Post on 21-May-2020
Introduction
Pendulum HealthCare Development Corporation is a leading
provider of integrated business management and technology
service solutions. PHDC supports physicians pursuing value-
based initiatives, helping them achieve clinical and financial
rewards for more effectively managing their patient populations.
With over 40 years of health care experience, we work with
clients to research, design, build and manage customized care
models including clinically integrated networks, bundled
payments, accountable care organizations and physician-
sponsored health plans.
The Big Picture
Alan Greenspan thinks major investors who understand Global population changes will rethink
their long term bond bets
“Once foreign creditors digest the extent of the population shift
that is turning Medicare and Social Security into fiscal time
bombs-and its negative implications for the broader US
economy- they will demand higher returns for their money and
be far less willing to accept the current low rates of 20 and 30
year US treasurys”.
“The cost of public pensions and health benefits is on track to
double to 24% of the Gross Domestic Product by 2040.”
“Three countries in even greater peril Japan, Germany and China”
Source; Wall street Journal June 2006 thinking Global Fredrick Kempe
Health benefits Ail as Pensions Heal
“While traditional pension plans often are contractual obligations at companies that have them, health benefits are not. Thus most companies are trimming their post retirement health care spending”
“Under funded pensions at US Auto makers have gotten a lot of ink but their health plans are in worse shape”.
“Of the 110 Billion total pension and healthcare under funding at the start of this year at GM and Ford more than 97 Billion of that amount was accounted for by retiree health care costs” according to Standard and Poors.
Source WSJ June 6th Tracking Numbers by Ian McDonald
What employers are looking for
Large self funded employer group have (TPA Outsourced) systems to
track and pay claims, conduct traditional UR are changing.
This accounting approach is usually retrospective and helps identify where
the money went but does not help identify the future. Medical expense %
for most self funded companies are in the 90 to 95% of premium range.
Most health plans understand prospective payment and the need to
anticipate costs and frequency of illness . To date actuarial modeling of
claims behavior per 1000 and using various forms of case management
has helped keep the medical expense ratio at 85% to 90% of premium
To remain competitive the goal for both is to move to 85% to 90% of
premium and that requires non traditional medical management.
Beyond trends,
from buying benefits to managing
benchmarks
As employers move away from the defined benefit approach to buying insurance ( one benefit) to a defined contribution approach (one cost) and attempt to give employees choice of new plans, cafeteria selection and include Medical savings accounts the quest of managing benfits comes to the forefront.
Many of the techniques used by healthplans in terms of medical management are now part of what employers are curious about. They see charges and utilization that points out problems of inconsistency and also see the government taking a role in standardizing quality measures for Medicare Contracting health plans .
These measure or benchmarks are key to stabilizing/projecting risk and cost.
Predicted
Cost
Risk Level:
Low 165 $750
5,445 $690
12,843 $687
Risk Level:
Moderate 94 $1,300
2,513 $1,220
6,317 $1,198
Risk Level:
High 34 $6,500
419 $5,700
1,223 $5,600
Employer Risk Profile
PHDC Population Profiling System
Survey Statistics
Number
Surveyed
Number
Responding
Response
Rate
Employer: 150 78 52%
Population: 8,377 2,240 27%
Benchmark: 20,383 5,450 27%
PCPPCP PopulationPopulation BenchmarkBenchmark
To manage and predict benchmarks requires
a return to a focus on the
patient physician relationship
Discounting physician care after the fact only makes physicians angry at the insurer /employer and the patient.
In many cases we are seeing the shrinking of physician care reimbursement actually shrinking the availability of PCP and up to date hospital care.
Patients who get caught short by non covered benefits and angry docs usually do not follow treatment that’s recommended so Patients sometimes only receive a small fraction of the VALUE of care employers purchased.
Solution is to build a plan that changes behavior of the physician and patient through new incentives to re create value. to swing back the Pendulum in favor of comprehensive care at affordable and predictable costs.
PHDC Population Profiling SystemProvider Ranking - Total Dollars
Develop Tiered Networks
Compare Risk Adjusted Cost
Population: The Universe
Benchmark: N/A
PROVIDER POPULATION
Rank ID Name Mbrs Seen
Actual Paid Amt
Expected Paid Amt
Diff Perf
Index
phdc
3899 6636498 Provider 6636498 183 $127,190 $75,642 $51,547 1.68 0.90
3905 6636492 Provider 6636492 350 $229,000 $166,453 $62,547 1.38 1.03
3876 6631410 Provider 6631410 165 $99,304 $72,703 $26,600 1.37 0.95
3897 6637732 Provider 6637732 354 $214,405 $167,368 $47,037 1.28 1.02
3883 6636491 Provider 6636491 336 $176,154 $141,255 $34,900 1.25 0.91
3813 6637895 Provider 6637895 150 $83,074 $75,027 $8,047 1.11 1.08
3823 6636495 Provider 6636495 232 $120,429 $111,345 $9,084 1.08 1.04
3776 6636242 Provider 6636242 157 $79,036 $74,498 $4,538 1.06 1.03
3387 6637765 Provider 6637765 265 $96,586 $96,279 $307 1.00 0.79
315 6634381 Provider 6634381 219 $111,192 $119,540 -$8,348 0.93 1.18
99 6633835 Provider 6633835 525 $170,727 $211,799 -$41,072 0.81 0.87
147 6633712 Provider 6633712 280 $101,897 $127,628 -$25,731 0.80 0.99
RedirectPatients
Include Provider in
Select Network
Estimated Savings From Redirection
REDIRECTION
ID NameMbrsSeen
ActualPaid Amt
ExpectedPaid Amt
DiffPerf
Index25% 50% 75% 100%
6636498 Provider 6636498 183 $127,190 $75,642 $51,547 1.68 $12,886.75 $25,773.50 $38,660.25 $51,547.00
6636492 Provider 6636492 350 $229,000 $166,453 $62,547 1.38 $15,636.75 $31,273.50 $46,910.25 $62,547.00
6631410 Provider 6631410 165 $99,304 $72,703 $26,600 1.37 $6,650.00 $13,300.00 $19,950.00 $26,600.00
6637732 Provider 6637732 354 $214,405 $167,368 $47,037 1.28 $11,759.25 $23,518.50 $35,277.75 $47,037.00
6636491 Provider 6636491 336 $176,154 $141,255 $34,900 1.25 $8,725.00 $17,450.00 $26,175.00 $34,900.00
Total Redirection: $55,657.75 $111,315.50 $168,973.25 $222,631.00
Total Redirection:
$55,657.75 $111,315.50 $168,973.25 $222,631.00
Tiered Network Example
0%
20%
40%
60%
80%
100%
Tiers
Par
tici
pat
ing P
hysi
cian
s Regular
100%
Premium
75%
Ultra
50%
A value higher than 1.0
indicates actual deaths
exceed expected deaths
Risk Adjustment In Action
Source: Pendulum, Copyright © 2002 Learning and Knowledge Resources.
1.01.0 indicates actual
deaths are equal to
expected deathsA value lower than 1.0
indicates actual deaths are
lower than expected,
which is the ideal situation
Risk-Adjusted
Mortality Index
Sum of Observed Mortality
Sum of Expected Mortality=
Source: Pendulum, Copyright © 2002 Learning and Knowledge Resources.
Risk-Adjusted Mortality Index:
Leveling The Playing Field
Risk-Adjusted Mortality Index (RAMI) attempts to account for all factors that may
explain variations in patient mortality outcomes, other than the health care or the
process of care itself. RAMI allows comparison over time within your own
organization and other health care organizations. Adjusting for risk in this manner
levels the playing field and can help you identify trends and target areas for
performance improvement.
The RAMI model looks at:
Relationships between principal and secondary diagnosis
Demographic factors (such as age and sex)
Validity of the data
Facility characteristics like geography (urban or rural) and function (teaching or
non-teaching)
65 Year Old Male 90 Year Old Male65 Year Old Male 90 Year Old Male
Source: Pendulum, Copyright © 2002 Learning and Knowledge Resources.
Risk Adjustment In Action
Two male patients with the same principal diagnosis (congestive heart failure) are
admitted to different emergency rooms. Though medical intervention does its best
for both patients, the reality is that advanced age and serious secondary diagnoses
put the 90 year old at a much higher risk of death. It would be unfair to compare
mortality outcomes of the two without risk adjustment. Therefore, risk adjustment
provides a better comparison.
Congestive Heart Failure with Diabetes Mellitus
with Hypertension
Congestive Heart Failure with COPD with Mitral Valve
Insuffic with Aortic Valve Stenosis
This patient’sexpected mortality is 8.0 times
the expected mortality forthe 65 year old
===
PatientDischarge
Disposition
Observed
Mortality
Expected
Mortality
DRG 127 Heart Failure and Shock
1 Deceased 1 0.74
2 Alive 0 0.20
3 Alive 0 0.11
Total 1 1.05
RAMIObserved Deaths
Expected Deaths
1.00
1.050.95
Source: Pendulum, Copyright © 2002 Learning and Knowledge Resources.
Obtaining RAMI: Sample
Visualizing An Annual >>2.5% Gain In
Cost Efficiency
2.5%/year2.5%/year
2.5%/year2.5%/year
50th %ile50th %ile
50
th%
ile5
0th
%ile
MD
Qu
alit
y I
ndex
(ou
tco
mes
of
% a
dh
eren
ce t
o Q
ru
les)
MD
Qu
alit
y I
ndex
(ou
tco
mes
of
% a
dh
eren
ce t
o Q
ru
les)
L
ow
erH
igh
er
L
ow
erH
igh
er
Lower Longit. Efficiency/ Higher Total CostLower Longit. Efficiency/ Higher Total Cost
Higher Longit. Efficiency/ Lower Total Cost
Higher Longit. Efficiency/ Lower Total Cost
Low Longit. Efficiency Low Quality (Worst)
Low Longit. Efficiency Low Quality (Worst)
High Longit. Efficiency High Quality (Best)
High Longit. Efficiency High Quality (Best)
High Longit. Efficiency Low QualityHigh Longit. Efficiency Low Quality
Total Cost of Care Index for Seattle MDs(total cost per case mix-adjusted treatment episode)
Total Cost of Care Index for Seattle MDs(total cost per case mix-adjusted treatment episode)
Low Longit. Efficiency High QualityLow Longit. Efficiency High Quality
New level of insight for hospitals
The system actually rewards providers who let patients get sicker.
The more complex the patient the more the providers can charge.
When hospitals become more efficient and more effective they
lower costs, save lives but also lower revenue projections .
Right now the more efficient and effective the hospital is , the
more money the insurance company makes.
The only way to harvest these savings from improvements is to
share risk in carefully constructed performance driven
agreements.
CAP Protocol Compliance
Source: Intermountain Healthcare, Dr. Brent James, .
Pro
po
rtio
n C
om
pli
ant
Pro
po
rtio
n C
om
pli
ant
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
-23 -21 -19 -17 -15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 17
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8Baseline ImplementationBaseline Implementation
Month Relative to CPM ImplementationMonth Relative to CPM Implementation
Implementation Group – Loose Abx Compliance
Community Acquired Pneumonia
Source: Intermountain Healthcare, Dr. Brent James,.
Without
Protocol
With
Protocol
‘Outlier’ (complication)
DRG at Discharge15.3% 11.6% 24.7% p<0.001
In-hospital Mortality 7.2% 5.3% 26.3% p=0.015
Relative Resource Units
(RRUs) per case55.9 49.0 12.3% p<0.001
Cost per Case $5211 $4729 9.3% p=0.002
CAP: Cost Vs. Reimbursement
Source: Intermountain Healthcare, Dr. Brent James, .
Act
ual
vs.
Exp
ecte
d R
eim
bu
rsem
ent
($)
Act
ual
vs.
Exp
ecte
d R
eim
bu
rsem
ent
($)
0
5000
10000
15000
-37 -35 -33 -31 -29 -27 -25 -23 -21 -19 -17 -15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 17 19 21 23
0
5000
10000
15000
Expected Cost projected from risk-adjusted history, controls
Actual Cost as complication rate fell
Actual Reimbursement
Expected Cost projected from risk-adjusted history, controls
Actual Cost as complication rate fell
Actual Reimbursement
Month Relative to Protocol IntroductionMonth Relative to Protocol Introduction
Impact On Net Income
Source: Intermountain Healthcare, Dr. Brent James,.
Payment Mechanism
Improvement to Cost
Structure
Discounted
FFS
Per
Case
Per
Diem
Shared
Risk
Decrease Cost per Unit
Decrease # Units per Case
Decrease other units per case
Decrease LOS (# nursing hours)
Decrease # of Cases
(45%) (40%) (0%) (15%)
Impact On Net Income
Source: Intermountain Healthcare, Dr. Brent James,.
Payment Mechanism
Improvement to Cost
Structure
Discounted
FFS
Per
Case
Per
Diem
Shared
Risk
Decrease Cost per Unit
Decrease # Units per Case
Decrease other units per case
Decrease LOS (# nursing hours)
Decrease # of Cases
(45%) (40%) (0%) (15%)
Strategies To Harvest
Quality Savings
1. Target specific improvement projects
Project likely medical and cost improvements
Track to final budgets
Select projects with internal savings
2. Use in contract negotiations
E.g., demonstrate that clinical improvement has produced a
superior total cost compared to competitors, even with a lower fee-
for-service discount
Always looks worse within current budget cycle, but savings
appear in subsequent cycles
3. Partner with purchasers: ‘shared risk’ contracts
Source: Intermountain Healthcare, Dr. Brent James, .
0
10000
20000
30000
40000
Identifying
Profitable Service Lines
Source: HealthLeaders, March 2003.
Cardio/VascularThoracic Surgery Orthopedics General Surgery
Complications Tot
Pats Tot Pay Avg
Tot Cost Avg
Tot Profit Avg
Tot Pats
Tot Pay Avg
Tot Cost Avg
Tot Profit Avg
Tot Pats
Tot Pay Avg
Tot Cost Avg
Tot Profit Avg
None
838 13732 30505 3227 925 5688 6702 -1014 842 8473 9410 -937
Single CoC 350 16672 16585 87 152 7100 9728 -2628 346 13608 36293 -2685
Multiple CoCs 180 17649 27080 -9431 80 8296 12530 -4234 335 23910 36270 -12360
Grand Total 1368 14999 14241 758 1157 6054 7503 -1449 1523 13035 16882 -3847
Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost AvgTot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg
None
Single CoC
Multiple CoCs
None
Single CoC
Multiple CoCs
Cardio/Vascular/Thoracic Surgery Orthopedics General SurgeryCardio/Vascular/Thoracic Surgery Orthopedics General Surgery
Merit Based Payment Incentive (MIPS)
Replaces SGR
Consolidates Physician Quality reporting System (PQRS), Value Based
Modifier ( VBM )and Meaningful use payments for EMR under one program
effective 2019
Medicare payment increases are limited to 5% increase in 2015 to 2019 then
all Medicare rates are frozen until 2025.
Quality measures will expand as will reporting requirements at the practice
level and professionals not making improvements in quality could receive
negative or zero increases
To be exempt from the freeze physician are encouraged to participate in
Alternative Payment Models( APM) . These include Medicare Advantage (
MA) and Accountable Care Organizations (ACO) whose payment from CMS
will not be frozen.
CMS has announce that 80% of all Medicare payments will be done under
APM by 2019. This includes bundled payments, Capitation and similar global
payment models .
New organizational arrangements now
emerging
Traditional physician/insurer relationships changing and physicians create their own database and use it to negotiate fees and feedback as clinically integrated groups.
IPAs evolving to new MSO arrangements directly contracting with larger employers and in some cases directly contracting with Medicare for larger amounts of the premium creating physcisn managed savings pools and potential for additional shared overhead.
Employers and providers co venturing to develop better understanding of GOOD benchmarks and fostering better communications with consumers and third parties.
All of this requires new technology and data-measurement tools that were not available 3 years ago.
Organization Variations
In 2015 Health Care
Mass Customization/Lifestyle management
Insurance and banking alliances manage assets of consumer health funds,
credit cards, consumer loans and lines of credit can include physician practice
working capital and equipment financing bringing consumer and physicians
closer through debt management and prospective budgeting.
“This financing the product” is not new, the product is!!.
The Dell Mass Customization approach where a consumer index based upon
health risk and needs, customizes bundles of products and services across the
spectrum of services and builds a total solution based on you and your family’s
needs and benefits plan, income and cost of care
Not there yet but Aetna and Cigna are working it
Organization Variations
In 2015 Health Care
Physician sponsored/brokered health plans
Community based plans are remerge in order to create differentiation in a crowded market
By taking best of class services from area communities and linking them together with low cost, more efficient health plans, on line selection technology, integrated transaction services and links with ancillary services to compete with the big boys
In some cases these are provider based, and in some cases, employers begin to drive the transformation armed with infomatics and specialized tools to build high performance tiered networks by sharing transparency of price and quality with patients.
Employers ARE willing to support a local plan/network as a means to keep price competition between providers in motion. This becomes a critical element to cost control.
This also means the single carrier theory is dead.
Organization Variations
In 2015 Health Care
Benchmarking Consortiums,
Integration of health plan like standards, clinical information, drug benefits, reimbursement, geographic databases and similar source data and combines the offering with data analysis tools and services to support outcome studies and training of medical staff to improve outcomes against regional and national standards
Links together exchange networks of best providers for employers and consumers to select from based upon outcomes and cost.
Moves care management to the life sciences industry grouping and away from insurance
Integrates health, DM, Case Management ,Disability and Workers Comp, wellness, behavioral health, End of Life issues into a dashboard that models and measures changes.
Employers Now See The Single Carrier
Theory Is Flawed
Employers have discovered by offering a single carrier managed care insurance program, that there is no competitive tension to lower pricing or innovate new programs to improve quality outcomes as there is when you offer several HMOs
Employers are now looking for local options to keep costs in check against the big guys, but with no local options they are offering high deductibles with discount networks as a quick fix.
Brokers are being replaced by data companies. Some of these new generation data companies are owned by physicians who are buying a franchise from a data company that acts as the independent and objective performance data measurement source.
This next step evolution IPAs and MSOs creates an answer to harvesting savings and reward as well as meeting federal integration guidelines
Employer
PhysiciansJVCO Hospital
New Structure of Community- based
Benchmarking Consortium/ Health Plan
Pendulum Health Care Structured
arrangement as an service bureau for
several community based enterprises
GoldStar
Alliance for
Health
Local Accountable
Care Organization
Local Integrated Delivery System
Local Community
Based Health Plan
Pendulum Health Care
Development Corporation
Services
Formulates provider network
Provider sponsored entity joins Goldstar Alliance for health LLC
Agrees to specific conditions and commitments to be a member
Selects specific services Pendulum can provide through GoldStar
Administrative Services
Staffing
Assistance in capital formation
Information technology
ACO or HMO licensure
Clinical decision support
Summary
Large employers and regional health plans are in a hurry to manage benchmarks not just benefits
Building benchmarks creates new interest in the minds of buyers to tier providers and design benefits to incent use of top providers
The governments pay for performance demo projects , new payment formulas under Merit-based Incentive Payment System MIPS and risk adjusters is a driving force that is not going away
These changes create new opportunities for providers to collaborate and harvest savings through performance arrangements
Technology is changing in favor of supporting these more sophisticated models of care improvement and reimbursement improvement.