HIDA Webinar Series. ACOs and Acute Care Reimbursement Trends

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1 HIDA Webinar Series ACOs and Acute Care Reimbursement Trends

2 Agenda Healthcare reform update: acute care Status of the main provisions Key changes for hospitals Accountable care organizations Types Quality measures Trends Key to success in this changing environment Impact on the supply chain: big picture

3 What Is Healthcare Reform, Anyway? 1,000 Pages of Changes Hard to See the Whole Picture

4 Status of Healthcare Reform Provisions

5 Reform Was Built on Promise of An Insured Population State based Insurance Exchanges Federal Insurance Exchange Employee Mandates Individual Mandate Medicaid Expansion Million Business Co ops

6 Medicaid Expansion State Perspective

7 Insurance Exchanges State Perspective

8 Deadline for Employer Health Insurance Mandate Pushed Back a Year

9 Payment Drivers Are Changing Emphasis on quality Skin in the game Reduced costs Mandatory Coming to a market near you! Value-based purchasing Readmissions policy Infection policies Voluntary Accountable care organizations (ACOs) Bundled payment pilot program

10 Hospitals Key Changes

11 Hospital Payment Tied to Performance % of hospital pay tied to performance ACO amount is unknown and depends on physician participation/ pay model

12 VBP - 1,427 Hospitals Penalized This Year Value-based Purchasing (VBP) Ties pay to performance on quality measures Rolling out in acute care first Starts with measures for heart attack, heart failure, pneumonia, certain surgeries, six infections and patient experience Plan to implement VBP in skilled nursing facilities, ASCs Hospitals can earn back more than their share or lose it by not meeting performance benchmarks

13 CMS s Proposed Changes to VBP for new process measure: flu immunization 2 new HAIs: catheter-associated urinary tract infection and surgical site infection 3 process measures removed: coronary intervention w/in 90 min, discharge instructions for heart failure, and blood cultures for pneumonia patients prior to antibiotic New floor for all patient satisfaction measures Reweighting the four measure domains clinical process, patient experience, outcomes, and efficiency to increase weight of outcomes and efficiency

14 Hospital Readmissions Reduction Program - 1% Cut in 2013 Hospital payments reduced for excess readmission rates within 30 days of discharge: Heart attack, heart failure, and pneumonia FY2014 2% cut FY2015 3% cut

15 Other Providers are on The Hook for Readmissions More than 2000 hospitals penalized in FY2013 Hospitals hit hardest in NJ, NY, DC, AR, KY, MS, IL, and MA Safety-net hospitals hit harder than others Smooth transitions in care Mandates: 30 Day Hospital Readmission Policy Pressure to perform on other providers Future referrals at risk! Pressure to move to electronic medical records

16 CMS s Proposed Changes to Readmissions Policy Penalty increases up to 2% for FY 2014 Revised methodology to account for planning readmissions 2 new readmission measures for 2015 penalties: Hip/knee arthroplasty COPD

17 Infections: Multiple Programs Could Lead to Multiple Penalties Medicare and Medicaid do not reimburse for preventable health-acquired conditions FY2015 1% cut for hospitals in top quartile for infection rates Multiple penalties

18 CMS s Proposed Changes to Infections Policy Domain #1 patient safety indicators (PSIs): Pressure ulcer rate Volume of foreign object left in body Iiatrogenic pneumothorax rate Postoperative physiologic and metabolic derangement rate Postoperative pulmonary embolism or deep vein thrombosis rate Accidental puncture and laceration rate Domain #2: HAIs Central line-associated blood stream infection Catheter-associated urinary tract infection

19 Bundled Payments Another Step Away From FFS Pilot project where payments are bundled for acute inpatient, physician, outpatient, post-acute services 2 Payment Types, 4 Models CMS has suspended further implementation of Model 1 due to lack of participation. January 1, 2013, national voluntary pilot program begins HHS report to Congress on program HHS report to Congress on final results of program, as well as a plan for expansion

20 ACOs

21 What is an ACO? A group of healthcare providers that contracts with Medicare (or another payor) to coordinate care for beneficiaries and reduce the overall costs associated with delivering the care. Specifically ACO providers agree to work together to: Coordinate patient care Perform well on quality measures Reduce costs Share in achieved cost savings by reducing cost to deliver care

22 Various Types of ACOs Medicare Shared Savings Program (MSSP) Built into healthcare reform law Three-year participation agreement 221 ACOs selected Medicare Pioneer ACOs Demonstration project Similar emphasis on quality and savings, but with more flexibility in program Same quality measures Private sector ACOs Vary widely

23 The Rulebook Depends on Who Makes the Rules FEDERAL ACO PROGRAMS PRIVATE SECTOR ACOS 32 - Pioneer ACO Demo Medicare Shared Savings Program Insurers Healthcare Providers 10 - Physician Group Practice Demo Advanced Payment Model ACOs The framework, or rules, for each ACO depends on the payer

24 Does ACO Formation = Ownership Consolidation? Pioneer ACOs Medicare Shared Savings Program Private sector ACOs Not necessarily ACOs need a formal legal structure to receive and distribute payments for shared savings to participating providers Separate entities may participate, such as hospitals and physician practices One provider organization serves as convener

25 Medicare Sharing Savings Program

26 The Basics Share in the SAVINGS, and in some cases RISK At least 5,000 Medicare beneficiaries Participate for three years Medicare beneficiaries must be informed, they retain the option to decline participation 33 quality measures Governance requirements

27 How Does the Money Work? Approved Medicare Shared Savings ACOs have two track options: One-sided risk model Share in savings all three years Must first meet a minimum savings rate of between 2% and 3.9% (depends on population size) Then, they can share up to 50% of first dollar savings depending on quality scores Two-sided risk model Share in savings or losses all three years Must first meet 2% saving/loss rate Share up to 60% of savings/losses depending on quality scores

28 How Will Doctors in an ACO be Paid? Medicare will continue to pay individual providers for specific services as it currently does CMS will develop a benchmark for savings to be achieved by each ACO if the ACO is to receive shared savings The amount of an ACO s shared savings or losses depends on its performance on quality standards ACOs must develop their own legal structure to share any savings with its affiliated providers

29 How ACOs Work

30 Bumpy Road for Pioneer ACOs Pioneers balk at level of risk Up to 9 expected to shift to MSSP program

31 Pioneer ACOs Include Many Leading Systems Organization Service Area 1. Allina Hospitals & Clinics Minnesota and Western Wisconsin 2. Atrius Health Eastern and Central Massachusetts 3. Banner Health Network Phoenix, Arizona Metropolitan Area (Maricopa and Pinal Counties) 4. Bellin-Thedacare Healthcare Partners Northeast Wisconsin 5. Beth Israel Deaconess Physician Organization Eastern Massachusetts 6. Bronx Accountable Healthcare Network (BAHN) New York City (the Bronx) and lower Westchester County, NY 7. Brown & Toland Physicians San Francisco Bay Area, CA 8. Dartmouth-Hitchcock ACO New Hampshire and Eastern Vermont 9. Eastern Maine Healthcare System Central, Eastern, and Northern Maine 10. Fairview Health Systems Minneapolis, MN Metropolitan Area 11. Franciscan Alliance Indianapolis and Central Indiana

32 Pioneer ACOs Include Many Leading Systems (cont d) Organization Service Area 12. Genesys PHO Southeastern Michigan 13. Healthcare Partners Medical Group Los Angeles and Orange Counties, CA 14. Healthcare Partners of Nevada Clark and Nye Counties, NV 15. Heritage California ACO Southern, Central, and Costal California 16. JSA Medical Group, a division of HealthCare Partners Orlando, Tampa Bay, and surrounding South Florida 17. Michigan Pioneer ACO Southeastern Michigan 18. Monarch Healthcare Orange County, CA 19. Mount Auburn Cambridge Independent Practice Association (MACIPA) Eastern Massachusetts 20. North Texas ACO Tarrant, Johnson and Parker counties in North Texas 21. OSF Healthcare System Central Illinois 22. Park Nicollet Health Services Minneapolis, MN Metropolitan Area

33 Pioneer ACOs Include Many Leading Systems (cont d) Organization Service Area 23. Partners Healthcare Eastern Massachusetts 24. Physician Health Partners Denver, CO Metropolitan Area 25. Presbyterian Healthcare Services Central New Mexico Pioneer Accountable Care Organization Central New Mexico 26. Primecare Medical Network Southern California (San Bernardino and Riverside Counties) 27. Renaissance Medical Management Company Southeastern Pennsylvania 28. Seton Health Alliance Central Texas (11 county area including Austin) 29. Sharp Healthcare System San Diego County 30. Steward Health Care System Eastern Massachusetts 31. TriHealth, Inc. Northwest Central Iowa 32. University of Michigan Southeastern Michigan

34 Quality Measures for Medicare ACOs (Both MSSP and Pioneer)

35 Shared Savings Tied to Quality Measures Quality performance standards must be met in order for an ACO to share in any savings **EHR meaningful use participation is a performance measure, not a 50% requirement Completely & Accurately Report Meet Performance Minimums Year 1 Year 2 Year Providers in an ACO are still subject to additional health reform policies on infections, readmissions, and value-based purchasing!

36 The Challenge: Improve Quality, Reduce Spending Four groups of quality measures: Patient experience Care coordination and patient safety Preventive health Caring for at-risk populations CMS will develop spending benchmark for each ACO, every year to gauge financial performance

37 The Challenge: Improve Quality, Reduce Spending In the first year, providers must fully and accurately report on all four quality measure domains. In the second and third years, the share of savings will be tied to performance on quality measures. Points are assigned to each measure, and ACOs must attain a minimum of 30% on each measure for 70% of the measures in each domain. The benchmark is reset each year based on previous year s data.

38 Quality Measures in Final ACO Rule

39 Quality Measures in Final ACO Rule

40 Quality Measures in Final ACO Rule

41 Healthcare Providers Form an LLC to Contract with Medicare

42 Providers Bill CMS Separately for Services; Also Submit Performance Data

43 CMS Determines Whether ACO Has Met Quality Benchmarks and Reduced Total Costs

44 CMS Shares Any Savings Above Minimum Rate Shared Savings Savings above the minimum savings rate, 2 3.9% depending on ACO size and risk model, go to the LLC, which distributes them to participating providers

45 Private Sector ACOs

46 Major Private Sector ACO Initiatives Cigna: collaborative accountable care (CAC) program with 32 CACs serving 300,000 patients in 16 states Aims to have 100 CACs covering one million patients by 2014 Aetna: 10 ACO-like agreements with providers in place, 14 more in the works Investing $1B+ in a capabilities to support ACO program, including acquiring a health IT services firm Blue Cross Blue Shield Massachusetts: ACO-like contracts Alternative Quality Contracts with 11 provider organizations established in , produced savings and quality improvements

47 Comparing Medicare and Private Programs Providers participating in ACO agreements with private payers may also choose to participate in the national MSSP program however, private sector agreements may have significant differences in terms of patient volume, eligible participants, financial incentives, and clinical/quality.

48 Comparing Medicare and Private Programs 4 ACO Providers Fact Sheet, Centers for Medicare & Medicaid Services, October Premier accountable care organizations Driving to a people-centered health system, Premier, Inc

49 Key to Success in Your Changing Environment

50 Find the Pain and Take It Away Preventing infections Reducing readmissions Patient satisfaction Key clinical areas: heart attack, heart failure, pneumonia

51 Tie Your Marketing to New Quality Metrics For example: Patient Experience Care Coordination and Patient Safety COPD EHR Implementation by Primary Care Providers Screening for Risk of Falls Preventive Health Flu and Pneumonia Vaccination Rates Colorectal Cancer Screening Blood Pressure Screening Caring for At-Risk Populations Diabetes Control (SEVERAL measures) Blood Pressure Control

52 Plenty of Pain and Challenge on the Non-Acute Side Too Example: reducing readmissions Major opportunity to both improve quality of care and lower costs Majority are chronic disease patients Depends on primary care support Requires a strong primary care infrastructure ACO might decide to incentivize primary care physicians to spend more time on chronic disease management Requires trusted extended care relationships

53 Cost Pressures Create Enormous Customer Pain Being cheaper isn t the only way to reduce this pain Providers won t succeed if they cut spending in one area only to add costs in another ACOs won t succeed if they cut spending and quality declines Show Customers Why Spending for Your Product or Service Will Reduce System-Wide Costs

54 Hospitals of all sizes are generally willing to pay a 10-15% premium on average for disposables that demonstrate an ability to reduce errors and infection rates. --Stuart Jackson and Bob Lavoie L.E.K. Consulting Healthcare Reform Shifts Hospital Priorities, Creates New Opportunities for MedTech Companies, Executive Insights Vol. XIII, Issue 4, June 2011

55 Bring Data Providers are demanding data for evidence-based product and service selection Many distributors have more data than their customers do great source of competitive advantage Progressive providers and supplier organizations are preparing for this new era by expanding their talent pools with experienced data analysts who can conduct deeper dives into cost analytics to discover cost per case, cost per patient, and other needed metrics. New Integrated Delivery Models, ACOs, and the Healthcare Supply Chain, March 2012, Strategic Marketplace Initiative (SMI)

56 Speak the Language: Population Health Current State: Volume-Based Reimbursement (Fee-for-Service) Low financial accountability for cost of care Future State: Risk-Based Reimbursement (ACO/Shared Savings/ Capitation and Quality-Oriented) High accountability for cost of care Defines population as patients who present at the doctor s office Minimal infrastructure (technology, staff, data, etc.) to manage more than the sickest/most complex patients Culture rewards volume and operational efficiency Defines population as every patient in the provider organization panel, regardless of whether they present at the doctor s office Must have infrastructure to manage the entire population Culture rewards optimization of cost and quality Source: ACOs and Population Health Management, American Medical Group Association

57 Speak the Language: Clinical Integration Generic meaning: clinical providers across a continuum of services work together to better care for patients More specific meaning: a legal arrangement to create the incentives, management, and infrastructure for physicians and health systems to improve quality and efficiency With a looming mandate to manage total cost risk for patients, hospitals must make physicians true partners in delivery system redesign. Yet, for most organizations, current physician relationships are inadequate to create this level of alignment. As a result, many are now looking to clinical integration (CI) as a strategy to align both employed and independent physicians around performance improvement. The Advisory Board

58 Speak the Language: Standardization Taking on a larger meaning Procedures Processes Products Providers focus on reducing variation to increase predictability of outcomes AND standardize products and suppliers Standardization efforts will be driven by evidence based data such as clinical outcomes, comparative effectiveness, and operational costs. Within the healthcare supply chain, variability equates to costs. As such, in order to improve costs, efforts to standardize on clinical practice, processes, products and suppliers will increase. New Integrated Delivery Models, ACOs, and the Healthcare Supply Chain, SMI, 2012

59 Speak the Language: Value Analysis The process of evaluating products based on cost, quality, contribution to patient outcomes Often done through value analysis teams or VATs VATs usually organized by supply chain dept. but made up primarily of clinical personnel Physician participation increasing Becoming more formalized in most health systems Tends to focus on highest-cost physician preference items (PPI) Roles are evolving fast: Expanding beyond evaluation of products into processes and clinical procedures Increasing emphasis on life cycle costs, patient outcomes, metrics

60 Common Features of Value Analysis Teams Source: Strategies for Medical Device Manufacturers to Address Hospital Value Analysis, Medical Device and Diagnostic Industry, May 2013

61 Speak the Language: Utilization Management Continual process of managing, benchmarking and controlling day-to-day product consumption We evaluate, select, and contract for a product, service or technology and then we turn it over to our hospital staff who use too many, employ the wrong products, choose feature-rich products, unknowingly waste products, or vendors upsell new higher-cost products inside your new contract. Why supply utilization management is significantly different than value analysis, Robert Yokl, Value Analysis Magazine, 2013

62 Take More of a Team Approach Than Ever At the field level, reps still need strong relationships with clinicians, doctors, purchasing agents, and practice administrators At the ACO or IDN level, key decision-makers may include: The materials management or supply chain department Value analysis committees Clinical leaders in areas such as infection control The leader of physician alignment or physician integration efforts Coordination among levels of the sales force is critical

63 Ask Questions Is your organization part of an ACO? If yes, with what partners? What type of affiliation? Now or how soon? What changes are you making in your practice as a result of healthcare reform? How can I help?

64 How Will Accountable Care Impact the Supply Chain?

65 More Focus on Standardization of procedures and processes Evidence-based medicine Data analytics Physician engagement Patient engagement Service line management (example: spine care) Cost reduction Where do they start first? Supply chain! Important to all acute care customers, with ACOs leading the way. A reduction of two percent in supply chain spending (operating expenses) would require an average hospital to increase revenue by 30 to 40 percent to have the same impact. (Navigant Pulse, Winter 2011)

66 Some Will Look at Consolidating Purchasing Across the Continuum Integrated delivery network (IDN) Types of providers included is driven by system goals Most typically, common ownership, possible some joint ventures Greater likelihood of consolidated supply chain strategy IDNs IDN-led ACOs Accountable care organization (ACO) Types of providers included is driven by program rules or payer agreements Much looser affiliations likely Consolidating the supply chain strategy more challenging ACOs

67 Some Will Look at Self-distribution Survey of Supply Chain Executives: Reasons for Self-distribution (ranked): 1. Control 2. Improved service 3. Product standardization 4. Reduce distributor costs 5. Collect administrative/manufacturer fees 6. Disaster preparedness Source: Cardinal phone survey of 17 self-distributors Used with permission

68 Healthcare at a Tipping Point Fee-for- Service Patient Satisfaction Physician Employment ACOs Volume Value

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