1. Building a Fiscally Healthy VAD Program: Ensuring Financial Success and Growth Pavan Atluri, M.D Assistant Professor of Surgery Director, Mechanical Circulatory Support and Heart Transplantation Director, Minimally Invasive and Robotic Cardiac Surgery Program Division of Cardiovascular Surgery Department of Surgery University of Pennsylvania 9 th Annual INTERMACS Meeting Saturday, May 16 th, 2015

2. Navigating Hospital Administrators Growth is a factor of financials Strong financials = more support VAD therapy is expensive…..but, can be profitable VAD programs are profitable only if quality is excellent – Limited complications – Limited LOS

3. Review of profitability measurement at UPHS

4. PAYMENT BASICS CMS Centers for Medicare & Medicaid Services

5. Medicare payment basics $ Medicare payment Hospital base determined by several factors $ Hospital-specific base rate Indirect medical education Disproportionate share Regional wage rate adjustment others Determined by CMS x MS-DRG weight As a result: HUP rates are 61% higher PPMC rates are 38% higher Medicare payments are 17% higher at HUP than PPMC for the same procedure. HUP - #8 PPMC - #185 University of Michigan - #24 New York-Presbyterian - #86 Massachusetts General - #97 Mayo St Mary - #150 Northwestern Memorial - #187

6. Medicare MS-DRG Payments Vary by Institution FY 2013 CMS Median Payment for MS-DRG 1 ≈ $202,000 High cost cases may qualify for outlier payments

7. Medicare pays hospitals by MS-DRG Typical MCS MS-DRGs MS-DRG 1 (higher payment) versus 2 depends on presence of at least one MAJOR co-morbidity

8. Capturing MCCs critical to financial success MS-DRG 1 (higher payment) or MS-DRG 2 (lower payment)? – depends on presence of at least one “Major Complication and/or Co- morbidity” (MCC) MCCs – Medicare-defined list – Changes every year – Must be SECONDARY to primary dx A co-morbid condition NOT an exacerbation of the primary dx – Usually describes an acute manifestation of disease rather than chronic disease states Best Practice:Create a process to review all MS-DRG 2 assignments prior to claim submission

9. What are the common VAD MCCs? * These diagnosis codes are on the MCC list, but are not considered MCCs when the primary diagnosis is heart failure. Source: FY 2013 IPPS final rule MedPAR file (contains all hospital inpatient claims for Medicare beneficiaries from FY 2011) CodeDescriptionN % of Claims 785.51Cardiogenic shock 654 16.6% 428.23Acute on chronic systolic heart failure 574 14.5% 518.81Acute respiratory failure 327 8.3% 584.5Acute kidney failure with lesion of tubular necrosis 241 6.1% 570Acute and subacute necrosis of liver 170 4.3% 428.43Acute on chronic combined systolic and diastolic heart failure 157 4.0% 038.9Unspecified septicemia 142 3.6% 995.92Severe sepsis 136 3.4% 486Pneumonia, organism unspecified 128 3.2% 427.41Ventricular fibrillation 107 2.7% 785.52Septic shock 86 2.2% 348.30Encephalopathy, unspecified 71 1.8% 995.91Sepsis 66 1.7% 056.01Encephalomyelitis due to rubella 57 1.4% 262Other severe protein-calorie malnutrition 54 1.4% 507.0Pneumonitis due to inhalation of food or vomitus 53 1.3% 427.5Cardiac arrest 50 1.3% Courtesy of Thoratec Medical records defines cardiogenic shock as: inotrope dependence OR Cardiac index > 2.2 ****

10. MCC examples Primary DxSecondary Dx Acute on chronic heart failure Cardiogenic shock MS-DRG 1: Cardiogenic shock qualifies as a secondary & major co-morbid condition Primary DxSecondary Dx Chronic Systolic HFAcute on chronic heart failure MS-DRG 2: Acute heart failure is not secondary to chronic HF and does not qualify as a co-morbid condition Most common MS-DRG 1 Primary DxSecondary Dx Chronic Systolic HFSevere Malnutrition NOS MS-DRG 1: Severe malnutrition qualifies as a secondary & major co-morbid condition Primary DxSecondary Dx Acute on chronic heart failure Pulmonary collapse MS-DRG 2: Pulmonary collapse is secondary, but not a major co-morbid condition Primary DxSecondary Dx Acute on chronic heart failure Acute kidney failure MS-DRG 2: Acute kidney failure no longer on the CMS list of major co-morbid conditions

11. What difference does it make? it pays… MSDRG Code 60% of MSDRG 1 70% of MSDRG 1 58% of MSDRG 1

12. Why MSDRG 1 is so important

13. Pro Fee Coverage Procedural payment-unique operation in that follow–up daily care is billable Daily rounds – Day One – Acute – Less acute – Discharge day VAD interrogation 2012 MPFS Final Rule RVUs (CY 2012 Addenda) https://www.cms.gov/PhysicianFeeSched/downloads/Addenda.zip https://www.cms.gov/PhysicianFeeSched/downloads/Addenda.zip Varies depending on: LOS Number & type of procedure(s) Number of interrogations

14. PRIVATE PAYORS

15. Payments vary widely by payor Medicare sets their own rates Managed care and commercial rates are negotiated – Often include a device pass-through – Occasionally global arrangement for post- operative care – Can be significantly higher than Medicare Balancing the payor mix is an important component of financial success

16. Negotiate carve out contracts with private payers “Carve-out “contracts are one of the keys to making VAD program financially healthy “Carve-outs” pay a “better” rate for certain items Generally, carve outs include: – All implantable prosthetic devices – All accessories to implantable prosthetics Avoid payers bundling VADs into any transplant global package payments If not covered under a carve out contract, negotiate rate for outpatient VAD accessories and supplies, or outsource

17. COSTS

18. Three primary cost factors 1.Device cost ─ can vary widely Heartmate II and Heartware  $80–90K per kit Syncardia  100K R-VAD  $34K ECMO – minimal device cost vs Impella /Tandem 2.Length of Stay ─ varies widely 3.Site of Stay ─ ICU days versus Med/Surg days SICU days are twice as costly

19. Daily cost of the five basic phases of VAD care Post-Op 1 SICU Post-Op 2 Med/Surg Example:Patient GF Note: Implant cost omitted to clarify scale Pre-Op 1 Cath Lab (optional) Pre-Op 2 CCU or Med/Surg Implant Implant day literally “off the charts”

20. VAD financial profile Medicare MSDRG#1 Heart Transplant/VAD w MCC Net Loss Payment Profitable range of length of stay Pre-op Implant Day 7 SICU Med/Surg

21. QUALITY Quality has a direct impact on financial viability due to decreased LOS, decreased ICU days, fewer drugs, fewer OR returns....

22. Bleeding during primary admission seems to increase post-operative LOS Source: Intermacs

23. Infection during stay increases post-operative LOS 45% had some infection during stay

24. Keys to Success Decrease risk through: – Appropriate patient selection – “Right-time” implant Intermacs II – IV rather than I – Document to achieve appropriate reimbursement MS-DRG 1 versus 2 – Improve payor mix by outreach and affiliation strategy – Improve quality Fewer total days, ICU days, drug, and complications Minimize re-hospitalizations for HF, GI bleeding, thrombosis Minimize pump exchanges