Why You Need to Understand Value-Based Reimbursement and How to Survive It

1. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. © 2014 Health Catalyst www.healthcatalyst.comProprietary. Feel free to share but we would appreciate a Health Catalyst citation. Why You Need to Understand Value-Based Reimbursement and How to Survive It By Bobbi Brown

2. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Changing Reimbursement Models There is a clear shift in the healthcare industry to move from the old fee-for-care model to value-based reimbursement. This payment methodology is a key feature of accountable care organizations. Fee for Care Value Based Care

3. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Hospital Medicare Margins Consider this downward trend in Medicare reimbursement since the year 2000. Overall margins have been in the red since 2003. With Medicare representing 30 to 40 percent of business this negative trend makes like difficult for the industry. The gray line shows the downward trend of the overall Medicare margin.

4. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Making Value-Based Work To make value-based reimbursements work you must be a high-performing hospital, successful with risk-adjusted mortality and readmission rates, while maintaining a low cost structure. Focusing on these four topics will drive success within value-based reimbursement programs. Physician payment structure Bundled Payments Hospital Inpatient Prospective Payment Systems Commercial Payers

5. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Physician Payment Structure The value-based reimbursement is moving to the physician community. A Medical Group Management Association survey showed that primary care physicians had approximately 6 percent of their compensation tied to quality metrics in 2013. This amount is double the 3 percent from 2012. CMS issued proposed 2015 regulations that include the value modifier beginning in calendar year 2017.

6. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Physician Payment Structure This regulation will require physicians to report and meet quality cost standards. There is potential for a reporting penalty and a cost/quality adjustment in 2017, possibly with a significant impact for those physicians who don’t meet satisfactory quality reporting requirements for the Physician Quality Reporting System (PQRS). These providers could end up with a negative 4.0 percent penalty.

7. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Bundled Payments Medicare wants higher quality care and more coordinated care across various providers at a lower cost. To begin to achieve these goals, CMS opened a new submission period in January of 2014 that closed in April. During this timeframe, organizations completed bundled payment applications for an entire episode of care that included financial and performance accountability.

8. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Bundled Payments There are four bundled payment models hospitals and health systems have the option of choosing from, but models 2 and 3 are the most widely used, so our focus will be there. Providers start in Phase 1, the preparation phase, which includes receiving data from CMS. Providers can move to Phase 2, the risk bearing phase, where participants are chosen by CMS. CMS has announced 4,122 providers will be added to Phase 1. They will join the 2,412 providers already participating.

9. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Bundled Payments Model 2: Retrospective Acute Care Hospital Stay plus Post-Acute Care In Model 2, the episode of care includes the inpatient stay in the acute care hospital and all related services during the episode. There are 48 clinical episodes with an end of either 30, 60, or 90 days after hospital discharge. There are a total 2,150 participants in this model.

10. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Bundled Payments Model 3: Retrospective Post-Acute Care Only For Model 3, the episode of care will be triggered by an acute care hospital stay and begins at initiation of post-acute care services. The post-acute care services included in the episode must begin within 30 days of discharge from the inpatient stay and will end either 30, 60, or 90 days. Participants can select up to 48 different clinical episodes. There are a total of 4,617 participants in this model.

11. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Bundled Payments Organizations need to be able to replicate the bundles by combining data not typically viewed as one episode. For example, if an entity bid on major joint upper extremity, data is needed to show the payments and potential costs for a hospital stay, outpatient stay, the physician component, and related post-acute care. Organizations should embrace the value-based reimbursement path as they work to increase care and decrease costs.

12. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Inpatient Prospective Payment Systems Regulations (IPPS) When CMS published the regulations, they included a fact sheet titled “CMS to Improve Quality of Care during Hospital Inpatient Stay.” The title summarizes CMS’s philosophy on what needs to change for patients during their hospital stay: To achieve these goals CMS updated these four programs: Hospital-Acquired Condition Reduction Hospital Value-Based Purchasing Hospital Readmissions Reduction Hospital Inpatient Quality Report

13. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Inpatient Prospective Payment Systems Regulations (IPPS) Under the Hospital-Acquired Condition (HAC) Reduction Program, hospitals with the highest rate of HACs — specifically, those in the top 25 percent — will receive a 1 percent reduction in Medicare inpatient payments. CMS estimates 753 hospitals will be subject to the one percent reduction and overall payments will decrease by $330 million or 0.3 percent. The Hospital-Acquired Condition Reduction Program

14. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Inpatient Prospective Payment Systems Regulations (IPPS) Under the Hospital Value-Based Purchasing (HVBP) program, the portion of Medicare payments available to fund the value-based incentive payments will increase to 1.5 percent of the base operating diagnosis-related group (DRG) payment. In the proposed 2015 plan, 1,253 hospitals will receive a bonus (average of 0.3 percent) and 1,475 hospitals will receive a penalty. The HVBP program includes additional outcome measures and an efficiency measure. The Hospital Value-Based Purchasing Program

15. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Inpatient Prospective Payment Systems Regulations (IPPS) The performance score will be calculated with these weights for the top four domains: The Hospital Value-Based Purchasing Program Clinical process: 20 percent Patient experience: 30 percent Outcomes: 30 percent Efficiency: 20 percent There will also be two new outcomes measures for 2015: AHRQ Patient Safety Indicators (PSI) composite and central line-associated blood steam infection (CLABSI).

16. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Inpatient Prospective Payment Systems Regulations (IPPS) CMS added two new conditions to their Hospital Readmissions Reduction Program (HRRP) reporting measures: Chronic obstructive pulmonary disease (COPD) and total hip arthroplasty/total knee arthroplasty (THA/TKA). There is now a maximum penalty for readmissions of 3 percent, up from 2 percent. As a result of the program Medicare readmissions declined by a total of 150,000. Hospital Readmissions Reduction Program

17. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Inpatient Prospective Payment Systems Regulations (IPPS) For 2015, reporting requirements are aligned for the IQR reporting and the Electronic Health Record (EHR) Incentive Program. Hospitals not submitting quality data are subject to a penalty of one-fourth reduction to the market basket update. The overall IPPS regulations do include some payment increases, but the overall total dollars are lower by -0.6 percent due to the DSH (disproportionate share) and the penalty programs. Hospital Inpatient Quality Report

18. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Commercial Payers The shift to value-based reimbursement is impacting commercial payers as insurers move to value-based concepts. In fact, 90 percent of payers and 81 percent of hospitals have already implemented a mix of value-based reimbursement and fee-for-service. Over the next five years, payers are projecting fee-for-service will decrease from 56 percent to 32 percent to encourage the desired quality outcomes.

19. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Commercial Payers BlueCross-BlueShield estimates about 20 percent of all claims are based on value-based care. Initiatives include changing payment incentives, partnering on clinical information sharing, pricing transparency, and engaging patients. By reducing admissions and readmissions, emergency room visits, high-cost interventions, proactively enabling access to preventive care, and controlling of chronic conditions, BC/BS insurers have saved $500 million.

20. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. 3 Ways to Survive the Shift to Value-Based Reimbursement Data cannot be locked and guarded; it needs to be available to those who will use it to improve care and lower costs. An analytics system that can track performance and then measure improvements based on targeted quality interventions is essential. In addition to the analytics system, it’s also important to have an electronic data warehouse (EDW). The EDW will help you identify where variation exists along with the causes. 1. Provide access to rich data.

21. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. 3 Ways to Survive the Shift to Value-Based Reimbursement To achieve our goals we must share the value-based message and its implications. We will have to engage our peers and others outside the organization. Healthcare costs are now approaching one-fifth of the U.S. economy. Without reducing waste we will be unable to prove we have better health or quality. We must maximize our tools to build evidence-based content for all clinicians with a structure that facilitates learning. 2. Share knowledge and learn from each other.

22. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. 3 Ways to Survive the Shift to Value-Based Reimbursement What are the strategies for your organization for the next year and the next 5 years? You may need to do an assessment to determine your current state, your deficiencies, and a plan to overcome the deficiencies. How does your organization align with the value-based future? Will you be able to deploy your strategies? 3. Develop strategies by doing assessments.

23. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. Value-Based Reimbursement – Here to Stay To survive the value-based reimbursement model, providers must be able to access their data to mine improvements. Most current healthcare data models can’t support the need to analyze data and pull reports from the many different source systems. Instead, health systems need something different—a systematic approach using the right information and processes at a system level to drive improvement.

24. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. More about this topic How to Prepare for Value-Based Reimbursement in 4 Steps Bobbi Brown, VP of Financial Engagement The Key to Transitioning from Fee-for-Service to Value-Based Reimbursement Bobbi Brown, VP of Financial Engagement and Jared Crapo, VP of Sales Value-Based Reimbursement: Start with These Patients Dale Sanders, Senior Vice President, Strategy Surviving Value-Based Reimbursement in Healthcare (webinar) Bobbi Brown, VP of Financial Engagement and Jane Felmlee, Financial Consultant Surviving Value-Based Reimbursement: Connecting Clinical and Financial Data for the Best ROI (executive report) Bobbi Brown, VP of Financial Engagement

26. © 2013 Health Catalyst www.healthcatalyst.com Other Clinical Quality Improvement Resources Click to read additional information at www.healthcatalyst.com Bobbi Brown is Vice President of Financial Engagement for Health Catalyst, a data warehousing and analytics company based in Salt Lake City. Ms. Brown started her healthcare career at Intermountain Healthcare supporting clinical integration efforts before moving to Sutter Health and, later, Kaiser Permanente, where she served as Vice President of Financial Planning and Performance. Ms. Brown holds an MBA from the Thunderbird School of Global Management as well as a BA in Spanish and Education from Misericordia University. She regularly writes and teaches on finance-related healthcare topics.