1healthcare

Revenue at Risk

Craig TolbertMelinda HancockNovember 2, 2015

2healthcare

Go Beyond the Status Quo

“It isn’t the mountains ahead to climb that wear you out; it’s the pebble in your shoe.”

Muhammad Ali

3healthcare

Category 1: Fee for Service—No Link to

Quality Category 2: Fee for

Service—Link to Quality

Category 3: Alterative Payment Models Built on Fee-for-Service

Architecture Category 4: Population-

Based Payment

Payments are based on volume of services and not linked to quality or efficiency

At least a portion of payments vary based on the quality or efficiency of health care delivery

Some payment is linked to the effective management of a population or an episode of care Payments still triggered by delivery of services, but opportunities for shared savings or 2-sided risk

Payment is not directly triggered by service delivery so volume is not linked to payment Clinicians and organizations are paid and responsible for the care of a beneficiary for a long period (eg, >1 year)

Limited in Medicare fee-for-service Majority of Medicare payments now are linked to quality

Hospital value-based purchasing Physician Value-Based Modifier Readmissions/Hospital Acquired Condition Reduction Program

Accountable care organizations Medical homes Bundled payments

Eligible Pioneer accountable care organizations in years 3-5 Some Medicare Advantage plan payments to clinicians and organizations Some Medicare-Medicaid (duals) plan payments to clinicians and organizations

Another Way of Looking at This30% by end of 2016 & 50% by end of 2018 of

this category

85% by 2016 and 90% by 2018 of this

category

Source: Rahul Rajkumar, MD, JD; Patrick H. Conway, MD, MSc; Marilyn Tavenner, RN, MHACMS- Engaging Mulitple Payers in Payment Reform. JAMA. 2014;311(19(:1967-1968

Des

crip

tion

Exam

ples

4healthcare

CMS Accelerates the Tipping Point for Everyone

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2015 2016 2018

Traditional, Fee for Service

Alternative Payment Models

“…HHS goal of 30 percent traditional FFS Medicare payment through alternative payment models by the end of 2016… 50 percent by the end of 2018”

HHS Press Office 1-26-15

5healthcare

How Are We Doing?

6healthcare

Summary of Innovation Models

Accountable Care Episode Based Payment Initiatives

Primary Care Transformation Medicaid & CHIP Population To Accelerate Testing

of New ModelsSpeed Adoption of Best

Practices

ACOs BPCI Models 1-4 Advanced Primary Care Initiatives

Reduce Avoidable Hospitalizations for NF residents

State Innovation Models :Round 1 & 2

Beneficiary Engagement Model

Advanced Payment ACO ACE Demonstration Comprehensive Primary Care Initiative

Financial Alignment Incentive for Medicare & Medicaid

Frontier Community Health Integration

Community Based Care Transitions

Comprehensive ESRD Care Initiative

Oncology Care Model

FQHC AdvancedPrimary Care Practice

Strong Start for Mothers & Newborns Maryland All Payer Health Care Action and

Learning Network

ACO Investment Model Specialty Practitioner Payment Model

Graduate Nurse Education

Medicaid Innovation AcceleratorProgram

Health Care Innovation Round 1&2

Innovation Advisors Program

Next Generation ACO Model

Comprehensive Care for Joint

Replacement (CCJR)Independence at Home Medicaid Prevention of Chronic

DiseasesHealth Plan Innovation

Initiatives Million Hearts

Pioneer ACO Multi Payer Advanced Primary Care Practice

Medicaid Emergency Psychiatric Demonstration

Medicare Care Choices Award Partnership for Patients

Rural Community Hospital Demonstration

Transforming Clinical Practice

Medicare IVIG Demonstration

https://innovation.cms.gov/initiatives/

7healthcare

We Are Past the “Tipping Point”

8healthcare

It’s Been 5 Years…Still Divided?

9healthcare

Medicare Spend Flattens

10healthcare

Go Beyond Current Experiences

11healthcare

Anticipated Penetration of Value-Based Payment

12healthcare

Financial Impacts on Efforts to Date

13healthcare

Perceptions on Enabling Readiness

14healthcare

Risk Capability

15healthcare

Reform Across the Continuum

SNF Value Based Purchasing (VBP)Star RatingAlt Pmt Models- Hi End

HHVBPStar RatingAPMs- Low End

VBP/RRP/HACVBPM/PQRS/MIPSMeaningful UseComp Care For Total JointsStar Rating Roll out

Advanced Payment Models: Commercial/Medicare/State

Larger share of $TransparencyAbility to shop

16healthcare

And Now We Present…

In Place Now:Nursing Facilities Hospital HCAHPS (Added Spring 2015)Dialysis CentersMedicare Advantage PlansHome Health Agencies (Started July 2015)

Coming Soon:Overall Hospital Rating (expected 2016)

17healthcare

Dry Run Data Is Out Now from CMS

18healthcare

Transparency

19healthcare

Alignment of Strategy and Metrics

Questions to Ask• How many metrics am I tracking?• How many metrics are duplicated?

Do they have the same numerator and denominator? Source?

• Are they aligned with our results and strategic goals?

• What contracts are coming up for renewal that should have new metrics or should be at risk (mgdcare, medical directorships, PMAs, etc.)

• What are we focused on?

20healthcare

Mandatory Elements

21healthcare

Timeline of Performance Periods

22healthcare

Program builds each year

Hospital Mandatory Programs 2013 2014 2015 2016 2017

Value Based Purchasing 1.0% 1.25% 1.5% 1.75% 2.0%

Readmission Reduction Program 1.0% 2.0% 3.0% 3.0% 3.0%

Hospital Acquired Conditions - - 1.0% 1.0% 1.0%

TOTAL 2.0% 3.25% 5.5% 5.75% 6.0%

23healthcare

VBP – Shifting of Domain Weights

70%

30%

FY 2013: 1%

45%

25%

30%

FY 2014: 1.25%

20%

20%

30%

30%

FY 2015: 1.5%

10%

25%

40%

25%

FY 2016: 1.75%

5%

25%

25%20%

25%

FY 2017: 2%

25%

25%25%

25%

FY 2018: 2%

• Clinical Care • Patient Experience • Efficiency (MSPB)• Clinical Care – Mortality (FY’17 & FY’18)

• Safety - Outcomes

24healthcare

FY 2015- 2017 Metrics

Domain 2015 2016 2017HCAHPS Same composite since 2013

Outcomes Mortality CLABSIPSI- 90

Mortality CLABSIPSI- 90CAUTI

SSI

Mortality CLABSIPSI- 90CAUTI

SSIMRSAC Diff

Clinical Care AMI-7a AMI- 8aHF-1 PN-3b

PN-6 SCIP-Inf-1SCIP-Inf-2 SCIP-Inf-3SCIP-Inf-4 SCIP-Inf-9

SCIP-Card-2SCIP-VTE-2

AMI-7a PN-6 SCIP-Inf-2SCIP-Inf-3SCIP-Inf-9

SCIP-Card-2SCIP-VTE-2

IMM-2

AMI-7aIMM-2PC-01

Efficiency MSPB

25healthcare

Readmission Reduction Program

• Two Performance Periods at once…at least – 3% penalty of Medicare Reimbursement at risk each

program year– Measured Populations 30 days from DISCHARGE

• AMI, HF, PN, COPD, THA & TKA• August 2014: CABG Added to FY 2017• Performance Periods: 3 Year Rolling Program

– FY’15: July 1, 2010 – June 30, 2013 – 3%– FY’16: July 1, 2011 – June 30, 2014 – 3%– FY’17: July 1, 2012 – June 30, 2015 – 3% – FY’18: July 1, 2013 – June 30, 2016 – 3%– FY’19: July 1, 2014 – June 30, 2017 – 3%

26healthcare

How are Readmissions Measured?

• Scoring Index based at 1.0• Calculate Excess Readmission Ratio

• Excess Readmission Ratio > 1 = BAD• Excess Readmission Ratio < 1 = GOOD

Facility Predicted Value

Facility Expected Value

27healthcare

Hospital Acquired Conditions

• 2 Domains of Hospital Acquired Conditions Identified

• If a hospital is in the BOTTOM QUARTILE (worst performing 25% in the country), it will be penalized a FULL 1% of Medicare Reimbursement

• Penalties will begin FY’15 (beginning October 1, 2014)

28healthcare

Hospital Acquired Conditions: FY 2017

First Domain: PSIs15%

Second Domain: CDC85%

Pressure Ulcer Rate CLABSI

Foreign Object Left in Body CAUTI

Iatrogenic Pneumothorax Rate SSI Following Colon Surgery (FY 2016)

Postoperative Physiologic and Metabolic Derangement Rate

SSI Following Abdominal Hysterectomy (FY 2016)

Postoperative Pulmonary Embolism and Deep Vein Thrombosis Rate

Methicillin-Resistant Staphylococcus Aureus (MRSA) Bacteremia (FY 2017)

Accidental Puncture and Laceration Rate

Clostridium Difficile (FY 2017)

29healthcare

Total At Risk

Value Based Purchasing $11.5M $20.5M Readmissions Complete - Hospital Acquired Conditions $5.8M - FY 2018 Value Based Purchasing $11.5M $20.5M Readmissions $17.3M - Hospital Acquired Conditions $5.8M - FY 2019 Value Based Purchasing $11.5M $20.5M Readmissions $17.3M - Hospital Acquired Conditions $5.8M - FY 2020 Readmissions $17.3M

$103.8M $61.5M TOTAL $165.3M

30healthcare

Physician Penalties Arrive

SOURCE: Medical Group Management Association (MGMA) 2014

Year/Program eRX PQRS Meaningful Use Value Modifier MIPS

2012 -1.0%

2013 -1.5%

2014 -2.0%

2015 -1.5% -1.0%* -1.0%

2016 -2.0% -2.0% -2.0%

2017 -2.0% -3.0-5.0%**(each year) -4.0%

2018*** up to -4%

2019*** up to -5%

2020*** up to -7%

2021*** up to -9%

* Penalties will be greater for unsuccessful e-prescribers** Penalty amount could increase up to 5% depending on meaningful use success rates***MIPS information is estimate only

The Penalty Phase

31healthcare

MACRA: Physician Payments

• Payment rates for 2015-2019 will be .5% annually and then frozen 2020-2025 and thereafter tiered .25% (MIPS participants) or .75% (APM participants).

• Creates MIPS: Merit-Based Incentive Payment System– Starts 2019 & combines EHR incentive program, PQRS and VBPM

• Develops 4 categories of measures– Quality, Resource Use, Clinical Improvement, & EHR Use

• Range of payment adjustments– In 2019: -4% to +12%– In 2027: -9% to +27%

• Program is budget neutral• Allows providers in Alternative Payment Models (APMs) to opt out of MIPS and

can be eligible to receive 5% lump sum bonus 2019-2024

32healthcare

SNF Value Based Purchasing

• Good chance we are in the performance period now• Requires 2 metrics: all cause readmissions and preventable

readmissions• Effective 10/1/18 with a 2% withhold • Part of SGR fix in 2014 so not budget neutral: only 50 to

70% to be returned to SNFs• Same formula as hospital readmissions penalty

33healthcare

Medicare: Home Health Agencies1. Announced in July the start of Star Ratings2. Low spend providers in APMs3. On July 6, 2015, CMS proposed the HHVBP• Authorized by the ACA and implemented by CMMI as of 1/1/16

with the first payment year to be 1/1/18. Baseline year is CY15.• Comments due by Sept. 4, 2015• Will be among all HHAs in 9 states: random selection

• Mass., Md., N.C., Fla., Wash., Ariz., Iowa, Neb., Tenn.• Payments adjusted (performance year) Year 1 CY16 and 2 CY17: 5% Year 3 CY18: 6% Year 4 CY19 and 5 CY20: 8%

34healthcare

BPCI and CCJR

35healthcare

Bundled Payments for Care Improvement

8

36healthcare

BPCI Participants by Geography

37healthcare

Phase II Episodes by Period of Performance Begin Date

10/1/2013 1/1/2014 4/1/2014 7/1/2014 10/1/2014 1/1/2015 4/1/2015 7/1/2015 10/1/2015Model 2 48 249 3 2 21 213 995 1336 1721Model 3 21 647 6 21 622 3693 4505Model 4 1 34 1 3 1

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Model 2 Model 3 Model 4

Performance Begin Date important for Model 2 & 3

Precedence

38healthcare

Phase II Episodes by Group

0 100 200 300 400 500 600 700 800 900 1000

Major joint replacement of the lower extremitySimple pneumonia and respiratory infections

Congestive heart failureChronic obstructive pulmonary disease, bronchitis, asthma

Hip & femur procedures except major jointSepsis

Urinary tract infectionAcute myocardial infarction

Medical non-infectious orthopedicOther respiratory

CellulitisStroke

Fractures of the femur and hip or pelvisRenal failure

Esophagitis, gastroenteritis and other digestive disordersCardiac arrhythmia

Gastrointestinal hemorrhageNutritional and metabolic disorders

Lower extremity and humerus procedure except hip, foot, femurGastrointestinal obstruction

DiabetesRevision of the hip or knee

Syncope & collapseMajor bowel procedure

Transient ischemiaMedical peripheral vascular disorders

Episode Frequency

Model 2 Model 3 Model 4

39healthcare

Phase II Episodes by Episode Length

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

STAC PGP SNF LTAC IRF HHA

Post Acute Episode Length Selections

30 Day 60 Day 90 Day

Model 3Model 2 Model 2 & 3

40healthcare

Optimizing Bundles Requires New Areas of Understanding

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $3

Hospital Physician HHA SNF IRF

≈60% of spendingis outside of hospital

PAC Setting vitally important to manage- Discharge status- Picking PAC partners

Readmission often is over 2x the “spend” of non-readmitted patient

Ex. Target Price = $24kDRG 470, Spending by Setting

Readmit.

41healthcare

Precedence Rules

Model 4

Later admission Earlier admission

Models 2 & 3

Earlier or Same CE-PoP

Model 2

Attending PGP

Operating PGP

Non PGP (Hsp, SNF,IRF, HH,

etc)

Model 3

Attending PGP

Operating PGP

Non PGP (Hsp, SNF,IRF, HH,

etc)

Later CE-PoP

Model 2

Attending PGP

Operating PGP

Non PGP (Hsp, SNF,IRF, HH,

etc)

Model 3

Attending PGP

Operating PGP

Non PGP (Hsp, SNF,IRF, HH,

etc)

Precedence Has a Big Impact

17

42healthcare

Phase II Phase I"Live" "Applicant"

Acute Care 3 11PPG (Ortho Carolina) 1 0HHA 0 6SNF 2 33IRF 0 1

6 51

Precedence Matters

43healthcare

Multiple Models with Many Options Cloud Outputs

• Models (M1 is largely considered separate)3

• Types of episode Initiators7

• Episode durations (M2 and 3 only)3

• Risk mitigation levels (risk tracks)3

• Conveners, both at-risk and non-risk bearingDozens

• “Participants” - the activities of which Medicare is responsible forThousands

• Model1

• Type of episode initiator (hospital)1

• Episode duration (90 days)1

• Risk mitigation level (2x st. dev.)1

• Conveners0

• Participants outside of hospitals0

BPCI CCJR

32

44healthcare

12 Things to Know About CCJR

❶Bundled payment for lower extremity joint replacement (LEJR)

procedures

❷CCJR is mandatory in

75 selected geographies

❸Medicare chose LEJR

intentionally

❹CCJR only applies to

Medicare FFS beneficiaries

❺CCJR is a 5-year

program for CY 2016-2020

❻The bundle includes IP

stay and 90-days post-discharge

❼Hospitals can share

risk with physicians, PAC providers, etc.

❽Bundles are

retrospective not prospective; revenue cycle is not impacted

❾Hospitals can earn bonuses or face

repayment penalties in CCJR

❿LEJR episodes are not plotted on a normally distributed bell-curve

⓫CCJR requires

acceptable performance on three (3) pre-

determined quality measures

⓬CCJR will indirectly

affect post-acute care providers significantly

45healthcare

Bundle is for Lower Extremity Joint Replacement

• CCJR is a bundled payment for lower extremity joint replacement (LEJR) procedures; commonly knee replacement and full/partial hip replacement.

• Six (6) other infrequent procedures are commonly included.

• Two (2) MS-DRGs are:– 469 (w CC/MCC)– 470 (w/o CC/MCC

0%10%20%30%40%50%60%70%

Procedure Frequency in MS-DRGs 469, 470

FY11 FY12 FY13 FY14

46healthcare

CCJR is mandatory in selected geographies, with exceptions

• Medicare used a two-part randomization process to select 75 MSAs for participation.

• IPPS hospitals in the selected MSAs are required to participate in CCJR.

• MSAs selected in 35 states.• Only exceptions are:

• BPCI Phase 2 LEJR hospitals• Non-IPPS hospitals• Maryland hospitals

47healthcare

CCJR is a proposed 5-year program starting 1/1/16

Really Fast

• Rule was proposed less than 6 months before expected implementation

• Final rule won’t be published until October/November, leaving little time for deliberate preparation

Phasing in Downside, Stop-

Loss

• First year will be upside only; downside risk starts in 2017

• Limited downside risk in 2017 (10%)

• Fully-implemented downside risk in 2018-2020 (20%)

Phasing in Regional Pricing

• 2016-17: Majority hospital-based targets

• 2018: Majority regional-based targets

• 2019-20: Entirely regional-based targets

48healthcare

CCJR Quality Measures

• These quality measures are already collected, and would simply be applied to CCJR.

• Hospitals must meet the 30th or 40th percentile (depending on performance year) on all three measures to qualify for gain distribution from Medicare.

• Voluntary reporting on patient outcomes – separate from these three (3) measures –reduces the Medicare discount from 2.0% to 1.7%.

RSRR: risk-standardized readmission rate; RSCR: risk-standardized complication rate

49healthcare

BPCI has been (and continues to be) challenging to administer

34

50healthcare

CCJR: SNF Scorecard

51healthcare

Strategy: Aligned Continuum of Care

TELEHEALTH

52healthcare

Total Revenue at Risk

53healthcare

Total System Revenue At Risk

Medicare Medicaid CommercialMeaningful

Use TOTALHospitalPhysicianSkilledNursingHome Health TOTAL 2017 $ $ $ $ $HospitalPhysicianSkilledNursingHome HealthTOTAL 2018 $ $ $ $ $

This can be prepared through 2020 for Medicare.

54healthcare

Where do the metrics cross?

55healthcare

Craig Tolbert

Principal, DHG HealthcareBirmingham, ALP: 205-212-5355E:craig.tolbert@dhgllp.com

Melinda Hancock

Partner, DHG HealthcareRichmond, VAP: 804-474-1249E: melinda.hancock@dhgllp.com