The Importance of Aging Services Networks in the Developing Managed Care Environment
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1 The Importance of Aging Services Networks in the Developing Managed Care Environment Leading Age Missouri September 2015 Michael A. Scavotto Management Performance Associates, Inc. St Louis, Missouri
2 Environment Management Performance Associates, Inc. 2
3 Environmental Issues: Chronic Disease CD: 75 pct of annual health expenditures 80 pct adults 65+: one chronic condition 50 pct: more than 1 25 pct: some sort of activity limitation 1/3 confused about chronic mgt after seeing physician
4 Environmental Issues: Chronic Disease 7 out 10 deaths attributed to CD 81 pct of hosp admits; 91 pct all scrips; 76 pct doc visits CDs are the leading cause of disability in U.S. - Diabetes cancer heart disease Glaxo Smith Kline, Impact of Chronic Disease; Partnership to Fight Chronic Disease
5 Environmental Issues: States Medicaid: Often unaffordable in current form Built-in requirements to institutionalize Fragmentation ( open access ) is problematical FFS: cost driver Dual eligible: often 3x costlier than non-duals
6 Changing Times: The End of Fee for Service By the end of 2016: Tying 30 percent of traditional, fee-forservice, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations or bundled payment arrangements. By the end of 2018: Tying 50 percent of Medicare payments to alternative payment models. By 2016: Tying 85 percent of traditional Medicare payments to quality or value through programs such as Hospital Value Based Purchasing and Hospital Readmissions Reduction Programs. Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value HHS Press Release January 26, 2015
7 Changing Times: The End of Fee for Service By 2018: Tying 90 percent of traditional Medicare payments to quality or value through programs such as Hospital Value Based Purchasing and Hospital Readmissions Reduction Programs. According to HHS, [t]his is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments. Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value HHS Press Release January 26, 2015
8 Changing Times: Working with Others The point is not that SNFs will transition away from FFS. Larger players ACOs, health systems, health plans will transition to other payment forms before SNFs; this economic reality will create downstream financial pressures on SNFs that are in network or in the referral stream
9 Improving Your Position Decrease in Mobility (Long Stay) CC Mobility Worse Mean LCL AHCA State Norm UCL Linear ((Long Stay) CC Mobility Worse) Management Performance Associates, Inc. 9
10 Strategic Implications from Today s Environment Enormous pressure on providers to maintain net revenues Access to capital shrinks If you don t think this is true, watch the health systems Price has always been hammered Now utilization will receive just as much attention
11 Basics Risk & Structure
12 Conditions needed for managed delivery Need to control costs Provider surplus Management Performance Associates, Inc. 12
13 Health Plans Assume Risk Some providers assume risk usually Primary Care Physicians Most providers, including hospitals, do not Industry, esp acute care, is moving towards risk assumption Must have control of clinical process, management Must have committed physician group Economic stakes are high Management Performance Associates, Inc. 13
14 Understanding Risk in a Nutshell Shared Risk Plan capitates the medical group Plan keeps risk and contracts with institutional providers Plan shares any institutional risk pool savings with the medical group Full Risk Plan capitates the medical group Plan capitates the institutional providers, usually dealing through a hospital or health system
15 Managed Care Tools Provider networks/panels/contracts Financial incentives Full vs shared risk vs fee for service Information systems Care protocols Algorithms Case management
16 Illinois SNF Utilization Trend Resident Days per 1,000 Population
17 The Managed Care Triangle Management Performance Associates, Inc. 17
18 Opportunity Grid Open Spaces by Contract Primary Specialty Acute Hospital Opt SNF SLF HCBS Med Grp X X X Med Home X X IPA X X X Hlth System X X X X Other Weird Arrangement (OWA) Open Open Open 18
19 Reimbursement Expect per diems, maybe some case rates Do not expect discounts from charges Expect pay-for-performance criteria including payment withholds or bonus Plan to control your clinical processes too much variation will be costly Do not assume risk unless you can control the medical management of a large population
20 Pricing Under Managed Delivery Method Expect Issue Fee For Service (FFS) No No provider incentive to manage cost Discount No Same as above Per Diem Yes Provider at risk for daily cost Case Rate Yes Provider now at risk for LOS Capitation No No business reason to share upside with SNF..?.. 20
21 Objectives of Managed Care Control/reduce cost Reduced utilization of high cost services controlled access alternate settings alternate services alternate providers Improved clinical outcomes and patient satisfaction
22 Aligned Incentives Incentives are aligned for some players. But not for all What is my importance to the health plan? Your contract reflects your strategic importance to the health plan.
23 Remember: There is a clear strategy and structure to managed delivery. The business model for the MCO could not be more different than what we are used to. If managed delivery gains traction, its market forces can be very powerful. Embracing the change and being proactive will make a difference in your organization.
24 Strategy Considerations
25 Is there a provider surplus in the market? What makes my position different from any other provider? How much leverage will a single SNF have with the MCO? How does managed care delivery (MCD) work when objectives are not aligned? Do I have core strengths that will help the managed care organization (MCO) achieve its objectives? How much does the MCO need me? How much do I need the MCO? Strategy Questions Shaping the Managed Care Revolution
26 How Will the Revolution Develop? What Can We Expect? Major impact in larger metro areas Utilization will drop (case management) Activity will move downstream (network build-out) Remaining volume = higher acuity (cost pressure)
27 How Will the Revolution Develop? What Can We Expect? ACOs will pressure pricing not just rate, but value Fixed cost per unit of service will increase Access to capital (already tight) will decline Industry consolidation will likely begin Extraordinary opportunities for strategic visionaries
28 Revolution Wild Cards Will exodus from hospitals off-set downstream movement of SNF? Will Plans create sufficient network capacity to handle downstream volumes? Can providers off-set volume declines with other business? What will be the political & regulatory complications?
29 Strategic Determinants in a Managed Market Do you have chronic disease skills (and data) to assist in population health management? What new services will be created by the need to manage chronic disease? How will they be organized and delivered? Can you do it?
30 Strategic Determinants in a Managed Market Do you know the importance of Medicaid in your market?... How do volume reductions (by payer class) impact all competitors? Is your Medicare volume tied to Medicaid? Under State dual eligible programs, it could be.
31 Hot Buttons Provider surplus Pricing for services rendered Contract terms & conditions as important as price Market share = bargaining power Payer mix Reliable & replicable results Remember: only physicians deliver medical care
32 Which Provider Is Stronger? Large metro facility Well located, easy access Specialty niche in ALZ and renal dialysis 5-Star rating Impeccable reputation Consistently high occupancy Financially stable No trouble accessing capital The Place to Be Seen Aging Network of 30 SNFs Broad mkt coverage 5 and 4 Star rankings ALZ & Diabetes mgt carve-out Consolidated approaches to: medical & case mgt clinical protocols accreditation rehab pharmacy compliance quality risk mgt training & education 33
33 Market Share and Strategic Advantage More geography, more facilities are better Single provider = no leverage Price is a synonym for commodity, especially if supply exceeds demand Providers need inpatient volume, plans don t Add value: we are experts at.and here is our data 35
34 Competitive Advantage What to Appreciate More geography, more facilities are better Single provider = no leverage Price is a synonym for commodity, especially if supply exceeds demand Providers work on volume, plans need premiums Add value: we are unique; nobody does it this way and here is our data Add value: we have expert clinical management.and here is our data
35 Create Advantage Managed care needs a surplus of providers to be most effective In a provider surplus, providers can become commodities How does a commodity create competitive advantage? Objectives of MCO and provider are fundamentally different
36 New Incentives = Opportunity The importance of business definition Are we in the skilled nursing business? Is our business managing chronic disease? Is our business managing chronic health for a set population? Does a network give us a strategic advantage? Each view dictates what strategy you pursue
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Strengthening Community Health Centers. Provides funds to build new and expand existing community health centers. Effective Fiscal Year 2011.
Implementation Timeline Reflecting the Affordable Care Act 2010 Access to Insurance for Uninsured Americans with a Pre-Existing Condition. Provides uninsured Americans with pre-existing conditions access
Presented to: Long Term Care Workgroup May 26, 2011
Presented to: Long Term Care Workgroup May 26, 2011 Partners in the Grant SC Department of Health and Human Services Sam Waldrep Roy Smith Project Coordinator Office of Research and Statistics Institute