prospective payment system: mr. atkinson program review and evaluation health budgets and financial...

Prospective Payment System:

Mr. Atkinson

Program Review and Evaluation

Health Budgets and Financial Policy

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Overview Background PPS Future Next Steps/Issues for consideration

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Why Prospective Payment System?

Justify Budget Base Budgets on Outputs, not Inputs

Provide incentives for good health care practices

Rational Distribution of Funds Fund Business Plans Place Accountability for Care at MTF Quantify deviations from plan

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How is PPS related to Business Plans?

Currently Outputs from Business Plans used for initial allocation

Inpatient Relative Weighted Products (RWPs) Mental Health Bed Days

Outpatient Relative Value Units (RVUs)

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Prospective Payment Budgeting Valuing Business Plans

Value of MTF business plans Fee for Service rate for workload produced

Rates based on price at which care can be purchased CMAC rates Not MTF costs

Computed at MTF level but allocated to services Rolled up to Services

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PPS – Where are we PPS applied in FY05 to initial allocation

Based on Business Plans 25% Blend with traditional Budget

PPS applied at mid-year review Based on most recent 12 months of actuals 25% Blend with traditional Budget

PPS FY06 allocation implications determined Based on recent Business Plans 50% blend with traditional budget

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FY05 Mid Year Summary

Adjusment Plan Mid Year TotalArmy 30.6 8.4 Navy 2.2 4.1 Air Force (2.5) (4.4) Total 30.3 8.1

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Tracking FY06by MTF

FY03 and FY06 Plan Earnings are color coded with Green representing Rolling 12 >= 03/plan, yellow within 2% below, and Red >2% below.Rolling 12 month is current through 12th month of FY05 for inpatient, and 2nd month of FY06 for outpatientPPS Reconcilliation FFS onlyService DMIS Name FY03 Rolling 12 FY06 Plan FY03 Rolling 12 FY06 Plan FY03 Rolling 12 FY06 PlanF XXXX Base X 269,956 292,429 298,021 1,338 1,199 1,010 59 16 52

RVUs RWPs Mental Health Days

FY03 Rolling 12 FY06 Plan30,493,409 31,823,027 30,572,631

PPS Earnings

PPS Reconcilliation FFS onlyService DMIS Name FY03 Rolling 12 FY06 Plan FY03 Rolling 12 FY06 Plan FY03 Rolling 12 FY06 PlanA XXXX Base Y 378,661 384,093 465,650 2,110 2,538 2,616 48 47 56

RVUs RWPs Mental Health Days

FY03 Rolling 12 FY06 Plan44,616,404 49,318,766 55,632,511

PPS Earnings

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FY06 Mid Year Summary

Adjustment Rolling 12 PlanArmy 2.5 15.4 Navy (2.9) 17.3 Air Force (20.0) (16.4) Total (20.4) 16.3

Millions

FY03 Rolling 12 FY06 Plan FY03 Rolling 12 FY06 Plan FY03 Rolling 12 FY06 PlanArmy 11,314,329 10,691,909 11,254,054 100,014 104,162 103,821 34,067 31,460 35,566 Navy 7,533,511 7,136,237 7,805,835 60,141 61,866 65,238 18,344 21,156 21,526 Air Force 6,128,494 5,828,010 5,838,810 41,701 35,943 37,251 7,314 5,543 6,933 MHS 24,976,334 23,656,157 24,898,699 201,857 201,971 206,311 59,725 58,159 64,025

RVUs RWPs Mental Health Days

FY03 Rolling 12 FY06 Plan1,758,372,703 1,765,694,158 1,804,527,896 1,159,347,466 1,146,734,054 1,235,781,846

895,200,801 819,226,108 832,718,545 3,812,920,969 3,731,654,320 3,873,028,287

PPS Earnings

FY03 and FY06 Plan Earnings are color coded with Green representing Rolling 12 >= 03/plan, yellow within 2% below, and Red >2% below.Rolling 12 month is current through 2nd month of FY06 for inpatient, and 6th month of FY06 for outpatient

Future of PPS

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Why Expand PPS? Currently PPS only covers portion of MHS budget No value for Ancillary/Pharmacy Non-Industry Standard capture of workload in the MHS No value for Dental Care No value for Indirect Readiness Costs No value for Non-Benefit (“Readiness”) related functions Payment method rewards churn and earn behavior No distinction for outcomes/health management

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Ancillary/Pharmacy Ancillary

Where are we now Ancillary data in MDR Ancillary tables in M2

How approach Review data Apply weight Determine payment method

Pharmacy PDTS data available Ingredient Cost most likely will be used Fill Rate still needs to be determined

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Non-Industry Standard Workload Capture

Inpatient/Outpatient vs. Institutional/Professional Industry Based Workload Alignment (IBWA)

Rounds capture 2yrs old (appx 40% complete) Full Inpatient professional workload capture began this

year Facility component of ambulatory capture dependent

on Enhanced SADR Full RVU

Work RVU Practice RVU Malpractice RVU

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Dental/Other Benefit Dental

Starting to collect data in central systems Need to review data for consistency across Services Weights likely from CMS/ADA Payments still need to be determined

Other Benefits HCPCs Data? Payment?

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Non-Benefit Functions Education and Training

Workload/Performance measures unknown Data collection does not exist Cost vs. Payment must be determined

Indirect Readiness Similar to Indirect Medical Education Multiple method reviews to date with no success

Other reviews continuing on AD provider/population/patient

Direct Readiness Focus on DHP funding only Some related to enhanced medical care – Military unique RVU Other related to currently undefined/collected functions

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Prospective Payment Structure Based on Fee for Service

Benefits Pay for services provided not resources consumed Resources tied to workload

Concerns Rewards additional workload No incentive for utilization/disease management No incentive for prevention FFS does not necessarily capture entire value of non-

provider work

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Prospective Payment Structure Based on Enrolled Population

Utilization Incentive/Penalty Financial Bonus linked to trend in utilization

MTFs keep some of savings generated by decreased utilization Similar to Managed Care Support Contract

MTF partially at risk for utilization trend Adjusted for demographics

Capitation Value per enrollee

MTF at risk for entire health care costs Adjusted for demographics/health risk

Concerns Catastrophic Cases Small Enrolled Population

Both provide incentive for utilization management where Return on Investment (ROI) is near-term

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Prospective Payment Structure Based on Outcomes

Paying for Quality Financial incentives for outcomes, not just outputs Possible quality measures

ORYX – (JCAHO) AHRQ – (HHS)

Inpatient Quality Indicators Prevention Quality Indicators

HEDIS – (NCQA)

Potential for long-term investments in prevention/disease management

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PPS Roadmap

Inpatient

Outpatient

Ancillary

Data

Weights

Rates

PharmacyData

Rates

DirectReadiness/

Other

Data Weights Rates

Workload

Institutional

Professional

RiskAdjusters

ReinsurancePlan

MinimumEnrollment

HEDIS

SatisfactionORYX

Institutional

Professional

OtherBenefit

(HCPCs)

DataWeights

Rates

IndirectReadiness/

OtherData

Weights

Rates

Capitation Performance

DentalData

Weights

Rates

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PPS Roadmap

Inpatient

Outpatient

Ancillary

Data

Weights

Rates

PharmacyData

Rates

DirectReadiness/

Other

Data Weights Rates

Workload

Institutional

Professional

RiskAdjusters

ReinsurancePlan

MinimumEnrollment

HEDIS

SatisfactionORYX

Institutional

Professional

OtherBenefit

(HCPCs)

DataWeights

Rates

IndirectReadiness/

OtherData

Weights

Rates

Capitation Performance

DentalData

Weights

Rates

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Next StepsProspective Payment

Monitor FY06 performance against plan Apply to future budgets

FY07 - 75% FY08 - 100%

Incorporate Ancillary, Pharmacy data Ancillary data now being collected Analyze during FY06, apply in FY07 (scorecard only) Concern about standardization and unbundling

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Issues to Consider Non Provider specialty codes

Last year workload accepted is FY06 Future years no workload credit

Incorporate Inpatient Professional Services Professional services should be coding this year

Initial focus External partnerships and circuit riders Need to expand to all inpatient care

Begin with adjusting RWP rate down for rounds Approximately 40% complete (60% lost value) Began 1 Oct 2002

Accurate coding Need to ensure coding matches documentation Eventually audit adjustments to claims Timely data submission

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Questions/Discussion

Backup

Contact Info:

Gregory.Atkinson@ha.osd.mil

703-681-1724

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Valuing Business PlansFee for Service Rates (FY06)

Value per RWP - $6,491 Average amount allowed

Including institutional and professional fees Excluding MH/SA Adjusted for local Wage index

Value per Mental Health Bed day - $541 Average amount allowed

Including institutional and professional fees Adjusted for local Wage index

Value per RVU - $79 Average amount allowed

Segmented by Specialty Excluding Ancillary, Home Health, Facility Charges Adjusted for local Wage index

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Valuation Issues Capitation versus Fee for Service

Fee for Service initially; moving to Capitation Indirect Medical Education Adjustment

Use same methodology used for 3rd party collect OCONUS MTFs

Not part of PPS, but being score carded in FY06 Remote MTFs

Part of PPS Keesler not funded under PPS for FY06

Related to impact of hurricane, modified cost basis

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Capitation Risk Adjustment:Predicting Costs for Each Person with Each Model

Age & Sex information

Disease categoriescreated by each model

ACGCDPSCRGDCG

Identical regression

method

Predictedcosts

15,000+ ICD-9

Diagnoses

ProceduresProvider Type

Dates of Service(just for CRGs)

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Capitation Risk Adjustment: Costs and Predictive Ratios by Disease

All risk models predict cohort costs much better than age/sex

Disease Cohort N

Mean Cost

Predictive Ratios

Age/

SexACG CDPS CRG DCG

Diabetes 12,112 $6,513 0.52 0.97 0.97 0.97 0.97

Asthma 21,752 $3,184 0.54 0.99 0.99 0.86 0.97

Renal (CRF)

467 $25,038 0.13 0.82 0.87 0.75 0.81

PTSD 1,138 $6,005 0.36 0.86 0.83 0.80 0.83

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Pharmacy

Ancillary

Prof/Inst

Mission Essential

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Validate DataDevelop RatesBusiness Plan

Applied to BPShadowBudget

Data CollectionDC ProceduresStudy

Capitation

Capitation ResultsDevelop Cap ProposalAdjust Budgets (20%/50%)

Performance

Indirect

Develop ContractSite Visits/ Develop Codes

Timeline for Elements of PBP & PPS