8/2/2016

1

Innovation in Reimbursement

LeadingAge New YorkFinancial Managers Conference

September 1, 2016

2016 Medicare Trustees Report

• Total Medicare expenditures were $648 billion in 2015

– Part A SNF = $29.8B

• The estimated depletion date for the HI (Medicare Part A) trust fund is 2028, 2 years earlier than in last year’s report

• The fund is not adequately financed over the next 10 years

Social Programs Squeezing Other Spending

Source: OMB

8/2/2016

2

The “Hidden Crisis” Facing America

• From Moody’s report• Pension + Benefits shortfall total $20.4T:

– State, local, and federal governments are about $7 trillion short in funding coming pension payments (40% of GDP)

– Unfunded liabilities for the Social Security and Medicare programs is estimated at $13.4 trillion (75% of GDP)• Shortfall from the Hospital Insurance component of the Medicare

program amounts $3.2 trillion (18% of GDP)

– As the stand-alone sustainability of these two programs wanes with an aging population, the programs will be the primary drivers behind a sharp widening of federal budget deficits that is expected to occur after the fiscal year 2018

– https://www.moodys.com/research/Moodys-US-government-pension-shortfall-overshadowed-by-Social-Security-Medicare--PR_346878

2017 Presidential Budget: Medicare

Source: HHS

Adjust Payment Updates for Certain Post-Acute Care Providers: $87B cut from 2017 – 2026http://www.hhs.gov/about/budget/fy2017/budget-in-brief/cms/medicare/index.html

8/2/2016

3

Why Are We Targeted for Cuts?

• We are such a small part of the big picture so why is all of this attention being paid to post-acute care?– Our profit margins are very high relative to other

sectors

– We have a payment system that does not align well with cost (predictive power)

– We have the most cost variability of any sector

– Patient placement has been arbitrary with little correlation to outcomes (patient choice)

– The system is ripe for “Rationalization”

This is NOT Innovation

• SNF Medicare Payment Changes in Last 5 Years:

– RUG-IV reweighting

– Loss of Concurrent therapy

– Loss of Group therapy

– MMPI

– Therapy caps (reviews and exceptions)

– Sequestration

– ACA Productivity Adjustment

– SGR (eliminated by MACRA 2015)

– Enhanced audits

Exponential changes grow slowly in their early stages. But when they reach a certain

tipping point they take off like a rocket.

8/2/2016

4

The Future of LTC?

• My predictions (global market trends):

– Healthcare will remain a “local business”

– Divestiture from large national chains as they experience management challenges and struggle under highly leveraged transactions

– Many facilities, especially new players, will suffer under highly leveraged purchases

– Strong “Regional” operators

– Acceleration of “Boutique” post-acute care

The Future of LTC?

• My predictions (operational issues):

– Significant impact of healthcare reform in some markets, but little impact in others, especially rural

– Risk slowly introduced to LTC providers as payment systems transition

• Management and Scale required to succeed

– Move toward outsourcing therapy and billing

– Advancements in Analytics and Care Management technology

– Ongoing rate pressure from Government spending constraints

– Eventual adoption of Unified PAC (benefit to SNF)

Where Are We Going?

• Accountable Care Organizations• Alternative Payment Models: Bundling Demo; CCJR• Medicare & Medicaid Managed Care• Preferred Provider Networks• Push Toward Lower Cost Settings• Special Needs Plans• Quality Measures Tied to Payment

• Provider Risk• Reimbursement Penalties• Uniform PAC Assessment & Payment System • Data Analytics• “Real-time” Care Management Solutions• Care Transitions

8/2/2016

5

Medicare Alternative Payment Models

2008 2018

Source: HHS

Quality Defined?

• “Composite Quality Score”

–5-Star / Quality Measures

–All cause readmission rate

–Post-discharge readmission rate

–Delta of functional ability upon admit and discharge

–Patient satisfaction survey

–Episodic cost

Risk

• Statistics and Risk are about understanding how numbers, especially large numbers, behave

• How are SNFs assuming Risk?

– FFS: ISNP, BCPI, ACOs, Quality

– Managed Care: Episodic, Capitation, Quality

• Risk Checklist:

– Scale, Tolerance, Data, ROI

8/2/2016

6

Health of the SNF Industry

• Occupancy rates dropped from just under 85% in October 2011 to 82.8% in December 2015– ¼ of SNFs have occupancy below 76% (MedPAC)

• Average price per bed increased 12% from 2014 to $85,900

• Average cap rate (ratio of net operating income to property asset value) fell to 12.2%,

• Record SNF transactions in 2015 (357 acquisitions; 14% increase from 2014 (Levin Associates)

• http://www.cnbc.com/2015/12/07/there-arent-enough-nursing-home-beds-to-meet-demand.html

Healthcare M&A Activity

Source: Avalere

March 2016 MedPAC Report

• Number of SNFs decreased by 499 from 2005 –2015 (15,484 to 14,985 or 3.2%)

• SNF payment system needs significant refinement to remove incentive for volume-driven payment

• As broad payment reforms are implemented, SNF use may increase because it is a lower cost alternative to other PACs

• 2014 SNF Part A Profit Margins = 12.5%– Down from 13.2% in 2013 and a high of 21.3% in 2011

– Non-Medicare were negative 1.5%

– Overall margins were 1.9%

8/2/2016

7

Medicare Per Beneficiary Spending Growth (2005 – 2014)

Source: MedPAC

Medicare Per Beneficiary Spending Growth

Source: MedPAC

Medicare FFS SNF Utilization Changes

% Change

Volume Measure 2008 2010 2012 2013 2014 2008 - 2014

Admissions / 1,000 Beneficiaries 73 72 68 67 66 -9.6%

Days / 1,000 Beneficiaries 1,977 1,938 1,861 1,835 1,808 -8.5%

Covered Days / Admission 27.0 27.1 27.4 27.6 27.6 2.2%

Why the decreases in utilization?• ACOs• Bundling• Growth of Observation Stays

8/2/2016

8

Changes in SNF Measures

* All changes are risk-adjusted

(2014)

But There is Good News

The Current PPS is Broken

• OIG Report: “The Medicare Payment System for Skilled Nursing Facilities Needs to be Reevaluated” (OEI-02-13-00610)

• Continues to reward Quantity as opposed to Quality

• MedPAC Report for Developing a Unified PAC Payment System

• Therapy remains “mis-priced”

8/2/2016

9

Medicare SNF Transparency Data

• https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-03-09.html

• 2013 RUG Distribution published by CMS (not materially different from ZHSG’s 2015 data)

• Based on # of Assessments (2,797,965 total):

–Rehab: 97.4%– Ext. Services: 0.22%

– Special Care High: 0.57%

– Special Care Low: 0.39%

– Clinical: 0.95%

– Behavior: 0.01%

– Physical: 0.45%

Medicare RUG Distribution Analysis

• Within Each Category (based on # of assessments not days):

– Rehab Ultra: 53.92%

– Rehab Very: 31.26%

– Rehab High: 9.53%

– Rehab Medium: 5.27%

– Rehab Low: 0.01%

– Rehab X/L (all): 0.42%

– SC/Clinical “2”: 3.95%

Medicare Benchmarking

• Start thinking “Episodic”– National “Episodic” cost (based on

“Standardized” Medicare rates) = $10,919

– NY episodic: $11,437

– NJ episodic: $10,599• https://www.cms.gov/Research-Statistics-Data-and-

Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/SNF.html

– 2.5M stays in 2013 (21% were multiple admissions per beneficiary)

– CMS breaks down data by provider for individual facility benchmarking to peer group

8/2/2016

10

SNF Average Standardized Payment per Stay

National average = $10,919Highest average: IN = $12,406, TX = 12,064, CA = $11,862Lowest average: ND = $8,154, ME = $8,959, AK = $8,854

MGH Medicare Discharges to SNF

29

Massachusetts General Hospital (MGH)

SNFMedicare Payments

Referrals (#) Referrals (%)

Spaulding (North End) $2,555,296 323 8.0%

Leonard Florence Center $2,941,265 222 5.5%

Lighthouse Nursing $2,081,203 165 4.1%

Eastpointe Rehabilitation $2,517,659 142 3.5%

Chelsea Center $1,470,884 103 2.6%

Brudnick Center $826,505 91 2.3%

Chelsea Jewish $960,033 69 1.7%

Aberjona Nursing $713,456 64 1.6%

Courtyard Nursing $783,979 61 1.5%

Don Orione $734,038 60 1.5%

ALOS

30

Massachusetts General Hospital (MGH)

SNF Referrals (#) Referrals (%) ALOS

Spaulding (North End) 323 8.0% 18

Leonard Florence Center 222 5.5% 23

Lighthouse Nursing 165 4.1% 30

Eastpointe Rehabilitation 142 3.5% 55

Chelsea Center 103 2.6% 33

Brudnick Center 91 2.3% 22

Chelsea Jewish 69 1.7% 34

Aberjona Nursing 64 1.6% 26

Courtyard Nursing 61 1.5% 40

Don Orione 60 1.5% 64

8/2/2016

11

Per Diem Rate

31

Massachusetts General Hospital (MGH)

SNF Referrals (#) Referrals (%) ALOS Avg. Rate

Spaulding (North End) 323 8.0% 18 $542.57

Leonard Florence Center 222 5.5% 23 $660.39

Lighthouse Nursing 165 4.1% 30 $638.63

Eastpointe Rehabilitation 142 3.5% 55 $626.53

Chelsea Center 103 2.6% 33 $577.92

Brudnick Center 91 2.3% 22 $609.78

Chelsea Jewish 69 1.7% 34 $631.36

Aberjona Nursing 64 1.6% 26 $692.97

Courtyard Nursing 61 1.5% 40 $601.97

Don Orione 60 1.5% 64 $498.88

Episodic Cost

32

Massachusetts General Hospital (MGH)

SNF Referrals (#) Referrals (%) ALOS Avg. Rate Episodic Cost

Spaulding (North End) 323 8.0% 18 $542.57 $9,766

Leonard Florence Center 222 5.5% 23 $660.39 $15,189

Lighthouse Nursing 165 4.1% 30 $638.63 $19,159

Eastpointe Rehabilitation 142 3.5% 55 $626.53 $34,459

Chelsea Center 103 2.6% 33 $577.92 $19,071

Brudnick Center 91 2.3% 22 $609.78 $13,415

Chelsea Jewish 69 1.7% 34 $631.36 $21,466

Aberjona Nursing 64 1.6% 26 $692.97 $18,017

Courtyard Nursing 61 1.5% 40 $601.97 $24,079

Don Orione 60 1.5% 64 $498.88 $31,928

Five Star

33

Massachusetts General Hospital (MGH)

SNF Referrals (#) Referrals (%) 5 Star

Spaulding (North End) 323 8.0% *

Leonard Florence Center 222 5.5% ***

Lighthouse Nursing 165 4.1% ****

Eastpointe Rehabilitation 142 3.5% ****

Chelsea Center 103 2.6% *

Brudnick Center 91 2.3% ****

Chelsea Jewish 69 1.7% *****

Aberjona Nursing 64 1.6% ****

Courtyard Nursing 61 1.5% ***

Don Orione 60 1.5% **

8/2/2016

12

Re-Hospitalization Rate

34

Massachusetts General Hospital (MGH)

SNF Referrals (#) Referrals (%) 5 Star Re-Hosp (%)

Spaulding (North End) 323 8.0% * 22.9%

Leonard Florence Center 222 5.5% *** 24.2%

Lighthouse Nursing 165 4.1% **** 22.5%

Eastpointe Rehabilitation 142 3.5% **** 14.3%

Chelsea Center 103 2.6% * 25.6%

Brudnick Center 91 2.3% **** 23.7%

Chelsea Jewish 69 1.7% ***** 24.5%

Aberjona Nursing 64 1.6% **** 24.5%

Courtyard Nursing 61 1.5% *** 23.6%

Don Orione 60 1.5% ** 16.3%

Dashboard

35

Massachusetts General Hospital (MGH)

SNF(#)

Referrals(%)

Referrals ALOSAvg. Rate

Episodic Cost 5 Star Re-Hosp (%)

Spaulding (North End) 323 8.0% 18 $542.57 $9,766 * 22.9%

Leonard Florence Center 222 5.5% 23 $660.39 $15,189 *** 24.2%

Lighthouse Nursing 165 4.1% 30 $638.63 $19,159 **** 22.5%

Eastpointe Rehabilitation 142 3.5% 55 $626.53 $34,459 **** 14.3%

Chelsea Center 103 2.6% 33 $577.92 $19,071 * 25.6%

Brudnick Center 91 2.3% 22 $609.78 $13,415 **** 23.7%

Chelsea Jewish 69 1.7% 34 $631.36 $21,466 ***** 24.5%

Aberjona Nursing 64 1.6% 26 $692.97 $18,017 **** 24.5%

Courtyard Nursing 61 1.5% 40 $601.97 $24,079 *** 23.6%

Don Orione 60 1.5% 64 $498.88 $31,928 ** 16.3%

Cost By Diagnosis

36

Aftercare of Joint Replacement

Skilled Nursing Facility Medicare Payments Total Claims $ Per Claim

TCU at Spaulding Hospital North Shore $246,037 42 $5,858

Newbridge on the Charles $293,974 32 $9,187

Brudnick Center $92,410 21 $4,400

Sherrill House $94,994 19 $5,000

Erickson Living Linden Ponds $99,221 18 $5,512

Woodbriar of Wilmington $66,285 17 $3,899

Marina Bay Nursing $76,497 15 $5,100

Alliance Health of Mass $62,855 13 $4,835

HealthSouth New England $55,890 13 $4,299

EPOCH Senior Health Care of Weston $40,875 11 $3,716

8/2/2016

13

SNF Therapy is Under Assault• The improper payment rate for SNFs increased to 11% in

2015 largely due to insufficient documentation– Up 60% from 2014’s improper payment rate

– http://www.hhs.gov/afr/fy-2015-hhs-agency-financial-report.pdf

• The primary causes were insufficient documentation, medical necessity errors and administrative or coding errors

• More than 20% of SNFs provided RU/RV within 10 minutes of the minimum threshold

– Referral to RACs for further investigation

• OIG Report (9/15): “THE MEDICARE PAYMENT SYSTEM FOR SNFs NEEDS TO BE REEVALUATED”

• MedPAC, OIG and PEPPER focus area

• SNFs now being held accountable for actions of their contractors

Ultra High Continues to Rise

http://graphics.wsj.com/medicare-therapy/

RU Near Threshold

• 65% of RU MDSs between 720 – 730 minutes

• 215 SNFs had ALL RU therapy provided between 720 – 730 minutes

• > 20% of SNFs had > 75%of both RU and RV with therapy within 10 minutes of minimum threshold

Source: CMS Data

8/2/2016

14

Tremendous Variation in the Cost of Care

• Large cost variations in Medicare and Private per capita expenses throughout the country

• Limited to no quality correlation

• Impacts public program spending and private insurance rates, representing among the biggest threats to the country’s fiscal health and global competitiveness

• Post-acute care has the highest variability– Largely due to availability of venue options (supply),

provider incentives and patient choice

• New APMs are in part designed to reduce variability and unnecessary spending

Medicare v. Private Healthcare Costs

http://www.nytimes.com/interactive/2015/12/15/upshot/the-best-places-for-better-cheaper-health-care-arent-what-experts-thought.html?_r=1

8/2/2016

15

Re-Hospitalizations

• Most promising method for reducing Medicare spend

• UCSF study found improved discharge directions and communication between patients and providers could prevent up to 27% of readmissions (within 30 days)– http://archinte.jamanetwork.com/article.aspx?articleid=2498846

• Most common factors were ER decision-making, premature discharge, and lack of communication between patients and providers

• Readmitted patients were often non-compliant with post-discharge protocols

• SNF “Care Transition” concerns

Mapping Medicare Disparities

https://data.cms.gov/mapping-medicare-disparities

Mapping Medicare Disparities

https://data.cms.gov/mapping-medicare-disparities

8/2/2016

16

Mapping Medicare Disparities

https://data.cms.gov/mapping-medicare-disparities

Hospital Medicare Hospital Payments

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2013 2014 2015 2016 2017

Physician Value-Based PaymentModifier

Payment Adjustment for Hospital-Acquired Conditions

Hospital Readmission ReductionProgram

Hospital Value-Based PurchasingProgram

2015 Hospital Penalties = $2.2B

Source: Avalere

APM Impact on SNFs

• http://kff.org/report-section/payment-and-delivery-system-reform-in-medicare-report/

• ACOs and Bundles reduce SNF admissions and LOS– In first 2 years, SNF spending decreased by > 20% for ACO population

– Average H LOS for BCPI patients dropped from 3.58 days to 2.96 days

– Hospital readmissions decreased at the 30, 60 & 90-day benchmarks

– Average Medicare costs for each bundled episode of care decreased from $34,249 (year 1) to $27,541 (year 3)

– BCPI Model 2 (hospitals + post-acute) episodes had lower PAC spending than non-BPCI episodes

• Reduction attributable to decrease in use of SNF services and hospital readmission while Home Health increased

• Discharges to rehab facilities fell from 44% to 28%

8/2/2016

17

ACO Distribution

433 reported at www.data.cms.govAs of January 2016, almost 9 million Medicare beneficiaries were attributed to an ACO.

Local ACO Distribution

Local ACO Distribution

8/2/2016

18

Comprehensive Care for Joint Replacement Program

• April 1, 2016: Mandatory program in 67 markets impacting roughly 800 hospitals

• Hospitals at risk for all Medicare spending associated with hip and knee replacements and any charges within 90 days of discharge

• Performance compared to both their historical spending, as well as the regional spending levels.

• Episodes could subject hospitals to penalties under the demonstration if they do not rein in total episodic costs

• Waives 3-midnight rule in year 2 for high performing SNFs

• Perverse incentive re: post-acute placement

• Must balance with quality (readmissions/episodic) concerns

Source: Medicare Standard Analytical Files

Mandatory Bundle Expansion

• Expansion of the Comprehensive Care for Joint Replacement model to include episodes of care relating to surgeries for hip and femur fractures

• Cardiac care payment pilot begins on July 1, 2017, in 98 geographical markets

8/2/2016

19

Federal Efforts to Reduce Hospitalizationof LTC Residents

• Phase I: 2012: 7 CMS-funded demo to reduce avoidable hospitalizations in LTC (Enhanced Care & Coordination Providers or ECCPs)

– Specially trained RN and NP using evidence-based interventions in 143 SNFs

– https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/InitiativetoReduceAvoidableHospitalizations/AvoidableHospitalizationsamongNursingFacilityResidents.html

• CMS: 45% of 2005 H admits of LTC were avoidable = for 314K episodes; $2.6B Medicare $

– All 7 sites reported hospitalization reductions

Federal Efforts to Reduce Hospitalizationof LTC Residents

• Phase Two: Adding Payment Reform– To reduce avoidable hospitalizations by funding higher-

intensity treatment in SNF

– 3/24/16: CMS announced cooperative agreements with 6 organizations to expand the initiative to include approximately 250 SNFs starting Fall 2016

• Participating Sites:– Alabama Quality Assurance Foundation (Alabama)

– HealthInsight of Nevada (Nevada)

– Indiana University (Indiana)

– The Curators of the University of Missouri (Missouri)

– Greater New York Hospital Foundation (New York)

– University of Pittsburgh Medical Center (Pennsylvania)

State Efforts to Reduce Hospitalizationof LTC Residents

• NYS Restorative Care Unit Demonstration Program– RCUs provide higher-intensity treatment for residents at risk of

hospitalization utilizing evidence based tools and critical indicator monitoring and education to support advanced care planning and palliative care decisions; and protocols to effect care monitoring practices designed to reduce the likelihood of change in patient status conditions that may require acute care evaluation

– SNF must contract with “eligible applicant” with demonstrated experience in developing a similar type unit

– SNF requirements:

• Administrator with at least two years operational experience;

• minimum of 160 certified beds;

• 3 or more “Stars”

• Operates a discreet RCU with a minimum of 18 beds

8/2/2016

20

Medicare Advantage

• De-facto Medicare Reform?

• Enrollment continues to rise and accelerate

– Health systems aggressively entering the market

– All SNF utilization indicators are lower than FFS

• Site of service, admits/1,000, rate, LOS, collection time

• SNFs often grossly mismanaging the revenue cycle for this population resulting in significant lost revenue

Number of Provider-Owned MA Contracts

0

20

40

60

80

100

120

140

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

19 new contracts in 2016; 11 are Provider-owned

8/2/2016

21

2017 SNP PPS Rule

• 2.1% positive payment update ($800M)– 2.6% MBI less 0.5% MPA

• Four New Quality Measures as required by the IMPACT Act

– Assessment-based measure for the FY 2020 payment determination is the drug regimen review

– 3 claims based measures: Discharge to community; Medicare spending per beneficiary (MSPB); and a SNF potentially preventable 30-day post-discharge readmission measure

• CMS proposes to use a Calendar Year schedule for measure and data submission requirements that includes a period for provider review and correction, with quarterly deadlines of data submission beginning with data reporting for the FY 2019 payment determinations

• SNF Alternative Payment Research continues

8/2/2016

22

SNF Value-Based Purchasing Program

• SNFVPB starts 10/1/18

• Rewards SNFs with incentive payments for quality care

• Starting in the summer of 2016 and then quarterly, SNFs will receive confidential quality feedback reports on their measure performance; 10/1/16, CMS will post on NH Compare

• SNF 30-Day Potentially Preventable Readmission Measure is the all-cause, all-condition risk-adjusted potentially preventable hospital readmission measure

– CMS is seeking public comment on additional proposals related to the SNF VBP requirements including:• Establishing performance standards

• Establishing baseline and performance periods

• Adopting a performance scoring methodology

• Developing confidential feedback reports