(12) (10) Patent N0.: US 7,389,245 B1 Ashford et al. (45) Date of Patent: Jun. 17, 2008

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1 United States Patent US B1 (12) (10) Patent N0.: US 7,389,245 B1 Ashford et al. (45) Date of Patent: Jun. 17, 2008 (54) METHOD AND APPARATUS FOR 6,826,536 B1* 11/2004 Forman /4 PROVIDING INCENTIVES TO PHYSICIANS 2002/ A1* 2/2002 Costello /2 OTHER PUBLICATIONS (75) Inventors: Clint Ashford, Athens, GA (US); Jay sultan B gem GA (Us) Bitran, et a1, Provider Incentives and Productive Ef?ciency in Government Health Services document, Sep [Retrieved on (73) Assigneez Clinton B_ Ashforda Athens G A (Us) Jan. 2, 2004]. Retrieved from Internet. URL: < org/pubs/hfsmarl.pdf>.* * ~ _ ~ ~ ~ - Patterson, J.A. Jr. Physician Compensation, Incentive Plans, and ( ) Nonce' SutbJetCt. to altly ((iilsglalmeé. thf germdof?glg Tax Issues. Texas Health LaW Conference [Retrieved on Jan. pa en 15 ex en e or a Jus e un er 2, 2004]. Retrieved from Internet. URL: < U'S'C' 15403) by 366 days org/public/cle/patterson97.pdf>.* Friedman, H.Website Links Ma y Create Tax for Exem P t Or g s; (21) APP1~NO~309/ Return Disclosure Rules for Private Foundations; Gainsharing _ Arrangements Greenberg Traurig Website. [Ret Jan. 2, 2004]. (22) Flledi Aug- 25, 2000 Retr Internet.URL: < 1999/ friedman99f.htm>.* (51) Int. Cl.. G06Q 10/00 ( ) (Commued) (52) US. Cl /2; 705/4; 705/14 Primary Examiner4C_ Luke Gilligan (58) Field of Classi?cation Search /2, Assistant ExamineriNatalie A. Pass 705/3, 4, 1, 14, 7, 9, 38, 26, 37; 283/117, (74) Attorney, Agent, or Firm4Courtney Staniford & 283/54, 56; 702/181; 600/300, 529, 545; Gregory LLP 364/401; 707/1 See application?le for complete search history. (57) ABSTRACT (56) References Cited The present invention provides a method of providing a US. PATENT DOCUMENTS monetary incentive to a health care provider, typically a physician, responsible for treatment decisions of a patient 5,324,077 A * 6/1994 Kessler et a /54 With a condition during an episode of care. Once the patient 5,557,514 A * 9/1996 Seare et a /2 identity and condition are obtained, a baseline value related 5,819,228 A * 10/1998 Spiro /2 to treatment of the condition can be associated. Thereafter, all the claims processed during the episode of care of the 5,835,897 A * 11/1998 Dang /2 5,845,254 A * 12/1998 Lockwood et a1. 705/2 patient for the condition can be summed to obtain a total 5,890,129 A * 3/1999 Spurgeon..... treatment cost. And, if the total treatment is less than the 5,970,463 A * 10/1999 baseline value, then a monetary incentive can be provided to 6,022,315 A * 2/2000 the provider based upon that episode of care. 6,208,973 B1* 3/2001 6,208,974 B1* 3/2001 6,317,700 B1* 11/ Claims, 25 Drawing Sheets Fes-for-Servlce One-Third of Savings One-Thi. of Savings Inc-MM Mlllllllslrlmf 40 Ply-r so Rsums uousv

2 US 7,389,245 B1 Page 2 OTHER PUBLICATIONS Marsh.Sacri?cing Patients For Pro?ts:PhysicianIncentivesTo LimitCare&ERISAFiduciaryDutyWash.Univ.LaWQutly. V77,No. 4.l999.[Retr.Jan. 2, 2004]. Retr Internet.URL:< edu/wulq/77-4/index.html> and < 77-4/774-l323.pdf>.* Friedman, H. Appeals Court Rejects IRS Inurement Argument; IRS Approves Gainsharing Programs. Mar Greenberg Traurig Alert. [Retrieved Mar. 30, 2005]. Retrieved from Internet. URL: < l 999/friedman99a.pdf>.* Washlick, J. Physician-Hospital Gainsharing Arrangements. Oct Physician s News Digest. [Retrieved Mar. 29, 2005]. Retrieved from Internet. URL: < law/l099.html>.* Celadon Health Signs With Symmetry; Physician Incentive Sys tem Will Use Episode Treatment Groups (TM), PR NeWsWire. New York: Jun. 20, p. 1. [Retrieved from Internet Sep. 12, 2006]. URL: < &sid:l0&fmt:3&clientld:l9649&rqt:309&vname:pqd>.* Boyden A. et al., The appropriate use of?nancial incentives to encourage preventive care in general practice, May [Retreived from Internet Jun. 7, 2007]. URL: < monash.edu.au/centres/che/pubs/rrl8.pdf>.* * cited by examiner

3 U.S. Patent Jun. 17, 2008 Sheet 1 0f 25 US 7,389,245 B1 Patient 1 0 (D Premiums Provider Fee-for-Servioe Payer Provider 3o 20 One-Third One Third of Savings Adlncentivet - ministra or of Savings 40 Payer 3D RETAINS MONEY Figure 1

4 U.S. Patent Jun. 17, 2008 Sheet 2 0f 25 US 7,389,245 B1 6) Provider Patie' 10 _ 2 Gets Service CD Payer 30 Adjudicated Claim & Payment Q) Bonus Check _ Adjudicated Claim Amount & Claim Incentive Administrator 40 Figure 2

5 U.S. Patent Jun. 17, 2008 Sheet 3 0f 25 US 7,389,245 B1 Name Family ID Member ID Patient Sex Patient Age Amount Paid CPT4 Code First DX Code Second DX Code Third DX Code Fourth DX Code First Date Of Service Last Date Of Service Type Of Service Provider ID NDC Code Size Sample M /26/1999 A Description With Member ID, forms a unique identi?er for each patient in the plan With Family ID, forms a unique identi?er for each patient in the plan Code to indicate gender Age of patient Adjudicated amount, the amount the payor pays to the provider, which excludes copays and deductibles A industry standard code which designates the type pf procedure or action provided An industry standard (lcd-9) code which designates the primary diagnosis An industry standard (lcd-9) code which designates an additional diagnosis, if it exists An industry standard (lcd-9) code which designates an additional diagnosis, if it exists An industry standard (ICU-9) code which designates an additional diagnosis, if it exists The date the service was provided (or the?rst date of a date range) The last date of a date range when service was provided, or null A code which indicates the type of charge, if the CPT4 code is not available A unique identi?er for a provider An industry standard code which identi?es the drug used Figure 3A

6 U.S. Patent Jun. 17, 2008 Sheet 4 0f 25 US 7,389,245 B1 Nam ETG Assignment Episode Number Episode Cluster Episode Type Flag Record Type Flag Cluster Provider ID Size Added by Gr uper Sampl M Descripti n A code indicating the ETG Category assigned to this claim, which classi?es the episode type A sequential counter used to identify distinct episode instances A subset of an episode instance A code indicating the con?dence in the accuracy of the episode instance A code indicating the category of the expense The provider who is responsible for the claim which is the basic claim for this cluster. FIG. 3B1

7 U.S. Patent Jun. 17, 2008 Sheet 5 0f 25 US 7,389,245 B1 Nam EPG Assignment EPG Number Outlier Do not Pay Incentive Responsible Physician Baseline Adjusted Baseline Savings Referring Physician Default Physician Floor Value Ceiling Value Total Actual Cost Serial Episode Indicator Do not Check for Serial Episode Indicator Do not Check for Floor Indicator Below Floor Indicator Possible Upcode Indicator Prorata factor Comorbidity Factor Added by Incentive Administrator Siz Sample Description Entity A code indicating the EPG Category Episode Instance assigned to this claim, which classi?es the episode type A sequential counter used to identify Claim distinct episode instances 1 0 A?ag to indicate that the episode is an Episode Instance 1 0 outlier A?ag to indicate that the episode Episode Instance should not have an incentive paid The provider who is responsible for the Episode Instance EPG Default expected cost of the episode, Episode Category used as a normative measure of cost The baseline value for the episode Episode Instance instance, adjusted for comorbidities or other reasons The savings achieved for this episode Episode Instance instance - if negative, indicates that the total cost was greater than the baseline The physician who referred the patient, Episode Instance if any The default physician to use for the Patient patient if no Responsible Physician can be determined The minimum cost an episode instance Episode Category is expected to cost The maximum cost an episode is Episode Category expected to cost The total payments made for the claims Episode Instance in the episode 1 0 Indicates possible serial episode Episode Instance gaming validation 1 0 Indicates that this episode instance Episode Instance should not be checked for a serial episode gaming validation Indicates that this episode instance Episode Instance should not be checked for a Below Floor validation Indicates possible below?oor gaming Episode Instance validation Indicates possible upcoding gaming Episode Instance validation Percentage of total treatment (and expense) to be allocated to this episode where the patient enters or leaves the plan while an episode is in progress. Most episodes will be 1 Ratio used to adjust a baseline for the presence of a comorbidity condition for the patient FIG. 3B2 Episode Instance Cormorbidity Instance

8 U.S. Patent Jun. 17, 2008 Sheet 6 0f 25 US 7,389,245 B1 Payer Network 32 Provider Network 22 Internet 50 Incentive Administrator Network 42 Figure 4

9 U.S. Patent Jun. 17, 2008 Sheet 7 0f 25 US 7,389,245 B1 Claims Data from Payer Preprooessing of Open Data 200 Data Grouped Into Episodes 300 Post Process of Grouped Data No 400 l Yes Determine Responsible Physician 500 Need to regroup data? 600 Yes Outlier Determination 650 \ Comorbidity. Send Incentive Determination * calcula7tggavmgs Payments Archive Data Figure 5

10 U.S. Patent Jun. 17, 2008 Sheet 8 0f 25 US 7,389,245 B1 Are there duplicate claims? 202 Are there data exceptions? 204 Identify new No > Providers 208 Yes Ha" Ywa 205 Check (?gure 6A-2) 210 l Logic Adjustments (?gure 6A-3) 230 l Adjust Closed Episodes (?gure 6A-4) 250 Figure 6A-1

11 U.S. Patent Jun. 17, 2008 Sheet 9 0f 25 US 7,389,245 B1 i For each new claim 212 Is there an entry for the claims procedure and diagnosis codes in the non-allowed table"? 214 Is there another claim? 218 Yes i Mark claim as non-allowed '216 L Figure 6A-2

12 U.S. Patent Jun. 17, 2008 Sheet 10 0f 25 US 7,389,245 B1 i For all claims and Pre Processing business rules 232 Perform test 234 Did test. Is there?nd data which. modi?ed? Yes Modify data 238 Figure 6A-3

13 U.S. Patent Jun. 17, 2008 Sheet 11 0f 25 US 7,389,245 B1 For each patient with a claim with a DOS less than [claim cut-off date used for last processing] 252 l i Extract all claims for that patient from open and closed! epsiode instances UNION all new claims for a patient 254 Process the subset of claims through the rest of Pre processing, Grouping, and Post-Processing. making a "temp" result set of episodes 256 For each episode inshance that has already closed before the process 258 i Does the - isode exist (closed) in ' No - either an old episode is Make a new adjustment new "temp" result set, now open or an old eposode episode to reverse the matched by episode has gone away net savings category? l Create a new episode instance, marked as an Archive old claims Yes x > ajustment episode with 278 value 268 Y _ v Move all claims (with Yes.. new "adjustment" Arohive the old olaims, ciaims) to the open since those existed Claim area Yes before reoalc Yes Remember that this 1 closed episode does not ; need adjustment 264 Move claims to History, along with new "adjusment" claims 272 ls there another old closed episode? 266 "temp" set that did not exist in the set of episodes that already exists? Move the claims that beloing to the new epslode to the active area 284 i ere another pati with a DOS less than Figure 6A-4

14 U.S. Patent Jun. 17, 2008 Sheet 12 0f 25 US 7,389,245 B1 i Grouper used to Establish ETGs and initial aggregations 350 Figure 7

15 U.S. Patent Jun. 17, 2008 Sheet 13 0f 25 US 7,389,245 B1 Episode Payment Group Encoding (?gure 8A-2) 402 Gaming Check (?gure 8A-3) 430 Logic Adjustments (?gure 8A-4) 490) 1 Finished ) Figure 8A-1

16 U.S. Patent Jun. 17, 2008 Sheet 14 0f 25 US 7,389,245 B1 For each open and newly closed ETG instance 404 For each "EPG.... assignment translate to EPG code. 9 No > busmess rule" for for the ETG category. the ETG Category Yes 414 Process the business rule Yes 416 Assign the ETG Is there instance to the given another EPC} ETG code asslgnment business 405 rule? 420 Is there nother open or newl closed ETG instance? 410 No i Flag the ETG instance for manual review 422 No Figure 8A-2

17 U.S. Patent Jun. 17, 2008 Sheet 15 0f 25 US 7,389,245 B1 f as t, (Job is run in Post-Processing) For each EPG instance whether closed or open (refer to each as "Main" episode) 432 Did the same Patient have an earlier instance of the same or a similar EPG category? 434 Yes Refer to the earlier episode 5 as the "Prior" episode. If more than one earlier instance exists, select the 4 No latest one (the closest to the Main episode) 440 Is this a cronic condition? 436 Yes Yes Is the number i days between the Mai pisode's start date and the Prio episode's end date less than the number of days between episodes which is not suspicious" value for this EPG category? 442 Is there another instance to check? 438 Y Flag the Main 95 episode as a I episode "Serial" 444 Figure 8A-3 (1 of 4)

18 U.S. Patent Jun. 17, 2008 Sheet 16 0f 25 US 7,389,245 B1 M nu For each newly closed EPG instanoe 446 "override?oor - aseline" indicator been set for this EPG instance? 448 Yes adjusted baseline below the "?oor baseline value" for this EPG'? 450 Yes i Yes Mark the episode as "below?oor baseline" there another newly closed EPG instance? 454 k 1 Figure 8A-3 (2 of 4)

19 l l U.S. Patent Jun. 17, 2008 Sheet 17 0f 25 US 7,389,245 B1 For each newly closed EPG instance the "override diagnos upended check" indicated for this EPG instance? 458 For each "upcoding diagnosis check test which exists for the EPG category 462 Execute the related test 464 Was a result set found? 466 Yes No Yes Mark the episode as "possible diagnosis upcode" 468 another test for this category? 470 Is theref another newly closed EPG instance? 460 No Figure 8A-3 (3 of 4)

20 U.S. Patent Jun. 17, 2008 Sheet 18 0f 25 US 7,389,245 B1 - > a News : Has Payer rovided a list of membe who have exited the plan? 472 Yes Y For each Patient who has exited the plan before the "claim cut-off date" used in the processing is there another Patient who has exited the plan before the "claim cut-off date" used in the last processing? 480 oes Patie. have any open episodes? 478 YES For each episode for the Patient 482 l 1 l Find the average length of the episodes with the same EPG category Finished l<~ Calculate the factor 486 Is there another open episode for this Patient? 488 YE: Figure 8A-3 (4 of 4)

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