Prospective vs. Retrospective Target budget for each episode Will - - PDF document

Episode‐Based Payment: Are You Ready For Medicare’s Next Wave of Provider Payment Reform?

Robert Mechanic, MBA Brandeis University The Estes Park Institute February 27, 2012

Fee‐For Service

Payer

Hospital Specialist Surgeon

$ $ $ $ $

Internist Post Acute

Bundled Payment

Hospital or Integrated Network

$$$ Single payment to cover costs of episode of care (30, 60, 90 days)

Payer

$ $ $ $ $

Group is responsible for all care within the episode

Shared Accountability

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30 - 90 day look-forward

Index Hospitalization Inpatient Professional

Outpatient Professional Professional services Inpatient Stays

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Readmission SNF

Bundled Payment

Prospective vs. Retrospective

• Target budget for each

episode

• All providers paid FFS
• Periodic CMS settlements

– Distribute surplus – Reclaim deficit

• Health system can decide

– Whom to contract with – How to distribute bonuses

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Hospital or Integrated Network

$$$

$ $ $ $ $

Will Bundled Payment Really Be .….

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Could Bundled Payments Become the Next DRG System?

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1991 ………. 2008 2013 2009 201 1

Geisinger Provencare Prometheus Payment

IHA Commercial Bundled Pmt Project CA

Medicare ACE Demo CMS Innovation Center Bundled Payment Pilots

CMS National Payment Bundling Pilot

201 2 2010

CMS Heart Bypass Demonstration

This NEW‐NEW Thing is Actually Old

2007

CMS Innovation Center: Bundled Payment Pilot

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CMMI Bundled Payment Pilot

• More flexible than prior programs

– Four models – Prospective and retrospective options – Applicants define bundles

• Physician gain sharing allowed up to 50% of

Medicare fee schedule

• CMS encourages groups to apply

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Calculating Payments Under Medicare BP Pilot

2008 ‐ 09 Historical Cost Per Episode Target Price 2013 BPLN

Episode Definitions Risk Adjustment

CMS Discount*

$12,200 $13,320

Update Factor*

* For illustration update = 3%/yr discount = 3% 11

Calculating Payments Under Medicare BP Pilot

2008 ‐ 09 Historical Cost Per Episode Target Price 2013 BPLN

Episode Definitions Risk Adjustment

Actual FFS Cost

CMS Discount*

$12,200 $13,320 $12,900

Update Factor*

* For illustration update = 3%/yr discount = 3% 12

Calculating Payments Under Medicare BP Pilot

2008 ‐ 09 Historical Cost Per Episode Target Price 2013 BPLN

Episode Definitions Risk Adjustment

Actual FFS Cost Settlement

CMS Discount*

$12,200 $13,320 $12,900 $420

Update Factor*

* For illustration update = 3%/yr discount = 3% 13

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Nov 4, 2011 Feb 28, 2012 April 30, 2012

Expected Start Date LOI and Research Request

Jan 1, 2013

Expect Data Available Application Due

CMMI Bundled Payment Pilot

Design Bundles Model Finances Engage Medical Staff

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Index Hospitalization Inpatient Professional

Outpatient Professional Professional services Inpatient Stays

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Readmission SNF

CMMI Bundled Payment Pilot

Model 1*

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30 - 90 day look-forward

Index Hospitalization Inpatient Professional

Outpatient Professional Professional services Inpatient Stays

Brandeis University

Readmission SNF

CMMI Bundled Payment Pilot

Model 2*

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30 day look-forward

Index Hospitalization Inpatient Professional

Outpatient Professional Professional services Inpatient Stays

Brandeis University

Readmission SNF

CMMI Bundled Payment Pilot

Model 3*

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Index Hospitalization Inpatient Professional

Outpatient Professional Professional services Inpatient Stays

Brandeis University

Readmission SNF

CMMI Bundled Payment Pilot

Model 4: Prospective Pmt*

The asterix*

CMS will monitor and measure care provided during a post‐episode monitoring period to ensure that aggregate Medicare Part A and Part B spending for included beneficiaries does not increase. Aggregate expenditures for included beneficiaries during the episode and post‐episode monitoring period will be compared to a historical baseline payment trended forward which will include a risk

• threshold. If spending exceeds the risk threshold,

the awardee must pay Medicare for the excess.

Should you do this?

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Projected Growth in Per Capita Medicare Spending above GDP

Period Excess Rate

• f Spending

Growth 1980 ‐ 2007 2.2% 1990 – 2007 1.6% 2012 ‐ 2021 ‐0.4% 2020 ‐ 2021 0.8%

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Source: Chernew et al., NEJM, October 6, 2011 based on CBO June 2011 budget outlook

Why Episodes?

• Allows providers to proceed incrementally
• Can (should) be based on clinical guidelines
• Patient‐focused
• Encourages (or requires) participation by

specialists

• Incentives for improved efficiency and care

coordination across settings

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Why Episodes?

• New margin opportunity in a time of

declining FFS reimbursement

• A chance to learn/prepare

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Average Risk‐Adjusted Spending for Medicare Admission Plus 30 days Post Discharge

Service Low Average High Percent Dollars Total episode $7,757 $9,278 $11,019 42.0% $3,262 Hospital 4,837 4,826 4,824 0.0% (13) Physician 612 647 650 6.9% 38 Readmission 1,102 1,986 2,965 169.0% 1,863 Post-acute 842 1,378 2,041 142.0% 1,199 Other 363 441 539 48.5% 176

Congestive Heart Failure

Comparing Hospitals in the Low and High Resource Use Quartiles

Note: Spending for each service is based on national Medicare standardized payment rates excluding spending for teaching and DSH and geographic payment adjustments for input price differences

Source: MedPAC, June 2008

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Total costs per episode split between Typical and Complications

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 Total Costs in Dollars

Medicare Study Sample: Jan 2008 - July 2010.

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Opportunities to Improve Margins

Primary

• Reduce supply costs (e.g. implants)
• Reduce errors and complications
• Reduce post‐acute care costs

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Conditional (dependent on backfill)

• Reduce readmissions
• Reduce length of stay
• Increase throughput

Impact of operating improvements on other business lines

Financial Results

June 2009‐December 2010

Volume

≈1,985 Patients

Hospital Savings

>$4.3 Million

Shared Savings to Shared Savings to Patients

$646K

y Gainshare to Physicians

$558K Medicare ACE Demonstration: Baptist Health System (San Antonio TX)

Challenges

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HAZEL

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“Revolution” or “Run‐Around”

• Can the industry agree on standards?
• Can we move from easy to hard

episodes?

• Can new systems promote clinical

improvement while limiting gaming?

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• Can providers re‐engineer processes

‐ Clinical, Administrative, Social?