BUNDLING ARE INPATIENT REHABILITATION FACILITIES PREPARED FOR THIS PAYMENT REFORM?

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1 BUNDLING ARE INPATIENT REHABILITATION FACILITIES PREPARED FOR THIS PAYMENT REFORM? Uniform Data System for Medical Rehabilitation Annual Conference August 10, 2012 Presented by: Donna Cameron Rich Bajner

2 LEARNING OBJECTIVES 1. Provide an overview of the Bundling Demonstration projects, including recent Medicare Bundled Payments for Care Improvement 2. Summarize preliminary data trends regarding the CMS Bundling Demonstration projects, with particular emphasis on post-acute providers 3. Highlight the key implications for Inpatient Rehabilitation Facilities (IRFs) 4. Articulate strategies for IRFs to prepare for the future under bundled payments Page 2

3 BUNDLED PAYMENTS DEFINED FFS Model Bundled Model $ $ $ $ $ $ Acute Care Hospital IP Rehab Hospital OP Centers IRF/ SNF/ HH Acute Care Hospital IP Rehab Hospital OP Centers IRF/ SNF/ HH Physicians Physicians Page 3

4 STRATEGIC CONTEXT FOR BUNDLED PAYMENTS» CMS Value Based Purchasing framework defines CMS long-term plans to pay for outcomes (not just volume): Halo effects to other lines of business could be significant, both in opportunity and risk Commercial payers following CMS trend, quickly» Bundled payment pilot focused on aligning hospital, physician, and post-acute provider interests in order to improve quality, reduce (episodic) costs: Other Innovation Center pilots have similar goals targeting different populations, locations of care» Recognize that paying for outcomes could result in lost top line revenue and margin unless the payment system and cost infrastructure are redesigned.» External and internal payment funds flow models must align cost savings achieved with gain sharing in order for hospitals and physicians to share in savings.» Today we ll review initial analytics and results related to Medicare s bundled payment initiative and potential impact to post-acute providers. Page 4

5 DESIGN CONSIDERATIONS Design A Design B Episode Trigger IP Admission Diagnosis Episode Window Reimbursement Discount IP Stay Only 365 Days from discharge/ diagnosis None 3-4% Payment Methodology Outlier Protection Risk Adjustment Conditions Retrospective Outlier carve-out Risk adj. impacts annual price update IP focused Prospective None, included in rate None Any All Exclusion Criteria None User Defined Page 5

6 MEDICARE INCREASINGLY FOCUSED ON POST-ACUTE WITH PROSPECTIVE PAYMENT Payment of Bundle Retrospective (Traditional FFS payment with reconciliation against a predetermined target price after the episode is complete) Prospective (Single prospective payment) Acute Care Hospital Stay Only Acute Care Hospital + Post- Acute Post-Acute Only Chronic Care Model #1 Model #2 Model #3 Model #7 Model #4 Model #5 Model #6 Model #8 Current Go live 1/1/13 Future Timing TBD Imagine a bundle where hospitals will collect single payment from Medicare and be responsible for paying post-acute providers for services. Page 6

7 BUNDLING CONTEXT INITIAL RESPONSE Reasons Payers Will Adopt Bundling: Drives cost effectiveness and provides stronger outcomes (52%) Drives the ACO model to make providers more accountable for care quality (40%) Belief that payment bundle pricing would reduce medical cost (35%) Reasons Providers Will Adopt Bundling: Government will mandate it (72%) Would increase quality and coordination of care (46%) Knowledge that it will be used selectively with predictable costs (38%) Payer Concerns: 40% providers do not want to do payment bundling 40% providers cannot distribute payment bundling 33% no ability to recognize and adjudicate payment bundles Provider Concerns: 52% puts the provider at risk 49% difficult to determine how to share gains/losses Page 7 *2010 Gantry Group quantitative study findings

8 FIVE DATA TRENDS WORTH DISCUSSING Trend 1: Significant percentage of episode allowed amount driven by postacute providers Trend 2: Significant variation in (perceived) performance within post-acute providers Trend 3: Readmission rates vary drastically by post-acute provider Trend 4: Outlier payment variation compared to non-outlier cases driven by post-acute care Trend 5: Hospital post-acute utilization varies dramatically by market, even within a specified service Page 8

9 TREND #1: POST-ACUTE DRIVES SIGNIFICANT PERCENTAGE OF SPEND ACROSS EPISODES Joint Replacement Sample Client Allowed/Episode by Phase and Place of Service 43% of episode post discharge + readmission Allowed by Phase Client Post Phase of Episode Re Admit Trigger Pre 35% 8% 1% 56% Pre Trigger Re Admit Post $0.0K $2.0K $4.0K $6.0K $8.0K $10.0K $12.0K $14.0K Allowed/Episode IP OP Prof SNF HH ASC IRF Psych DME» Analysis of over 12 markets indicates that post-acute care accounts for 25-50% of allowed for key episodes (joints, CHF, pneumonia, etc.). Page 9

10 TREND #2: SIGNIFICANT VARIATION IN PERFORMANCE Joint Replacement Sample Initial Discharge Status (All Markets) Market Average HH SNF IRF Percent Discharged Initially To 37% 43% 12% HH Visits Per Episode HH Spend Per Episode $3,061 $1,635 $2,401 SNF Days Per Episode SNF Spend Per Episode $119 $10,597 $2,834 IRF Days Per Episode IRF Spend Per Episode $31 $182 $11,360 Total Post-Acute Spend Per Discharge $3,211 $12,414 $16,596 Readmission Rate 3.1% 6.1% 6.0% Allowed Per Readmission $6,698 $7,886 $8,905 Total Readmission Allowed Per Episode $205 $485 $533» Joint replacement patients discharged to IRF result in approximately $4k higher PAC spend than SNF discharges, with no significant difference in readmission rate.» Initial IRF stay on average is 11.4 days, and costs are $800 higher than the average initial SNF stay of 21.5 days. Page 10

11 TREND #2: SIGNIFICANT VARIATION IN PERFORMANCE Stroke Sample Initial Discharge Status (All Markets) Market Average HH SNF IRF Percent Discharged Initially To 15% 28% 23% HH Visits Per Episode HH Spend Per Episode $2,317 $508 $1,712 SNF Days Per Episode SNF Spend Per Episode $536 $15,348 $5,308 IRF Days Per Episode IRF Spend Per Episode $286 $1,000 $18,946 Total Post-Acute Spend Per Discharge $3,139 $16,856 $25,965 Readmission Rate 10.1% 14.8% 9.5% Allowed Per Readmission $8,086 $9,628 $8,457 Total Readmission Allowed Per Episode $814 $1,426 $802» For stroke patients, the significantly higher IRF spend translates to lower readmission rates, and lower costs per readmission.» IRF stays were half as long on average as SNF stays (15.6 days vs days), but still had 10.9 SNF days per discharge after discharge to IRF.» How can IRFs differentiate their quality of care and clinical outcomes for stroke patients (or other conditions) compared to a SNF post-acute stay? Page 11

12 TREND #3: READMISSION RATES VARY BY POST-ACUTE PROVIDER» Hospitals are evaluating readmission trends in selecting post-acute partners for bundled payments (and ACOs).» Higher costs are loosely correlated with lower readmission rates (more so for IRF than SNF). Hospitals are seeking best performing, lowest cost providers in the market for partnerships. $25,000 Average SNF and IRF Stay Variation vs. Readmission Rate (Midwest Urban Market) Spend per Stay $20,000 $15,000 $10,000 $5,000 Average IRF Stay Average SNF Stay Linear (Average IRF Stay) R² = Linear (Average SNF Stay) R² = $0 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Readmission Rate Page 12

13 TREND #4: OUTLIER ALLOWED VARIATION DRIVEN BY POST-ACUTE CARE $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 Standard Cases vs. Top 20% Allowed Outliers - Allowed by Phase Stroke $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 Joint Replacement $5,000 $5,000 $0 Post Acute Readmit IP Trigger Total Standard Outlier $0 Post Acute Readmit IP Trigger Total Standard Outlier» Analysis of 20% of highest cost cases reveals variation in allowed in post-acute rather than inpatient care setting.» Most clients agreed that predictively identifying, then managing outliers before they become outliers is key to driving significant savings. Page 13

14 TREND #5: HOSPITAL POST-ACUTE UTILIZATION VARIES DRAMATICALLY BY MARKET 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 18% Discharge Status by HRC: Stroke 28% 27% 28% 28% 7% 7% 9% 8% SNF 20% 26% 22% 23% Other IRF Let s do stroke here; 13% stroke is the 16% battleground 15% between IRF Homeand SNF. 28% 26% 25% 26% Market 1 Market 2 Market 3 All Markets Home Health» Discharge trends for stroke are relatively consistent by market (more so than for other conditions), based on current affiliations and relationships.» What volume shift opportunity/risk exists as IRFs differentiate their value offering to hospitals? Page 14

15 STRATEGIES FOR IRFS TO PREPARE FOR BUNDLED PAYMENTS Increased focus on post-acute spending and utilization: A. Improved data collection B. Management of care transitions C. Prevention of readmissions D. Integrated post-acute organizational structure E. Outcomes Management/Quality Page 15

16 IMPROVED DATA COLLECTION AND INFORMATION TECHNOLOGY INFRASTRUCTURE» Data needs to be collected and reviewed on a continuous basis to measure costs and financial impact.» IT system integration should support ongoing tracking of key metrics.» In the absence of technology solutions, resources need to be devoted to data and metrics management.» Data must be analyzed for active and ongoing process improvement.» Telemedicine options should also be used as a technology tool to enhance access to clinical resources and monitoring of patient status. IRF Take-Away Know your cost per case for key diagnostic groups. Consider options for EMR integration. Work collaboratively with referring health system to identify and report key performance metrics. Page 16

17 MANAGEMENT OF CARE TRANSITIONS» Currently, the discharge process to post-acute care is fragmented.» Multiple resources are likely involved (both from the acute and post-acute providers) prior to a post-acute discharge decision.» Many times, a pre-admission assessment is completed by multiple providers; competition for patients can be fierce in some markets.» Effective management of care transitions will: Reduce personnel involved in the transition Enhance patient and family satisfaction Improve information flow from acute to PAC Reduce the cost of the transition Improve patient and family education Engage collaboration between physicians IRF Take-Away Meet with the referral sources to identify opportunities for improvement to expedite the transition process. Make the transition easier than your competitors, including SNFs. Provide clinical outcome feedback to referring physicians and discharge planners. Page 17

18 PREVENTION OF RE-ADMISSIONS» Nearly 20% of Medicare patients discharged from the hospital were readmitted within 30 days, and 34% were readmitted within 90 days.» Return trips cost the healthcare system more than $17 billion in 12 months.» Medicare will begin penalizing hospitals for excessive readmission rates.» Managing patients who are discharged to post-acute care can have a significant impact on reducing acute readmission rates.» Many health systems are considering designated physicians to follow patients from acute to post-acute care as an investment in care coordination and readmission prevention. IRF Take-Away Is your IRF readmission rate better than regional and national benchmarks? Do you know your readmission rate within 30 days? 60 days? Source: Medicare May Penalize Hospitals That Readmit too Many Patients Washington Post (12/12/11) Mishori, Ranit New England Journal of Medicine Study, April 2009 Page 18

19 INTEGRATED POST-ACUTE ORGANIZATIONAL STRUCTURE» Frequently, post-acute organization structures within health systems are siloed.» Regulations are frequently used as the excuse to segment post-acute leadership need to consider creative solutions.» Post-acute services need to have a common boss who is knowledgeable and accountable for the performance of the entire post-acute continuum.» Physician leadership is key, particularly related to coordination/collaboration across venues of care. IRF Take-Away Consider proposing an integrated post-acute organizational structure. Organize a post-acute steering committee of preferred providers. Convene the medical directors to discuss opportunities for improvement for post-acute care. Page 19

20 OUTCOME MANAGEMENT/QUALITY» Post-acute programs must be willing to measure clinical outcomes to quantify quality.» Whenever possible, industry benchmarks should be utilized to assess performance.» Providers and strategic partners should be selected based on outcomes both financial and patient satisfaction.» Implement quality scorecards for post-acute providers to demonstrate positive performance expectations.» A culture of quality improvement, including action plans for performance improvement, is imperative (not just tracking the required metrics). IRF Take-Away Ensure your IRF team understands and can share your outcomes report card. Develop a report card reflecting key outcome measurements. Disseminate your report card to referrals regularly. Page 20

21 WHY SHOULD IRFS ACT NOW? POST-ACUTE MEDICARE SPENDING Dollars (in Billions) Medicare Post-Acute Spending All post-acute care Skilled nursing facilities Home health agencies Inpatient rehabilitation hospitals Long-term care hospitals Post-Acute Medicare Spending IRF 10% HHA 34% LTCH 9% SNF 47% Source: CMS, Office of the Actuary Post-Acute Care Case Study November 11, 2011 SNF = $26 HHA = $19.3 IRF = $6.4 LTCH = $5.1 Total = $57 Page 21

22 WHY SHOULD IRFS ACT NOW?» SNFs already appear to be winning based on Medicare post-acute spending trends over the last ten years.» In the absence of an IRF value proposition, SNFs will continue to drive more volume under bundled payments and ACOs.» Providers are evaluating their partnerships now to succeed with bundled payments and ACOs: More than 150 Medicare ACOs already exist Expected that more than 100 Medicare bundled payment pilots will go-live in January 2013» Patients should receive the most appropriate level of care for inpatient rehabilitation. Page 22

23 YOU SNOOZE, YOU LOSE An expression which states that anyone will miss out on a great opportunity if they don t remain aware or open to communication. Source: urbandictionary.com Page 23

24 BUNDLING READINESS IRF SELF-ASSESSMENT PLEASE LEAVE A BUSINESS CARD AND WE WILL SEND YOU OUR BUNDLING READINESS IRF SELF-ASSESSMENT Page 24

25 CONTACT INFORMATION THANK YOU! Presented by: Donna Cameron Rich Bajner Page 25

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