Medicare Value Based Purchasing Overview

Medicare Value Based Purchasing Overview South Carolina Hospital Association DataGen Susan McDonough Bill Shyne October 29, 2015

Today s Objectives Overview of Medicare Value Based Purchasing Program Review Methodologies Review South Carolina s VBP Report

Medicare Quality Based Payment Reform (QBPR) Programs Mandated by the ACA of 2010 VBP Program (redistributive w/ winners and losers) Readmissions Reduction Program (remain whole or lose) HAC Reduction Program (remain whole or lose) National pay-for-performance programs Most acute care hospitals must participate; CAHs excluded Program rules, measures, and methodologies adopted well in advance (2013-2021)

Medicare Quality Programs Payment adjustments based on facility-specific performance compared to national standards Performance metrics are determined using historical data Program components change every year Financial exposure increases every year

Medicare Value Based Purchasing (VBP) Program Program became effective FFY 2013 (October 1, 2012) The only Medicare quality program that provides rewards and penalties (redistributive) The only Medicare quality program to recognize improvement as well as achievement Funded by IPPS payment contribution (1.75% in FFY 2016) $1.5 Billion program (for FFY 2016) Contribution increases by 0.25% per year (2% in FFY 2017 is the cap)

Value Based Purchasing: Program Overview Measure Scores Domain Scores Total Performance Score Payout Percentage VBP Slope Adjustment Factor Program Impact Performance is evaluated on a measure-by-measure basis Quality achievement and improvement are both recognized Hospital performance is compared to national performance standards Measures are grouped into domains Process of Care Patient Experience of Care Outcomes of Care Efficiency

VBP Efficiency Measure Medicare Spending per Beneficiary:

South Carolina Medicare Spending per Beneficiary

Value Based Purchasing: Program Overview Measure Scores Domain Scores Total Performance Score Payout Percentage VBP Slope Adjustment Factor Program Impact Performance is evaluated on a measure-by-measure basis Quality achievement and improvement are both recognized Hospital performance is compared to national performance standards Measures are grouped into domains Process of Care Patient Experience of Care Outcomes of Care Efficiency Domain scores are combined to calculate a Total Performance Score (TPS) Total Performance Score is converted to an Adjustment Factor

VBP Program Trends Continually evolving Program rules established in advance The final 2016 IPPS rule establishes parameters through 2021 Increasing emphasis on outcomes and efficiency Moving targets 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 20% 30% 30% 25% 20% 25% 30% 25% 25% 25% 25% 25% 70% 30% 25% 40% 45% 25% 20% 25% 10% 5% 2013 2014 2015 2016 2017 2018 + Process of Care Patient Outcomes Patient Experience of Care Efficiency Safety Clinical Care

VBP Performance Standards National Benchmarks High achievement levels (average performance score for top 10% of hospitals nationwide) National Thresholds Minimum achievement levels (median performance score for hospitals nationwide) National Floors (HCAHPS only; lowest scores nationwide) Measure Name National Performance Standards Established by CMS (3) Floor Threshold Benchmark Communication with Nurses 53.99% 77.67% 86.07% Communication with Doctors 57.01% 80.40% 88.56% Responsiveness of Hospital Staff 38.21% 64.71% 79.76% Pain Management 48.96% 70.18% 78.16%

VBP Measure Scoring: Achievement Points Measure ID Measure Name Performance Period Analyzed (1) Hospital Performance Baseline Period Analyzed (2) Hospital Performance National Performance Standards Established by CMS (3) Case Count Measure Score Case Count Measure Score Threshold Benchmark Achievement Points Earned (4) Improvement Points Earned (5) Final Points Earned (6) SCIP_INF _3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time 392 99% 440 98% 97.494% 100% 6 5 6

VBP Measure Scoring: Improvement Points Measure ID Measure Name Performance Period Analyzed (1) Hospital Performance Baseline Period Analyzed (2) Hospital Performance National Performance Standards Established by CMS (3) Case Count Measure Score Case Count Measure Score Threshold Benchmark Achievement Points Earned (4) Improvement Points Earned (5) Final Points Earned (6) SCIP_INF _3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time 392 99% 440 98% 97.494% 100% 6 5 6 For each individual measure, the hospital received the higher point value of achievement or improvement. In this example, a score of 6 is assigned to the SCIP_INF_3 measure.

Domain Score and TPS Calculation

VBP Total Performance Score Unweighted Domain Score Original Domain Weight Proportionally Reweighted Domain Weight * Weighted Score (Unweighted Domain Score X Reweighted Domain Weight) Process Domain Patient Experience Domain Patient Outcomes Domain Efficiency Domain Total VBP Performance Score (TPS) (Sum of weighted scores) 68.57% 10.00% 10.00% 6.86% 58.00% 25.00% 25.00% 14.50% 24.29% 40.00% 40.00% 9.71% 20.00% 25.00% 25.00% 5.00% 36.07% Each domain score is calculated separately by adding measure components and taking percentage Domain scores are then weighted together

Slope Calculation VBP Linear Function (Payout Percentage) = [Total Performance Score x VBP Slope] VBP Adjustment Factor = [1 + (Program Contribution Percentage x Payout Percentage) Program Contribution Percentage] Annual Program Impact = [IPPS Base Operating Dollars x VBP Adjustment Factor IPPS Base Operating Dollars]

VBP Payment Percentage VBP Payment Adjustment Calculation VBP Contribution Amount VBP Program Impact (Current Estimate) F Estimated Total IPPS Operating Payments $93,951,800 G Program Contribution Percentage 1.75% H Program Contribution ( F X G ) $1,644,200 I Linear Payout Function Factor (slope of solid line in chart - based on U.S. distribution of hospital TPS) 3.22 J VBP Payment Percentage ( I X E) 46.49% K VBP Payout ( J X H ) $764,300 L Net Gain/Loss ( K - H ) ($879,900) M Estimated Payment Adjustment Factor (1+ (( G X J ) - G ) 0.9906 N Linear Payout Function Factor (slope of dashed line in chart set at 2.0) 2.00 Linear Exchange Function Graph 300% 280% 260% 240% 220% 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% VBP Program Impact (Conservative Estimate) ** O VBP Payment Percentage ( N X E ) 28.86% P VBP Payout ( H X O ) $474,500 Q Net Gain/Loss ( P - H ) ($1,169,700) Total Performance Score (TPS) Hospital's TPS and Corresponding VBP Payment Percentage Breakeven Score Payment Conversion Line (Current Estimate) R Estimated Payment Adjustment Factor (1+ (( G X O ) - G ) 0.9876 Payment Conversion Line (Conservative Estimate)

VBP Payment Percentage VBP Impact Analysis Worksheet Medicare Hospital VBP Analysis Score, Impact, and Trend Estimates Estimated FFY 2015 Program Performance Sample Hospital Update Based on Hospital Compare's June 2014 (2nd quarter 2014) Data Release VBP Score Estimates Unweighted Domain Score 1 Original Domain Weight Proportionally Weighted Score Reweighted Domain (Unweighted Domain Score X Weight * Reweighted Domain Weight) A Process Domain 72.73% 20.00% 20.00% 14.55% B Patient Experience Domain 30.00% 30.00% 30.00% 9.00% C Patient Outcomes Domain 20.00% 30.00% 30.00% 6.00% D Efficiency Domain 20.00% 20.00% 20.00% 4.00% E Total VBP Performance Score (TPS) (Sum of weighted scores) 33.55% Calculation of Total Performance score from domain scores VBP Contribution Amount F Estimated Total IPPS Operating Payments $65,081,300 G Program Contribution Percentage 1.50% H Program Contribution ( F X G ) $976,200 300% 280% 260% 240% Linear Exchange Function Graph I Linear Payout Function Factor (slope of solid line in chart - based on U.S. distribution of hospital TPS) 2.72 220% 200% VBP Program Impact (Current Estimate) VBP Program Impact (Conservative Estimate) ** J VBP Payment Percentage ( I X E) 91.37% K VBP Payout ( J X H ) $891,900 L Net Gain/Loss ( K - H ) ($84,300) M Estimated Payment Adjustment Factor (1+ (( G X J ) - G ) 0.9987 N Linear Payout Function Factor (slope of dashed line in chart set at 2.0) 2.00 O VBP Payment Percentage ( N X E ) 67.09% P VBP Payout ( H X O ) $654,900 Q Net Gain/Loss ( P - H ) ($321,300) 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Total Performance Score (TPS) Hospital's TPS and Corresponding VBP Payment Percentage Breakeven Score Payment Conversion Line (Current Estimate) Adjustment Factor calculation and estimated program impacts R Estimated Payment Adjustment Factor (1+ (( G X O ) - G ) 0.9951 Payment Conversion Line (Conservative Estimate) VBP Trends (Based on Current Estimate) Hospital Compare's Sept. 2013 Update (3Q2013) Hospital Compare's Dec. 2013 Update (4Q2013) Hospital Compare's March 2014 Update (1Q2014) Hospital Compare's June 2014 Update (2Q2014) Raw Score 59.09% 64.55% 72.73% Process Domain Rank within U.S. Insufficient Data 969 of 3040 850 of 3036 597 of 3029 Patient Experience Domain Patient Outcomes Domain Rank within State Raw Score Rank within U.S. Rank within State Raw Score Rank within U.S. Rank within State Insufficient Data Insufficient Data 20 of 60 19 of 59 15 of 59 35.00% 35.00% 30.00% 1535 of 3155 1644 of 3135 2007 of 3128 41 of 65 45 of 65 52 of 65 26.00% 20.00% 20.00% 1843 of 2831 2085 of 2834 2085 of 2835 42 of 64 49 of 64 48 of 64 Quarterly Performance Trends Comparison to nation Raw Score 20.00% 20.00% 20.00% Efficiency Domain Rank within U.S. Insufficient Data 1101 of 3150 1096 of 3144 1095 of 3139 Rank within State 26 of 65 26 of 65 26 of 65

VBP Performance Scorecard Worksheet Measure and Domain Score Comparison Process of Care Program Eligibility FFY 2013 Program ACTUAL Performance Hospital Performance Eligible VBP Measure Score FFY 2014 Program ACTUAL Performance Hospital Performance AMI-7a N/A N/A N/A N/A N/A N/A N/A N/A AMI-8a N/A N/A 87.5% 0 96.4% 3 ggg SCIP-Inf-1 95.1% 2 gg 97.8% 5 ggggg 99.3% 8 gggggggg SCIP-Inf-2 97.6% 2 gg 99.2% 6 gggggg 99.5% 7 ggggggg 99.0% 0 SCIP-Inf-3 93.6% 0 94.5% 2 gg 95.8% 5 ggggg 96.0% 2 gg SCIP-Inf-4 98.9% 9 ggggggggg 94.3% 0 96.4% 2 gg SCIP-Inf-9 Measure Not Evaluated for VBP 2013 93.1% 5 ggggg 95.5% 6 gggggg 96.0% 4 gggg HF-1 90.6% 4 gggg 92.0% 3 ggg 93.9% 3 ggg PN-3b 95.6% 0 96.7% 2 gg 97.0% 4 gggg PN-6 95.8% 5 ggggg 94.1% 0 96.7% 2 gg 94.0% 0 SCIP-Card-2 95.0% 3 ggg 98.3% 8 gggggggg 98.6% 7 ggggggg 99.0% 6 gggggg SCIP-VTE-1 97.4% 5 ggggg 99.3% 8 gggggggg Measure Not Evaluated for VBP 2015 SCIP-VTE-2 94.1% 2 gg 95.9% 2 gg 98.2% 6 gggggg 99.0% 7 ggggggg Hospital Performance VBP Measure Score Hospital Performance IMM-2 Measure Not Evaluated for VBP 2013 Measure Not Evaluated for VBP 2014 Measure Not Evaluated for VBP 2015 90.0% 1 Eligible VBP Measure Score FFY 2015 Program ACTUAL Performance Eligible FFY 2016 Program ESTIMATED Performance VBP Measure Score Projected to be Eligible Measure Not Evaluated for VBP 2016 Measure Not Evaluated for VBP 2016 Measure Not Evaluated for VBP 2016 Measure Not Evaluated for VBP 2016 g Unweighted Domain Score 32.0% 34.2% 48.2% 28.6% Actual VBP scores and estimated scores Year-to-year improvement in performance on a measure does not guarantee improved score

Value Based Purchasing Program Trends Chasing a moving target Measures/Domains National Improvement Trends Performance Standards Providence Alaska Medical Center U.S. Top 10% U.S. Average 102% 100% 98% 96% 94% 92% HF_1: Discharge Instructions 100% 100% 96% 94% Scheduled Quarterly Release June 2011 Sept. 2011 Dec. 2011 Mar. 2012 June 2012 Sept. 2012 Dec. 2012 Mar. 2013 June 2013 Sept. 2013 Dec. 2013 Mar. 2014 June 2014 Data Collection Dates 90% 88% 89% Oct. 1, 2009 - Sept. 30, 2010 Jan. 1, 2010 - Dec. 31, 2010 Apr. 1, 2010 - Mar. 31, 2011 Jul. 1, 2010 - June 30, 2011 Oct. 1, 2010 - Sept. 30, 2011 Jan. 1, 2011 - Dec. 31, 2011 Apr. 1, 2011 - Mar. 31, 2012 Jul. 1, 2011 - June 30, 2012 Oct. 1, 2011 - Sept. 30, 2012 Jan. 1, 2012 - Dec. 31, 2012 Apr. 1, 2012 - Mar. 31, 2013 Jul. 1, 2012 - June 30, 2013 Hospital Performance 96% 97% 97% 97% 98% 98% 99% 99% 99% 99% 99% 99% 100% CASES 247 273 303 301 291 292 290 307 312 315 298 282 300 U.S. Top 10% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% U.S. Average 89% 90% 90% 91% 92% 92% 93% 93% 93% 94% 94% 94% 94% Oct. 1, 2012 - Sept. 30, 2013 U.S. Rank 943 of 3269 820 of 3264 876 of 3248 944 of 3243 772 of 3233 760 of 3209 586 of 3176 611 of 3169 619 of 3144 647 of 3131 683 of 3122 718 of 3133 1 of 3119 State Rank 3 of 8 2 of 7 3 of 8 2 of 7 3 of 8 3 of 8 2 of 7 2 of 7 2 of 6 2 of 6 1 of 7 1 of 7 1 of 7 Applicable to the 2013, 2014 and 2015 VBP Programs.

Value Based Purchasing: Hospital Case Study 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 2013 2014 2015 Total Performance Score Process HCAHPs Outcomes Efficiency Total Performance Score drops from 81.6% to 34.1% due to its poorer performance in HCAPHPs, and the addition of Outcomes/Efficiency and increased domain weight Hospital Payout Percentage drops from 149.9% to 88.0% from FFY 2013 to 2015 2013 2014 2015 Process 95.6% 94.0% 90.0% HCAHPs 49.0% 32.0% 27.0% Outcomes N/A 50.0% 13.3% Efficiency N/A N/A 20.0% Total Performance Score 81.6% 64.4% 34.1% VBP Slope 1.8374 2.0962 2.5801 Adjustment Factor 1.0050 1.0044 0.9982 Payout Percentage 149.9% 135.0% 88.0% As CMS shifts more and more weight towards these Outcomes/Efficiency domains, this hospital may experience larger losses in future program years

South Carolina Performance Trends Domain Ranking (Lower is Better) 2013 2014 2015 Process of Care 7 of 50 15 of 50 17 of 50 Patient Experience of Care 5 of 50 8 of 50 4 of 50 O utc omes of Care N/A 34 of 50-19 of 50 Effic ienc y N/A N/A - 36 of 50 - Total Performance Score (TPS) 3 of 50 8 of 50 15 of 50 Key Drivers of Statewide Performance: New Domains FFY 2014: Outcomes Domain FFY 2015: Efficiency Domain New/Removed Measures FFY 2014: Added - SCIP-9, AMI, Heart Failure, and Pneumonia Mortality Measures FFY 2015: Added - PSI-90, CLABSI, Medicare Spending Per Beneficiary; Removed - SCIP-VTE-1 FFY2016: Added Removed - IMM-2: Influenza Immunization (2018+) and AMI-7A: Fibrinolytic Therapy Received within 30 Minutes of Hospital Arrival (2018+); Removed - process domain (2018+) with remaining PC-01 measure to move to Safety Domain Changing Eligibility Update performance periods/standards Nationwide Improvement Changing Domain Weights Increased weight towards Outcomes/Efficiency

VBP Measure Updates Reference population update to CDC measures To be updated to CY 2015, effective for CY 2016 reporting Reference Population effects denominator of SIR Expected Infections CMS proposes to recalculate performance period SIRs to allow for Improvement Point Calculation Standardized Infection Ratio (SIR) 1 = Number of Observed CLABSI Infections Number of Expected CLABSI Infections Potential Expansion of CAUTI/CLABSI measures to non-icu wards Current Measure: Adult, pediatric, and neonatal intensive care unit (ICU) data only Expanded Measure: Adds non-icu adult or pediatric medical, surgical, and medical/surgical wards Proposed expansion would be effective for FFY 2019 VBP and future years

South Carolina VBP Performance Trends 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% Statewide Payback Percentage 112.6% 104.8% 105.3% 2013 2014 2015 P ayout P erc entage 112.6% 104.8% 105.3% Total Impac t $1,678,800 $805,600 $1,081,300 Eligible Hospitals 51 48 53 Number of Winners 35 26 34 Number of Losers 16 22 19

VBP Program Timeframes FFY 2016 VBP Program Timeframes 2010 2011 2012 2013 2014 2015 Process of Care: Baseline Period 6 Patient Experience of Care: Baseline Period 6 Process of Care: Performance Period 7 Patient Experience of Care: Performance Period 7 Outcomes of Care (Mortality & PSI-90): Baseline Period 6 Outcomes of Care (HAI Measures): Baseline Period 6 Efficiency of Care: Baseline Period 6 Outcomes of Care (Mortality & PSI-90): Performance Period 7 Outcomes of Care (HAI Measures): Performance Period 7 Efficiency of Care: Performance Period 7 Pa

VBP Program Timeframes 2010 FFY 2017 VBP Program Timeframes 2011 2012 2013 2014 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S Clinical Care - Process: Baseline Period 2015 2016 Clinical Care - Process: Performance Period Patient Experience of Care: Baseline Period Patient Experience of Care: Performance Period Clinical Care - Outcomes: Baseline Period Clinical Care - Outcomes: Performance Period Safety of Care (PSI-90): Baseline Period Safety of Care (PSI-90): Performance Period Safety of Care (All other): Baseline Period Efficiency and Cost Reduction: Baseline Period Safety of Care (All other): Performance Period Efficiency and Cost Reduction: Performance Period

Efficiency and Cost Reduction Patient Experience of Care Clinical Care: Outcomes Safety of Care QBPR Reference Guide Quality Based Payment Reform (QBPR) Reference Guide Value Based Purchasing (VBP) Overview: FFY 2018 Program Measures, Performance Standards, Evaluation Periods, and Other Program Details for the FFY 2018 VBP Program National National Minimum Measure ID Measure Description ThresholdBenchmarStandards 1 k 2 4 HAI_1* Central Line-Associated Blood Stream Infection (CLABSI) 0.3690 0.0000 HAI_2* Catheter-Associated Urinary Tract Infection (CAUTI) 0.9060 0.0000 HAI_5* Methicillin-resistant Staphylococcus Aureus (MRSA) Blood Laboratory-identified Events 0.7670 0.0000 HAI_6* Clostridium difficile (C.diff.) 0.7940 0.0020 PSI-90* PC-01* (MOVED) Pooled Surgical Site Infection (SSI) Measure**: Patient Safety Indicator Composite (FFY 2016 IPPS final rule standards used AHRQ v4.4) Elective Delivery Prior to 39 completed Weeks Gestation TBD (v4.5a) TBD (v4.5a) 1 Predicted Infection 3 Cases 2.0408% 0.0000% 10 Cases HAI-3 * Surgical Site Infection - Colon 0.8240 0.0000 1 Predicted HAI-4 * Surgical Site Infection - Abdominal Hysterectomy 0.7100 0.0000 Infection Measure ID Measure Description National National Minimum ThresholdBenchmarStandards 1 k 2 4 MORT 30 AMI MORT 30 HF MORT 30 PN Acute Myocardial Infarction (AMI) 30-Day Mortality Rate (converted to survival rate for VBP) Heart Failure (HF) 30-Day Mortality Rate (converted to survival rate for VBP) Pneumonia (PN) 30-Day Mortality Rate (converted to survival rate for VBP) 85.1458% 87.1669% 88.1794% 90.3985% 25 Cases 88.2986% 90.8124% Measure ID Measure Description National Floor 3 National National Minimum ThresholdBenchmarStandards 1 k 2 4 Communication with Nurses 55.27% 78.52% 86.68% Communication with Doctors 57.39% 80.44% 88.51% Responsiveness of Hospital Staff 38.40% 65.08% 80.35% Pain Management 52.19% 70.20% 78.46% Communication about Medicines 43.43% 63.37% 73.66% Hospital Cleanliness & Quietness 40.05% 65.60% 79.00% Discharge Information 62.25% 86.60% 91.63% Overall Rating of Hospital 37.67% 70.23% 84.58% CTM-3 (NEW) 3-Item Care Transitions Measure 25.21% 51.45% 62.44% 100 Surveys Measure ID Measure Description National National Minimum ThresholdBenchmarStandards 1 k 2 4 SPP-1* (MSPB-1) Spending Per Hospital Patient With Medicare Mean Median Ratio of Ratio Lowest Across All 25 Cases Hospitals * Decile of ** Hospitals * **

Other SCHA / DataGen Quality Webinars Readmission Reduction Program Nov 17 @ 1p.m. Invitation to all South Carolina hospitals Finance teams Quality teams Executive team Registration is required

Questions?