Post on 17-Jun-2020
Getting Fee-for-Service Fundamentals Right Presentation at CHCS Webinar on Medicaid Payment Reform
June 28, 2010
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The New Fortune 500
$4
$7
$9
$10
$13
$15
$18
$24
$34
$42
$44
$51
$- $20 $40 $60
491 CT Medicaid
328 Coventry
259 NJ Medicaid
250 Schering-Plough
180 FL Medicaid
148 Eli Lilly
124 TX Medicaid
84 HCA
60 CA Medicaid
45 Walgreen
41 NY Medicaid
31 Pfizer
2006 Revenue in Billions
24 Medicaid programs would
rank in the Fortune 500
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 3
80% of Medicaid Spending Is Fee for Service
$-
$20
$40
$60
Man
aged
car
e
HCBS
Inpat
ient h
osp
Nursin
g faci
lity
Outpat
ient h
ospDSH
Pharm
acy
Other
car
e
ICF/M
R
Physic
ian
Med
icar
e
Other
acu
te c
are
Men
tal h
ealth
Amounts in Billions
Source: Holahan et al, Medicaid Expeditures Increased By 5.3% in 2007, KCMU 2009
Total Spending
2000 $206 Billion (Light Green)
2007 $331 Billion (Dark Green)
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 4
Does this patient
need a CT scan or not?
Payment Methods Matter in an Uncertain World
How much therapy is warranted?
Should I discharge the
patient today or tomorrow?
Do I really need to coordinate with Dr. Jones?
Our average set-up time for the cardiac cath lab is 2 hours. Good enough?
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 5
Provider Responses to Payment Methods
Medicare DRG Implementation 1983
Controlled Medicare spending and increased hospital profits
―The most effective cost-containment program ever enacted‖—Michael Bromberg, Federation of American Hospitals, 1985
Providers Re-Organize in Response to Medicare Incentives
Transitional care units
Specialty cardiac hospitals
Long-term acute care hospitals
IDTFs
Incentives in Physician Payment
Procedures more profitable than evaluation and management
8,000 separate billable services
No payment for phone or email
No incentive to coordinate care or minimize re-testing
High fees and low variable costs of imaging reward heavy use
―Watchful waiting‖ pays zero
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 6
A Short History of Payment Methods
“Pay More to Those Who Do More”
In the beginning:
More = more charges, more cost
Fee for service philosophy:
More = more care
The DRG revolution in 1983:
More = treat sicker patients
The next revolution:
More = better results
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Medicaid’s Varying Roles in the Market
Hospital inpatient
Prescription drugs
Hospital outpatient
Physician
Inpatient MH facility
Community MH center
Dental
Other
Subtotal acute care
Nursing facility
Personal assistance
ICF-MR
Adult day services
Case management
Residential support
Skilled home health
Other
Subtotal long-term care
Managed care--full
Managed care--carveouts
Subtotal managed care
Total
Provider Type
Medicaid Payments as Percentage of Provider Revenue, FFY 2003
20% 40% 60% 80%
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Medicaid IN the Market Medicaid IS the Market
Examples: Hospitals, physicians, dental, drugs
Examples: Pediatrics, obstetrics, HCBS, DD services, MH, AIDS/HIV
Client needs similar to those of general population
Clients may be special populations
Physician-driven, care increasingly high tech
Physician in background, care often “high touch”
Lots of data available on industry organization and other payers
Data may be hard to come by
Other payers have significant influence on cost, access, quality
Medicaid has significant influence on cost, access, quality
The Two Roles of Medicaid (A Bit Exaggerated)
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 9
The Eight Basic Health Care Payment Methods
Also Known As Examples (with Casemix Adjustors)
1 Per time period Budget State psychiatric hospital, public health clinic
2 Per eligible person Capitation MCOs (DCGs, ACGs, CDPS, CRGs)
3 Per recipient Contact capitation Physician specialist services
4 Per episode
Per stay (hospital),
case rates
Hosp. inpat. (DRGs), home health (HHRGs), surgeries
(RBRVS), multi-provider (ETGs, MEG)
5 Per day Per diem Nursing facilities (RUGs), hospital outpatient (APGs)
6 Per service Fee for service Physicians (RBRVS), hospital outpatient (APCs)
7 Per dollar of cost Cost reimbursement Critical access hospitals, state-owned providers
8 Per dollar of charges By report Any
For example, total charges for inpatient hospital care for 1,000 people may equal $324,000. This sum can be decomposed
into eight financial risk factors that correspond to alternative units of payment. The time period is one year, 1,000 people are
eligible for care, and 10% actually receive care. On average, those 100 people have 2 inpatient stays (episodes of care) a
year, with an average length of stay of 3 days. On average, 6 services are received per day at an average cost of $60 per
service. The hospital sets its charges as 1.5 times cost. That is, $324,000 = 1 x 1000 x 10% x 2 x 3 x 6 x $60 x 1.5. The
choice of a unit of a payment determines which risk factors Medicaid is responsible for and which risk factors the hospital is
responsible for.
Pro
vid
er f
inan
cial
ris
k --
->M
edicaid
finan
cial risk ---->
Unit of Payment
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Criteria to Select a Payment Method
Criterion Explanation Implication
Access
Gear payment to expected
resource cost
Adjust payment for patient acuity to head off
access problems for high-acuity patients
Efficiency Reward lower cost for same care
Set prospective rates that do not depend on
individual provider costs or charges
Policy control Overall and for specific priorities
Provide levers over payment overall and for policy
priorities
Admin ease For Medicaid and providers
Think carefully before adding complexity; think
through operational implementation
Data integrity Base calculations on good data
Avoid reliance on vague or hard-to-verify Dx, Px,
charge or cost values
Purchasing clarity Enable understanding of services
Use clinically meaningful groupings and publish
data on rates and utilization
Fairness
Similar pay for similar care; reflect
uncontrollable cost differernces
Standardize rates for services; consider variable
payment for uncontrollable cost variation
Quality Specifically facilitate improvement Few current methods inherently promote quality
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The Choice of the Unit of Payment
Per Time
Period
Per Eligible
Person
Per
Recipient Per Episode Per Day Per Service
Per Dollar
of Cost
Per Dollar
of Charges
Managed care
HCBS
Inpatient hosp
Nursing facility .
Outpatient hosp
Pharmacy .
ICF/MR .
Physician .
Clinic
Dental/other prof. .
. Best practice (arguable) for the unit of payment for a given provider type
Other units of payment commonly used by Medicaid and other payers
UNIT OF PAYMENT
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Themes for Coming Years
Pay for quality
Still rare in Medicaid, especially outside managed care
Very promising but very contentious
More bundling
Within provider type (e.g., Medicare composite APCs)
Across provider types (e.g., physician + hospital)
Longer time periods (e.g., admission + readmission)
Never-ending search for better casemix adjustors
Data, coding, clinical expertise more important
ICD-10 will expand the policy possibilities
Coping with the challenge of more and more complexity
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Near-Term Value Purchasing Opportunities?
1. ―Lower of‖ pricing for Medicare crossover claims
2. Drug pricing, especially on generics
3. Hospital outpatient therapy and imaging services
4. Hospital outpatient observation services
5. Payments to ―provider-based‖ clinics
6. Hospital inpatient services paid per diem or cost
7. Hospital outpatient services paid a percentage of cost
8. Hospital inpatient complications and readmissions
9. Any services paid at a percentage of costs or charges
10. Revisiting fees and MMIS edits on most common services
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 14
Seven Keys to Success in Payment Projects
1. Not just a systems job, certainly not ―plug and play‖
2. Close collaboration between policy staff, systems staff, providers, other stakeholders
3. Extensive analysis of claims dataset in order to set budget target and simulate impacts
4. Think twice before adding complexity
5. Early start on approvals as needed: APD, state plan amendment, regulation, legislation
6. Extensive MMIS testing
7. Good provider education
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Implications for the Agency
1. Push down responsibility and authority for value purchasing
2. Increase staff expertise in claims data, data analytics, health care coding, and evidence from outside sources
3. Gather evidence and analyze payments before the crisis hits
4. Be mindful of Medicaid’s different roles in the different markets for health care
5. Shift financial risk to the provider where feasible
6. 5% of the population accounts for half of health spending, so accurate acuity adjustment is essential
7. Whatever the unit of payment is, expect providers to increase the number of units and decrease their own cost per unit
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 16
Notes to the Slides
Slide 1 – This presentation is part of a webinar organized by the Center for Health Care Strategies. For further information, see Deborah Bachrach, Payment Reform: Creating a Sustainable Future for Medicaid , available at www.chcs.org.
Slide 5 – On the lessons that can be learned from the success of DRGs, see:
R. Mayes and R. A. Berenson, Medicare Prospective Payment and the Shaping of U.S. Health Care (Baltimore, Johns Hopkins Press, 2006, pp. 51-53, 68
R.F. Averill, N.I. Goldfield, J.C. Vertrees et al., ―Achieving Cost Control, Care Coordination and Quality Improvement Through Incremental Payment System Reform,‖ Journal of Ambulatory Care Management 33:1 (January-March 2010), pp. 2-23.
K. Quinn, ―Achieving Cost Control, Care Coordination and Quality Improvement in the Medicaid Program,‖ Journal of Ambulatory Care Management 33:1 (January-March 2010), pp. 38-49.
Slides 7 and 8 – On the role of Medicaid as a purchaser, see K. Quinn and M. Kitchener, ―Medicaid’s Role in the Many Markets for Health Care,‖ Health Care Financing Review 28:4 (Summer 2007), pp. 69-82, and K. Quinn, ―How Much Is Enough? An Evidence-Based Framework for Setting Medicaid Payment Rates,‖ Inquiry 44 (Fall 2007), pp. 247-256.
Slide 13 – For additional discussion of some of these ideas, see Medicaid Value Purchasing: Ten Ideas for Controlling Cost while Maintaining Access, available at www.acs-inc.com/healthcare.aspx under ―Payment Method Development‖
Slide 15 – On the concentration of spending (point 6), see M.W. Stanton and M. Rutherford, The High Concentration of U.S. Health Care Expenditures (Rockville, MD: AHRQ, 2005).
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 17
Useful Websites on Medicaid Payment Topics
Center for Health Care Strategies (www.chcs.org)
Kaiser Commission on Medicaid and the Uninsured (www.kff.org)
Medicare Payment Advisory Commission (www.medpac.gov)
Despite a focus on Medicare, MedPAC’s analytical work can be a model for Medicaid ACS Government Healthcare Solutions (www.acs-inc.com/healthcare.aspx)
Payment method descriptions, tables on how states pay for hospital care, and other information about Medicaid is available under ―Payment Method Development‖
New England States Consortium Systems Organization (www.nescso.org)
This website includes a series of video tutorials intended for Medicaid managers, including Medicaid payment methods and the basics of claim forms and codesets
State Health Access Data Assistance Center (www.shadac.umn.edu)
National Academy for State Health Policy (www.nashp.org)
Medicaid Statistical Information System (http://msis.cms.hhs.gov)
An excellent tool that deserves to be better known
HHS Office of Inspector General (www.oig.hhs.gov/reports.html)
CMS reports (www.cms.hhs.gov/ResearchGenInfo)
Government Accountability Office (www.gao.gov)
Drug Effectiveness Review Project (www.ohsu.edu/drugeffectiveness)
© ACS 2010. ACS® and the ACS design are trademarks of ACS Marketing LP in the US and/or other countries. XEROX® and XEROX and Design® are trademarks of Xerox Corporation in the United States and/or other countries. Slide 18
Contact Information
Kevin Quinn
Vice President, Payment Method Development
ACS Government Healthcare Solutions
34 N. Last Chance Gulch
Helena, MT 59601
406-457-9550
kevin.quinn@acs-inc.com