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GREAT LAKES GAZETTE

HFMA

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A Publication of the Great Lakes Chapter of the Healthcare Financial Management Association

Summer 2012 July 9, 2012

WILL BUNDLED PAYMENTS ADD VALUE TO THE HEALTHCARE SYSTEM?

Victoria Bergmans, MBA, CHFP

Finance team members in the healthcare sector do an excellent job developing budgets and forecasts, con-ducting detailed analysis of key cost drivers, and projecting medical trends through modeling of historical costs. Critical data is distributed to senior leaders through cost management reports, metrics and KPI dashboards; yet, nobody seems to have a handle on the actual cost of medical care in the U.S. While there is broad agreement that the current fee-for-service (FFS) methodology promotes spending, there seems to be a lack of consensus on what payment model best aligns incentives across the healthcare system to pro-vide value-based care focused on health rather than just disease. Harvard Professor and co-author of Rede-fining Health Care: Creating Value-Based Competition on Results, Michael Porter, defines value in health-care as patient results or health outcomes achieved per dollar spent on care. According to Professor Porter, patients, providers and payors all benefit when value improves while the economic sustainability of the healthcare system increases. Value should be the pre-eminent goal in the delivery of healthcare as it is what matters to the patient and unites the stakeholders.1

The Accountable Care Act (ACA) created a pathway for the development of patient care and reimbursement models designed to increase value in the delivery of healthcare. The core principle of accountable care is aligning payments, benefits, and other healthcare policies with measurable, meaningful progress in improv-ing healthcare while reducing costs.2 Section 3021 of the ACA established the Center for Medicare and Medicaid Innovation (CMMI), within the Centers for Medicare and Medicaid Services (CMS). The purpose of CMMI is to collaborate with stakeholders on piloting innovative delivery systems and reimbursement models that improve quality and reduce cost. CMS established the Bundled Payments for Care Initiative (BPCI) as the first initiative in a series of activities focused on care episode redesign. The BPCI program offers four categories of models with various degrees of financial risk and gain sharing.

Model 1: Retrospective payment for acute inpatient services. Model 2: Retrospective payment for acute inpatient, physician and post-

acute services. Model 3: Respective payment for post-acute services. Model 4: Prospective bundle for hospitals and physicians for acute inpa-

tient services. 1 Porter, Michael (2010, December). “What is Value in Healthcare?” New England Journal of Medicine,

Supplementary Appendix 1.

2 Fisher, Elliott & McClellan (2011, January). Overview of Key Principles of Accountable Care Organiza-

tions. Retrieved from https://xteam.brookings.edu/bdacoln/Documents/ACO%20Toolkit%20January%

202011.pdf , (7).

INSIDE THIS ISSUE

Page Will Bundled Payments Add Value to the Healthcare System 1 Officers & Directors—2012-2013 2 Sponsor Profile 3 New Education Programs 4 President’s Message 5 The Sustainable Growth Rate Formula and Other Financial Challenges for Physicians 6 New Members 7 Is Contact Information Obtained at Registration Relevant Today 11 Sponsor Profile 16 Corporate Sponsors 2011-2012 17

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PUBLICATION POLICIES

The Great Lakes Gazette is the official publication of the Great Lakes Chapter Healthcare Financial Management Association. Our objective is to provide members with information regarding Chapter and national activities, with current and useful news of both national and local significance to healthcare financial professionals, and serve as a forum for the exchange of ideas and information.

Opinions expressed in articles or features are those of the author and do not necessarily reflect the view of the Great Lakes Chapter, the Healthcare Financial Management Association, or the Editor. The Editor reserves the right to edit material and accept or reject contributions whether solicited or not. All correspondence is assumed to be released for publication unless otherwise indicated. Address communications to:

William Roche Hutchinson, Shockey, Erley & Co. 200 Maple Park Blvd., Suite 204

St. Clair Shores, Michigan 48081 Telephone: 586-782-7058

E-mail: wroche@hsemuni.com

GREAT LAKES CHAPTER

OFFICERS AND DIRECTORS June 1, 2012 - May 31, 2013

OFFICERS

PRESIDENT Amy Bilyea Otsego Memorial Hospital 825 N. Center Ave. Gaylord, MI 49735-1560 989-731-2210 PRESIDENT-ELECT Josh Wiggins Vice President & Controller MidMichigan Medical Center -Clare 703 N. McEwan Street Clare, MI 48617 989-802-5346 SECRETARY Chad Gutzman, MSA, FHFMA Client Services Manager Truven Health Analytics 507 S. Crapo Mt. Pleasant, MI 48858 989-317-0509 TREASURER Melissa Grew

St. Mary’s of Michigan 1015 S. Washington Ave, 3rd Flr

Saginaw, MI 48601 989-907-7556 PAST PRESIDENT Pamela Sanborn

Director, Business Intelligence and Medical Economics HealthPlus of Michigan 2050 S. Linden Rd. Flint, MI 48532

Attention Advertisers

Remember that the Great Lakes Gazette

will reserve space in the next issue for your ad

Per Issue All Three Issues 9-1/2 x 8 (1 page) $200.00 $500.00 5 x 7 (1/2 page) $150.00 $400.00 4 x 5 (1/4 page) $ 75.00 $200.00 2 x 5 (1/8 page) $ 50.00 $125.00

Please Contact:

William Roche 586-782-7058 Kathryn Huskin 586-782-4532

PUBLICATION SCHEDULE

Published 3 Times a Year!

Deadline Issue June 1, 2012 Summer 2012 October 1, 2012 Fall 2012 March 1, 2013 Spring 2013

DIRECTOR - NORTHERN MICHIGAN Tabitha Rudolph

Controller Charlevoix Area Hospital 14700 Lake Shore Dr. Charlevoix, MI 49720-1999

231-547-8508 DIRECTOR - UPPER PENINSULA Gerald David Artman, Jr., CHFP Reimbursement Specialist Helen Newberry Joy Hospital 502 W. Harrie Newberry, MI 49868-109 906-293-9154

BOARD MEMBERS Anthony Doud St. Mary’s of Michigan - Standish Hospital 805 W. Cedar St. Standish, MI 48658 989-846-3427 Regina Bergh

Marquette General Health System 420 W. Magnetic St.

Marquette, MI 49855 906-225-4704 Lori Swarts Mercy Health Services - North 400 Hobart Street Cadillac, MI 49601 231-876-7387 Robert L. Lutz St. Mary’s of Michigan 800 S. Washington Saginaw, MI 49601 989-907-7561 COMMITTEE CHAIRS Mentoring Lori Swarts, Chair 231-876-7387 Membership Mike Graham, Chair 989-839-3268 Newsletter William Roche, Chair 586-782-7058 Certification Mark Thompson, Chair 989-907-2021 Program Gerald Artman, Chair 906-293-9154 Networking Tom Matonican, Chair 800-968-2733 x252 Publication & Membership Elizabeth Linn, Chair 906-776-5323 Sponsorship Brent Smith, Chair 810-262-9748 Financial Review Lindy Beldyga, Chair 517-332-6200

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EDITOR’S MESSAGE William M. Roche, Editor

We are always looking for articles, job openings or jokes for the newsletter. Please feel free to call, fax or email your materials to me or my assistant Kathryn Huskin.

Sincerely, William M. Roche, Editor Kathryn Huskin, Assistant Editor 586-782-7058 586-782-4532 wroche@hsemuni.com khuskin@hsemuni.com Fax: 586-778-3548

Hurley Medical Center is a 443-bed premier public teaching hospital located in the heart of Genesee County, Michigan. As the region’s only Level I Trauma Center, Burn Center, Pediatric Intensive Care Unit (PICU), andthe highest level Neonatal Intensive Care Unit (NICU) available, Hurley is a recognized leader in clinical care and education, maintaining affiliations with Michigan State University, the University of Michigan-Ann Arbor, the University of Michigan-Flint, Mott Community College and Henry Ford Health System. Founded in 1908, Hurley provides patient care for more than 100,000 people annually.

To live up to its mission, “Clinical Excellence, Service to People,” Hurley offers a wide variety of hospital and health services. From mid Michigan’s most comprehensive health care offerings for children, to specialized critical care centers, Hurley has the dedicated professionals, advanced technology and convenient facilities to meet the complex health needs of our region.

With over 2,500 employees, Hurley is one of the area’s largest employers, and is actively involved in collaborative efforts to enhance the quality of life in our community. Thanks to special affiliations with local agencies and organizations, Hurley is able to reach thousands of residents by offering wellness education and free health fairs throughout the year. This remains an important aspect of Hurley’s commitment to the community.

Our physicians and clinical staff are continually improving skills and introducing innovative techniques to assure that people of our region receive the most cutting edge care right here at home in our community. We reach beyond the walls of the medical center to be a regional leader for health education, illness prevention and in the promotion of wellness. Hurley has been committed for 100 years to providing quality health care to all Genesee County families, regardless of their ability to pay. For more information, visit www.hurleymc.com.

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NEW Education Programs ********

August 16, 2012 Annual Golf Outing

Treetops Resort

What’s New in Reimbursement September 20, 2012 Gaylord, Michigan

Fall Regional Conference

October 11, 2012 Plymouth, Michigan

Cold Accounting Facts

December 13, 2012 Frankenmuth, Michigan

*******

CHECK WEBSITE FOR NEW INFO

http://www.greatlakeshfma.org/ We strive to bring members of the Great Lakes Chapter of HFMA educational seminars that address current is-sues and are presented by renowned healthcare speak-ers.

If you want any job postings listed on the web site please email the information to Kathryn Huskin at: khuskin@hsemuni.com This is a free service for Healthcare members with at least one member in the Great Lakes Chapter. If a Hospital does not have any member in the Great Lakes Chapter the cost is $125.00 per posting. Checks should be mailed to the attention of:

William Roche Hutchinson, Shockey, Erley & Co.

200 Maple Park Blvd., Suite 204 St. Clair Shores, MI 48081

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From: Amy Bilyea

HFMA Chapter President

PRESIDENT’S MESSAGE

Welcome to the new chapter year! This year’s national theme is Leadership Matters. The 2012-2013 HFMA National Chair, Ralph E. Lawson, FHFMA, CPA, chose this theme and here are his thoughts:

One person’s acts of leadership—however small-—can make a difference. Acts of leadership on a day-to-day basis may not be acknowledged as they occur, yet that does not diminish their importance. Even the smallest acts of leadership and courage can change another person’s life.

Good leadership can spell the difference between success and failure or mediocrity. All other

things being equal, having a leader who motivates and inspires is often the factor that tips the scales toward success.

It’s important to stay vigilant for opportunities to exercise a leadership role. Some of the greatest

leadership opportunities may be disguised as ordinary, everyday situations in your personal and professional lives.

In summary, each person’s acts of leadership can make a difference. We are all accountable for the fulfillment of our organizations’ missions; and Finance professionals should lead the way to a better future in health care. As current President of the Great Lakes Chapter, I urge you to participate in our success. Pursue leadership opportunities by volunteering; take advantage of local education; and participate in networking opportunities. Speaking of education, be sure to take advantage of our upcoming educational offerings. Our Pro-gram Committee has many webinars and live sessions planned for this upcoming year. Wouldn’t you like to join your peers for the “Breakfast before Santa” webinar series where we’ll cover bench-marking for financial improvement and sustainability? Or maybe you’ll join us for “On the Road to CHFP” series? Or, in live sessions, we’ll be covering “What’s New in Reimbursement”; “Cold, Hard Accounting Facts”, or an “Early Spring Ice Breaker”? You won’t want to miss them! I want to recognize our past Chapter president, Pam Sanborn, for all the effort and time dedicated to this past year. In addition to Pam, I would like to thank our outgoing and incoming leadership team for their dedicated time and effort put forth to make this a successful chapter. And lastly, I’d also like to take this opportunity to welcome all the new and returning sponsors for this upcoming year. Without you the Leadership team couldn’t make it happen. What’s it, you ask? Quality education sessions, informative newsletters and news briefs, certification opportunities and networking with your peers is just a few examples of what our chapter provides its members. Re-member, membership has its advantages. Thank you for your support. Here’s to an outstanding year! Sincerely, Amy A Bilyea, Chapter President Great Lakes HFMA, 825 N Center Ave, Gaylord, MI 49735 989-731-2210 abilyea@myomh.org

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The Sustainable Growth Rate Formula and Other Financial Challenges for Physicians

By: Steve Fehlinger, FHFMA HFMA-EMC Program Committee Member Steve.fehlinger@lubawaymasten.com What is the Sustainable Growth Rate or SGR? The Balanced Budget Act of 1997 was enacted on August 5, 1997 and replaced what was called the Medicare Volume performance Standard with the “Sustainable Growth Rate” (SGR) provision for Medicare payments to doctors under Medicare Part B. Do not confuse this with the sustainable growth concept first published by Robert C. Higgins in financial literature in 1977. That SGR is an estimate of the maximum growth rate a firm can achieve, given the firm’s profitability, asset utilization, desired dividend pay out, and financial leverage ratios. Perhaps Congress should have chosen UGR which is more suitable for cost escalation that has become unsustainable. The only year the cuts required under BBA 1997 when into effect was 2002, when the formula called for a reduction of 4.8 percent. Every year since then when cuts are due, Congress has intervened and overridden the reduced update under the formula. The intent of the SGR was to constrain the growth in Medicare physician expenditures by limiting Medicare payments to physicians to the growth rate of the economy by incorporating the following estimated cost factors into the SGR update formula:

• The change in fees for physician’s services • The change in the number of beneficiaries enrolled in Medicare fee-for-service system • The 10-year average annual change in GDP per capita • The change in expenditures due to law and regulation

Because of the way the SGR formula developed, the required expenditure reduction has been getting larger every time the reduction is delayed. Many physicians were hopeful that the SGR would be repealed as part or ACA, but that did not happen. The Present State of Affairs Under the SGR On February 17, 2012 Congress averted a 27.4% cut in the Medicare physician payment rates that would have become effective March 1, 2012. This scheduled reduction was driven by the sustainable growth rate formula. The legislation also extended several small Medicare payment provisions that were set to expire after February 29, 2012. These include payment extensions for physicians practicing in rural and low-cost areas, exceptions to limits on certain outpatient therapy services, an enhancement in pay rates to sole community hospitals with fewer than 100 beds, and an increased rate for ambulance services. In addition, hospital geographic reclassifications were extended, but only through March 31, 2012. While the reduction in payments was averted, it froze physician payments for 10 months at a cost of $20.9 billion. This cost will be paid for by payment reductions primarily to hospitals and clinical laboratories:

• $6.9 billion in reduced payments for hospital and nursing home bad debts expenses • $5 billion in reduced funding for certain pubic health and prevention services enacted under the

ACA • $4.1 billion from reduced payments to hospitals for disproportionate share • $2.5 billion in Post Hurricane-Katrina payments for Louisiana Medicaid, and • A two percent reduction in clinical laboratory payments: $2.4 billion.

Continued on page 8

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Bryan Krogman

Chief Financial Officer

Community Mental

Health for

Central Michigan

Shane M. Jacques

Chief Finance Officer

Aspirus Keweenaw Hospital

Jennifer Grennell

Manager, Provider Relations

HealthPlus of Michigan

Susan Ly

Senior Associate

McGladrey

Rani Patel

(Sponsored by Peter J. Leenhouts)

Josh Richards

Staff Accountant

Plante & Moran, PLLC

Brian D. Post

Cytology Group Leader

MidMichigan Medical

Center-Midland

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Continued from page 6

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The Sustainable Growth Rate Formula and Other Finan cial Challenges for Physicians (continued)

The temporary patch to the SGR payment reduction formula only delays a growing problem. Physicians will now face an impending 32% payment reduction in 2013 and a budget hole of $300 billion. Many anticipate that in five years, this deficit will grow to $600 billion. Since 2012 is an election year, another pay patch is anticipated in December 2012 because this will be a lame-duck session of Congress. Such a delay would put off the delay in cuts a couple of months probably until March 1, 2013. Other Financial Challenges for Physicians It is important to note that not all physicians are facing crisis. This is because about 50 percent of the nation’s physician’s are employed by hospitals or hospital systems. Of the remaining 50 percent of physicians, cardiologists and oncologists have been especially hard hit. This again is due to Medicare payment policy changes. Last year CMS significantly reduced payments to cardiologists for echocardiograms, stress tests and similar testing procedures. The payment reduction was based on a survey by the American Medical Association for CMS. This assessment excluded many cardiologists in private practice from the survey. It is believed this was done intentionally because private practice cardiologists to a large extent have dropped out of the AMA. Oncologists are also suffering but not because of the AMA. They are suffering from cancer treatment chemotherapy drug payments that often do not cover their costs. What exacerbates the problem is that private insurers adopt payment structures that are modeled after what Medicare pays. This is especially common when the Medicare payments are being reduced. If the SGR formula and other Medicare payment reductions were not enough to give physicians heartburn, a recent Wall Street Journal article highlighted further financial concerns for physicians in medical practice. A number of family practice physicians have begun to use electronic medical records, call patients at home, and coordinate with other specialists and hospitals to improve patient care. These are the things policy makers and insurers say physicians should be doing to improve patient care. In many cases, these enhancements are not reimbursed under traditional insurance contracts. The article cited an example of a three physician practice that gave up $200,000 in revenue from patient visits to make the medical home practice transition. The Advisory Board has estimated that for a five-doctor practice, the first year cost for conversion to a medical home practice is between $126,000 and $356,500. This is the cost to upgrade information technology systems, add and educate staff, and pay for outreach and care coordination. In the Wall Street article, officials from Aetna, WellPoint and UnitedHealth have indicated that they are moving forward with payment reform to encourage physicians to adopt alternative payment options. Prudently, physicians remain cautious about whether payments will continue beyond demonstration projects. This uncertainty will drive more physicians to the employment security offered by hospitals or integrated delivery systems, a trend fueled by the prospect of the development of accountable care organizations.

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Continued from page 8

The Sustainable Growth Rate Formula -continued Health Care Costs and Economic Realities Hospitals lose $150,000 to $250,000 per year for the first three yeas of physician employment. The losses decrease about 50 percent after three years. In the end, ambulatory office practices seldom turn a profit for hospitals. The losses from employing primary care physicians may be offset in part by referrals to specialists that use the hospital. Although some physicians would prefer autonomy to employment, the reality is that hospitals are under pressure to engender cost-saving strategies for their own survival. The expectation is that this struggle for survival will eventually benefit patient customers if savings are passed on through lower costs. A point to ponder – unsustainable describes health care costs continuing to absorb a larger percentage of GDP each year -- if something cannot go on forever, it will eventually stop.

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Is Contact Information Obtained at Registration Rel evant Today? Steve Chrapla, CHFP

Director 3rd Party Solutions Avadyne Health

schrapla@avadynehealth.com

We need to ask ourselves, is the patient contact information we are gathering relevant in today’s world? Are we following the same basic approach to getting contact information that we did when we were registering patients in 1980?

Name/address/phone number/nearest relative?

The world has changed greatly since 1980. Personal and business communication has undergone a metamorphosis unlike anything we could have imagined. The phone company is no longer just the phone company. Land lines and the US Post Office are becoming secondary communication vehi-cles. Whether we like it or not, we are a mobile society connected digitally with wireless accessibility wherever we go. Yet when we register patients, many of us are still gathering the same contact in-formation we did years ago. Cell phones have become so commonplace and cost-effective many households have done away with the traditional telephone land line. And in this world of high tech polling, solicitation and robo-calling, consumers use caller ID to screen any and all calls they deem unimportant. It is time to take a fresh look at the importance of relevant contact information in registration. It is not just to complete the boxes with data but provide for a meaningful, consumer-friendly way to reach out and connect with our patients. That means we need to look beyond some legacy registration system’s data fields and compile con-tact information relevant to each patient being registered. We need to ask patients, how do we con-nect with them after they have left our facilities? What is their mode of preference for emergency contact? Is it their home phone or is it a cell phone, or is it both? Do we also look for other avenues to connect with them in non-emergent situations; such as email, text, social media etc. Obviously, we need to maintain compliance with HIPAA and all confidentiality requirements but we should be looking at what is relevant to our patients, not what is dictated by what we have done in the past. Here are some things we need to examine in our registration processes:

Do we ask patient for the most relevant means of contacting them? Beyond land telephone lines, do we request cell phone #’s? Do we ask if patients would like to receive non-emergent communications via the internet? Review registration systems data fields for appropriate documentation of key contact info. This may mean a work–around to document information in a note field etc., or possibly in an unused data field Establish procedures that will outline which contact method will be used for medical issues vs. administrative issues. Make sure you also establish any time preferences, such as evenings, etc.

For more information on how registration processes can enhance the patient experience as well as operational challenges please contact Avadyne Health. www.avadynehealth.com Steve Chrapla is Director of 3rd Party Solutions fo r Avadyne Health and a member of the First Illinois HFMA Chapter. He can be reached at (847) 3 95-7655.

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Will Bundled Payments Add Value . . .(continued)

A bundled payment, or episode-based payment, is defined as “a single negotiated episode payment of a predetermined amount for all services (physician, hospital, and other provider services) furnished during an episode of care.” 3 The goal of bundled payments is similar to the Institute for Healthcare Improvement’s (IHI) Triple Aim objectives of improving the health of the population, enhancing the patient experience and reducing the per capita cost of care. Using Model 2 and a knee arthroplasty surgical procedure as an exam-ple, the bundled price for an episode of care would include pre-admission services that are billed as part of the hospital stay, hospitalization, surgery, post-acute rehabilitation and follow up care. The current FFS methodology reimburses each provider separately for their part in the episode of care, leading to frag-mented care and minimal coordination among the providers. Bundling payments would align acute and post-acute service delivery, reduce duplicated care and waste, and improve quality outcomes.

Pricing the bundle of acute and post-acute services delivered during an episode of care requires a thorough understanding of the key cost drivers and resource utilization for the full cycle of care. In order to gain con-sensus and increase trust among stakeholders, sharing historical cost and quality data provides a level of transparency to the process. So what is the starting point in pricing a bundle of care? The first step is to convene the strategic partners to decide what services to include in the bundle and define the episode of care. The strategic partners for the Model 2 knee arthroplasty episode include the interdisciplinary provid-ers from the continuum of care, as well as administrative and financial team members. In the world of pro-ject management, clearly defining the “project scope” is critical to getting all of the stakeholders on the same page to accept full accountability for outcomes and costs. A project scope outlines the parameters, bounda-ries and limitations of the project, clarifies assumptions, defines timeframes and identifies exclusions. In the knee arthroplasty episode, defining the episode of care can be viewed as defining the project scope.

Continuing with the Model 2 knee arthroplasty episode, the next steps, which can be completed simultane-ously, are assembling the historical Medicare FFS claims into distinct episodes of care and creating a proc-ess map of current care pathways. Organizing claims data from the Medicare limited data set (LDS) file into meaningful episodes of care requires significant database and/or business intelligence programming skills. Health plans utilize commercially available bundling tools, such as the Ingenix Episode Treatment Group, the Thomson Reuters Medical Episode Grouper, and the 3MTM Clinical Risk Grouping software packages to develop episode-based rates. Each of these grouper methodologies utilizes an anchoring event, such as an admission into an acute care hospital for a specific Diagnosis Related Group (DRG) to begin the epi-sode. The methodologies of grouping assignable acute and post-acute claims in some pre-determined pro-spective period differ somewhat, but all yield a specific group of billing codes assignable to the anchoring event. 4

3 Center for Medicare & Medicaid Services (2011, August). Bundled Payments for Care Improvement Initiative Request for Application. Retrieved from

http://innovations.cms.gov/initiatives/bundled-payments/index.html, (2).

4 Casale, Paul, et al. (2011, July). Payment Reform: Current and Emerging Reimbursement Models. Retrieved from http://www.cardiosource.org/

Advocacy/Issues/~/media/Files/Advocacy/Health%20Refrom/PaymentReformWhitePaper.ashx, (4).

Continued from page 1

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Will Bundled Payments Add Value . . . (continued) CMS has defined the episode of care for Model 2 as beginning on the admission date, including pread-mission testing, and extending to a minimum of 30 days post discharge. Identifying the episodes of care, based on each DRG from the Medicare LDS file is the starting point in analyzing the claims data. The Medicare LDS files for institutional (UB-04) or non-institutional claims (CMS-1500) contain utilization and payment information on inpatient hospital, outpatient services, skilled nursing facilities, home health agencies, durable medical equipment and Part B claims. If your organization has an advanced analytics department and the expertise to complete the data analysis in-house, the Medicare LDS files are loaded into a database application (e.g., SAS, Oracle or Sybase), since database programs such as Microsoft Access do not have the capacity to handle these files. The other option is to outsource the data analysis to a consulting services partner, such as TRG Healthcare Solutions or Singletrack Analytics. According to Jonathan Pearce, the founder of Singletrack Analytics, his organization has found that the LDS data for the BPCI application requires an enormous amount of programming, which would be difficult to com-plete in a short period of time. Mr. Pearce indicated the overall data sizes are huge (most of the data sets provided CMS expand to about 30 gigabytes) with calculation nuances, such as selection of the cor-rect fields, date timing and others that need to be done correctly. The episode files completed by Single-track for the BPCI program, including all of the carrier claim level detail have been typically 5 to 12 mil-lion records in length.5 Once the episodes of care are created for each DRG in the Medicare LDS file, Singletrack works with the client using an enhanced Excel based analytical tool with drill down capabili-ties, to assist with pricing of the bundle of care and analysis of the historical episodes of care, including DRG specific analysis, such as variations in payment per DRG.

Another tool designed to assist with decision-making around an episode of care is the PROMETHEUS Payment model, which is based on evidence-informed case rates (ECR). The Healthcare Incentives Im-provement Institute (HCI3), which designed and is implementing the PROMETHEUS Payment model, offers a SAS-based freeware analysis package that is partially based on that model, to assist BPCI appli-cants with analysis of the Medicare FFS claims data.6 The analysis package is free of charge, however, the applicant requires a SAS license, hardware, software and SAS programmers to implement the sys-tem. Using well-accepted clinical practice guidelines and best practices, ECRs bundle all covered inpa-tient and outpatient services for a single episode of care. The bundle is risk adjusted to factor in the pa-tient’s severity of illness and the software generates a price for the bundled episode of care.7 The foun-dation of the Prometheus model is that within an episode of care, risks inherent to the patient and risks imputed by the providers in management of the patient’s care can be identified allowing bifurcation of provider technical risk from probability risk.8 The negative consequences of technical risk are defined as potentially avoidable consequences (PACs) that lead to increased cost for the episode of care. Analyz-ing technical risk and developing a strategy to avoid preventable complications and readmissions pre-sents an opportunity to improve patient outcomes, enhance patient satisfaction and reduce the per cap-ita cost of care. Examples of PACs in the Model 2 knee arthroplasty episode are readmissions for man-ual rupture of joint adhesions, debridement of wound infection and revision of knee arthroplasty.9

5 Pearce, Jonathan (2012, April). E-mail Interview. http://www.singletrackanalytics.com.

6 http://www.hci3.org/cmmi-analytic-report-tools 7 PROMETHEUS Payment, Inc. (2009, June). What is PROMETHEUS Payment? http:// www.PROMETHEUSPayment.org.

8 Rastogi, Amita, et al. (2009, June). “PROMETHEUS Payment Model-Application to Hip and Knee Replacement Surgery.” Symposium: ABJS Carl T. Brigh-

ton Workshop on Health Policy Issues in Orthopaedic Surgery. 9 ibid

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Avadyne Health is a revenue cycle workflow technology and patient-centric outsourced services firm serving more than 200 hospitals in 30 states. Clients use our Next-in-Queue workflow technology to maximize patient access and business office outcomes. And since our self-pay, insurance, and pre-access services run on the same platform, our team be-comes a true extension of your team. So we continuously adapt to meet your goals, with a customer solution you control. The result is increased cash, transparency, and patient loy-alty.

Continued from page 15

Will Bundled Payments Add Value . . .(continued) According to the Executive Director of HCI3, Francois de Brantes, feedback received from BPCI applicants utilizing the freeware to complete the BPCI application suggested it was a starting point for organizing and analyzing the CMS data. While applicants reported the freeware as easy to install and user friendly, the run time, which varied from 48 hours to several days due to the size of the CMS files, was the main technical point.10 The applicants are using the reporting capabilities of the analytic package to develop the episode bid price, identify PACs, and analyze the historical episodes of care.

The BPCI program brings healthcare entities one step closer to aligning reimbursement with value and to under-standing cost in relation to quality and outcomes. The Model 2 knee arthroplasty episode includes the total cost of care for the patient’s condition, which requires alignment among the stakeholders. Strategic opportunities to attain the best clinical pathway for the defined episode of care are achieved by engaging the strategic partners in discus-sion of the data and review of the current state process maps. Developing and implementing bundled payments is extremely complex and not for the faint of heart. However, the applicants in the BPCI program are gaining experi-ence in developing the capacity to implement bundled payments, which may be considered a competition advantage in the near future. 10 de Brantes, Francois (2012, April). E-mail interview. http:// www.hci3.org.

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