodologies Example of Aggregate Pool with one, single distribution formula Total Pool X Attributed Members as % of Total X Quality Score X % Reduction in Total Cost of Care Additional Decision Point How to address undistributed funds = Participation Payment 38

39 DSRIP Funds Flow DSRIP Funding Levels (Statewide) $1.8B over 5 years (eff. July 1, 2017) Payments to Commonwealth contingent upon hitting predefined metrics and milestones To be replaced with savings generated from VBP in 5 years 39

40 DSRIP Funds Flow ACO Funding Stream: Uses: Infrastructure and start-up On-going/operational costs Flexible services (not currently covered by MassHealth) Transitional funding for certain safety net hospitals currently funded through the Delivery System Transformation Initiatives program Award Calculation: ACO start-up and on-going support Funded based on proportional size of attributed members at a $ PMPY Safety Net PMPY increase for ACOs with high % of safety net providers ACO Model PMPY increase for advanced ACO models MassHealth to designate a portion for investment in primary care Glide Path for Certain Safety Net Hospitals based on MassHealth guidance Flexible services PMPY amount fixed across all 5 DSRIP years 40

41 DSRIP Funds Flow ACO Funding Stream (cont d): Decision Rights on Spending: ACO start-up and ongoing support MassHealth to develop guidance on allocation of dollars for safety net glide path funding and PC investment dollars Balance allocated at the ACO s discretion Flexible services funding is use it or lose it and allocated at the ACO s discretion Accountability to the State: ACOs will have accountability for the total cost of care of their attributed members in DY1 An increasing amount of DSRIP funds will be at risk over the 5 year DSRIP period (0-20%) based on an accountability score including the following variables: Avoidable hospital utilization Reduction in State spending Attaining quality metrics Progress towards integration across physical health, behavioral health and LTSS 41

42 DSRIP Funds Flow What to expect: During the governance development, committees will be formed - Executive Finance (budget and funds flow) Clinical Workforce Technology Projects will be developed to accomplish the goals of DSRIP and population health management Discussions will ensue with regards to what services to be performed at the ACO versus those to be delegated down to the ACO s members The Funds Flow of the DSRIP waiver dollars will follow the responsibilities and participation in projects Generally DSRIP funds will be paid based on performance, so the timing of fund distributions may occur after-the-fact 42

43 The VBP Dilemma The timing of potential new revenue streams under VBP are not aligned with the costs for successful participation in VBP Timing of Cost Payment Model One-time, Upfront On-going, Operational Timing of Revenue Base Compensation Through-out the year as services are provided Care Coordination Through-out the year as services are provided Quality Incentive Payments 6-9 months after the end of the measurement period Global Budgets/Payment 6-9 months after the end of the measurement period 43

44 VBP Financial and Operational Considerations What is this going to cost? Identify new services to be provided Evaluate whether to go this alone versus join forces Develop a 3-year financial model, including cash flow Quantify a range of capital requirements Identify outside funding sources to offset capital needs and reserves What is the return on investment Understand financial requirements of participation in VBP arrangements Develop sound assumptions based on available data Utilize financial model to inform ACO/MCO negotiations 44

45 Agenda Goals for Today Overview of VBP, Drivers of Revenue and Financial Dilemma Defining the Tasks; Defining the Responsibilities Detailed Walkthrough of the Financial Model Wrap Up and Implications for Next Steps 45

46 Re-visiting the Pyramid Thinking about Population Needs PATIENT POPULATION INTERVENTION BH CPs Risk Management High Need, High Cost High Risk Complex Care Management Expense Management Elevated Need, Elevated Cost Moderate Risk Care Management Risk Mitigation Chronic Conditions Low Risk Care Coordination Revenue Management Well Populations No or Limited Risk Wellness Initiatives Attributed Members/Not Yet Patients Engagement and Outreach 46

47 Population Health Management: Different Perspectives Payers and Providers Providers and payers have different perspectives of the activities that are included in utilization management, case management, and chronic condition management. The highly regulated nature of the health insurance industry presently requires that payers maintain oversight of functions that they shift to providers. The current process for function oversight is tightly managed and highly controlled which poses challenges to making it scalable across a large network. There is a significant change management challenge in sharing accountability between payers and providers. Clear communication of the driving factors behind the strategy to shift accountability will need top-down executive reinforcement as well as bottom-up operational buy-in Not all providers within your ACO have the same capacity, expertise, or desire to perform these functions.

48 Three Truths There are a set of tasks that need to be done for the ACO to function and achieve triple-aim goals and for members to be supported These tasks need to be done either locally (in health centers) or centrally by the ACO or the MCO Decisions about who does the tasks have significant financial implications Revenue impact Care efficiency and effectiveness Effective financial strategies 48

49 VBP Payer/Provider Service Continuum: Assess ACO Participants Current State Provider function Payer function Care delivery Inpatient care Outpatient care Preventive Care Ancillary services (e.g. lab) Provider management services Scheduling services Patient billing for services rendered Capacity or access management ACO: financial/data management Care enhancement Care coordination Process Algorithms/ EBM Guidelines Provider process & quality improvement Quality/ informatics Data warehousing HIE / connectivity Quality measures / analytics Physician performance/ quality management Medical management Utilization management Care management Disease management Wellness programs Pharmacy Formulary management Pre-auth for nonformulary Medical monitoring Compliance enhancement Member acquisition/ management Member enrollment Member Engagement State and Federal Advocacy Network management Provider contracting / network participation Alternative payment structures Physician credentialing & privileging QA for network providers Admin. services Plan billing (MCO function) Risk-pooling Claims processing/ payment Member services Telemedicine Compliance management 49

50 Payer Administrative Services Admin. services Plan billing (MCO function Risk-pooling Claims processing/ payment Member services Basic administrative functions of a health plan: paying claims, actuarial risk calculations, benefit administration Member service: Basic health plan customer service ** For Model A ACOs, these functions done by MCO; for Model B ACOs, these functions done by Mass Health. 50

51 Network Management Network management Provider contracting / network participation Alternative payment structures Physician credentialing & privileging QA for network providers Network of primary care providers, specialty providers, hospitals, rehab facilities, ancillary services, behavioral health providers Traditionally health plans have not had a lot of nonmedical services that may be important to care for your members Maintaining the quality of the network is important to members care and has long been a task done by health plans Monitoring performance on risk based contracts 51

52 Enrolling and Retaining Members Member acquisition/ management Member enrollment Member engagement State and Federal Advocacy Member enrollment o In the MCO or MassHealth AND o With the ACO Marketing strategies and resources Growth strategy Work with State and Federal entities to ensure adequate program funding 52

53 Pharmacy Benefit Management Pharmacy Formulary management Pre-auth for non-formulary Medical monitoring Compliance enhancement Pharmacy network Developing and implementing formulary including knowledge about costs Prior authorization process for primary care AND specialty providers Compliance 53

54 Care Delivery Care delivery Inpatient care Outpatient care Preventive Care Ancillary services (e.g. lab) Telemedicine Core services for taking care of members: Inpatient care, specialty care, primary care, BH care Labs and ancillary services Preventive Care, diagnoses Is mostly outside any PMPM Billing still done Fee for Service 54

55 Provider Management Services Provider management services Scheduling services Patient billing for services rendered Capacity or access management ACO: financial/data management Scheduling with providers Access management Billing Compliance ACO monitoring of performance Compliance management 55

56 Care Enhancement Care enhancement Care coordination Process algorithms/ebm guidelines Improving how care is delivered to members: Care Coordination Transitions of Care Applying Evidence-Based Medicine Interventions Quality Improvement Efforts including transparent data sharing efforts Provider process & quality improvement 56

57 Quality and Informatics Quality/ informatics Data warehousing HIE / connectivity Quality measures / analytics Data! o What data are you going to receive? HIE and connectivity between systems Quality measures and analytics Quality directory and sharing results Predictive Analytics for Risk Stratification Physician performance/ quality management 57

58 Medical Management Medical management Utilization management Care management Disease management Wellness programs Managing patients care outside of the traditional visit Developing and maintaining staffing patterns to support this care Ensuring your assigned members are receiving the right care at the right time 58

59 VBP Payer/Provider Service Continuum: Thinking about roles differently Provider function Payer function Care delivery Inpatient care Outpatient care Preventive Care Ancillary services (e.g. lab) Provider management services Scheduling services Patient billing for services rendered Capacity or access management ACO: financial/data management Care enhancement Care coordination Process Algorithms/ EBM guidelines Provider process & quality improvement Quality/ informatics Data warehousing HIE / connectivity Quality measures / analytics Physician performance/ quality management Medical management Utilization management Care management Disease management Wellness programs Pharmacy Formulary management Pre-auth for nonformulary Medical monitoring Compliance enhancement Member acquisition/ management Member enrollment Member engagement State and Federal Advocacy Network management Provider contracting / network participation Alternative payment structures Physician credentialing & privileging QA for network providers Admin. services Plan billing (MCO function) Risk-pooling Claims processing/ payment Member services Telemedicine Compliance management 59

60 Exercise: Determining the Provider Role (local)/provider Role (Central or ACO)/ Payer Role? Task Care Coordination EBM/ Clinical Protocols Quality Improvement Data Warehousing HIE/ Connectivity Quality Measures/ Analytics ACO Financial Data Management Provider Role (if any) ACO Role (if any) MCO Role (if any) HEALTH MANAGEMENT ASSOCIATES 60

61 Exercise: Determining the Provider Role (local)/provider Role (Central or ACO)/ Payer Role? Task Member Enrollment Member Engagement Provider Performance Wellness Programs Telemedicine Formulary Development and Management Formulary Compliance Enhancement Provider Role (if any) ACO Role (if any) MCO Role (if any) HEALTH MANAGEMENT ASSOCIATES 61

62 Exercise: Determining the Provider Role (local)/provider Role (Central or ACO)/ Payer Role? Task Provider Role (if any) ACO Role (if any) MCO Role (if any) Utilization Management Inpatient Procedures Care Management Complex Transitions of Care Chronic Condition Disease Management Registry Management Active Engagement HEALTH MANAGEMENT ASSOCIATES 62

63 Exercise Part 2 For each of the areas where you identified a provider role, which are your priorities? What resources do you need to meet these goals? How will you share accountability with the ACOs? Where can you leverage resources through partnering with the ACO or the MCO? PRIORITIES = Strategies you can deploy to ensure your patients receive the care they need within the ACO + the resources required to deploy those models + factor in negotiating with ACO OR MCO to ensure those factors are met HEALTH MANAGEMENT ASSOCIATES 63

64 Agenda Goals for Today Overview of VBP, Drivers of Revenue and Financial Dilemma Defining the Tasks; Defining the Responsibilities Detailed Walkthrough of the Financial Model Wrap Up and Implications for Next Steps 64

65 Value Based Payment Financial Model Develop a financial model Prepare 3-year financial model, including cash flow Decide on the services required to be provided for success under VBP In-house (personnel) versus outsourced (ACO vs. MSO) On-going versus one-time Develop a cost projection based on services required Project potential revenues under VBP arrangements Understand and develop best estimates for key assumptions Utilize financial model to inform VBP negotiations Project opportunities under DSRIP Estimate potential capital requirements Other funding sources (e.g. Foundations; HRSA QI awards, reserves/existing operating surpluses) 65

66 WARNING! WARNING! THE CONTENTS OF THE FOLLOWING FINANCIAL MODEL ARE BASED ON GROSS ASSUMPTIONS AND INTENDED TO PROVIDE PARTICIPANTS WITH AN UNDERSTANDING OF THE KEY DRIVERS OF FINANCIAL PERFORMANCE UNDER VBP AND COULD BE HARMFUL TO YOUR HEALTH! THE FINANCIAL MODEL AND ITS RESULTS WILL CHANGE AS CHCs DECIDE ON THEIR INFRASTRUCTURE NEEDS AND ACO/MCO ARRANGEMENTS NEGOTIATED. ACTUAL RESULTS WILL VARY SIGNIFICANTLY! 66

67 Services to Be Provided Under VBP Services Decide on the services required to be provided for success under VBP Improved coding and clinical documentation Managing patient centered care (per patient) Data analytics (including business intelligence) Care management/delivery (HIT/HIE) Partnerships and collaboration MCO contracting Financial management systems In-house (personnel) versus outsourced (ACO vs. MSO) On-going versus one-time 67

68 Care Coordination/ Management Services Staffing Model Costs must be assigned to care coordination services identified Example - care managers Care manager capacity (productivity) Patient utilization Number of care managers required = # of patients average panel size Panel sizes may be impacted based on risk-stratification of patients 68

69 Care Coordination Management Fees Case Study ABC MCO is looking to construct a VBP arrangement with CHC-ACO ABC MCO has not historically paid providers for care management/coordination services CHC-ACO is looking to negotiate a care coordination PMPM with ABC MCO to include care management fees to be paid to member health centers as well as central support services Care management fees to be paid separately, directly, to health centers and CHC-ACO by ABC-MCO Health centers will directly employ the care managers CHC-ACO has compiled data to assist with developing a cost estimate for the provision of these services Task Calculate the total annual cost and cost PMPM of care coordination services at both the ACO-level and individual health center level 69

70 Care Coordination Management Fees Case Study (Assumptions) CHC-ACO projects average ABC MCO covered lives = 50,000 CHC-ACO has identified 3 risk-categories of its patients and required level of case management services Condition A 40,000 members, 1 unit per member per year Condition B 5,000 members, 2 units per member per year Condition C 5,000 members, 5 units per member per year Average capacity per care manager FTE = 5,000 units Support staff ratios: 1.00 FTE HC support staff for every 5.00 FTE care managers 1.00 FTE ACO care management central support for every FTE care managers (no part-time; round-up) 1.00 FTE ACO support staff for every 2.00 FTE care management central support staff (no part-time; round-up) 70

71 Care Coordination Management Fees Case Study (Assumptions, Continued) Personnel costs: Care managers (blended skill sets)= $50,000/FTE Support staff = $20,000/FTE Care management central support - $75,000 Care management technology outsourced through an MCO at the ACO-level for $5.00 PMPM Overhead calculated at 10% excluding the cost of MCO services 71

72 Basic Assumptions in the Financial Model Amounts are hypothetical and included to demonstrate the flow of the financial model and highlight the key drivers of performance Patients The number of patients served is projected flat over the 3- year period (25,000 patients) and by month, pro-rated» Used for staffing 50% (12,500 patients) are considered participating in the DSRIP/VBP program» Used for payment Payments from ACO $4 PMPM for care coordination/management services Participation in VBP arrangement DSRIP funding for participation in projects 72

73 Staffing Assumptions Assess the need for oversight and technical support Assess the need for care management/ coordination staff Staffing ratios differ by: Populations served Risk stratification of patients Staff type VBP Oversight and Technical Support: Position FTE Salary QI Coordinator ,000 Data Analyst ,000 Care Coordination/Care Management Function: CM Ratios: Population Total Pop Low Risk Medium Risk High Risk General Population 25, % TBD TBD Special Population - Health Homes - TOTAL 25,000 25,000 TBD TBD FTE Calculation: Salary Ratios 12,500 TBD TBD RN CMs ,000 Ratios 10,000 TBD TBD CHWs ,000 Ratios 12,500 TBD TBD LCSWs ,000 Projected Annual Salary Increases: Year Two 3.00% Year Three 3.00% Please note that the above staffing ratios do not reflect actual data but are purely included as an example. These ratios need to be developed! 73

74 Salary Projections Salaries for participation in VBP should include: Direct care services Oversight and technical support Salaries should be projected to link to changes in patients utilizing appropriate staffing ratios Additional staff may be required for DSRIP projects Year One: Description Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Totals Salaries and wages: QI Coordinator FTE Salary 5,417 5,417 5,417 5,417 5,417 5,417 5,417 5,417 5,417 5,417 5,417 5,417 65,000 RN Case Managers FTE Salary 14,167 14,167 14,167 14,167 14,167 14,167 14,167 14,167 14,167 14,167 14,167 14, ,000 Community Health Workers FTE Salary 7,292 7,292 7,292 7,292 7,292 7,292 7,292 7,292 7,292 7,292 7,292 7,292 87,500 LCSWs FTE Salary 9,167 9,167 9,167 9,167 9,167 9,167 9,167 9,167 9,167 9,167 9,167 9, ,000 Data Analyst FTE Salary 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 45,000 Total salaries and wages 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39, ,500 74

75 Other Expense Projections Fringe benefits should be projected at the health centers historical fringe rate (e.g. 20%) Contracted Services ACO/MCO services services to be provided by the ACO relative to performance under VBP are forecasted to be borne by the ACO If costs are to be passed along from the ACO to the health center, these must be budgeted as well DSRIP expenses budget expenditures anticipated as a result of projects and other requirements for participation in DSRIP Outsourced Technology Solution budgeted $.25 PMPM Other technology and data analytics projected to reside at the ACO Program Administration/Overhead budgeted at 15% of direct costs Other 75

76 Revenue Projections -- VBP Care management/coordination payments PMPM Model assumes a $4 PMPM This may come through the ACO out of DSRIP or MCO/MassHealth funding for these services Could also be paid directly from the MCO/MassHealth It is anticipated that if these funds are paid by DSRIP, that they would eventually be paid out of future shared savings generated under VBP Surplus-sharing arrangements MCO/MassHealth projected to make surplus distributions to the ACO ACO to distribute surplus to its members based on an ACO distribution methodology In general, ACOs distribute funds based on attributed members and quality For purposes of the financial model, the amount of distribution to the FQHC will be based on The projected % of the FQHC s attributed members to total ACO members AND A projection of the FQHC s quality scores 76

77 ACO Surplus/ Risk Sharing Revenue projection complicated and various assumptions Targeted Spend/Benchmark Use of historic claims versus Medical Loss Ratio (MLR) Projection of actual spend Surplus-sharing and risk-sharing %s Impact of quality scores on distribution amount Timing of payments interim versus annual 77

78 Key Assumptions ACO Framework and VBP Arrangement Benchmarks Surplus-sharing arrangement in Years One and Two (50%), transitioning to risk-sharing in Year Three (70% upside; 30% downside) Interim surplus calculation performed after 4 months of midpoint with final reconciliation paid 7 months after contract period ends Benchmarks Benchmark set on a PMPM basis based on historical claims experience (estimated for example purposes) Future benchmarks projected based on projected savings, averaging the prior 2 years actual spend PMPM 78 Next Year's Benchmark PMPM (@50%) Year Projected Savings % Benchmark PMPM PMPM After Savings Yr. 1 2% $ $ $ Yr. 2 3% $ $ $ YR. 3 2% $ $ $380.38

79 ACO Surplus/ Risk Sharing, Year 1 Number of Year One Description ACO Members PMPM Amount 83,333 50% Targeted Benchmark $ ,000,000 Projected Actual Spend $ ,000,000 Projected ACO Surplus 8,000,000 Total ACO Surplus Available Surplus Only 50% 4,000,000 Projected Distribution (d) Quality Modifier 100% 4,000,000 Projected Payment Dates - 10/31/XXX1 40% 1,600,000 7/31/XXX2 60% 2,400,000 4,000,000 Notes: (d) FQHC specific quality score will be used to adjust FQHC-specific distribution projection. 79

80 CHC Surplus/ Risk Sharing Allocation (Year One) Year One Interim Final Total Total ACO Projected Distribution 1,600,000 2,400,000 4,000,000 % of Members Attributed to FQHC (a) 15.00% 15.00% 15.00% ACO Distribution Adjusted by Membership 240, , ,000 FQHC-Specific Quality Score 50.00% 50.00% 50.00% Projected FQHC Distribution 120, , ,000 Payment Dates 10/31/XXX1 7/31/XXX2 Notes: (a) % of Massachusetts FQHC members as a % of total ACO members: FQHC-Specific Members 12,500 ACO Total Members 83,333 FQHC Members as % of Total Members 15.00% 80

81 FQHC Quality Score (Year One) Quality Metrics - Actual and Projected Measurement Period > Base Year One Benchmark Projected Score Quality Measure Actual Improve % Score 50th %tile Year One Measure A 45.00% 15.00% 51.75% 60.00% 0 Measure B 35.00% 15.00% 40.25% 50.00% 0 Measure C 45.00% 5.00% 47.25% 40.00% 1 Measure D 65.00% 15.00% 74.75% 85.00% 0 Measure E 40.00% 10.00% 44.00% 45.00% 0 Measure F 60.00% 10.00% 66.00% 55.00% 1 Measure G 30.00% 10.00% 33.00% 45.00% 0 Measure H 30.00% 10.00% 33.00% 30.00% 1 Measure I 45.00% 10.00% 49.50% 45.00% 1 Measure J 35.00% 5.00% 36.75% 30.00% 1 Total Points Earned 5 Maximum Points 10 Quality Score 50.00% 81

82 Revenue Projections, Other DSRIP Projected to cover DSRIP projected expenses This may not be the case as DSRIP funding is often earned based on performance and meeting metrics To be received 3 months after each 6-month reporting period Other Revenue (not projected) Potential additional patient service revenue to be generated from new care team members (RN Care Managers, LCSWs) Depends on services provided Whether payors will reimburse for care management services (e.g. Medicare) HRSA Quality Improvement awards This same team and its objectives are aligned with HRSA s quality measures and their efforts could result in additional grant funding 82

83 Monthly Financial Projection (Year One) Year One: Description Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Totals MCO/MassHealth 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12, ,000 TOTAL MEMBERS 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12, ,000 Operating Revenue: Care Management Fee (PMPM) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50, ,000 Surplus/Risk-sharing 120, ,000 Other - DSRIP 75,000 75,000 TOTAL OPERATING REVENUE 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50, , ,000 50,000 50, ,000 Operating Expenses Salaries and wages 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39,792 39, ,500 Fringe 20% 7,958 7,958 7,958 7,958 7,958 7,958 7,958 7,958 7,958 7,958 7,958 7,958 95,500 Total Personnel Costs 47,750 47,750 47,750 47,750 47,750 47,750 47,750 47,750 47,750 47,750 47,750 47, ,000 Contracted services ACO/MSO costs - DSRIP Project Implementation 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12, ,000 Oursourced Technology Solution 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 3,125 37,500 Total Contracted Services 15,625 15,625 15,625 15,625 15,625 15,625 15,625 15,625 15,625 15,625 15,625 15, ,500 Prog 15% 9,506 9,506 9,506 9,506 9,506 9,506 9,506 9,506 9,506 9,506 9,506 9, ,075 TOTAL OPERATING EXPENSES 72,881 72,881 72,881 72,881 72,881 72,881 72,881 72,881 72,881 72,881 72,881 72, ,575 SURPLUS (LOSS) (22,881) (22,881) (22,881) (22,881) (22,881) (22,881) (22,881) (22,881) 52,119 97,119 (22,881) (22,881) (79,575) Cumulative Surplus (Loss) (22,881) (45,763) (68,644) (91,525) (114,406) (137,288) (160,169) (183,050) (130,931) (33,813) (56,694) (79,575) The VBP/QI department should be viewed as its own profit center! 83

84 Annual Cash Flows Years One through Three Year One Year Two Year Three Description Amount PMPM Amount PMPM Amount PMPM MCO/MassHealth 150, , ,000 TOTAL MEMBER MONTHS 150, , ,000 Operating Revenue: Care Management Fee (PMPM) 600,000 $ ,000 $ ,000 $4.00 Surplus/Risk-sharing 120,000 $ ,680 $ ,809 $6.31 Other - DSRIP 75,000 $ ,000 $ ,000 $0.33 TOTAL OPERATING REVENUE 795,000 $5.30 1,188,680 $7.92 1,595,809 $10.64 Operating Expenses Total salaries and wages 477,500 $ ,825 $ ,580 $3.38 Fringe 20% 95,500 $ ,365 $ ,316 $0.68 Contracted services ACO/MSO Costs - $ $ $0.00 DSRIP Project Implementation 150,000 $ ,000 $ $0.00 Outsourced Technology Solution 37,500 $ ,500 $ ,500 $0.25 Program 15% 114,075 $ ,154 $ ,809 $0.65 TOTAL OPERATING EXPENSES 874,575 $ ,844 $ ,205 $4.95 SURPLUS (LOSS) (79,575) ($0.53) 351,837 $ ,604 $

85 Monthly Cumulative Cash Position Years One through Three Year One Year Two Year Three Jan (22,881) (99,312) 260,411 Feb (45,763) (119,049) 248,561 Mar (68,644) (63,786) 286,710 Apr (91,525) (83,523) 274,860 May (114,406) (103,260) 263,009 Jun (137,288) (122,997) 251,159 Jul (160,169) 37, ,829 Aug (183,050) 17, ,978 Sep (130,931) 47, ,128 Oct (33,813) 311,735 1,149,567 Nov (56,694) 291,998 1,137,716 Dec (79,575) 272,262 1,125,866 The VBP Dilemma Need for upfront capital and maintain a reserve! 85

86 Monthly Cumulative Cash Position Reduced Care Management Fee Care Management Fee at $3 PMPM Year One Year Two Year Three Jan (35,381) (261,812) (52,089) Feb (70,763) (294,049) (76,439) Mar (106,144) (251,286) (50,790) Apr (141,525) (283,523) (75,140) May (176,906) (315,760) (99,491) Jun (212,288) (347,997) (123,841) Jul (247,669) (200,234) 277,329 Aug (283,050) (232,471) 252,978 Sep (243,431) (214,708) 228,628 Oct (158,813) 36, ,567 Nov (194,194) 4, ,216 Dec (229,575) (27,739) 675,866 86

87 Monthly Cumulative Cash Position No Interim Settlement Year One Year Two Year Three Jan (22,881) (219,312) (23,269) Feb (45,763) (239,049) (35,119) Mar (68,644) (183,786) 3,030 Apr (91,525) (203,523) (8,820) May (114,406) (223,260) (20,671) Jun (137,288) (242,997) (32,521) Jul (160,169) 37, ,829 Aug (183,050) 17, ,978 Sep (130,931) 47, ,128 Oct (153,813) 28, ,277 Nov (176,694) 8, ,427 Dec (199,575) (11,419) 605,576 87

88 Financial and Operational Key Considerations Key assumptions in financial model to refine Services provided by FQHC versus ACO Populations served (risk stratification) Staff required and staffing ratios DSRIP projects cost versus revenue Care coordination/management revenue PMPM ACO distributions from MCO VBP arrangements ACO distribution methodology MCO surplus-sharing model Other revenue opportunities 88

89 Financial and Operational Key Considerations ACO payment models/distribution methodologies DSRIP Negotiate for DSRIP waiver funds specifically impacted/earmarked for health centers Bump in DSRIP award PMPM for safety net providers Funds earmarked by MassHealth for investment in primary care Actively engage in conversations concerning services provided at the ACO versus locally at provider sites Care coordination/management services Stay active in the development of the budget and funds flow methodology Projects the health center will impact (know your cost) Workforce Technology If a care coordination/management PMPM fee is developed, understand your cost and how it will transition to VBP 89

90 Financial and Operational Key Considerations ACO payment models/distribution methodologies MCO/MassHealth surplus distribution methodology Make sure your value is recognized (attributed members, quality) Understand dollars that are retained before the total pool available for distribution is determined Stay involved in discussions on the design of the distribution methodology Separation of pools (e.g. participation versus performance) Distribution formulae Attributes (attributed lives, quality, participation, etc.) Evaluate the reasonableness of the quality benchmarks Stay active in VBP contract negotiations with MCOs/MassHealth as they impact your financial model! 90

91 Financial and Operational Key Considerations ACO payment models/distribution methodologies MCO/MassHealth surplus distribution methodology Year One: Example of distribution pool design 91 TOTAL Amount of surplus distribution 1,000,000 Less: ACO retention for infrastructure/reserves (200,000) Less: Repayment of capital - Balance remaining for performance incentive pools 800,000 Allocation between pools: Participation Quality Percentage 50% 50% Amount 800, , ,000 Year Two: TOTAL Amount of surplus distribution 2,000,000 Less: ACO retention for infrastructure/reserves (400,000) Less: Repayment of capital - Balance remaining for performance incentive pools 1,600,000 General Population General Population 1,000,000 (200,000) - 800,000 1,500,000 (300,000) - 1,200,000 Allocation between pools: Participation Quality Percentage 30% 70% Amount 1,600, , ,000

92 Financial and Operational Key Considerations ACO payment models/distribution methodologies MCO/MassHealth surplus distribution methodology Example of distribution formulae Participation Pool Health Center FQHC A Attribute Met? Attribute Score Attribute 1 - Attribute 2 - Attribute 3 - #1 #2 #3 Total Y Y Y 33.3% 33.3% 33.3% 100.0% Health Center FQHC A Total # of Members % of Total Members Amount Available Participation Score Amount Earned 12, % $ 77, % $ 77,101 64, % $ 400,000 $ 400,000 Health Center FQHC A Total Performance/Quality Pool # of Members % of Total Members 92 Amount Available Quality Score Total Amount to be Distributed $ $ 12, % $ 115, % 57,826 64, % $ 600, ,679

93 Financial and Operational Key Considerations Use financial model to inform MCO/MassHealth VBP negotiations Utilize key assumptions in financial model around surplus-sharing and risk-sharing arrangements when developing negotiation strategies Monthly care management/infrastructure fee (PMPM) Benchmarks Use of historic claims data versus Medical Loss Ratios (MLRs) Future adjustments to benchmarks Surplus-sharing and risk-sharing %s Transitioning from surplus- to risk-sharing Quality adjusters/modifiers Risk mitigating factors Reserves versus risk corridors, carve-outs and stop-loss Timing of payments Interim versus final distributions 93