Value Based Contracting
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1 Value Based Contracting The Strategy and Approach of One Network in Oregon Aaron Crane February 17, Copyright Propel Health
2 Session Objectives Overview of network strategy and payment transformation in healthcare Understand various contract structures involved in a value-based business model Provide and overview of the methods of collective contracting Understand one path in the development of a regional clinically integrated network s shared contracting strategy 1 Copyright Propel Health
3 Our Statewide Network 2 Copyright Propel Health
4 Clinical Model Designed for Managed Risk A patient care management strategy is critical to success in Population Health An additional strategy to reduce variance and perform to metrics adds transformative value Access to data is needed to create Physician engagement and behavior change 3 Copyright Propel Health
5 Care Model Enhancement Description: Focused on Programs and Patients Application of Additional Clinical Resources/Staff Generally large endeavors Augments the current Clinical Care Model Generally Passive Physician Involvement Current Projects At Risk Program Transition Care Program Development of Post-Acute Care Program 4 Copyright Propel Health
6 Metric Performance Improvement Description: Focused on Physicians, Providers, Peers and Competition Performs to Population Health Metrics Aligns with Alternative Payment Models Appropriately Transparent and NON-PUNITIVE Individually led and accountable Promotes Active Physician Engagement Current Projects External Measures (See Performance Measures Crosswalk) Patient Centeredness Survey (Aligns with MSSP) Complete and Accurate Coding (RAF improvement) 5 Copyright Propel Health
7 Variance Reduction Description: Focused on Peer Groups, Service Lines and Disease States Data Driven Analysis to identify Targets of Opportunity Adherence to Evidence based medicine or appropriate best practices Subject Matter Expert/ Operations led and accountable Requires Active Physician Engagement Current Projects Pharmacy Value Advanced Care Planning 6 Copyright Propel Health
8 Medicare emerged as a Logical Starting Point for Propel Health because Similar reimbursement for Medicare population across Propel Health members Medicare shifting 50% of FFS payments to APMs and 90% of all payments to value by 2018 accelerated urgency for change MACRA requirements and CPC+ emerged as critical issues to address across markets and independent physicians The Medicare population inclusive of Medicare Advantage plans provide an opportunity to design narrow networks and offer incentives for meeting quality and cost goals Commercial opportunity was more challenging, initially started with health system employee health plans 7 Copyright Propel Health
9 Medicare FFS Reimbursement Trend CMS Annual Inpatient Rate Updates Relative to Medical Cost Inflation 0.70% 1.40% 0.90% 0.95% 2.15% 2.15% 2.15% % -3.08% -4.77% Rate Update Rate Update Less Inflation* -6.41% -6.85% -7.29% -7.73% * Assumes 3.59% annual cost inflation per adjusted inpatient day and 1% increase for value-based payment incentives Source: MEDPAC analysis of cost report data from CMS KFF Hospital Adjusted Expenses per inpatient Day 8 Copyright Propel Health
10 Projected Medicare FFS Margin Margin Decline 300% over the next 3 years! Current Reimbursement $200,000,000 $201,900,000 $206,241,000 $210,675,000 Cost $220,000,000 $236,192,000 $257,449,000 $281,752,000 Loss ($20,000,000) ($34, ) ($51,208,000) ($71,077,000) Margin (10.0%) (17.0%) (25%) (34%) Reimbursement $50,000,000 $50,475,000 $51,560,000 $52,669,000 Cost $55,000,000 $59,048,000 $64,362,000 ($70,438,000) Loss ($5,000,000) ($8,573,000) ($12,802,000) ($17,769,000) Margin (10.0%) (17.0%) (25%) (34%) Medicare IP Rate update - MedPac 0.95% 2.15% 2.15% Medical inflation Kaiser Foundation 7.36% 9.0% 9.44% Aging Population Factor?? 9 Copyright Propel Health
11 MACRA Strategy: MIPS or APM? Merit-Based Incentive Program (MIPS) MIPS Category Performance Weighting MEASURE CATEGORIES YEAR 1 (2019) YEAR 2 (2020) YEAR 3 (2021) Quality (PQRS) 60% 50% 30% Cost - Resource Use (VM) 0% 10% 30% Advanced Alternative Payment Models (QP) No downside risk on Physician Fee Schedule Proposed Models: Comprehensive Primary Care Plus (CPC+) MSSP Tracks 2 & 3 Next Generation ACO Comprehensive ESRD Care (CEC) Model Oncology Care Model (now available 2017) MSSP Track 1 Plus (available 2018) Others TBD by January 1, 2017 Advancing Care Information ( Meaningful Use ) New - Clinical Practice Improvement Activities 25% 25% 25% 15% 15% 15% *THRESHOLDS 2019 to to 2022 * Percent of Payments 25% 50% 75% Percent of Patients 20% 35% 50% *Starting in 2021 All-Payer Combination Option 10 Copyright Propel Health
12 MACRA: APM vs. MIPS Participate in the Advanced APM Path + 5 % + 5 % + 5% + 5 % % 5 % - 7 % + -9 % Participate in MIPS 11 Copyright Propel Health
13 12 Copyright Propel Health Delivery Networks and Requirements for Success in Value-Based Contracting
14 Pursuit of a Clinical Integration Plan and Network Model A Clinically Integrated Network (CIN) is a selective partnership of physicians collaborating with hospitals to deliver evidence-based care, improve quality, efficiency, and coordination of care, and demonstrate value to the market. Clinically Integrated Network Single Signature Contract Payors and Employers $ Participation Agreement CI Entity Participation Agreement 13 Copyright Propel Health Private Practice Physicians Physician employment Hospital-led initiative $ Distribution $ of Funds WHAT IT S NOT Health System and Employed Physicians Mechanism to gain negotiating leverage over payors
15 Review of Necessary Components of a Functional Network 14 Copyright Propel Health
16 Network Contracting Models and Options MESSENGER MODEL Refers to the legal structure in which a network serves as the facilitator without any action of negotiations related to price. The contract is finalized when the proposal is accepted by the provider. FINANCIAL INTEGRATION Refers to the sharing of financial data and financial risk and reward with mutual dependency on financial outcomes through aligned financial incentives. CLINICAL INTEGRATION Refers to the coordination of patient care across conditions, providers, settings, and time in order to achieve care that is safe, timely, effective, efficient, equitable, and patient-focused. Enables providers to execute single signature contracts. 15 Copyright Propel Health
17 FTC Perspective on Joint Contracting FTC Regulation Definition of Clinical Integration Indicia (Probability) of Clinical Integration Price Fixing: unreasonable constraint of competition Market Power: monopolization of a market An active and ongoing program to evaluate and modify practice patterns by providers A high degree of interdependence and cooperation among select providers to control costs and ensure quality? Network providers demonstrate cooperation and interdependence in providing care? A commitment to reduce costs, improve quality and increase efficiency? 1.Use of common information technology to ensure exchange of all relevant patient data 2.Development and adoption of clinical protocols 3.Care review based on the implementation of protocols 4.Mechanisms to ensure adherence to protocols. 16 Copyright Propel Health
18 17 Copyright Propel Health Understanding APM Contracting
19 Alternative Payment Models DEFINITION: Encourage providers to work together to provide more efficient health care in a way that can be rewarded through the alignment of financial incentives and clinical performance outcomes across the continuum GOAL OBJECTIVES OF APM Outcomes and quality over volume Accountability for efficient care delivery Create incentives for the prevention, early identification and early intervention of conditions that lead to chronic illnesses Provide person-centered planning and care coordination Incentivize collaboration across provider types and levels of care Better Patient Care "TRIPLE AIM PRODUCTION Better Population Health Lower Per Capita Cost PERFORMANCE 18 Copyright Propel Health
20 Maturity/Integration Of Delivery System Infrastructure / IT Needed Hierarchy of Risk and Payment Models Capitated / Global Payments Bundled Payments Shared Savings Program Pay-for-Performance (P4P) Discounted Fee-for-Service / Per Diem Payments Traditional Fee-for-Service Payments STRATEGIC AND OPERATING RISK ACTUARIAL INSURANCE RISK FINANCIAL ASSET / LIABILITY RISK 19 Copyright Propel Health 19
21 Pay for Performance (p4p): overview DEFINITION: Providers are rewarded for meeting specific performance targets, as set between parties, which are generally defined by quality of care or patient outcome measures. OBJECTIVE: Create long-terms savings through improved primary health care, use of preventive health services, coordination across providers, and practice improvements THE ROLE OF STAKEHOLDERS ROLE OF NETWORK ROLE OF PAYER/EMPLOYER ROLE OF PATIENT Create Care Model Delivery Define the managed patient population Define and Track Performance Metrics Drive Provider Integration and Collaboration Align Provider Incentives Identify High-Risk Patients Process Claims Define and Track Performance Metrics Review and Provide Performance Dashboards Collaborate on Care Model Design Utilize healthcare services 20 Copyright Propel Health
22 P4P - How it Works Bonus / Withhold Payment TYPE OF P4P Bonus / Withhold Payment Penalties Fee Schedule Adjustment Per-Member Payment Differential Payment Update Payment for Participating / Reporting Quality Grant or Loans Performance achievement Hospital CMS Metrics Physicians Medicare Advantage HEDIS Metrics Bonus pool PAYERS / EMPLOYERS (Discounted) $ FFS Payment $ Bonus pool $ $ Performance achievement HEALTH SYSTEMS PHYSICIANS 21 Copyright Propel Health
23 Shared Savings: overview DEFINITION: risk-based payment model designed to pay providers for each procedure performed with the potential to receive bonus income for reducing spending on the attributed patients below a defined spending target. OBJECTIVE: create incentives for providers to deliver high-value care, moving away from high volume to high quality. THE ROLE OF STAKEHOLDERS ROLE OF NETWORK ROLE OF PAYER/EMPLOYER ROLE OF PATIENT Create Care Model Delivery Define the managed patient population Define and Track Performance Metrics Drive Provider Integration and Collaboration Align Provider Incentives Identify High-Risk Patients Distribute Shared Savings Process Claims Define and Track Performance Metrics Review and Provide Performance Dashboards Review and Reconcile Claims Utilize healthcare services Accountability will vary based on product offering 22 Copyright Propel Health
24 Shared Savings How it Works FUNDS FLOW HEALTHCARE SERVICES NETWORK PAYER / EMPLOYER FFS Pmt. NETWORK CONTRACT FFS Pmt. HOSPITAL PHYSICIAN TARGET SPEND ACHIEVED 50 / 50 % Split of Savings. ELEMENTS SHARED SAVINGS BONUS POOL PERFORMANCE ACHIEVEMENT AGREEMENT Contract signed between providers and payers: Contract includes patient attribution, covered services, risk adjustments, and quality scores BILLING & CLAIMS Providers bill normally, received standard FFS payment Define claims run out period COMPARISON Payer and provider review medical costs for assigned population compared to riskadjusted target expenditures RECONCILIATION If total expenses were less than target, payer pays provider organization bonus based on savings achieved EVALUATION Network measures provider performance against baseline / benchmark DISTRIBUTION Provider organization divides bonus amount(s) among provider participants (e.g., hospital, specialists, pcps, etc.). Can be a 12 months reconciliation process 23 Copyright Propel Health
25 Capitation / Global Payment DEFINITION: Set payment per patient to a provider organization, or group of organizations, from the payer for specific medical services. The provider assumes the financial risk for all care services of the attributed patients. OBJECTIVE: Financially incentivize providers to efficiently manage patient care, avoid costly complications and expensive services (e.g., emergency department visit or inpatient admission) CRITICAL SUCCESS COMPONENTS Predictive Data Modeling Fully Integrated Providers Care Management KEY DECISION & CONSIDERATIONS Level of Risk & Patient Attribution Methodology Care Management Control Delegation of Administrative Services Contract Structure (e.g., stop loss, length, charge back, etc.) Performance Metrics & Surplus Distribution 24 Copyright Propel Health
26 Capitation / Global Payment How it Works 5 NETWORK 1 HEALTHCARE SERVICES GLOBAL BUDGET SET 3 CLAIMS RECONCILIATION PAYER / EMPLOYER 2 FFS Pmt. NETWORK CONTRACT FFS Pmt. HOSPITAL PHYSICIAN EXCESS spend 4 SURPLUS savings PERFORMANCE ACHIEVEMENT 5 25 Copyright Propel Health
27 Contracting Dynamics The transition from fee-for-service to value-based care focuses on impacting cost through fee schedules and managing utilization through alternative payment models. In the early stages of maturation, networks should focus on utilization. As the network matures, infrastructure is deployed and core competencies are refined, contracting should shift energies to utilization and cost based arrangements. UTILIZATION Performance & savings discussions Overlay contracting for aggregate shared savings Collective performance with individual accountability COST Base Rate discussions Individual pricing and discount negotiations Individual focus with organizational support 26 Copyright Propel Health
28 Network Metrics for Management Professionals Metric Participants Covered Lives Access Quality Metrics - Acute Quality Metrics Ambulatory Value-Based Agreements Employer Relationships Revenue at Risk Measurement # of Physicians / Providers / Facilities Belly Buttons Drive Time to PCPs Hospital Compare Metrics HEDIS, PQRS # of Contracts # of Contracts / Wellness Clients % of Total Revenue tied to VBP 27 Copyright Propel Health
29 28 Copyright Propel Health The Pursuit of an APM Strategy in Oregon
30 Oregon ACO Purpose and Strategies Purpose: A statewide, Clinically Integrated Network that delivers value to our communities and competes successfully in the marketplace by Network Development to achieve sufficient access and a scale valued by the market Sufficient number of participants to maintain adequate access to services in the most appropriate setting. 2- Assure sufficient Engagement of delivery system participants Aligned network of providers and facilities around transformation of our delivery system to one focused on value. 3- Risk Arrangements that share risk and align incentives around value. Vehicle that connects populations to this new model, while aligning payment to value-based outcomes. 4- Establish programs driving Clinical Product Optimization Results in market differentiation by affordably meeting the health needs of defined populations. 5- Develop a supporting operating infrastructure A collection of people, processes and technologies that support the portfolio of work in pursuit of our purpose. 29 Copyright Propel Health
31 Birth of the Oregon ACO July 2015 Accelerate model Added lives to develop care model competency Access to external funding of our program Medicare Shared Savings Program Track 3 Best balance of upside opportunity to downside exposure Prospective attribution Risk corridor at 0% Approved beginning 1/1/2016 Four partners participated in the original network, all partners participated in the risk model 30 Copyright Propel Health
32 Introduction Strategy Implementation The Oregon ACO s Enterprise Portfolio has been developed to enable participating providers and facilities to prepare for the future and meaningfully impact the quality and total cost of care for current risk populations in The Enterprise Portfolio consists of five programs representing a platform driving a successful scalable enterprise: 1. Network Development 2. Engagement 3. Risk Arrangements 4. Clinical Product Optimization 5. Operating Infrastructure 31 Copyright Propel Health
33 At Risk Program Results January November Product Reached Assessed Graduated Employer Sponsored Health Plan % 57% 47% MSSP 27% 45% 54% Total 36% 51% 50% Identified Assigned Reached Assessed Graduated Employer MSSP Percentage Reached = # Reached / # Attempts to Reach patient Percentage Assessed = # Assessed / # Reached Percentage Graduated = # Graduated / #Assessed 32 Copyright Propel Health
34 Transition Care Program Results May November Product Reached Assessed Graduated Employer Sponsored Health Plan 37% 56% 70% MSSP 50% 65% 76% 200 Total 44% 62% 74% Identified Assigned Reached Assessed Graduated Employer MSSP Percentage Reached = # Reached / # Attempts to Reach patient Percentage Assessed = # Assessed / # Reached Percentage Graduated = # Graduated / #Assessed 33 Copyright Propel Health
35 Medical Economics Report Description A B C D E F Inpatient PMPM $ $78.28 $55.09 $ $77.49 $62.55 Outpatient PMPM $ $ $ $ $96.90 $ Professional PMPM $ $ $ $ $ $ Other/Additional PMPM $39.40 $11.89 $15.39 $26.41 $9.38 $10.34 Total Medical $ $ $ $ $ $ Pharmacy PMPM $81.42 $61.20 $58.16 $73.45 $74.79 $67.18 Total PMPM $ $ $ $ $ $ Utilization per 1000 members Inpatient Medical Inpatient Surgical Emergency Room Outpatient Surgery High cost imaging Pharmacy Claims incurred Jan Jul 2016, paid through October Copyright Propel Health
36 35 Copyright Propel Health 601 SW 2 nd Ave. Suite 1940, Portland, OR 97204
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