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1 Proprietary & Confidential

Medicare Bundled Payments: New Program

Comprehensive Care for Joint Replacement (CCJR) Payment Model for Acute Care Hospitals Furnishing

Lower Extremity Joint Replacement Services

John Waltko Vice President

Regulatory & Financial Reporting


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Today’s Presenter

John Waltko Vice President, Regulatory & Financial Reporting

As Vice President of Regulatory and Financial Reporting, Mr. Waltko is a senior level consultant with over 30 years in the healthcare industry. Prior to joining QHR in 1994, John was a Manager with a Big 4 CPA firm in healthcare consulting practice. John entered health care industry in 1984 with a large fiscal intermediary as a Senior Auditor in provider reimbursement and audit. John is a Certified Public Accountant.

Mr. Waltko specializes in Medicare and Medicaid program payment issues, underlying Medicare and Medicaid program regulations, monitoring of developing federal public policies and estimating payment impacts and operating challenges such policies have on health care providers.

His experience includes a variety of financial areas such as budgeting, rate setting, financial forecasting, mergers and acquisitions due diligence, financial and operational auditing and hospital turnaround engagements with focus on Medicare and Medicaid reimbursement and payment issues.

Mr. Waltko delivers multiple Medicare reimbursement education seminars throughout the year including QHR's Reimbursement Boot Camps for CAH and PPS Hospitals.


Greetings and Introductions


2015

2016

2017

2018

2019

•New bundled payment program

Will last for five years

• Proposed Rule published on July 10th, 2015

Comments due to CMS by September 8, 2015

• This is a New and Distinct Payment Program

Separate from BPCI program already in process

Builds on CMS experience with BPCI, ACE Demo, and CABG program from early 80s

Comprehensive Care for Joint Replacement (CCJR)


• Bundled payment defined:

Single payment for episode of patient care

o Clinical dimension: type of service and services considered “part of” the episode”

o Time dimension: start, middle, and end

Bundled payment covers ALL Medicare Part A and Part B payment amounts

o Hospital inpatient and outpatient services

o Physician professional services

o Post acute care: HHA, SNF, Rehab, outpatient therapy

o DME, ambulance, etc.

Complete contrast to typical fee-for-service (FFS) pay for each service provided

CCJR Bundled Payment Program


• CABG Program

•ACE Demo

• BPCI

• CCJR different because

Mandatory participation by hospitals

Hospitals cannot “Opt Out”

Bundled Payments History


Current Method

Medicare

Hospital

Therapy

CenterRadiology

Surgeon

Anesthesiology Skilled NursingFacility

Home Health

Agency

Other Payors are expected to adopt Bundled Type Payment programs as well.


Hospital

Radiology

Surgeon

Anesthesiology Skilled NursingFacility

Home Health

Agency

Medicare

Bundled Payment Concept



• CMS has selected 75 Metropolitan Standard Areas (MSAs) MSA is an area with an urban core area population of 50,000+ MSA includes a county and sometimes multiple counties CMS used analysis and random sample to select MSAs to participate

o Generally higher population areas PLUS higher spending MSAs over lower spending MSAs

o Spending equals Medicare payments to providers

• All hospitals and beneficiaries in MSA will be subject to CCJR Limited exceptions:

o Hospitals in BPCI as of July 1, 2015 – Hospital is Model 1 participant

– Hospitals are episode initiators in Model 2 or 4

– Hospital NOT episode initiator in Model 2 or 3 excluded as well

o CAHs: not subject to IP PPS

Hospitals/providers participating in ACO NOT exempt



• Bundle will ONLY apply to two specific MS-DRGs

MS DRG 469: Major joint replacement or reattachment of lower extremity with MCC

MS DRG 470: Major joint replacement or reattachment of lower extremity without MCC

•We expect CMS to expand to additional MS DRGs in future

High volume

High costs

Variation in costs across the country



• Episode starts at admission and ends 90 days after discharge from acute care hospital

Will include “72 hour” rule as well

o Outpatient diagnostic and non-diagnostic services

o Services performed by hospital or owned or operated entity

Beneficiary included (claim) if:

o In Medicare Part A and Part B throughout episode

o Not a ESRD beneficiary

o Not in Medicare Advantage Plan

o Not United Mine Workers of America Health Plan

o Medicare is primary payer



•All providers/physicians/suppliers will be reimbursed as services provided under current fee-for-service reimbursement systems

IPPPS or OPPS for hospitals

Physician Fee Schedules (PFS) for other providers

• Year-end reconciliation: Think Cost Report settlement process

Payment to or from hospitals

Gain sharing ability for hospital



•Hospitals bear financial responsibility for CCJR bundled payment because:

Infrastructure to handle bundled payment

o Case management and discharge planning

o HIM/EHR

o Care management and care coordination

o Patient and family education

Large payment for CCJR to hospitals

o Approximately 50% of Medicare payment for hip and knee replacements go the hospital

o Other 50% goes to doctor(s), SNF or HHA, therapist, etc.



• CMS will perform payment “reconciliation” annually

See following slide illustrating repayments

Hospitals are taking on risk!!!

Hospital refunds CMS if episode payments greater than target price

Hospital receives payment from CMS if episode payments are less than target price

o A “shared savings” between CMS and hospital

o Hospitals will be able to share savings.. .



Radiology

Hospital

Surgeon

AnesthesiologySkilled Nursing

Facility

Home Health

Agency

Medicare

Bundled Payment Target Price Exceeded



CCJR Bundled Payment Program: Bonus Payments and Penalties

Year One Net

MS –DRG: 469 470

Hospital Aggregate Specific Target Price: CMS determines based on “performance period”

900,000 1,000,000

Hospital Aggregate Actual Part A and Part B Payments made to Hospital and other providers for Episode of Care

$1,000,000 $800,000

Reconciliation Payment to (from) Hospital: (100,000) 200,000 100,000

(1) Reconciliation Payments received in years 1 through 5: Payment never made if hospital does not exceed Quality Thresholds!

(2) Reconciliation Repayments in years 2 through 5, no repayment in year 1

(3) Target Price incorporates Quality Indicators

(4) CMS will review all payments made 30 days after each 90-day episode: IF hospital average post payments >3 standard deviations from regional average, hospital must repay CMS


CCJR Bundled Payment Program: Performance Period


• Target prices will be communicated to hospital prior to start of performance period(s)

Allows hospitals to plan and manage care to control Medicare spending

• Target price includes services/reimbursements for all services provided by all providers

CCJR Bundled Payment Program: Setting the Target Price


Payments and Repayments: Maximum Limits Set for Repayments

Limits Based on Target Price (target price x percent below)

Year 1 Year 2 Years 3-5

Repayment To CMS 0 10% 20%

Repayment for SCH, MDHs & RRC 0 3% 5%

Payment to Hospital 20% 20% 20%


• Hospital can share:

Reconciliation payments received

Hospital internally generated cost savings

Repayments to CMS

• Hospital must enter into financial arrangements (CCJR sharing arrangements) with other providers (CCJR collaborators)

Arrangements must comply with all laws, including Stark and Fraud and Abuse laws

CMS retains right to review arrangements for beneficiary risk:

o Access to care, withholding care

o Freedom of choice

o Quality of care

o Patient steering

Shared Savings Component


• Beneficiary can choose to receive services wherever and from whomever they choose

• IF beneficiary receives service at participating hospital:

Beneficiary CANNOT opt out

Hospital must inform beneficiary about CCJR

Right to choose other provider(s)

CMS will perform outreach and education

• CMS reserves right to audit

Inappropriate changes in service delivery

CCJR: Beneficiary Protections


• Hospitals in Select 75 MSAs

• Hospitals surrounding or near the 75 select MSAs

Hospital not subject to bundled payment, but..

Patients in community receive hip/knee replacement in select MSA

Where does the patient obtain outpatient therapy or sub-acute care??

o Today, rural hospitals capture post-acute and outpatient care in hospital owned therapy centers, SNFs, HHAs, or swing beds

– Hospitals performing hip/knee replacements often refer patients due to poor Medicare payment rates

– Patient convenience

o Hospital performing hip/knee replacement are now motivated to control continuum of care

– Hospital own sub acute providers or sub acute providers in same MSA

– Quality control issue

– Shared savings opportunity

How Does this New Bundled Payment Program Affect My Hospital?


•Developing contractual relationships with sub-acute providers

•Modeling payments from Medicare and identifying potential areas where Medicare payments can be reduced

Enhance patient care protocols to “speedier” recovery, leading to fewer post-acute care services

Fewer SNF days of care, for example

• Reducing and controlling hospital operating costs

CCJR is a Medicare spending reduction program

Controlling hospital costs will continue to be a priority

Has a “shared savings” component, allowing some recoupment of reduced reimbursements

What Should Hospitals in Select 75 MSAs Be Doing?


• Identify hip/knee replacement patients that utilize your hospital’s outpatient and sub-acute care services

•Work with hospitals in MSA and enter into sub-acute-care contract with them?

You will have to provide higher quality

Better and faster outcomes

Shorter stays in sub-acute settings

What Should Hospitals NOT in Select 75 MSAs Be Doing?


• Started with cost reimbursement All services provided via inpatient acute care hospital within four walls of the

hospital

• DRGs in early 80s Caused shift to outpatient and sub-acute providers under cost

reimbursement

Unbundle the care episode yields additional payments

• BBA 1997 transitioned all services to PPSs Additional PPS payment to “unbundling” care across different settings

Unbundling the care still provides additional payment

• ACA bundled payments Back to the future

One payment for entire episode of care

Time to bring all care back into hospital?

Summary: A Reimbursement Perspective


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