The Changing Roles of the CFO

Transcription

1 The Changing Roles of the CFO NEO HFMA 2017 GHALI May 23, 2017 Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor CliftonLarsonAllen LLP

2 Learning Objectives Overview of evolving payment systems and their impact on the competencies of a financial leader Identify best practices that foster a working collaboration among hospitals, physician practices and post-acute providers Recognize the differences in language between departments and the steps (and tools) that will translate into an integrated management culture 2

3 Background 3

4 Background Information Many variations of physician, hospital, post-acute partnerships are forming throughout the country Some geographies moving faster than others More applicable to urban areas, but change will impact everyone Hospital systems are narrowing their post-acute network Increased control Re-hospitalization penalties Preparing for transition from fee-for-service payment 4

5 Risk-Based Payment Train Has Left The Station 2013 Value-oriented payment = about 10% of all payments 7% of hospital Medicare payments are at-risk 61% of providers receive more than 80% of revenue from FFS 2x as many providers have riskbased contracts in 2013 vs More providers seeking riskbased arrangements with Commercial payers rather than Medicare And It s Picking Up Speed % of providers who don t currently have a Total Cost of Care Contract expect to Pursuing to gain experience for future and align financial incentives 80% expect to have a Bundled Payment contract Seeking to increase volume, gain experience Source: 2013 Accountable Payment Survey: The State of Risk-Based Payment and How Industry Leaders Expect to Transition, The Advisory Board 5

6 HHS Announces Medicare Value-Based Payment Goals Today, 20% of Medicare FFS dollars are under an alternative payment model such as Shared Savings, Bundled Payment, etc Goals 85% of all Medicare Fee-For-Service dollars to be tied to quality or value 30% tied to alternative payment models (this is part of the above number) 2018 Goals 90% of all Medicare Fee-For-Service dollars to be tied to quality or value - 50% in alternative payment 6

7 Provider Strategies Hospital/Physician Integration Physician employment is on the rise: As of 2014, the American Medical Association reported 35% of doctors still fully or partially owned their own practices. This is down from 75% in Conversion from jointly-sponsored system to single sponsorship Aurora joint venture with Tennessee hospital conglomerate to seek acquisitions Implementation of Lean, Six Sigma and other cost efficiencies Started in hospitals 10+ years ago, but is much more widespread Collaborations with new partners Payers, vendors, post-acute providers etc. 7

8 Collaboration to Create Value 8

9 Collaboration Maximize the Opportunity = 8: Accomplish more together Build upon combined skills of each organization Remain focused on core competencies Building a continuum Access to the tools and resources for growth or to address the changing environment, including: Develop a new service or product Expand into new geographies or increase capacity Increase access to capital 9

10 Collaboration Maximize the Opportunity Necessary under new regulations Risk mitigation strategy Safety in numbers Access to resources without absorbing full cost Maintain long-term viability Funding changes manage cost and care across sites of service Need to be able to negotiate contracts for reimbursement with managed care payers 10

11 Managed Care Impact For Health Care Providers Fewer discharges to skilled nursing facilities, as these individuals are being diverted to other settings (i.e. home, comfort suites via orthopedic entities) Hospitals may discharge direct to home with or without home health Hospitals may discharge to SNFs earlier (shorter hospital lengths of stay with more co-morbidities) Shorter lengths of stay in acute and post-acute Must control readmissions! Manage quality rating of partners (Star ratings) 11

12 Approaches to Operating in a Managed Care Environment Individual Stand Alone Provider - each provider contracts separately with each managed care entity in the marketplace using resources within their own organization to manage all functions necessary to efficiently operate within managed care environment. Network Provider Contracting- multiple providers collaborate to efficiently operate within managed care environment. 12

13 Collaboration and Integration Models 13

14 Organizational Relationship Continuum Collaboration Affiliation Informal Partnering Joint Venture Holding Company Model Merger Sale/ Acquisition Association membership Sharing information or costs Formal link or partnership frequently used to pursue a business line or opportunity Two or more organizations join together to form a holding company or parent to guide the system Two or more organizations join together with one surviving corporation One organization sells to another 14

15 Collaboration Exploration Process Internal Discussion What do we want from an partner(if this is not well understood the organization looks unprepared and not serious when the discussions begin) What do we have to offer What do we want to avoid Deal breakers 15

16 Collaboration Exploration Process When opportunities are presented or sought: First determine if there is a cultural, missional, values fit Understand their objectives from collaborating Consider the strategic opportunities Then understand the business aspects Operations, Market Viability, Financing/Financial Design the structure Based on objectives of each organization And the business needs 16

17 Successful Collaboration Successful Find the compelling reason early and easily Result from the alignment of clear, shared objectives Are based on mutual respect, not the appearance of mutual respect Appreciate the emotional dimension Unsuccessful Are based solely on the achievement of economic leveraging/efficiencies Attempt to create a uniform culture within individual communities Are based on unrealistic expectations and objectives or the wrong motives 1 7

18 Merger and Acquisition Activity 18

19 Value From Post-Acute Relationships 19

20 Value From Post-Acute Relationships Volume Information Exchange Consistency/Simplicity Communication 20

21 Volume Primary drivers Greater control with fewer relationships Belief that hospitals can influence cost and quality Reasonable cost and high quality are baseline expectations Assumption that larger post acute systems have a greater ability to implement necessary change Technology Quality measurement Understanding of cost Informal partnerships/relationships are important 21

22 Information Volume Exchange Poor Information Exchange Poor Care Transition Higher Total Cost of Care 22

23 Information Volume Exchange 23

24 Information Volume Exchange 24

25 Collaboration strategy is merely one of many important endeavors for health systems Physician relationships, capital needs, technology, etc. Limited appetite for post-acute strategy Consistency and simplicity in Hospital discharge to post-acute Including related information exchange Protocols when an event occurs in the post-acute setting How do hospital and SNF interact when a resident has an episode that could lead to a rehospitalization? Outcomes Consistency/Simplicity Volume Reporting quality metrics 25

26 As relationship is forged, include: Flexibility Patience Persistence Results-based Communication Volume We have been disappointed with the pace of the discussions. (Major health system) said they want to work exclusively with us, but getting their attention to move forward has been a challenge. - CFO of multi-site senior living organization 26

27 During the partnership, include: Accessibility Communication Volume Consistency written and verbal Understanding of what information is important When our physicians or nurses have a question about a treatment protocol for one of the patients, we are able to get the right person on the telephone at (post acute provider), who can explain what the expectation is and what they told the patient. We rely on them, and they rely on us. - President and CEO of major east-coast health system 27

28 Emerging Themes 28

29 Top 10 Emerging Themes 1. More often than not, Hospitals are driving the conversations 2. Desire to work with significantly fewer SNFs 3. Goal is lower rehospitalizations 4. Common set of selection criteria 5. Focus on three Cs Communication Clinical pathways Care transitions 29

30 Top 10 Emerging Themes (continued) 6. Volume matters 7. Most seeking integration without M&A 8. Changing clinical procedures may be required 9. More key individuals playing in your sandbox Nurse Practitioners, care coordinators, etc. 10. Robust quality reporting requirements 30

31 Health Care Reform 31

32 American Health Care Act On March 24, 2017 House Speaker Paul Ryan pulled the AHCA from the floor Last minute changes to the bill failed to gain more conservative votes We re going to be living with Obamacare for the foreseeable future Paul Ryan The new administration could make adjustments through regulatory changes 32

33 Four Emerging Principles in Policy Reductions in federal health care spending Greater state management & control with less federal intervention Increased market competition and incentives to drive consumerism Continue to drive policies that promote increasing the value of health care 33

34 Making the Transition to Risk-Based Payment Significant Change Bundled Payments Significant Change Negotiated Episode Price Longitudinal Accountability Risk based Shared Savings/Total Cost of Care Risk based Collaboration Predictive modeling Global budget or subcapitation Fee For Service No risk payments Common payments Predictable Significant Change Value Based Reimbursement New metrics Best practices Performance based Uncertainty Electronic communications 34

35 Medicare Advantage Enrollment National 35

36 Medicare Advantage Enrollment National 36

37 Medicaid Expansion Current Status 37

38 Managed Care 38

39 Health and Housing Research identifies importance of controlling health care costs through stabilizing housing Proactive care management decreases total spend per beneficiary Improved health care outcomes and management of chronic conditions through appropriate use of health care resources (clinics versus emergency rooms) Payers have Noticed: CMS CMS funded Health Innovation Grants have demonstrated success of health/housing models and scalability (Vermont-SASH) Expand LTSS to include Health and Housing with Support Services (Washington Medicaid Waiver) Focused on transitions and stabilization in the home (SIM grants, Dual Demo s) 39

40 Health and Housing Payers have Noticed (continued): Health Plans Identify and manage high-risk/ high-utilization enrollees United HealthCare s Optum Program ACOs/ Health Systems Population management in total cost of care model Need to collaborate to prevent payment penalties for readmissions & to control of medical pool costs SIM Grants/Accountable Health Communities via CMS Funding Population health, improved health and housing for special populations 40

41 Health and Housing Value to CMS/State and Other Payor Research identifies importance of controlling health care costs through stabilizing housing Improved health care outcomes and management of chronic conditions through appropriate use of health care resources (clinics versus emergency rooms) CMS funded Health Innovation Grants have demonstrated success of health/housing models and scalability Payers (Hospitals/ACO s bundled payment) need to collaborate to prevent payment penalties for readmissions/control of medical pool costs Increased aging demographics requires more community based health/housing services for State and Federal government to manage Medicaid budgets Value to Housing Entity Stabilized Occupancy through proactive resolution of problems- less turnover Additional payment for health collaboration efforts with payers and health systems Less staff time/maintenance Less legal costs due to reduction in evictions; Improved community perception/marketability Closer coordination with Accountable Communities of Health, State s SIM program- apply for grants

42 Medicare Advantage Dual Eligible Special Needs Plans Dual Eligible Chronic Condition Institutional Enrollees must be eligible for both Medicare and Medicaid Traditionally provide only Medicare benefits but coordinate with enrollee s Medicaid benefits Fully Integrated Dual Eligible (FIDE) SNPs provide both Medicare and Medicaid benefits Focus is on a specific chronic condition and developing optimal benefits and clinical supports to avoid and/or manage acute episodes Enrollees must have been diagnosed with the chronic condition the plan is targeting Enrollees are long term nursing facility residents Enhanced assisted living Clinical protocols are developed to reduce unplanned discharges and provide as many services as possible within the nursing facility, avoiding hospitalizations Dual Eligibles as a percent of total Medicare enrollees: U.S. = 21% Ohio = 18% Source Kaiser Family Foundation 42

43 MyCare Ohio 2012 Ohio became 3 rd state to receive CMS approval for dual-eligible coordination 3-Year demonstration launched May 2014 Currently covers 100,000 lives in 29 counties dicareandmedicaidbenefits.aspx 43

44 Accountable Care Organizations 44

45 Accountable Care Organizations Overview Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, collaborating voluntarily to provide coordinated high quality care to their Medicare patients. The goal of coordinated care is to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program. Medicare offers several ACO programs: Medicare Shared Savings Program (MSSP) Assists a Medicare fee-for-service program providers become an ACO Advance Payment ACO Model A supplementary incentive program for selected participants in the Shared Savings Program Pioneer ACO Model A program designed for early adopters of coordinated care Next Generation ACO Model Sets predictable financial targets, enables providers and beneficiaries greater opportunities to coordinate care, and aims to attain the highest quality standards of care 45

46 Accountable Care Organizations MSSP ACO Assigned Beneficiary Population 46

47 Bundled Payments 47

48 Bundled Payments Medicare BPCI Bundled Payment Demonstration BCPI s Four Models of Care Participants had a choice of 4 bundle models Model 1: Retrospective Acute Care Hospital Stay Only Model 2: Retrospective Acute Care Hospital Stay plus Post-Acute Care Model 3: Retrospective Post-Acute Care Only Model 4: Acute Care Hospital Stay Only BCPI s 48 Episodes of Care Participants had 48 episodes to choose from Multiple episodes could be selected Acute Myocardial Infarction Amputation Atherosclerosis Automatic Implantable Cardiac Defibrillator Procedures Back and neck except spinal fusion Cardiac Arrhythmia Cardiac Defibrillator Cardiac Valve Cellulitis Cervical Spinal Fusion Chest Pain COPD, Bronchitis, Asthma Combined anterior posterior spinal fusion Congestive Heart Failure Coronary Artery Bypass Graft Surgery Diabetes Esophagitis, gastroenteritis and other digestive disorders Double joint replacement of the lower extremity Fractures femurs and hip/pelvis Gastrointestinal hemorrhage Gastrointestinal obstruction Hip and femur procedures except major joint Lower extremity and humerus procedure except hip, foot, femur Major Bowel procedures Major Cardiovascular procedure Major joint replacement of the lower extremity Major joint replacement of the upper extremity Medical non-infectious orthopedic Medical peripheral vascular disorders Nutritional & Metabolic Disorders Other Knee Procedures Other Respiratory Other Vascular Surgery Pacemaker Pacemaker Device Replacement/Revision Percutaneous Coronary Intervention Red Blood Cell Disorders Removal of Orthopedic Devices Renal Failure Revision of the hip or knee Sepsis Simple Pneumonia and Respiratory Infections Spinal Fusion (non-cervical) Stroke Syncope and Collapse Transient Ischemia Urinary Tract Infection

49 Bundled Payments Medicare BPCI Models The four Medicare BPCI models are as follows: Model 1 The episode of care is defined as the inpatient stay in the acute care hospital. Medicare pays the hospital a discounted amount based on the Diagnosis Related Grouping (DRG). Model 2 A retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. The episode includes the inpatient stay in an acute care hospital plus the post-acute care and all related services up to 90 days after hospital discharge. Model 3 A retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. The episode of care is triggered by an acute care hospital stay but begins at initiation of post-acute care services with a skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency. Model 4 A single prospectively determined bundled payment to the hospital that encompasses all services furnished by the hospital, physicians, and other practitioners during the episode of care, which lasts the entire inpatient stay. 49

50 Bundled Payments Medicare BPCI Models Bundled Payment for Care Improvement Models Participants Payment Arrangement Services included in Bundle Model 1: Retrospective Acute Care Hospital Stay Only Health systems Hospitals, Physician Groups, PHOs, Conveners of Participating Providers Retrospective Bundled Payment Hospitals are paid a discounted amount based on a predetermined payment rate established under Original Medicare. Physicians are paid separately under the Medicare Physician Fee Schedule. Bundled payment only includes those services incurred during the inpatient stay at the acute care hospital. (All Part A Services) Model 2: Retrospective Acute Care Hospital Stay plus Post-Acute Care Health systems Hospitals, Physician Groups, PHOs, Conveners of Participating Providers, & Post- Acute Care Providers Model 3: Retrospective Post-Acute Care Only Health systems Hospitals, Physician Groups, PHOs, Conveners of Participating Providers, Post-Acute Care Providers, Long-Term Care Hospitals, Inpatient Rehabilitation Facilities, & Home Health Agencies Retrospective Bundled Payment Expenditures are reconciled against a target price for the episode of care. Target price is based upon historical payments for the beneficiaries in the episode and a discount. Reductions in expenditures below target price is paid to the participant & expenditures over target price is paid to Medicare. Bundled Payment includes all services incurred during the inpatient stay in the acute care hospital, post-acute care and readmissions. Episode ends 30, 60 or 90 days after discharge Bundled Care includes any services incurred after the acute hospital stay and at the initiation of post-acute care services with a SNF, inpatient rehabilitation facility, longterm care hospital. or home health agency, and readmissions. Post acute services must begin within 30 days of discharge and ends 30, 60 or 90 days after initiation of post-acute care services. 50

51 Bundled Payments Medicare BPCI Models 51

52 Bundled Payments Takeaways From Medicare BPCI Models Based on participant experience, Model 2 results are trending toward a 30% shift away from skilled nursing facilities to home health or outpatient therapy post hospital discharge. When skilled nursing facilities are the discharge destination there is intense pressure to reduce length of stay. For example stays related to lower extremity joint replacement are trending toward the single digits. There will likely be similar shifts in setting and length of stay in areas that are targeted for the Comprehensive Care for Joint Replacement mandatory bundling model. Markets or buildings that heavily invested in orthopedic rehabilitation for CCJR will feel substantial impact. To meet the goal of 80% of Medicare payments tied to value there may be an expansion of the BPCI and open it up to new entrants and, after some experience, include additional conditions into a bundled payment model. 52

53 CMS Bundled Payments Mandatory Bundles Lower Extremity Joint Replacement CMS has issued a final rule for a new demonstration that requires hospitals in 67 geographic regions across the U.S. to participate (includes Akron, Cincinnati, Toledo MSA s) Goal is to test bundled payment and quality measurement through an episode of care for hip and knee replacements with a variety of providers and geographic areas Participation is mandatory for hospitals in one of the identified regions (some but few exceptions exist) which began April 1, 2016 The episode would be initiated in the hospital and follow the patient through 90 days post discharge. Services in the bundle include all Medicare Part A and B services related to the joint replacement Providers will continue to be paid through traditional fee for service but a retrospective analysis of costs compared to the target price will result in either a bonus payment to the hospital or repayment of funds by the hospital to CMS In 2016, the bundle was expanded to include knee / hip (DELAYED) Update On March 20 th, CMS announced that expansion of the mandatory bundled payment pilots has been delayed 53

54 CMS Bundled Payments- Mandatory Bundles Cardiac Rehabilitation In December 2016 CMS issued a final rule for a new demonstration that requires hospitals in 90 geographic regions across the U.S. to participate. Goal is to test bundled payment and quality measurement through an episode of care for cardiac rehabilitation with a variety of providers and geographic areas. The first performance period will begin on October 1, 2017 and will continue for five performance years, ending on or about December 31, The episode would be initiated in the hospital and follow the patient through 90 days post discharge. Services in the bundle include all Medicare Part A and B services related to the diagnosis. Providers will continue to be paid through traditional fee for service but a retrospective analysis of costs compared to the target price will result in either a bonus payment to the hospital or repayment of funds by the hospital to CMS. 54

55 CMS Bundled Payments Payment Overview CMS sets hospital-specific spending target and compares that target to hospital-specific spending for the bundles Over Bundle Target = Repayment Under Bundle Target + Quality = Additional Payment Reconciliation payments = Payments received by hospitals for which bundled costs are less than the target and minimum quality level achieved Quality incentive payments for some hospitals with higher episode quality Repayment = Hospitals that exceed the bundle target price will need to repay some portion of that amount beginning in Year 2 and beyond 55

56 CMS Bundled Payments Payment Overview All providers continue to be paid fee-for-service CCJR target price to actual: Year 1: No repayment obligation Year 2: repayment up to stop loss of 5% Year 3: repayment up to stop loss of 10% Years 4 and 5: Repayment up to stop loss of 20 % Cardiac target price to actual: Years 1 and 2: No repayment obligation Year 3: repayment up to stop loss of 5% Year 4: repayment up to stop loss of 10% Years 5: Repayment up to stop loss of 20 % Hospital is allowed to share: reconciliation payments, internal cost savings, and the repayments with certain providers and suppliers 56

57 Lisa Hilling, CPA Principal, Health Care James Watson, CPA Principal, Health Care CLAconnect.com linkedin.com/company/ cliftonlarsonallen facebook.com/ cliftonlarsonallen twitter.com/claconnect