PREPARING FOR VALUE BASED PAYMENT:
Financial Considerations
Presented by: Peter R. Epp, CPA
O v e r v i e w
Payment Reform Initiatives
–
Medicare
–
Medicaid
Overview of Value-Based Purchasing – “Patient-Centeredness”
–
Managing the Cost per Patient – In-House Services
–
Global Payments/Budgets
Transitioning to Tomorrow
M e d i c a r e ’ s P a y m e n t R e f o r m
G o a l s
On January 26, 2015, DHHS announced its goals and timeline for shifting Medicare reimbursement from volume to value
Goal for shifting Medicare fee-for-service reimbursement to alternative payment models (e.g. ACOs and/or bundled payment models)
– 30% by 2016
– 50% by 2018
Additional goal of tying traditional Medicare payments (fee-for-service) to quality and value (e.g. Hospital Value Based Purchasing and Hospital Readmissions Reduction programs)
– 85% by 2016
– 90% by 2018
DHHS will also intensify its work with states and private payers to support adoption of alternative payment models, attempting to exceed the
M e d i c a r e ’ s P a y m e n t R e f o r m
G o a l s
Fee-for-service linked to quality = Categories 2 though 4
Alternative Payment Models = Categories 3 and 4
N e w Y o r k S t a t e - D S R I P a n d V a l u e
B a s e d P a y m e n t R o a d m a p
• DSRIP is a 5-year incentive payment program to be paid “in addition to”
the Medicaid program to assist providers with transforming to a high-performing healthcare delivery system
• During the DSRIP project period (April 1, 2015 – March 31, 2020), the
Medicaid program will be transitioning to value-based payment
• When we wake-up on April 1, 2020, the Medicaid program will be
reformed to include integrated Performing Provider Systems with:
‒ 100% Medicaid managed care AND
V B P A r r a n g e m e n t s – “ T h e 3
-L e g g e d S t o o l ”
VBP arrangements contain a hybrid of several different payment models to incentivize and tie together desired behaviors
The key components of VBP arrangements include:
− Base Compensation Models
• Fee-for-service
• Partial capitation
• Care management PMPM
− Quality Incentive Payments
− Global Payments/Budgets • Surplus-sharing/Risk-sharing • Global capitation 6 VBP Arrangements Qual ity Inc ent iv e Pay m ent s
E l e m e n t s o f a V a l u e - B a s e d
P a y m e n t M o d e l
An ACO manages the total cost of care (global budget) for patients
attributed to the ACO
Beneficiaries are assigned to an ACO based on a specified attribution
algorithm
MCO pays providers within the ACO for services provided and
monitors the global budget.
MCOs pay providers for specific services (Base Compensation)
– Fee-for-service versus partial capitation
– PMPM case management fee
Providers may also be eligible for quality incentive payments
Surplus-sharing/Risk-sharing arrangements:
– Surpluses/losses shared amongst providers based on an algorithm established by the governing body
– Amount of surpluses/losses shared are often impacted by performance against specified performance metrics!
S u m m a r y – V B P A r r a n g e m e n t s
Success in VBP arrangements requires:
– Knowledge of the payment mechanisms that drive each component of these arrangements
– Development of new workflows and reporting
The key components of VBP arrangements include:
− Base Compensation Models
• Fee-for-service
• Partial capitation
• Care management PMPM
− Quality Incentive Payments
− Global Payments/Budgets
• Surplus-sharing/Risk-sharing
• Global capitation
B a s e C o m p e n s a t i o n P a y m e n t
M o d e l s ( I n - H o u s e S e r v i c e s )
As VBP arrangements evolve, payments to FQHCs will change away
from the traditional “per visit” model
Payment will be moving towards quality outcomes and
patient-centeredness
As such, the financial model and mindset must change!
– Budgeting– Financial reporting
– Operations/Clinical
Revenue/Cost
M a n a g i n g t h e C o s t P e r P a t i e n t
( I n - H o u s e S e r v i c e s )
Financial Performance per Patient
10
` Patient A Patient B
Revenue Per Member Per Year:
Fee-for-service
Capitation
Care Management Fee Quality Incentive Payments
$ 300 $ 300
Cost Per Member Per Year (PMPY)
$ 250 $ 375
Financial Success $ 50 $ (75)
To d a y - I m p r o v i n g E f f i c i e n c i e s
A n d R e d u c i n g T h e C o s t P e r V i s i t
All-inclusive cost per visit analysis
−
The following variables impact the all-inclusive cost per visit and
must be managed to improve financial performance:
• Salary levels and staffing mix
• Support staff ratios (direct care versus patient support)
• Amount of enabling and ancillary services
• Administrative/overhead infrastructure
• Provider productivity/clinician capacity
Center’s will continue to monitor/manage these cost/operating metrics
as they move to Value Based Payment!
$ 1,542,100
⁼
$ 154.21 per visit 10,000 visitsTo d a y – E v a l u a t i n g C o s t P e r
P a t i e n t
12
Service Description
Patient
Utilization Unit Cost
Annual Cost per Patient
Primary Care 3 visits PMPY $175 per visit $ 525 Behavioral Health Care 1 visit PMPY $100 per visit 100 Care Management (PCMH) 1 patient $75 per patient 75
Total Direct Care 700
Administration/HIT 20% of direct 140
Total Cost PMPY $ 840
Total Cost PMPM $ 70
Simple Cost PMPM Calculation – Per Visit per Patient Basis:
This example highlights the importance of understanding patient utilization of services on a high level!
The analysis would be further enhanced if utilization and cost were analyzed on a per procedure basis (use of a cost-based charge structure)!
Utilization varies by health condition of
To m o r r o w – E v a l u a t i n g C o s t
P e r P a t i e n t
Service Description
Patient Utilization
Unit Cost (per procedure RVU) Annual Cost per Patient Primary Care: Office Visits 3.00 $ 150 $ 450 Immunizations 1.00 10 10 Medical Nutrition 2.00 60 120
Behavioral Health Care:
Individual psychotherapy 1.00 100 100
Group psychotherapy 2.00 50 100
PCMH Services:
Case management 4.00 10 40
Total Direct Care 820
Administration/HIT 20% of direct 164
Total Cost PMPY $984
Total Cost PMPM $ 82
Complex Cost PMPM Calculation – Per Procedure per Patient Basis:
Cost-Based Charge Structure
E v a l u a t i n g C a r e M a n a g e m e n t
F e e A r r a n g e m e n t s
Financial success with care management PMPM payments requires
understanding care management costs PMPM
Key financial metrics
− Care manager capacity (productivity)
− Patient utilization
Productivity: Patient Utilization:
# of service units/FTE # of service units/patient/year
(e.g. 2,400/FTE) (e.g. 12/patient/year)
Panel Size = 200 patients/FTE
If the personnel cost of a care manager is $75,000 and requires
annual HIT support of $10,000, what is the cost PMPM?
− $35 PMPM ($85,000 annual cost ÷ 2,400 member months)
− What happens to the cost PMPM if patient utilization increases?
S u c c e s s i n V B P A r r a n g e m e n t s
f o r I n - H o u s e S e r v i c e s
As Centers move away from fee-for-service payment arrangements to
VBP, patient-centered care, the drivers of success expand:
− Proper coding of services provided required for appropriate risk-stratification of patients
− Managing provider productivity impacts panel size and thereby revenue
− Managing the cost per patient
• Improving cost efficiencies (per visit or per unit)
• Monitoring clinical staff capacity and panel sizes
• Managing patient utilization and health condition
– Actuarial mix of patients including cost and utilization patterns
– Unusual utilization patterns and drilling down to the patient level and identifying high utilizers of services
G l o b a l P a y m e n t / B u d g e t s – K e y
C o n s i d e r a t i o n s
Key items which impact success:
Panel formation
– Enrollees– Attribution
Development of overall budget
– Utilization assumption based (bottom up) – “Paid Claims”
– Historic baseline or revenue based (top down) – “Medical Loss Ratio”
Protections against outliers
– Stop Loss– Carve-Outs
P a t i e n t A t t r i b u t i o n
In a fee-for-service demo where patients retain freedom of choice,
the payer assigns beneficiaries to ACOs based on their specific
attribution algorithm
– Usually beneficiaries are assigned to an ACO if the beneficiary receives the plurality of his or her primary care services from primary care physicians within the ACO
– Attribution models will also include specific look-back periods for claims data to make attribution decisions
– Attribution models may also include a 2-step processes in which beneficiaries are first assigned to specific sub-populations, and then attributed based on specific attribution algorithms
In a mandatory managed care environment, the beneficiary is generally attributed to their assigned Primary Care Provider
ACO participants that bill for primary care services are generally required to be exclusive to an ACO for a specific payer
B u d g e t / B e n c h m a r k S e t t i n g
Setting a “Budget Target” – Bottom Up Approach:
Service Description
Expected
Utilization Unit Cost
Cost Per Patient Per Year
Inpatient Care 1 $3,000 per discharge $ 3,000 Emergency Services 1 $500 per visit 500 Specialty Care 2 $150 per visit 300 Primary Care* 3 $125 per visit 375 Behavioral Health Care* 1 $100 per visit 100
Laboratory 8 $25 per lab test 200
Radiology 2 $100 per xray 200
Pharmacy 12 $25 per script 300
PCMH Services* 170
Administration/HIT 855
S u r p l u s / R i s k - S h a r i n g – K e y
C o n s i d e r a t i o n s
Keys to Success
Monitor the cost and utilization of services provided by other
providers:
– Analyze total cost PMPM by actuarial class
– Cost per unit (visit or procedure)
– Utilization trends
– Identify high cost patients
– Identify high utilizers of services
– Analyze high cost providers (unit cost)
– Further analyze by health condition
– Ensure quality measures are met
Health information exchange systems
Quality partners have been identified and arrangements executed
Informatics and data reporting systems to manage all services
provided to the patient
U s i n g T h i r d - P a r t y C l a i m s D a t a
Analyze the high cost and high utilizing members
Combine Claims data files
–
Determine the Total Cost of Care by patient and PMPM
–
Determine Total Cost of Care for patients with like conditions
(e.g., all diabetic patients regardless of comorbidities)
Stratify the high cost/high utilizing members and develop
plans to better manage care and reduce the Total Spend
–
Clinical interventions to manage utilization
–
Outreach efforts/patient engagement
–
Specialty referral practices and high cost specialists
Link to EHR/PMS, ED Use and High Risk Member Reports
U s i n g T h i r d - P a r t y C l a i m s D a t a
I s Y o u r C e n t e r P r e p a r e d f o r
V B P ?
Excerpt – “NACHC Payment Reform Readiness Assessment Tool”
QUESTION
27. The health center has identified the up-front costs of participation in the proposed payment model.
28. The health center is able to track system-level utilization and cost data for its patients.
29. The health center has analyzed how payment timing and
methodology for a proposed payment reform model relates to health center revenue cycle management needs.
30. The health center has experience and capacity to manage performance-based contracts.
31. The health center has secured appropriate legal and compliance expertise for payment reform activities.
32. The health center has developed a business case for linking reimbursement to utilization and social complexity of health center patients and health center cost structure.
33. The health center has analyzed its ability to engage in risk-based contracts.
34. The health center has an established strategy for coordination of performance-based incentives and payment reform strategies across payer types.
35. The health center has analyzed the relationship between payment reform models and health center PPS or alternate payment methodology (APM) payment for Medicaid.
36. The health center has developed internal payment incentives based on quality and patient outcomes rather than volume. 37. The health center is leveraging all the available state and local
assistance and funding to support payment reform and service delivery transformation efforts.
P r e p a r i n g F i n a n c i a l
M a n a g e m e n t S y s t e m s f o r V B P
Cost Efficiency of Current Operations
In preparation for VBP, centers need to ensure that services
currently provided in-house are provided efficiently as well as
with high quality
Efficiency is attained through the management of –
–
Actual cost of providing services
–
Clinician productivity (coupled with quality)
Historically, centers have monitored the cost per visit of
providing services; this measurement needs to move down to a
per procedure basis
Coding is also critical to improving efficiency and quality
P r e p a r i n g F i n a n c i a l
M a n a g e m e n t S y s t e m s f o r V B P
Cost Efficiency of Current Operations
What should a health center do today?
– Monitor/manage provider productivity levels
• Move from a “per visit” basis to a “per procedure” basis
• Regularly review provider productivity reports with clinical leadership
– Monitor/manage productivity/capacity levels of non-provider staff
– Improve cost efficiencies and reduce the current cost of care per unit
• Concentrate efforts on reducing the current cost of care (move from a “per visit” to a “per procedure” basis)
• Aside from productivity, identify other areas for improvement (e.g. support staff ratios, panel sizes)
– Refine and utilize your “cost-based charge structure” as a unit costing system
• Begin to capture services for non-CPT codable services (e.g. social determinants of health)
P r e p a r i n g F i n a n c i a l
M a n a g e m e n t S y s t e m s f o r V B P
Financial Analysis of Patient Centered Care
•
Success under VBP requires a financial system that provides
financial and operational data to understand the underlying cost
of a patient and linked to their clinical conditions
•
For services provided in-house –
–
Coding of services is imperative as costs need to be captured and
measured at the per procedure basis
–
Managing the utilization of services provided per patient is the
second variable in understanding the cost per patient
•
VBP will also require centers to take on the management of
care outside of its 4 walls
•
These analysis will require new capabilities and systems
P r e p a r i n g F i n a n c i a l
M a n a g e m e n t S y s t e m s f o r V B P
Financial Analysis of Patient Centered Care
What should a health center do today?
– Further enhance coding accuracy of providers
• Coding training during orientation with annual updates
• Monitor coding practices and address anomalies
• Consider hiring of HIM professionals certified coders
– Move to managing the total cost per patient for in-house services
• Manage/monitor utilization of services
• Move from a “per visit” to a “per procedure” analysis
• Consider non-CPT codable services
– Manage quality metrics that drive incentive payments
• Document/catalog metrics which drive quality incentive payments
• Design reports to manage/monitor metrics; understand data elements
• Review quality incentive payment programs and metrics with clinical
leadership on a regular basis and implement clinical interventions to improve outcomes
P r e p a r i n g F i n a n c i a l
M a n a g e m e n t S y s t e m s f o r V B P
Financial Analysis of Patient Centered Care (continued)
What should a health center do today?
– Actively engage with the management of the total cost of care of assigned patients/members
– Consider participation in shared-savings arrangements
– Demand claims data from third party payers!
• Monthly Data Reports
– Member Enrollment Roster
– Member Emergency Room Utilization and Cost
– Member Inpatient Utilization and Cost
– High Risk Identification List (Top 10% High Risk Members)
• Recent Claims Data
– Outpatient Medical Claims
– Outpatient Behavioral Health Claims
– Pharmacy Claims
– Inpatient Claims
P r e p a r i n g F i n a n c i a l
M a n a g e m e n t S y s t e m s f o r V B P
Financial Health
•
VBP brings with it many unknowns to the financial well-being of
health centers
•
Prior to participation in VBP, centers need to ensure that their
financial house is in order –
–
Financial condition and reserves
–
Operational financial performance under today’s financing
mechanisms
H e a l t h C e n t e r S u c c e s s i n V B P
A r r a n g e m e n t s
30 Managing the Visit Managing the Patient In-HouseFee-For-Service Partial Capitation Global Budgets
Overall Patient Utilization High Value Providers
Patient Utilization Quality Metrics
Panel Sizes Quality Metrics Effective Coding Cost Efficiencies Managing the Patient Total Cost
C h a n g i n g R o l e o f t h e C F O &
F i n a n c e F u n c t i o n
Additional roles/functionality of the future
–
Connecting with clinical leadership:
• Understand metrics/outcome measures that drive incentive payments
• Managing patient utilization both in-house as well as out-house
–
Better understanding of the health center’s patient base to impact
attribution
• Patient satisfaction
• Primary care and preventive services coding
C h a n g i n g R o l e o f t h e C F O &
F i n a n c e F u n c t i o n
Additional roles/functionality of the future
–
Emphasis on cost accounting and unit-costing
• Analyze/drive cost efficiencies
• Need to develop a new internal budget model centered around patients – in-house versus out-house
–
Heightened involvement with collaborations and strategic planning
• Documenting value• Understanding funds flow
–
Risk management – managing risk-sharing arrangements
–
New required skill sets/functionality
• Care management/coordination• Clinical informatics
• Business intelligence solutions
S u c c e s s f u l T r a n s i t i o n t o T o m o r r o w
C O N T A C T I N F O R M A T I O N
Peter R. Epp, CPA, Partner
Practice Leader – Community Health Centers
CohnReznick LLP
646.254.7411
Peter.Epp@CohnReznick.com
HMA
HealthManagement.com
Preparing for Value-based Payment:
Clinical Considerations
Art Jones, MD
AccountableCareInstitute.com
Hypothesis: Successful FQHC Transition to
Accountable Care Requires
2
1. Patient Centered Medical Homes
2. Clinical and Financial Integration (with shared governance and
decision authority) with reform minded partners
3. Data analytics and connectivity real time
4. Targeted, innovative model for the full continuum of care 5. Multi-payer outcomes based payment
6. Patient engagement/wellness programs
Clinical Focus
•
Improving transitions of care
•
Care Management of high risk patients
•
Behavioral and physical health integration
•
Reducing low value medical practices
•
Performance on Quality Parameters
AccountableCareInstitute.com
High Value, Consumer-facing
Practice Transformation
•
Team-based care with non-billable providers
•
Enhanced access to primary care
– Urgent care center level of access – Expanded hours
– Nurse triage
– Phone consultation
– Management over the patient portal
•
E-consults for specialty care
•
Structured care management at the PCP practice level
informed by analytics fed by multiple data sources
including real time hospital ADT alerts and impactable
social risk factors
•
Home and nursing facility visits
•
Telemedicine
Distinct Provider Types
Social Workers Other Specialists Primary Care Physicians Mental Health Clinics Community-based Orgs. HospitalWhen health care is not integrated, continuous linkage to
care from the hospital to outpatient providers represents a
greater challenge
Integrated Health Systems
The New York DSRIP Model
Substance Abuse Providers Other Specialists Primary Care Physicians Mental Health Clinics Social Workers Hospital
Integrated health systems offer better linkages to care
between the hospital and
Comprehensive, Community-based, Integrated
HMA
Oregon Results for 3 Pilot FQHCs
Paid a PMPM APM within a CCO
•
Metrics:
(January 1st 2013 through December 31st 2013):
–
Tobacco Screenings hit and remained at 100%
–
Weight control for kids increased by 145%
–
Childhood immunizations increased 115%
–
Patients with a favorable survey response
regarding their care team averaged 96% among
the health centers (a 50% increase)
–
Increases seen in diabetes control, cervical
cancer screening, weight control for adults.
–
Depression screening unchanged
–
Decrease in blood pressure control
Oregon APM 1
st
Year Results
Inpatient utilization: average decrease in trend of
20.3%
Note: Year 3 Pre-APM is counter-factual projection (trend). Post-APM is actual data. Optumas , 2015.
Inpatient Utilization Per 1000 by Facility & Population
Mosaic OHSU Virginia
Pre APM Post APM Pre APM Post APM Pre APM Post APM
Year 1 631.8 - 1,284.9 - 646.0 - Year 2 666.8 - 1,365.9 - 613.2 - Year 3
(Pilot)
HMA
Oregon APM 1
st
Year Results
ED utilization: average decrease in trend of 5.6%
Note: Year 3 Pre-APM is counter-factual projection (trend). Post-APM is actual data. Optumas , 2015.
Outpatient ER Utilization Per 1000 by Facility & Population
Mosaic OHSU Virginia
Pre APM Post APM Pre APM Post APM Pre APM Post APM
Year 1 862.5 - 1,081.5 - 653.8 - Year 2 833.2 - 1,007.0 - 661.6 - Year 3 (Pilot) 825.2 792.4 881.7 837.8 633.8 580.2 10
Minnesota FQHC Urban
Healthcare Network
• 10 FQHCs in the Twin Cities with an attributable population of 24,000 (total MA population 50,000)
• Based on historical
under-spending in primary care, and overspending in hospital/ER care
• Only IHP model consisting of independent provider groups. • Secured business partner
(Optum) to assist with infrastructure and data analytical support
• Upfront investments costs borne solely by IHPs= $0 state support 10.3% ER Visits $2.6 Million in MA Savings
For Year 1, 100% of savings accrued to the state … even though FUHN fronted 100% of
costs!
HMA
Medicaid Integrated Health Partnerships
(IHP) Demonstrations
•
Total Cost of Care (TCOC) or
Accountable Care Organization
(ACO) approach to delivering
health care to specific set of
patients
•
Move away from
Fee-For-Service to provider group
assuming risk
•
6 organizations initially serving
100,000 Medicaid enrollees
Base Year 1 Year 2 Year 3 Baseline 2% Threshold Actual TCOC “Savings” split 50/50 between state and HCDS after meeting 2% cost threshold
Must also meet
QUALITY
BENCHMARKS
MHN ACO Providers MHN ACO Geography 9 FQHCS 3 Hospital Systems 86 Medical Homes 360 PCPs 120 Care Managers 1200 Specialists 5 Hospitals
MHN ACO & CountyCare Membership
14
Growth in Total Cost of Care
:
MHN vs. non
MHN Matched Cohort Trend
-1.9% 4.3% 1.4% 9.3% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Trend Over Baseline Period
MHN Risk Adjusted Performance Year 2 vs. Baseline Performance Year 1 vs. Baseline In Year 2, MHN risk-adjusted PMPM growth in total cost of care is 5% lower than non-MHN
Improvements in Patient Engagement and
Care
71.4% of 80,000 members have completed Health Risk
Assessment
July 2014 – May 2015
34% reduction in bed days/1000*
13.9 % reduction in ED visits/1000*
35% reduction in readmission rates*
Reduction in global care of care results pending claims run out
* Reflects the reduction achieved by MHN PCPs as compared to non-MHN PCPs in the CountyCare
program; MHN has 48% of the ~180,000 CountyCare member population. CountyCare is a no-cost publicly funded managed care health plan in Cook County, Illinois.
16
The Building Blocks for
Delivery System Transformation
& Population Management
Challenges to Care Coordination Services
• Patients expected to
coordinate on their own
• Telephonic care
management ineffective
in engaging patients
• Lack of systematic
approach to care
management with tools
and electronic platform
• Outpatient providers
unaware of patient
admits and discharges
• Lack of timely
bidirectional
Care Management Connect: Tracking Quality Assessments & Indicators
18
TM
FINDINGS
1. MHN’s risk stratification algorithm accurately correlates with subsequent cost of care
2. Presence of risk factors even in the absence of historical high inpatient or emergency room utilization increases subsequent cost of care by approximately 29%
3. Inability to complete a screening HRA in an individual accessing subsequent health care services approximates the cost of a moderate risk member
HRA Completion Rate
MHN ACO 71% External Network 31%
(January 2015 – June 2015)
HRA Risk Profile Count
% of Members % Members with No Claims ER Visits /1000 Inpatient Admits /1000 Medical PMPM Relative Cost No HRA - no claims 4,088 22% 100% 0 0 $0 0
No HRA - with claims 8,303 44% 0% 1,070 220 $301 174%
Low 1,270 7% 29% 413 80 $173 100%
Low: 1-3 risk factors 3,306 17% 19% 591 100 $223 129%
Medium: 4-5 risk factors/high ED 878 5% 14% 945 200 $284 164%
High: >5 risk factors/ high inpatient 879 5% 11% 1,370 340 $441 255%
Total 18,274
Medical Home Network:
Driving Effective Population Health
MHN judges effective care management by its ability to lower patient risk
Medical Complexity Behavioral Health Complexity Level of Risk Social Complexity
High Risk High Risk
High Risk
Low Risk Low Risk Low Risk
Criteria
• Frequent ED Use
• Avoidable Hospitalization
• Chronic PQI
(potentially avoidable hospitalization)
• Gaps in Care
Criteria
• Hospitalization or ED
Use for SMI or SA
• High PHQ9
• Untreated SA
Criteria
• Barriers to therapeutic
compliance
Are PCMH/P4P/Shared Savings Payments Enough or
Do We Need an Alternative Payment Methodology?
1 2 5 3 4 Managed Care Organizations & Direct Payers Reimbursement Structure:
• All MCOs/Payers offer P4P with uniform parameters measured in a standardized fashion
• All MCOs/Payers offer shared savings/capitation based on standard set of services
• Contracts cover most if not all of a provider’s panel
FQHC IPA
IDS
• Aggregates data from multiple MCOs/Payers for
total actual performance
• Establishes a performance/incentive method to
pass rewards to the practice level to providers that are creating value
• Provides performance reports, transparency &
consultation to individual practices/providers
• Manages contracting process PCP
PCP PCP PCP PCP PCP PCP Behavioral Health Specialists Hospital