The New Era of Healthcare A DISCUSSION OF VALUE BASED PURCHASING AND BUNDLED PAYMENTS Michael Lewensohn PKF O’Connor Davies, LLP Matthew McGarvey Harmony Healthcare International Deanna L. Stephenson Director Managed Programs NYSHFA / NYSCAL

A New Era... THE PAST Fee for Service = Payment for quantity of services THE FUTURE Pay for Performance = Quality of Care and Accountability for cost of care 2

Glossary of Terms Bundled payment – Known as episode – based payment, case rate, evidence – based case rate, package pricing. Reimbursement of health care providers on the basis of expected costs. Bundled Payments for Care Improvement (BPCI) – Made up of four models of care that link payments for multiple services beneficiaries receive during an episode of care. Organizations enter into payment arrangements that include financial and performance accountability for episodes of care. CCJR – Comprehensive Care for Joint Replacement. Part A and Part B payment model which acute care hospitals in certain selected geographic areas will receive retrospective bundled payments for episodes of care. All related care within 90 days from admission is included in the episode. DRG – Diagnosis related group. Used to classify patients by diagnosis, average length of hospital stay and therapy received. Episode – All services provided to a patient with a medical problem within a specific period of time across a continuum of care in an integrated system. 3

Glossary of Terms Downstream Provider – Any party that enters into a provider agreement with a first tier entity to provide services needed by the entity. Fee for Service – A payment model where services are unbundled and paid for separately. This model give incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care. Metropolitan Statistical Area (MSA) – Serve to group counties and cities into specific geographic areas for the purposes of a population census and the compilation of related statistical data. Value Based Purchasing - Is a demand side strategy to measure, report and reward excellence in health care delivery. VBP can include many different coalitions of health care stakeholders. High performing health care providers are rewarded with improved reputations through public reporting, enhanced payments through differential reimbursement and an increase in market share. 4

CMS Quality Agenda Transform Medicare From A Passive Payer To An Active Purchaser Value- Based Purchasing (Payment Based On Quality) Tools & Initiatives For Promoting Better Quality, While Avoiding Unnecessary Costs Triple Aim --- Better Care, Better Health, Lower Cost 5

Bundled Payments–What? Where providers are reimbursed a set fee for an “episode” of care. Financial rewards for improved coordination, quality and efficiency of care. CMS (payer) get the savings upfront rather than waiting to see if providers can meet targets. CMS piloted its bundled payment pilot in Health and Human Services under the Affordable Care Act launched their pilot in 2013 based on 10 conditions representing a mix of chronic, acute, surgical and medical conditions. 6

Bundled Payment for Care Improvement (BPCI) – 4 Models Model 1 includes only hospitalization services for all Medicare severity diagnosis – related groups (DRGs). Medicare pays traditional FFS, less a negotiated discount and participants can enter into gain sharing arrangements with other providers. Model 2 includes inpatient hospitalization and post-discharge services. Medicare pays expected amount less negotiated discount. (SNF related). Continued FFS payments but recoupment can occur if target is not met. Model 3 includes only post-discharge services and paid same as Model 2. (SNF related). Continued FFS payments but recoupment can occur if target is not met. Model 4 includes the inpatient hospitalization, physician and related readmission services. For this model Medicare reimburses a prospective determined amount. Providers submit “no-pay” claims, and are paid by the hospital out of the bundle payment. 7

Bundled Payment for Care Improvement (cont.) As of October 2015 CMS has 723 SNF’s included in Models 2,3 and 4, phase 2 (risk bearing period). Usually hospitals are the risk bearing agent and the other participants are active in the model through an agreement with the risk bearer (hospital or BPCI awardee). Models 2,3 and 4 there are 48 clinical episodes that participants are able to choose from, examples: Amputation (DRG 239,240 etc.) Cardia arrhythmia (DRGs ), Cellulitis (DRGs 602,603), Chest Pain (DRG 313). 8

Key to Succeed in a Bundle Payment Environment Get contracts and form essential relationships, the hospitals want market share to start. The early bird will get the worm in this new era. Monetary incentive does NOT drive patients to the hospital. Have a resource or resources to track and trend data including patients in your facility from admission to discharge. Know your data for every service your facility renders including patient satisfaction. Change of Culture – It all starts with you! Early Bird Gets The Worm 9

Discussion 10

What is the CCJR Proposal–Now Final Rule Comprehensive Care for Joint Replacement The test of the 90 day bundled payment. Implementation date of April 1 st 2016 and end March 31 st Applies to 67 Metropolitan Statistical Areas (MSAs) Based on 2013 Claims Data looking at average wage of episode payment. Population size. Hospitals cannot join if in Model 1 or Phase II of Models 2 or 4 of the BPCI model (as we discussed previously). Concentration of 2 DRG’s for hips and knees: 469 and

What is the CCJR Proposal–Now Final Rule Comprehensive Care for Joint Replacement (cont.) Concentration of 2 DRG’s for hips and knees: 469 and 470. Episode includes: Hospitalization and 90 days post discharge, ALL Part A and Part B services including: Long Term Care Hospital, SNF’s, Independent outpatient therapy, DME, Part B drugs and Hospice. Enrollees meet criteria if: Medicare is primary, Enrolled in Part A and B throughout the episode. Enrollees not covered if: Enrollee is End Stage Renal Disease, enrolled in a Medicare Advantage, Pre-payment plan or HMO or if covered under United Mine Workers of America health plan. Beneficiaries have a choice to choose their facility regarding hospital and / or post acute setting. 12

CCJR: Payment and Pricing: Risk Structure Model is retrospective with hospital bearing financial risk and responsibility. Providers (hospitals) and suppliers (ex. SNF’s) continue to be paid Medicare FFS. Target prices are established for each hospital based on 3 years of retrospective data and already include discount (which will be the CMS savings). Pricing: Years 1 & 2: hospital specific, 1/3 regional Year 3: hospital specific, 2/3 regional Years 4 & 5: 100% regional pricing 13

Payment and Pricing: Link to Quality Hospitals must meet minimum threshold on 3 quality metrics to receive their bonus ( based on facility standardized risk measures). Collect data on your performance & share with hospitals Re-hospitalization rate during SNF stay & after SNF discharge Discharge to community rate LOS Improved function Satisfaction score Improve your rates on the measures that count. Maintain 3 Star overall rating or higher. 14

Payments and Pricing Episode payment capped at 2 standard deviations above the regional mean. Payments to providers and suppliers under Medicare FFS for episode services would not be capped. Reconciliation payments capped at 20 % of target prices ( remember CMS still gets their savings). Year 1: no responsibility, Year 2: Capped at 10% of target prices, Year 3-5: Capped at 20%. 15

BPCI or CCJR or What Else? BPCI trumps CCJR. CCJR trumps all other models. Hospitals in CCJR can also participate in a ACO model, this will go for other providers. What this means for different geographic areas of NY, examples of same day surgery centers and orthopedics and their models. 16

Discussion 17

Financial Arrangements SNF’s would be considered collaborators, providers or suppliers in this model. Hospitals would share with their providers: reconciliation payments (performance based) and hospital’s internal cost savings through care redesign activities. Hospitals are NOT mandated to contract with downstream providers in this model. Hospitals could assign percentages to a two sided risk scenario ( this is when the hospital shares in the portion of savings and is also at risk for the same portion of spending if over the target, hence the incentive to create savings). In these cases the hospital is responsible for paying and recouping from its providers (this would need to be agreed to). CMS to limit hospital’s sharing of risk to 50% of total repayment to CMS. 18

Program Waivers CCJR waives the SNF three-day rule for coverage of a SNF stay beginning in Year 2. Only SNF’s with rating of 3 stars or higher can participate. Beneficiaries cannot be discharged prematurely to SNF. How adverse to risk are you? 19

Quality Measures On February 20, 2015, CMS announced that they were recalibrating the way the Five-Star Quality Rating would be calculated The end result has been an overall decrease in the number of facilities receiving the rating of five Stars, and an increase in the number of facilities receiving the rating of one star. The IMPACT Act of 2014 put in new and streamlined Quality Measures for nursing facilities and other post-acute providers participating in Medicare. The measures being addressed can all be classified as measures related to unintended health care outcomes. CMS will be adopting the following measures for payment determinations in 2018 o New or worsened pressure ulcers; o Falls with major injury; and o Assessment and care planning for functional status, Section GG of the MDS. 20

Short Stay Quality Measures Moderate to Severe Pain New or Worsening Pressure Ulcers New Antipsychotic Medications 21

Long Stay Quality Measures Antipsychotic Medications Injurious Falls Urinary Tract Infection Catheter Moderate to Severe Pain Physical Restraints ADL Decline High Risk Pressure Ulcers 22

The Care Tool – Section GG of the MDS Implementation of Section GG into standard operating practice will be mandated as of October Will measure functional change from admission to discharge through the MDS process. 23

New Quality Measures The six new Quality Measures will be added to the QIES System in April 2016 for a preview. Five of the six QMs will impact the Five-Star Quality Rating Systems beginning July Note that the anti-anxiety/hypnotic medication measure will be the only measure that will not impact the Five-Star Quality Rating. The six new quality measures are as follows: Percentage of short-stay residents who have had an outpatient emergency department visit except those that lead to an inpatient admission (claims based). Percentage of short-stay residents who were re-hospitalized after nursing home admission (all cause), including observation stay and excluding planned readmissions and hospice patients (claims based). Percentage of short-stay residents who were successfully discharged to the community within 100 days of admission and were not hospitalized, readmitted to a nursing home and did not die within 30 days of discharge from the SNF (claims based). Percentage of short-stay residents who made improvements in function which is based on self-performance in the following mid-loss ADLs (MDADL): transfer, locomotion on the unit, and walk in corridor (MDS based). Percentage of long-stay residents whose ability to move independently worsened which is based on self-performance in locomotion on unit (move about their room and adjacent corridor) (MDS based). Percentage of long-stay residents who received an anti-anxiety or hypnotic medication. The purpose of this measure is to prompt facilities to examine the prescribing pattern (MDS based). 24

Key Takeaways Design – DRGs: 469 & 470, Part A & B, Target price for hospital, Retrospective reconciliation, Begins April 1, Participants – Hospitals, 67 MSAs, Few exclusions. Definition – Anchor stay & 90 day post discharge, Few exclusions. Payment – Retrospective bundle, 25% discount, Target price derived from blend of hospital and regional spending data, Repayment begins in Year 2. Quality – Complication rate, Readmission rate, Increased performance over 5 years. Flexibilities – Waiver of first 3 days at SNF, Gainsharing, Collaborative Partners. 25

Value-Based Purchasing WHY: Financial Viability – For the beneficiaries served. Payment Incentives – Payments linked to value. Joint Accountability – Physicians and providers working together. Effectiveness – Care is outcome based and performance driven. Access – Equal access to high quality and affordable care. Safety and Transparency – Information shared with beneficiaries so they are able to make the best decisions possible. Smooth Transitions – Well coordinated care across different providers and settings. Electronic Health Records – Value driven health care supports use of information technology. NEW – Patient care no longer stops with the clinician or discharge from a hospital. Will result in a comprehensive approach to patient care and processes. Ultimate Goal – Delivering patient centered, high quality, efficient care at a lower cost – All Payers. 26

DSRIP Vision – NY Centric 27

How to Succeed Under VBP Develop effective, quality, utilization, risk and infection management programs. Implement reliable performance improvement tools and measures. Implement effective admission, discharge and transfer protocols. Improve performance in reducing conditions and complications that will lead to readmissions. Build solid relationships…. DO NOT wait! 28

Who Are YOU? Facility Identity Self Evaluation Strengths and weaknesses Specialization Community perception Hospitals Physicians Community population Know: Medicare and Medicaid cost reports, historical data, available “public information” about neighboring providers, information from trade associations. 29

Who Are YOU? Metrics / Know YOUR Metrics Cost per patient category Key to successful negotiations Length of stay Hospital re-admission rate Potentially avoidable hospitalizations Patient acuity versus staffing Medical staffing Mid-level providers General availability of medical resources 30

Who Are YOU? Communication Staff training and ongoing communication service delivery changes. Vendors Apprise vendors of when bills should be sent to the Facility versus other 3 rd party payers. Patients and Families Apprise patients and or families of costs which they may be responsible to pay. Ongoing communication with hospitals and other care partners. 31

Questions and Discussion NYSHFA / NYSCAL Contact: DEANNA STEPHENSON 32