how new payment models are driving post-acute care deliverydallas‐fort worth‐arlington, tx msa...

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How New Payment Models are Driving Post-Acute Care Delivery

Allen Dobson, PhDDobson DaVanzo & Associates, LLC

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Dobson DaVanzo & Associates, LLC Vienna, VA 703.260.1760 www.dobsondavanzo.com

Post‐Acute Care Provider Dynamics in an Alternative Payment Model World

PRESENTED BY: Al Dobson, PhD

PRESENTED TO: The California Hospital Associa on − The Center for Post‐Acute Care

February 12, 2016

• Current pressures on post‐acute care utilization in an evolving marketplace

• Will the pressures intensify?

• Things to keep in mind

Presentation Overview

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Current Pressures on PAC Utilization in an Evolving Marketplace

© 2016 Dobson DaVanzo & Associates, LLC. All Rights Reserved. 5

The Number and Complexity of CMS Pilot Programs has Created Alternative Payment Model Overlaps and has Potential to Transform Stakeholder Alignments

Given program overlaps, hospitals and physicians are often placed in opposition (e.g., physician‐managed bundles take precedence over hospital‐based bundles)

CMS is offering Medicare providers greater incentives for alignment

The interaction between APMs may create unintended consequences

Note: BPCI is Bundled Payments for Care Improvement. CJR is Comprehensive Care for Joint Replacement. LEJR is Lower Extremity Joint Replacement. MSPB is Medicare Spending Per Beneficiary. MACRA is Medicare Access and CHIP Authorization Act.VBP is Value‐Based PurchasingAMP is Alternative Payment Models

ACOsCover Parts A & B

‐Voluntary Participation

BPCI 48 Episode Types

(approximately 181 MS‐DRGs)‐VoluntaryParticipation

MSPB Controlling Regional Variation

in Spending Driven by PACs‐Mandatory for Acute Care

© 2016 Dobson DaVanzo & Associates, LLC. All Rights Reserved.

CJR (2 MS‐DRGs)‐CJR and BPCI Cover the same 2 LEJR

MS‐DRGs‐MandatoryParticipation

Hospital VBP Program Pays

Hospitals for Value (quality measures),

not Volume‐Mandatory Participation

Hospital Readmissions Reductions Program

‐Mandatory for Acute Care Hospitals

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Bundling will lead to changes in providers’ business models as to ways to deliver care and do business:

• The move away from 50 years of fee‐for‐service payment changes providers’ risk calculation —VALUE is paramount, which is a fundamental change in CMS value‐based payment strategy

• Revenue centers will become cost centers

• As care pathways are redesigned in response to new incentives from bundling, a provider that used to function as a revenue center — such as a downstream PAC, (HHA, SNF, IRF, LTCH), would become a cost center

• The transformation of revenue centers into cost centers will require hospitals to redesign care and partner with the most effective downstream providers

• Markets with many downstream providers will present an opportunity for mergers and acquisitions

Consequences of Bundling as the “Logical Next Step”


“Providers should compare ACO earnings not with what they could earn in today’s fee‐for‐service payment environment but with what they could expect to earn in the future if they didn’t participate in such alternative payment models.”

In CMS’ View…

Source: Pham HH, Pilotte J, Rajkumar R, Richter E, Cavanaugh S, Conway P. (Sep 2015). Medicare’s Vision for Delivery‐System Reform‐The Role of ACOs. NEJM 373;11.


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SNFs and HHAs Represent the Largest Share of First PAC Patient Episodes

PAC First Setting Patient Episode Distribution

OP Therapy 6.9%

HHA 35.8%

SNF 45.0%

IRF 10.6%

LTCH 1.6%

Total 100%

Source: Dobson | DaVanzo analysis of research‐identifiable 5% SAF for all sites of service, 2008, wage index adjusted by setting and geographic region.

Distribution of PAC First Setting Patient Episodes from Simulated Clinically Appropriate First Setting Among Select MS‐DRGs

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An Anatomy of MS‐DRGs 469 and 470 under Proposed CJR Bundling: Distribution of Episodes, Readmissions, and Spending per Episode

Care SettingsNumber Episodes

Average Readmissions

Spending per Episode

469 14,200 24.3% $47,093HHA 2,017 13.1% $28,061HOME 873 18.9% $31,446HOSP 4 0.0% $47,115IRF 2,645 24.3% $54,106LTCH 158 34.2% $85,417OTHER 15 26.7% $52,993SNF 8,266 25.4% $50,257READMISSIONS 222 100.0% $52,514470 274,679 9.8% $25,352HHA 102,939 5.5% $19,596HOME 38,315 5.3% $17,235HOSP 8 37.5% $38,871IRF 26,275 13.3% $36,350LTCH 113 29.2% $49,740OTHER 73 16.4% $33,088SNF 104,007 12.2% $31,125READMISSIONS 2,949 100.0% $28,983Grand Total 288,879 10.5% $26,421

Source: Dobson│DaVanzo analysis of Medicare LDS 100% data for 2011‐2013.Note: Spending per episode has been trended to 2013, wage index normalized and trimmed.

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• The data in the table represents one major hospital Episode Initiator (EI) in the Dallas‐Fort Worth‐Arlington, TX MSA

• This one hospital EI has 577 unique HHAs downstream from the index: 39 for MS‐DRG 291 and 118 for MS‐DRG 470, respectively, and the remainder for all other MS‐DRGs

• For MS‐DRG 470, this hospital has 66 unique downstream SNFs and 28 unique downstream inpatient rehabilitation facilities (IRFs)

• This has the potential to make managing bundles very difficult unless tight networks are developed

Under Bundling, Large Numbers of Unique Downstream Providers Are Perceived As Unmanageable ─ Provider Consolidation is Highly Likely

DRG HHA SNF IRF LTCH291: Heart failure & shock w/ MCC 39 14 3 3470: Major joint replacement or reattachment of lower extremity w/o MCC

118 66 28 3

Total (All MS‐DRGs) 577 218 55 27

Source: Dobson | DaVanzo analysis of 100% Medicare Claims data July 2009 to June 2012.


Episode Payment Varies by First PAC Setting –This Has Implications for First PAC Selection and Marketplace Stability (e.g., HHA over SNF)

Average Medicare Episode Payment by First PAC Setting Example of Heart Failure, MS‐DRG 291

for 30‐Day Fixed‐Length Episodes (2007‐2009)

$13,470

$20,318

$33,295

$45,293

$23,679

$12,388

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

HHA SNF IRF LTCH STACH Community

Average

Med

icare Episod

e Paym

ent

© 2016 Dobson DaVanzo & Associates, LLC. All Rights Reserved.

Source: Dobson, A., et al. (2012, October). Medicare payment bundling: Insights from claims data and policy implications. Retrieved from American Hospital Association website: http://www.aha.org/research/reports/12bundling.shtml Notes: Dobson | DaVanzo analysis of research‐identifiable 5 percent SAF for all sites of service, 2007‐2009, wage index adjusted by setting and geographic region, and standardized to 2009 dollars.

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As Patient Pathways with Readmissions Double Medicare Episode Payments, Reducing Readmissions Presents a Major Opportunity for Savings

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Episode Does Not Contain Readmission

Episode Contains Readmission

Average M

edica

re Episode

Paymen

t

$15,335

$33,926

Average Medicare Episode Payment by Readmission Status

Source: Dobson, A. et al. (2012, October). Clinically appropriate and cost‐effective placement (CACEP): Improving health care quality and efficiency. Retrieved from Alliance for Home Health Quality and Innovation website: http://ahhqi.org/research/efficient‐careNotes: Dobson | DaVanzo analysis of research‐identifiable 5% SAF for all sites of service, 2007‐2009, wage index adjusted by setting and geographic region and standardized to 2009 dollars. Average Medicare Episode Paid includes care from all facility‐based and ambulatory care settings and excludes beneficiary co‐payments and Part D payments.


Understanding Patient Pathways is Critical to Clinical Redesign — Thousands of Pathways Exist Across MS‐DRGs, But Only a Few are Both Clinically Appropriate and Cost‐Effective

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MS‐DRG 469Number Episodes


A S C 1,363 $43,077

A S H 1,335 $43,210

A S H C 1,172 $40,109

A H C 1,060 $25,586

A S 887 $50,779

A I H C 586 $44,818

A H 558 $24,352

A C 435 $25,796

A I H 386 $45,103

A S C H C 344 $45,022

Subtotal 8,126 $39,323

Other 6,074 $57,488

Total 14,200 $47,093

MS‐DRG 470Number Episodes


A H C 56,545 $19,059

A H 35,960 $18,304

A C 24,955 $16,499

A S C 23,963 $27,279

A S H 21,184 $30,150

A S H C 20,664 $28,272

A S 12,173 $29,268

A 9,670 $15,325

A I H C 6,494 $33,897

A I H 5,311 $34,054

Subtotal 216,919 $22,726

Other 57,760 $35,216

Total 274,679 $25,352

Source: Dobson│DaVanzo analysis of Medicare LDS 100% data for 2011‐2013.Note: Spending per episode has been trended to 2013, wage index normalized and trimmed.

Patient Pathways for MS‐DRG 469 Patient Pathways for MS‐DRG 470

Facility‐Based Sequence Stops:A=STACH (Index or Readmission)H=HHAI=IRFL=LTCHS=SNFAmbulatory‐Based Sequence Stops:C=Community (Physician and Outpatient)E=ERP=OP TherapyT=HospiceZ=Other IP

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ACOs That Achieved Shared Savings for PY2 Showed Reductions in PAC Expenditures Across All Settings Including HHAs

PAC Expenditures Percent Change

IRFs ‐2.7%

HHAs ‐8.5%

LTCHs ‐13.5%

SNFs ‐19.7%

Source: CMS. (2015). Medicare Shared Savings Program Webinar: Performance Year 2014 Quality Performance and Financial Reconciliation Results for ACOs with 2012, 2013, and 2014 Start Dates.

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Analysis of simulated payments under CJR suggest that:

• Being per‐discharge and diagnosis‐based, the IRF prospective payment system allows IRFs little flexibility to affect their Medicare payments through the adoption of clinical or operational efficiencies, or to share risks with other acute care hospitals participating under CJR

• Unlike IRFs, as SNF reimbursement methodology is based on per diem payment, SNFs have substantial opportunities to reduce spending through lowering lengths of stay and reducing therapy levels

• The proposed IRF Shared Accountability model would include the following features:

• Limited to CJR on a voluntary basis

• Payment based on length of stay or per diem

• Flexibility in application of therapy services

• Payment allowed for risk and discount adjustment

• Relief of the 60% Rule and 3‐hour Rule

The Importance of Flexible Thinking: Proposed IRF Shared Accountability Payment Would Provide Flexibility to IRFs to Reduce Medicare Spending to CJR Patients

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A One Percentage Point Increase in PAC Spending Is Associated with Approximately $300 Change in Total Spending per Capita — PAC Accounts for About 18% of Total Spending per Capita

Y = 296.98X + 5035.5R = 0.72

Avg PAC Spending per Capita = $2,010Avg Total Spending per Capita = $10,435

$0

$5,000

$10,000

$15,000

$20,000

$25,000

0 5 10 15 20 25 30 35 40 45Y = Per Capita Total Spending

X= PAC per Capita Spending As a Percent of Total Spending per Capita

Per Capita Total Spending vs PAC As a Percent of Total Spending per Capita by ACO, PY1

Source: Dobson│ DaVanzo analysis of ACO MSSP Public Use File for PY1 (2012‐2013). Data represent CY2013.Note: R is the linear correlation coefficient, measuring the strength and direction of a linear relationship between two variables. The value of r is between – 1 and +1. If a strong linear relationship exists between the variables, the value of r would be close to±1.

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Reduction in IRF per Capita Spending Bears Little Effect Upon Total per Capita Spending

Y= 28.037 X+ 10375R = 0.017

Avg IRF Spending per Capita = $224Avg Total Spending per Capita = $10,435

$0

$5,000

$10,000

$15,000

$20,000

$25,000

0 2 4 6 8 10

Y = Per Capita Total Spending

X = IRF per Capita Spending As a Percent of Total Spending per Capita

Per Capita Total Spending vs IRF As a Percent of Total Spending per Capita by ACO, PY1


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A One Percentage Point Increase in SNF or HHA Could Be Associated with Approximately a $300‐$400 Change in Total Spending per Capita

Y = 294.24X + 8709.8R = 0.34

Avg HHA Spending per Capita = $637Avg Total Spending per Capita = $10,435

$0

$5,000

$10,000

$15,000

$20,000

$25,000

0 10 20 30

Y = Per Capita To

tal Spending

X = HHA per Capita Spending As a Percent of Total Spending per Capita

Per Capita Total Spending vs HHA As a Percent of Total Spending per Capita by

ACO, PY1Y = 376.68X + 7116

R = 0.64Avg SNF Spending per Capita = $991

Avg Total Spending per Capita = $10,435

$0

$5,000

$10,000

$15,000

$20,000

$25,000

0 10 20 30 40

Y = Per Capita To

tal Spending

X = SNF per Capita Spending As a Percent of Total Spending per Capita

Per Capita Total Spending vs SNF As a Percent of Total Spending per Capita by

ACO, PY1


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LTCH per Capita Spending is Highly Related to Total Spending per Capita

Y = 767.65X + 9383.6R = 0.43

Avg LTCH Spending per Capita = $159Avg Total Spending per Capita = $10,435

$0

$5,000

$10,000

$15,000

$20,000

$25,000

0 2 4 6 8 10

Y = Per Capita Total Spending

X = LTCH per Capita Spending As a Percent of Total Spending per Capita

Per Capita Total Spending vs LTCH as a Percent of Total Spending per Capita by ACO, PY1


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Will the Pressures Intensify?


If the Office of the Actuary of CMS certifies that any of these experimental programs has increased quality without raising costs, or has reduced costs without reducing quality, the Secretary of Health and Human Services has the authority to implement the new idea throughout Medicare or Medicaid without prior Congressional approval.

CMS is Acting as if it Has a Mandate to Accelerate Payment Reforms Without Congressional Approval

Source: Centers for Medicare and Medicaid Services. Office of Actuary. Paul Spitalnic, Chief Actuary. Certification of Pioneer Model Savings. April 10, 2015.

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• Historical appropriation timelines suggest that major reconciliations are likely to happen early in the new administration. Examples:

• 1983: Social Security Reform paved the way for Inpatient Prospective Payment System (IPPS) legislation

• 1993: Deficit Reduction Act

• 1997: Balanced Budget Act

• 2001: Economic Growth And Tax Relief Reconciliation Act

• 2009: Introduced and debated Affordable Care Act (ACA)

• Similarly, big changes could happen in 2017/2018

• Congress and CMS will likely to attempt to “bank” VBP savings — is there a point at which forced savings will “break” the industry?

• Transitioning from FFS to VBP Is a complex process, and how long it will take is unknown, BUT does the government have the patience to get it right?

Whether the New Administration is Republican or Democratic, a Reconciliation Bill Is Likely to Be Crafted in 2017, Directed at Reforming Medicare

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• The first setting to which a patient is discharged after an index hospitalization can have a significant impact on total episode costs

• Readmissions to the hospital during an episode double the cost of the episode

• The number of downstream partners an Episode Initiator has will impact manageability

• CMS precedence rules will result in hospitals running the system in many markets and requiring “value” from downstream providers

• This could lead to massive reorganization of patient pathways (e.g., more HHA, less LTCH, SNF and IRF) and pressure on hospitals to reduce readmissions and cut their internal costs (e.g., physician preference items)

• You need to understand this material; if you do, you can be a winner

• MedPAC IPPS winner and loser study

Things to Keep in Mind


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Questions?

Dobson DaVanzo & Associates, LLC (Dobson|DaVanzo) is a health care economics consulting firm based in the

Washington, D.C. metropolitan area

Contact information:

(703) 260‐[email protected]

www.dobsondavanzo.com

Dobson|DaVanzo

how new payment models are driving post-acute care deliverydallas‐fort worth‐arlington, tx msa...

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