Medicare, Managed Care & Emerging Trends

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1 Medicare, Managed Care & Emerging Trends LeadingAge Michigan 2015 Annual Leadership Institute August 12, 2015 Jon Lanczak, Manager Beth Sullivan, Senior Manager Plante Moran, PLLC

2 Overall Theme Healthcare reform and baby boomers will present increasing challenges and opportunity for healthcare. Growth in all senior service lines Significant growth in HCBS Need for strong case management Managing health vs. treating illness 2

3 How do Medicare Patients Use Post-Acute Care? Higher Intensity of Service Lower SHORT-TERM ACUTE CARE HOSPITALS LONG-TERM ACUTE CARE HOSPITALS INPATIENT REHAB SKILLED NURSING FACILITIES OUTPATIENT REHAB HOME HEALTH CARE 2% 2% 10% 11% 41% 52% 9% 21% 37% 61% Healthcare reform will be focused on placing patients in the least costly venue that provides the best outcome and will seek to eliminate utilization of multiple care sites on the continuum Patients first site of discharge after acute care hospital stay (1) RTI, 2009: Examining Post Acute Relationships in an integrated Hospital System Patients use of site during a 90 day episode 3

4 SNF Business Models Predominantly Medicare Predominantly Medicaid 4 4

5 Factors Disrupting SNF Medicare Volumes Source: The Advisory Board Company, Understanding Trends in SNF Medicare Volumes 5

6 External Factors Influencing Market Share Demographics Hospital discharge trends 3-day hospital stay Payer influences Growth of managed care Managed care pressure on length of stay Ability to negotiate managed care contracts Preferred provider relationships Payor Sources 6

7 Payor Sources Medicaid Reimbursement System cost based Integrated Care Model (MI Health Link) 3 Year Program Healthy Michigan Days Change in the Medicaid program in the future??? Medicare Part A Services Medicare Advantage Plans Many plans are available and they should be tracked individually Private Payors Insurance Programs Bundled Payments Accountable Care Organizations 7

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9 Unaware of???? Census who is in the facility, how can we get more residents, how much will I get paid? When the facility will get paid? How should we track our costs? Are you profitable by payor type??? Why do you care??? Comparable to other in the area? The acuity of the residents you are admitting? 9

10 Cost Accounting Common Response.I am making a profit Profit on what? Do you know what the average cost is per resident by their payor type? Cost Reports Filed Not all costs included Segregated by payor type With all of the changes do you know if you are profitable? 10

11 What should you be tracking? Census Need more detail than what is kept now Revenue Each plan should be tracked not usually tracked Expense All services should be segregated and tracked by payor type not done at most providers Staffing Overstaffed or understaffed and understanding why 11

12 Medicare Models for Managing Care Fee for Service Medicare Advantage Accountable Care Organization (ACO) Bundled Payments BPCI Unlimited Consumer Choice Choice of Plan Network Providers Unlimited Consumer Choice Unlimited Consumer Choice Any Willing Provider can Participate Providers Paid Medicare Rates Provider must be credentialed for the Network Providers Paid Health Plan Rates Any Willing Provider can Participate ACO Will Seek to Influence Provider Choice/Utilization Any Willing Provider can Participate BPCI Will Seek to Influence Provider Choice/Utilization 12 12

13 Current System Managing Coverage Pay for Performance Incentives being Added Readmissions, ETC Establish Medicare Coverage Medicare Advantage may require preauthorization Discharge influenced by many factors Determine Treatment Plan Receive payment in one of 66 payment groups for each day of care. Payment may fluctuate during stay Per Diem Payment Related to Care Rendered 13

14 New World - Managing an Episode of Care Pay for Performance Incentives likely DRG Like system e.g. Stroke Joint Replacement COPD CHF Potential outliers 14

15 Transitioning to Episodic Payment System Current Per Diem System Episode Payment Revenue $420 Revenue $12,600 Expense $350 Expense $10,500 Profit $ 70 Profit $2,100 ALOS 30 days ALOS 30 days Episodic Payments will be based on CMS Payment History Episodic Payments are necessary for CMS to continue to transition to site neutral payments 15

16 Bundled Payment Care Improvement Demonstration Model 2 Hospital plus PAC Model 3 all PAC DRG Based System Priced per Beneficiary Achieve Savings for CMS Provider Keeps Funds Convener Episode Initiator All entities paid regular FFS rates CMS cost less 3% Don t Achieve Savings for CMS Convener Remits Funds Participate in the management of a bundle of services across healthcare venues Goal is to reduce cost while maintaining quality Reconcile with CMS Each Quarter on a One quarter delay 16 16

17 Mandatory Bundling On July 9 th CMS proposed a mandatory bundled payment program for hip and knee replacements Comprehensive Care for Joint Replacement Model (CCJR) MS-DRG 469 and MS-DRG 470 (Major joint replacement with or without complications) Bundled payment designed to cover all related Medicare Part A and Part B services across the episode Episode starts with inpatient admission and spans 90 days post-discharge Applies to hospitals in 75 designated metropolitan areas 5 year program kicks off on January 1,

18 Mandatory Bundling Retrospective bundle CMS will pay each provider individually Reconciliation process at the end of each performance year If target price of bundle is beat or exceeded, bonuses or repayments would occur after recon process CMS appears to be committed to payment transformation goal Secretary Burwell s goal of 50% of all Medicare payments through alternative payment models by

19 Cook IL 25% Cuyahoga OH 40% Lake IN 17% 19 19

20 Medicare Advantage Utilization Reports/MCRAdvPartDEnrolData/Monthly-MA-Enrollment-by-State-County-Contract.html 20

21 Internal Factors Influencing Market Share Facility Reputation CMS Five Star (3 to 5 Stars) My Innerview and other Resident Satisfaction Surveys Clinical Matters RN s onsite 24/7 Ability to start IV s 24/7 Quality of Physical Plant Quality performance Measurements CMS Five Star Hospital readmission rates: within 30 days, within 72 hours Length of Stay 21

22 Preparing for the Inevitable Assess your business model Internal strengths, external threats and opportunities, and partner/provider network options Expand clinical competencies / admit within 2-3 hours Increase finance/business office capabilities and skills Improve data analytics with respect to cost and clinical outcomes Focus on marketing and public relations 22

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24 How do you Analyze your Current Managed Care Financial Performance TOMORROW Track all managed care by individual contract Need accurate revenue recognition for all ancillary services New Revenue Chart of Accounts for Managed Care / Contract or Managed Care Billing Log Apply Medicare cost to charge ratios to above charges, then add routine Assume Medicare routine cost per day is consistent to Medicare 24

25 How do you Analyze your Current Managed Care Financial Performance TOMORROW Also you need to track separately: Managed care census per contract Managed care discharges per contract Managed care net revenue rate(s) per contract 25

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27 Monitoring the Cost of Care What method is used to collect this information for each individual patient charge? Diagnostics and Other Room and Board Therapy Pharmacy Medical Supplies - How does the facility capture the cost of each of these services? - By each segment (i.e. Rehab, Long-Term, Memory Care, Hospice, etc.) 27

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29 Questions? Jon Lanczak Beth Sullivan