ACOs and Bundled Payments. The Patient Protection and Affordable Care Act (ACA) I. The Basics. Medicare s Financial Condition

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1 ACOs and Bundled Payments ACO and Bundled Payments What You Need To Know Missouri Health Care Association August 2014 Brian Hickman, CPA Brad Brotherton, CPA Sherri Robbins, RN, LNHA, CLNC, RAC-CT I. The Basics II. The Environment III. IV. Bundled Payments V. Accountable Care Organizations VI. Clinical and Operational Considerations VII.Where Do We Go From Here? I. The Basics Medicare Reimbursement Managed care initiatives will gradually replace fee-for-service system Accountable Care Organizations (ACOs) Bundled Payments Why? Growth in Medicare Spending Without ACA % of Federal Budget 30% 25% 20% 15% 10% 5% 0% Year Medicare s Financial Condition Part A trust fund projected to be depleted in 2030 Increasing number of beneficiaries as baby boomers reach eligibility age, along with declining ratio of workers per beneficiary making payroll contributions 1

2 Concerns in SNF Reimbursement High percentage of admissions based on rehab needs Processes primarily directed by therapy High concentration of rehab in upper levels Ultra High RUGs 55% Very High RUGs 28% Limited connection between other provider types ACOs and bundled payment Both seek to facilitate and encourage coordinated and integrated care and to reduce the cost of care ACOs through organizational structure reforms Bundled payment initiative through payment reforms Structure ACOs much more restrictive ACOs require separate legal entity Bundling less prescriptive Under Bundling, participating organizations can choose the bundled services, share in gains (losses) for episode of care ACOs scope of services is broader compared to bundling. Part A and Part B services over a measurement period (i.e. one year) are included in Shared Savings calculation Bundling - acute, physician, post-acute, etc. are included within a specific episode, cont. ACOs measured over time Bundling focuses more on specific services to specific patient Participants ACOs all Medicare provider types can participate, but only certain types can be a sponsor (SNF cannot be a sponsor) Bundling eligible awardees can include physicians, hospitals, health systems, SNFs, IRFs, HHAs, other 2

3 Savings Rates ACOs savings are shared between ACO and Medicare. Higher potential savings rate if ACO participates in model that shares both savings and losses Savings Rates, cont. Retrospective Bundling difference between actual fee-for-service payments for episode compared to target price to determine if savings retained or repay losses Prospective Bundling applicants paid a predetermined single payment for episode Hospitals in the Cross Hairs II. The Environment Medicare can no longer pay for cost overruns Limited provider integration potentially drives cost throughout the care continuum New systems attempting to reduce the inefficiencies Cost Control Fundamental to Future Profits Urgent Need to Bend Supply Cost Growth Curve Cost Growth Nearly on Par with Revenue Growth Median Hospital Operating Expense Growth and Revenue Growth Unchecked Supply Growth 2008 to 2011 Average three-year CAGR 1 Price Pressure Unabated Suppliers facing 2.3% medical device excise tax, begins December 2012 Flattening clinical innovation curve fails to drive down prices in maturing markets Market demand for new device-dependent procedures, Source: 2011 Not-for-Profit Hospital Medians, Final Report, Moody s Investor, August 2012 Advisory Board interviews and analysis. 1) Compound annual growth rate. without proven benefit Source: Lichtenberger Scott, et al, How Sourcing Excellence Can Lower Hospital Costs, Health International, 2010, 10: 18-29; Advisory Board research and analysis. 3

4 Volume Performance 19 Reimbursement 20 Modest Growth Anticipated for the Near Term ACA Includes Hospital Reimbursement Cuts Inpatient and Hospital Based Outpatient Volume Projections Law Reduces Annual Payment Increases Across Ten Years Inpatient Volume, CAGR 1 Hospital-Based Outpatient Volume, CAGR 1 Medicare Fee-for-Service Payment Cuts Reductions to Annual Payment Rate Increases % $415B in total fee-for-service cuts, ) Compound Annual Growth Rate (2.3%) Source: Advisory Board Inpatient and Outpatient Market Estimators; Advisory Board research and analysis. 1) Includes hospital, skilled nursing facility, hospice, and home health services; excludes physician services. 2) Disproportionate Share Hospital. $260B Hospital payment rate cuts, $56B Reduced Medicare and Medicaid DSH 2 payments, Source: CBO, Letter to the Honorable John Boehner Providing an Estimate for H.R.6079, The Repeal of Obamacare Act, July 24, 2012, available at: Advisory Board research and analysis. Pulling Back the Curtain on Hospital Reimbursement Bundled Payment Models Accountable Care Organizations III. Insert slide on readmissions and patterns 4

5 Required Component of ACA Relates to certain readmissions within 30 days of acute hospital inpatient stay National readmission rate has been hovering around 20% costing Medicare close to $15B annually Annual 3% reduction to Medicare inpatient reimbursement possible in 2015 Readmissions Penalties Hospital Creating Penalties for Avoidable Inpatient Volumes 19.6% Hospital Percentage of Medicare Patients Readmitted within 30 Days Began in FY 2013 All hospital DRGs reduced by an adjustment factor calculated based on excessive readmissions Adjustment factor is calculated as percentage of revenue paid for excessive readmissions divided by total revenue Projected $7.1B in reduced Medicare payments, $13,023 Average Medicare payment for medical pneumonia readmission Source: Jencks SF, et al., Rehospitalizations Among Patients in the Fee-for-Service, New England Journal of Medicine, 2009, 360: , MedPAC, Report to the Congress, available at: accessed April 4, 2011; Gage B, et al., Examining Post Acute Care Relationships in an Integrated Hospital System, RTI International, available at: accessed April 4, 2011; Advisory Board interviews and analysis. Acute Myocardial Infarction Heart Failure Pneumonia COPD (Starting in 2015) Total Hip Arthroplasty (Starting in 2015) Total Knee Arthroplasty (Starting in 2015) CABG Planned to Start in 2017 Based on Lagging 3 Year Period Data 2015 Rates Based on Actual Results Requires a Long-Term Commitment to Improvement All but 12 Missouri hospitals face some payment reductions 1 Missouri hospital penalized full 3% IV. Bundled Payments 5

6 Bundled Payments for Care Improvement Initiative Bundled Payments for Care Improvement Initiative Now More than 6,000 Providers Voluntarily Participating 4 Different Bundled Payment Models to Choose From Only 243 Providers (Just 4%) Currently Bear Any Financial Risk (Phase II) Bundled Payments Redefining the Acute Care Episode Bundled Payments Drive Delivery System Integration Fee-for-Service Environment Individual Payments Reinforce Siloed Care Delivery Bundled Payment Lump Sum Environment Payments Drive Integration through Shared Accountability Elevating the Episodic Care Ambition Reform Legislation Expands Bundling Across the Continuum Model 1 3 Days Pre-Acute 1 Hospital Inpatient Stay Inpatient MD Post-Acute Facility Post-Acute MD Related Readmissions Payer Payer Model 2 Model 3 Model 4 Case in Brief: Medicare s Bundled Payments for Care Improvement (BPCI) seeking voluntary participation in four bundled payment models Physician Hospital Post-Acute Physician Hospital Post-Acute Source: Advisory Board interviews and analysis. Models 1-3 provide retrospective reimbursement; Models 2 and 3 include post-episode reconciliation; Model 4 offers single prospective payment Acute care hospitals, physician groups, health systems eligible for all models; post-acute facilities may participate without hospitals in Model 3 Participating providers may share in the financial gains resulting from a more efficient care model if cost savings are achieved 1) Includes all hospital diagnostic testing and related therapeutic services furnished by an entity wholly owned or operated by the admitting hospital. Source: Centers for Medicare and Medicaid ; Advisory Board interviews and analysis BCPI Participants Favoring Longer Episodes Not Just a Medicare Private and Public Sector Bundling Pilots Emerging Nationwide Participation by Model Type Bundling for obstetrics Reimbursing for Baskets of Care Participating in Prometheus Pilot Exploring cardiac bundling Developing orthopedic bundling Bundling for CABG 1 Participating in Prometheus Pilot Hospital Inpatient Hospital and Physician Inpatient and Post-Discharge Post-Discharge Hospital and Physician Inpatient Source: Centers for Medicare and Medicaid ; Advisory Board research and analysis. Bundling joint replacements, procedures with defined outcomes 1) Coronary Artery Bypass Graft. ACE Demo Sites Bundling total joint replacement Bundling for cardiac surgery Bundling total knee replacement Four physician groups bundling for orthopedic surgery Source: Advisory Board research and analysis. 6

7 Accountable Care Organizations ACOs Off and Running ACO Presence Steadily Extending Nationwide V. Accountable Care Organizations (ACOs) Total Number of Medicare ACOs January 2014 Widening Reach of ACOs 52% 14% Portion of US population living in a primary care service area with an ACO Portion of US population treated by an ACO Pioneer April 2012 July January January ACO MSSP Model Cohort MSSP MSSP MSSP Cohort Cohort Cohort 1) Medicare Shared Savings. Total 5.3M Medicare FFS beneficiaries treated by an ACO Source: Muhlestein D, Continued Growth of Public and Private Accountable Care Organizations, Health Affairs Blog, February 19, 2013; Oliver Wyman, Accountable Care Organizations Now Serve 14% of Americans, February 19, 2013; Advisory Board interviews and analysis Where the Medicare ACOs Are 23 Pioneer and 228 Shared Savings ACOs August 2013 Mechanics of the Medicare Shared Savings Applying Total Cost Accountability to Fee-for-Service Payments Shared Savings Payment Cycle Source: Centers for Medicare and Medicaid ; Health Care Advisory Board interviews and analysis. in Brief: Medicare Shared Savings Cohorts launched April 2012, July 2012, and January 2013; contracts to last minimum of three years Physician groups and hospitals eligible to participate, but primary care physicians must be included in any ACO group Participating ACOs must serve at least 5,000 Medicare beneficiaries Bonus potential depends on Medicare cost savings, quality metrics Two payment models available: one with no downside risk, the second with downside risk in all three years Assignment Patients assigned to ACO based on terms of contract Billing Providers bill normally, receive standard fee-for-service payments Comparison Total cost of care for assigned population compared to risk-adjusted target expenditures Shared Savings Payment Bonuses or penalties levied based on variance of expenditures from target Distribution ACO responsible for dividing bonus payments among stakeholders Source: Advisory Board research and analysis Three Primary Levers for ACOs to Reduce Spending ACOs Targeting Total Cost of Care First Year Pioneer ACO Results Are In Strong Quality Performance, Uneven Financial Results 1 Options for Risk-Bearing Providers Prevent Utilization through Medical Management Example: High-risk patient care management (e.g., medication management, care transitions management) Year One Financial Results Beneficiary Cost Growth, 2012 Gross savings: $87.6M Year Two Participation Decisions Moving to MSSP 1 Staying in Pioneer ACO Model Population Health Manager 2 Retain Utilization Within Network Example: Cost incentives to encourage in-network imaging referrals Opting Out Entirely 3 Direct Unavoidable Utilization to Low-Cost, High-Quality Partner Inpatient, outpatient procedures Select inpatient medical care Example: Volume steerage to high-value acute care providers Source: Advisory Board research and analysis. 1) Medicare Shared Savings. First Year Pioneer ACO Results 13 Earned bonuses, totaling $76M 2 Incurred losses, totaling $4M 25 Generated lower risk-adjusted readmission rates 32 Successfully reported quality measures Source: Centers for Medicare and Medicaid ; Health Care Advisory Board interviews and analysis. 7

8 What Causes Readmissions? VI. Clinical and Operational Considerations Overly cautious post-acute providers? Overly cautious physicians? Inadequate discharge planning by acute? Poor information exchange in care transitions? Lack of understanding about communicating options (presenting all post-acute care providers equally)? Lack of specialization among post-acute care providers? Post-Acute Care Action Steps What Hospitals May Not Know Open lines of communication with hospital discharge planners/case managers. What type of cases do they have trouble placing? Educate about types of services/patients you serve (everyone does rehab, focus on clinical) Know your referring hospital s frequently occurring cases. Develop specialties. Learn to market. Change intake procedures, staffing, etc. to ease transitions. 20% of hospital discharges occur on Friday.20% of hospital admissions occur on Monday. Get onsite to evaluate patients. How well the discharge to SNF happens is a strong predictor or readmissions. Difficult transitions are the norm due to poor communication Our caregivers are equal to their caregivers, & in some ways significantly better. We do not have the same resources (onsite pharmacy, specialty equipment) Lack of cooperation by the hospital reflects badly on our facility We need earlier and clear communication regarding prospective admissions. Physicians Payments for care plan oversight and rounding are often misunderstood. In general for Medicare skilled services: Do not receive compensation for care-plan oversight Paid for initial comprehensive visits, including certification Paid for monthly required visits Paid for other medically necessary visits, including those prior to initial comprehensive visit New physician service codes fro transition for postdischarge transitional care management (1/1/13) Physicians & Referral Decisions Education physicians on what skilled nursing has to offer: Home like atmosphere, consistent caregivers s for certain diagnosis Implement a program that provides strategies, tools, care process improvements, and related staff education aimed at identifying acute changes in resident conditions early. Determine if there is a need for your SNF to specialize in certain patient care types. 8

9 Families and Residents Families and Residents Since we all understand how unrealistic family members can be at times regarding a patient s ability to return to a state of health: Have those hard conversations early, every elderly patient does not get well. Every patient is not appropriate for rehab, speak up, you are the patient advocate. May need to educate physicians and referral sources, depending on patient type. It is not a reflection of the care provided. Be realistic, offer Palliative Care and Hospice Care when appropriate. Palliative care is to promote as much comfort as possible. Hospice care is for patients with a life expectancy of six months or less. Be a family and patient educator regarding various programs and how they may be beneficial for certain patients. Your Re-Hospitalization Rate What is your re-hospitalization rate? Choose a specific period of time, such as 30 days. Count the number of re-hospitalizations in that period Divide the number by the facility s average census for that period of time Multiply by re-hospitalizations, avg. census divided by 89 =.1348 X 100 = 13.48% Re-Hospitalization Rates by Diagnosis Recommended each provider knows their re-hospitalization percentage per diagnosis as well: CHF Pneumonia Orthopedics Cardiovascular disorders Urinary tract infections Interact II Interact II Acronym for Interventions to Reduce Acute Care Transfers Systematic approach with a goal to improve care and reduce the frequency of avoidable transfers to the acute hospital A quality improvement program designed to improve the early identification, assessment, documentation, and communication about changes in the status of residents in SNFs Implement Toolkit 9

10 Protecting Access to Medicare Act of 2014 Also know as the Sustainable Growth Rate (SGR) bill Includes provision requiring HHS to implement a value-based purchasing program for SNFs by federal fiscal year 2019 In reality is a hospital readmission incentive policy Protecting Access to Medicare Act of 2014 Medicare rates cut 2% in FY % to 70% of cut goes back into incentive pool Redistributed to SNFs who perform well on hospital readmission measure Low performing SNFs will get no money back Play Well With Others - Other Providers Know your referral sources key inpatient diagnoses & develop relevant care plans. Know the hospitals readmission rates & educate them about what you can do to help. Coordinate care across care providers from hospital discharge to home If you have an electronic health record (EHR).do you have a continuity of care record? Play Well With Others - Patients and Families They are not as informed about health care as you are: Help them have realistic expectations regarding Benefits Care plan Outcomes Understand and remember that changing care sites (acute-snf-home health) is not only uncomfortable, but care transitions can be a key factor in readmissions. Play Well With Others - Physicians Remember what physicians want Patients to get quality care Patients to get efficient care Things to be done their way To get paid for the services they provide Remember Hospitals are the gatekeepers of our services learn their issues & how to help them solve THEIR problems. Educate with real information rather than finger-pointing Learn how to market! You have a great story, tell it!! Part of that is understanding other post acute provider advantages. Get the patient in the right post-acute setting at the right time for the right amount of services. Implement a program to track and reduce re-hospitalizations. Re-educate regarding skilled care, it is not just Rehab services. Play well with others. 10

11 Where Do We Go From Here? VII. Where Do We Go From Here? Understand your market area ACOs or Bundlers looking at SNFs? What types of patients/conditions being served by hospital(s) in your area? Can you fill a niche or need? Look beyond therapy Where Do We Go From Here? Where Do We Go From Here? Know your costs Know your hospital readmission rates Know your lengths of stay Know your quality indicators EHR will you have the ability to effectively communicate with other providers? Compliance program is it effective? Ultimately, can you demonstrate you provide excellent care, operate efficiently, and communicate effectively? Are you desired by patients, physicians and hospitals? Thank You! Brian Hickman Brad Brotherton Sherri Robbins

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