Region 1 IDN Winter Advisory Council 2.28.18 The Journey to Alternative Payment Models: How to Speak the “Local” Language Region 1 IDN Winter Advisory Council 2.28.18 Lynn Guillette VP – Payment Innovation, Dartmouth-Hitchcock Finance Director – Region 1 IDN

Objectives for Today Translate “Finance Lingo” to “Normal Person Lingo” Review Oversimplified Alternative Payment Model Financial Reconciliation Re-visit Medicaid APM Roadmap and Timeline

New Hampshire’s DSRIP Promise to CMS This initiative will provide a short term federal investment, such that by the end of the demonstration the behavioral health infrastructure will be supported through the state’s managed care delivery system using alternative payment methodologies, without the need for demonstration authority. The Medicaid service delivery plan should address “what approaches service delivery providers will use to reimburse providers to encourage practices consistent with IDN objectives and metrics, including how the state will plan and implement a goal of 50% of Medicaid provider payments to providers using Alternative Payment Methodologies by 2020”.

Learning and Action Network (LAN): Alternative Payment Model Framework https://hcp-lan.org/workproducts/apm-whitepaper.pdf Category 1 Fee for Service – No Link to Quality & Value Category 2 Fee for Service - Link to Quality & Value A Foundational Payments for Infrastructure & Operations B Pay for Reporting C Rewards for Performance D Rewards and Penalties for Performance Category 3 APMs Built on Fee For Service Architecture APMs with Upside Gainsharing APMs with Upside Gainsharing / Downside Risk Category 4 Population-Based Payment Condition-Specific Population-Based Payment Comprehensive Population-Based Payment Payments are based on volume of service. At least a portion of payments vary based on quality or efficiency of service. Some payment is linked to effective management of a segment of the population or episode of care. Payments are still triggered by delivery of services but with opportunities for shared savings or 2-sided risk. Payment is not directly triggered by service delivery so payment is not linked to volume.

Revenue Terminology Finance Lingo Normal Person Lingo Charges Gross Patient Service Revenue Contractual Allowances Net Patient Service Revenue Payor Mix Sticker Price Revenue for services provided to our patients based on our sticker price Sticker Price discounts Revenue for services provided to our patients based on discounted sticker price Revenue categorized by where the payments for service to patients come from

“Technical” vs. “Professional” Technical revenues relate to hospital stays and ancillary services like labs, x- rays, and pharmaceuticals Professional revenues relate to services provided by a physician or other practitioner (e.g. a licensed clinical social worker)

What do we mean by “Cost”? Definition #1 Definition #2 The amount paid by someone for services provided by someone else Examples of these “costs” are Patient Co-Pays and Deductibles Private insurance company payments to providers Medicare and Medicaid payments to providers Insurance premiums The amount paid by someone to provide services to someone else Examples of these “costs” are Wages Office rent Utilities Taxes Supplies Loan repayments When “cost” is discussed in the public arena, almost everyone means Definition #1

Who Pays the Bills? Finance Lingo Normal Person Lingo Governmental Payors Commercial Payors Self-Pay Charity Health Insurance Exchange Marketplace Medicare, Medicaid… Anthem, Aetna, Cigna… Patients without insurance Patients without the ability to pay for their care Where you buy ObamaCare

These Are Delivery Models… Not Payment Models Patient-Centered Medical Home Center of Excellence Accountable Care Organization (ACOs)

These Are Payment Models… The Risk Continuum Fee-For- Service Pay for Reporting Pay-For-Performance Bundled Payments or Episodes of Care Payments Upside Gainsharing Upside Gainsharing / Downside Risk Condition-Specific Population-Based Payments Comprehensive Population-Based Payments

LAN Category 1 and 2 Payment Models Finance Lingo Normal Person Lingo Fee-For-Service (FFS) Pay-For-Reporting Pay-For-Performance Bundled Payment or Episode-of-Care Payment The most traditional of healthcare payment models. Providers are paid for each service performed. There is no incentive for providers to implement preventative care strategies, prevent hospitalization, or take any other cost-saving measures. Getting paid for each office visit or lab test provided to a patient (FFS model) + bonus payment for reporting certain metrics for quality and efficiency Getting paid for each office visit or lab test provided to a patient (FFS model) + bonus payment for achieving certain metrics for quality and efficiency Pays healthcare providers for specific episodes of care such as an inpatient hospital stay for a hip replacement surgery. There is only a set amount of money to pay for the entire episode of care, regardless of how much it actually costs the healthcare providers to deliver that care.

LAN Category 3 Payment Models Finance Lingo Normal Person Lingo Upside Gainsharing (“Shared Savings”) Upside Gainsharing / Downside Risk (“2-Sided Risk”; “Shared Risk”) Opportunity to get a bonus payment from the insurance company for hitting cost and quality targets as part of a contract to manage health of a specific patient population. If actual costs are in excess of cost target, no liability to repay the difference between excess and target. Best case scenario: Same as Upside Risk Worst case scenario: Having to pay a financial penalty to the insurance company for missing cost and quality targets as part of a contract to manage health of a specific patient population. Missing cost target means the actual costs are in excess of the cost target.

LAN Category 4 Payment Models Finance Lingo Normal Person Lingo Condition-Specific Population-Based Payment (“Partial Capitation”) Comprehensive Population-Based Payment (“Global Budget”; “Full Capitation”) Providers get a per member, per month (PMPM) payment for patients assigned to them by an insurance company. Patients are generally assigned to a particular provider because the patient has actively selected that provider as their primary care provider (PCP). Payment rates are tied to expected usage regardless of whether the patient visits more or less. Under partial capitation models, only certain types or categories of services are paid on a per member, per month basis such as primary care, or a clinical condition like diabetes. A fixed total dollar amount paid annually for all care delivered. This fixed total is based on expected use and providers do not receive additional dollars if patient care costs exceed the annual budgeted amount. Note: Payment models in Category 3 and 4 that do not have link to quality will not count towards CMS’ definition of advanced alternative payment models

Health Care Reform Finance Lingo Normal Person Lingo Value-based arrangements Delivery of care models tied to an alternative payment model intended to deliver better health, better care experience, and lower costs Framework developed by the Institute of Healthcare Improvement in 2009 with three elements, then known as the “Triple Aim”: Better Health Better care experience Lower Costs The framework has recently been updated to include a 4th element to acknowledge the need for an engaged and productive health care delivery workforce that finds joy and meaning in their work: Better experience providing care

Risk Contracts Finance Lingo Normal Person Lingo Attributed Lives or Covered Members or Assigned Patients or Aligned Beneficiaries or At-Risk Lives Revenue At-Risk Patients who have been assigned by their health plan to a provider because these patients have historically gotten primary care services from this doctor or nurse practitioner Payments to providers from insurance companies that get paid under the terms of a risk contract

Oversimplified Shared Risk Reconciliation Illustration Shared Savings Shared Loss Cost Target = $100 Actual Costs = $90 Savings = $10 Share of Savings = 50% Bonus Payment Received = $5 Actual Costs = $110 Cost Target = $100 Loss = $10 Share of Loss = 50% Financial Penalty Owed = $5

The Region 1 IDN Finance Committee has been reconfigured to focus on APM development

Thank you for your interest!