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Transfer Pricing Update: The Impact of Transfer Pricing on Customs

Melinda HancockMelinda S. Hancock is Partner, Dixon Hughes Goodman and Chair Elect of HFMA for the 2014-2015 Term.

Having joined Dixon Hughes Goodman in the last year, Melinda has specific responsibility for developing DHG Healthcares next generation financial modeling products and services related to the transition from fee for service to non Fee For Service payment models. Prior to joining DHG, Melinda was the Senior Vice President and Chief Financial Officer of Bon Secours Virginia Health System.11Edward StallEdward combines over 20 years of health care consulting experience with 7 years of corporate experience to provide realistic business thinking for our healthcare clients. Edward has acquired significant experience in the areas of strategic business planning, health system planning, growth strategies, service line strategies, affiliations and relationships, physician alignment, and ambulatory strategies. His business experience, coupled with his healthcare focus and 20+ years of hands on planning experience ensures practical and manageable strategic direction for healthcare providers of all sizes. Edward has specific experience in new, replacement, and consolidation planning for acute care hospitals across the country.22Critical Intelligence for the Risk Capable OrganizationEdward Stall // Principal, DHG HealthcareMelinda Hancock // Partner, DHG HealthcareDavid Hatch // Director of Managed Care, Providence HospitalsLearning ObjectivesAt the end of this session each participant will understand the following 5 key learning objectives:

Understand the market drivers that are accelerating the need for new forms of Enterprise IntelligenceLearn how new revenue models are accelerating intelligence needsLearn about the emerging analytics and intelligence capabilities required for risk capabilityStudy Kicking the Tires - an analytics case study Understand the top things that all healthcare organizations should consider tomorrow to advance enterprise intelligence through the risk capability continuum 44Agenda5Intelligence for What? A Framework of Coming Risk Models

Enterprise Intelligence for the Risk Capable Organization

Kicking the Tires A Case Study

Intelligent Things to Do Tomorrow

5Intelligence For What?A Framework For Coming Risk Models66Tipping Point In Sight?7

7CMS Accelerates the Tipping Point for Everyone8HHS 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 1-26-1585% of payment tied to quality and value metrics (ex. HVBB, HRR) Another Way of Looking at This930% by end of 2016 & 50% by end of 2018 of this category85% by 2016 and 90% by 2018 of this categorySource: Rahul Rajkumar, MD, JD; Patrick H. Conway, MD, MSc; Marilyn Tavenner, RN, MHACMS- Engaging Mulitple Payers in Payment Reform. JAMA. 2014;311(19(:1967-1968Category 1: Fee for ServiceNo Link to Quality Category 2: Fee for ServiceLink 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 paymentsEligible 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 DescriptionExamples9The Business Intelligence Journey to Risk Capable10FFS Reimbursement ReductionsPenalty Avoidance and Pay for PerformanceBundled Payment (BPCI) Capitation, Shared Savings (MSSP)

Fee For Service Payment Reductions11Source: Centers for Medicare and MedicaidMedicare Fee-for-Service Payment CutsReductions to Annual Payment Rate Increases1$415B in total fee-for-service cuts, 2013-2022$260BHospital payment rate cuts, 2013-2022$56BReduced Medicare and Medicaid DSH2 payments, 2013-2022

11The Business Intelligence Journey to Risk Capable12FFS Reimbursement ReductionsPenalty Avoidance and Pay for PerformanceBundled Payment (BPCI) Capitation, Shared Savings (MSSP)

Penalties and Pay for Performance13

13The Business Intelligence Journey to Risk Capable14FFS Reimbursement ReductionsPenalty Avoidance and Pay for PerformanceBundled Payment (BPCI) Capitation, Shared Savings (MSSP)

Risk Capability Assessment15

Experimenting with Bundled Payments16Source: innovation.cms.gov

6,635 Entities16Bundled Payments17There are 4 models to choose from and each one has its unique attributes

MODEL 1MODEL 2MODEL 3MODEL 4MODEL NAMERetrospective Acute Care Hospital Stay OnlyRetrospective Acute Care Hospital Stay plus Post-Acute CareRetrospective Post-Acute Care OnlyAcute Care Hospital Stay OnlySCOPE OF EPISODESEntire HospitalUp to 48 EpisodesUp to 48 EpisodesUp to 48 EpisodesSERVICES INCLUDED IN EPISODESAll Part Aservices paid aspart of the MSDRGpaymentAll non-hospicePart A and Bservices duringthe initialinpatient stay,post-acuteperiod andreadmissionsAll non-hospicePart A and Bservices duringthe post-acuteperiod andreadmissionsAll non-hospicePart A andB services(including thehospital andphysician) duringinitial inpatientstay andreadmissionsPAYMENTRetrospectiveRetrospectiveRetrospectiveProspectiveBPCI DISCOUNT0.5%, and increasing over time2-3%3%3-3.25%NUMBER OF ADMITTED BPCI HEALTHCARE ORGANIZATIONS AS OF 7/31/14192,0554,53417

Note: Model 1 is on a different implementation timeline than Models 2, 3 and 4.17Target Price$13,647Historical Cost Per Episode$12,500Actual FFS Cost during Performance Period$13,400Settlement(Per Case)$247BPLNEpisode Definitions Risk AdjustmentEnvironment of Care - Hospital (40%)$99Physicians (35%)$86Update factorFor illustration:3% inflation/yrDiscount = 3%2009-20122015Environment of Care - Post-acute (25%)$62Quality MetricsQuality MetricsQuality MetricsFundamentals of the ProgramMedicare Gain Sharing Opportunities 18Procedure nursing, rehab, cost categories. What % of revenue can the cost be to break-even. Implants 29 to 31%. Reduce the total cost to meet those break-even number. If the doctors dont hit this number, their group will not qualify break even analysis on what they are doing. 18Outpatient Bundling/OCM19Summary of additional Bundled Models Comprehensive APCsOncology Care Model25 Comprehensive APCsEffective 1/1/15Mandatory for all OPPS hospitalsUp to 6 months of careKey to success will be management of internal cost structure Covers outpatient chemotherapy care for up to 6 monthsFor Oncology physician practicesSeveral participation requirementsOpen to other payers to participateIncludes Part A, B and DPerformance Based Measures and Quality Monitoring MeasuresThe Business Intelligence Journey to Risk Capable20FFS Reimbursement ReductionsPenalty Avoidance and Pay for PerformanceBundled Payment (BPCI) Capitation, Shared Savings (MSSP)

Risk CapableACO Adoption21

Source: Oliver Wyman, April 2014Fundamentals of the MSSP Program22Explanation Of How MSSP Works And Are Structured. Source: Health Care Advisory Board, 2012DESIGN ELEMENTONE-SIDED MODELTWO-SIDED MODELSharing RateUp to 50% based on quality performanceUp to 60% based on quality performanceMinimum Savings Rate (MSR)Varies by number of assigned beneficiaries2%Shared Savings MethodFirst dollar sharing once MSR is met or exceededFirst dollar sharing once MSR is met or exceededMaximum Sharing CapTotal shared savings payments cannot exceed 10% of benchmarkTotal shared savings payments cannot exceed 15% of benchmarkMinimum Loss RateNoneACO repays share of all losses if expenditures are more than 2% higher than benchmarkShared Loss RateNoneOne minus final sharing rate applied once minimum loss rate is met; loss rate is capped at 60%Maximum Loss CapNoneLosses capped at 5%, 7.5%, 10% in years 1, 2, 3, respectively

SHARED SAVINGS PAYMENT CYCLE22Aggregate & Patient Level Data From CMSSource: Health Care Advisory Board, 201223Initial Data ProvisionProvided to al ACOs at start of agreement period

Based on historical beneficiaries used to calculate cost benchmarkQuarterly Data ReportsProvided to all ACOs on quarterly basis and in conjunction with annual quality/financial reports

Based on most recent 12 months of data for prospectively assigned beneficiariesBenchmark DataProvided at beginning of agreement period and end of performance year as well as each quarterly aggregate data reportInformation on historically assigned beneficiariesHIPAA restrictions applyBeneficiary Claims DataProvided upon formal request from ACOAvailable monthlyFor use only in coordinating and/or improving careMust publicize to patients how data will be usedAggregate-Level DataIndividual-Level DataIncludes (Where Available)Financial performanceQuality performance scoresAggregated metrics on assigned populationUtilization data from historical beneficiaries (at start of agreement period)Includes Beneficiary namesDate of birthHealth insurance claim number23Enterprise Intelligence For The Risk Capable Organization2424Big Data Big Deal?$600to buy