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Avalere Health LLC | The intersection of business strategy and public policy Change in the SNF Marketplace May 2012 Anne Tumlinson Avalere Health LLC.

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Presentation on theme: "Avalere Health LLC | The intersection of business strategy and public policy Change in the SNF Marketplace May 2012 Anne Tumlinson Avalere Health LLC."— Presentation transcript:

1 Avalere Health LLC | The intersection of business strategy and public policy Change in the SNF Marketplace May 2012 Anne Tumlinson Avalere Health LLC

2 © Avalere Health LLC Page 2 Agenda  Context: budget and reform  Immediate future: rate cut environment  New paradigm: value, quality, risk  Managed care and delivery system evolution  Strategic planning imperatives

3 © Avalere Health LLC Page 3 Growing Pressures to Reduce Federal Spending Source: Federal Gross Public Debt. usgovernmentspending.com

4 © Avalere Health LLC Page 4 Source: MedPAC, June 2011 Data Book Deficit Reduction: Policymakers Seek to Slow the Growth in Medicare Post-Acute Spending

5 © Avalere Health LLC Page 5 Immediate Future: Rate Cut Environment Source% Change in Payments FY 2012 Payment UpdateStatutory (annual)2.7 percent Productivity AdjustmentLegislation (ACA)(1.0 percent) RUG RecalibrationRegulation(12.6 percent) Total(11.1 percent) FY 2013 Productivity Adjustment*Legislation (ACA)(1.0 percent) Medicare SequestrationLegislation (Deficit)(2.0 percent) Bad Debt ReductionLegislation (Doc Fix)Small; phased in to 2015 *Estimated productivity adjustment. Note: CMS is required to provide an annual payment update to SNFs to account for changes in the cost of providing care, including labor expenses, so there will be a payment update for FY 2013 as well. Pending Regulation, Other Legislation Balance of 2012

6 © Avalere Health LLC Page 6 Medicare Providers Hit Hardest by Impending Sequestration Healthcare Cuts  Medicare cuts are limited to 2% for all non-exempt Medicare programs and activities »Concentrated largely on providers and plan payments  Congress still needs to address the Sustainable Growth Rate (SGR) to prevent even more significant cuts to Medicare physician reimbursement on March 1, 2012  Exchange cost-sharing subsidies will be cut in addition to Medicare spending, which constitute 15 percent of exchange subsidy and related spending 2 LIS = Low-income subsidy QI = Qualified individual 1. Medicaid, the Children’s Health Insurance Program (CHIP), Part D LIS, catastrophic coverage, and QI program, and exchange premium subsidies (administered as tax credits) exempted from the cuts 2.

7 © Avalere Health LLC Page 7 Potential Legislative Changes to Medicare SNF Payments ProposalProbability (2-Year Timeframe)Impact Market basket reductions High, likely to occur through deficit reduction or physician payment fix legislation Negative, 2% reduction in CY13 under sequestration; SNFs likely to fare worse under legislative changes to sequestration, which could shift cuts from the military to Medicare and Medicaid Further Reduction in Bad Debt High, versions of this proposal have been around for years; probable component of an overall deficit reduction plan or physician payment fix legislation Negative, could reduce industry reimbursement by close to 1% per year by phasing-out or eliminating Medicare reimbursements for unpaid deductibles and co-pays owed by beneficiaries or state Medicaid programs (on behalf of dual eligibles) Revise SNF PPS payment system; therapy issues Medium, recommended by MedPAC, but may be difficult for CMS to develop and Congress to pass given the many significant changes the SNF payment system has undergone in recent years Likely negative, would significantly change the way SNFs are paid. May add an outlier payment, a non-therapy ancillary component, and base payments on the patient care need and not the amount of therapy provided. Therapy issue could be a positive.

8 © Avalere Health LLC Page 8 Potential Legislative Changes to Medicare SNF Payments (continued) ProposalProbability (2-Year Timeframe)Impact Rebase SNF payments Medium, recommended by MedPAC; but would likely be passed in combination with a revised SNF PPS Negative, MedPAC recommended an initial reduction of 4% to SNF payments Recoupment of FY2011 Overpayments Low; if it occurs recoupment could be implemented over 2-3 years Negative, equates to about a 11% take-back of Medicare industry reimbursement (would not reduce base level for subsequent year increases) SNF hospital excessive readmissions penalty Medium-High, proposed by President Obama and recommended by MedPAC to penalize SNFs for excess readmissions to hospitals Negative, up to 3% reduction beginning in FY 2015 Co-pays on Medicare stays (for first 20 days) Low, could be part of broader reform but unlikely in the very near-term Negative, could reduce Federal payments to nursing homes by 5%, but net impact would be significantly muted by Medicare beneficiary co- payments

9 © Avalere Health LLC Page 9 State Budgets Are Also Under Pressure State Budget Shortfalls in SFY 2012 No Shortfall <11% 11% - 19% ≥20% Unknown WA OR NV ID MT WY CO UT AZ NM TX OK KS NE SD ND MN IA MO AR LA MS AL SC NC TN IL WI MI IN OH PA KY VA FL CA NY VT ME NH MA RI WV DE MD NJ AK HI DC CT Source: "States Continue to Feel Recession's Impact," Center on Budget and Policy Priorities, March 9, Available at: SFY = State Fiscal Year GA Shortfall as % of SFY12 General Fund Expenditures

10 © Avalere Health LLC Page 10 Shortfall in Medicaid Payments Increasing Source: Eljay, LLC. A Report on Shortfalls in Medicaid Funding for Nursing Home Care. American Health Care Association *Notes: 2011 data are projected. These data show the shortfall between Medicaid reimbursement and allowable Medicaid costs. Shortfall per Medicaid Resident Day, All States,

11 © Avalere Health LLC Page 11 Many States are Pursuing Care Coordination Programs for Dual Eligible Beneficiaries Source: Avalere tracking as of May 8, Has not released a proposal (25) Pursuing Capitated Model (18) Pursuing Managed Fee-for- Service Model (5) Pursuing Both Models (3)

12 © Avalere Health LLC Page 12 Dual Eligibles’ Care Needs Vary, but Many are Disabled and Medically Complex Dual Eligibles by Age Group, Number of Chronic Conditions, and Functional Impairment, N = 3,279,733 duals age <65, 2,140,048 duals age 65-74, 1,692,792 duals age and 942,033 duals age 85+ Source: Avalere analysis of the Medicare Current Beneficiary Survey (MCBS). Functional impairment is defined as receiving at least standby assistance with one of more activities of daily living (ADLs) and/or three or more instrumental activities of daily living (IADLs). Note: Totals may not sum to 100% because duals with functional impairment only are not shown in this chart; among all duals, 1% have functional impairment only.

13 © Avalere Health LLC Page 13 Among Duals, Alzheimer’s/Dementia is Prevalent and Very Costly, Especially Among those with Comorbidities Percent with Alzheimer’s/dementia Diagnosis in 2009, by Dual Status Source: Avalere analysis of 2009 Medicare claims data. Medicare spent $25,595 per capita on duals with Alzheimer’s/dementia in 2009 If the dual eligible also had 3 chronic conditions, Medicare spent $36,941 If the dual eligible also had 5 or more chronic conditions, Medicare spent $80,595

14 © Avalere Health LLC Page 14 Severe Mental Illness is Also Prevalent Among Dual Eligibles and is Associated with Higher Rates of Rehospitalization Source: Avalere analysis of 2010 Medicare claims data. Note: Severe Mental Illness is defined by the presence of any claim with a diagnosis of major depression, bipolar/mood disorders, or schizophrenia and other psychoses. 23% of duals with severe mental illness were re-hospitalized for any reason in % of duals without severe mental illness were re-hospitalized for any reason in 2010

15 © Avalere Health LLC Page 15 Impact of Health Reform – Provider Perspective 2015 Reduction in payments Increase in transparency Transfer of Risk Quality-Based Payment Expansion of Coverage Executing Strategies …and yet, to be successful, capabilities and infrastructure investments must be developed in advance © Avalere Health LLC Page 15

16 © Avalere Health LLC Page 16 ACOs 32 Pioneer ACOs announced, Medicare Shared Savings Program applications due 1/20 and 3/20. Health Care Innovation Challenge $1 billion available to test “shovel ready” approaches. CMS received an estimated 10,000 letters of intent in December. Applications due 1/27; second round Summer of 2012? Integrated Care for Dual Eligibles 15 states received planning grants to integrate Medicare and Medicaid for duals, 30+ states pursuing integration. Independence at Home Demonstration CMS hoping to include 50 practices serving 10,000 Medicare beneficiaries to provide in-home primary care services. Applications due 2/6. Comprehensive Primary Care Initiative Multi-payer initiative to include 75 practices each in of 5-7 markets across the country serving 330,750 Medicare and Medicaid and 1.5 million commercial lives. Applications due 1/17. Unprecedented Activity at CMS and CMMI to Test Various Payment and Delivery Reforms © Avalere Health LLC Page 16

17 © Avalere Health LLC Page 17 Key Reform Provisions and Impact on SNFs Accountable Care OrganizationsBundled Payments Value-Based Purchasing ACOs can form starting in 2012ACA demonstration will begin in 2013 but CMS has created bundling pilot program that can begin earlier CMS required to submit plan for SNF VBP; missed October 1, 2011 deadline in ACA. Includes physicians and hospitals (PAC providers are optional) Includes varying combinations of physicians, hospitals, and PAC providers, depending on the model SNF VBP demonstrations are being conducted in 3 states (Arizona, New York and Wisconsin) Accountable for all Part A and B spending for their assigned population Includes spending for services provided during an episode of care (e.g., 30, 60, or 90 days) for patients with specified conditions Likely to include all spending by a specific provider type ACOs are able to share in the savings achieved above a certain threshold Unclear how providers would share in the savings under the ACA bundling demonstration Likely that a shared savings pool will be created from reduced provider payments; savings will be distributed by quality or improvement Anticipated Impact: Next 1-2 years - Low Next 3-5 years –Low Anticipated Impact Next 1-2 Years - Low Next 3-5 Years - Medium-High Anticipated Impact Next 1-2 Years – Low Next 3-5 Years – Medium ACO: Accountable Care Organization PAC: Post Acute Care ACA: Affordable Care Act CMMI: Centers for Medicare & Medicaid Innovation VBP: Value-Based Purchasing

18 © Avalere Health LLC Page 18 Incentive Payments Only Upside/Downside Risk Penalties Only Nonpayment Baseline/Performance Period With the Passage of Health Reform, CMS Is Advancing Value in Medicare Source: Centers for Medicare & Medicaid Services 1. Program is voluntary, but penalties are/will be in place for nonparticipants; 2. Program is voluntary; 3. Nonpayment for Hospital Acquired Conditions (HACs) began in 2008; HAC penalties of up to 1% of Inpatient payments begin in Fiscal Year (FY)2015; 4. The Hospital Value-Based Purchasing Program (VBP) begins in FY2013 by affecting payments for discharges occurring on or after October 1, The Baseline period for the program was from July 1, 2009 to March 31, 2010; the Performance period for the FY2013 program payment determination is from July 1, 2011 to March 31, The ACA mandates that the Secretary develop Value-based Purchasing plans for skilled nursing facilities, home health agencies, and ambulatory surgical centers Hospital Inpatient Quality Reporting Program (P4R) 1 Accountable Care Organizations 2 Readmission Penalties for Low Performers National Episodic Bundling Pilot 2 Hospital Acquired Conditions 3 Physician Value-Based Modifier Meaningful Use (Stimulus Law) 1 Hospital Outpatient Quality Reporting Program (P4R) 1 Physician Quality Reporting System (P4R) 1 Hospital Value-Based Purchasing (P4P) 4

19 © Avalere Health LLC Page 19 For the First Time in FY2015, Hospitals Will Be Accountable for Resource Use and Efficiency  The measure assesses Medicare Part A and Part B payments for services provided to a Medicare beneficiary during a episode that spans from 3 days prior to an inpatient hospital admission through 30 days after discharge »This measure is already included in the Inpatient Quality Reporting Program and posted on Hospital Compare »It will be included in the VBP Program in FY2015  The score is calculated by dividing the amount Medicare spends per patient for an episode of care initiated at a hospital by the median amount Medicare spent per patient nationally »A score of 1 means that Medicare spends ABOUT THE SAME amount per patient for an episode of care initiated at the hospital as it does per hospital patient nationally »A score that is more than 1 means that Medicare spends MORE per patient for an episode of care initiated at the hospital than it does per hospital patient nationally »A score that is less than 1 means that Medicare spends LESS per patient for an episode of care initiated at the hospital than it does per hospital patient nationally

20 © Avalere Health LLC Page 20 Hospitals Should Carefully Evaluate PAC Discharge Options to Ensure Patients Are Going to High-Value Facilities Avalere analyzed PAC utilization in Louisiana and Pennsylvania, and found a relationship between percent of patients sent to PAC facilities and higher costs. Efficiency Scores for Discharges to LTACH Percent Discharged to Facility Type Efficiency Score Efficiency Scores for Discharges to IRF Percent Discharged to Facility Type Efficiency Score Efficiency Scores for Discharges to HHA Percent Discharged to Facility Type Efficiency Score

21 © Avalere Health LLC Page 21 Hospital Readmissions Reduction Program  Avoidable rehospitalizations represent one of the highest-profile issues in both acute and post-acute care »Beginning October 1, 2012, Medicare payments to hospitals with higher than expected readmissions for AMI, pneumonia, and heart failure will be reduced »In FY 2015, CMS will expand the program to include an additional four conditions (COPD, CABG, PTCA, and other vascular conditions), to the extent practicable »The maximum payment reduction will be 1 percent in 2013, 2 percent in 2014 and up to 3 percent in 2015 and beyond The potential size of these penalties should give hospitals a considerable incentive to increase the percentage of discharges going to SNFs that provide higher-quality care (e.g., SNFs with more staff and other resources). AMI: Acute Myocardial Infarction COPD: Chronic Obstructive Pulmonary Disease CABG: Coronary Artery Bypass Graft PTCA: Percutaneous Transluminal Coronary Angioplasty

22 © Avalere Health LLC Page 22 Care Coordination Today To date, much of the conversation on care coordination and accountable care models has focused on the ambulatory and inpatient settings Ambulatory specialty care Ambulatory, primary, and chronic care Inpatient care Current Focus Areas

23 © Avalere Health LLC Page 23 But Accountability Spans the Entire Spectrum of Care Long-term care Home care Ambulatory specialty care Ambulatory, primary, and chronic care Assisted living and residential care Hospice and palliative care Rehabilitation & skilled nursing Inpatient care Current Focus Areas Future Focus Areas

24 © Avalere Health LLC Page 24 SNF Operators Need to Evolve to Survive Old Paradigm  Siloed payment systems with different rates by site of care  Payments based on service type, intensity and volume  Limited coordination or shared risk among providers New Paradigm  Bundled payments across settings for most providers in Medicare  Site-neutral payment  Payment influenced by patient outcome  Encourage care coordination and primary care

25 © Avalere Health LLC Page 25 Policymakers Are Also Contemplating Expanding the Readmissions Policy to Post-Acute Care Providers Current - Hospital Readmissions Policy Future – Expanding Readmissions Policy to PAC Providers Hospital Stay Hospital Stay Period At Risk for Readmissions

26 © Avalere Health LLC Page 26 Proposals to Equalize Payments Across Post- Acute Care Providers Are Under Consideration LTACH SNF HHA IRF Long-Term Acute Care Hospital Home Health Agency Skilled Nursing Facility Inpatient Rehabilitation Facility Current Silo-ed Medicare Post-Acute Care Payment System* New Site-Neutral Payment System Equalizing Payment *Circles Adjusted to Represent the Difference in Payments by Site of Care The President’s Deficit Reduction package included a proposal to equalize SNF and IRF payments for certain conditions such as hip and knee replacements.

27 © Avalere Health LLC Page 27 Changes Driving Commercial Plan Strategy Health Reform / Fiscal Pressure Market Changes Plans Imperative to Control Costs Growing Interest in Integration Regional Concentration Shifting Costs / Information to Consumers Adherence/ Clinical Metrics Quality-Based Payments

28 © Avalere Health LLC Page 28 Quality Outcomes Now Drive Health Plan Economics Percent of Beneficiaries in Plans with Specified Quality Score, 2010 Source: Avalere Health analysis of Centers for Medicare & Medicaid Services 2010 Part C Report Card, released November 2009 and enrollment data released April Insufficient data to calculate contract score Plan too new to be measured

29 © Avalere Health LLC Page 29 Payment System Data Necessary to Survive in Outcomes World Delivery System Measurement Evidence (e.g. CER) HIT Incentivizes Supports HIT: Health Information Technology CER: Comparative Effectiveness Research

30 © Avalere Health LLC Page 30 Hospital A (n=11,691) LTACH (n=194) (2%) IRF (n=255) (2%) SNF (n=1,755) (15%) HHA (n=1,363) (12%) Home (n=6,923) (59%) Other (n=1,201) (10%) Patient Flow Analyses Allow Providers to Explore Care Patterns After a Discharge Patient Flow Analysis/ First Site of Care after Acute Admission Avalere Vantage Care Positioning System ™ 1.Data pulled from the Avalere Vantage Care Positioning System. 2.The Vantage Care Positioning System includes 2009 Medicare 100 Percent Standard Analytic File (SAF) claims data from the Centers for Medicare and Medicaid Services (CMS). *Other = Long-Term Acute Care Hospitals, Inpatient Rehabilitation Facilities, a different Inpatient Hospital and other Inpatient Hospitals such as Inpatient Psychiatric Facilities.

31 © Avalere Health LLC Page 31 Number of Cases Discharged to SNFs and Rate of Readmission (non- adjusted) by SNF In 2010, Hospital A discharged patients to 112 different SNFs for post-acute care. Other SNFs 1,068 cases 8,735 Cases Discharged Home or to Other Non-SNF Post-Acute Care Settings Avalere Vantage Care Positioning System ™ 1.Data pulled from the Avalere Vantage Care Positioning System. 2.The Vantage Care Positioning System includes 2009 Medicare 100 Percent Standard Analytic File (SAF) claims data from the Centers for Medicare and Medicaid Services (CMS). Deeper Level Patient Analyses Allow Providers to Track Patient Referrals and Compare Readmission Rates for Care Partners

32 © Avalere Health LLC Page 32 Number of Cases Discharged to HH and Rate of Readmission (non- adjusted) by HH Other HHs 717 cases (15%) 9,127 Cases Discharged Home without Home Health or to Other Post-Acute Care Settings Avalere Vantage Care Positioning System ™ 1.Data pulled from the Avalere Vantage Care Positioning System. 2.The Vantage Care Positioning System includes 2009 Medicare 100 Percent Standard Analytic File (SAF) claims data from the Centers for Medicare and Medicaid Services (CMS). In 2010, Hospital A discharged patients to 93 different HHs for post-acute care. Deeper Level Patient Analyses Allow Providers to Track Patient Referrals and Compare Readmission Rates for Care Partners

33 © Avalere Health LLC Page 33 Keys to SNFs’ Success in the New Environment  Prepare for Rate Pressures  Improve Performance on Current CMS Outcome Measures »Rehospitalizations, length of stay, Nursing Home Compare measures; potentially bounces, clinical metrics »Increase ability to track and monitor health information, including integration with acute and home settings  Position for Integrated or Capitated Systems »Develop relationships and prove value relative to competitors in better integrating care and improving clinical outcomes »Increase knowledge of risk and contracting to avoid incurring bad risk and unmanageable risk.

34 © Avalere Health LLC Page 34 Keys to SNFs’ Success (Continued)  Role of SNFs in Medicare and Medicaid »What is their unique value proposition, relative to hospitals and to other PAC providers? »How to capture value for improved outcomes over cost- justification argument »Carefully assess economics of new integration efforts for duals  Agreement on Value Proposition and Outcome Measures »Industry needs to reach a consensus on which CMS should be measuring, how data should be collected, and deployed.  Coalesce around Reform Proposals


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