The Cost of Care: Understanding the Next Generation of Payment Models Presented by: Debbie Welle Powell, MPA, Vice President Sisters of Charity Health System and Exempla Healthcare September 27 th, 2012 1 1 Today s Objectives Understand future health care payment models Overview of history and explanation of current Coordinate bundled payment impact on discharge philosophies Continuum of Care Plan for anticipated scope of responsibilities under a bundled payment structure Exempla experience ACE Acute Care Episode Payer Partnerships Next Steps 2 Who are We: Where We Serve 3 1
Motivators and Drivers for Change.. Poor quality documented Unsustainable increases in health care costs and over utilization Deficit Under estimated the costs of PPACA Rewarding the production of volume with no improvement in outcomes Provider integration 4 Payer Dynamics Medicare: Paying for Health Reform Spending for Health Reform = $938 Billion Paying for Health Reform = $1,081 Trillion Source: CBO Letter to Nancy Pelosi, March 20, 2010; Joint Committee on Taxation Report JCX-16-10, March 20, 2010; PwC Analysis 5 Payment Models: What are Payers/Purchasers talking about Bundled payments CMI - Center for Medicare Innovation ACE Prometheus Shared Savings Pioneer Program ACO Medicare Shared Savings (MSSP) Global Payment Capitation Medical Homes Management fee - Per member per month (anywhere from $1 to $7 pmpm) Health Exchanges Buying on price and quality 6 6 2
7 The Era of Risk-Based Reimbursement Is Here Hospital Medicare Payment at Risk, Year by Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Value-Based Purchasing 1% 2% 30-Day Readmissions 1% 2% 3% Hospital-Acquired Conditions 1% TOTAL 2% 3% 5% 6% 8 CMI Bundled Payment Program What.. CMS is seeking to partner with organizations that are focused on the transformation of their payment and care delivery model from one reliant on FFS volume to one that is more focused on optimizing outcomes of care. All models are expected to include care redesign and enhancements such as reengineered care pathways using evidence-based medicine, standardized care using checklists, and care coordination. All may also include opportunities for gainsharing among participating providers. Under all models, applicants must provide Medicare with a discount on Medicare FFS expenditures. 9 3
CMI: Current Initiatives Bundling begins Four Models Model 1: Retrospective payment models for the acute inpatient hospital stay only. Model 2: Retrospective bundled payment models for hospitals, physicians, and post-acute providers for an episode of care consisting of an inpatient hospital stay followed by post-acute care. Model l3: Retrospective ti bundled d payment models for post-acute t care where the bundle does not include the acute inpatient hospital stay. Model 4: Prospectively administered bundled payment models for hospitals and physicians for the acute inpatient hospital stay only. (Similar to the structure of ACE.) DEADLINE: LOI (non-binding) Final Application Models 1 9/22/11 10/21/11 Modes 2 4 11/4/11 3/15/12 10 Episode of care or Bundling What is it.. Providers assume financial and quality performance risk for: All services for a particular treatment or condition: Physician Lab Imaging DME Acute Care/hospital All post acute care related to the condition including Medicare SNF rehabilitation costs Avoidable complications and mortality All readmission costs 11 CMS: ACO Shared Savings Final Rule 10/11.. Patient Assignment Prospective vs. retrospective Payment Structure Shared savings Quality Measures Electronic health record Applications due early 2012 (start 4/2012) 12 4
Prometheus A New Direction.. Prometheus Episodes of Care - Evidenced-informed Case Rates (ECRs) 23 Medical Conditions - Makes providers responsible for their portion of the unnecessary care Potentially Avoidable Conditions (PACs) - Requires the role of the financial integrator - Promotes integration of providers 13 Exempla Healthcare Payer Contracts with Quality Provisions PAYOR TYPE TIME FRAME STRATEGY Anthem IP 2011 1% directive, administrative data Cigna IP/OP 2012 ACE Demonstration Bundled 2012 House account - 6,000 lives; steerage, cost reduction, quality improvement, payment reform, Prometheus Expansion of ACE to post acute CMI Kaiser Permanente IP 2011 Partnership, volume with critical mass 14 2011 Exempla Healthcare Joint Report Card KP and Exempla 15 5
Innovation and Collaboration Best Practice Quality Teams - MDs, RNs, Edu, Quality, Information Technology Monthly/Quarterly system meetings Senior Leadership Ownership Key Physicians in CPMG Assigned as Champions Partnership with Health Plan leaders EMR Optimization - Order Sets, BPA Communication Techniques - SBAR Deploy Best Practice Techniques 16 2011 Exempla Healthcare Performance Results Sepsis Mortality 4.4% decrease in hospital Sepsis mortality across Exempla Healthcare based on early identification and order set use 95 Additional Lives are projected to be saved by end of year from these interventions Sepsis Mortality: Exempla Healthcare 30% 25% 20% 15% 10% 5% 0% Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 - National Sepsis Mortality rate = 20-25% -10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11-11 Nov-11 Dec-11 17 Acute Care Episode (ACE) Demo Key Takeaways. Bundled payment provides: a single global fee covering hospital and physician services for a discrete hospitalization or care episode Bundled payment programs have: lowered provider costs enhanced quality and improved hospital relationships with specialists in general have not increased volume The success of bundled payment hinges on: a range of design decisions that influence physician buy-in, administrative complexity, and the distribution of savings between physicians and the hospital The 2013 CMS Bundled Payment Pilot will: increase the number of providers receiving bundled payments mark a shift from hospital-physician bundling to episode bundling which includes diagnostic and post-discharge services Creates new opportunities: Prometheus and large commercial insurer interest 18 6
ACE Demonstration Purpose. To determine whether improvements in quality of care can result from the alignment of financial incentives between hospitals and physicians, in such a way that they must coordinate care on a case- by-case basis. 19 CMS s Goals ACE Demonstration. 1. Improve coordination and quality of care 2. Align incentives between hospitals and physicians through global pricing and cost savings incentives 3. Designate selected centers as value-based care centers and provide financial incentives for Medicare beneficiaries to select centers CMS to actively market programs 20 CMS ACE Demonstration Participants CMS-Selected Programs Cardiovascular Baptist Health System San Antonio, TX Exempla Saint Joseph Hospital Denver, CO Hillcrest Medical Center Tulsa, OK Oklahoma Heart Hospital, LLC Oklahoma City, OK Orthopedics Baptist Health System San Antonio, TX Hillcrest Medical Center Tulsa, OK Lovelace Health System Albuquerque, NM 21 7
CMS ACE Flow of Funds. Physician Hospital Organization Physicians Hospital CMS 22 Key Program Elements 1. 3-year demonstration (with 90-day termination) 2. Must collect and report clinical and operational data to CMS 3. Cost reduction plans to be approved by CMS 4. Annual updates to global fees 23 ACE Components 28 Cardiac & 9 Ortho DRGs Competitive Bidding Bundled dpayment Gainsharing Beneficiary Incentive 24 8
Benefits of Participation Beneficiaries.. 1. Receive improved quality of care and outcomes 2. Benefit from better-coordinated care 3. Obtain 50% of program s savings (in the form of incentive payments to individual beneficiaries) not to exceed annual Part B premiums 25 Benefits of Participation Providers. Physician engagement: Improve quality of care Financial opportunities Receive gain-sharing up to 125% RBRVS 100% of Medicare Allowable (no collections from patients) 26 PHO and TPA Functions Requires PHO can be formed just for the project Physician agreements documentary evidence of an agreement between the entities Clinical protocols Gainsharing arrangements Signed statement agreeing to the accepting site s own bundled-payment amounts Shows evidence of a quality committee between hospital and board-certified physician representatives 27 9
Third Party Administrator Functions. Claims processing Check / EOB processing Enrollment and benefits Physician online access via the web 24/7 Administrative and financial capabilities Reporting capabilities ERISA / HIPAA compliance Complete IRS 1099 reporting Supplemental recovery efforts Clinical protocols 28 Operating Protocols Quality monitoring and improvement Care-coordination interventions Education and training Beneficiary outreach Bundled-payment administration Provider incentive program Marketing plan Administrative and clinical oversight 29 Gainsharing Protocol Physician-Incentive Methodology Step 1 Definitions Determine baseline for quality, utilization, and direct costs Measurement quarters: four quarters in given year DRG groupings Patient populations Medicare inpatients in fee-for-service program with Part A and B Step 2 Quality Validation Payment begins with key parameter of quality. Physicians who fail to meet will not be eligible Physician payments capped at 125% of RBRVS 30 10
Gainsharing Protocol (cont d) Step 3 - Savings Calculate by collecting the physician s actual billing records for patients included in the program Determine if the overall costs of the specific DRG decreased every DRG will have a baseline Can have no increases in other areas no new costs Step 4 - Payment Apply adjustments to savings in initiative Payment capped based on difference between baseline and weighted average costs for all participating physicians Payments are allocated on physician s or group s volume and practice pattern Calculate payments within 90 days of calendar quarter end. Payments are not cumulative, and start anew each quarter 31 Physician-Incentive Examples Mechanical Value All physicians baseline average unit costs = $6,000 Physician A Q1 average unit cost = $5,000 Physician A Q1 value volume = 10 Physician A Q1 savings = ($6,000-$5,000) x 10 valves = $10,000 Open heart surgery treatment delays start-time reduction All physicians baseline average = 45 minutes Physician C Q1 = 15 minutes Physician C Q1 patient volume = 50 Q1 operating room direct variable cost / minute = $40 Physician C A1 savings = (45 15 minutes) x 50 patients x $40 / minute = $60,000 EKGs calculate costs per patient and utilization Stents Average costs per stent and average utilization stent/patient Calculate actual per-physician costs Determine savings 32 Gainsharing Example DRG 231 Cornary Bypass with PTCA w/o MCC 900 Medicare Admissions Medicare Part B Physician Payment = $1,065,000 $ 300,500 Gainshare Opportunity (25%) 700 Cases $ 429 Per Case Gainshare Opportunity 33 11
Operational Challenges Early identification of patients with ACE Hired a patient navigator Development of gainsharing criteria Data collection Implant standardization and vendor negotiations Consensus on quality metrics Design / build infrastructure for program administrator 34 ACE Demonstration Update Update 11/1/10 6/30/11. Volume = Total 250 patients 22 ACE Patients 223 Commercial Patients Marketing Minimal marketing efforts by CMS ESJH has struggled to capture new patients as they don t tend to shop around for cardiac & vascular procedures. Most of ESJH s Medicare population is Kaiser MA (excluded from program) Start-up costly Consulting $224k, licensing $131k = $355k; however in 2011 costs were $47k as of 8/31 Net financial performance: costs vs. bundled payments Q42010 = ($20k) Q12011 = ($17k) Physician Network 20 signed physician contracts in PHO Vendor/Supplies standardization = $320,000 Changing clinical practice patterns Gainsharing distributions $90,000 Exceptional physician engagement with commitment to improve quality and lower costs 35 Next Steps Applying for Model 4 Scalable system attributes from ACE Goals Physician alignment Reduce costs increase efficiency Improve quality performance Get really good at managing Medicare patients it s 50% of our business 36 12
Cost Sharing in the Exchange Sample Health Exchange Cost Sharing Amounts Consistent with Actuarial Valuation Without Cost Sharing Bronze Small Employer Silver Package Gold Package Platinum Package Actuarial Value 1.0.60.70.80.90 Hospital Deductible $0 $2,500 Hospital Coinsurance $0 40% 30% 20% 10% Deductible Single $0 $2,500 Deductible Family 0% $5,000 Medical Services Coinsurance 0% 40% 30% 20% 10% Prescription Drugs Coinsurance 0% 40% 30% 20% 10% Preventive Care Coinsurance 0% 0% 0% 0% 0% Copayment limit Single $0 $5,950 Copayment - Family $0 $11,900 PMPM in 2011 $424 $254 The Act also reduces the maximum out-of-pocket spending limits by income level Less than 150% FPL.94 (coinsurance = 8%) 150% to 200% FPL =.87 (coinsurance = 10%) 200% to 250% FPL =.73 (coinsurance = 25%) 250% to 400% FPL =.70 (coinsurance = 25%) Catastrophic 37 Thank You Questions? Debbie Welle-Powell, MPA Vice President Payer Contracting and Strategy & Government Affairs Sisters of Charity Health System and Exempla Healthcare Welle-powelld@exempla.org 303-813-5009 38 38 13