U N C H E A L T H C A R E S Y S T E M Bundled Payments for Care Improvement (BPCI) Initiative Overview October 8, 2014

2 Where did BPCI come from? Bundled Payments for Care Improvement (BPCI) initiative was developed by the CMS Innovation (Innovation Center). The Innovation Center set out to align hospitals, post-acute care providers, doctors and other practitioners through common payment Research suggests that bundled payments can align providers across the continuum of care which can enhance the patient’s overall care delivery January 31, 2013, CMS announced the health care organizations selected to participate in the BPCI initiative Bundled Payments for Care Improvement (BPCI) Initiative: General Information. CMS.gov. Accessed on 10/2/2014http://innovation.cms.gov/initiatives/Bundled-Payments/index.html

3 The 4 Payment Models EpisodeWhat’s in the bundle?Payment Selected DRGs, hospital plus readmissions All non-hospice Part A & B services (including the hospital and physician) during initial inpatient stay & readmissions Prospective Select DRGs, post- acute period only All non-hospice Part A & B services during the post-acute period & readmissions Retrospective Select DRGs, hospital + post-acute period All non-hospice Part A & B services during the initial inpatient stay, post- acute period & readmissions Retrospective All acute patients, all DRGs All Part A services paid as part of the MS-DRG payment Retrospective Model 1 Model 2 Model 3 Model 4 Bundled Payments for Care Improvement (BPCI) Initiative: General Information. CMS.gov. Accessed on 10/2/2014http://innovation.cms.gov/initiatives/Bundled-Payments/index.html

4 BPCI payments explored a little further… Model 1 Model 2 Model 3 Model 4 Two phases in this model ‒ “Prep” period: CMS provides data; Participant engages in learning events and receive target pricing information. ‒ “Risk-bearing” period: Time period evaluated for savings or costs. Participants select up to 48 different clinical condition episodes. The episode ends either 30, 60, or 90 days after hospital discharge. ‒ Participants can decide how much risk do they want to take Participants are paid fee-for-service and a reconciliation is performed at the end of the period. ‒ Participants either pockets the savings (remember CMS’s cut) or cut a check to CMS If the Participant is an acute-care hospital (ACH), then: ‒ The episode is started based on an inpatient admission for any participating MS-DRG If the Participant is a physician group practice (PGP), then: ‒ The episode is started based on the inpatient admission to any ACH for a participating MS-DRG and the PGP’s physician is the attending or operating physician for that inpatient stay Medicare pays the hospital a discounted IPPS payment. Physicians payments are unaffected by this BPCI model. Within certain circumstances, hospitals and physicians are permitted to share savings created by their redesign efforts. 16 Awardees ‒ 15 in NJ ‒ 1 in KS Two phases in this model ‒ “Prep” period: CMS provides data; Participant engages in learning events and receive target pricing information. ‒ “Risk-bearing” period: Time period evaluated to determine if fee-for- service payments were greater or less than pre-determined DRG price Participants select up to 48 different clinical condition episodes. The episode ends either 30, 60, or 90 days after hospital discharge. ‒ However, the acute-care service has to start within 30 days of the discharge. ‒ Participants can decide how much risk do they want to take Participants are paid fee-for-service and a reconciliation is performed at the end of the period. ‒ Participants either pockets the savings (remember CMS’s cut) or cut a check to CMS The episode is triggered at an ACH and is initiated with a post-acute services at the participating acute-care center. BUNDLED PAYMENT OF THE FUTURE (?) Two phases in this model ‒ “Prep” period: CMS provides data; Participant engages in learning events and receive target pricing information. ‒ “Risk-bearing” period: Time period evaluated for savings or costs. Participants select up to 48 different clinical condition episodes. The episode ends either 30, 60, or 90 days after hospital discharge. ‒ Participants can decide how much risk do they want to take Participates get one, prospectively determined bundled payment for all services furnished during the inpatient stay by the hospital, physician, and all other practitioners ‒ Physicians and other practitioners submit a “no pay” claims to CMS ‒ Hospital pays physicians/practitioners from the bundled payment ‒ Related readmissions within 30 days are covered by the bundled payment Bundled Payments for Care Improvement (BPCI) Initiative: General Information. CMS.gov. Payments/index.html. Accessed on 10/2/2014http://innovation.cms.gov/initiatives/Bundled- Payments/index.html

5 Why participate? Having the choice of service line, health providers can be focused in their effort to reduce cost/improve quality Serves as a platform to engage physicians at a new, higher level Forces health systems to understand their costs better Inform hospitals of post-acute costs and patient utilization Ultimate learning environment for value-based payments 5 Reasons to Participate in the CMS Bundled Payments for Care Improvement Initiative. Accessed on 10/2/2014http://

6 Do the dollars outweigh the risk? Examine the data for your System’s performance Historical claim information, you can quickly understand the financial risk for each episode group; selecting the ones with the most upside. Understand the offering from CMS This is based on DRG, not ICD-9 codes or any other classification. Know your physicians’ interest level In order for this to work, the entity taking risk needs alignment/buy-in from physicians and other caregivers. Readmission rates Readmission costs are a critical part in the patient care cost continuum. Having a solid understanding and execution of post-acute care is paramount in these type of arrangements. 4 Considerations for Hospital Bundled Payment Programs. Heather Linder. May 13, Accessed on 10/2/2014http://

7 UNC Health Care is preparing for a new payment system through participation in various programs Bundled payments at Medical Center (outside of the BPCI program) Participating organizations: UNC Hospitals and UNC School of Medicine (SOM) Services: Organ transplants Allocation/Split methodology ‒ Hospital and physician agree to an overall split (80/20, 70/30) ‒ It’s reviewed each fiscal year ‒ Once the physician portion is determined, its further divided among the various participating Departments within the SOM by examining wRVUs:  Each physician determines the typical CPT codes they perform in the transplant  Calculate the total wRVUs associated with those CPTs  Compare each Department’s total wRVUs to the total wRVUs of all Departments  The Department receives its proportionate share dollars based on wRVU ratio

8 UNC Health Care is preparing for a new payment system through participation in various programs Shared Savings Program Joint venture with largest commercial payer in our market Create a practice that is the quintessential patient-centered medical home ‒ Spent significant dollars in the primary care settings in order to managed patients’ care better to avoid costly ER visits and hospitalizations Three-year project that was recently extended another year Third-party research group engaged to determine if savings were achieved ‒ Findings to be published in research journal

9 UNC Health Care is preparing for a new payment system through participation in various programs Taking risk in Medicare Advantage programs Medicare Advantage Program Risk-bearing entity Members Some % retained to cover SG&A and margin Other independent physician practices PMPM Care centers (owned by risk-bearing entity) UNC Health Care has ownership share gain share