1. Managing Bundled Service Contracts William Banks VP, Managed Care 2016 –6 – 9

2. 2 Introduction Bundled Payments for Care 1.How do they work? 2.Pros/Cons for buyers and sellers 3.Incentives once the deal is done/ in place

3. 3 Two competing views on change and who will manage it: 1.Change will be managed by ACOs Theory is that motivated (properly incentivized) physicians will better direct how and when patients receive specialist and institutional care Driven by observations of Geisinger and other high-functioning IDNs Made law as part of the ACA (MSSP) and will grow to manage other populations Downside – as structured, patients aren’t restricted to use of the ACO (often are not aware that they’re even IN the ACO!) 2.Change will be managed by individual patients Theory is that individuals can be better motivated to ‘self-ration’ care HDHPs and Tiered Networks give patients an economic reason to care about spending Downside – patients don’t understand when they are declining useful vs. useless care.

4. 4 Risk Contracting

5. 5 Mechanics of Bundles 1.Defining the bundle Ex - ‘All care related to the primary diagnosis from initial diagnosis to return to function’ Most often date driven – i.e. ‘Intervention and 90 days post” Chronic conditions may be ‘every 12 months’

6. 6 Mechanics of Bundles 2.Defining the Value of the Episode Look at our own history Look at the average and/or best practice regionally/nationally Negotiate ’the’ price  CMS doesn’t negotiate; they supply targets

7. 7 Defining the Value

8. 8 Mechanics of Bundles 3.Managing the Bundles Payments can be made: a) To the contractor and then disbursed, or b) To each provider on a FFS basis If a, we need to negotiate price, performance with each sub-contractor If b, price is given, but you still must manage behavior Managing the utilization of each participant is key to performance

9. 9 Pros/ Cons for buyers/sellers Provider Pro – potential to gain market share Pro – potential to gain by reducing expenses associated with care Pro – potential to maintain or enhance incomes of those managing risk Con – risk adds complexity and cost to the practice of medicine Con – risk contracts are a potential loser if not managed well Purchaser Pro – expense will be known/ ‘budgetable’ up front Pro – Provider engagement may lower costs over time Con – risk contracts add complexity and cost Con – usually depend on narrow, closed network panels Con – purchaser gives up control and windfall savings that may come

10. 10 Incentives once the deal is ‘done’ Original Payer Just watch things – be sure everyone behaves Risk Taker Manage internal costs Manage downstream providers Suppliers Don’t get locked out! Show value added if you’re in – goal is to stay in

11. 11 Managing your costs

12. 12 Contact Information William Banks VP, Managed Care St. Elizabeth Healthcare 1 Medical Village Dr. Edgewood KY 41017 (850) 655-4328 bill.banks@stelizabeth.com