HFMA Presentation:

Value Driven Care Update

January 15, 2018

Melinda Hancock

Chief Financial Officer

VCU Health

Jeffery Gruen, MD, MBA

Chief Innovation Officer and Chief Medical Officer

Innosight1

Jeffery Gruen, MD, MBA

Chief Innovation Officer and Chief Medical Officer

Innosight

2

3

POLITICS

Trump Officials, After Rejecting Obama Medicare Model, Adopt One Like ItJan 10, 2018

“The current administration would like to reverse everything associated with the Affordable Care Act and the Obama administration,” Dr. Fisher said. “But this week’s announcement shows that there is a bipartisan consensus on the need to change the way we deliver and pay for health care.”

- Dr. Elliot Fisher, Dartmouth

Provider Profit Margins Falling

Source: Congressional Budget Office, Sept. 2016

Disruption Accelerating

The new

flexible

delivery

platform?

The new

asset light

health

system?

Ubiquitous

health

services on

demand?

The new

health plan/

provider?

Inpatient Model Being Disrupted

0%

Inpatient

+23%

Outpatient

Inpatient Disruption Will Accelerate Over Next 10 Years

CMS Increasing Value Payments

MACRA legislation allowed for slower transitional shift to value in 2017 and 2018—in 2019, implementation accelerates significantlyMedicare value-based reimbursement trends will continue to drive increased adoption on the commercial side

Commercial Payors Also Increasing Value Payments

9

45% spend tied to value in 2016; goal of 75% by 2020

45% spend tied to value

43% spend tied to shared savings; goal of 50% by 2018

Provider MIPS CMS Payment Dollar Risk Increasing

Those remaining largely in Medicare fee-for-service will see increasing Medicare reimbursement swings based on quality and cost

Increasingly incentivized to participate in “Alternative Payment Models” across all payers, all bearing a more-than-nominal amount of

downside risk in a variety of arrangements

+4%+5%

+7%+9%

-4%

-5%-7%

-9%

+9%

-9%

+9%

-9%

+9%

-9%

2019 2020 2021 2022 2023 2024 2025+

MEDICARE ACO PARTICIPATION IN WESTERN REGION

Source: Centers for Medicare and Medicaid Services

• Less than 20% of MSSP ACOs are located in the Western Region

• About 30% of Next Generation ACOs are located in the Western Region

WESTERN REGION MEDICARE ACO RESULTS

Source: Centers for Medicare and Medicaid Services

• Based on the most recent available results, the highest performing Medicare ACO (MSSP) earned more than $7.4M, with the lowest performing ACO (Next Generation) losing $5.2M

2015 MSSP ResultsCommonwealth Primary Care ACO $7,404,173

Revere Health $6,300,913

Scottsdale Health Partners, LLC $4,568,301 John Muir Health Medicare ACO $3,305,157

National ACO $3,069,100

Rainier Health Network $2,981,335 Silver State ACO LLC $2,686,857 Premier Choice ACO, Inc $2,676,462

Arizona Connected Care, LLC $2,239,894

Advanced Premier Physicians ACO $1,849,761 Copeland - Beajow Medical Institute, Chtd DBA Internal Medicine Associates $1,580,006 Antelope Valley ACO $1,398,168

2016 Results Western NG ACO

Prospect $938,839 MemorialCare ($5,240,146)

Legislative and Regulatory Changes Adding Pressure

2018 Hospital Outpatient Prospective Payment System Update

Dec 21 Short-Term Spending Bill

Tax Law

• Individual mandate repeal 13 million fewer insured by 2026

• Overall higher deficit jeopardizes Medicare spend

• Extends CHIP only through March• Does not address delaying DSH cuts

• Payments for 340B drugs cut by 20+%• More procedures removed from inpatient-only list

Trump’s CMS Not Backing Away From “Value”

Design differences aside, the push towards value is bipartisan

New CMS Bundles: January 9, 2018

Inpatient Episodes

• Disorders of the liver excluding malignancy, cirrhosis, alcoholic hepatitisAcute myocardial infarction

• Back & neck except spinal fusion• Cardiac arrhythmia• Cardiac defibrillator• Cardiac valve• Cellulitis• Cervical spinal fusion• COPD, bronchitis, asthma• Combined anterior posterior spinal fusion• Congestive heart failure• Coronary artery bypass graft• Double joint replacement of the lower extremity• Fractures of the femur and hip or pelvis• Gastrointestinal hemorrhage• Gastrointestinal obstruction

• Hip & femur procedures except major joint• Lower extremity/humerus procedure except hip,

foot, femur• Major bowel procedure• Major joint replacement of the lower extremity• Major joint replacement of the upper extremity• Pacemaker• Percutaneous coronary intervention• Renal failure• Sepsis• Simple pneumonia and respiratory infections• Spinal fusion (non-cervical)• Stroke• Urinary tract infection

Outpatient Episodes

• Percutaneous Coronary Intervention (PCI)

• Cardiac Defibrillator

• Back & Neck except Spinal Fusion

CMS Incentivizing Outpatient Care

Procedures Removed from inpatient-only list for 2018:

1. Total knee arthroplasty

2. Laparoscopy, surgical, repair of paraesophageal hernia with implantation of mesh

3. Laparoscopy, surgical, gastric restrictive procedure; removal of adjustable gastric restrictive device component only

4. Laparoscopy, surgical, gastric restrictive procedure; removal and replacement of adjustable gastric restrictive device component only

5. Laparoscopy, surgical, gastric restrictive procedure; removal of adjustable gastric restrictive device and subcutaneous port components

6. Laparoscopy, surgical prostatectomy, retropubic radical, including nerve sparing, includes robotic assistance, when performed

Providers are beginning to realize severity of situation

Safe Early Warning Sign Red Alert!

Customer Loyalty Stable or Increasing Slow decline Rapid decline

Venture CapitalInvestment

Little or noneSubstantial seed and early

stage activitySubstantial growth stage

activity

Industry Entrant Activity

Little or noneGrowth at the low-end or

fringe of the marketEntering or present in

mainstream

Customer Habit Shift Habits are stable Change at the fringes Change in the mainstream

Business Model Innovation

Entrants are me-too copycats Entrants exploring new modelsEntrants succeeding with new

models

Profit MarginsStable or increasing due to

top-line growthSlow decline or increasing due to cost management

Rapid decline

Our client surveys and interactions indicate that healthcare executives believe industry is already in or are fast approaching the Red Alert stage

But don’t feel they are prepared to change.

80%Recognize the

need to transform in response to

changing markets31%

Are very confident that

their company is prepared to change

Source: “Are Business Leaders Caught in a Confidence Bubble,” Innosight Survey, 2017;

https://www.innosight.com/insight/are-business-leaders-caught-in-a-confidence-bubble/

MANY ORGANIZATIONS TAKING MORE STRATEGIC APPROACH TO VALUE DRIVEN CARE DESIGN

COMPETING ON HEALTH INNOVATION PLATFORM(Health Innovation Model, Assets and Capabilities Repository)

TRANSFORMATION ACore Growth & Repositioning

TRANSFORMATION BNew Growth

• Reposition core as needed

on key Jobs to be Done

• Complementary and adjacency

growth

• Cost transformation,

as needed

• M&A and partnerships

• Jobs to be done

• Business model innovation

• System / value network

development

• Test and learn plans

and implementation

• M&A and partnerships

CAPABILITIES LINK

Shared resources and capabilities, while managing

the interface between A & B in

the right way

FUTURE-BACK STRATEGY

The New Approach to Building Value Driven Care Programs

Innovation Assessment

Strategic Opportunity Areas (SOA)

Determine the scope, scale and timing of transformative innovation required and its contribution to future growth gap / organization objectives

Structure and define SOAs to focus innovation activities and drive action by tying them to consumer needs, emerging business models, and tech

Create business model framework for each SoA to help teams innovate beyond tech or product and consider breadth of innovation levers to drive success

Care Model Assessment

Growth gapCustomer-

centered SOAs

Business Model

Canvas for SoAs

What might ’Compete on Health’ look like?

I N D I V I D U A L

H E A L T H

Exposure

management

Social services

and resources

Integrated care

delivery

World-class

academic research

Personal

genomics

On-going

monitoring

Healthy lifestyle

advice

Customized behavioral

support

A BTRANSFORMATION A

Reposition Today

TRANSFORMATION B

Create Tomorrow

1. Zero in on the post-disruption job

to be done

2. Innovate your business model to deliver against the job

3. Determine and monitor new

metrics

4. Implement aggressively

1. Identify constrained markets

2. Iteratively develop a business

model to serve that market

3. Use partnerships, acquisitions, and

new hires to succeed against a

new competitive set

A & B SUCCESS FACTORS

Melinda Hancock

Chief Financial Officer

VCU Health

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Our Academic Health Center…

The VCU Health System is an urban, comprehensive academic

medical center in central Virginia established to preserve and

restore health for all people, to seek the cause and cure of

diseases through innovative research, and to educate those

who serve humanity.

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VCU Health System by The Numbers…

12,500Team Members

830+Physicians

200+Clinical

Specialties

5,000+Students & Residents

VCU Medical Center• 805 licensed acute care beds • 37,938 inpatient discharges• 714,669 clinic visits• 23% share of the Richmond metro

inpatient market • 93,354 emergency department visits,

and is the region's only Level I Trauma Center

VCU Community Memorial Hospital• 99 licensed acute care beds• 2,682 inpatient discharges• 23,005 emergency department visits• 161 licensed long-term care beds

Children’s Hospital of Richmond• Pediatric specialty hospital• 60 licensed long-term care beds

MCV Physicians• ~830-physician,

faculty group practice• Most comprehensive

scope of clinical services in the Commonwealth

• Provides all teaching and training for medical students and residents

Virginia Premier Health Plan• 209,000 members

Medicaid Health Maintenance Organization

25

Value Based Care and VCU Health

26

Transition to Value Based Care Mandatory Programs Voluntary Programs Governmental/Commercial/Internal Complex Care Clinic/Care for Advanced Health Management

Access to Care Ambulatory presence Parking, parking, parking Geographic reach

Partnerships Department of Human Resource Management Little Clinics Open to new definitions of partnerships

Mandatory Payment Reform is Everywhere

27

VBP

RRP

HAC

CJR

PQRS/VM

MU

MIPS/APM

SNF VBP

HH VBP

Cost = Spend

28

➢ Medicare cost is from the perspective of Medicare

➢ Attributed to the hospital by discharge and to the physician by plurality of services

➢ For example, Medicare Spend per Beneficiary

▪ 3 days prior to admission

▪ The admission

▪ Any claim initiated within 30 days of discharge

▪ Part A and B

Fundamental Formula

29

30

Internally

Identified

Opportunity

CMS Value

Based

Purchasing*

CMS

Readmission

Reduction

Program*

CMS Hospital

Acquired

Condition

Program*

CMS Merit-

Based

Incentive

Payment

Program*

Anthem

QHIP®*

Vizient

Q&A

Ranking

Reference

% $$ left

on table

Hospital Acquired Infections X X X X X

Mortality X X X X

Readmissions X X X X X

Pt Experience/STAR Service X X X X X

Spend/Cost/Efficiency X X X X

Throughput/LOS X X X X

Safety: PSIs X X X X

Access to Care X X X

High Reliability Culture X

$2,879,589

$1,086,554

$878,822 $795,709 $755,709

$310,000 $-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

0% 5% 10% 15% 20% 25% 30%

Do

llars

Lef

t o

n T

able

, FFY

18

, ac

ross

pro

gram

s, M

CV

H

% Weighting in Vizient Q&A Rankings

Quality, Safety, Service Measures: Relative WeightsHAIs

Mortality Total

Readmission/Care CoordinationTotalPatient Experience Total

Efficiency/Spend/MSPB

LOS/Throughput

Patient Safety for SelectedIndicators (PSI)

X0

Alignment of Quality, Safety,

Service Priorities

Acute: VBP/RRP/HAC

31

($3,000,000)

($1,000,000)

($2,000,000)

$4

$6,000,000

($4,000,000)

($3,000,000)

($2,000,000)

($1,000,000)

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

Readmission Hospital Acquired Condition Value Based Purchasing

Current Total Incentive

Base of $100,000,000 of Medicare Part A Revenue

Decision Tree for QPP

32

Am I in an APM?

Is it an Advanced APM?

Do I meet the volume or

revenue criteria?

Yes

Yes

Yes

NoDo I meet minimum criteria?

No NeitherYes

No

No (Option of Partial Qualifying, if not, then MIPS Path)

MIPS Optimization

33

$1,000,000$1,250,000

$1,750,000

$2,250,000

-$1,000,000-$1,250,000

-$1,750,000

-$2,250,000

$2,500,000 $2,500,000 $2,500,000 $2,500,000

2019 2020 2021 2022

Incentive Penalty 10% Bonus

Practice with $25M in Medicare fee schedule payments

Does not include the adjustment factor of up to 3X per year

Anthem

34

Currently 30% of Anthem providers are value based

Website lists 3 methods:1) ACOs: currently 118 ACOS2) P4P3) Bundles

Source: http://marketrealist.com/2015/04/anthem-mergers-acquisitions-target-medicaid-medicare/

Aetna

35

• Currently at 30% value based with a goal of 75% by the end of the decade

• Specifically calls out:– ACOs (currently in 62 ACOs)

– Bundles

– P4P: 7 efficiency metrics and up to 20 quality metrics

– Medical Homes (currently 1 million members)

– High Performance Networks (760k members)• Source: http://www.forbes.com/sites/brucejapsen/2015/05/15/value-based-care-may-drive-aetna-bid-for-cigna-or-humana/#4e60fee6512d

• http://www.ehcca.com/presentations/pfpsummit10/curran_1.pdf

Documentation, Documentation, Documentation

36

Hips: With Fractures

37

Post Acute Networks

38

• Formalizing preferred providers by post acute provider type

• Hold preferred providers accountable based on quality metrics/outcomes

• Share data on routine basis

• Partner on streamlined protocols

• Gain share or put dollars at risk

SNF Criteria Grids

39

➢ Criteria includes: Skills and Service Availability, Coverage, Capacity, Safety & Quality

Appendix

Voluntary Bundles in Virginia

41

Bundles (BPCI Model 2 and 3)

Source: https://innovation.cms.gov/initiatives/map/index.html#model=

Bundle Data: CABG

42

All Innovation Models in Virginia

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Source: https://innovation.cms.gov/initiatives/map/index.html#model=

HEALTH SYSTEM 2017 APM PARTICIPATION

4%

4%

4%

4%

12%

15%

19%

27%

27%

31%

50%

0% 10% 20% 30% 40% 50% 60%

I don’t know

Medicare Shared Savings Program Accountable Care Organization…

Medicare Shared Savings Program Accountable Care Organization…

Comprehensive End-Stage Renal Disease Care Model

Oncology Care Model (OCM)

Next Generation Accountable Care Organization

Bundled Payment for Care Improvement (BPCI)

Commercial/other payer risk-based payment contracts

Comprehensive Care for Joint Replacement (CJR)

Comprehensive Primary Care Plus (CPC+)

Medicare Shared Savings Program Accountable Care Organization…

In which Alternative Payment Models (APMs) are your system currently participating (2017 performance year)? (Please check all that apply.)

Source: Huron & Health Management Academy

HEALTH SYSTEM PLANNED PARTICIPATION

4%

4%

8%

8%

8%

12%

15%

19%

31%

0% 5% 10% 15% 20% 25% 30% 35%

I don’t know

Medicare Shared Savings Program Accountable CareOrganization Track 2

Medicare Shared Savings Program Accountable CareOrganization Track 3

Next Generation Accountable Care Organization

Medicare-Medicaid Accountable Care Organization

Medicare Shared Savings Program Accountable CareOrganization Track 1+

Comprehensive Primary Care Plus (CPC+)

Medicare Shared Savings Program Accountable CareOrganization Track 1

New commercial/other payer risk-based contracts

Is your system currently considering participating in any of the following models for the first time, to begin in 2018?

Source: Huron & Health Management Academy