KNOW YOUR BATNA: SHARED RISK AND FUTURE PAYMENT SYSTEMS DISCLOSURES OBJECTIVES

Transcription

1 KNOW YOUR BATNA: SHARED RISK AND FUTURE PAYMENT SYSTEMS Stanley W. Stead, M.D., M.B.A. President, Stead Health Group, Inc. Section Chair, ASA Section on Professional Practice AMA Relative Value Update Committee AMA CPT Assistant Editorial Panel Professor of Anesthesiology and Pain Medicine, UC Davis 1 DISCLOSURES I serve as a health care economic consultant to a variety of entities including: physician practices, hospitals, health systems, universities, states and the US government. I am a major stockholder in my company, Stead Health Group, Inc. This presentation does not contain information or services for which I could derive a financial benefit. 2 2 OBJECTIVES Understand the Economic influences of New Systems Understand Anesthesiology influence on case outcomes and cost Calculating s under New Systems 3 3

2 NEGOTIATION DYNAMICS Reservation Points for: Payers (Buyers) Providers (Providers) Best Alternative to Negotiated Agreement (BATNA) Dividing up the Surplus Bargaining Power in negotiations - follows the Golden Rule Payers Surplus Providers 4 4 COST SHIFTING BETWEEN PAYERS Medicare Medicaid Commercial Total Hospital $! (34.8) $! (16.2) $! 51.0 $! 0.0 (DRG) Physician $! (14.1) $! (23.7) $! 37.8 $! 0.0 (CPT/units) Total $! (48.9) $! (39.9) $! 88.8 $! 0.0 Dollars in Billions MedPAC and Congress recognize there is both Overpayment and Underpayment by Medicare for Professional Services. Source: Fox W, Pickering J. Hospital & Physician Cost Shift: Level comparison of Medicare, Medicaid, and Commercial Payers, 2008, Milliman 5 5 NEGOTIATION BETWEEN PAYERS AND PROVIDERS Providers use CPT/RUC, negotiate the Conversion Factor Outcome depends upon the relative size and power of participants Insurers - Internally are negotiating the total dollars Single dominant commercial insurers overwhelm market Few providers - rates similar to government Multiple larger providers rates may be higher Payer-by-payer negotiations results in very different prices for the same service in the same market Profit and loss depends upon patient mix & efficiency Cost shifting 6 6

3 COMPETITION BETWEEN PROVIDERS FOR PATIENTS Physicians and Hospitals are Marketing to Patients Competition for services covered by insurance is rare Fixed co-payments makes the consumer indifferent to cost differences among providers Consumer co-payment (% of total price) provides some sensitivity High deductible plans make consumers highly sensitive to prices differences on low-cost services, but indifferent to costs exceeding deductibles 7 7 PAYER S ALTERNATIVE APPROACH: Charge the consumer the difference between the highcost and low-cost providers, creating incentives. Requires a change in the patient s benefit structure Assumes providers have equivalent quality Assumes consumers have choices Assumes that prices can be compared before treatment Consumers can compare when payments are bundled, rather than FFS THIS IS OFTEN CALLED QUALITY OR VALUE-BASED 8 8 SETTING PAYMENT LEVELS Two Providers with Equivalent Quality No difference between Providers with Copayment. Significant Difference in Patient Copayment Cost Insurance Share Copay Less Cost Higher-Value Provider Insurance Share Copay Patient Share Lower-Value Provider Cost 9 9

4 FEE FOR SERVICES PAYS MORE FOR BAD OUTCOMES Healthy Patient Continued Health Preventable Condition No Hospitalization $ Fee-for-Service Pays more for Bad Outcomes and Less When People Stay Healthy Acute Care Episode Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions WHICH PAYMENT SYSTEMS ARE BEING CONSIDERED? Full-risk or global capitation traditional insurance risk. Providers accept fixed payment per enrollee, agree to provide unknown future benefits and absorb the costs associated with clinical care. Providers become micro-health insurers with unmanageable risk Source: Cox T, Exposing the True Risks of Capitation Financed Healthcare, Journal of Healthcare Risk Management, 30:34-41, WHICH PAYMENT SYSTEMS ARE BEING CONSIDERED? The overall goal is to incentivize physicians to consider the cost of treatment Fee-for-Service creates the Moral Hazard providing strong financial incentives to deliver more service to more people. Episode single price for all healthcare services needed during an entire episode of care (e.g., all inpatient/outpatient care for hip replacement) Comprehensive Care condition-adjusted capitation, or risk-adjusted global fees with a single price for all services needed by a specific group of people for a fixed period of time (e.g., all care needed for a year for all employees of a company who have chronic diseases such as diabetes) 12 12

5 HOW DIFFERENT PAYMENT MODELS PERFORM No Penalty for Taking Sick Patients Adequate Pay for Quality Care No Penalty for Better Quality No Penalty for Reducing Overuse Flexible Service Delivery Goals of Reform Fee for Service FFS +Shared Savings Episode Partial Comp. Care Pmt +P4P Global Capitation Alternate Methods of DIFFERENT PAYMENT SYSTEMS SOLVE QUALITY PROBLEMS Variation in the cost per episodes, favors a Fee-for-Service or Episode Variation in frequency of episodes per condition favor comprehensive care payment 76% of Medicare spending is on patients with 5 or more chronic diseases VARIATION IN FREQUENCY OF ANESTHESIA SERVICE 00810

6 SOLVING COST/QUALITY PROBLEMS High Amount/ Variation of Episode Low Episode Examples: Hip Fractures, Labor & Delivery Fee for Service Examples: Immunizations, Simple Injuries Comprehensive Care Pmt. +Episode Examples: Heart Disease, Back Pain Comprehensive Care Pmt. (or Year-Long Episodes) Examples: COPD, Congestive Heart Failure Low Size/Variation in Frequency of Episodes Per Condition High EPISODE OF CARE PAYMENT Healthy Patient Continued Health Preventable Condition No Hospitalization Episode of Care A single payment for all care needed from all providers for the Episode, With a Warranty for complications When to use Episode s? Reduce cost and variation within episodes (e.g. uncomplicated labor and delivery, total joints). Does not change number of episodes. Acute Care Episode Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions COMPREHENSIVE CARE PAYMENT Healthy Patient Continued Health Preventable Condition Reduces the number of unnecessary episodes of care, to control overuse of procedures or preventable hospitalizations (e.g., lower back pain, Prometheus ) No Hospitalization Acute Care Episode Efficient Successful Outcome Comprehensive Care A single payment for all care needed from all providers during the course of the year. would be higher for sicker patients. High-Cost Successful Outcome Complications, Infections, Readmissions 18 18

7 WHEN TO USE BOTH EPISODE AND COMPREHENSIVE PAYMENTS Medicare uses a mixed DRG/FFS system for inpatient care Is a Mixed System Viable? Pay for care for each condition the right way, not the same way Medical Home where primary care practice is paid to provide Comprehensive Care, but the practice pays for an Episode when patients need to be hospitalized. (e.g., heart disease with heart surgery where there is both high variation in episodes and cost of episodes). Perioperative Surgical Home? BUNDLED PAYMENT ANALYSIS ROADMAP Demographics Practice Payers Know your patients Know your practice Know your payers Kinds of cases Number of cases How cases are prepared How cases are done When cases are done What are the resources needed Costs What does it cost? Who are the payers What do they pay Contribution to your business Collections How do you get paid? EXAMPLE OF EPISODE-BASED PAYMENT ASSESSMENT FOR CASE Prometheus Model for Hip and Knee Replacement Surgery Determined typical stay Evidence-informed Case Rates (ECR) price Determined Severity-adjusted ECR price Calculated Potentially Avoidable Complications (PAC) -14% total costs Provider-specific cost variations Professional fees were 18% of cost 21 21

8 EVIDENCE-INFORMED CASE RATE PROMETHEUS PAYMENT Patient specific budget for entire episode of care, includes all covered services for a single condition. 1. Providers paid base ECR payments 2. Bonuses through comprehensive quality scorecard. 70% payment based upon individual provider, 30% on other providers. 3. Potentially Avoidable Complications have a separate budget available for bonus. Source: PrometheusModel, ECR 82% PAC 18% Up to 40 cents of every dollar spent on chronic conditions and 15 to 20 cents of every dollar spent on acute hospitalization and procedures are attributable to Potentially Avoidable Complications (PACs) PROMETHEUS EXAMPLE John, a 63-year-old white man with chest pain and a history of unstable angina, is admitted to a teaching hospital. John also has hypertension and diabetes. Here s how it would play out under PROMETHEUS vs. today s fee-for-service approach. $120,000 $101,500 $76,500 Readmissions Complications Physicians Hospital $100,000 $80,000 $60,000 $40,000 $20,000 $25,000 $12,800 Savings $15,300 $14,000 $13,000 $15,000 $61,000 $47,500 $0 Fee-for-Service Had the readmission been prevented, the hospital, surgeon and physicians would effectively have earned a bonus of $12,800 of $15,300 (83.6% available) ($101,500 $25,000 = $76,500, which is $12,800 under the PROMETHEUS budget). Prometheus $ BATNA NEGOTIATING YOUR PRACTICE FEES Operations (10%) Insurance & Liability (15%) Professional Fees (75%) Professional value set by both time spent and units generated Costs need to be set by provider and time spent. Negotiation Components Physician Professional Fee Associated Procedures (Monitoring, Pain Blocks) Complication Rate - leading to new procedures Reducing Overall Costs Dividing up the Surplus Reductions in PAC Reductions in provider-specific cost variations Reductions in other hospitalbased costs 24 24

9 PRACTICE EXPENSE DATA (COSTS) CMS RUC PE Expenses Anesthesiology Weight Expense Physician Work 77.94% Practice Expense 13.18% Professional Liability 8.87% 22.06% of $21.05 = $4.64/unit Federal Register 75:113, pg Your Practice PE Expenses Anesthesiology Weight At $40.78/unit Expense Revenue* Professional Compensation Operating Costs Insurance and Benefits 75% $ % $ % $6.52 $10.80/unit Source: Table 5.7b 2011 MGMA Cost Survey for Anesthesia and Pain Management Practices CASE RATE FOR TOTAL JOINTS Joint Cases Number of Cases Average Time Hip Replacement Knee Replacement Base + Time = Total Units * CF commercial Hips: (8+129/15) * $60/unit = $996 Knees: (7+123/15) * $60/unit = $912 Case rate = weighted average (hips + knees) = ((132*$996)+(189*$912))/( ) = $947 Your Cost is Estimated at $ 40/unit, so similarly your COST is $631 per case (break-even). $75/unit Commercial CF from 2011 ASA Survey 2011 Stead Health Group, Inc. $40/unit Cost from 2010 MGMA Cost Survey JOINT REPLACEMENT ANESTHESIA PAYMENT BY PAYER PROCEDURES (CPT Code) Cases Medicare Average Commercial Average Average Average Mins Anesth for Total Hip (01214) 137 $ 314 $ 991 $ Anesth for Revised Total Hip (01215) 14 $ 460 $1,173 $ Anesth for Total Knee (01402) 210 $ 311 $ 921 $ Average /Case 361 $ 330 $ 955 $ You determine the average payment from non-government payers is $955!. 33% PROBLEM! CMS is paying only 1/3 of private Source: Stead & Merrick, ASA Newsletter, May

10 ANESTHESIA ECON 101: HOW ANESTHESIA VALUES SERVICES (BASE + TIME) Preop Intraoperative Management Post Op Base Preop, IV, Monitoring RR +Post OP Vist Time Induction and Maintenance of Anesthesia Anesthesia Econ 201 :How Anesthesia Needs To Value Its Case Rates Base Time Preop PreOp Consult Preop, IV, Monitoring Intraoperative Management Physical Status Invasive Monitoring Induction and Maintenance of Anesthesia Post Op RR + Post OP Visit Pain Management Secondary Procedures $2,000 Joint Replacement By Payer $1,500 Avg:Mins Avg:Pay $1,000 $500 $ 'COMM 01214'CHAMP Costs $613-$ 'AUTO 01402'CHAMP 01402'IHS 01214'COMM 01214'WKC 01402'COMM 01402'SELF 01402'WKC 01214'BC 01402'BC 01214'SELF 01215'MCD 01215:Total 01214:Total Overall 01402:Total 01214'MCD 01215'MED 01215'MEDRR 01402'MCD 01214'TRI 01214'MED 01402'TRI 01402'MED 30 30

11 FREQUENCY OF OTHER PROCEDURES REPORTED WITH JOINT REPLACEMENT CPT Procedures Reported with Total Joints Total Hip Commercial Payers Revised Total Hip Total Knee Total Hip Medicare Revised Total Hip Total Knee % % 0.8% % 16.7% 1.1% 4.5% 2.5% % 33.3% 54.9% 55.1% 37.5% 51.3% % % 4.4% % 24.4% % % 6.6% 78.7% 55.5% % 83.3% 7.7% 4.5% 3.4% Source: Stead & Merrick, ASA Newsletter, May PAYMENTS OF OTHER PROCEDURES REPORTED WITH JOINT REPLACEMENT CPT Procedures Reported with Total Hip Total Joints Commercial Payers Revised Total Hip Total Knee Total Hip Source: Stead & Merrick, ASA Newsletter, May 2011 Medicare Revised Total Hip Total Knee $ $114 $ $244 $255 $204 $45 $ $221 $377 $241 $70 $75 $ $ $198 $ $220 $ $ $0 $58 $1 $ $128 $82 $142 $0 $10 Average $195 $177 $216 $30 $25 $ COMPLICATIONS ASSOCIATED WITH HIP REPLACEMENT 138,399 patients undergoing primary THA in California from 1995 to

12 COMPLICATIONS ASSOCIATED WITH KNEE REPLACEMENT 222,684 patients undergoing primary TKA in California from 1991 to Complications Total Hip Replacement Total Knee Replacement Mortality 0.68% 0.53% Dislocation 1.39% Deep Infection 0.70% 0.71% Venous Thromboembolism 0.64% 0.41% Periop Fracture 0.01% 0.02% Revision 0.93% 12.90% Neurologic Injury 0.05% 0.08% COMPLICATIONS REQUIRING ANESTHESIA IN AN EPISODE Commercial Payers Medicare CPT Procedures Total Hip Revised Total Total Knee Total Hip Revised Total Total Knee Hip $150 Hip $ $ $ $ $1,165 $867 $ $ $855 $ $ $ $ $456 $953 $276 $ $602 $185 Avg Pay $510 $1,165 $680 $328 $275 Frequency 6.3% 16.7% 15.4% 7.9% 0% 6.7% /Case $32 $194 $105 $26 $0 $18 Source: Stead & Merrick, ASA Newsletter, May TOTAL ANESTHESIA PAYMENT IN A 90-DAY GLOBAL PERIOD CPT Procedures Cases Commercial Average Additional CPT Services Additional Surgeries Total s Anesth for Total Hip 48 $991 $195 $32 $1, Anesth for Revised Total Hip 6 $1,173 $177 $194 $1, Anesth for Total Knee 91 $921 $216 $105 $1,242 Average /Case 145 $955 $196 $84 $1,235 Using the methods discussed to determine cost for the additional CPT services and additional surgeries, the average additional time needed is 26 minutes, yielding a practice cost of $1,031 per case. Source: Stead & Merrick, ASA Newsletter, May

13 Base Time Base Time Preop Anesthesia Econ 201 Episode-based Preop Intraoperative Management PreOp RR + Post OP Visit Physical Status Consult Invasive Monitoring Hospitalization Induction and Maintenance of Anesthesia Preop, IV, Pain Management RR + Post OP Visit PAIN MANAGEMENT Secondary Monitoring Procedures Physical Status Invasive Monitoring Induction and Maintenance EPISODE OF CARE throughout LOS Length of Stay of Anesthesia Pain Management PreOp Consult Preop, IV, Monitoring Intraoperative Management Post Op SURGICAL HOME Shared Savings Opportunities Post Op Decreased Secondary LOS Procedures DEMONSTRATE ANESTHESIA S VALUE ACROSS HEALTHCARE { Support 1 o Activity Administrative Management of Preoperative Evaluation Examine, evaluate, manage patients Operating Room Management Medical Direction of PACU Perform Anesthesia Acute Pain Management Recovery & Discharge Billing, Coding, Collection Service: F/ U & Pt. communic ations Margin Anesthesia Value Chain Inspired from Porter, Competitive Advantage: Creating and Sustaining Superior Performance, 1985, HOW CAN ANESTHETIC MANAGEMENT CHANGE COSTS? SURGICAL HOME Preoperative Consultation and medical intervention Reduces LOS Intraoperative techniques to control blood loss Reduce blood products and infection rates Pain Management techniques Lead to early ambulation and less thromboembolic events Reduce LOS, reduce morbidity and mortality 39 39

14 SURGICAL HOME: PREOPERATIVE CONSULT VALUE Literature states that anesthesia consultations reduce LOS days. It led to preoperative interventions that reduced preoperative delays ARCH INTERN MED/VOL 169 (NO. 6), MAR 23, TOTAL JOINT REPLACEMENT ASSUMPTIONS: LENGTH OF STAY Parameter Value Source Current LOS of Joint Patients 6.6 days Hospital Data, same as CMS 2010 DRG 470 Cost per Patient Day $ 1,369 AHRQ; National Hospital Cost and Utilization Project Core Data 2008 Expected LOS of of Joint Patients with Preop Consult Decreased Direct Cost per Patient 0.35 ARCH INTERN MED/VOL 169 (NO. 6), MAR 23, 2009 $ 479 Calculated In a hospital filled over 80% capacity, there is ALSO an increased revenue opportunity HYPOTENSIVE ANESTHESIA DECREASES BLOOD LOSS AND NEED FOR TRANSFUSION 45% DECREASE IN USE OF BLOOD PRODUCTS 42 42

15 TOTAL JOINT REPLACEMENT ASSUMPTIONS: BLOOD TRANSFUSION SAVINGS Parameter Value Source Blood Transfusion Rate 79.8% Hospital Measured Data Average Transfusion per patient 1.77 Hospital Measure Data units Blood Transfusion Rate with Anesthetic Technique 52.3% Blood Loss Pilot Study Cost per Transfusion (100% Direct) $ 784 AHRQ; National Hospital Cost and Utilization Project Core Data 2008 Direct Cost Reduction per Procedure $ 382 Calculated Niemi TT, Pitkanen M, Syrjala M, Rosenberg PH. Comparison of hypotensive epidural anesthesia and spinal anesthesia on blood loss and coagulation during and after total hip arthroplasty. Acta Anesth Scand. 2000; 44: SAMPLE PRACTICE NEGOTIATING WORK SHEET For an Episode of Joint Replacement our average payment is $732 BUT, remember our cost of performing anesthesia for just the Joint Replacement alone is $ SUGGESTED STRATEGY FOR THE YEARS AHEAD Prepare for other revenue models. Medicare rates will become the norm. Participate in new payments programs with hospitals, but be a leader in analysis. We need to broaden our concepts of charges and costs Case Rates need to encompass all the services provided Costs need to reflect all the time that is provided Group Leadership is key. Individuals may be edged out