How To Develop A Case Rate: A Guide To Bundled Payments

How To Develop A Case Rate: A Guide To Bundled Payments The 2018 OPEN MINDS Strategy & Innovation Institute June 5, 2018 2:30 3:45 PM Ken Carr, Senior Associate, OPEN MINDS Paul Duck, Principal & Consultant, Paul M. Duck, LLC #OMInnovation 1 www.openminds.com 15 Lincoln Square, Gettysburg, Pennsylvania 17325 Phone: 717-334-1329 - Email: info@openminds.com 2018. All Rights Reserved.

Agenda I. Overview of Bundled Rates II. III. IV. Examples of Successful Case Rate Contracting Models A Guide To Developing Case Rates - Paul Duck, Principal & Consultant, Paul M. Duck, LLC Questions & Discussion 2 2018. All Rights Reserved.

Overview Of Bundled Rates

Emerging Framework For Integrated Care Coordination Behavioral health system optimization is central to success and value-based reimbursement key to that optimization At Risk For Population Health Management Managed Care Programs & Health Plans Accountable Care Organizations Bundled payments create payment flexibility to implement integration and care coordination Medical Homes & Specialty Medical Homes At Risk For Individual Health Management Specialized Disease Management Program 4 2018. All Rights Reserved.

Transition From Volume To Value Payments For Provider Organizations Compensation By Level Of Financial Risk Small % Of Financial Risk Moderate % Of Financial Risk Large % Of Financial Risk Fee-forservice Performance -Based Contracting Bundled & Episodic Payments Shared Savings Shared Risk Capitation Capitation + Performance -Based Contracting No Financial Accountability Moderate Financial Accountability Full Financial Accountability Management Via 100% Case By Case External Review Internal Ownership Of Performance Using Internal Data Management Passive Involvement Provider Engaged Provider Active In Management Provider Assumes Accountability 5 2018. All Rights Reserved. Bundled payments reflect a moderate level of provider risk and accountability for outcomes within the contracted bundled rate.

With Value-Based Reimbursement Components How Does A Provider Use Value-Based Reimbursement In Market Positioning? Specialist positioning Case Rates & Bundled Rates Comprehensivist positioning Medical Homes & Specialty Medical Homes Capitation &/Or Population Health Gainsharing Arrangements 6 2018. All Rights Reserved.

What Is A Bundled Payment? A single payment for a specific episode of care for a specific treatment, or services during a defined period of time Bundled Rate a single comprehensive payment for a group of related services Case Rate a form of bundled payment to cover services of a specific consumer based on the average cost of all services Episodic Rate includes payment for services for treatment of a specific condition over time in one rate Example: Monthly rate for Assertive Community Treatment services Example: Behavioral Health Home per diem rate Example: Comprehensive ayment for entire MAT course of treatment 7 2018. All Rights Reserved.

Steps To Develop A Case Rate 1. Define The Service The Payer Wants 2. Build The Components Of The Service 3. Identify The Cost Drivers 4. Tie Cost Drivers To Costs 5. Calculate The Unit Rate 6. Create Productivity Standards 7. Perform Scenario Analysis To Reduce Costs 8 2018. All Rights Reserved.

Step #1: Define The Service The Payer Wants Need to understand the service the payer wants to build the cost of the service, including: Service definition Staffing ratio requirements Credentialing requirements Authorizations and billing method Reporting Collaboration and integration expectation (drive technology) Marketing 9 2018. All Rights Reserved.

Step #1: Define The Service The Payer Wants Service Requirement Staffing ratio Credentialing Authorizations & Billing Methods Reporting Collaboration & Integration Intake Impact On Unit Costs If not defined by the payer, can give flexibility to the provider in balancing quality and costs. Can give direction to the types of staffing costs required, with a focus on licensed staff working at the highest level of their license. Payer requirements for authorizations can drive additional staffing costs; bundled case rates take fewer resources to implement than hourly rates. Payer defined reporting requirements may take additional technology resources. Additional costs will be incurred for HIPAA and technology to implement collaboration and integration requirements. Marketing Reaching the full market will require marketing efforts call center, website, marketing initiatives. 10 2018. All Rights Reserved.

Step #2: Build The Components Of The Service Salaries Types of positions Staffing ratios for each position Market rates for each position need to attract quality candidates Fringe benefits and payroll taxes identify as a percentage of salaries Position Staff/Client Ratio Market Salary Benefits LCSW 50 $60,000 $15,000 Care Coordinator 25 $30,000 $7,500 11 2018. All Rights Reserved.

Step #2: Build The Components Of The Service Expenses Tied To Staff Mileage reimbursement Cell phone reimbursement Laptop Access to EHR Expense Driver Unit Cost Mileage 100 miles per client per month $.55 Cell Phone Per month $60 Laptop Cost allocated over 36 months $1,200 EHR Fee per staff member per month $25 12 2018. All Rights Reserved.

Step #2: Build The Components Of The Service Other Expenses Supplies Office space Program support direct or as a percentage of direct costs Management & general expenses When building a new program, be careful not to build in excessive infrastructure costs Fully-loaded costs Marginal costs 13 2018. All Rights Reserved.

Step #4: Tie Cost Drivers to Costs Tie drivers to costs Identify the number of clients to be served each month Separate by start-up/buildup period, and fully implemented timeframes Tie staff FTEs needed to clients served Build costs based on staff FTEs needed Fringe - % of staff Working space based on number of staff needed at maximum number of clients served Oher expenses tied primarily to staffing Identify types of expenses Variable expenses Fixed expenses 15 2018. All Rights Reserved.

Step #4: Tie Cost Drivers To Costs Driver Jan Feb Mar Apr Clients 50 75 100 125 LCSW $60,000 $120,000 $120,000 $180,000 Care Coordinator $60,000 $90,000 $120,000 $150,000 Mileage $2,500 $3,750 $5,000 $7,500 Cell $180 $300 $360 $480 16 2018. All Rights Reserved.

Step #5: Calculate The Unit Rate What is the basis of the unit rate? Clients served per month Per Member Per Month Hours by CPT code Bundled or Episodic rate based on time period (day, month) Description Start-Up Period (Average Per Month) Fully Implemented (Average $ Per Month Costs $50,000 $75,000 Clients 500 1,000 Cost Per Member Per Month $100 $75 17 2018. All Rights Reserved.

Step #6: Create Productivity Standards Create Productivity Standards Benchmark to other organizations Benchmark to best practices Model productivity relationship to revenue 18 2018. All Rights Reserved.

Step #7: Perform Scenario Analysis To Reduce Costs Identify the least amount of activity for the expected level of quality Assess the impact of differing staffing levels and client service ratios Identify efficiencies with other expenses Just In Time staffing Route planning technology for community visits Identify excess productivity at specific client service/client ratios levels especially during the start-up phase of a new service 19 2018. All Rights Reserved.

Paul M. Duck, LLC Paul Duck, Principal & Consultant, Paul M. Duck, LLC

How To Develop A Case Rate: A Guide To Bundled Payments

My Goals: 1. Provide an overview of the new payment models 2. Define and explain case rates 3. Talk about case rate rate setting 4. Discuss things to consider when managing under a case rate 5. Talk about a couple of case studies with care rates 6. Talk about the risks under case rates and new payment models

In an era of rapid change, do you ever feel like this guy?

COMPLEXITY Payment Models VALUE-BASED PURCHASING OPTIONS Total Health Outcomes Shared risk on total member experience Behavioral Health Capitation Risk for providers Full behavioral health payment Defined coverage set Episode Bundle Group of services Combined payment Quality goals Defined time period Fee-for-service One service One payment Pay for Performance (P4P) Upside only Key process measures Case Rate Group of services Combined payment Monthly/weekly payment Overtreatment INCENTIVE-BASED TREATMENT RISK Under-treatment

Case Rate Defined Definition: A Case Rate represents a predetermined amount of money paid to a provider organization to cover the average costs of all services needed to achieve a successful outcome for a given defined episode of care for an individual over an agreed upon time period. Example: Goal: Treatment: Length: Cost: Example: An orthodontist charges $5,000 for Phase 1 care Aligned teeth Spacers, braces and retainers 1 to 3 years (depending on the patient s compliance with treatment) Based on the average length of care and type of treatment 100 patients will require 1 year of care 100 patients will require 2 years of care 100 patients will require 3 years of care

What Case Rates are NOT Case Rates are NOT a fixed budget for an individual consumer. Case Rates are an AVERAGE payment for all of the consumers to be served at a given level of care. By definition, some individuals will require MORE care at a given Case Rate Level and some will require LESS care in order to achieve the intended outcomes. Case Rates are meant to provide flexibility to the provider and consumer, not lock them into a rigid box.

Examples Example: A substance abuse agency is paid $3,500 per person for six months to provide recovery services for people stepping down from an inpatient treatment center. Expected short-term outcomes: Sustained sobriety, improved coping skills, no emergency room services Expected long term outcomes: Zero recidivism

What is the payer strategy and motivation? Fee for service billing is difficult to manage and financially sustain For payers like Medicaid, there is a set amount of money budgeted, and a set number of people to cover Case rate math: Total amount of spending Total # of covered lives = Average cost per case

Case Rates Versus Fee for Service Fee for Service Payment for services regardless of outcomes Fixed reimbursement by payer The most units the higher the payment No financial incentive to provide good outcomes Service array restricted by payer Case Rates Payment is the same no matter how many services are rendered Service array is flexible Services can be adjusted to better met the needs of the patient If a provider can achieve outcomes with fewer or less expensive services, provider profits

Understanding Rate Setting Key Questions: What is the defined population being served? How much of the population will you serve? How much reimbursement are you currently receiving by client? What outcomes are you measuring? What service array are leading to good outcomes?

Checklist for Setting Case Rates 1. Define the Population 2. Estimate the Penetration Rate 3. Define the Categories of Care/Episode Types 4. Estimate the Case Mix 5. Estimate the Utilization at Each Level of Care 6. Estimate the Cost per Unit of Service 7. Run the Calculations and Set the Case Rates 8. Identify the Performance Metrics

How to Manage Under Case Rates Part A: Clinical Design Part B: Clinical-Financial Modeling Part C: Implementation and Ongoing Operations

Part A: Clinical Design Step A1: Assessment and Level of Care Design Step A2: Evidence-based and Promising Practices Research Step A3: Clinical Intervention Design Step A4: Utilization Management Guidelines Step A5: Outcome-based Care Model Design Step A6: Training and Coaching Program

Part B: Clinical-Financial Modeling Step B1: Clinical-Financial Model Development Consumers and Consumer Mix Service Hours Caseload Sizes Full Time Equivalents Staffing Costs Overhead Costs Projected Revenue Capacity/Demand and Revenue/Expense Dashboard

Part B: Clinical-Financial Modeling (Continued) Step B2: Clinical-Financial Modeling Step B3: Clinical-Financial Tracking System Design

Part C: Implementation and Ongoing Operations Systems will need to be developed Training Coaching Change management process Utilize a continuous quality improvement framework Use Rapid Cycle Improvement methods Stay flexible Use of analytics CRITICAL SUCCESS FACTOR

Two Case Studies Two case rates developed for two geographies for similar treatments In both cases, there was massive over utilization for treatment of SUD in step-down program In both cases, the payer and provider (both were single providers covering very large geographies) came together and negotiated a case rate. The provider knew they could reduce utilization and the payer wanted to get rid of the financial burden. Under the case rate model, the providers simply increased the number of patients, reduced the services and got the same marginal outcomes. The payers ended canceling the contract in both cases. The moral of the story if someone is trying to cheat the system, moving to a case rate does not solve it!

On Payment Model Shifts Real-life Assessment: Provider confidence in taking on financial risk is notably low Data quality, balance sheet, systems, population size, geography, lack of control Provider s may be overly conservative, but conservative is better than the alternative Helpful distinction between insurance risk and performance risk Higher confidence around performance risk on things you know how to do Be realistic about the trade-offs between risk and administrative flexibility or simplification A deal predicated mostly on performance risk is less likely to yield administrative simplification than a deal predicated on financial risk Sets up a natural partnership opportunity between MBHOs and CMHCs

life = risk #leadershipmatters

@paulmduck paulmduck @paulduck paulduck Paul M. Duck paul@paulduck.com www.paulmduck.com

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