Pay-for-Performance (P4P) and the Shifting Reimbursement Paradigm

Pay-for-Performance (P4P) and

the Shifting Reimbursement

Paradigm

Speakers

Daniel J. Hettich

2

King & Spalding LLP

Washington, DC James Landman, PhD Healthcare Financial Management Association Westchester, IL Keith Fontenot

Hooper, Lundy & Bookman, PC

The Road to P4P

Evolution of Medicare as a Purchaser

•

Cost reimbursement

–

rewards more services but capped at “reasonable

costs”

•

Prospective payment

–

Flat fee; incentives for efficiency but still rewards

volume

•

And now . . . .

“A majority of Medicare fee-for-service

payments already have a link to quality

or value. Our goal is to have 85% of all

Medicare fee-for-service payments tied

to quality or value by 2016, and 90% by

2018.”

4

Pay for Performance (P4P)

Sylvia Burwell, New England Journal of Medicine (January 26, 2015)

What Should Be the Goal for

Value-Based Payment?

•

Observed: Very uneven movement toward value across

markets today—few provider organizations are

anywhere near the “tipping point”

•

CMS: 90% of traditional FFS Medicare payments tied to

quality or value and 50% of payments tied to

alternative payment models (APMs) by 2018

•

Healthcare Transformation Task Force: 75% of member

organizations’ businesses operating under value-based

payment arrangements by 2020

•

Catalyst for Payment Reform: 20% of payments

proven

Comprehensive Care for Joint Replacement (CJR):

CMS’s Bundled Payments for Hip and Knee

•

On April 1, 2016 (not Jan. 1, 2016 as proposed), bundled

payments for one of the most common Medicare

procedures, hip and knee replacement surgeries, will

become mandatory for hospitals in 67 metropolitan

statistical areas (not 75 as proposed) under the

Comprehensive Care for Joint Replacement (“CJR”)

program

•

Hospitals in those geographic regions performing at least

400 eligible LEJR cases between July 2013 and June 2014

would be required to participate in the proposed

five-year model.

•

CMS received over 400 comments on its proposed rule.

CMS’s Bundled Payments for Hip and Knee

•

Hospital performing the LEJR accountable for the

“episode” of care, which would begin at the time of

surgery and end 90 days later.

•

Every year during the five performance years of the

CCJR Model, Medicare episode prices would be set

for LEJR procedures at each participating hospital.

•

Only hospitals held financially accountable yet CMS

stated that hospital payment makes up only about

50% of the total 90-day episode of care payment

CMS’s Bundled Payments for Hip and Knee

•

Normal payments (PPS, etc.) throughout the year but

true-up at the end of the year.

•

Bonus/Penalty = the difference between the target

price and actual episode spending, up to a specified

cap.

– First year, only upside. Penalties phase-in over years 2-5. – CMS anticipates net gain to program.

– Large variation in the quality and cost of care for hip and

knee replacements

CMS’s Bundled Payments for Hip and Knee

•

In addition to keeping their 90-day costs per episode

down, hospitals will also need to meet 3 quality

performance measures to receive reconciliation

payments:

– Hospital-Level Risk-Standardized Complication Rate Following

Procedure;

– Hospital-Level 30-day, All-Cause Risk-Standardized Readmission Rate

(Following Procedure; and

– Hospital Consumer Assessment of Healthcare Providers and Systems

(HCAHPS) Survey results.

CJR the Start, Then What?

• First step. Phase 2: “the Secretary may, through rulemaking,

expand (including implementation on a nationwide basis)…” Section 1115A

• 400k beneficiaries a year, $7b hospital, $6b post acute. Hospitals

look to economize in PAC. More alliances.

• CMS will look to expand concept – CABG next?

• How much opportunity overall? Hips and knees costs range from

$16k to $33k nationally, small number of expensive cases.

• Quality measure issue; more stop loss for smaller. • Bundles may have limited impact on volume.

• Beneficiary “steering” via copays etc.? More robust education?

10

CJR Proposed Rule: HFMA’s Concerns

where your opportunities are, and you don’t know who to partner with.”

• Bundle pricing • Access to data:

– Post-acute care “blind spots” – Timeliness

– Exclusion of data related to substance abuse – Beneficiary “opt outs” on data sharing

• Volume Thresholds

• Risk adjustment (including socio-economic factors) • Administrative complexity

• Uneven distribution of risk across providers; little opportunity for

Other CJR Questions

•

Impact of bundled payments on the total cost

of care:

–

Provide price “certainty,” but little impact on

utilization

–

Limited number of procedures that can be

bundled?

•

Industry consolidation

–

If hospitals/health systems are identified as sole

ACA Accelerates Shifts to P4P

Next Phase in Policy/Payment

•

Historical Fee For Service Payment Structure

–

Promoted volume over value. Medicare

established on traditional BCBS payment

structure

–

1983 IPPS; 1990s brought more .

•

Movement towards quality & performance

metrics

–

2003 MMA began reporting and incentivizing

quality, now a component of all payment

systems

•

Movement towards Alternative Payment Models

(APMs) & Episode- Based Payment

–

ACA, MACRA.

Next Phase in Policy/Payment (cont)

• Changes in physician reimbursement will reinforce and

accelerate the transition from volume to pay-for-quality. Hospitals that employ physicians or own

practices will need to adapt.

• The disparate measures in hospital area are ripe for

some consolidation/harmonization. Proliferation of metrics and weighting.

• Permanent MB reductions narrow options – more value

based payment, etc. likely.

• Quality measure development may require governance

changes.

• Dynamics of VBID and narrow networks.

• Expect to see more VBID, including beneficiary

incentives, in MA and potentially exchanges. 15

VBP -- Concept of Program

– Funded through reductions in base operating DRG per

discharge payment reductions

• 1.5% in FY2015 up to 2% in FY2017 & forward

• Redistribute the pool among PPS hospitals based on their

performance on certain quality measures

– as compared to other hospitals

– as compared to each hospital’s prior performance • Over $1 billion per year redistributed

• Rather than establishing a “floor,” performance is comparative

so creates a “race to the top” 16

How Will Hospitals Be Evaluated?

Improvement vs. Achievement

17

What Is Being Measured?

• Quality Measures divided into differently weighted buckets or

“domains”

• Domains re-structured for 2017:

• The clinical process domain completely eliminated for 2018

19

Threshold v. Benchmark

20

New VBP Measures Coming Soon?

•

A measure results must be posted on IQR 1-year prior to

incorporation into VBP program

•

New measures for 2016 IQR program include Stroke and

COPD 30-day mortality rates (COPD already part of

Readmission program)

•

New measures for 2017 IQR program include 1) episode

of care payment measures for pneumonia and heart

failure, and 2) mortality measures for Coronary artery

bybass graft (CABG) (CABG already part of Readmission

program)

21

•

CMS added seven new measures to the 2018 IQR

Program

•

Four episode-based payment measures:

– Kidney/UTI; Cellulitis; Gastrointestinal Hemorrhage; primary

elective THA/TKA (90-day claims-based) (CJR déjà vu?)

•

Two “excess days” measures:

– Excess Days in Acute Care after Hospitalization for Acute

Myocardial Infarction (claims-based); and Excess Days in Acute Care after Hospitalization for Heart Failure (claims-based)

22

Hospital-Acquired Condition (HAC) Reduction

Program

•

Hospitals in the top 25% nationally for incidents

of certain hospital-acquired conditions will have

their PPS payments reduced by 1% beginning

with 2015 discharges.

•

Amount of payment is determined after the

application of the payment adjustment under

the Hospital Readmissions Reduction Program

and the VBP program.

HAC -- Measures and Domain

• Domain 1, Agency for Healthcare Research and Quality's (AHRQ)

PSI-90 composite measure

• Domain 2, CDC chart-abstracted hospital acquired infection (HAI)

measures

• Originally, Domain 1 weighted at 35% and Domain 2 at 65%.

• For FY 2017, Domain 1 weighted 15% and Domain 2 (infection)

85%

• For 2018, med/surg wards added to ICU locations for the

CLABSI and CAUTI infection measures

• If a hospital’s Total HAC score is in the top 25% of nation, 1%

payment cut.

VBP and HACs: HFMA’s Concerns

• Continuing concern over dearth of socio-economic factors

used in risk adjustment and impact on safety net hospitals s

• Overlapping measures between VBP and HAC present

“double jeopardy” concerns

• HCAHPS weighting:

– Variations by acuity level and geographical region

– Uncertain correlation between patient satisfaction and quality

of outcomes/patient safety

• Efficiency metric: penalizing hospitals for spending they do

not fully control?

– HPSA correlation?

IT’S NOT JUST HOSPITALS:

MIPS AS THE SGR FIX

MIPS, the SGR Fix

•

Medicare Access and CHIP Reauthorization Act of 2015

(“MACRA”), Pub. L. 114-10 (signed Apr. 16, 2015)

repealed SGR cuts with fixed MPFS rate increases

through 2019

•

For the period 2015-2019 there will be modest annual

rate increases of 0.5%.

•

As of 2020, no annual increase

•

Instead, physicians may have the possibility to increase

payments either by participating in the Merit-based

Incentive Payment (MIPS) program or the Alternative

Payment Model (APM) program but also risk penalties

Alternative Payment Models (APMs)

28

• An APM generally requires participation in an entity that

assumes meaningful financial risk, uses electronic health

records, and uses quality measures such as ACOs and bundled payments

• Physicians who participate in APMs will receive a 5% bonus

annually during 2019-2024.

• Criteria become more stringent over time:

– 2019-2010 -- 25% or more of a physician’s Medicare revenue

must come through an APM entity

– 2021 and 2022-- 50% Medicare threshold or 25% from

Medicare APM entities and 50% from non-Medicare APM entities.

– 2023 and later -- 75% Medicare threshold or 75% from a

MIPS Summary

• Instead of APMs, physicians can participate in the Merit-Based Incentive

Payment System (MIPS)

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MIPS Summary MIPS Performance Category _Weights

• Sunsets current Meaningful Use, Value-Based Modifier, and Physician Quality Reporting System (PQRS) penalties at the end of 2018, rolling requirements into a single program

• Adjusts Medicare payments based on performance on a single budget-neutral payment beginning in 2019

• Applies to physicians, NPs, clinical nurse specialists, physician assistants, and certified RN anesthetists

• Includes improvement incentives for quality and resource use categories

1) Resource Use measures would be weighted less during first two years of MIPS program, reaching 30 percent in the third year of the program. Quality measures would be weighted more than 30 percent during the first two years to make up the difference.

Source: The Medicare Access and CHIP Reauthorization Act of 2015;

MACRA: MIPS

• Each physician will be assigned a composite MIPS score based on

the four components on a scale of 0-100

• CMS will establish a performance threshold, which will be the

mean or median of the scores for all MIPS physicians during the prior period.

• Physicians who score at the threshold have no MIPS adjustment,

above the threshold, bonuses; and below the threshold, penalties

• Generally, bonuses and penalties will be capped at 4% in 2019,

increasing in steps to 9% by 2022 and beyond.

• Results will be published and patients can vote with their feet!

MACRA: MIPS

•

Bonuses and penalties must offset to achieve budget

neutrality (except for $500 mill. exceptional

performance bonus pool).

•

$500 million is reserved for “exceptional

performance” such that MIPS will not be a zero sum

game but there will be winners and losers since

payment reductions will fund payment increases.

•

Each year is a fresh start

MACRA Headlines and Issues

updates through next ten years.

• Transitions Medicare payment away from a

volume-based system toward payment for value of services.

• Headlines focused on stable updates – the bigger

story is what happens next and the administrative role in implementation.

• Implications well beyond physicians.

• Approval of APM through process yet to be

determined or through CMMI development.

• APMs will include some level of quality & performance

Issues

• Is MIPS a death spiral? Budget neutrality, linearity –

playing field tilted to APMs.

• Enormous delegation of authority. Some boundaries,

but too complex to legislate.

• Technology isn’t there yet on many of these issues:

the availability of alternative payment models is fairly limited.

• Capacity of CMS in time of limited resources and

ambitious time-frames.

• Are the deadlines/expectations realistic? • MACRA implications for other payors, MA. • What is an APM? MA count? Managed Care? • If providers move to APMs, does medical home

Summary of Two Tracks Post SGR

Providers Must Choose Enhanced FFS1 or Accountable Care Options

34

Source: The Medicare Access and CHIP Reauthorization Act of 2015;

Advisory Board analysis. 1. Fee for service.

2. Positive adjustments for professionals with scores above the benchmark may be scaled by a factor of up to 3 times the negative adjustment limit to ensure budget neutrality. In addition, top performers may earn additional adjustments of up to 10 percent.

3. APM participants who are close to but fall short of APM bonus requirements will not qualify for bonus but can report MIPS measures and receive incentives or can decline to participate in MIPS.

Compliance Pitfalls

• The Patient Inducement Statute: “Arrangements whereby [a

provider] offers beneficiaries a non-covered item or service free of charge implicate the fraud and abuse laws and must be closely scrutinized.” OIG Adv. Op. 06-20 at 5 (Nov. 1, 2006)

• Incentive to Limit Services: “[O]ne Quality Target requires a

prophylactic antibiotic to be administered prior to select surgeries and to be discontinued within specified times. If adherence to this standard results in physicians discontinuing prophylactic antibiotics sooner than would be their practice in the absence of the Proposed Arrangement, then a limitation of items or services would occur” and Civil Monetary

Penalties may attach. See OIG Adv. Op 08-16. 35

MACRA Helps Out

•

MACRA, however, introduced common-sense exception

to inducements to physicians (§ 512):

–

Eliminates civil monetary penalties (CMPs) for

inducements to physicians to limit services that are

not medically necessary

• Applies to payments made on or after Apr. 16, 2015

• N.B. AKS and Stark still apply

–

Requires HHS OIG to report to Congress by April 16,

2016 on options to permit gainsharing arrangements

between physicians and hospitals that improve care

while reducing waste and increasing efficiency

Improved Alignment, But Much to Be

Resolved

•

Potential for easier alignment of physician &

health system goals around value-based

payment and care delivery

•

Devil will be in details:

–

Are there meaningful quality metrics across

specialties

–

Do APMs offer adequate opportunities for all

clinicians?

–

What do incentives to participate in APMs mean

Evolve or Become Extinct?

•

As the paradigm for healthcare

reimbursement shifts, the paradigm for

healthcare delivery must also shift.

“It is not the strongest of the species that survives, nor

the most intelligent that survives. It is the one that is most adaptable to change.”

Charles Darwin