Show Me the Money! Adjusting to the Market: The Business Behind Hospitalist Medicine Francisco Alvarez, MD, FAAP Priti Bhansali, MD, FAAP Suzanne Swanson-Mendez, MD, FAAP Stephanie Todd, MD, FAAP 1

2 Disclosure We have no relevant financial relationships with the manufacturer(s) of any commercial product(s) and/or provider(s) of commercial services discussed in this presentation.

Learning Objectives 3 1.Review the terms and definitions related to hospital based care and the various determinants of hospital care payments 2.Recognize the differences between fee for service versus outcome based payment models 3.Demonstrate a hospitalist programs return on investment (ROI) within an outcome based payment system 4.Discuss the correlation between implementation of outcomes based payments and various hospital metrics

Terms and Definitions

Terms Diagnosis Related Group Case Mix Index Fee for Service Capitation Value Based Purchasing Bundled Payments Shared Savings Definitions Pays a set amount for each enrolled person whether or not that person seeks care Rewards quality of care through payment incentives and transparency Reduces spending below level that payer expected, the provider is rewarded with a portion of the savings Reimbursement "on the basis of expected costs for clinically-defined episodes of care” Groups of doctors, hospitals, and health care providers coming together for coordinated care Services are paid for as itemized in the hospital’s invoice A patient classification system adopted on the basis of diagnosis consisting of distinct groupings Accountable Care Organizations Relative value assigned to a diagnosis-related group of patients in a medical care environment

% 85% % 90% Target percentage of payments in ‘FFS linked to quality’ and ‘alternative payment models’ by 2016 and ~20% >80% % ~70% GoalsHistorical Performance All Medicare FFS FFS linked to quality Alternative payment models Source: Centers for Medicare and Medicaid Services

Source:

How Much Are You Paid and Why?

Case Mix Index Based on INPATIENTS ONLY How sick are your patients? Affects Medicaid and Medicare reimbursement rates

Payer Mix Hospital “stock portfolio” Diversify Market and attract the highest “stocks”

Inpatient vs. Observation/Outpatient Payment Differences Patient Cost Differences – Observation/Outpatient Status: home/maintenance medications and post-acute care not covered (Medicare) Observation Status Disincentives and Incentives – Disincentives » Lower payment with same care cost/resources – Incentives » Does not count towards 30-day readmission rates

How Are You Paid ? (Current and Future)

Payment Models ①Fee for Service ②Capitation ③Pay for Performance ④Bundled Payments/Episode of Care ⑤Shared Savings (ACO’s)

Fee for Service A payment model where services are paid for as itemized in the hospital’s invoice.

Capitation A payment arrangement for health care service providers such as physicians or nurse practitioners. It pays a physician or group of physicians a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care.

Pay for Performance Also known as "P4P“ is a payment model that rewards physicians, hospitals, medical groups, and other healthcare providers for meeting certain performance measures for quality and efficiency. It penalizes caregivers for poor outcomes, medical errors, or increased costs.

Bundled Payments/Episode of Care The reimbursement of health care providers (such as hospitals and physicians) "on the basis of expected costs for clinically-defined episodes of care”

Shared Savings Program where a healthcare system or provider reduces total healthcare spending for its patients below the level that the payer (e.g., Medicare or a private health insurance plan) would have otherwise expected, the provider is rewarded with a portion of the savings.

Payment Models-Group Discussion Diagnosis: Asthma GOAL: Maximize Revenue! [3 Patients Each] Fee for Service – Paid: $20 per intervention or encounter – Cost: $10 per intervention Capitation – Paid: $300 for all patients – Cost: $10 per intervention – 3 Asthma Patients: 1 Severe, 1 Moderate, 1 Mild Pay for Performance/Value Based Purchasing – Paid: $80 per patient – Get $20 extra if achieve all 3 metrics – Metrics: 30 Day Readmission Rate 90% Asthma Action Plan, Patient Satisfaction > 80%ile – Cost: $10 per intervention

Bundled Payments/Episode of Care – Paid: $100 per patient – Cost: $10 per intervention Shared Savings (ACO’s) – Paid: $50 per patient (reimbursement per area) – Estimated total cost per patient: $100 – 3 Areas in System (Hospital, PCP, Urgent Care Center) – 1/3 split to all from savings – Cost: $10 per intervention Payment Models-Group Discussion Diagnosis: Asthma GOAL: Maximize Revenue! [3 Patients Each]

Source: Centers for Medicare and Medicaid Services

How Does This Affect You?

Medical Staff ①Physician Provider Staffing of Current or New Services ②Ancillary or Advanced Practice Provider Support ③Nursing Staffing ④Salaries (Current and Future Raises) ⑤Administrative, Research, and Education Support ⑥Vacation and CME Time ⑦Educational Stipends

Hospital ①Development of New Patient Care Programs ②Expansion and Renovation of Hospital ③Quality and Safety Improvements ④IT Infrastructure and Communication Improvements ⑤Marketing Capabilities ⑥Retention and Recruitment of National Leaders

What Value Can I Provide?

VALUE = (QUALITY + SAFETY) COST

Quality Measures Decrease use of Levalbuterol for Asthma Decrease use of steroids for Bronchiolitis Asthma Action Plan Compliance Press Ganey (or CHCAHPS) Scores

Safety Measures % Dosage Errors Number Contraindicated Medications Used Number of Falls per month Number of Transfers within 12 hrs of admission

Cost Average Length of Stay (Affects bundled payments) 30 Day Readmission Rate (Affects Value Based Purchasing Return) Hospital Utilization per DRG (Affects bundled payments) Medically Complex Patients Admission Rate (Affects population based payments)

VALUE QUALITY: SAFETY: COST: Small Group Metrics that measure your value? Case Diagnosis: Bronchiolitis, Pneumonia, Hyperbilirubinemia

QUESTIONS? 32

Some Extra Definitions: Accountable Care Organizations (ACO)- are groups of doctors, hospitals, and other health care providers who come together voluntarily to give coordinated high quality care to their Medicare patients. Centers for Medicare and Medicaid Services (CMS)- a federal agency within the United States Department of Health and Human Services (DHHS) that administers the Medicare program and works in partnership with state governments to administer Medicaid. Diagnosis Related Group (DRG) - a patient classification system adopted on the basis of diagnosis consisting of distinct groupings. Full Time Equivalent (FTE) - as the number of total hours worked divided by the maximum number of compensable hours in a full-time schedule Children Hospital Consumer Assessment of Healthcare Providers and Systems (CHCAHPS) - a nationally standardized survey that captures patients‘ perspectives of their hospital care.

Some Extra Definitions: Value Based Purchasing - a payment methodology that rewards quality of care through payment incentives and transparency. Case Mix Index (CMI)- Case mix index is a relative value assigned to a diagnosis-related group of patients in a medical care environment. The CMI value is used in determining the allocation of resources to care for and/or treat the patients in the group. Payer Mix - The percentage of cases that are Medicare, Medicaid, Commercial Insurance, HMO, Managed Care, and self-pay. Inpatient (CMS Definition)- Services designated as inpatient-only, surgical procedures, diagnostic tests and other treatments are generally appropriate for inpatient hospital admission and when the physician (1) expects the beneficiary to require a stay that crosses at least two midnights and (2) admits the beneficiary to the hospital based upon that expectation. Observation/Outpatient (CMS Definition)- Everything that does not meet Inpatient status.

Healthcare Payments Timeline (Medicare- Provider) 1965 Medicare Program Established 1984 Prospective Payment System 1992 Resource- Based Relative Value Scale (RVU’s) 1997 Sustainable Growth Rate (SGR) Formula Physician Quality Reporting System (PQRS) -Incentive Payments Value Based Payment Modifier

Healthcare Payments Timeline (Medicare- Hospitals) 1965 Medicare Program Established 1984 Prospective Payment System 2010 Productivity Improvement 2012 Value-Based Payments 2013 Bundled Payments 2015 Hospital Acquired Conditions Penalty