payment reform and physician realignment: the road ahead

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Payment Reform and Physician Realignment: The Road Ahead Collin-Fannin County Medical Society May 24, 2011

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Collin-Fannin County Medical Society May 24, 2011. Payment Reform and Physician Realignment: The Road Ahead. Annual Increase in per Capita Health Spending vs. Increase in Consumer Price Index. National Health Expenditures per Capita. - PowerPoint PPT Presentation

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Page 1: Payment Reform and Physician Realignment: The Road Ahead

Payment Reform and Physician Realignment:The Road Ahead

Collin-Fannin County Medical SocietyMay 24, 2011

Page 2: Payment Reform and Physician Realignment: The Road Ahead

Annual Increase in per Capita Health Spending vs. Increase in Consumer Price Index

Page 3: Payment Reform and Physician Realignment: The Road Ahead

National Health Expenditures per CapitaHealthcare spending in 2010 was $2.6 trillion, over17% of GDP.

Per capita spending has increased 70% over the past decade.

3

Page 4: Payment Reform and Physician Realignment: The Road Ahead
Page 5: Payment Reform and Physician Realignment: The Road Ahead

Distribution of Healthcare Expenses for the U.S. Population

Percent of U.S. Population Ranked by Expenses

1977 1987 1997 2007

Top 1 Percent 27% 28% 28% 23%

Top 5 Percent 55% 56% 56% 50%

Bottom 50 Percent 3% 4% 3% 3%

5

The Five Most Costly Medical Conditions end of lifeheart diseasepulmonary diseasemental disordercancer

Page 6: Payment Reform and Physician Realignment: The Road Ahead

Mean Healthcare Expenditure per Person by Spending Group - 2008

6

Page 7: Payment Reform and Physician Realignment: The Road Ahead

Mandated Medicare Payment Reductions 2012 - 2019

SGR - $380 Billion Cut payments for physician services under the Sustainable Growth Rate Formula.

Scheduled 27% reduction in 20013.

ACA - $500Billion reduce physician and hospital payments based on private, non-farm business

productivity growth. reduce disproportionate share hospital (DSH) payments reduce Medicare Advantage payments eliminate Medicare Improvement Fund

7

Current law mandates almost $900 billion in cuts to provider payments over the next 8 years.

Page 8: Payment Reform and Physician Realignment: The Road Ahead

Simulated Comparison of Relative Medicare, Medicaid and

Private Health Insurance Prices Under Current Law

Source: Office of the Actuary, Centers for Medicare and Medicaid Services 8

Page 9: Payment Reform and Physician Realignment: The Road Ahead

What are the Alternatives?1. Congress allows the mandated cuts to take effect, and by 2019 over 20%

of US hospitals have negative operating margins and a large percentage of physicians have dropped out of Medicare.

2. Congress allows the cuts to take effect and implements “all-payer” rate-setting to prevent the gap between Medicare and commercial payers from becoming too wide.

3. Congress serially acts to delay and postpone mandated cuts in the name of preserving Medicare which, coupled with the projected $875 billion cost of expanded coverage, causes healthcare inflation and pressures on the federal budget to accelerate.

4. Congress acts to fundamentally change how healthcare is paid for, e.g., bundled and global payments.

9

Page 10: Payment Reform and Physician Realignment: The Road Ahead

United States Income Statement FY 2012

FY2012 Revenue$2.47 Trillion

FY2012 Expenses$3.80 Trillion

Social Security$773B

Medicare +Federal

Medicaid$733B

Unemployment Insurance+ Other Entitlements

$746B

Security +Defense$868B

DiscretionaryNon-Defense

$450B

Net Interest$225B

Individual Income Tax

$1,165B

SocialInsurance Tax

$841B

CorporateIncome Tax

$237B

Other$226B

9%

47%

34%

10%

20%

19%

20%

23%

12%

6%

Page 11: Payment Reform and Physician Realignment: The Road Ahead

How Healthcare is Currently Purchased

11 11

Page 12: Payment Reform and Physician Realignment: The Road Ahead

12

How Physician Payments are Determined

PHYSICIANPAYMENT

ConversionFactor

Volume ofServices

Relative Pmt.Per Service

PaymentAdjustments

SustainableGrowth Rate

SGRFormula

PracticeExpense

Work

ProfessionalLiability

Provider/Location

HPSABonus

WorkRVU

WorkGPCI

Pract. Exp.RVU

Pract. Exp.GPCI

PLIRVU

PLIGPCIPerformance

BillableServices

RUCWeighting

ProfessionalEarnings

Non-MDWages

Floor

VariationShare

Office SpaceExpense

Equipment& Supplies

MedicalHome P4P Gain

Sharing

Svc Vol./MixPer Physician

PQRI

PracticeFee Areas

PracticeFee Areas

Cost ShareWeights

HOW PHYSICIAN PAYMENTS ARE DETERMINED BY MEDICARE

Page 13: Payment Reform and Physician Realignment: The Road Ahead

13

Payment Reform Alternatives

Areawide budgets

Fee-for-service

Pay for performance bonuses for quality

Pay for performance bonuses for quality penalties for inefficiency

Episode based payments

Capitation

Page 14: Payment Reform and Physician Realignment: The Road Ahead

Current Payment Reform Initiatives

Major CMS payment reform initiatives currently under way include:

Medicare Shared Savings Program (MSSP)

Pioneer Accountable Care Organization (ACO) Model

Value Based Purchasing Initiative

Bundled Payments Initiative

The market is moving away from utilization based reimbursement. The momentum of change is now mandating effective clinical integration, regardless of participation in any of these current CMS programs.

14

Page 15: Payment Reform and Physician Realignment: The Road Ahead

Candidates for Episode Based Payment

Any medical condition that meets the following criteria would be a potential candidate:

has a high cost per event is subject to wide variation in treatment requires services that are currently not adequately reimbursed,

e.g., case management, provision of patient care outside an office setting, etc.

has clear beginning and end points that could readily be documented by clinicians

has generally agreed upon clinical practice guidelines

15

Page 16: Payment Reform and Physician Realignment: The Road Ahead

Episode Based Payment Options

Type of Case

Trigger Time Window Examples

Chronic Medical

OutpatientProfessional

One year from trigger Diabetes, CHF, COPD Asthma, CAD, HTN

Acute Medical

InpatientFacility

3-day look-back;30-day look-forward

AMI, Stroke, Pneumonia

InpatientProcedural

Inpatient Facility

30-day look-back;180-day look-forward

Hip/Knee Replacement, Bariatric Surgery,

CABG

OutpatientProcedural

Outpatient Fac./Professional

30-day look-back;180-day look-forward

PCI, Hernia, Knee Repair, Ligaments

16

Page 17: Payment Reform and Physician Realignment: The Road Ahead

17

Current Practice

PCP

SurgeonPHYSICIANS

DEVICES/EQUIPMENT

DRUGS

FACILITY

NON-MDSTAFF

PCP PCP PCP

Other Specialist

Surgeon SurgeonOther Specialist

Surgeon

Home CarePCP Care

Mgr

HospitalStaff

HospitalStaff

Hospital HospitalRehab FacilityLong-Term Care

Drugs Drugs DrugsDrugs

Imaging ImagingImplants,

etcImaging Imaging

DRG DRG

Pre-Admission

Hospitalization

Post-Acute Care

Readmission

Page 18: Payment Reform and Physician Realignment: The Road Ahead

18

Episode Based PaymentHospital “Warranty”

PCP

SurgeonPHYSICIANS

DEVICES/EQUIPMENT

DRUGS

FACILITY

NON-MDSTAFF

PCP PCP PCP

Other Specialist

Surgeon SurgeonOther Specialist

Surgeon

Home CarePCP Care

Mgr

HospitalStaff

HospitalStaff

Hospital Rehab FacilityLong-Term Care

Drugs Drugs DrugsDrugs

Imaging ImagingImplants,

etc

Imaging Imaging

DRG DRG

Pre-Admission

Hospitalization

Post-Acute Care

Readmission

Hospital

Page 19: Payment Reform and Physician Realignment: The Road Ahead

19

Episode Based PaymentAll Inpatient Services

PCP

SurgeonPHYSICIANS

DEVICES/EQUIPMENT

DRUGS

FACILITY

NON-MDSTAFF

PCP PCP PCP

Other Specialist

Surgeon SurgeonOther Specialist

Surgeon

Home CarePCP Care

Mgr

HospitalStaff

HospitalStaff

Hospital HospitalRehab FacilityLong-Term Care

Drugs Drugs DrugsDrugs

Imaging ImagingImplants,

etc

Imaging Imaging

DRG DRG

Pre-Admission

Hospitalization

Post-Acute Care

Readmission

Page 20: Payment Reform and Physician Realignment: The Road Ahead

20

Full Episode Based Payment

PCP

SurgeonPHYSICIANS

DEVICES/EQUIPMENT

DRUGS

FACILITY

NON-MDSTAFF

PCP PCP PCP

Other Specialist

Surgeon SurgeonOther Specialist

Surgeon

Home CarePCP Care

Mgr

HospitalStaff

HospitalStaff

Hospital HospitalRehab FacilityLong-Term Care

Drugs Drugs DrugsDrugs

Imaging ImagingImplants,

etc

Imaging Imaging

DRG DRG

Pre-Admission

Hospitalization

Post-Acute Care

Readmission

Page 21: Payment Reform and Physician Realignment: The Road Ahead

The Patient-Centered Medical Home Personal physician - each patient has an ongoing relationship with a

personal physician trained to provide first contact, continuous and comprehensive care.

Physician directed medical practice – the personal physician leads a team of individuals at the practice level who collectively take responsibility for the ongoing care of patients.

Whole person orientation – the personal physician is responsible for providing for all the patient’s health care needs or taking responsibility for appropriately arranging care with other qualified professionals. This includes care for all stages of life; acute care; chronic care; preventive services; and end of life care.

Care is coordinated and/or integrated across all elements of the complex health care system (e.g., subspecialty care, hospitals, home health agencies, nursing homes) and the patient’s community (e.g., family, public and private community-based services).

21

Page 22: Payment Reform and Physician Realignment: The Road Ahead

Identification andmonitoring (registry)

Care plans andcare coordination

The Care Triad

Primary Care Medical Home

Chronic Condition Management

Preventive Care Services

Well child visits

Immunizations

Screening and identification

Acute Illness Management

Acute illness visits

Emergency room care

Hospitalizations

Telephone triage

CCM office visits

Other (patient education,advocacy, outreach)

Co-managementwith specialists

Page 23: Payment Reform and Physician Realignment: The Road Ahead

23

Treatment of Stage III Colorectal CancerActivity Person

Counseling on need for colonoscopy Primary care provider

Colonoscopy Gastroenterologist

Biopsy Pathologist

Visit to review biopsy Gastroenterologist

Appointment regarding surgery Surgeon

Resection Pathologist

Hospital stay and surgery (3-5 days) Hospital, Surgeon and hospital staff

Review data for stage III disease Medical oncologist

Visit social worker Social worker

Visit chemo nurse for teaching Chemotherapy nurse

Decide on drug therapy Medical oncologist

Lab for pre-chemo CBC, CMP, liver, CEA Lab

Meet with clinical trial staff regarding protocol Trial staff

Chemotherapy and follow-up visit every two weeks (24 visits) Medical oncologist, chemo nurse

Evaluate and treat potential problems: nausea, diarrhea, fever, etc. Medical oncologist, nurse

One month post therapy, review drug therapy and survivorship likelihood Medical oncologist

Follow-up visit every 3 months Medical oncologist

Ongoing disease and case management Medical oncologist and/or PCP

Page 24: Payment Reform and Physician Realignment: The Road Ahead

Key Implementation Issues

New types of organizations will need to be established to receive and distribute bundled payments and to determine:

♦ How evidence-based standards of appropriate care will be determined.

♦ How adherence to clinical guidelines will be monitored and enforced.

♦ How the performance of individual service providers will be monitored and evaluated.

♦ How clinical outcomes data will collected and reported.

♦ What new billing and collections systems will be needed.

♦ What new information technology capabilities will be required.

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Page 25: Payment Reform and Physician Realignment: The Road Ahead

Trend of Payment Reform

Global Capitation

Fee for Service

P4PValue Based

Purchasing

Episode Based

Payments

Level of financial risk borne by providerLevel of financial risk borne by payer

Page 26: Payment Reform and Physician Realignment: The Road Ahead

Physician-Hospital Alignment

medical directorships department/program chairs committee participation

clinical co-management of service lines, centers or institutes

focus on practice management quality and safety initiatives

physicians active on board and executive team

dyad leadership models shared strategic objectives

minimal financial linkages or risk sharing

group practice contracts on-call contracts

gainsharing in specific programs

ambulatory and ancillary joint ventures

bundled reimbursement common payer contracting

strategy

common HIT limited but growing

MSO/PHOs provide support services to affiliated physicians

integrated/interfaced EHR shared service agreements for

select business functions

integrated information management

service line management across the organization

shared effectiveness/efficiency goals

volume focused quality and safety

management programs in place

delivery system provides continuity of care

organizational commitment to quality and safety

value based ACO delivery model

clinical protocol management is core competency

continuous quality improvement

Leadership

Financial

Operations

ClinicalServices

Low Degree of Alignment High

Page 27: Payment Reform and Physician Realignment: The Road Ahead

Trend of Physician Realignment

Large Virtual Multi-Specialty Medical Group

Large Multi-Specialty Group

Practice

Large Single Specialty Group

Practice

Virtual or Clinically

Integrated Group

Independent Practice Group

Solo or Small Practice

Independent Medical Staff

Physician-Hospital

Organization

EMR Clinical Integration

Employed Medical Group

Virtual Clinical

Integration

Physician – Hospital System Integration

Page 28: Payment Reform and Physician Realignment: The Road Ahead

Everybody On the Bus … but Who’s Driving?

28

Hospitals and ClinicsPCPs

SpecialistsNursesImaging

PharmaceuticalsRehab

Home HealthSocial Workers

Page 29: Payment Reform and Physician Realignment: The Road Ahead

This presentation can be downloaded from the Collin-Fannin County Medical Society

webpage under the Events/Announcements tab.

To stay current on these issues, visit:

http://healthaffairs.org/

http://healthaffairs.org/blog/

http://hschange.org/