Anna 100503

AGGRESSIVE ANALYTICS, INC | Health Policy • Quality Improvement • Information Technology • Management Science • Market Research |

Seizing the opportunity in a changing health care marketplace

Provider, Heal Thyself or Tag, You’re It:The Changing World of Provider Payment

Brady A. Augustine

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ANNA National SymposiumMay 2-5, 2010


Objectives

• Increase understanding of Payment Policy:

– The Value Conundrum

– Historical Payment Policy

– Emerging Models of Payment

– The ESRD PPS (Expanded Bundle)

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PART 1. THE VALUE CONUNDRUM

“Health care has no intrinsic value at all, none. Health does. Joy

does. Peace does…The best health care is the very least health

care we need to gain the long, full and joyous lives that we really

want. The best hospital bed is empty, not full. The best CT scan

is the one we don't need to take. The best doctor visit is the one

we don't need to have.”

Don Berwick, M.D. in New York Times article on 4/20/10

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Reference Points

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ESRD PPS

Mechanics

Value

Checkbook


Mechanics

• Credence goods are characterized by asymmetric information between sellers and consumers that may give rise to inefficiencies, such as under- and overtreatment or market break-down.

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Think about the last time you took your car in for a major repair. How did your car insurance pay?

SOURCE: Dulleck, U. et al. “On Doctors, Mechanics, and Computer Specialists: the Economics of Credence Goods.” Journal of Economic Literature. Vol XLIV (Mar 2006). Pages 5-42..


Value (Process)

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State Level Medicare Spending per Beneficiary (thousands of $)

Source: Congressional Budget Office. Geographic Variation in Health Care Spending. February, 2008.Note: Composite measure reflects 2004 data for of recommended care to pts hospitalized with AMI, heart failure, and pneumonia.

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Value (Outcome)

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Source: Aaron, H and P Ginsburg. “Is Health Spending Excessive? If So, What Can We Do About It?” Health Affairs. Vol 28:5. September/October 2009. Pages 1260 – 1275.


Checkbook (Government)

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Entitlement programs already make up over 47% of Federal spending…

…and will only grow

SOURCE: CBO. Long-term Budget Outlook. December 2007.


Checkbook (Personal)

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Summary of the Problem (#1)

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Summary of the Problem (#2)

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PART 2. HISTORICAL PAYMENT POLICY

“Low and slow. ”

Anonymous doctor responding to the question “What do you think of

Medicaid payment?”

“Our nation has a clear history of reducing health care program

budgets through across-the-board cuts to health care professionals,

and the impact on patients is reduced access to care ... Public

safety-net programs like Medicaid and Medicare need to be

properly financed so that they work for patients and physicians.”

Joseph Heyman, chairman of the AMA in the USAToday on 06/03/2009

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Getting Thrown Overboard

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The Leaky Ship

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Mission Mismatch

From the IOM report Health Professions Education: A Bridge to Quality (2003):

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…students and working professionals develop & maintain proficiency in five core areas: delivering patient-centered care, working as part of interdisciplinary teams, practicing evidence-based medicine, focusing on quality improvement and using information technology.


The Good News, Maybe

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CMS wants to trade its leaky old ship in for…

…a fleet of sailboats


PART 3. EMERGING PAYMENT MODELS

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“The times…they are a-changin’.” Bob Dylan


Everything Old is New Again

• Accountable Care Organizations (ACOs) –either practitioner, hospital, health center, or IDS driven (either FFS with shared-savings or capitated)

• Medical Homes – blended payment featuring management fee, FFS, and shared savings tied to quality.

• Specialty Plans

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The Trend to Value

SOURCE: Porter, M and E. Teisberg. “Redefining Competition in Health Care.” Harvard Business Review (Jun 2004). Vol 82:6.

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SOURCE: Guterman, S, K Davis, et al. “Using Medicare Payment Policy to Transform the Health System: Framework for Improving Performance. Health Affairs Web Exclusive (Jan 27, 2009): w238-w250.

The Risk Continuum


PART 4. THE ESRD PPS

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“We support Congress’ effort to shift its Medicare payment

systems to increasingly focus on high-value care. But, we are

concerned that without thoughtful implementation and appropriate

oversight, these changes may increase barriers to care for

individuals with kidney disease.”

Bobbi Wager, RN and Eli Friedman, MD from AAKP in letter to CMS


Background

• 1972 – Congress authorized Medicare ESRD benefit

• 1983 – CMS implemented the composite rate

• 2003 – With MMA, CMS is directed to make first major changes to ESRD payment in 20 years.

• 2005 – CMS implemented basic case-mix adjustments and drug add-on

• 2008 – With MIPPA, CMS is directed to implement a new PPS (expanded bundle)

• 2009 – CMS proposed new PPS system

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Expanded BundlePer MIPPA 2008 Sec 153(b)(1):

The term ‘renal dialysis services’ includes—(i) items and services included in the composite rate for renal

dialysis services as of December 31, 2010;(ii) ESAs and any oral form of such agents that are furnished to

individuals for the treatment of ESRD;(iii) other drugs and biologicals that are furnished to

individuals for the treatment of ESRD and for which payment was made separately under this title, and any oral equivalent form of such drug or biological; and

(iv) diagnostic laboratory tests and other items and services not described in clause (i) that are furnished to individuals for the treatment of ESRD.

Such term does not include vaccines.

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A Base Rate by Any Other Name…

• Projected average 2011 bundle payment calculated (i.e. unadjusted base rate) $261.58

• This rate was then “standardized.” HUH? In very simple terms, it subtracted any predictive power of the new case mix adjusters and wage indexes. This adjustment backs out 21.73% $204.74

• Next, CMS adjusts for expected outlier payments by reducing this rate by 1% $202.69

• Congress’ cut of 2% up-front savings $198.64

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Components of Facility Payment

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SOURCE: Mayne, Tracy. Nephrology News and Issues. October 2009. Pages 34 – 38.


Case-mix Adjusters (non-pediatric)

SOURCE: Mayne, T. Nephrology News and Issues. October 2009. Pages 34 – 38.


Phase-in Adjuster

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• What is the Phase-in adjuster? It adjusts for the scenario.

• CMS assumes 36% of facilities choose full PPS and 64% choose transition to new PPS

Facility A Facility B TOTAL

Payment if transition all at once $260 $240 $500

Payment if transition over time $250 $250 $500

Payments actually made based on choice $260 $250 $510 oops


Quality Incentive Program

• Payments reduced by up to 2% for facilities not achieving or making progress toward specified performance standards

• Initially, CMS proposes to use claims-based measures that focus on anemia and adequacy of dialysis

• CMS will compute a Total Performance Score and proposes a sliding scale to determine payment reductions

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Outlier Payment

• Outlier payment is basically an insurance policy against unusually high costs at the patient-level for outlier services

• Outlier services are separately billables in the current system and ESRD-related Part D drugs.

• Facilities have 1% withheld (premiums)• Claims are made at the patient level• Outlier payment is 80% of costs after threshold• Outlier payment would be added to per-

treatment payment amount.

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Issues

• Race/Ethnicity as case-mix adjuster

• Septicemia as case-mix adjuster

• Inability of facilities to replicate model

• “Oral-only” drugs included in PPS

• MCP lab tests may cause more blood draws

• Possible increased cost-sharing due to labs

• No additional payment for home training

• QIP does not include outcomes measures

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Timeline

• 11/1/2010 – Provider election whether to transition immediately or over time

• 1/1/2011 – Expanded bundle implemented

• 1/1/2012 – QIP implemented using 2010 data

• 1/1/2012 – Statutory annual update begins

• 1/1/2014 – All facilities transitioned


Is the model in CMS’ NPRM an improvement over existing policy? No, not in the short-run (with a few exceptions).

But it does move CMS into a role where it is better suited and pushes accountability down to the provider level where it is better managed.

Just as CMS is flailing at re-inventing itself to meet the challenge, renal dialysis facilities will have to do the same. Some will prosper, some will fail.

There will be a few years of confusion and hardship but eventually, the system will settle and include meaningful incentives that incorporate overall savings and focus on quality.

Only then, can we call the new PPS a success.

Conclusion


Thank You

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BRADY AUGUSTINE President & CEOAggressive Analytics, Inc.850-443-6368 [email protected]

Medicaid Policy Blog: www.medicaidfirstaid.com

Anna 100503

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