Florida Health Care Association 2013 Annual Conference

The Westin Diplomat Resort & Spa

Session #49 – Value-Based Reimbursement Update

Wednesday, August 7 – 4:30 to 5:30 p.m.

Regency 1

Upon completion of this presentation, the learner will be able to:

review Value Based Reimbursement (VBR), a key component of health care reform designed to reduce costs and achieve desired outcomes;

compare the old and new quality metrics and consider what their organization will need to do differently to meet the expectations of hospitals and health care systems; and

examine how key metrics are calculated so they can be established within the organization to tell their performance story.

Seminar Description: Accountable Care Organizations (ACO) and Value-Based Reimbursement (VBR) are the major trends affecting health care today. ACOs are meant to redistribute the risk in managing episodes of care. Concurrently, VBR is being introduced as an approach in which regulators inspect post-discharge care and how patients are managed. For years, employers and governmental entities have pushed for the measurement of the efficiency, effectiveness and quality of care to guide purchasing decisions and evolve reimbursement mechanisms that support VBR. Value, by definition, is in the eye of the beholder and efforts are underway to better define value from a patient/consumer perspective. This presentation will review the current thinking on VBR, compare the past with the present and the likely future and discuss key metrics that can help providers prepare for and excel in this new environment. Presenter Bio(s): Sue Bunevich is a health care principal with CliftonLarsonAllen, specializing in prospective financial reporting and operational consulting for senior housing providers and other healthcare providers. She guides clients through all of the financial aspects involved in the research, development and construction of new or expansion facilities by first developing strategic plans, annual budgets and multi-year financial projections. Sue prepares short and long term feasibility projections for development or expansion, prior to their submission to credit committees. Additionally, she assists clients in estimating the cost of sales and establishing sale prices for new housing units by performing analyses of construction and development costs. Gregory Hathorne, CPA, CHFP, is a health care principal with CliftonLarsonAllen, specializing in audit and reimbursement services to the health care industry. He has over 15 years of experience as a financial consultant in the health care industry. He has extensive third-party reimbursement experience, including the preparation of Medicare and Medicaid cost reports for nursing homes. Gregg received his Bachelor of Science in finance from the University of South Carolina. He is a Certified Public Accountant in three states, a Certified Healthcare Financial Planner and a member of the AICPA and Florida Institute of CPAs.

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CE Session #49:  Value‐Based Reimbursement Update 

Gregory Hathorne & Sue BunevichAugust 7, 2013

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Reform GPS: Navigating Health Care 

Organizations Toward Value

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“If we wait for the moment when everything is ready, we shall never begin.”

‐‐ Ivan Turgenev 

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Business Case for Change

Key Steps :

1. Understand the market

2. Define your place

3. Create value

4. Demonstrate value

5. Establish role in the continuum

6. Contract

Emerging Business Models

ClinicalQuality

Referral Growth

Revenue Growth

Operating Excellence

Market Position

Customer Satisfaction

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The Foundation: Value‐Based Payment Value Based Payment: “a reform initiative whereby health care providers will receive payment for service based on their performance or the potential outcomes of the service” 

Tying payment to performance is perhaps the most significant aspect of health care reform.

The de facto definition of “value” in health care reform is the intersection of lower cost and improved quality.

Providers who can lower costs and deliver quality will be measured as “value‐based providers”

Lower Cost

Improved Quality

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“Pay‐For‐Performance,” Health Affairs, October 11, 2012http://www.healthaffairs.org/healthpolicybriefs/“Pay‐For‐Performance,” Health Affairs, October 11, 2012; http://www.healthaffairs.org/healthpolicybriefs/

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llen LLPValue Based Purchasing: 

Medicare Value‐Based Purchasing Programs• For Hospitals (FY2013):  Ties a percentage of hospital 

Medicare payment to performance on quality measures for common, high‐cost conditions but not include a readmissions measure. 

• For SNFs and Home Health: The HHS Secretary must submit a plan to Congress by FY2012 for transitioning skilled nursing facilities and home health agencies to a value‐based payment system.  

• For physicians: Beginning by 2015 a budget‐neutral payment system that adjusts Medicare payments for physicians based on the quality and cost of care they deliver will be phased‐in over a two‐year period.   

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llen LLPIP Value‐Based Purchasing Program

• Hospital Value Based Purchasing (VBP):– Program initially funded by 1% reduction in DRG payments, which will be 

redistributed to higher performing hospitals◊ FFY 2014 : 1.25%◊ FFY 2015: 1.50%◊ FFY 2016: 1.75%◊ FFY 2017 & Thereafter: 2.00%

• VBP will apply to the following select conditions (others my be added):– Acute Myocardial Infarction (AMI)

– Heart Failure

– Pneumonia

– Surgeries (as measured by Surgical Care Improvement Project)

– Healthcare Associated Infections

• For discharges beginning in FY2014, and subsequent years, measures must include efficiency measures, including Medicare spending per beneficiary. 

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llen LLPIP Value‐Based Purchasing Program (cont’d)

• VBP Program Summary:– Performance evaluated over two domains, with multiple measures in each 

domain:◊ Clinical Process of Care: 12 Measures◊ Patient Experience of Care from measures reported in HCAHPS 

– Scoring based on “achievement” & “improvement”◊ Points awarded based on achievement scores compared to other hospitals◊ Points also awarded for improvement over prior period

– Scores from domains will be combined into a “Total Performance Score” weighted 70% clinical domain 30% patient satisfaction domain.

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llen LLPIP Value‐Based Purchasing Program (cont’d)

• In FFY 2013 final IPPS rule, CMS outlines policies for calculating a hospital specific “value‐based incentive payment adjustment factor”

• In general, this payment adjustment factor is the result of the following:– VBP Total Performance Score compared to other hospitals nationwide 

results in a “VBP Percentage”.– Multiplied by the 1% withhold from each hospital– Scores of < 1% = decrease in payments (i.e. “Net Funder”)– Scores of > 1% = increase in payments (i.e. “Net Recipient”)

• Range of payment adjustments is 0.9922 to 1.0091, and will be applied to the based DRG operating payment beginning 1/1/13

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llen LLPValue‐Based Purchasing Program (cont’d)

IP VBP Per Discharge Adjustment Formula

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llen LLPPayment Reform Models Focus:

Behavior‐Intensive Diseases w/Deferred ConsequencesMyopia

Hypothyroidism

Psoriasis

Allergies

Multiple Sclerosis

EpilepsyHIV

Depression

Infertility

Chronic Back Pain

GERD Crohn’s Disease

Celiac Disease

Ulcerative Colitis

Sickle Cell Anemia

Type I Diabetes

AsthmaCongestive HeartFailure

Type II DiabetesSchizophrenia

Alzheimer’s

Obesity

Addictions

Bipolar Disorder

Cerebrovascular Disease

Coronary Artery Disease

Parkinson

Cystic Fibrosis

Chronic Hepatitis B

Osteoporosis

HypertensionHyperlipidemia

Motivation to Com

ply With

 Be

st Kno

wn Th

erap

y

Strong:ImmediateConsequences

Weak:DeferredConsequences

Degree to Which Behavior Change is Required

Diseases with deferred consequences

Beha

vior dep

ende

nt diseases

Diseases with Immediate Consequences

Techno

logy Dep

ende

nt Diseases

Source: “The Innovator’s Prescription” by Clayton M. Christensen

ExtensiveMinimal

Crushing costs of caring for chronically ill are in this quadrant: diabetes, 

asthma, tobacco, obesity, CHF, affect tens of millions of people each.

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Early Learnings ‐ Physician Practice Demo

The variances by region will continue even as new payment systems are developed.  The ACO shared savings calculation uses national comparisons for purposes of calculating the savings compared to expected costs which should benefit the low Medicare cost states.

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The Health Systems Vary Significantly

The hospitals operating in Hillsborough County vary in both size and range of services offered.

As hospital inpatient volumes decline providers will be looking for new revenue streams, cost efficiencies and some will merge. 

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llen LLPInnovation Center – Current Demos w/ VBP

There are currently 41 demonstration types underway that include new payment models designed to reduce costs, improve care and speed the implementation of best practices:

– The Medicare Shared Saving including the Pioneer and the Advanced Payment ACO Model

– The Primary Care Incentive Payment 

– Patient‐Centered Medical Home/Independence at Home

– Multi‐payer Advance Practice Primary Care Model 

– Federally Qualified Health Center Advanced Primary Care Practice Demonstration

– The Comprehensive Primary Care Initiative

– Private, for‐profit demo on PACE

– Physician/Hospital Collaboration Demo

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llen LLPBCBSMT Patient Centered Medical Home –

Demonstration Project Overview *• Project Objectives:

– Identify and eliminate “gaps” in care– Reduction of health risk factors and enhancement of quality of life

• Focused Clinical Conditions:– Asthma – Coronary Artery Disease– Hyperlipidemia– Hypertension– Adult/Adolescent/Childhood Immunizations– COPD– Diabetes– Anxiety/Depression– Breast/Cervical/Colorectal Cancer Screenings– Vital & Others

* Source: BCBSMT Presentation at MT HFMA on PCMH Demonstration Project Results Fall, 2011

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llen LLPPatient Centered Medical Home: 

BCBSMT Demonstration Project Incentive Plan*• Structure Incentives Based on Outcomes

– Participation Amount– Quality Outcome Amount– Patient Satisfaction– TCOC Amount– Incentive s for Both Improving & Achieving Targets

• Additional Payment Incentives– $200 PMPY for Care Management of Chronic Conditions– $100 PMPY for Care Management of Preventive Conditions

• Potential Savings– Reduced ER visits– Preventable Admissions & Re‐Admissions– Improved Health Status– Increased Productivity, Employee Morale & Reduced Absenteeism

* Source: BCBSMT Presentation at MT HFMA on PCMH Demonstration Project Results Fall, 2011

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llen LLPPatient Centered Medical Home: 

BCBSMT Demonstration Project Outcomes*

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Evolution of Performance Based Reimbursement

Ortho/CV Episode 

Payments 1990s

Acute Care Episodes  2009

Bundled Payment Demo 2013/2014

Physician Group Practice Demo 

2005

Accountable Care Organizations 

2012

Total Cost of Care Contracting 2011

Each of these payment demonstrations required achievement of performance targets before final pay out could be made.  The metrics continue to evolve.

In addition to performance based payments, hospitals are receiving financial penalties based on patient safety and quality performance.

Shared Savings Payments

Episode Payment Rates

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Bundled Payment Data Demonstrates1. The post‐acute diagnoses and data does not match many providers’ 

assumptions about care delivery.

2. The episode costs for those with a post‐acute stay are expensive.

3. About 50+% of home care episodes do not start with an acute care stay.

4. While the overall re‐hospitalization rate for home care is higher than SNF, for many medicine MS‐DRGs it is comparable.

5. The hand‐offs between post‐acute providers has not been a priority and will grow in importance.

6. The re‐hospitalization are a significant issue for some providers, but they continue to improve.

7. Most applicants for Bundled Payment area appear to be focused on the same MS‐DRGs categories, orthopedic and cardiovascular. 

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llen LLPChanging Health Care Use – One Example 

45,00047,00049,00051,00053,00055,00057,00059,000

Wisconsin Medicare Hospital Admission Rates

Wisconsin is one state that has made significant progress on reducing both admissions and readmissions to acute care.  

Wisconsin was one of the demo states for Value Based Payments in SNF.  The payout was contingent on reducing the total admissions and meeting defined performance measures.

During the demo admissions and readmissions declined allowing substantial payouts.

Source:  WHA, 2012

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Keys to SuccessThese key success factors have not changed:

1. Volume2. Marketshare3. Strong, diverse referral network4. Low cost, high quality provider5. High customer satisfaction6. Strong, positive reputation

New changes:1. New performance metrics2. Specialty services3. Physician engagement and leadership4. Incorporating health preservation and recovery into senior living5. Relationship cultivation6. Negotiation skills

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Current Performance Measurement – Health Plans

1. Medicare Advantage – 50 metrics – 5 Stars – Up to 5% bonus based on:– Customer service on responsiveness– Prevention services and vaccinations– Health outcomes– Complaints, appeals and voluntary disenrollment– Call center patient satisfaction– Managing chronic care

2. Private Health Plans – Negotiated Separately

3. Managed Medicaid – similar to Medicare Advantage – State insurance regulations may define payment options

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ACO Performance Measurement DomainsThe ACO participants are being measured in four domains in order to share in the savings they create:

Domain Measures1. Patient & Caregiver Experience 72. Care Coordination/Patient Safety 63. Preventable Health 84. At‐risk Populations: 12

DiabetesHypertensionIschemic Vascular DiseaseHeart FailureCoronary Artery Disease 

ACOs cannot share revenues with non‐ACO applicant providers until 2014 for Pioneer ACOs and 2017 for Shared Savings ACOs.

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So what to do…..New Data and Information1. Hospital acquired conditions resulting in readmissions are important.

• 90% of readmissions that are Hospital acquired conditions involves mediastinitis, post‐orthopedic surgery infection, or a fall related injury. 

2. Establishing Best Practices and care models become important.• Payments based on clinical performance require common understanding 

and recognition of outliers.• Defining conservative care becomes important.

3. Predictive modeling is in its early stages of development.• Understand the metrics on which payments are set.• Managing by data takes on new meaning.• Monitor best practice compliance.

4. Defining payment and data review schedules.

5. . 

6. So much to do….so little time!

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Implications to Financial Statements

1. Meaningful performance metrics

2. Uniform definition of performance metric

3. Accurate calculation of performance 

4. Estimate of incentive/penalty

5. Timely reporting of data

6. Timely feedback on data from payers

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HFMA has established a taskforce to evaluate the implications of performance measures and value based reimbursement on financial statement reporting. One discussion point has been whether to engage an accrediting body to assess the accuracy of and definition of uniform performance measures..

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llen LLPKey Conclusions & Thoughts..

Reimbursement changes will gradually expand and clinical, operational and financial performance will matter.   Some potential impacts  may include:

1. Performance will determine who is “in”

2. Payers, including risk‐based providers, will differentiate based on performance and costs

3. Value will be “king” – but measured differently across the continuum

4. Integration will lower overall costs, but may increase costs for some providers

5. Mergers and acquisitions will continue to occur

6. New competitors will evolve as the market continues to be                unsettled                                     

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Questions / Discussion

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THANK YOU!Sue Bunevich, CPA, Partner

Sue.Bunevich@cliftonlarsonallen.com

Gregory Hathorne, CPA, PartnerGregory.Hathorne@cliftonlarsonallen.com

For more information on health care reform, go to 

CliftonLarsonAllen’s Health Care Reform Center at:

http://www.cliftonlarsonallen.com/healthreform/

Follow our blog for current discussions on health care.

www.cliftonlarsonallen.com/blog