A Practical Guide to Implementing

Bundled Payments

July 15, 2014 Sheldon Hamburger

If you remember just one thing…..

Your next CFO isn’t coming from

General Ortho, General Surgery, or General Hospital.

Your next CFO is coming from General Dynamics, General Motors, or General Electric.

Great news!

•Everything’s getting better •And cheaper •And more accessible

Bad News….

2013 Study – How patients choose Drs

Choose Dr Choose TV Acceptance of insurance

plan Cost

Bedside manner/empathy Customer service Proximity of office to home,

work, or school Location

Convenient office hours Store hours

What Are Bundled Payments?

Bundle – all services provided during an episode for which “you” are financially

responsible

The Theory Cost savings by shifting risk Being closer to the care, the

provider can drive efficiencies

Nothing new here

Why Participate?

Profitable – if you can figure it out

First one to success sets the stage

Capture market share

Increase market size

If I Don’t Participate?

•Lose patients •How many patients do you have to lose to be out of business?

•30%, 20%, 10% ?

Planning/executing your project

•Getting started •Determining bundles •Contracting •Workflow •Cost management •Monitoring performance

Getting Started

• Secure project champion – visionary • Creating a culture – care transformation • Develop multidisciplinary team

– Gain physician “buy-in” early and often – Bring in everyone including patients

• Establish baselines – gather historical data • Identify key success factors / KPIs • Build cost accounting models at case level

Determining Bundles

•You’re building models •Acute vs. chronic situations •Limiting exposure while maintaining quality •Clinical/finance involvement in design •Redeveloping care models •Adding services (non-medical, too)

•Where to start? – What you’re good at – What you can control – Areas of excellence / best practices – MS-DRG if you’re a hospital – High volume

Determining Bundles

•Questions to answer – What products/services are in/out? – What have we done in the past? – What is redundant/unnecessary ? – Where can we leverage control? – What causes “outliers”?

Determining Bundles

•Many answers (currently) in claims data – The only structured data source we have – Your internal systems (billing) – Business partner (payer)

•Commercial products can help •Data sharing leads to new insights

– Analytics to ID hi and lo risk cases

Determining Bundles

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Determining Bundles

•Redeveloping care models – Review current models – Industry clinical protocols & your best practices – Quality metrics (KPIs)

• Reduce avoidable complications – Financial ramifications (KPIs)

• Cut the “fat”, maintain/improve margin

Determining Bundles

• Who is the contracting agent with the payer? • What is the scope of the bundle? • More scope = more risk, control, upside $ • Including non-medical services in bundles • Joint ventures, PHO, mergers, etc. • Legal structure / governance / policy • Stark, RICO, safe harbor, anti-trust, state reg’s • Alignment of interests/payments

Contracting

• Opportunity to remake the rules – Create “steerage”

• Gainsharing and withhold models • Employer-provider contracting bypassing insurance companies

• Physician directed models – the hospital as a resource

• Patient/provider contracts

Contracting

• Gainsharing and withhold models – Parties share “savings” – Spend reductions from established threshold – Billing FFS with periodic “true-up” – My claims vs. your claims – Other claims? – Indemnification – Distributing “savings”

Contracting

• Employer-provider contracting – Bypassing insurers – Employer is now the payer – No claims - how to bill this? – Provider = vendor (from employer view) – Provider can directly solicit business

Contracting

• Physician directed models – Physician is the contracting agent – The hospital as a resource – Buying hospital nights, OR hours, etc. – How to bill this?

Contracting

• Other services – Commonly travel today – Could be gym, nutrition, Rx – Linking these costs with cases

• Patient/provider contracts – Patients are “out of control” – Binds patient compliance with bundle rules – Non-compliance gives provider recourse

Contracting

• Excluded conditions – BMI > 33, A1C > 6.5, anemia – Significant depression/drug use/abuse

• Excluded services – Inpatient/outpatient rehab

• Warrantied services – Readmission related to surgical site issues

• Contingencies – Drug availability: brand vs. generic

Contracting

Workflow

• Operating both FFS and BP treatment models • Operating both FFS and BP billing models • Lack of standards in bundled payments • Limited “lessons learned” • Successes are a competitive advantage

Workflow

•Treating bundled patients – Changing care pathways – Educating staff (internal & external) – Changes to EMR, financial, other systems

• Avoid introducing separate systems/flows • Maintain “single point of truth” • Support multiple models

– Patient support tools

Workflow

•Treating bundled patients – Different than traditional patients? – Yes and no – Standardized care benefits everyone – Dedicated case management – Discharge planning / review of systems

Workflow

•Treating bundled patients – Ongoing tracking of

• Costs/activities/services – Ultimately, the models tend to merge to

a single one for BP and FFS

Workflow

Workflow

•Billing bundled patients – Effects on charge capture – Not just for claims, but for costs – Establish charge-cost relationship – Consider cost capture mechanisms

Workflow

•Billing bundled patients – FFS for some models – “Dummy” 837 – “Conventional” invoicing

→

Workflow

Workflow

•Billing bundled patients – Effects on payment processing – No changes on FFS based models – Withholds – Booking bonus/savings payments – Simple bill = simple payment

Workflow

•The effects of bundles on analytics – Example: pro-rating payments

•Metric: average reimbursement for a service

– FFS: 835 ties payment to service – BP: What portion of payment is assigned

to a service?

Workflow

Workflow

Workflow

•The key to profitability – Reality: Healthcare lags in cost management – New cost accounting methods and systems – Understanding/allocation of costs – Cost capture

Cost Management

Cost Management

•What are costs? – Direct costs (implants, anesthesia) – Indirect costs (administration, utilities)

•Cost allocation (to a case) – Direct costs are one-for-one – Indirect costs are more complex – Activity-based cost accounting

Cost Management

•Cost reduction issues – Understanding current costs – Cost reduction:

• Standardizing care saves money • Improved purchasing/negotiations • New protocols

Cost Management

•Cost elimination issues – Holy grail of cost efficiency – Removing steps from the process

• Eliminate the step • Combining steps into one

– Eliminate intermediaries – disintermediation

Cost Management

•Cost (not charge) capture – Continuous process – Charge-cost relationship – Real time capture/feedback

• System/process changes • Supply usage, event capture

Cost Management

•Other cost issues – Expanding the bundle process to FFS

• Reduces revenue, also! – Bundling can increase (add) costs

• Broadening the scope of services • ↑ costs & ↑ revenue

Monitoring Performance

• Questions: – Are we making money? – Where are the outliers/PACs & how to avoid? – How can we squeeze/eliminate costs? – What are the opportunities for more revenue? – Are my “customers” happy? – Can we renew our contracts with better terms?

Monitoring Performance

•Continuous improvement feedback loop – Quality measures/KPIs - defined, now use them – Clinical:

• Readmission rates, SCIP scores • Surg. site infection rate, length of stay • Patient vs provider assessment

Monitoring Performance

•Continuous improvement – Financial:

• Average cost/case, margin/case • % outlier cases

– Customer: • Satisfaction index/outcomes

Monitoring Performance

•Continuous improvement – Case management

• Early intervention avoids adverse exposure • Tools to support case managers • Monitor internal and external (patient)

performance – Predictive analytics

Monitoring Performance

•Continuous improvement – Ongoing analysis/corrective action for outliers

• Shifts more patients into the bundle

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# of

Pat

ient

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Tota

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mbu

rsem

ent

Total Reimbursement Ranges

Model Reimbursement PAC Reimbursement # Pats

Monitoring Performance

•Continuous improvement – Using results to renegotiate payer contracts

• Get out in front of this • Today’s threshold/price = tomorrow’s memory

We’re ready to go!

•Getting started •Determining bundles •Contracting •Workflow •Cost management •Monitoring performance

Questions? Thank You!

Sheldon Hamburger shamburger@thearistonegroup.com

(248) 613-7166