Navigating the Path to Value - MaineHFMA · 2018-04-20 · • Value Based Care is here to stay –...

1© 2018 Strata Decision Technology

Navigating the Path to ValueStrategies in Margin Management and Cost

ReductionMaine HFMA Spring Symposium

Tushar Pandey, VP Decision SupportStrata Decision Technology

April 23rd, 2018


Our Time Together….

• Introduction to Strata Decision• State of the Industry – New Value Equation• Understanding and React to Change

– Negotiations– Understanding the impact of Change– Medicare Break Even– Managed Care = Margins, not just Reimbursement

• New Approaches to Reimbursement – Episode Design• Mythbusters!

– More is better?– Doc, Let’s talk!

Redesign your topline

Revenue is just half the battle!


Yesterday ≠ Tomorrow


Yesterday ≠ Today


Two baskets…and a new business model

Drive Volume

Drive Value


The OLD math…

Success =Quantity


The NEW math…

Value = QualityCost______


But…You need to maintain a margin to fuel your mission


State of Managed Care

• Value Based Care is here to stay – accept & embrace• Fee for Service reimbursement continues to become more complex• Uneven playing field for payors & providers - unfair negotiations• Focus on both sides of the margin equation to survive • Accurate Cost Information severely lacking to make decisions


Strata Overview


The Strata Integrated Suite of Solutions

Continuous ImprovementEliminates variation, waste and inefficiency on an on-going basis

Physician Variation Quality Variation Staffing to Demand Productivity Cost Improvement Tracking

Financial PlanningDelivers advanced modeling, planning and budgeting controls

Long Range Financial Plan

Rolling Forecast Operating Budgeting Advanced Planning Management Reporting Capital Planning Equipment Replacement

Decision SupportProvides true costs and margins across continuum of care – ranked #1 in KLAS

PLAN

ANALYZE

PERFORM

Advanced Reporting and Analytics

Strategic Pricing

Cost Accounting Contract Analytics Episode Analytics


~ 200 healthcare delivery systems and 1,000+ hospitals including many of the most influential in the U.S.

~90% of the cost accounting selections in the last 5 years have gone to Strata

Our Family


Evolution of Reimbursement


Does this apply to you? 3 Common Examples

• Providers are going into contract negotiations without truly understanding how changes in net revenue will affect their bottom line

• With uncertainty in the future of Medicaid, being able to model potential changes to reimbursement will become even more important

• As the aging population is increasing there is need to benchmark commercial payors to Medicare reimbursement


Breakeven Analysis

• Provides a benchmark to measure commercial payors against• Shift in payor mix due to aging population• Evaluate performance of key service lines• Identify focus for cost reduction


Current State Medicare Breakeven


Compare Traditional v Non Traditional


Similarly, Getting Ahead of Medicaid? Why?

• Shifts in APR DRG weights can have a drastic affect on reimbursement depending on volumes of patient populations and case types

• Be Proactive!


Medicaid Reimbursement Analysis


Repeal & Replace…Uncertainty in the future of the Affordable Care Act

– Signs point to decrease in Medicaid funding– Increase in uncompensated care and bad debt– Increase in self pay


Contract Negotiations


Why?

• Annual Contract Escalators• Change in Term Methodology

– Per Diem vs. DRG– HCD/Implant %– Stop-Loss

• Change in payor mix


Change in Terms


Rate Increase


HMO vs PPO


Payor Mix Shift


Embracing Value Based Care


Central Ohio’s Only Academic Health Center 7 Hospitals, 1,321 Beds9 Multispecialty CentersNCI -ComprehensiveCancer Center 35+ Affiliate Hospitals & Clinics7 Health Sciences Collegeson a Single Campus


The Driving Force

University Hospital The James

MANDATORYFree Standing

Cancer Hospital

Need the ability to REACTIVE

Need the ability to PROACTIVE


What are Alternative Payment Models?

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html


Common episode payment models

• Prospective episode– Payment is fixed for time period of episode– May include carve outs (chemo, devices, etc.)

• Retrospective episode (AKA Shared Savings Model)– OCM, BPCI and SIM are examples– Historical payment for episode is calculated – Actual payment under current payment system is compared to historical– Savings from historical rates may be split between payer and provider

• Either model may be total cost of care (all settings) or limited to particular setting(s)


Why prepare for Payment Reform Now?

• Payment reform pressure in managed care negotiations

– Desire to influence forthcoming payment models

– Payors may look to existing models as a starting point

• Questionable design & Uncertainty of government programs

– Focused on ability to administer, not clinical relevance

– Need to ensure incentives are aligned on both sides

• Desire for payment predictability if/when going at risk (Health Plans)


Episode-based Payments – The Basics

• Episodes of care set a fixed payment amount for care for a particular set of patients or portion of the population over a fixed time frame

• Drivers:– Patient Attribution– Time frame

• Day 0 or trigger event: determines a patient is included in the episode population• Look back: timeframe included in episode prior to trigger event; likely includes diagnostic procedures and events

leading up to trigger event• Duration: amount of time from trigger event to end of episode

– Carve outs (services in/out of episode scope)


Episode Design Considerations

• Trigger Event• Duration

– Shorter episodes vs Longer episodes? • Variation

– Patient-based – not in provider’s control (age, comorbidities, stage, etc.)– Technical – in provider’s control (treatment protocol, chemotherapy choice)


Medicaid Breast Cancer Surgery Episode

• Trigger: Breast cancer surgery (IP or OP) CPTs with selected diagnosis codes• Duration: begins 30 days prior to trigger and ends 30 days after discharge• Principal Accountable Provider – clinician or group performing the breast biopsy• Included services

– Pre-trigger – all diagnostic work up (mammogram, genetic testing, fine needle aspiration)– Pre-op prep – all E&M visits, anesthesia included– Procedure – including medical and drug spend– Post trigger – surgical pathology, medication management, complications, MRI

• Excluded – procedures related to staging (lymph node biopsy), reconstruction, radiation therapy


OSU Lumpectomy – Malignant Episode

• Trigger: Lumpectomy CPTs with selected cancer diagnosis codes• Duration: begins at trigger and ends 180 days after discharge• Principal Accountable Provider – OSU clinician or group performing the lumpectomy• Included services

– Procedure – lumpectomy and breast cancer diagnosis• Excluded – patients without breast cancer diagnosis, mastectomy or reconstruction within

episode, second lumpectomy within episode, medications, chemotherapy, unrelated services including ED, observation and inpatient services, services outside of OSU


Episode Design Steps: You’re not in it alone

Data cleaning and preparation Eligibility criteria Trigger rules Building the episode

Validity testing Risk adjustment logic Pricing the base services Implementation

Measure Performance

Analytics

Analytics with

Clinical Input

Finance

Managed Care


Commercial Bundled Episode Exploration

Service Line/Business Leader

•Identify service lines suitable for episode-level treatment plans

•Set goals on percentage of volume under bundled arrangements

Financial Data Analyst/Decision Support

•Identify specific product lines to analyze for episode suitability

•Analyze sources of controllable and uncontrollable variation for historic patient episodes

•Develop proposals for variation reduction plans and bundled episode terms to mitigate variation

•Discuss findings with clinical team to verify clinical relevance of proposals

Managed Care Contracting

•Determine acceptable bundle price based on terms and margin requirements

•Run pricing scenarios based on changes to proposed terms, volume growth assumptions

•Iterative negotiation with payor on terms, additional volume expectations, and price

•Finalize contract


Episode Performance Management

Service Line/Business Leader

•Develop scorecard metrics to measure performance of each episode

•Determine ideal care pathway for each patient cohort eligible for bundle and align physicians and staff

•Select and initiate cost improvement projects relevant to episode

•Specify primary measures of care pathway compliance and cost management

Financial Data Analyst/Decision Support

•Calculate performance of each episode on all relevant metrics monthly

•Communicate red/green performance status to operational team and service line leadership

•Measure impact of agreed-upon cost improvement initiatives

Operational Team

•Identify patients eligible for bundle throughout the episode (including pre-trigger) to optimize care plan

•Monitor daily progress of patients through post-trigger window to ensure compliance with ideal care plan

•Analyze causes of unfavorable quality or outcome metrics and propose improvement initiatives


Value Equation

Qual i ty Indicators

Achieve 80% or more of Qual i ty Targets

Achieve 50-79% of Qual i ty Targets

Achieve less than 50% of Qual i ty Targets

Cost Indicators

Cost less than or equal to 125% of Medicare reimbursement

Cost i s between 126-150% of Medicare reimbursement

Cost i s over 150% of Medicare reimbursement

Quality 80%Cost 134%

Overview

Change from Previous ReportValue Met

CABGQuality18%êNo

Cost125%é

Cardiac ValveQuality55%éNo

Cost122%é

CHFQuality17%çNoTotal # Episodes6

Cost126%êTarget # Episodes5

Episodes Meeting Value0

Hip/Knee ReplacementQuality60%çNo% Episodes Meeting Value0%

Cost111%ê

PCIQuality40%êNo

Cost138%ç

SpineQuality13%çNo

Cost134%ç

Quality IndicatorsCost Indicators

Achieve 80% or more of Quality TargetsCost less than or equal to 125% of Medicare reimbursement

Achieve 50-79% of Quality TargetsCost is between 126-150% of Medicare reimbursement

Achieve less than 50% of Quality TargetsCost is over 150% of Medicare reimbursement

&G&"-,Bold"&14Clinical Care and Payment TransformationEpisode Scorecards Performace Overview&"-,Regular"&11Reporting Period: FY2016 Q4

Overview


CABGQuality18%êNo

Cost125%é


Cost122%é





Cost111%ê

PCIQuality40%êNo

Cost138%ç

SpineQuality13%çNo

Cost134%ç






Overview


CABGQuality18%êNo

Cost125%é


Cost122%é





Cost134%ê

PCIQuality40%êNo

Cost138%ç

SpineQuality13%çNo

Cost134%ç







Time for another episode of…


Myth: “More Services = More Profitability and Better Patient Care”


Healthcare has Changed…but Perceptions still Remain

Yet…– Inside: If we do more, we’ll get

paid more! The Revenue Cycle Complex!!??

– Outside : If I have more treatment, I must be getting better care.

What’s Changed?Reimbursement Methods Low(No) MarginsCompetitionConsumerismPrice TransparencyPatient Populations


Where the Confusion on “Cost” Begins…The Need in Healthcare

Provider Patient Payor

PriceWhat the patient paid?

ChargeWhat the hospital charged?

ReimbursementWhat the hospital charged?

CostHow much did a patient’s care cost the hospital?

Which one are we talking

about?


The State of the Market

Source: Harvard Business Review, The Strategy That Will Fix Healthcare (October 2013)

“The absence of accurate cost information in health care is nothing short of astounding”

“The existing systems are wholly inadequate”

“Healthcare organizations are flying blind in deciding how to improve processes and redesign care”

“Understanding true costs will finally allow clinicians to work with administrators to improve the value of care”

Michael PorterProfessorHarvard Business School

SIGNIFICANT MARKET OPPORTUNITY FOR COSTANALYTICS SOLUTIONS

Less than 10% of health systems have an advanced cost accounting solution

10%

51%9%

30%

Advanced Decision SupportLegacy Decision SupportSelf-DevelopedNo System

Decision Support Market Penetration

Source: HIMSS Analytics, Company Analysis


First you need to understand the true cost of care!

Decision Support

EHR

GL

Payroll

Revenue – Expense Alignment

Consolidate Cost Components & Assign Variability

Allocate Overhead Expenses

Attribute costs to Patients & Activities

Layer Topside Adjustment & Patient Specific Costs

Report

Clinical & Financial


COSTACCURACY

LOW

HIGH

RCC

TD-ABCTIME DRIVEN - ABC

% MARKUP

STANDARD COSTS

COSTSTUDIES

ABC ACTIVITY BASED COSTING

PATIENT LEVEL CCR

Cost Accounting – it’s not just one thing

EASE OF IMPLEMENTATION & MAINTENANCEEASY HARD

ORGANIZATIONAL IMPACT(Contracting, Cost, Profitability)

ACQUISITION COST

True Cost of Care

Advancing Cost Accounting


Cost Accounting across the Continuum


Supply Based Costing

• Cost varies by:– Manufacturers– Site of implant– Time of purchase


Advanced Pharmacy Costing

• Cost varies significantly by patient– Status– Location– Bundling of Charge Codes

Patient receives Drug A… Cost

at market-reported rate (WAC) 100%

at non-340B eligible clinic (WAC w/ discounts)

92%

during inpatient admission (GPO) 90%

at 340B-eligible outpatient dialysis clinic (340B)

0.02%

0%

50%

100%

150%

Drug A Drug B

AWP

WAC

WAC w/discountsGPO


What about Labor?

Data Driven Approach (Expand your procedure master )

Activity Codes

Procedure Master/Events

Supply Codes NDCs

Clinical Activities

Beyond Patient Care

Cost StudiesTimestamps


Output


Medicare Payment

Would You Grow This Service?

$13,800

$14,840

$15,200

-$2,760

$1,400

Variable Cost Per Case Margin

∆$1,040RCC Labor & Supplies

ABC + Supply Acquisition CostTRUE COST

$15,200$17,960

RVU + Average Supply Cost∆$3,120

$15,200 $360


Medicare Payment

Would You Take 110% of Medicare in Exchange for More Volume?

$13,800

$14,840

$16,720

-$1,240

$2,920

Variable Cost Per Case Margin

∆$1,040RCC

ABC + Acquisition CostTRUE COST

$16,720$17,960

RVU + Average Cost∆$3,120

$16,720 $1,880


Story of 2 Patients

Steve John

Age: 65No Pre-existing

conditionsCost: $9,000

Total Knee Replacement

Age: 65No Pre-existing

conditionsCost: $36,000

Total Knee Replacement

58© 2018 Strata Decision Technology CONFIDENTIAL

What do you think is the most likely cause of the variation in cost?

A. Physician Variation in choice of supplies & implantsB. More expensive staffing/labor used in SurgeryC. Preventable harm leading to increased utilization/LOSD. Other


Quality Impacts Costs: Directly and Indirectly

59

QVIs can also be used to analyze readmissions rates based on adverse events that occur during the inpatient stay. This assists with prioritizing quality initiatives based on the likelihood a patient will readmit.

60© 2018 Strata Decision Technology60

Improved Quality, Improved Margin….less Readmission Penalty offset by Readmitted case Revenue……

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

QVI Non-QVI QVI Non-QVI QVI Non-QVIAvg. Maximum QVI Cost Avg. Total Cost Avg. Net Revenue

$12k$17k

$3.5k

$2k

$6k$11k

…the more we do the less we make...

$-66k Penalty

$+18k ReadmitRevenue

NewKnowledge

Source: Internal Yale New Haven Health analysis


Bringing Together Quality and Cost Data

61

More services = more profitability and better care?


MYTHBUSTERS: Healthcare Edition

Reason“More Services = More Profitability and Better

Patient Care”

62

Accurate Costing & Quality Variation has a HUGE impact on understanding Cost of Care

Myth 1


MYTHBUSTERS: Healthcare EditionPolling Question

Myth 2“Physicians don’t know and don’t care about costs.”


Do you share cost data with Physicians?A. No – Are you crazy?B. We embed cost data within order setsC. We perform cost based case reviews with PhysiciansD. We’ve selectively made cost information available for Physicians such as Lab costsE. Other

64


Cost Information in the Hands of Physicians is a Major Opportunity

• Time Frame: December 2012 and March 2013

• Participants: 503 MDs at orthopedic departments at Duke, Harvard, the University of

Maryland, Mayo, the University of Pennsylvania, Stanford, and Washington U

• Approach: Orthopedic physicians were asked to estimate the costs of 13 commonly

used orthopedic devices. Estimates within 20% of actual cost were considered correct.

• Results:

• Physicians correctly estimated the cost of the device only 21 % of the time.

• However, more than 80% of all respondents indicated that cost should be

“moderately,” “very,” or “extremely” important in the device selection process.

2Survey Finds Few Orthopedic Surgeons Know the Costs of the Devices They Implant, Health Affairs, January 2014.


With the Right Data…Physicians are Ready to Engage

~20% Only 1 in 5 MDs could correctly estimate the cost for common

orthopedic devices

>80% Over 8 of 10 MDs would

consider cost as a key criteria in the selection of a medical

device

PHYSICIANS AT SIX MAJOR HEALTHCARE SYSTEMS WERE ASKED TO ESTIMATE THECOST OF 13 COMMONLY USED ORTHOPEDIC DEVICES

(ESTIMATES WITHIN 20% OF ACTUAL COSTS WERE CONSIDERED CORRECT)1

Physicians don’t know… …but do care about cost

n =503 MDs at orthopedic departments at Duke, Harvard, University of Maryland, Mayo, University of Pennsylvania, Stanford, and Washington University

1Survey Finds Few Orthopedic Surgeons Know the Costs of the Devices They Implant, Health Affairs, January 2014.


NUDGE!


Using your EHR to bend the cost curve…

Phase 1 available now (Epic 2017)HB & PB workflows and reportsUses cost loaded into Resolute from Strata (or other sources)



Expose Cost to your Epic users to impact behavior

Phase 2 in Epic 2018:

Expose relative cost to providers at time or ordering!



z

Controlling Costs With Computer-Based Decision Support Leonard S. Feldman, MD; et alJAMA Intern Med. 2013;():1-2.

Presented MDs cost information on lab tests at the point of care via computer

Surgical Vampires and Rising Health Care Expenditure: Reducing the Cost of Daily Phlebotomy Elizabeth Stuebing, MD, MPH; Tom Miner, MD Arch Surg. 2011;146(5):524-527.

A weekly announcement to surgical house staff and attending physicians of dollar amount charged to non-intensive care unit patients for lab services during prior week

> 25% reduction in dollars charged/ patient/day for routine blood work

~10% reduction in test volume ($400,000+ in savings)

Nudging Your Clinicians!

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=PpTY2JfD0ieiqM&tbnid=gHRGyMhYd9d4MM:&ved=0CAUQjRw&url=http://umpbc.com/&ei=PVSjUby4H6i4yAH7gYGoAQ&bvm=bv.47008514,d.aWc&psig=AFQjCNGtKpj_IcYxBrm17ygugaZSWWq7cA&ust=1369744824421433


MYTHBUSTERS: Healthcare Edition

Myth 2“Physicians don’t know and don’t care about costs.”

Reason“Physicians have the largest impact on cost of care

and are willing to make a difference”


The Evolvement of Reimbursement

GONE ARE THE DAYS…….Questions?

Slide Number 1Our Time Together….Yesterday ≠ TomorrowYesterday ≠ TodayTwo baskets…and a new business modelThe OLD math…The NEW math…But…You need to maintain a margin to fuel your missionState of Managed CareStrata OverviewThe Strata Integrated Suite of SolutionsOur Family Evolution of ReimbursementDoes this apply to you? 3 Common ExamplesBreakeven AnalysisCurrent State Medicare BreakevenCompare Traditional v Non TraditionalSimilarly, Getting Ahead of Medicaid? Why?Medicaid Reimbursement AnalysisRepeal & Replace…Contract NegotiationsWhy?Change in TermsRate IncreaseHMO vs PPOPayor Mix ShiftEmbracing Value Based CareSlide Number 28The Driving ForceWhat are Alternative Payment Models?Common episode payment modelsWhy prepare for Payment Reform Now?Episode-based Payments – The BasicsEpisode Design ConsiderationsMedicaid Breast Cancer Surgery EpisodeOSU Lumpectomy – Malignant EpisodeEpisode Design Steps: You’re not in it aloneCommercial Bundled Episode ExplorationEpisode Performance ManagementValue EquationTime for another episode of…Slide Number 42Myth: “More Services = More Profitability and Better Patient Care”�Healthcare has Changed…but Perceptions still RemainWhere the Confusion on “Cost” Begins…�The Need in HealthcareThe State of the MarketFirst you need to understand the true cost of care!Advancing Cost AccountingCost Accounting across the ContinuumSupply Based CostingAdvanced Pharmacy CostingWhat about Labor?Workflow Events and TimestampsOutputWould You Grow This Service? Would You Take 110% of Medicare in Exchange for More Volume? Story of 2 PatientsWhat do you think is the most likely cause of the variation in cost?Quality Impacts Costs: Directly and IndirectlyImproved Quality, Improved Margin….less Readmission Penalty offset by Readmitted case Revenue……Bringing Together Quality and Cost DataMYTHBUSTERS: Healthcare EditionMYTHBUSTERS: Healthcare Edition�Polling QuestionDo you share cost data with Physicians?�Cost Information in the Hands of Physicians �is a Major Opportunity�With the Right Data…Physicians are Ready to EngageSlide Number 67Slide Number 68Using your EHR to bend the cost curve…Expose Cost to your Epic users to impact behaviorNudging Your Clinicians!�MYTHBUSTERS: Healthcare EditionThe Evolvement of Reimbursement

Navigating the Path to Value - MaineHFMA · 2018-04-20 · • Value Based Care is here to stay –...

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Transcript of Navigating the Path to Value - MaineHFMA · 2018-04-20 · • Value Based Care is here to stay –...