Bundled Payments - First Illinois Chapter...

Bundled Payments2017 and Beyond

Outline for Discussion

This session will briefly review bundled payment models;

Insightful information on how bundled payment programs have grown;

We will also provide details on the newly proposed Episode Payment Models (EPMs);

We will suggest ideas how to strategically address EPMs for your organization;

Although the current administration may delay bundled payments, they are here to stay and work needs to get done to succeed with them.

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They’re Here!

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Session Description

Background Information – Healthcare Costs are a problem and CMS is taking steps to address;

Overview on Bundled Payments & Why CMS is promoting;

Review of CMS’ Common Bundled Payment Programs;

Cardiac Episode Payment Models in Chicago MSA 7/1/17 –Description;

Possible Approaches & Strategic Implications.

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17.8% of GDP

U.S. health care pending increased 5.8 percent to reach $3.2 trillion or $9,990 per person;

Hospital Care – 32% of total & costs increased 5.6% driven by continued growth in non-price factors (use and intensity of services);

Physician & Clinical Services – 20% of costs. Spending increased 6.3% despite lower prices;

Prescription Drugs – 10% of total costs. Spending increased by 9.0% in 2015.

2015 Healthcare Costs in the USA

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Accountable care models

Episode-based models

Oncology care model

Primary care transformation programs

Initiatives focused on Medicaid & CHIP Population

Initiatives designed to accelerate the development and testing of new payment and delivery models

Initiatives to speed the adoption of best Practices

Total of 82 Initiatives

Center for Medicare & Medicaid Innovation (CMMI) “Experiments”

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Value-based Care - Definition

Outcomes Cost Value

Outcomes are hard to measure but we’re in process of defining/refining

Costs are easily measurable

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Medicare’s commitment towards quality-based payments grows.

CMS Payment Changes 2015-2018

80%

20%

85%

30%

90%

50%

By 201820172016

Quality based payment programs

Hospital Value-Based Purchasing Hospital Readmissions Reduction Hospital-Acquired Condition Reduction End-Stage Renal Disease (ESRD) Quality Incentive Value-Based Modifier

Alternative payment programs

Pioneer Accountable Care Organization Medicare Shared Savings Program Bundled Payments for Care Improvement Comprehensive Primary Care Initiative

Patient Centered Medicare Homes Comprehensive End Stage Renal Disease Oncology Care Model Medicare/Medicaid Financial Alignment

All Medicare Payments

% of payments linked to quality programs

% of payments linked to alternative programs

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Historical Medicare Value-based Payment Demonstrations

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Medicare’s 1990’s Heart Bypass Bundled Payment Demonstrated Significant Savings

-HCFA 1998 Report Summary

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CMS’ move to Value-based reimbursement is NOT optional.

It effects everyone!

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Commercial Payors are also Investing in Value-based Care AETNA: “AETNA’s value-based payment models aim to pay for value

delivered, not services rendered”.

– Models: ACOs, PCMHs, P4P (cost/quality metrics), Bundled Payments

– Currently has 22% of spend running through VBCs touching 1.5M lives

BCBS: “Blue Cross Blue Shield Plans are Leading the Market in Developing and Executing VBC programs”.

– Models: ACOs, PCMHs, P4P programs, Bundled Payment Programs.

– 350 programs in 49 states, engaging 155,000 PCPs and 60,00 Specialists, covering more than 24 million BCBS enrollees.

United Healthcare: “Value-based contracting models represent an evolution in clinical and payment methodologies that will create quality and cost outcomes, foster greater accountability, and take advantage of innovations in medical technology”.

– Models: ACOs, PCMHs, Clinical Integration Payments, Premium Designations, Centers of Excellence Designations.

– Projected 50-70% of enrollees to be touched by VBC initiatives by 2016.

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The “Bundled” payment combines payment for physician, hospital and other provider services into a single payment.

Creates incentives for providers to deliver care more effectively through care coordination;

Providers may be jointly accountable and may realize a gain or loss based on how they manage resources;

Armed with information on historical costs, an organizations can begin to determine true value and/or emerging strategic issues;

May be “Prospective” or “Retrospective” in nature;

Other terms include Episode Payment Models (EPMs) and Episodes of Care Groupers (ECG’s).

Bundled Payment Overview

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Voluntary - Bundled Payment Care Initiative through 2017 –there are 341 hospitals (and additional provider participation);

Mandatory Hospital Bundles;

◦ Comprehensive Joint Replacement (CJR) – 2016 in 790 hospitals in 67 Metropolitan Statistical Areas (MSAs);

◦ Episode Payment Models (EPM)– Cardiac bundles – 7/1/17 in 1,127 hospitals and 98 MSAs – INCLUDING CHICAGO;

◦ Surgical Hip and Femur Fracture Treatment (SHFFT) – added to the existing CJR hospitals/MSAs;

◦ Cardiac Rehab Project – 45 EPM MSAs and 45 non-EPM MSAs (not including Chicago).

Two Main CMS Bundled Payment Programs

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JAMA Study published September 21, 2016

First 21 months of BPCI, Medicare payments declined more for BPCI-

participating hospitals than those provided in comparison hospitals;

With no significant change in quality outcomes.

Initial BPCI Performance Conclusions

Study Group3 YR

Baseline PatientsPerformance

Period Patients

BPCI Hospitals 27,441 31,700

Non BPCI Hospitals (control group) 29,440 31,696

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Initial BPCI Performance Conclusions cont’d

JAMA Study published September 21, 2016

First 21 months of BPCI, Medicare payments declined more for BPCI-participating hospitals than those provided in comparison hospitals;

With no significant change in quality outcomes.

Study Group3 YR

Baseline PatientsPerformance

Period Patients

BPCI Hospitals (178) 27,441 31,700

Non BPCI Hospitals (control group) 29,440 31,696

Study Group3 YR Baseline Cost/Patient

(90 day episode)

Performance Period Cost/Patient

(90 day episode)Change Reduction %

BPCI hospital costs 30,551 27,265 (3,286) 12.1%

Non BPCI Hospital Costs 30,057 27,938 (2,119) 7.6%

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$104,166,200 – Savings from BPCI Participants

$62,383,360 - Savings from control group

$166,549,560 - Total Savings to Medicare from study participants!

This explains CMS interest in Bundled Payments

JAMA Conclusions –21 Month Savings to Medicare

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Reducing Costs associated with initial hospitalization (Hospital payments);

Reducing COSTs associated with the 90 day bundle (CMS cumulative payments);

From a Risk perspective, hospital internal costs reductions do NOT change the costs associated with the bundle (CMS payments).

Achieve quality requirements (CMS is changing to make sure these programs qualify as an “Advanced APM (under MACRA)

Generic CMS Bundled Payment Savings Paradigm – General Framework

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More on CMS Bundled Payment Savings Paradigm– Initial Hospital Stay

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Minimal variation exists within the initial hospital stay

Patient Name Hospital Part B Acute Totals

a $10,124 $2,233 $12,357

b $10,124 $2,280 $12,403

c $10,630 $1,810 $12,440

d $10,124 $2,336 $12,460

e $10,124 $2,439 $12,563

f $10,654 $1,932 $12,586

g $10,654 $1,995 $12,649

h $10,654 $1,998 $12,652

i $10,124 $2,592 $12,716

j $10,124 $2,601 $12,725

k $10,563 $2,166 $12,729

l $10,654 $2,079 $12,733

m $10,359 $2,381 $12,740

n $10,654 $2,100 $12,755

o $10,563 $2,201 $12,763

p $10,359 $2,413 $12,771

q $10,124 $3,044 $13,168

r $10,654 $2,556 $13,210

s $10,563 $2,763 $13,325

t $10,654 $2,673 $13,327

More on CMS Bundled Payment Savings Paradigm– Post Acute Spend

Tremendous variation exists in the post acute environment

Patient Name Hospital Acute Totals Post Acute Totals Episode Totals

a $10,124 $12,357 $2,023 $14,375

b $10,124 $12,403 $23,898 $36,297

c $10,630 $12,440 $45,585 $58,022

d $10,124 $12,460 $6,687 $19,143

e $10,124 $12,563 $24,419 $36,980

f $10,654 $12,586 $12,333 $24,915

g $10,654 $12,649 $2,709 $15,352

h $10,654 $12,652 $4,041 $16,689

i $10,124 $12,716 $66,066 $78,776

j $10,124 $12,725 $25,024 $37,739

k $10,563 $12,729 $31,992 $44,715

l $10,654 $12,733 $10,978 $23,701

m $10,359 $12,740 $40,583 $53,323

n $10,654 $12,755 $2,559 $15,305

o $10,563 $12,763 $29,833 $42,587

p $10,359 $12,771 $26,879 $39,638

q $10,124 $13,168 $25,909 $39,071

r $10,654 $13,210 $90,096 $103,288

s $10,563 $13,325 $7,521 $20,842

t $10,654 $13,327 $22,365 $35,686

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Internal costs of providing care are important but do not dictate success under a bundled payment program;

Acute care totals & Hospital DRGs are essentially a fixed cost component to the program;

Post-Acute – Variable expenses and the key to success under a CMS bundled payment program

Conclusions

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DRG payment is nothing more than an interim payment to the hospital

Success/failure under the bundled payment program is the ultimate payment (and an adjustment to the DRG payment)

Welcome to value-based reimbursement & the new paradigm!

CMS Bundled Payment Program Summary

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Voluntary Bundles; Bundled Payments for Care Initiative (BPCI )

BPCI Models

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= Current = Proposed

Voluntary Bundles; BPCI - Summary

Target prices determined on 3 years historical costs & trended forward;

Target prices determined 100% based on organizations historical experience;

4 Model programs were introduced;

CMS program from 2013 through 2017;

The breakdown of participants by provider type as follows:

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Provider Type Participants

Acute Care Hospitals 341

Skilled Nursing Facilities 622

Physician Group Practices 252

Home Health Agencies 81

Inpatient Rehab Facilities 9

How BPCI Works

For Model , awardees guarantee a 2% savings to CMS (historical price less 2% savings = Target Price). For Model 3, CMS required a minimum 3% savings.

Retrospective Model - CMS processes all claims at 100% of allowed charges for all providers.

Organizations must achieve quality measures but were able to propose their own (therefore does NOT qualify as an Advanced APM program under MACRA.

CMS introduced a number of waivers – Most popular enabled physician gainsharing up to 50% of their professional services.

CMS provides quarterly reconciliations:

– CMS adjusts Trend/Wage index factors

– If the sum of individual patients claim costs are less than the Target Price, the organization retains 100% of this surplus.

– If the sum of individual patients’ claim costs are greater than the Target Price, the organization owes CMS this difference.

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Voluntary Bundles; Bundled Payments for Care Initiative Advanced

(BPCI Advanced)

New program to be introduced – 2018 and beyond;

Will qualify for Advanced APM status which means CMS will mandate quality measures.

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Comprehensive Care for Joint Replacement (CJR) Program

CJR Statistical Summary

Design principals similar to BPCI;

790 hospitals began testing the CJR model in 2016;

67 MSAs;

Published reports have estimated that 2/3rds of hospitals will lose money on this program;

Surgical Hip and Femur Fracture Treatment (SHFFT) was added to the current CJR mandate;

Excludes Chicago market.

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Episode Payment Models (EPMs)

The Proposed Models

In August 2016, the CMS Innovation Center published a proposed rule;

The rule proposes:

◦ Three new episode payment models (EPMs)

◦ A Cardiac rehabilitation (CR) incentive payment model

◦ Refinements to the (CJR) model

The new payment models begin on July 1, 2017 an continue through December 31, 2021 (5 performance years);

The models are intended to provide the opportunity to achieve high quality care, improve health for beneficiaries, and reduce Medicare spending.

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Acute Myocardial Infarction (AMI Episodes);◦ AMI DRGs: 280-282 and PCI DRGs: 246-251 with AMI ICD-

CM diagnosis code

Coronary Artery Bypass Graft (CABG) episodes;◦ MS-DRGs: 231-236

98 MSAs randomly selected including Chicago;

Episode Length – Initial hospital admission plus 90 days discharge.

Cardiac EPMs - Overview

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Target Prices – phased towards regional price targets by DRG. 1st year is 2/3rd historical costs & 1/3 regional;

Discount to CMS – 3% but this can be adjusted to as low as 1.5% based on performance on quality measures;

Hospitals will be provided with historical experience & development of Target Prices.

EPM Basics

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Cardiac EPM Quality Measures

AMI Quality Measures:

◦ Hospital 30-Day, all-cause, risk-standardized mortality rate (RSMR) Following Acute Myocardial Infarction (AMI) Hospitalization (NQF # 0230) (MORT-30-AMI)

◦ Excess Days in Acute Care after Hospitalization for AMI

◦ HCAHPS Survey (NQF# 0166)

◦ Voluntary Hybrid Hospital 30-Day, all-cause, risk-standardized Mortality Measure (NQF # 2473) (Hybrid AMI Mortality) data submission

CABG Quality Measures:

◦ Hospital 30-Day, all-cause, risk-standardized mortality rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF # 2558) (MORT-30-CABG)

◦ HCAHPS Survey (NQF # 0166)

Good performance reduces the discount to CMS by 50% (3% down to 1.5%).

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Cardiac EPM Sharing Gains and Losses

New term - collaborators to support efforts to improve quality and reduce costs;

Collaborators may include:◦ Physician and non-physician practitioners◦ Home Health agencies◦ Skilled Nursing facilities◦ Long term care hospitals◦ Physician group practices◦ Inpatient rehabilitation facilities◦ Providers of outpatient therapy services◦ Hospitals◦ Critical access hospitals◦ Accountable care organizations (ACO) that participate in the MSSP

Gainsharing payment or losses must be based on quality of care and provision of EPM activities;

Gainsharing capped at 50% for physicians. Enables gainsharing programs with physician group practices;

The EPM must retain 50% of the downside risk, but can share the remaining risk with collaborators (limited to 25% with an one collaborator and 50% with an ACO).

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Cardiac EPM Waivers

Gainsharing - of federal fraud and abuse laws, due to financial arrangement opportunities

Of the 3-Day SNF rule for the AMI model in year 2

Home Visits Waiver

Telehealth Waiver

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Cardiac EPM Beneficiary Protections

Beneficiaries’ access to care would not be impacted by EPMs;◦ Copayments would not change

◦ May still select any provider of choice with no restrictions

◦ May still receive any Medicare covered service with no new restrictions

◦ EPM participants are required to notify beneficiaries of the payment model

Beneficiaries can only be offered certain items or services that are reasonably connected to their medical care during the episode.

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Cardiac Rehabilitation (CR) Incentives

90 MSAs in total; 45 participating in EPMs (out of 98 in total) & 45 not. Excludes Chicago;

CMS will incent cardiac rehabilitation services utilization post-discharge within the 90-day episode:

◦ First 11 CR services post-discharge from CABG or AMI admission: $25

◦ Remaining CR services in 90-day episode: $175

CMS believes CR is capable of achieving significant improvements in patient outcomes, but is currently underutilized;

An annual, reconciliation report and payment will be issued;

CMS will allow transportation to/from CR services as a beneficiary engagement incentive.

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The break down on Cardiac EPM spending How costs have been disbursed for each cardiac service can

suggest an approach to reduce spending:

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CategoryCosts

Related to IP Stay

Readmission Costs

Suggested Approach to Reduce Spending

AMI 35% 22%Establish an effective care continuum to prevent readmissions

CABG 60-70% 6%

Most patients are discharged to a SNF; develop post-acute protocols and preferred partners. Medical Device utilization.

Cardiac EPMs –Impact on Local Hospitals

Industry Sources examined 2013-2014 data from CMS under the proposed EPM. They found that:

◦ 85% of hospitals would not have gains or losses exceeding $500,000 per year.

◦ However, 15% could experience significant penalties.

◦ Hospitals with higher cardiac care spending are more likely to struggle to meet CMS targets.

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CABG Hospital X Regional

Episodes 109 13,141

Cost per Episode 36,845 41,554

Anchor Inpatient 29,050 32,435

Skilled Nursing Facility 2,925 2,476

Home Health Agency 2,159 1,565

Inpatient Readmits 1,597 3,639

Outpatient 1,113 1,439

Facility after initial discharge

Home Health 30,357

Skilled Nursing 45,510

Other Inpatient Facility 42,845

Perspective – Brief Glance at One Chicagoland Hospital (2014 & 2015 combined numbers)

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AMI Hospital X Regional

Episodes 175 32,266

Cost per Episode 19,907 20,738

Anchor Inpatient 7,613 8,213

Skilled Nursing Facility 5,332 3,313

Home Health Agency 5,169 6,903

Inpatient Readmits 1,003 901

Outpatient 790 1,408

Facility after initial discharge

Home Health 15,695

Skilled Nursing 30,152

Other Inpatient Facility 21,005

Development of Target Prices (Simplified Summary)

Summary / EpisodeAnnual Episode

Estimate2 Yr Cost Ave

Approx. Target Price

CABG 55 36,845 37,261

AMI 88 19,907 19,578

1st year target price = 2/3 Hospital and 1/3 regional costs.

Moves to 100% regional over 5 year period.

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Estimate2 Yr Cost Ave

Approx. Target Price

CABG 55 36,845 37,261

AMI 88 19,907 19,578

Annualized Totals Current Costs Target Price Costs

CABG 2,008,053 2,030,708

AMI 1,741,863 1,713,093

Totals 3,749,915 3,743,802



Even though this hospital had better then avg. costs, it is essentially a breakeven at starting point.

Stop loss/stop gain – 5% of target moving to 20% over 5 years.


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Estimate2 Yr.

Cost AveApprox.

Target Price

CABG 55 36,845 37,261

AMI 88 19,907 19,578


Annualized Totals Current Costs Target Price Costs

CABG 2,008,053 2,030,708

AMI 1,741,863 1,713,093

Totals 3,749,915 3,743,802

Value of achieving quality (1.5% of Target Price)

CABG 30,461

AMI 25,696

Totals 56,157

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Even though this hospital had better then avg. costs, it is essentially a breakeven at starting point.

Stop loss/stop gain – 5% of target moving to 20% over 5 years.

Performance on quality measures are important and hospitals are already performing measures.

Achieve program quality measures;

Collaborate with physicians & post acute

network;

Success is primarily a function of post acute

expenses;

◦ Reduce readmits – complications are expensive

◦ Avoid inpatient rehab where possible

◦ Lower SNF lengths of stay (and avoid where possible)

◦ Expand home health services

CMS Episodes of Care Basics

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Approach Action Steps

Minimum financial impact too small & too many other initiatives

Education & Monitoring of results

Moderate- some investment related to value-based medicine

Development of Post-Acute Network & steerage

Specific Strategies related to reducing Readmits

Aggressive - additional investment

Develop & invest in Care Redesign

May tie this to existing ACO engagement initiative

Gainsharing with physicians/others

Hiring of Care coordinators

Investment in technology

All In - playing to win Seek to implement BPCI Advanced for 2018

Possible Approaches to Review

Every hospital will need to understand the underlying data and methodology;

Will start with a capabilities/readiness assessment for each hospital.

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Care Redesign Workflow

Map existing episode care management workflow;

Highlight process gaps based on industry leading and evidence-based practices;

Identify workflow value points and high-return opportunities for improvement;

Present alternative workflow design(s) and related performance enhancements;

Determine resource needs and return on investment (ROI) for changes.

Provider Alignment and Sharing Arrangements

Determine gainsharing opportunities;

Determine internal cost savings opportunities (optional);

Engage providers in sharing model and design;

Annual accounting and distribution of funds.

Care Redesign & Alignment Summary

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Transparent Results – Expect all of the results to be publicly available;

Advantages to size & scale – Greater ROI on investments with larger volumes;

Coordination of Care through an Episode of Care will work – higher outcomes/lower costs;

Don’t forget Advanced APM – it’s a winner for physicians and hospitals;

Winners will also grow market share.

Longer Term Implications / Summary

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Questions & Open Discussion

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Thank you FIHFMA & Chicago Health Executive Forum for hosting a great program today!

Chad Beste

Partner, PBC Advisors, LLC

[email protected]

Visit us at www.pbcgroup.com

http://www.pbcgroup.com/

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