CMS APPROVES BUNDLED PAYMENT FOR CARE IMPROVEMENT ADVANCED (BPCI-A) Ready. Set. Go? EDWARD STALL, CRAIG TOLBERT AND MICHAEL WOLFORD

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1 CMS APPROVES BUNDLED PAYMENT FOR CARE IMPROVEMENT ADVANCED (BPCI-A) Ready. Set. Go? BY EDWARD STALL, CRAIG TOLBERT AND MICHAEL WOLFORD

2 BPCI ADVANCED (BPCI-A) // READY. SET. GO? I. BPCI ADVANCED AND THE ENVIRONMENT OF ALTERNATIVE PAYMENT In this past year, the healthcare industry has seen a range of changes in Alternative Payment Models ( APM s ) from the Centers for Medicare and Medicaid Services ( CMS ). ACO acceleration, MACRA clarification, EPM cancellation, and CJR mandatory market contraction have all led to confusion about the path ahead for alternative payment models. When CMS announced in August 2017 the cancellation of mandatory episodic payment programs, it also doubled-down on its commitment to voluntary episodic programs. Many providers are currently engaged in voluntary initiatives with CMS, and we expect to continue to offer opportunities for providers to participate in voluntary initiatives, including episode-based payment models. (1) The expectation of a new voluntary episodic model was then re-confirmed in CMS EPM final rule announced December 20, Specifically, CMS stated Building on the BPCI initiative, the [CMS] Innovation Center intends to implement a new voluntary bundled payment model for CY 2018 where the model(s) would be designed to meet the criteria to be an Advanced APM [for APM qualification in MACRA.] (2) The cancellation of EPM and the reduction of mandatory CJR participants had led many to assume that alternative payment models in general and bundles in particular are less important going forward. In our opinion, this assumption is dangerously limited. Mark Twain once told a newspaper that reported of his death that the reports of my death are greatly exaggerated. (3) He could have said the same thing about the false narrative surrounding episodic payment models. On January 9th, 2018, CMS made its formal announcement of Bundled Payment for Care Improvement Advanced (BPCI-A). This announcement is clear confirmation that CMS is committed to the growth of alternative payment models in general and voluntary bundles in particular. CMS also announced an application process with a March 12, 2018, deadline creating a short window for acute care hospitals and physician groups to respond as applicants. The application process is non-binding and creates a limited time opportunity to evaluate and decide if participation in a voluntary bundling program is a strategic fit, a competitive advantage, a clinical improvement opportunity, a financial opportunity, or all of these. 1 CMS.Gov website. CMS proposes changes to Comprehensive Care for Joint Replacement Model, Cancellation of the Mandaotry Episodic Payment Models. Press release, page 1. August 15, CMS.Gov website. Final Ruling. Press Release. December 20, This day in quotes website. Subtropic Productions LLP. 2

3 Finally, it s clear that participation in BPCI Advanced can play a central role in your organization s overall journey to risk capability. DHG Healthcare believes that, whether defined by explicit strategic planning or actual execution, virtually all markets in the United States are now operating in a post-tipping-point environment. As demonstrated by the following graphic, this means creation of operational playbooks that enable, for your specific organization and your specific market, your game plan for achieving risk capability that is responsive to your unique execution beyond the tipping point. Strong consideration of BPCI Advanced participation (including, at a minimum, "no-harm no-foul" participation in the application process) is accretive to such goals. Responsible Confidence in Economic Portfolio Transition Innovation Acceleration Clinical Assets New Infrastructure Population Health Scenario Planning & Dynamic Financial Modeling Leadership & Culture Governance Thoughtful and Deliberate Response to Market Forces Meaningfully Positive Community and Patient Clinical Impacts Organizational Preparedness and Transformational Agility Committed Governance and Collaborative Culture Alignment of Mission and Strategy with Pursuit of Value-based Care 3

4 BPCI ADVANCED (BPCI-A) // READY. SET. GO? II. TEN REASONS BPCI ADVANCED MATTERS TO YOUR SUCCESS DHG Healthcare is actively serving clients in each mandatory and voluntary program. Given this deep episodic experience we would like to share our thinking around why we believe it is important for providers to consider BPCI Advanced and consider an application to explore the voluntary bundling model. We offer ten Reasons why BPCI Advanced could matter to your success. 1. ALTERNATIVE PAYMENT MODELS ARE FOCUSED ON COST, QUALITY AND PATIENT EXPERIENCE; THESE WILL BE NECESSARY CORE COMPETENCIES Every alternative payment model, whether mandatory or voluntary, is focused on reducing the cost of care, maintaining or improving quality outcomes, and delivering an excellent care experience for the patient. Many call this focus population health management, but in its simplest sense, the focus is on incurring the right amount of Medicare expenditures, in the right setting, with high quality, for demonstrably satisfied patients. Our view is that the ability to manage patients across the continuum of care and beyond the four walls of a provider or physician office will be a critical competency that providers must develop, refine, and continually improve for long term clinical and financial success. It s also the right thing to do for patients. BPCI Advanced is an opportunity to accelerate core competencies needed for success in all Alternative Payment Models. 2. ALTERNATIVE PAYMENT MODELS (APM) ARE ALL OVER THE BUILDING Even with the cancellation of CMS mandatory cardiac bundles, client experience indicates that alternative payment models are all over the building in hospitals, post-acute providers, and physician practices. Mandatory CMS programs and incentive opportunities already make alternative payment models a critical component of current revenue streams. Many providers today already have up to 6-10% of Medicare revenues at risk today for penalties, performance, or value based measures. 4

5 Our view, after working with dozens of clients in alternative payment models, is that the tipping point to value based payment models is no longer some indefinite point in the future. All providers will have to balance fee-for-service and value-based environments to be effective in the long term. If this tipping point has already been crossed, adding voluntary programs like BPCI Advanced only leverages these new competencies to a broader base of patients. BPCI Advanced is an opportunity to leverage your core competencies to a broader patient population. 3. OPPORTUNITY FOR PHYSICIAN ENGAGEMENT AND ALIGNMENT In alternative payment programs to date, the importance of physician engagement has clearly been demonstrated. Some of the greatest spending reductions in joint replacement, for instance, have been achieved by physician groups who entered the initial BPCI program with a focus on changing practice patterns to appropriately take advantage of program rules. BPCI Advanced offers an opportunity to engage physicians in alternative payment models through NPRA Sharing ( Net Payment Reconciliation Amount Sharing). CMS has also announced that BPCI Advanced will qualify as an Advanced Alternative Payment Model for MACRA purposes allowing many physician practices to generate additional bonuses on their Medicare Part B revenue. BPCI Advanced creates opportunities for physician engagement and qualifies as an Advanced Alternative Payment Model for physician incentive programs. 4. FOCUSES ATTENTION ON POST-ACUTE PERFORMANCE Alternative Payment Models to date have extended care coordination beyond the provider to care delivered outside the hospital or physician practice. A significant factor in success of early payment model participants has been strategies to manage patients across settings and across the episode time frame. 5

6 BPCI ADVANCED (BPCI-A) // READY. SET. GO? Many post-acute strategies have emerged including the development of postacute networks and partnering, reduction in post-acute length of stay, and discharging from the hospital to the most appropriate post-acute setting for specific episodes and underlying conditions. BPCI Advanced creates an opportunity to expand post-acute and care coordination strategies to a new base of patients. If you have developed a post-acute strategy or are positioned as a high value post-acute provider, then BPCI Advanced presents another way to leverage your competency to a new base of patients and expand the reach of your post-acute strategies and networks. BPCI Advanced allows those with post-acute strategies to extend their reach and grow the base that these strategies can impact. 5. COMPETITIVE POSITION Few providers think of Alternative Payment Models as a competitive advantage but our experience tells us that bundling can lead to competitive market advantages. While patients aren t likely to choose a provider based on being in a program like BPCI Advanced, the participation and success in these kinds of programs often differentiates a hospital provider to its payer, physician and post-acute communities. Physician engagement ( NPRA sharing ) can also be a tool to align with physicians. BPCI Advanced can be a tool to improve competitive position, particularly with physicians, payers, and post-acute leaders. 6. DATA MINING ON STEROIDS What other industry receives a dataset of every care event and dollar spent in a market over the course of several years? For those who are data savvy, CMS provided data can lead to competitive advantage, specific strategies, and enable success of APM programs. 6

7 BPCI Advanced offers rich, robust datasets to evaluate and manage this program. The slide below is an example of data mining possible in today s episodic programs. In the example above, the value of the data mining is clear when one (1) avoided readmission or change in discharge setting results in episode savings of $14-$17k. It only takes minor improvements generated from data mining to generate major savings. In BPCI Advanced, CMS commits to share baseline historic data through a data application process and then regular data releases to monitor performance once an applicant is live (October 1, 2018, is the go live data announced). Our experience is that CMS program-specific data must be processed to develop actionable information. This data can be mined to understand opportunities, pick episodes and even give a view into post-acute and physician variation. The data savvy participants can use data to improve performance. BPCI Advanced allows access to rich and robust data that leads to actionable strategies and improved performance. 7

8 BPCI ADVANCED (BPCI-A) // READY. SET. GO? 7. ACO PARTICIPANTS FIND SYNERGY Many providers are participating in the Medicare Shared Savings Plan ( MSSP ) or Next Gen ACO models. In any ACO program the early focus is typically on prevention, utilization and right settings. Our experience with ACO's confirms that an ACO's annual beneficiary spend is heavily impacted by episodes that originate in an acute hospital and typically include costly post-acute care. In a typical ACO we find that 45-50% of all ACO spending may be driven by these 90 day episodes of care. The slide below illustrates spending and variation of a typical ACO when looked at through this episodic lens. So, the story of an ACO is that it really functions as a bundler on steroids. 8

9 Many ACO participants have historically avoided voluntary bundling programs, often citing concerns over double counting. BPCI Advanced and most ACO programs are highly complementary and some BPCI-A rules make voluntary bundles even more attractive for ACO providers. ACO participants can accelerate success with the complementary episodic focus of BPCI Advanced program. 8. PREPARES FOR COMMERCIAL BUNDLES While BPCI Advanced remains exclusively a CMS program, there is evidence that commercial payers in some markets are accelerating bundled payment models. In the table below 22% of commercial spending and 41% of Medicare advantage spending today are tied to alternative payment models. (4) % HEALTHCARE SPENDING TIED TO APM, BY PAYER TYPE Overall Healthcare spending 25% Medicare FFS 30% Medicare Advantage 41% Commercial 22% Medicaid 18% BPCI Advanced and other Alternative Payment Models are terrific tools to gain experience and be prepared as commercial payers in some markets move to more value-based payment models. A provider with demonstrated success in CMS bundles will be better prepared to respond to payers or to create new innovations in payment models. BPCI Advanced provides critical experience to position for potential commercial bundles and value based programs. 4 Source: Health Care Payment Learning & Action Network (2016). 9

10 BPCI ADVANCED // READY, SET. GO? 9. FINANCIAL UPSIDE IS MEANINGFUL FOR GOOD PERFORMANCE IN THE RIGHT BUNDLES The nationwide macro-level results from existing alternative payment models are beginning to be shared by CMS. There are two data points that provide additional insight into how bundled payment programs have performed recently: 1. No Two Episodes are Alike: Medicare s annual report on the BPCI program indicated that surgical bundles performed very well financially without a measurable downturn in quality. On the other hand, the results for the more medically-focused bundles have been generally mixed. In short, surgical bundles appear more naturally positioned for episodic management. (5) 2. Winners Have Exceeded Planned Performance Results: First year CJR participant hospitals exceeded Medicare s initial estimates for savings by more than 350%. For those that won financially, the upside was greater than predicted. (6) BPCI Advanced can present significant financial upside with limited downside risk. 5 Source: The Lewin Group. CMS Bundled Payments for Care Improvement Initiative Models 2-4: Year 3 Evaluation & Monitoring Annual Report. October Source: accessed 1/8/18 10

11 10. PROVIDERS CAN PICK YOUR PITCH BPCI Advanced applicants will have the opportunity to assess if BPCI Advanced is a strategy they want to pursue. BPCI Advanced is one of the few programs that a provider has the opportunity to decide if it participates (go live or not), and what it participates in (which episodes). This is a unique opportunity to assess an opportunity before committing or taking risk. Many of us are familiar with Ted Williams, who is often regarded as the best hitter in Major League baseball history. His lifetime batting average of.344 and single season batting average of.406 are records still held today. What he learned after experience and analysis is that he did much better with pitches that were over the center of the plate of slightly high and right. The orange and red boxes in the photo to the right illustrate his higher percentage of success with pitches in these areas. His secret sauce then, was more than a silky swing it was a plan to pick his pitches. (7) In BPCI Advanced CMS allows a participant to also pick your pitches In this program the participant decides which episodes (29 inpatient and 3 outpatient), if quality measures help, and if target pricing is favorable. As a result a BPCI Advanced participant that does its homework should not only expect to do well in the program but can also model the size of the potential financial opportunity before it picks its pitch using national and peer group benchmarks on key episodic metrics. Opportunity is high and risk is low for those that enter BPCI Advanced with a thorough analysis and pick their pitch. BPCI Advanced allows participants to pick their pitch increasing probability of strong performance and limiting risk. 7 The Science of Hitting, Ted Williams and John Underwood, Touchstone Publishers, April

12 BPCI ADVANCED (BPCI-A) // READY. SET. GO? We ve explored in some detail our point of view on ten key reasons you should consider BPCI Advanced participation. In summary, BPCI Advanced provides opportunities to: 1. Accelerate core competencies needed for success in Alternative Payment Models. 2. Leverage your core competencies to a broader patient population. 3. Increase physician engagement and qualify as an Alternative Payment Model (APM) for physician incentive programs. 4. Extend post-acute strategies to grow the base that these strategies can impact. 5. Improve competitive position, particularly with physicians, payers, and post-acute leaders. 6. Gain access to rich and robust data that leads to actionable strategies and improved performance. 7. Accelerate success of MSSP participation with the complementary episodic focus of BPCI Advanced program. 8. Demonstrate critical experience to position for commercial bundles and value based programs. 9. Achieve significant financial upside with limited downside risk. 10. Pick your pitch and improve the probability of strong performance and limiting risk. 12

13 III. READY. SET. GO? WHAT DO I DO TO PREPARE FOR BPCI ADVANCED? So, what does a provider do to respond to BPCI Advanced? APPLY: Now that BPCI Advanced is announced any acute care hospital or physician group is eligible to apply for the BPCI-A program. The application process is thorough but will allow the applicant to have a no commitment period to assess the program, assess competitive strategies, and mine historic data to determine if the BPCI-A program can be successful. The BPCI Advanced application period is fast with a portal close date of March 12, 2018, so there is urgency in completing the application process. This will be the only application process until January of 2020, so those that delay will not have another chance for two (2) years. So commit the resources to complete the BPCI-A application by March 12. COMPLETE DATA REQUESTS (DRA): CMS commits to provide a rich set of data for evaluation and insight. The data is multiple years of historic claims and will be important to an effective assessment of the BPCI-A opportunities and episodes. The data is only received by completing a Data Request and Attestation Form (DRA). So as you complete your application also complete the data request. PLAN TO ANALYZE THE DATA, PICK YOUR PITCH, AND DETERMINE GO/NO GO: Once the application and data request are submitted CMS will notify applicants if they are accepted, will share datasets, and will provide target prices to applicants. The applicant has several months to assess the information and make a go-no go decision by August 2018 to participate (and complete a Participation Agreement). DHG Healthcare and its experts will be sharing more about BPCI Advanced as it is announced including webinars and other education forums. We have also developed tools to assist with applications, to manage and mine expected datasets, to evaluate episodic opportunities, to understand risks and success factors, and to make a go-no go decision on this unique voluntary payment model. For more information on our Ready. Set, Go? solution for BPCI-A you can respond to any of the contacts listed on the following page. BPCI ADVANCED IS COMING. READY. SET. GO? 13

14 BPCI ADVANCED (BPCI-A) // READY. SET. GO? CONTACT EDWARD STALL // PRINCIPAL MICHAEL WOLFORD // SENIOR MANAGER BILL HANNAH // PRINCIPAL STEPHEN KITTERMAN // MANAGER CHRIS MASONE // PRINCIPAL WALTER COLEMAN // MANAGER CRAIG TOLBERT // PRINCIPAL WANDA JUSTUS // PRINCIPAL DEBORAH HOLZMARK // CHIEF NURSING OFFICER

15 REFERENCES 1. CMS.Gov website. CMS proposes changes to Comprehensive Care for Joint Replacement Model, Cancellation of the Mandaotry Episodic Payment Models. Press release, page 1. August CMS.Gov website. Final Ruling. Press Release. December 20, This day in quotes website. Subtropic Productions LLP Source: Health Care Payment Learning & Action Network (2016). org/2016/10/u-s-health-care-system-is-progressing-in-the-adoption-of-alternativepayment-models-that-promote-quality-and-value/ 5. Source: The Lewin Group. CMS Bundled Payments for Care Improvement Initiative Models 2-4: Year 3 Evaluation & Monitoring Annual Report. October Source: accessed 1/8/18 7. The Science of Hitting, Ted Williams and John Underwood, Touchstone Publishers, April

16 ABOUT DHG HEALTHCARE DHG Healthcare is ranked by Modern Healthcare as the 10th largest privately-held healthcare consultancy and serves the industry with approximately 300 dedicated healthcare industry professionals across consulting, assurance and tax. DHG Healthcare s consulting business includes a distinctive capabilities and solutions portfolio sharply focused on critical business issues facing healthcare organizations in today s transformative environment. We have aligned our practice organizational structure and delivery framework to support transformational themes related to the achievement of Risk Capability which we believe is critical to the successful future of our healthcare clients Dixon Hughes Goodman LLP. DHG Healthcare. All rights reserved. / PN