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3 A method for shifting payment risk to healthcare providers with the following dimensions? The Unit of Payment The Time Period Number of Providers Risk/Return Arrangements + Bundled Payments
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Bundled Payments: Why and Why Not?
2
Why bundled payments? What are current Medicare
Payments? What costing systems need to
be developed? What key factors drive bundled
cost: MSDRG 469/470
+ Outline
3
A method for shifting payment risk to healthcare providers with the following dimensions?
The Unit of Payment The Time Period Number of Providers Risk/Return Arrangements
+ Bundled Payments
4
The Unit of Payment Specific Services-service
intensity is issue Encounter -MSDRG/APC-
encounters are issue but not services
Episode-Episodes are issue but not encounters
Capitation-Episodes are not an issue
+ Bundled Payments
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The Time Period Specific number of Days
+ Bundled Payments
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Number of Providers At Risk One –Complete risk shift
e.g. Hospital in CCJR Multiple-Partial risk shift
+ Bundled Payments
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Risk/Return Arrangements Collaboration Agreements Common Ownership-Transfer
Pricing
+ Bundled Payments
8
Medicare Insolvency+ Why Bundled Payments?
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Reduce Benefits Reduce Beneficiaries-Increase age
to match retirement Reduced Covered Services
Increase Revenue Taxes Premiums
Reduce Service Expenditures Cut Provider Payments Reduce Utilization
+ Medicare Strategies
Discharge Destination of Medicare Fee-For-Service Beneficiaries 2006-2013
Destination2006 2009 2012 2013
Percentage change 2006-
2013
Home Self-care 52.3% 50.1% 48.0% 46.9% -5.4%
Skilled Nursing or Swing Bed 18.8 19.8 20.3 20.6 1.8
Home with Organized Home Health Care 13.8 15.2 15.9 16.7 2.9
Inpatient Rehabilitation Facility 3.4 3.3 3.5 3.5 0.1
Long-term Care Hospital 0.9 1.1 1.2 1.2 0.3
Hospice 1.6 2.1 2.7 2.8 1.2
Transferred to Other Acute Care Hospital 2.5 2.2 2.2 2.1 -0.3
Died in Hospital 3.8 3.5 3.3 3.4 -0.4
+ Medicare Post Acute Care Services Are Increasing
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+ Per Capita Medicare Spending Among FFS Beneficiaries
2004 2013 % Change
Inpatient Hospital 3,261 3,695 13.3
Physician 1,580 2,020 27.8
SNF and HHA 797 1,257 57.7
Outpatient Hospital 463 987 113.2
+ Source: CMS Office of the Actuary
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+ Provider Payment by Medicare
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+ Provider Payments SNF
2006 2013
Facilities 15,178 14,978
Hospital Based % 8 5
For Profit % 68 70
Medicare Payments (Billions) $19.5 $28.7
Medicare Margin 12.8% 13.1%
For Profit Margin 15.1% 15.3%
Non-Profit Margin 3.2% 5.0%
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+ Provider Payments SNF(Must Be Above Average)
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+ Provider Payments Home Health
2002 2013
Episodes (Millions) 4.1 6.7
Visits per Episode 18.4 16.5
Medicare Payments (Billions) $9.7 $18.3
Payment Per Episode $2,335 $2,674
Medicare Margin NA 12.7%
For Profit Margin NA 13.7%
Non-Profit Margin NA 10.0%
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+ Provider Payments Inpatient Rehab
2004 2013
Number of IRF Cases 495,000 373,000
Average LOS 12.7 12.9
Medicare Payments (Billions) $6.6 $6.8
Payment Per Case $13,290 $18,258
Medicare Margin 16.7 11.4
For Profit Margin 24.4 23.4
Non-Profit Margin 12.8 1.5
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+ Provider Payments Long-term Care Hospitals
2004 2013
Number of Cases 121,955 137,827
Average LOS 28.5 26.5
Medicare Payments (Billions) $3.7 $5.5
Payment Per Case $30,059 $40,070
Medicare Margin NA 6.6%
For Profit Margin NA 8.4%
Non-Profit Margin NA -1.7%
Medicare
Episode Providers/Initiating
HospitalInitiating Hospital
Actual payments >
Target paymentYES – Payment to Medicare
NO
– P
aym
ent t
o In
itiati
ng h
ospi
tal
Target PaymentActual Payments
+ CCJR Payment Model
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Critical Questions in Cost Design
What are we trying to cost? Episode of Care Across Providers
What time period is being costed? Historical – Management Control Future – Budgeting/Planning
+ Bundled Care Costing
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Costing Framework for Bundled Payments Cost= Sum of all Provider Costs
Costs Incurred by Hospital Variable Variable and Fixed
Direct Payments to Other Providers By Medicare By Hospital to Contracted
Providers
+ Bundled Care Costing
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+ Data SourcesName Of File Scope
Standard Analytical Inpatient File All traditional IP claims from hospitals
Standard Analytic Outpatient File All traditional OP claims from hospitals
Standard Analytic Home Health File Claims submitted by home health agencies
Standard Analytic Hospice File Traditional and HMO claims from hospices
Standard Analytic Skilled Nursing File All traditional claims from skilled nursing facilities
Carrier File CMS-1500 claims from non-institutional providers
(5% sample)
Durable Medical Equipment File Claims from durable medical equipment suppliers (5%
sample)
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+ Key Factors
US OH Difference%
Difference
Hospital 15,454 13,662 1,792 -11.5%
Other IP 4,335 4,012 323 -7.5%
Home Health 1,870 1,577 293 -15.7%
Physician/PT/other 4,403 3,942 461 -10.4%
SNF 6,478 5,738 740 -11.4%
Hospital OP 932 935 -3 0%
Hospice 155 210 -55 35.5%
Other 168 94 74 -44.1%
33,795 30,173 3,622 -10.7%
+ 469/470 Episode Cost
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+ Key Factors
US OH Difference%
Difference
Hospital 22,286 18,528 3,758 -16.1%
Other IP 7,667 9,263 (1,597) 20.8%
Home Health 1,955 1,284 671 -36.1%
Physician/PT/other 6,394 3,942 534 -8.4%
SNF 6,394 6,573 2,907 -45.5%
Hospital OP 1,622 1,267 355 -21.9%
Hospice 400 379 21 -5.1%
Other 202 64 138 -68.3%
Total 50,005 43,217 6,788 -13.5%
+ 469 Episode Cost
24
+ Key Factors
US OH Difference%
Difference
Hospital 14,187 12,943 1,244 -8.8%
Other IP 3,717 3,237 480 -12.9%
Home Health 1,855 1,621 234 -12.6%
Physician/PT/other 4,033 3,659 374 -9.3%
SNF 5,922 5,615 307 -5.2%
Hospital OP 804 886 (82) 10.2%
Hospice 110 185 (75) 68.2%
Other 162 99 63 -38.9%
Total 30,790 28,245 2,545 -8.3%
+ 470 Episode Cost
25
+ Key Factors
Total Episode CostDRG 469 DRG 470
Procedure US OH Difference US OH Difference
Partial Hip 54,930 41,611 13,319 41,788 38,528 3,260
Total Hip 47,941 44,085 3,856 28,625 26,411 2,214
Total Knee 41,981 45,666 (3,685) 26,745 24,745 2,320
+ Procedure Cost Differences
26
+ Key Factors
Home Health
Inpatient Facility SNF Other
MSDRG 469
Partial Hip 39,260 68,656 56,242 36,483
Total Hip 36,049 68,030 47,660 34,658
Total Knee 32,332 63,294 40,662 34,281
MSDRG 470
Partial Hip 27,143 50,441 41,905 34,293
Total Hip 22,250 41,620 32,818 21,513
Total Knee 22,242 32,681 30,272 22,313
+ Discharge Status
27
+ Key Factors
HCC Quintile 469 470
1 ( .283 to .428) 26,452 24,190
2 (.429 to .706) 31,235 26,137
3 (.707 to 1.071) 37,932 30,030
4 (1.072 to 1.675) 44,833 37,083
5 (1.676 to 6.67) 55,800 43,392
+ Hierarchical Condition Category (HCC) Scoring Based Upon CMS Risk Scoring for Medicare Advantage
28
+ Key Factors
MSDRG 469 MSDRG 470
ALL US 2.15 .85
Ohio 2.17 .90
Michigan 2.18 .84
Kentucky 2.21 .94
Indiana 2.20 .87
+ Hierarchical Condition Category (HCC) Scoring
29
+ Key Factors
469 470
Hospital A 2.14 .77
Hospital B 2.21 .96
Hospital C 2.09 .75
Hospital D 2.31 .74
Hospital E 1.91 .70
Hospital F 2.09 .78
Hospital G 2.20 .89
All US 2.15 .85
+ Hierarchical Condition Category (HCC) Scoring
30
+ Key Factors
Impact Variables 469 470
Intercept 17,614 15,789
Avg LOS 1,509 1,602
Home Health Discharge 5,920 (598)
SNF Discharge 16,656 7,578
IP Fac Discharge 31,254 14,865
Partial Hip 924 4,526
Total Knee (2,833) (1,121)
HCC Community Score 2,937 3,416
+ Regression Results
31
Medicare post acute care payments are rising rapidly
Post acute care payments often exhibit the greatest variability in total episode cost
Medicare profit margins for post acute care providers have been significantly higher than hospital Medicare margins.
Budgeting and management control require the development of realistic benchmarks for post acute care.
Critical drivers of episodic cost require extensive data analysis
+ Summary
+ Thank you!
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