Evolving Payment Methods EVOLVING PAYMENT METHODS Melinda Hancock National HFMA Chair Elect January 23, 2015
Medicare IP Reductions OCT OCT OCT OCT OCT OCT OCT OCT OCT 2012 2013 2014 2015 2016 2017 2018 2019 2020 Value Based Purchasing 1.0% 1.25% 1.5% 1.75% 2.0% 2.0% 2.0% 2.0% 2.0% Readmission Reduction Program 1.0% 2.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Hospital Acquired Conditions 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 2.0% 3.25% 5.5% 5.75% 6.0% 6.0% 6.0% 6.0% 6.0% Market Basket Reductions 0.1% 0.3% 0.2% Multifactor Productivity Adj * 0.7% 0.5% 0.5% Documentation & Coding Adj (DCA) ** 1.0% 0.8% 0.8% 1.8% 1.6% 1.5% Sequestration 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% TOTAL IMPACT 5.8% 6.9% 9.0% % = % of Medicare inpatient operating payments * The Multifactor Productivity Adjustments is an estimate generated by the CMS Office of the Actuary **DCA, also known as the behavioral offset. 2
Revenue Industry Transformation Time How do local market conditions impact timing considerations? Can market-changing events create an urgent paradigm shift? What is my step-change business model risk? Do I have the financial tools to adequately analyze relevant states? 3
ACA Estimated Gains Through 2019:$64.4B Amounts in Billions Ind Pmt Advisory Bd $15.5 Excise Tax on High Cost Ins Plans $32.0 HAC Penalties Pt Centered Outcomes Research $1.4 $2.2 Readmission Penalties $7.1 CMMI ACOs $1.3 $4.9 $0 $5 $10 $15 $20 $25 $30 $35 Source:CBO and Joint Committee on Taxation, 2010 Projection
The Continuum of Risk Source: Hancock, M., Hannah, B. Determining Your Organization s Risk Capability, HFM, May 2014. 5
Alignment of Strategy and Metrics Questions to Ask: How many metrics am I tracking? How many metrics are duplicated? Do they have the same numerator and denominator? Source? Are they aligned with our results and strategic goals? What contracts are coming up for renewal that should have new metrics or should be at risk (mgd care, medical directorships, PMAs, etc.) What are we focused on?
Mandatory and Voluntary Programs Mandatory Value Based Purchasing Readmission Reduction Program Hospital Acquired Conditions SNF Value Based Purchasing Physician Value Based Modifier Comprehensive APCs Voluntary Patient Centered Medical Home Bundled Payment for Care Improvement Medicare Shared Savings Physician Group Practice Transition Demonstration Transforming Clinical Practices Initiative Many more on Innovation website 7
VBP Shifting of Domain Weights FY 2013 FY 2014 FY 2015 FY 2016 Core Measures Patient Experience Outcomes Efficiency (MSPB)
New NQS Based Domains for FY 2017 HCAHPS = 25% Clinical Care - Process = 5% Clinical Care - Outcomes = 25% Safety = 20% MSPB = 25% 12
Reform Timeline
VBP FY 2017 Patient Experience Communication with Nurses Communication with Doctors Responsiveness of Hospital Staff Pain Management Communication about Medicines Cleanliness and Quietness of Hospital Discharge Information Overall Rating of Hospital
VBP FY 2016 Core Measures AMI-7a PN-6 SCIP-Inf-2 SCIP-Inf-3 SCIP-Inf-9 SCIP-Card-2 SCIP-VTE-2 IMM-2
VBP FY 2017 Clinical Care: Process AMI-7a IMM-2 PC-01 PC-01 = Elective Delivery Prior to 39 Completed Weeks Gestation
VBP FY 2017 Clinical Care and Safety Clinical Care- Outcomes Safety 30 Day Mortality AMI 30 Day Mortality HF 30 Day Mortality PN AHRQ PSI-90 CLABSI CAUTI SSI-Colon SSI-Abdominal Hyster. MRSA C. Diff
VBP FY 2017 - Efficiency Medicare Spend Per Beneficiary (MSPB) Captures total Medicare Spending Per Beneficiary relative to a hospital stay, bundling hospital sources (Part A) with post acute care (Part B) Bundles the cost of care delivered to a beneficiary for an episode across the continuum of care: 3 Days Prior Hospital Inpatient Stay 30 Days post Discharge
VBP: MSPB Sample US
VBP: MSPB 17
PROPOSED MSPB Measures Additional Efficiency Measures proposed to be added Medical Kidney/Urinary Tract Infection Cellulitis Surgical Hip replacement/revision Knee replacement/revision Gastrointestinal hemorrhage Lumbar spine fusion/refusion Risk Adjusted similarly to MSPB Proposed to facilitate alignment with the Physician Value Based Payment Modifier program Includes Part A and B and 3 days prior to admission and 30 days post discharge SOURCE: May 1, 2014 Federal Register 18
VBP FY'13 FY'15 TOTAL PERFORMANCE Earned Back Unearned Available $$ % Earned CGH System $4,925,357 $288,853 $6,187,541 $540,406 $11,112,898 $829,259 34.83% 44.32% $288,853 $4,925,357 Breakeven Point: $5,301,360 Breakeven Point: $451,333 $0 $0 $829,259 $11,112,898 Chesapeake Overall General Performance Performance System was penalized $376,003 in FY 15 VBP Program Must acknowledge the amount UNEARNED Of the programs dollars made available: System did not capitalize on $6,187,541
Core Measures Earned Back Unearned Measure Value % Earned Facility $381,643 $218,077 $599,720 63.64% Outcomes Earned Back Unearned Measure Value % Earned Facility $539,763 $359,837 $899,600 60.00% Breakeven Point: $232,525 $381,643 Breakeven Point: $348,788 $539,763 $0 $599,720 $0 $899,600 HCAHPS Earned Back Unearned Measure Value % Earned Facility $278,896 $620,704 $899,600 31.00% $278,896 Breakeven Point: $348,788 Efficiency Earned Back Unearned Measure Value % Earned Facility $59,974 $539,746 $599,720 10.00% Breakeven Point: $232,535 $59,974 $0 $899,600 $0 $599,720
Facility Bonus / (Penalty) Total Score State Average National Average National Δ Facility A $97,593 42.03 41.81933117 41.70169535 0.325577377 Core Measures HCAHPS Measure Score Amount Earned by Measure Amount Unearned by Measure % of Measure Earned AMI-8a 6 $ 32,712 $ 21,808 60.00% SCIP-Inf-1 9 $ 49,068 $ 5,452 90.00% SCIP-Inf-2 7 $ 38,164 $ 16,356 70.00% SCIP-Inf-3 5 $ 27,260 $ 27,260 50.00% SCIP-Inf-4 9 $ 49,068 $ 5,452 90.00% SCIP-Inf-9 5 $ 27,260 $ 27,260 50.00% HF-1 8 $ 43,616 $ 10,904 80.00% PN-3b 5 $ 27,260 $ 27,260 50.00% PN-6 8 $ 43,616 $ 10,904 80.00% SCIP-Card-2 3 $ 16,356 $ 38,164 30.00% SCIP-VTE-2 5 $ 27,260 $ 27,260 50.00% Core Measures TOTAL $ 381,643 $ 218,077 63.64% Comm. w/ Nurses 2 $ 17,994 $ 71,966 20.00% Comm. w/ Doctors 1 $ 8,998 $ 80,962 10.00% Resp. of Hosp. Staff 2 $ 17,994 $ 71,966 20.00% Pain Management 2 $ 17,994 $ 71,966 20.00% Comm. Re: Medicines 1 $ 8,998 $ 80,962 10.00% Clealiness & Quietness 2 $ 17,994 $ 71,966 20.00% Discharge Information 3 $ 26,990 $ 62,970 30.00% Overall Rating 1 $ 8,998 $ 80,962 10.00% Consistency Score 17 $ 152,933 $ 26,987 85.00% HCAHPS TOTAL $ 278,896 $ 620,704 31.00% Outcomes Efficiency AMI 10 $ 179,920 $ (0) 100.00% HF 3 $ 53,980 $ 125,940 30.00% PN 8 $ 143,934 $ 35,986 80.00% AHRQ PSI-90 9 $ 161,928 $ 17,992 90.00% CLABSI 0 $ 0 $ 179,920 0.00% Outcomes TOTAL $ 539,763 $ 359,837 60.00% MSPB 1 $ 59,974 $ 539,746 10.00% Efficiency TOTAL $ 59,974 $ 539,746 Facility TOTAL $ 1,260,277 $ 1,738,363 42.03%
Pain Management 2 $ 17,994 $ 71,966 20.00% Comm. Re: Medicines 1 $ 8,998 $ 80,962 10.00% Clealiness & Quietness 2 $ 17,994 $ 71,966 20.00% Discharge Information 3 $ 26,990 $ 62,970 30.00% Overall Rating 1 $ 8,998 $ 80,962 10.00% Drilldown on Outcomes Consistency Score 17 $ 152,933 $ 26,987 85.00% HCAHPS TOTAL $ 278,896 $ 620,704 31.00% Outcomes Efficiency AMI 10 $ 179,920 $ (0) 100.00% HF 3 $ 53,980 $ 125,940 30.00% PN 8 $ 143,934 $ 35,986 80.00% AHRQ PSI-90 9 $ 161,928 $ 17,992 90.00% CLABSI 0 $ 0 $ 179,920 0.00% Outcomes TOTAL $ 539,763 $ 359,837 60.00% MSPB 1 $ 59,974 $ 539,746 10.00% Efficiency TOTAL $ 59,974 $ 539,746 Variation within the Domain: Facility TOTAL $ 1,260,277 $ 1,738,363 42.03% Maxed out on AMI Mortality and then got a 0 on CLABSI
Florida VBP FFY 13-15 1.015 1.01 1.005 Bonus 1 0.995 0.99 FFY 13 FFY 14 FFY 15 Penalty 23
FY 19 New Measure Added THA/TKA for 30 month performance period. January 1, 2015-June 30, 2017 Baseline of July 1, 2010-June 30, 2013 Risk standardized measure for complications after Total Hips and Knees surgeries for up to 90 days post surgery One of eight complications: AMI, pneumonia, sepsis, SSI, PE, death, mechanical complication or periprosthetic joint infection/wound infection. Each has a defined time frame Each is a Yes or No Risk adjusted for patient age, sex and comorbidities SOURCE: August 2014 Proposed Rules Federal Register 24
Reform Timeline
Readmission Reduction Program 9% of Current and Future Medicare Reimbursement at Risk 3% penalty of Medicare Reimbursement at risk each program year Measured Populations 30 days from DISCHARGE AMI, HF, PN, COPD, THA & TKA August 2014: CABG Added to FY 2017 Performance Periods: 3 Year Rolling Program FY 15: July 1, 2010 June 30, 2013 3% FY 16: July 1, 2011 June 30, 2014 3% FY 17: July 1, 2012 June 30, 2015 3% FY 18: July 1, 2013 June 30, 2016 3% FY 19: July 1, 2014 June 30, 2017 3% Currently participating in 3 performance periods simultaneously
How are Readmissions Measured? Scoring Index based at 1.0 Calculate Excess Readmission Ratio Facility Predicted Value Facility Expected Value Excess Readmission Ratio > 1 = BAD Excess Readmission Ratio < 1 = GOOD
100240 100117 100071 100002 100200 100254 100258 100277 100090 100118 100057 100266 100081 100073 100048 100099 100181 100150 100043 100230 100063 100122 100212 100176 100028 100256 100087 100132 100075 100307 100001 100315 100314 100291 Florida RRP Penalties FFY 13-15 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% FFY 13 FFY 14 FFY 15 28
Hospital Acquired Conditions 12 Hospital Acquired Conditions Identified Divided in to 2 Domains If a hospital is in the BOTTOM QUARTILE (worst performing 25% in the country), it will be penalized a FULL 1% of Medicare Reimbursement Penalties will begin FY 15 (beginning October 1, 2014) *1% After DSH, Uncompensated Care, and IME
Hospital Acquired Conditions: FY 15 First Domain: PSIs Performance Period: 7/1/11-6/30/13 Pressure Ulcer Rate Foreign Object Left in Body Second Domain: CDC Performance Period: CY 2012 & 2013 CLABSI CAUTI Iatrogenic Pneumothorax Rate Postoperative Physiologic and Metabolic Derangement Rate Postoperative Pulmonary Embolism and Deep Vein Thrombosis Rate Accidental Puncture and Laceration Rate
HAC Domain Weightings: FY 15 DOMAIN 1: 35% DOMAIN 2: 65% Pressure Ulcer Rate: 8.33% CLABSI: 32.5% Foreign Object Left In Body: 8.33% CAUTI: 32.5%
Hospital Acquired Conditions: FY 2016 First Domain: PSIs 25% Second Domain: CDC 75% Pressure Ulcer Rate Foreign Object Left in Body CLABSI CAUTI Iatrogenic Pneumothorax Rate SSI Following Colon Surgery (FY 2016) Postoperative Physiologic and Metabolic Derangement Rate SSI Following Abdominal Hysterectomy (FY 2016) Postoperative Pulmonary Embolism and Deep Vein Thrombosis Rate Accidental Puncture and Laceration Rate
HAC Domain Weightings: FY 16 DOMAIN 1: 25% DOMAIN 2: 75% Pressure Ulcer Rate: 5.83% CLABSI: 32.5% SSI: 32.5% CAUTI: 32.5% 33
Hospital Acquired Conditions: FY 2017 First Domain: PSIs Second Domain: CDC Pressure Ulcer Rate Foreign Object Left in Body CLABSI CAUTI Iatrogenic Pneumothorax Rate SSI Following Colon Surgery (FY 2016) Postoperative Physiologic and Metabolic Derangement Rate Postoperative Pulmonary Embolism and Deep Vein Thrombosis Rate SSI Following Abdominal Hysterectomy (FY 2016) Methicillin-Resistant Staphylococcus Aureus (MRSA) Bacteremia (FY 2017) Accidental Puncture and Laceration Rate Clostridium Difficile (FY 2017)
Reform Timeline
Penalties & Your DRG Payment SAMPL IPPS Reimbursement Letter PPS EFFECTIVE 10/1/2014 DRG Weight 1.00 Facility CMI 1.54 OPERATING INFORMATION Federal National Standardized Labor Rate 3,329.57 Wage Index 0.8994 Labor Rate x Wage Index 2,994.62 Federal National Standardized Non-Labor Rate 2,040.71 PPS Blended Rate 5,035.33 FY 2015 Hospital Readmissions Reduction (HRR) Adjustment Factor 0.9994 5,032.30 ($3.02) RRP Reduction FY 2015 Value-Based Purchasing (VBP) Adjustment Factor 0.994348 5,003.86 ($28.44) VBP Reduction ($31.46) Per DRG Reduction ($31.46) x 1.54 Disproportionate Share Adjustment (Operating) (Empirically Justified Amount 25%) 0.0691 0.02 5,090.43 Disproportionate Share Adjustment (Operating) (Uncompensated Care Amount) 507.71 5,598.14 Fully Loaded Operating Rate adjusted for CMI 8,346.97 FY 2015 Hospital Acquired Condition (HAC) Adjustment Factor 0.99 8,263.50 ($48.45) ($83.47) VBP & RRP Per DRG Red. CMI Adj HAC Per DRG CMI Adjusted ($131.92) Total Per DRG Reduction
Florida HAC Scores: FFY 15 10 9 8 7 Penalized 6 5 4 3 2 1 0 37
Thoughts from John Glaser, CEO Under payment models that reward efficiency and high-quality care, if a hospital or health system is losing money due to inadequate clinical performance, it cannot afford to wait one or more months to find out the problem. Healthcare leaders should understand how their organizations are performing today so they can take corrective action before revenue loss becomes a hemorrhage. -May 2014 HFM Magazine
Risk Capability Risk management in an efficient and profitable organization Educated patients with accountability who utilize services appropriately Incentivized providers that manage quality and costs Best practices for patient-centered care Maximize portfolio reimbursement to foster financial success Integrated provider network that enhances the continuum of care and creates value Provider criteria with defined metrics to ensure compliance 39
Medicare Shared Savings Program Strong growth in MSSP since 2012 inception Now an annual enrollment process Timeline of enrollees Growth in beneficiaries 40
Fundamentals of the MSSP Program Explanation Of How MSSP Works And Are Structured. DESIGN ELEMENT ONE-SIDED MODEL TWO-SIDED MODEL SHARED SAVINGS PAYMENT CYCLE Sharing Rate Up to 50% based on quality performance Up to 60% based on quality performance Minimum Savings Rate (MSR) Varies by number of assigned beneficiaries 2% Shared Savings Method First dollar sharing once MSR is met or exceeded First dollar sharing once MSR is met or exceeded Maximum Sharing Cap Total shared savings payments cannot exceed 10% of benchmark Total shared savings payments cannot exceed 15% of benchmark Minimum Loss Rate None ACO repays share of all losses if expenditures are more than 2% higher than benchmark Shared Loss Rate None One minus final sharing rate applied once minimum loss rate is met; loss rate is capped at 60% Maximum Loss Cap None Losses capped at 5%, 7.5%, 10% in years 1, 2, 3, respectively Health Care Advisory Board, 2012 41
Fundamentals of the MSSP Program Health Care Advisory Board, 2012 42
Fundamentals of the MSSP Program Health Care Advisory Board, 2012 43
MSSP Early Results Summary of the early results http://www.brookings.edu/blogs/up-front/posts/2014/09/22-medicare-aco-results-mcclellan 44
ACO Investment Model AIM class starting with 2016 Current MSSP participants can join from 2012, 2013 and 2014 Three payment streams for 2016 class: An upfront, fixed payment: Each ACO receives a fixed payment. An upfront, variable payment: Each ACO receives a payment based on the number of its preliminarily prospectively-assigned beneficiaries. A monthly payment of varying amount depending on the size of the ACO: Each ACO receives a monthly payment based on the number of its preliminarily prospectively-assigned beneficiaries. During the selection process, the ACO Investment Model will target new ACOs serving rural areas and areas of low ACO penetration and existing ACOs committed to moving to higher risk tracks. 45
On December 1, CMS Proposed a 3 rd Track: MSSP Proposed Expansion Issue Track 1: current Track 1: Proposed Track 2: current Track 2: Proposed Track 3: Proposed Risk One Sided No change Two Sided No change Two Sided Transition To Two Sided Assignment 1 st agreement is one sided but subsequent are two sided Preliminary prospective assignment for reports. Retrospective assignment for financial reconciliation Remove requirement to transition to two sided Can go straight into two sided but cant go back to track 1. No change Same as Track 2 No change Same as Track 1 No change Prospective assignment for reports and financial reconciliation Benchmarks Quality Sharing Rate Reset at the start of each agreement period Up to 50% based on quality Seeking alternatives Same as Track 1 Seeking alternatives Up to 50% based on quality for 1 st agreement period, reduced 10 % points for each subsequent pd under this model Up to 60% based on quality No change Same as Track 1 and seeking alternatives MSR/PPL 2%-3.9%/10% No change 2%/15% No change 2%/20% Loss Sharing Limit N/A No change 5% Yr 1, 7.5% Yr 2, 10% Yr 3 No change 15% Up to 75% based on quality 46
Bundled Payments There are 4 models to choose from and each one has its unique attributes MODEL 1 MODEL 2 MODEL 3 MODEL 4 MODEL NAME Retrospective Acute Care Hospital Stay Only Retrospective Acute Care Hospital Stay plus Post-Acute Care Retrospective Post-Acute Care Only Acute Care Hospital Stay Only SCOPE OF EPISODES Entire Hospital Up to 48 Episodes Up to 48 Episodes Up to 48 Episodes SERVICES INCLUDED IN EPISODES All Part A services paid as part of the MSDRG Payment All non-hospice Part A and B services during the initial inpatient stay, post-acute period and readmissions All non-hospice Part A and B services during the post-acute period and readmissions All non-hospice Part A and B services (including the hospital and physician) during initial inpatient stay and readmissions PAYMENT Retrospective Retrospective Retrospective Prospective BPCI DISCOUNT 0.5%, and increasing over time 2-3% 3% 3-3.25% NUMBER OF ADMITTED BPCI HEALTHCARE ORGANIZATION S AS OF 7/31/14 19 2,055 4,534 17 Note: Model 1 is on a different implementation timeline than Models 2, 3 and 4. 47
Fundamentals of the Program CMS created 48 Episodes, each with up to 15 individual MS-DRG codes DHG categorized Episodes into 9 Service Lines; illustrative purposes only Model 2, 3, or 4 applicants may select 1-48 Episodes for testing Spine (5) Cardiac Services (12) Vascular Services (3) DHG Category: Vascular Services Episode: Major cardiovascular procedure MS-DRGs 237 & 238 Orthopedics (10) Neurology (2) Oncology / Hematology (1) Episode: Medical peripheral vascular disorders MS-DRGs 299, 300, & 301 Episode: Other vascular surgery Pulmonology (3) General Surgery (2) General Medicine / Internal Medicine (10) MS-DRGs 252, 253, & 254 http://innovation.cms.gov/initiati ves/bundled-payments/ 48
Fundamentals of the Program: Medicare Gain Sharing 2009-2012 2014 Historical Cost Per Episode $12,500 Update factor For illustration: 3% inflation/yr Discount = 3% Target Price $13,647 Quality Metrics Physicians (35%) $86 Settlement (Per Case) $247 Quality Metrics Environment of Care - Hospital (40%) $99 BPLN Episode Definitions Risk Adjustment Actual FFS Cost during Performance Period $13,400 Quality Metrics Environment of Care - Post-acute (25%) $62 49
Fundamentals of the Program Another Opportunity for Savings: Internal Cost Savings Must achieve Internal Cost Savings as compared to established baseline cost data while meeting Quality Targets and Care Redesign criteria Only Physicians directly related to the patient in chosen episodic MSDRG s are eligible for Internal Cost Savings Pool Physician can be reimbursed up to 50% of achieved Internal Cost Savings Savings are calculated on an individual Physician basis to most accurately reward individual savings efforts Example: A Physician experiences $25,000 of savings over baseline $25,000 x 50% = $12,500 $12,500 is the maximum bonus amount to be earned by this individual 50
Strategic vs Financial Implications All payment models should fit within Strategic Objectives 51
Outpatient Bundling/OCM Summary of additional Bundled Models Comprehensive APCs Oncology Care Model 25 Comprehensive APCs Effective 1/1/15 Mandatory for all OPPS hospitals Up to 6 months of care Key to success will be management of internal cost structure Covers outpatient chemotherapy care for up to 6 months For Oncology physician practices Several participation requirements Open to other payers to participate Includes Part A, B and D Performance Based Measures and Quality Monitoring Measures 52
Commercial Efforts 53
Commercial Movements Anthem Blue Cross Blue Shield Saved $155M over 3 years through PCMH Various quality improvement initiatives Examples: Michigan, Wisconsin United Healthcare $20B in reimbursement tied to quality and cost efficiency wants it to be $50B by 2017 Accountable care and value based contracts with more than 575 hospitals and 75,000 physicians Example: Texas Aetna 2.3 million members served by value based health care models Provider combinations, PCMH, accountable care 54
State Initiatives Arkansas Tennessee Ohio Colorado Alabama 55
Organizational Success Factors Planning ahead Collaboration among clinical and financial Ability to operationalize data Alignment of goals Mainstreamed and not a project Leadership focus Integration of other projects and objectives 56
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