1. American Association of Physical Medicine and Rehabilitation
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

2. 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

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

4. Progress on Value Based Pay?
Mass Medicare ACO (Guess)
50%
CMS Goal: 50% in APMs by 2018
Mass Commercial in APMs4
38%
Medicare Beneficiaries in MA3
31%
Medicare Beneficiaries in ACOs1
15%
Non-Medicare Beneficiaries in ACOs2
6-7%
Sources: CMS (1); Calculated based on Levitt Partners (2); KFF (3); Mass CHIA 2015 (4).

5. Medicare’s New Physician Pay System

6. MIPS APMs 2019 +/- 4% +5% 2020 +/- 5% 2021 +/- 7% 2022 +/- 9%
(and beyond)
(until 2024)

7. 10-Year Avg. Change in Physician Payment Under Merit Based Incentive Program
$102
Source: 2014 Medicare Trustees Report
Brandeis University

8. 10-Year Change in Physician Payment Under Merit-Based Incentive Program
$111
$102
$93

9. Scoring System for MIPS
Today
2019
VBPM MU
PQRS

10. 10-Year Change in Physician Payment Under Merit-Based Incentive Program
$136
$111
$102
$93

11. Qualifying for APM Trackl

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

13. Medicare Heart Bypass Demo Medicare Acute Care Episode Demo
A Brief History of Bundled Payment
1983
1993
2007
2009
2010
2014
2016
Medicare Heart Bypass Demo
Medicare Acute Care Episode Demo
Medicare BPCI
Medicare
Inpatient
DRGs
Private Efforts:
ProvenCare
Prometheus
Affordable
Care
Act
Medicare CCJR & OCM

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

15. Hospital or Integrated Network
Prospective
Retrospective
Hospital or Integrated Network
$$$ $
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

16. BPCI Models Model 1 Outpatient Professional Inpatient Professional
Professional services
Inpatient Professional
Index Hospitalization
Readmission
SNF
Inpatient Stays
90 day look-forward 16 16

17. BPCI Models Model 2 Outpatient Professional Inpatient Professional
Professional services
Inpatient Professional
Index Hospitalization
Readmission
SNF
Inpatient Stays
day look-forward
Brandeis University 17 17

18. BPCI Models Model 3 Outpatient Professional Inpatient Professional
Professional services
Inpatient Professional
Index Hospitalization
Readmission
SNF
Inpatient Stays
30 day look-forward
Brandeis University 18 18

19. BPCI Models Model 4: Prospective Payment Outpatient Professional
Professional services
Inpatient Professional
Index Hospitalization
Readmission
SNF
Inpatient Stays
30 day look-forward
Brandeis University 19 19

20. Choices for Bundlers Select bundles Exclusions (not optional)
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

21. 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

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

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

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

25. Medicare Post Acute Care Spending
Brandeis University

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

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

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

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

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

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

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

33. 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.

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

35. Post Acute Strategy Components
Right setting
Right partners
Right relationships
Patient & Family
Primary Care Physician
Post-Acute Providers

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

37. 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

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

39. Top 6 SNFs by Number of Admissions for **** TJR Patients
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.

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

41. Assessing Quality is Difficult

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

43. 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

44. Atrius Health SNF Program: Better Results
Atrius Health clinicians in Preferred Facilities means better:
Patient & provider satisfaction
Clinical Outcomes
Total Cost of Care
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

45. 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).

46. 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).

47. What Does This Mean For Physiatrists?

48. 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.

49. WalMart Center of Excellence Program
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

50. Avoiding
Unneeded
Surgery
= VALUE

51. Questions
Robert Mechanic The Heller School for Social Policy & Management The Health Industry Forum Brandeis University