HAI LEADERSHIP PARTNERING FOR ACCOUNTABLE CARE

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1 HAI LEADERSHIP PARTNERING FOR ACCOUNTABLE CARE

2 Cepheid s Government Affairs Department Advocating for Patient Access to Molecular Diagnostics in the Era of Healthcare Reform A TEAM APPROACH Legislative and regulatory reform measures aim to reduce healthcare-associated infections (HAIs) by incorporating various strategies into rapidly evolving national healthcare delivery and payment models. These strategies include shared-savings programs (e.g., Accountable Care Organizations) and incentive programs (e.g., Value-Based Purchasing and Readmission Reduction Programs). Because any meaningful national conversation surrounding HAIs must address the political, economic and social implications of proposed policies, it is important to convey the value of rapid molecular testing as part of a comprehensive infection control program that may assist healthcare providers in meeting the quality and cost benchmarks of shared savings and other incentive programs. An important aspect of industry involvement in the development of and response to reform measures is stakeholder and policymaker education. Cepheid s U.S. Government Affairs (GA) Department is comprised of a dedicated team of professionals experienced in legislative, regulatory, and reimbursement-related aspects of the healthcare system. The team works closely with providers, policymakers and other key opinion leaders in the public and private sectors to improve patient access to rapid on-demand molecular testing.

3 STATE OF AFFAIRS Healthcare-associated infections (HAIs) are a significant public health issue. Reducing the incidence of HAls has become a national priority in policy initiatives that aim to improve patient safety and outcomes by rewarding facilities and clinicians for providing high quality services. The Patient Protection and Affordable Care Act (ACA) of 2010 initiated several provisions that are affecting standards for care delivery, payment methodologies and the exchange of information. The ACA, upheld by the United States Supreme Court in July 2012, established national programs designed to encourage providers to better coordinate care and share in any resulting cost savings. Even before the ACA, the Centers for Medicare and Medicaid Services (CMS), as well as many commercial payers, were actively engaged in the development of shared savings programs and bundled payment systems. All of these activities have begun to move the healthcare system away from the more traditional fee for service method of paying for healthcare and toward practices that tie payments to quality and cost metrics. SHARED SAVINGS PROGRAMS A key provision of the ACA is the establishment of the Medicare Shared Savings Program, which includes the creation of a new category of provider the Accountable Care Organization (ACO). In an ACO model, a set of providers across care settings collaborate with one or more public or private payers in an effort to deliver more coordinated care in return for a share of the savings they achieve through improved efficiencies in the delivery of services. In any shared savings program, the cost of care for a group of patients is monitored for a predetermined time to develop a baseline. Subsequent years of cost measurement are compared against the baseline. If the ACO is able to reduce the cost of care (i.e., generate savings), the payer shares a percentage of the savings with the provider group. If the cost of care increases, the ACO/ provider group may have to reimburse the payer(s) for a portion of the increase. All ACOs are held to various quality and performance metrics in order to ensure that cost reduction is attained without a reduction in the quality of care. Effective prevention of HAIs within the ACO patient population is one way providers may improve quality and generate savings under the program.

4 INCENTIVE PROGRAMS Value-Based Purchasing (VBP), sometimes referred to as Pay for Performance (P4P) programs, were developed by public and private payers to provide incentives for providers to improve and maintain high quality services. There are three key steps in any VBP initiative: first, facilities are given a payment incentive to report data on a predetermined and standardized set of quality measures so that payers can calculate a baseline performance [e.g., rate of methicillin-resistant Staphylococcus aureus (MRSA) bacteremia]. Next, process measures are incorporated to incentivize utilization of processes that will improve care. An example of one such measure is the Surgical Care Improvement Process (SCIP) measure to determine whether the appropriate antibiotic prophylaxis is given prior to surgery. Finally, outcome measures (such as the reduction of catheter-associated urinary tract infections) are incorporated. Positive or negative payment incentives will be applied depending on outcomes achieved. Through the Readmission Reduction initiative, CMS hopes to reduce preventable readmissions by applying a penalty against a hospital s total annual DRG payment if it has an excessively high rate of readmissions for any reason for patients initially admitted with heart attack, heart failure or pneumonia. Both readmission rates and the associated penalties are available for consumers to review prior to making a determination of where to seek care. 1 Page 7 shows an example of the dollars at risk due to excess readmissions. Under CMS various incentive programs, significant healthcare dollars are potentially at risk. By 2017 up to 8% of hospital-based DRG payments may be at risk depending on a facility s reported quality performance (Table 1). As of January 1, 2013 hospitals are required to report rates of five HAIs, including MRSA and Clostridium difficile (C. difficile) infections to the CDC NHSN as part of the Medicare Inpatient Quality Reporting Program. If rates continue to be of concern to policymakers, potential process and/or outcome measures could be developed under the VBP program to further the reduction of MRSA or C. difficile infection rates. In addition to hospitals, CMS is expanding the requirement for reporting certain HAIs to other sites of care (Table 2 - see back page). TABLE 1 Maximum Financial Impact of CMS Incentive Programs on DRG Payments FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Hospital Inpatient Quality Reporting Program* (Reduction to annual update) Hospital Value-Based Purchasing Program (VBP) (Incentive/Penalty) Reducing Hospital Readmission Program (Penalty) Hospital Payment Reductions for Healthcare-Acquired Conditions (Penalty) -2.0% TBD TBD TBD TBD ± 1.0% ± 1.25% ± 1.50% ± 1.75% ± 2.0% 1.0% 2.0% 3.0% 3.0% 3.0% 1.0% 1.0% 1.0% * Each year Medicare sets the hospital payment update for HIQR through a formal rule making process for participating acute care hospitals.

5 STRATEGIES FOR SUCCESS IN THE CHANGING U.S. HEALTHCARE LANDSCAPE Various incentives hold facilities accountable for patient safety and allow patients the opportunity to select the best hospitals for their care. As shared savings programs and payment incentive initiatives continue to gain traction, diagnostic testing will likely become more critical in helping providers direct patients towards more cost-effective patient management strategies. Cepheid s innovative molecular diagnostic tests can aid healthcare facilities in reducing HAIs and in meeting infection-related quality performance goals. By quickly and accurately identifying patients who are at the greatest risk of contracting an infection, treating providers can make more timely decisions to effectively manage patient care, potentially adding value by: Enabling improved health outcomes and quality of care Reducing rates of complications and length of hospital stay Reducing hospital readmissions due to infection Promoting better antibiotic stewardship Maximizing the efficient use of healthcare resources Reducing the total cost of care Helping facilities meet quality metrics Improving patient and provider satisfaction Cepheid s Government Affairs team continues to work closely with CMS and other policymakers as these payment policies are further developed and implemented. Providers who would like additional information or are interested in collaborating on policy or reimbursement matters should contact their Cepheid representative to be connected with a member of the Government Affairs team.

6 Revenue at Risk Due to Excessive Readmissions:

7 As data becomes publicly available, consumers will be able to make more informed decisions on where to seek elective care based on each hospital s performance relative to others in any given geographic area. Hospitals will be able to assess how they perform relative to others competing for the same patient population. Hospitals further will be able to assess the impact of incentives or penalties on their overall financial health, as illustrated by the following example. 2 Hospital XYZ is a suburban acute care facility with 196 acute care beds, 10,594 total discharges, of which 4,062 (38%) are Medicare discharges. On their 2010 Medicare Cost Report, 3 Hospital XYZ reported the following 30-day all cause readmission rates: 20.1% for patients with initial admission for heart attack 24.9% for heart failure 18.7% for pneumonia As a result, the hospital was assessed a readmission penalty of 0.36%. In 2010, Hospital XYZ reported a total of approximately $39,329,654 in payments from CMS for all acute care Medicare Part A admissions. Applying the readmission penalty, Hospital XYZ stands to lose approximately $141,587 in FY2013 if its income is similar to that of FY2010. FIGURE 1 Revenue at Risk Due to Excess Readmissions Figure 1 Examples of Penalties Assessed Through Readmission Reduction Program $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 0% 0.36% 0.5% 1% 2% 3% 2013 Penalty Status 2014 Max 2015 Max Penalty Penalty These types of payment incentive programs not only apply to Medicare patients, but increasingly are being implemented in the commercial payer sector, further raising the financial stakes for hospitals to improve quality. Patients are times more likely to be readmitted if they have a surgical site infection compared to those that do not, 4 with 24 39% being readmitted within 30 days if they had a healthcare-acquired infection defined in CMS healthcare-acquired condition (HAC) program. 5 Another study showed an increased risk of readmission for patients testing positive for MRSA, vancomycin-resistant enterococci (VRE) or C. difficile within 48 hours of a primary admission. 6 Reduction in infections would improve patient safety and satisfaction, and potentially lower the penalties assessed in subsequent fiscal years.

8 TABLE 2 Medicare Payment Programs and HAI Measure Reporting Dates Hospital Inpatient Quality Reporting Long-Term Care Hospitals Quality Reporting Inpatient Rehabilitation Facility Quality Reporting Cancer Hospitals Quality Reporting Hospital Value-Based Purchasing Program Preventable Hospital-Acquired Condition Non- Payment Policy Catheter-Associated Urinary Tract Infection 1/1/ /1/ /1/2012 1/1/ /1/2008 Central Line Bloodstream Infection 1/1/ /1/2012 1/1/2013 Baseline: 1/1/ /31/2011 Performance: 2/1/ /31/2013 For FY 2015 VBP Program Surgical Site Infection MRSA Bacteremia infection Clostridium difficile Infection Vascular Catheter- Associated Infection 1/1/ /1/2008 1/1/ /1/ /1/2008 References: 1. See [http://www.hospitalcompare.hhs.gov/]. See also Kaiser Health News Medicare Readmissions Penalties By Hospital at [http://khne.ws/2013adjustments]. Accessed August 30, Analysis for the example presented was based on examination of actual data for 71 hospitals available through The American Hospital Directory at [http:/www.ahd.com]. 3. The 2010 Cost Report is the most recent year available to the public. 4. Herwaldt LA, et. al. A prospective study of outcomes, healthcare resource utilization, and costs associated with postoperative nosocomial infections. Infect Control Hosp. Epidemiol. 27(12): December Radey LA. Readmissions Due To Hospital Acquired Conditions (HACs). February Available at: [http://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitalacqcond/ Downloads/Final-Report-Readmissions.pdf]. 6. Emerson CB, et. al. Healthcare-Associated Infection and Hospital Readmission. Infect Control Hosp. Epidemiol. 33(6): June CORPORATE HEADQUARTERS 904 Caribbean Drive Sunnyvale, CA USA TOLL FREE PHONE FAX EUROPEAN HEADQUARTERS Vira Solelh Maurens-Scopont France PHONE FAX

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