December 11, Being Successful Under Bundled Payments; What We’ve Learned So Far

Models 1, 2, 3 and 4 Model 1: inpatient stay; discounted IPPS Models 2 and 3: retrospective bundled payment arrangement; FFS with reconciliation Model 4: single, prospective payment to hospital to pay all costs of inpatient stay 2 What is the Bundled Payments for Care Improvement Initiative (BPCI)

3 What Is It and How It Works  Models 2 and 3  48 Bundles  Based upon DRGs  Choose which bundles  1 to 48 bundles  30 – 60 – 90 day risk  Longer risk had greater pricing  Pricing is a combination of own historical data and regional data  Fee for service  Paid to all providers during the bundle  Costs accrue  Some exclusions  Reconciliation

Bundle starts after patient discharged from the hospital HHAs, SNFs, operating/attending physicians can initiate the bundle HHAs and SNFs only initiate the bundle if they are the first site of service post discharge If patient goes to SNF first and then HHA, the HHA does not initiate the bundle 4 Model 2 vs. Model 3 Bundles Includes the initial hospitalization plus 30, 60, or 90 days post discharge Hospital or operating/attending physicians can initiate the bundle

Model 2 bundles almost always trump Model 3 bundles If hospital initiates the bundle, SNF or HHA cannot initiate the bundle Model 2 bundle cannot pass on a bundle in which they are participating Still need PAC providers who understand managing patients under a bundled payment model Risk sharing/gain sharing opportunities Model 2 and Model 3 bundles trump CJR “AS IF” the CJR event did not occur; exclude the CJR event from the hospital’s reconciliation Hospitals paid fee for service; no risk Risk sharing/gain sharing opportunities 5 Precedence Rules

 There is more bundled payment activity in Ohio than any other state in the U.S. 6 Bundled Payment Market Activity Ohio BPCI Participation November 2015 Source: CMS

 We often see significant variation in cost of a bundle across providers, clinical conditions and regions. 7 Bundled Payments Overview - The CMS Perspective Source: Archway Health BPCI Pricing files Lower Extremity Joint Replacement (DRG470) Bundle Price Benchmarking

 Done correctly, Providers can be clinically and financially successful under BPCI 8 Bundled Payments Overview – The Provider Perspective Lower Extremity Joint Replacement (DRG 470) Source: Archway Health BPCI Pricing files

Increase Patient Satisfaction Enhance long term relationship with patients Network Development Facilitates development of a network of preferred providers Does not conflict with patient choice Low Risk Low risk way to prepare for other alternative payment initiatives Enhance Provider Alignment Opportunity to enhance alignment and loyalty of upstream and downstream providers 9 Bundled Payment Overview – The Provider Perspective There are a number of strategic benefits for providers to participate in bundled payment programs. Increase Net Revenue Significantly increase net revenue opportunity

Cedar Village Case Study 10

Bundled Payment for Care Improvement Initiative 11 Triple Aim Better Health Better Experience Lower cost Care Improvement Focus Bundled Payments align incentives

How To Be Successful in Bundled Payments 12 Care Transitions  Program/Coordinators  Assist with providing quality care in a safe, cost-effective setting  Software  Data Analytics to drive process improvement  Reduce avoidable readmissions  Manage to appropriate length of stay  Real time data  Inclusive system available to all providers along the continuum

The Need for Real Time Data 13 The CareLink App updates the dashboard with health status updates. Demo data-Not real names.

Case Management – real time tracking tools Inter-disciplinary Team – daily monitoring Nursing, Therapy, Social Services Comprehensive 30-day Care Plans Discharge Planning begins at admission Home Care involved early Warm hand offs between settings 14 Cedar Village - Critical Factors for Success

15 PACN Results Under Bundled Payment Methodology (all cause Medicare A)

16 PACN Results Under Bundled Payment Methodology (all cause Medicare A)

17 PACN Results Under Bundled Payment Methodology (all cause Medicare A)

Tippy Canoes 18 Current – Per DiemFuture – Bundled Payment

Cedar Village – by the numbers 19 DescriptionAmount ST Admissions 4/1 – 11/30429 ALOS Medicare A29 Med A bundles16 Reduction in ALOS13 Days Lost1064 Admissions need to refill46 Increase needed11% Actual increase YTD7%

Straddling the Tippy Canoes 20 Short Run  Reducing LOS reduces revenue  Gains under BPCI is shared between Convener and Episode Initiator  Gain sharing payments are delayed 9 months  Success depends on increasing admission to refill the beds Long Run  Early adopters are learning to manage under the new payment model  Begin restructuring to adapt to shorter LOS  Success depends on managing the full 30-day episode and avoiding readmissions

21 Recap Bundled Payments are not coming, they are already here By 2018, CMS wants 50% or $330B of the Medicare spend in alternate payment models (mainly BPCI, CJR, and some ACO’s) By 2018, CMS wants 50% or $330B of the Medicare spend in alternate payment models (mainly BPCI, CJR, and some ACO’s) Precedence Rules are somewhat complicated Model 2 almost always trumps a Model 3 Model 2 and Model 3 trump CJR Precedence Rules are somewhat complicated Model 2 almost always trumps a Model 3 Model 2 and Model 3 trump CJR Success can only be achieved through acute care/post-acute care providers partnering with a clear focus on CMS’s Triple Aim

“Moving from the concept that the best bed is a full bed to the concept that the best bed is an empty one – that’s a major transition.”  Donald M. Berwick, MD, former Administrator of the Centers for Medicare and Medicaid Services (CMS). Former President and Chief Executive Officer of the Institute for Healthcare Improvement [1.Centers for Medicare and Medicaid ServicesInstitute for Healthcare Improvement [1  Berwick is Clinical Professor of Pediatrics and Health Care Policy in the Department of Pediatrics at the Harvard Medical School and Professor of Health Policy and Management at the Harvard School of Public Health. [17] He is also a pediatrician, Adjunct Staff in the Department of Medicine at Children's Hospital Boston, and a Consultant in Pediatrics at Massachusetts General Hospital.Harvard Medical SchoolHarvard School of Public Health [17]Children's Hospital BostonMassachusetts General Hospital 22 Don Berwick, MD

23 Don Berwick, MD “Everybody is doing what makes sense to them individually. We pay hospitals to be full, so they try to be full. We pay doctors to see patients, so they see a lot of patients. We create a public expectation that more is better, (which isn’t actually true) so people seek more. Everybody is doing their jobs; we just designed the jobs wrong.”

24 Don Berwick, MD We have a long way to go. Board, executives and finance leaders still need to really convince themselves that the best way to contain costs is to improve care.

The Cost Conundrum – “The lesson of the high quality, low cost communities is that someone has to be accountable for the totality of care. Otherwise the system has no brakes.” 25 Atul Gawande, MD

26 Tim Grimes Executive Director Post-Acute Care Network 6279 Tri-Ridge Blvd. Loveland, Ohio Cell: Office: Jan Wooles, CPA, MBA Chief Financial Officer Cedar Village Retirement Community 5467 Cedar Village Drive Mason, Ohio Office: Contact Information