Surviving Value-Based Purchasing in Healthcare

1. Surviving Value Based Care: A Road Map to Success Under the New Reimbursement Model October 15, 2013 Proprietary and Confidential Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.com © 2013 Health Catalyst www.healthcatalyst.com 1

3. Poll Question #1 What is your primary area of focus?  Physician/clinical  Quality  Information system  Finance  Other Proprietary and Confidential 3 © 2013 Health Catalyst www.healthcatalyst.com

5. Trend of Hospital Margins Medicare Margins for Hospitals 15% 10% 5% 0% IP OP -5% Overall -10% -15% -20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Medpac report March 2013 Proprietary and Confidential 5 © 2013 Health Catalyst www.healthcatalyst.com

7. Background from MedPAC The current aim is to transform Medicare from a fee-driven model to one that encourages delivery of efficient, high-quality care. Focus on: Payment reform Delivery system reform Medicare payment policies tend to set a precedent for other payers. Proprietary and Confidential 7 © 2013 Health Catalyst www.healthcatalyst.com

8. Context for Medicare payment policy • Growth in healthcare and Medicare spending • Impact on Federal budget and Medicare • Variation in healthcare spending  Significant variation in use and spending, which does not correspond to better quality, raises flags that higher healthcare use and spending are not improving overall health and put beneficiaries at risk. Proprietary and Confidential 8 © 2013 Health Catalyst www.healthcatalyst.com

9. Facts from report • Over the next 10 years, Medicare spending will grow at annual rate of 6.8 percent, consisting of 3.9 percent per-beneficiary growth and 2.9 percent enrollment growth • From 2004 to 2011, outpatient services per beneficiary grew 34 percent and inpatient admissions declined 8 percent. • The overall 2013 Medicare margins are projected to be -6%. Source: Medpac report March 2013 Proprietary and Confidential 9 © 2013 Health Catalyst www.healthcatalyst.com

10. Medicare Facts Medicare Spending Disease Prevalence Condition 100% 90% 23% 46% 70% 60% >6 Conditions 4-5 Conditions 32% 40% 28% Chronic Chronic kidney COPD Congestive heart failure Diabetes Ischemic heart disease 9% 10% 15% 25% 31% 13% 10% 11% 27% 25% 2-3 Conditions 1% 7% 1% 4% 1% 7% 1% 4% 0-1 Conditions 30% 20% 2010 14% 80% 50% 2006 32% 19% 10% 7% 0% Beneficiaries Spending Acute AMI Atrial fibrilation Hip fracture Stroke Source: Medpac report March 2013 Proprietary and Confidential 10 © 2013 Health Catalyst www.healthcatalyst.com

11. High Performing Hospitals Relatively Efficient Other Number of hospitals 297 1,864 Share 14% 86% Measures of Success: • Risk adjusted mortality • Risk adjusted readmit Performance Metrics 2011 Risk adjusted Composite 30 day mortality 87% Readmission rates 95% 101% Standardized cost per discharge 90% 102% Relative % of patients highly satisfied 69% 67% Median occupancy 63% 57% Overall Medicare margin , 2011 2% -5% NonMedicare margin, 2011 5% 7% Total margin, 2011 4% rate 103% 4% • Standardized costs Median: Source: Medpac report March 2013 Proprietary and Confidential 11 © 2013 Health Catalyst www.healthcatalyst.com

12. CMS Programs (subset of 41 programs) • VBP (Value Based Purchasing) Incentive • Readmission Penalty 2% for 2014 • HAC (Hospital Acquired Conditions Penalty in 2015) ─ Patient Injury and Prevention: Hospital Acquired Infections (CAUTI and CLABSI), PSI90 Index • Meaningful Use • ACO (Accountable Care Organization) – responsible for a population • Bundled Payments Proprietary and Confidential 12 © 2013 Health Catalyst www.healthcatalyst.com

13. CMS Template for programs • Identification of quality measures • Payment for quality performance • Measures of physician and provider resource use • Payment for value- promote efficiency while providing high quality care • Alignment of financial incentives among providers • Transparency and public reporting Source: CMS: Roadmap for Implementing Value Driven Healthcare in the Traditional Medicare Fee-for-Service Program Proprietary and Confidential 13 © 2013 Health Catalyst www.healthcatalyst.com

15. Yearly Incentives Readmit Program Value Based Purchasing 2013 2014 2015 2013 2014 2015 1% 2% 3% 1% 1.25% 1.5% Hospitals know penalty in advance Decreased payment for all MSDRGs for year All hospitals reduced payment by % Can then receive add’l payment based on score Proprietary and Confidential 15 © 2013 Health Catalyst www.healthcatalyst.com

16. VBP Clinical Measures FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 AMI-7a Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival AMI-8a Primary Percutaneous Coronary Intervention (PCI) Received Within 90 Minutes of Hospital Arrival HF-1 Discharge Instructions IMM-2 Influenza Immunization PN-3b Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital PN-6 Initial Antibiotic Selection for Community-Acquired Pneumonia (CAP) in Immunocompetent Patient SCIP-Inf-1 Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision SCIP-Inf-2 Prophylactic Antibiotic Selection for Surgical Patients SCIP-Inf-3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time SCIP-Inf-4 Cardiac Surgery Patients with Controlled 6:00 a.m. Postoperative Serum Glucose SCIP-Card-2 Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period SCIP-VTE-1 Surgery Patients with Recommended Venous Thromboembolism (VTE) Prophylaxis Ordered SCIP-VTE-2 Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery SCIP-Inf-9 Postoperative urinary catheter removal on postoperative day 1 or2 Key: Proprietary and Confidential Active Inactive 16 © 2013 Health Catalyst www.healthcatalyst.com

17. VBP- continued Patient experience of care measure FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS) Communication with nurses Communication with physicians Responsiveness of Hospital Staff Pain Management Communication about Medicine Cleanliness and Quietness of Hospital Environment Discharge Information Overall rating of hospital Outcome Measures Mort-30-AMI AMI 30 day mortality rate Mort-30-HF HF 30 day mortality rate Mort-30-PN Pneumonia 30 day mortality rate AHRQ PSI composite Composite for patient safety CLABSI Cental line blood associated infection CAUTI Catheter-Associated Urinary Tract Infection SSI Surgical site infection- colon and abdominal hysterectomy MSPB-1 Efficiency Measures Medicare spending per beneficiary Proprietary and Confidential 17 © 2013 Health Catalyst www.healthcatalyst.com

18. Value Based Purchasing Metric weights by year 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 30% 25% 30% 70% 20% 25% 40% 40% 25% 25% 10% 10% FY 2016 FY 2017 30% 30% 45% 20% FY 2013 25% FY 2014 FY 2015 Clinical Process Patient Experience Outcome Measures Efficiency Measures Dates for FY 2014 Performance 4-1-2012 to 12-312012 Clinical Baseline 4-1-2010 to 12-312010 Patient Experience Baseline 4-1-2010 to 12-312010 Performance 4-1-2012 to 12-312012 Outcome Baseline 7-1-2009 to 6-302010 Performance 7-1-2011 to 6-302012 Proprietary and Confidential 18 © 2013 Health Catalyst www.healthcatalyst.com

19. Example of scoring Improvement My hospital compared to my baseline performance Achievement My hospital compared to all hospitals Measure SCIP-1 -prophylactic ABX received w/n 1 hr prior to surgical incision Hospital Baseline Performance 98.55 99.22 National Benchmark Threshold 99.98 Proprietary and Confidential 97.35 Achieve Improve 7 4 19 Points 7 © 2013 Health Catalyst www.healthcatalyst.com

20. Updates on Programs Readmission Value Based Purchasing • 2013- 1% $280M for • In 2013, 1,557 hospitals got 2,213 hospitals - Average fine .42% additional payment and 1,427 hospitals got less payment 2,225 hospitals In a forecast for year one, the researchers found that: - Average fine .38% • 65% of hospitals would have • 2014- 2% $227M for experienced a payment change between -0.25% and 0.24%; • Overall readmit rate for Medicare 12% Source: Kaiser Health News • 3% of hospitals would have received a payment decrease larger than 0.5%; and 2.4% would have received a payment increase larger than 0.5%. Source: Health Affairs Sept 2012 Proprietary and Confidential 20 © 2013 Health Catalyst www.healthcatalyst.com

22. Commercial Market United Healthcare unveils ACO expansion plan: Set to double deals by 2017 Blue Cross Blue Shield of Massachusetts saved $107 per patient and improved quality of care for chronically ill adults in the 2nd year of an ACO A large medical ACO partnership in California saved $20 million in costs and reduced readmissions by 22 percent. Proprietary and Confidential 22 © 2013 Health Catalyst www.healthcatalyst.com

23. California P4P Integrated Healthcare Association • Started in 2003 with incentive program • Now 8 health plans, 200 physician groups and 10 million commercial HMO members and $40 million annual payout • 85 uniform measures publicly reported • Steady, incremental improvements Proprietary and Confidential 23 © 2013 Health Catalyst www.healthcatalyst.com

24. Value Based Health Care Vaccines. Anesthesia. Penicillin. Bypass surgery. Decoding the human genome. Unquestionably, all are life-saving medical breakthroughs. But one breakthrough that will change the face of medicine is being slowed by criticism, misunderstanding, and a reluctance to do things differently. That breakthrough is value-based care, the goal of which is to lower health care costs and improve quality and outcomes. Value-Based Health Care Is Inevitable and That’s Good - by Toby Cosgrove, M.D., Cleveland Clinic CEO Source: http://blogs.hbr.org/2013/09/value-based-health-care-is-inevitable-and-thats-good/ Proprietary and Confidential 24 © 2013 Health Catalyst www.healthcatalyst.com

25. Impact of Changes in Payment Volume Value • Fee for service • Payment to manage - Per case population • No quality rewards • Incentives and penalties for quality metrics • Collaboration/partnership not valued • No IT investment incentives • Shared accountabilities • IT core to strategy Proprietary and Confidential 25 © 2013 Health Catalyst www.healthcatalyst.com

27. Poll Question #2 How does your organization distribute outcome performance?  Internal web site  External web site  Only to quality staff  Does not distribute Proprietary and Confidential 27 © 2013 Health Catalyst www.healthcatalyst.com

28. Value Based Purchasing Information Flow Hospital publically reports IQR measures Hospital improves performance Each measure scored 0-10 The incentive payment is calculated on TPS Measures are grouped into domains and scored Total performance score is calculated based on weighting of domains Excerpted from StratisHealth Proprietary and Confidential 28 © 2013 Health Catalyst www.healthcatalyst.com

29. It doesn’t just happen…… Hospital Improves Performance Data Measurement & Analytics Value Stream Mapping Waste Reduction Outcome Patient Experience of Care Alignment Reduced Cost Improved Quality Efficiency Clinical Processes of Care Observation Root Cause Analysis Coordination Proprietary and Confidential 29 © 2013 Health Catalyst www.healthcatalyst.com

31. Need a sustainable framework …..because we can’t go back Clinical Process of Care and Patient Experience of Care Measures Timeline Baseline April 1, 2010 to December 31, 2010 Performance Period April 1, 2012 To December 31, 2012 Fiscal Year (FY) 2014 October 1, 2013 to September 30, 2014 …..let’s get ahead of the curve Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.com

32. Ingredients for Success Get the right people doing the right work People Develop standard, reliable processes Process Technology Leverage technology where possible Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.com

34. Legacy Reporting Environment DEPARTMENTAL SOURCES (e.g. Apollo) FINANCIAL SOURCES (e.g. Lawson) Financial Reports Departmental Reports ADMINISTRATIVE SOURCES (e.g. API Time Tracking) PATIENT SATISFACTION SOURCES (e.g. Press/Ganey) Administrative Reports Patient Satisfaction Sources (e.g. Press/Ganey) EMR SOURCE (e.g. Epic) HR Epic Reports Proprietary and Confidential HR Reports © 2013 Health Catalyst www.healthcatalyst.com

35. Legacy Reporting Environment • Ease of Use: Coding report objects were cryptic and relationships between data was poorly defined • Integration: Integration of data from different source systems was hard or impossible • Efficiency: Report run times were long and in some cases did not complete at all • Visualization: End user presentation reporting tools non-existent • User Self Reliance: No ability for report consumers to “fish for themselves” Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.com

36. Catalyst Adaptive Data Warehouse Catalyst’s Adaptive Data Model Metadata: EDW Atlas Security and Auditing Common, Linkable Vocabulary Financial Sources (e.g., EPSi, Peoplesoft, Lawson) Financial Source Marts Departmental Sources (e.g., Apollo) Departmental Source Marts Readmissions Administrative Sources (e.g., API Time Tracking) Administrative Source Marts Diabetes Patient Source Marts Patient Satisfaction Sources (e.g., NRC Picker, Press Ganey) Sepsis EMR Source Marts HR Source Mart EMR Source Human Resources (e.g., PeopleSoft) (e.g., Epic, Cerner) More Transformation Proprietary and Confidential Less Transformation © 2013 Health Catalyst www.healthcatalyst.com

41. Involve & Align the right people 1. Identify strong process champion 2. Engage the people who do the work 3. Connect them with the “data people” 4. Measure what matters 5. Feedback….feedback….feedback Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.com

44. Reduce Wasted Time Initial assessment: At least 80% of time spent hunting for and gathering data rather than understanding and interpreting data Abstractor, Analyst or Clinician Time 1. 1. Understanding the need 2. 1. 2. 3. 2. Hunting for the data 3. Gathering or compiling 4. Interpreting & Improving 3. 4. 5. Distribution of data Value-add Waste 4. 5. Proprietary and Confidential 5. © 2013 Health Catalyst www.healthcatalyst.com

45. Personal Testimony Important words from a leader accountable for infection prevention: “The immediate effect is the freeing up of data specialists’ and infection preventionists’ time. Data specialists no longer have to cobble together reports manually. Health Catalyst’s data automation allows them to move from data gathering and report generation to providing analysis. She cites more time to operate at the top of her license, moving from manual chart abstraction to delivering improved patient care. “We’re extremely strapped for time in the infection prevention world,” she said, “and CMS is coming out with new regulations every year.” “The more we’re out there preventing – rather than measuring – infections, the bigger a difference we can make, educating clinicians and, as a result, increasing patient safety and quality.” IMPRESSIVE RESULTS  80-90 percent estimated reduction in surveillance activities  Estimated 87 percent decrease in manual reporting resources  Rapid time to value with 10-week implementation Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.com

46. Closing Thoughts • It is not optional • Engage & align providers, analysts, abstractors, and subject matter experts • Leverage data (close to the source) to drive change • Be transparent • Keep the patient at the center Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.com

47. Resources www.healthcatalyst.com ● White Paper: Surviving Value-Based Purchasing in Healthcare ● How-to Guide: How to Prepare for Value-based Payment www.cms.gov ● The Official Website for the Medicare Hospital Value-based Purchasing Program ● Innovation Models Proprietary and Confidential 47 © 2013 Health Catalyst www.healthcatalyst.com

48. Questions and Answers Speakers Next Webinars Bobbi Brown Analytics Adoption Model Bobbi.brown@healthcatalyst.com Dale Sanders 10/23/13 - Register Jane Felmlee Healthcare Transformation Jane.felmlee@healthcatalyst.com Dr. John Haughom 10/30/13 - Register The Value Equation Dr. Charles Macias, Texas Children’s Hospital 11/6/13 Proprietary and Confidential 48 © 2013 Health Catalyst www.healthcatalyst.com