bundled payments the impact on it

Bundled Payments:The Impact on IT

January, 2014

If you remember just one thing…..

Your next CFO isn’t coming from the health industry.

Your next CFO is coming from industrial USA.

The Commoditization of Healthcare

• Great news

– everything’s getting better

– and cheaper

– and more accessible

• Bad news

– providers are a dime-a-dozen

Your New Bag of Tricks

→Differentiators in offerings

→New reimbursement models

→Bundled payments

What Are Bundled Payments?

• Episode - all services provided to a patient related to a specific medical problem in a limited timeframe

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

What Are Bundled Payments

Episodes

CABG Gall Bladder

Colonoscopy Joint Arthroscopy

C-Section Joint Replacement

Endoscopy Pregnancy/Deliver

What Are Bundled Payments

Chronic Conditions

Asthma Depression

CAD Diabetes

CHF GERD

COPD Hypertension

The Theory

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

provider can drive efficiencies

Nothing new here

The Reality

→This time it’s different

→Commoditization makes this possible

→That’s what’s new….for healthcare

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

• Develop multidisciplinary team

– Gain physician “buy-in” early and often

• Identify key success factors

• Identify key performance analytics (KPIs)

• Establish baselines – gather historical data

• Build cost accounting models for case tracking

Determining Bundles

•You’re building a model(s)

•Acute vs. chronic situations

•Limiting exposure while maintaining quality

•Clinical/finance involvement in design

•Redeveloping care models

Determining Bundles

•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)

– CMS data

•Start and end point (warranty)

•Commercial products can help

Determining Bundles

Source: http://info.medinsight.milliman.com/?Tag=Bundled+Payment

Determining Bundles

Source: http://info.medinsight.milliman.com/?Tag=Bundled+Payment

Determining Bundles

•Redeveloping care models

– Review current models

– Specialty clinical protocols

– Best practices…for you

– Financial ramifications

Determining Bundles

• IT impacts

– Identifying data sources

– Data aggregation from disparate sources

– Defining/acquiring/developing analytical tools

– Ongoing analysis to refine bundle definition process

Contracting

• Gainsharing and withhold models

• Employer-provider contracting bypassing insurance companies

• Physician directed models – the hospital as a resource

• Including non-medical services in bundles

• Billing for bundles in a fee-for-service world

• Patient/provider contracts

Contracting

•Examples of excluded conditions

– BMI > 33, A1C > 6.5, anemia

– Significant depression/drug use/abuse

•Examples of excluded services

– Inpatient/outpatient rehab

•Examples of warrantied services

– Readmission related to surgical site issues

Contracting

• IT impacts

– Tracking/analyzing historical data

– Directing/receiving bills to/from multiple parties

– Billing for bundles in a fee-for-service world

Workflow

•Clinical and IT

– Operating both FFS and BP treatment models

– Operating both FFS and BP billing models

– Standards (and lack of) in bundled payments

– The effects of bundles on analytics

Workflow

•Treating bundled patients

– Different than traditional patients?

– Case management

– Ongoing tracking of costs (services)

Workflow

•Billing bundled patients

– Effects on charge capture

– Automation of different billing models

• “Dummy” 837

• “Conventional” invoicing

– Effects on payment processing

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

Workflow

• IT impacts

– EMR identifying and tracking BP patients

– Ongoing feedback on BP case progress

• Wholesale changes to charge capture?

– Billing/invoice processing

– Payment processing

Cost Management

•The key to profitability

– Cost accounting methods and systems

– Issues in tracking costs by case

– Standardizing care to leverage purchasing and reducing costs

– Expanding the bundle process to FFS

– Broadening the scope of services

Cost Management

•Question:

– How do we know if we’re making money?

•Answer:

– If revenue exceeds cost.

Cost Management

•What are costs?

– The usual suspects (payroll, supplies, …..)

– Direct costs (implants)

– Indirect costs (administration, regulatory)

•FFS ties direct costs (implants) thru billing

– Sometimes

•Reality: Healthcare lags industry in cost management

Cost Management

•Cost management/reduction issues

– Understanding current costs

– Cost reduction: standardizing care

– Cost elimination: process change

– Expanding the bundle process to FFS

• Reduces revenue, also!

– Broadening the scope of services

• ↑ costs & ↑ revenue

Cost Management

• IT impacts

– Cost management system implementation

– Ancillary support systems (e.g., surgical trays)

– System integration

Monitoring Performance

•Continuous improvement

– Case tracking/intervention avoids adverse exposure

– Quality measures/KPIs

– Ongoing analysis/corrective action for outliers

– Using results to renegotiate payer contracts

Monitoring Performance

• Questions:

– Are we making money?

– Where are the “exceptions”/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

•Examples of KPIs:

– Clinical: Readmission rates/SCIP scores

– Financial: Average cost/case, margin/case

– Customer: Satisfaction index/outcomes

Monitoring Performance

• IT impacts

– Exception reports/alerts in “real time”

– Regular/on-demand performance analysis reports

– Quality measures: capture, analyze, report

Questions?

Thank You!

Sheldon Hamburger

shamburger@thearistonegroup.com

(248) 613-7166