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© 2013 THE ADVISORY BOARD COMPANY Carolinas HealthCare Towards an Economics of Value Making a Case For Quality Eric Fontana, Practice Manager, Data and Analytics Group
© 2013 THE ADVISORY BOARD COMPANY Toward an Economics of Value 2 Adapting to New Rules of Competition Source: Physician Executive Council interviews and analysis. Health System Strategy, c “Price-Extractive Growth” Health System Strategy, “Value-Based Growth” Description Grow by being bigger: Leverage market dominance to secure prime pricing, network status Grow by being better: Leverage cost, quality, service advantage to attract key decision makers Key Success Factors Expand market share Strengthen service lines Exert pricing leverage Solidify referrals Secure physicians Increase utilization Expand covered lives Compete on outcomes Minimize total cost Assemble network Offer convenience Expand access Competitive Dynamics Service line competition Centers of excellence Referral channels Physician loyalty Comprehensive care Patient engagement Clinical quality Service quality Inpatient Performance Metrics Discharges Service line share Fee-for-service revenue Pricing growth Occupancy rate Process quality Readmission rates Outcomes quality Cost per discharge Patient satisfaction Guideline adherence Critical IP Infrastructure Inpatient capacity Outpatient imaging centers Clinical technology Ambulatory surgery centers EBP Infrastructure Care management staff and systems IT analytics Post-acute care network
© 2013 The Advisory Board Company Delivering Next-Generation Acute Care 3 Evolution of Acute Care Performance Standards Workshop of Choice Targeted Quality Improvement Next-Generation Acute Care High-Performance OR and ED Streamlined admission and discharge processes Proactive, effective quality department Productive hospitalist program Top-tier performance on publicly reported metrics Comprehensive infrastructure supporting evidence-based practice Patient-centered care Integration with cross- continuum care management Emerging PrioritiesBaseline Expectations
© 2013 The Advisory Board Company EBP the Key to All Value-Based Payment Models 4 Source: Advisory Board and Physician Executive Council interviews and analysis. Focus: Quality Improvement Adherence to Evidence-Based Practice Focus: Efficiency Throughput Supply Management Contract Negotiation Focus: Utilization Management Chronic Care Management Disease Prevention Degree of Provider Cost Accountability Pay for Performance Bundled Pricing Population Health Management Reduced Readmissions Patient Experience
© 2013 The Advisory Board Company Real-World Consequences for Poor EBP Adoption 5 Source: Paul R, Neuman MI, Monuteaux MC, Melendez E, “Adherence to PALS Sepsis Guidelines and Hospital Length of Stay,” 2012, Pediatrics; Los Angeles Times, June 6, 2011;CDCNCHS, National Hospital Discharge Survey, ; Lisa Stoneking and Kurt Denninghoff, Sepsis Bundles and Compliance with Clinical Guidelines, 26, 3, Journal of Intensive Care Medicine, 2011; Physician Executive Council interviews and analysis. From LA Times, 2011 Nearly 70,000 Americans die needlessly each year because they are not given optimal heart failure therapy Physicians have been slow to implement many of the procedures called for in the guidelines… Sepsis Guidelines Effective, but Underutilized 25% Mortality reduction with introduction of sepsis bundle 19% Physicians who follow pediatric sepsis guidelines 17% Increase in sepsis inpatient hospital death rates in the past decade 1
© 2013 THE ADVISORY BOARD COMPANY Inpatient Medicare Margins Remain Under Pressure 6 Quality Based Payment Contributes to Price Deceleration Medicare Acute Inpatient PPS Margin 1)Margins calculated as revenue minus cost divided by revenue. Data based on Medicare-allowable costs and exclude critical access hospitals. Includes services covered by the acute care inpatient PPS Source: “Health Care Spending and the Medicare Program” June 2012, MedPAC, Accessed Advisory Board Analysis Four Forces Shaping Future Margins Decelerating Price Growth Continuing Cost Pressure Shifting Payer Mix Deteriorating Case Mix Ongoing initiative to support margins in an era of increasing financial pressures Available to all Health Care Advisory Board members at no extra cost The Medicare Breakeven Project
© 2013 THE ADVISORY BOARD COMPANY Three Programs You Need to Know 7 Comparing Major Pay For Performance Programs Source: CMS, Advisory Board Analysis Financial Incentives Take More of a Stick Than Carrot Approach Maximum Penalty FY 2013 – 1% FY 2014 – 2% FY 2015 onward – 3% 30 day Readmit Discharge 1% Penalty for top quartile of HACs from FY 2015 Hospital Readmissions Reduction Program Hospital Acquired Condition Program Hospital Inpatient Value Based Purchasing Program Payment Impact Begins: FY 2013 Payments (October 1, 2012) FY 2015 (October 1, 2014) FY 2013 Payments (October 1, 2012) Incentive Structure: Penalty only, 1% cap for FY 2013 Penalty only, 1% maximum for FY 2015 Bonus or penalty, depending on performance Payment Unit to be Modified: “Base Operating DRG Payment Amount” Revenue after adjustment for Readmissions and VBP programs Base Operating DRG Payment Amount Comment: Compares your facility to national average performance based on retrospective three year period Most program details finalized in FY 2014 IPPS Final Rule, specific payment adjustment methodology subject of future rule Budget neutral, creates winners vs. losers scenario
© 2013 THE ADVISORY BOARD COMPANY 8 Source: CMS, Advisory Board Analysis 1)As of October )Performance periods 3)Assumes readmissions performance judged on timeframe of July 1, 2011 – June 31st, 2014 Performance Periods Currently In Progress For Fiscal Years (FY) 1 Future Dollars on the Line What You’re Doing (Or Not Doing) Today Has Financial Ramifications Payment Adjustments Can No Longer be Inflected Data Collection In Progress VBP 1 Readmissions 2 HAC Data Collection Not Yet Started 2017
© 2013 THE ADVISORY BOARD COMPANY HAC Program Mechanics 9 1% Penalty For Worst Performing Quartile on Defined HAC Measures Program #1: Hospital Acquired Conditions Who is Included? HAC Performance Assessment Penalty Allocated Inclusion of all subsection (d) hospitals, HAC program will include Maryland hospitals Excludes LTCH, Cancer Hospitals, Children’s Hospitals, IRFs, IPFs, Critical Access Hospitals, Hospitals in Puerto Rico or US Territories Finalized methodology assesses HAC performance on two distinct domains Patient Safety Measures CDC NHSN Measures Points assigned based on decile performance compared to other facilities, the higher the points the worse the performance. Two domain system, individual domain scores weighted and combined to form overall HAC score. Statutorily mandated penalty is a 1% cut to what “otherwise would be paid” for hospitals in top (worst) performing quartile. Penalty would apply to payments after the readmissions and value based purchasing program adjustments have been made Payment adjustment specifics TBD, likely in FY 2015 IPPS Proposed Rule Source: CMS, Advisory Board Analysis Penalty Overview of HAC Program
© 2013 THE ADVISORY BOARD COMPANY Two Domain Quality Structure Finalized 10 Program #1: Hospital Acquired Conditions Targeting Patient Safety and Infection Measures Two Domain Structure for HAC Reduction Program MetricFY 2015FY 2016FY 2017 CLABSI CAUTI SSI – Colon SSI – Abdominal Hysterectomy MRSA C. Difficile 35%65% + Domain 1: Patient Safety Measures Domain 2: CDC/NHSN Surveillance Measures PSI-90 Composite Metric Source: CMS, Advisory Board Analysis Including component indicators: PSI #3 Pressure Ulcer Rate PSI #6 Iatrogenic Pneumothorax Rate PSI #7 Central Venous CRBSI Rate PSI #8 Postoperative Hip Fracture Rate PSI #12 Perioperative PE DVT Rate PSI #13 Postoperative Sepsis Rate PSI #14 Postoperative Wound Dehiscence Rate PSI #15 Accidental Puncture or Laceration Rate July 1, June 30, 2013 CY2012 & CY2013
© 2013 THE ADVISORY BOARD COMPANY Readmissions Program Mechanics 11 Capped Penalty to Hit 3% Maximum from FY 2015 Onwards Program #2: Hospital Readmissions Reduction Who is Included? Readmissions Performance Assessment Penalty Allocated Inclusion of all subsection (d) hospitals Excludes LTCH, Cancer Hospitals, Children’s Hospitals, IRFs, IPFs, Critical Access Hospitals, Hospitals in Puerto Rico or US Territories Maryland hospitals participation subject application for exemption. Top date exempted for FY 2013 and FY Assesses whether hospital had excess readmissions compared to national performance on a set of NQF-endorsed, 30-day risk-standardized readmissions rates: Acute Myocardial Infarction Heart Failure Pneumonia COPD (from FY 2015) THR/TKR (from FY 2015) Being assessed as worse than expected in any one of the defined conditions will result in a financial penalty Payment adjustment will apply for all inpatient discharges, not just the associated patient populations Penalty capped at maximum levels in given fiscal year; 1% in FY 2013, 2% in FY 2014, 3% in FY 2015 onward. Unlike VBP, no opportunity for high performers to earn bonus payments Source: CMS, Advisory Board Analysis Overview of Readmissions Program
© 2013 THE ADVISORY BOARD COMPANY Improvement in Readmissions Year 2 Estimated Readmissions Penalties - Carolinas HealthCare Program #2: Hospital Readmissions Reduction 12 ProviderName Estimated Readmissions 2013 Penalty Percentage Estimated Readmissions 2014 Penalty Percentage Anson Community Hospital $ (22,764)0.76% $ (17,384)0.70% Wilkes Regional Medical Center $ (70,418)0.57% $ (93,926)0.75% Carolinas Medical Center $ (842,844)0.53% $ (452,166)0.29% Scotland Memorial Hospital $ (98,863)0.51% $ (76,160)0.42% Carolinas Medical Center - Union $ (50,981)0.16% $ (13,853)0.05% Carolinas Medical Center - Lincoln $ (19,394)0.15% $ (25,088)0.21% Grace Hospital $ (16,343)0.10% No Penalty0.00% Murphy Medical Center $ (6,073)0.07% $ (11,956)0.17% Stanly Regional Medical Center $ (10,895)0.06% $ (23,750)0.15% Carolinas Medical Center - NorthEast $ (28,805)0.03% No Penalty0.00% Alamance Regional Medical Center $ (9,589)0.03% $ (37,520)0.13% Columbus Regional Healthcare System $ (5,872)0.03% $ (58,513)0.33% Carolinas Medical Center - University $ (1,246)0.01% $ (8,185)0.07% The Moses H. Cone Memorial HospitalNo Penalty0.00%No Penalty0.00% Carolinas Medical Center - MercyNo Penalty0.00%No Penalty0.00% MedWest-HaywoodNo Penalty0.00% $ (12,413)0.07% Roper St. Francis Mount PleasantNo Penalty0.00%No Penalty0.00% AnMed Health Medical CenterNo Penalty0.00%No Penalty0.00% Kings Mountain HospitalNo Penalty0.00% $ (1,725)0.03% Harris Regional HospitalNo Penalty0.00% $ (8,982)0.09% Cleveland Regional Medical CenterNo Penalty0.00% $ (46,573)0.14% Roper HospitalNo Penalty0.00%No Penalty0.00% Valdese HospitalNo Penalty0.00%No Penalty0.00% Total Estimated Impact $ (1,184,087) $ (888,194)
© 2013 THE ADVISORY BOARD COMPANY VBP Program Mechanics 13 Program #3: Hospital Inpatient Value Based Purchasing Incentive Payment Based on Quality Performance Payment Withhold Quality Performance Assessment Redistribution of Payment Payment withhold applies to base operating DRG payment Withhold applies only to roughly 3,000 hospitals meeting VBP inclusion criteria Assesses performance on quality measures including (FY started in parenthesis): Clinical process of care (2013) Patient experience of care (2013) Outcomes (2014) Efficiency (2015) Scored on achievement relative to national benchmarks and improvement compared to historical baseline Quality measure scores combined to form single figure Total Performance Score (TPS) Payment directly proportional to TPS score Budget neutrality results in “winners vs. losers” roughly half of hospitals earn back more than withhold, others earn back less Source: CMS, Advisory Board Analysis
© 2013 The Advisory Board Company Overall a Positive VBP Result Projected for FY )Valdese Hospital had insufficient case volume to calculate VBP score using current most recent Hospital Compare data ProviderNameEstimated VBP IncentiveIncentive Percentage Carolinas Medical Center $ (430,531)-0.28% Carolinas Medical Center - Union $ (72,092)-0.26% Roper Hospital $ (144,673)-0.21% Carolinas Medical Center - University $ (5,572)-0.05% Wilkes Regional Medical Center $ (4,972)-0.04% Cleveland Regional Medical Center $ 1, % AnMed Health Medical Center $ 34, % Alamance Regional Medical Center $ 17, % The Moses H. Cone Memorial Hospital $ 141, % Grace Hospital $ 14, % Carolinas Medical Center - Mercy $ 94, % Anson Community Hospital $ 4, % Harris Regional Hospital $ 18, % MedWest-Haywood $ 45, % Stanly Regional Medical Center $ 48, % Columbus Regional Healthcare System $ 59, % Kings Mountain Hospital $ 20, % Murphy Medical Center $ 25, % Carolinas Medical Center - Lincoln $ 59, % Carolinas Medical Center - NorthEast $ 638, % Scotland Memorial Hospital $ 225, % Roper St. Francis Mount Pleasant Hospital $ 42, % Total Estimated Impact$ 835,177 Program #3: Hospital Inpatient Value Based Purchasing 14 Estimated Value Based Purchasing Incentive Payment
© 2013 THE ADVISORY BOARD COMPANY Final Performance Periods For FY Source: CMS, Advisory Board Analysis 2014 Patient Experience of Care Clinical Process of Care Dec 31 Jan 1 Mortality and Patient Safety Measures Finalized in Previous Rules Efficiency Dec 31Jan Mortality AHRQ June 30Oct 1 June 30Oct 15 We are here: November 1, 2013 Finalized Measures Proposed Measures Outcomes measures proposed in CY 2014 HOPPS Proposed Rule, not yet final DomainFY 2013FY 2014FY 2015FY 2016 Clinical Process of Care70%45%20%10% Patient Experience of Care30% 25% Outcomes of Care-25%30%40% Efficiency--20%25% Domain Weights Under Four Domain Structure Outcome: CAUTI/CLABSI/SSI Dec 31Jan 1 Program #3: Hospital Inpatient Value Based Purchasing
© 2013 THE ADVISORY BOARD COMPANY Finalized Performance Periods FY FY Source: CMS, Advisory Board Analysis 2015 FY 2017 – AHRQ PSI FY Mortality June 30 October 1 All finalized baseline periods are already completed and are of the same duration as the performance periods October 1 Kickoff for FY 2017 and FY 2018 Performance Periods FY Mortality June FY Mortality FY 2019 – AHRQ PSI (Not Finalized) June 30 July FY 2018 – AHRQ PSI June 30July 1 October 1 June 30 Program #3: Hospital Inpatient Value Based Purchasing
HAC REDUCTION PROGRAM Implementation of the Hospital-Acquired Condition (HAC) Reduction Program for FY 2015 Implementation of the Hospital-Acquired Condition.
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