How To Develop A Case Rate: A Guide To Bundled PaymentsCase Rate –a form of bundled payment to...

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The 2018 OPEN MINDS Strategy & Innovation InstituteJune 5, 2018 | 2:30 – 3:45 PM

Ken Carr, Senior Associate, OPEN MINDS

Paul Duck, Principal & Consultant, Paul M. Duck, LLC

How To Develop A Case Rate: A Guide To Bundled Payments


I. Overview of Bundled Rates

II. Examples of Successful Case Rate Contracting Models

III. A Guide To Developing Case Rates - Paul Duck, Principal &

Consultant, Paul M. Duck, LLC

IV. Questions & Discussion

Agenda

Overview Of Bundled Rates


Emerging Framework For Integrated Care Coordination

Behavioral health system optimization is central to success –

and value-based reimbursement key to that optimization

Managed Care

Programs & Health

Plans

Accountable Care

Organizations

Medical Homes &

Specialty Medical

Homes

Specialized Disease

Management Program

‘At Risk’ For

Population

Health

Management

‘At Risk’ For

Individual

Health

Management

Bundled payments

create payment

flexibility to

implement

integration and

care coordination


Capitation +

Performance

-Based

Contracting

CapitationShared RiskShared

Savings

Bundled &

Episodic

Payments

Performance

-Based

Contracting

Fee-for-

service

Transition From Volume To Value Payments For Provider Organizations

Compensation By Level Of Financial Risk

No Financial Accountability Moderate Financial Accountability Full Financial Accountability

Passive Involvement Provider Engaged Provider Active In Management Provider Assumes Accountability

Management Via 100% Case By

Case External Review

Internal Ownership Of Performance

Using Internal Data Management

Small % Of Financial Risk Moderate % Of Financial Risk Large % Of Financial Risk

Bundled payments reflect a moderate

level of provider risk and accountability

for outcomes within the contracted

bundled rate.


How Does A Provider Use Value-Based Reimbursement In Market Positioning?

Case Rates

& Bundled Rates

Medical Homes & Specialty

Medical Homes

Capitation &/Or Population

Health Gainsharing Arrangements

Wit

h V

alu

e-B

ase

d R

eim

bu

rsem

en

t

Co

mp

on

en

ts

Specialist

positioning

Comprehensivist

positioning


What Is A Bundled Payment?

A single

payment for a

specific

“episode of

care” – for a

specific

treatment, or

services during

a defined

period of time

Bundled Rate – a single

comprehensive payment for a

group of related services

Case Rate – a form of bundled

payment to cover services of a

specific consumer based on the

average cost of all services

Episodic Rate – includes payment

for services for treatment of a

specific condition over time in

one rate

Example:

Comprehensive

ayment for entire

MAT course of

treatment

Example:

Behavioral Health

Home per diem

rate

Example: Monthly

rate for Assertive

Community

Treatment services


Steps To Develop A Case Rate

1. Define The Service The Payer Wants

2. Build The Components Of The Service

3. Identify The Cost Drivers

4. Tie Cost Drivers To Costs

5. Calculate The Unit Rate

6. Create Productivity Standards

7. Perform Scenario Analysis To Reduce Costs


Step #1: Define The Service The Payer Wants

Need to understand the service the payer wants to build the cost of the

service, including:

Service definition

Staffing ratio requirements

Credentialing requirements

Authorizations and billing method

Reporting

Collaboration and integration expectation (drive technology)

Marketing


Step #1: Define The Service The Payer Wants

Service Requirement Impact On Unit CostsStaffing ratio If not defined by the payer, can give flexibility to

the provider in balancing quality and costs.

Credentialing Can give direction to the types of staffing costs

required, with a focus on licensed staff “working at

the highest level of their license”.

Authorizations & Billing Methods Payer requirements for authorizations can drive

additional staffing costs; bundled case rates take

fewer resources to implement than hourly rates.

Reporting Payer defined reporting requirements may take

additional technology resources.

Collaboration & Integration Additional costs will be incurred for HIPAA and

technology to implement collaboration and

integration requirements.

Intake

Marketing Reaching the full market will require marketing

efforts – call center, website, marketing initiatives.


Step #2: Build The Components Of The Service

Salaries

– Types of positions

– Staffing ratios for each position

– Market rates for each position – need to attract quality candidates

– Fringe benefits and payroll taxes – identify as a percentage of salaries

Position Staff/Client

Ratio

Market

Salary

Benefits

LCSW 50 $60,000 $15,000

Care Coordinator 25 $30,000 $7,500



Expenses Tied To Staff

– Mileage reimbursement

– Cell phone reimbursement

– Laptop

– Access to EHR

Expense Driver Unit Cost

Mileage 100 miles per client per month $.55

Cell Phone Per month $60

Laptop Cost allocated over 36 months $1,200

EHR Fee per staff member per month $25



Other Expenses

– Supplies

– Office space

– Program support – direct or as a percentage of direct costs

– Management & general expenses

When building a new program, be careful not to build in excessive

infrastructure costs

– Fully-loaded costs

– Marginal costs


Step #3: Identify The Cost Drivers

Driver Jan Feb Mar Apr

Clients 50 75 100 125

LCSW 1 2 2 3

Care

Coordinator

2 3 4 5

Mileage 5000 7,500 10,000 12,500

Cell 3 5 6 8


Step #4: Tie Cost Drivers to Costs

Tie drivers to costs

– Identify the number of clients to be served each month

Separate by start-up/buildup period, and fully implemented timeframes

– Tie staff FTEs needed to clients served

– Build costs based on staff FTEs needed

Fringe - % of staff

Working space – based on number of staff needed at maximum number of clients served

Oher expenses – tied primarily to staffing

– Identify types of expenses

Variable expenses

Fixed expenses


Step #4: Tie Cost Drivers To Costs

Driver Jan Feb Mar Apr

Clients 50 75 100 125

LCSW $60,000 $120,000 $120,000 $180,000

Care

Coordinator

$60,000 $90,000 $120,000 $150,000

Mileage $2,500 $3,750 $5,000 $7,500

Cell $180 $300 $360 $480


Step #5: Calculate The Unit Rate

What is the basis of the unit rate?

– Clients served per month – Per Member Per Month

– Hours by CPT code

– Bundled or Episodic rate based on time period (day, month)

Description Start-Up Period

(Average Per Month)

Fully Implemented

(Average $ Per Month

Costs $50,000 $75,000

Clients 500 1,000

Cost Per Member Per

Month

$100 $75


Step #6: Create Productivity Standards

Create Productivity Standards

– Benchmark to other organizations

– Benchmark to best practices

– Model productivity relationship to revenue


Step #7: Perform Scenario Analysis To Reduce Costs

Identify the least amount of activity for the expected level of quality

Assess the impact of differing staffing levels and client service ratios

Identify efficiencies with other expenses

– Just In Time staffing

– Route planning technology for community visits

Identify excess productivity at specific client service/client ratios levels –

especially during the start-up phase of a new service

Paul M. Duck, LLC

Paul Duck, Principal & Consultant, Paul M. Duck, LLC

How To Develop A Case Rate:

A Guide To Bundled Payments

My Goals:1. Provide an overview of the new payment

models

2. Define and explain case rates

3. Talk about case rate rate setting

4. Discuss things to consider when managing

under a case rate

5. Talk about a couple of case studies with

care rates

6. Talk about the risks under case rates and

new payment models

In an era of rapid

change, do you ever

feel like …

this guy…?

Payment Models

Overtreatment Under-treatment

INCENTIVE-BASED TREATMENT RISK

CO

MP

LE

XIT

Y

VALUE-BASED PURCHASING OPTIONS

Behavioral Health Capitation

• Risk for providers

• Full behavioral health payment

• Defined coverage set

Fee-for-service• One service

• One payment

Case Rate• Group of services

• Combined payment

• Monthly/weekly payment

Episode Bundle• Group of services

• Combined payment

• Quality goals

• Defined time period

Total Health Outcomes

• Shared risk on total member experience

Pay for Performance (P4P)• “Upside only”

• Key process measures

Case Rate Defined

Definition: A Case Rate represents a predetermined amount of money

paid to a provider organization to cover the average costs of all

services needed to achieve a successful outcome for a given defined

episode of care for an individual over an agreed upon time period.

Example: An orthodontist charges $5,000 for Phase 1 care

Goal: Aligned teeth

Treatment: Spacers, braces and retainers

Length: 1 to 3 years (depending on the patient’s compliance

with treatment)

Cost: Based on the average length of care and type of

treatment

Example: 100 patients will require 1 year of care

100 patients will require 2 years of care

100 patients will require 3 years of care

What Case Rates are NOT

Case Rates are NOT a fixed budget for an

individual consumer.

Case Rates are an AVERAGE payment for all of

the consumers to be served at a given level of

care.

By definition, some individuals will require MORE care

at a given Case Rate Level and some will require

LESS care in order to achieve the intended outcomes.

Case Rates are meant to provide flexibility to the

provider and consumer, not lock them into a rigid

box.

Examples

Example: A substance abuse agency is paid $3,500 per

person for six months to provide recovery services for

people stepping down from an inpatient treatment center.

Expected short-term outcomes: Sustained sobriety,

improved coping skills, no emergency room services

Expected long term outcomes: Zero recidivism

What is the payer strategy and

motivation? Fee for service billing is difficult to manage

and financially sustain

For payers like Medicaid, there is a set

amount of money budgeted, and a set

number of people to cover

Case rate math:

Total amount of spending

Total # of covered lives

Average cost per

case=

Case Rates Versus Fee for Service

Fee for Service

Payment for services

regardless of outcomes

Fixed reimbursement by

payer

The most units – the

higher the payment

No financial incentive to

provide good outcomes

Service array restricted

by payer

Case Rates

Payment is the same no

matter how many

services are rendered

Service array is flexible

Services can be

adjusted to better met

the needs of the patient

If a provider can achieve

outcomes with fewer or

less expensive services,

provider profits

Understanding Rate Setting

Key Questions:

What is the defined population being served?

How much of the population will you serve?

How much reimbursement are you currently

receiving by client?

What outcomes are you measuring?

What service array are leading to good

outcomes?

Checklist for Setting Case Rates

1. Define the Population

2. Estimate the Penetration Rate

3. Define the Categories of Care/Episode Types

4. Estimate the Case Mix

5. Estimate the Utilization at Each Level of Care

6. Estimate the Cost per Unit of Service

7. Run the Calculations and Set the Case Rates

8. Identify the Performance Metrics

How to Manage Under Case Rates

Part A: Clinical Design

Part B: Clinical-Financial Modeling

Part C: Implementation and Ongoing

Operations

Part A: Clinical Design

Step A1: Assessment and Level of Care

Design

Step A2: Evidence-based and Promising

Practices Research

Step A3: Clinical Intervention Design

Step A4: Utilization Management Guidelines

Step A5: Outcome-based Care Model Design

Step A6: Training and Coaching Program


Step B1: Clinical-Financial Model Development

Consumers and Consumer Mix

Service Hours

Caseload Sizes

Full Time Equivalents

Staffing Costs

Overhead Costs

Projected Revenue

Capacity/Demand and Revenue/Expense Dashboard


(Continued) Step B2: Clinical-Financial Modeling

Step B3: Clinical-Financial Tracking System

Design

Part C: Implementation and Ongoing

Operations Systems will need to be developed

Training

Coaching

Change management process

Utilize a continuous quality improvement framework

Use Rapid Cycle Improvement methods

Stay flexible

Use of analytics CRITICAL SUCCESS FACTOR

Two Case Studies

Two case rates developed for two geographies for similar treatments

In both cases, there was massive over utilization for treatment of

SUD in step-down program

In both cases, the payer and provider (both were single providers

covering very large geographies) came together and negotiated a

case rate.

The provider knew they could reduce utilization and the payer

wanted to get rid of the financial burden.

Under the case rate model, the providers simply increased the

number of patients, reduced the services and got the same marginal

outcomes.

The payers ended canceling the contract in both cases.

The moral of the story – if someone is trying to cheat the

system, moving to a case rate does not solve it!

Real-life Assessment: Provider confidence in taking on financial risk is

notably low

Data quality, balance sheet, systems, population size, geography, lack of control

Provider’s may be overly conservative, but conservative is better than the alternative

Helpful distinction between “insurance risk” and “performance risk”

Higher confidence around performance risk on things you know how to do

Be realistic about the trade-offs between risk and administrative flexibility or

simplification

A deal predicated mostly on “performance risk” is less likely to yield administrative

simplification than a deal predicated on “financial risk”

Sets up a natural partnership opportunity between MBHOs and CMHCs

On Payment Model Shifts

life = risk

#leadershipmatters

Paul M. Duck | [email protected] | www.paulmduck.com

@paulmduck

paulmduck

@paulduck

paulduck

www.openminds.com 15 Lincoln Square, Gettysburg, Pennsylvania 17325 717-334-1329 [email protected]

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