1. Value-Based Payment Systems: How Will They Change The Delivery of Care? Robert Mechanic, MBA Brandeis University American Association of Physical Medicine and Rehabilitation October 3, 2015

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3. What Would Stuart Altman Say? 3 You guys better fix this system before I have to use it!

4. Stuart’s Granddaughter Weighs In 4 Please take great care of grandpa but don’t spend too much!

5. Overview What’s happening to Medicare physician pay and value-based pay generally? Medicine through an episode of care lens Post-acute care: The next frontier in Medicare cost containment Implications for Physiatrists 5

6. Progress on Value-Based Care? “At this juncture, 'volume to value' is as much (or more) a marketing slogan as it is actual policy” 6 Jonathan Oberlander and M Laugesen, Leap of Faith – Medicare’s New Physician Payment System NEJM September 24, 2015

7. Progress on Value Based Pay? Mass Medicare ACO (Guess) 50% Mass Commercial in APMs 4 38% Medicare Beneficiaries in ACOs 1 15% Non-Medicare Beneficiaries in ACOs 2 6-7% Medicare Beneficiaries in MA 3 31% Sources: CMS (1); Calculated based on Levitt Partners (2); KFF (3); Mass CHIA 2015 (4). CMS Goal: 50% in APMs by 2018

8. Medicare’s New Physician Pay System 8

9. 9 MIPSAPMs 2019+/- 4%+5% 2019+/- 5%+5% 2019+/- 7%+5% 2019+/- 9% (and beyond) +5% (until 2024)

10. 10-Year Avg. Change in Physician Payment Under Merit Based Incentive Program Brandeis University 10 Source: 2014 Medicare Trustees Report $102

11. 10-Year Change in Physician Payment Under Merit Based Incentive Program Brandeis University 11 MIPS Avg. Source: 2014 Medicare Trustees Report $154 $64 $102

12. Scoring System for MIPS 12 VBPM MU PQRS Today 2019

13. 10-Year Change in Physician Payment Under MIPS and APM Brandeis University 13 MIPS Avg. Source: 2014 Medicare Trustees Report $136 $64 $102 $154

14. Qualifying for APM Trackl 14

15. Alternative Payment Models? 15 Bundled Payments ACOs & Global Payments PCMH Payments Stuff We Haven’t Seen Yet

16. Medicare Inpatient DRGs Private Efforts: ProvenCare Prometheus Medicare Acute Care Episode Demo Affordable Care Act 198320072014199320092010 Medicare Heart Bypass Demo Medicare BPCI 16 A Brief History of Bundled Payment 2016 Medicare CCJR & OCM

17. Bundled Payment Hospital or Integrated Network $$$ Single payment to cover costs of episode of care (30, 60, 90 days) Payer $ $$$$ Group is responsible for all care within the episode Shared Accountability

18. Prospective Target budget for each episode All providers paid FFS Periodic CMS settlements – Distribute surplus – Reclaim deficit Health system decides – Whom to contract with – How to distribute bonuses 18 Hospital or Integrated Network $$$ $$$$$ Retrospective

19. 90 day look-forward Index Hospitalization Inpatient Professional Outpatient Professional Professional services Inpatient Stays Readmission SNF BPCI Models Model 1

20. 30 - 90 day look-forward Index Hospitalization Inpatient Professional Outpatient Professional Professional services Inpatient Stays Brandeis University Readmission SNF Model 2 BPCI Models

21. 30 day look-forward Index Hospitalization Inpatient Professional Outpatient Professional Professional services Inpatient Stays Brandeis University Readmission SNF Model 3 BPCI Models

22. 30 day look-forward Index Hospitalization Inpatient Professional Outpatient Professional Professional services Inpatient Stays Brandeis University Readmission SNF Model 4: Prospective Payment BPCI Models

23. Choices for Bundlers Select bundles – 48 bundles (encompassing DRG families) – Covering about 70% of Medicare payments Exclusions (not optional) – Readmissions and Part B services – Generally exclude transplants, trauma cancer – Include all medical readmissions (328 for 469) Select bundle length (30, 60, 90) Brandeis University 23

24. Gainsharing CMS gets first 2 - 3% of savings Additional savings can be shared between facility, physicians, post-acute providers – Physician gain share capped at 50% of Medicare – No cap on other providers CMS approves gain share plans – Payments must be linked to quality Brandeis University 24

25. Financial Model 2009 - 12 Historical Cost Per Episode Target Price 2014 Episode Definitions Risk Tracks CMS Discount $18,200 $18,382 Settlement Actual FFS Cost $17,400 $982 Update Factor * * For illustration update = 1%/yr discount = 2% 25

26. BPCI Enrollment Now Exceeds 2000 Brandeis University 26 Source: CMS BPCI Analytic File as of 7-15-2015. Numbers here may differ from other estimates because of duplicate participant names. Average Participant is at Risk for 5 Episodes

27. The Financial Opportunity of Bundled Payment Medicare Spends a Tremendous Amount in the 30 – 90 Days After Patients Are Discharged from the Hospital 27

28. Medicare Post Acute Care Spending Brandeis University 28

29. 29 Average 2013 Medicare Inpatient Payments Select Episodes for Sample Hospital Source: Brandeis University analysis of Medicare Claims.

30. 30 Avg. 2013 Medicare 90-Day Episode Price for Index Stay & Post Acute: Sample Hospital 29% 45% 70% 71% 69% 48% Source: Brandeis University analysis of Medicare claims data.

31. Brandeis University 31 Hospital Administrators Thinking About Post-Acute Care

32. There is Significant Variation in Post-Acute Care Spending Across Hospitals …. …. And Many Opportunities to Reduce Post-Acute Care Spending 32

33. Average 2009 Post-Acute Care Spending per Episode for Total Joint Replacement (90 day) 33 Source: Brandeis University analysis of Medicare Claims data. Figures adjusted for hospital wage index. $6,000 $12,000 “St. Minimus” “St. Maximus”

34. A Tale of Two Hospitals: Joint Replacement Episode 34 Source: Brandeis University analysis of Medicare Claims data. Unadjusted data.

35. 35 A Tale of Two Hospitals: Joint Replacement Episode Source: Brandeis University analysis of Medicare Claims data.

36. Opportunities for St. Maximus Expand home health and reduce use of SNF services where appropriate Put a program in place to monitor patients following discharge – Medication reconciliation – Home assessment – Primary care visit within 7 days – Emergency plan for likely events Consider preferred relationships with collaborative & high value facilities. 36

37. Post-Acute Care – The Next Frontier for Controlling Medicare Spending

38. Post Acute Strategy Components 1.Right setting 2.Right partners 3.Right relationships – Patient & Family – Primary Care Physician – Post-Acute Providers 38

39. 2008 Medicare Post-Acute Care Payments Per User by Site of Service: DRG 470 (Total Joint) 39 Source: RTI Inc, Post-Acute Care Episodes: Expanded Analytic File, June 2011 100%60%40%7% 0.2% 9% Percent with Service: Within 30 Days of Hospital Discharge

40. Medicare Payment Methods SNF: Per-diem payment with therapies billed separately – Patients covered for up to 100 days Home health: 60-day bundle Inpatient Rehab: Prospective per case payment (similar to DRG method) – 60 percent of patients must have one of 13 conditions 40

41. Variation in 2010 Medicare Average Length of Stay for Skilled Nursing Facilities 41 Source: Adapted form Office of HHS Inspector General December 2010. 29 34 61 24 5 Difference Between Top & Bottom Quartile 10 Days = $4,000+

42. 42 2013 Average SNF Spending Per Admission for A Hospital’s Total Joint Replacement Patients Top 6 SNFs by Number of Admissions for **** TJR Patients Source: Brandeis University analysis of Medicare claims data. All SNFs have 10+ cases.

43. Variation in 2009 Risk Adjusted Readmission Rates from Skilled Nursing Facilities 43 Source: MedPAC Report to Congress, March 2012.

44. 44 Assessing Quality is Difficult

45. Post-Acute Care – The Next Frontier for Controlling Medicare Spending

46. Pioneer ACO Post-Acute Strategies Preferred SNF network SNF rounding teams and case managers – Improve quality – Manage LOS – Reduce readmission Direct SNF admissions – 3-day waiver Financial incentives Many other pilots 46

47. Atrius Health SNF Program: Better Results ©2015 Atrius Health, Inc. All rights reserved. Not for distribution. Admissions: Preferred w/clincian (1.380); Preferred (1,026); All Other (1023). Facilities with Atrius Employed Clinicians: Facilities:16 ALOS: 13.9 Readmit rate: 8.3% Cost/Case: $7,624 : Preferred Facilities: Facilities: 20 ALOS: 15.8 Readmit rate: 8.4% Cost/Case: $9,395 All Others Approx. 240 Facilities ALOS: 22.3 Readmit rate: 10.9% Cost/case $11,249 Atrius Health clinicians in Preferred Facilities means better: Patient & provider satisfaction Clinical Outcomes Total Cost of Care

48. Percent of ACOs With Core Partners (N=60) Source: L&M Policy Research. Pioneer ACO Findings from PY1 and PY2, March 2015. Note: Finding based on ACO interviews: Pioneer (23); AP-MSSP (20); MSSP (17).

49. Percent of ACOs With Developing Relationships by Provider Type (N=60) Source: L&M Policy Research. Pioneer ACO Findings from PY1 and PY2, March 2015. Note: Finding based on ACO interviews: Pioneer (23); AP-MSSP (20); MSSP (17).

50. What Does This Mean For Physiatrists? 50

51. WalMart Center of Excellence Program Employees have no out-of-pocket costs if they get selected spine, heart or transplant procedures at one of six “centers of excellence”: Cleveland Clinic; Mayo Clinic; Virginia Mason; Scott and White; Geisinger; and Mercy Hospital.

52. Two years into the program, an unexpected pattern is emerging: the biggest savings and improvements in care are coming from avoiding procedures that shouldn’t be done in the first place. Atul Gawande, Overkill, The New Yorker WalMart Center of Excellence Program

53. 53 Avoiding Unneeded Surgery = VALUE

54. Questions Robert Mechanic The Heller School for Social Policy & Management The Health Industry Forum Brandeis University mechanic@brandeis.edu www.healthforum.brandeis.edu 54

55. Appendix Participation in BPCI 55

56. BPCI Enrollment Now Exceeds 2,000 Brandeis University 56 Source: CMS BPCI Analytic File as of 7-15-2015. Numbers here may differ from other estimates because of duplicate participant names. Average Participant is at Risk for 5 Episodes

57. Top Model 2 Bundles (700 bundlers) Brandeis University 57 Source: CMS BPCI Analytic File as of 7-15-2015.

58. Model 2: 61% of Participants Selected 1 or 2 Bundles (N=698) Brandeis University 58 Average Episode Initiator at Risk for 5 bundles Source: CMS BPCI Analytic File as of 7-15-2015. Numbers here may differ from other estimates because of duplicate participant names.

59. Model 2: Approximate Distribution PGP- Controlled Bundles by Specialty Brandeis University 59 Source: CMS BPCI Analytic File as of 7-15-2015.