Bundled Payments for Care Improvement Decisions THE FIRST IN DHG HEALTHCARE S SERIES ON BUNDLED PAYMENTS October 2014
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1 WHAT HEALTHCARE EXECUTIVES SHOULD CONSIDER IN Bundled Payments for Care Improvement Decisions THE FIRST IN DHG HEALTHCARE S SERIES ON BUNDLED PAYMENTS October 2014 Melinda Hancock PARTNER Melinda.Hancock@dhgllp.com Walter Coleman MANAGER Walter.Coleman@dhgllp.com Michael Wolford MANAGER Michael.Wolford@dhgllp.com This white paper is the first in DHG Healthcare s series on bundled payments. BPCI-accepted healthcare organizations that are making decisions on whether or not to accept Medicare risk starting in early 2015 will find answers to mission critical questions in this article. Healthcare organizations that have not yet applied for BPCI should use the information in this article to assess risk capability, organizational readiness, and strategic priorities. Introduction The Patient Protection and Affordable Care Act (ACA) empowered Medicare to create a national pilot program on payment bundling [to] improve the coordination, quality, and efficiency of [beneficiary] health. 1 After months of study, Medicare through the Centers for Medicare & Medicaid Innovation (CMMI) announced the Bundled Payments for Care Improvement (BPCI) initiative in th Congress of the United States. "The Patient Protection and Affordable Care Act." 23 March September 2014.
2 Since that time, BPCI has admitted more than 6,600 healthcare organizations to one of its four models of this voluntary initiative. 2 By nearly every measure, BPCI has quickly become the most popular Medicare accountable care program in use today. 3 Most of the BPCI-admitted healthcare organizations are facing a challenging decision in early 2015: Which BPCI, if any, will be transitioned into Phase II 4 to begin taking risk in April 2015? Colloquially speaking, are we a go or no-go for BPCI? On the surface, it appears to be a simple binary decision, but it is made more and more complex when considering the magnitude of the financial and strategic opportunity, reality of potential downside, intricate and seemingly rigid program rules and countless other factors. Nonetheless, this is a seminal moment for BPCI-admitted healthcare organizations as each must begin transitioning into risk or face disenrollment from BPCI. What Makes BPCI So Compelling To Healthcare Organizations? Since CMMI released BPCI enrollment figures in July, much attention has been given to the fact that many organizations applied for and were admitted to BPCI. Certainly participation has exceeded CMMI s expectations to such a degree that implementation timelines have been extended to allow for proper processing of such a large quantity of applications. As close observers of BPCI and advisors to several BPCI participants, the most likely reasons for strong participation in BPCI are rooted in data access, alignment opportunities, preparation for the future, and strong pressure from outside groups. RICH, OTHERWISE ELUSIVE DATA In spite of the hundreds of millions of dollars spent on healthcare IT platforms and analytic solutions, healthcare organizations have struggled mightily to make data-supported management decisions. Participation in BPCI fills a need for data on the Medicare population without purchasing any new systems by providing all Medicare claims for, both during a three-year baseline period (mid-2009 through mid-2012) and on a recurring monthly basis during Phase I and Phase II for at-risk. UNIQUE GAINSHARING AND ALIGNMENT OPPORTUNITY WITH PHYSICIANS Physician-hospital alignment can take many forms, but few alignment vehicles aside from BPCI allow healthcare organizations to 2 Centers for Medicare & Medicaid Innovation. BPCI Initiative : Details on the Participating Health Care Facilities. 31 July Excel Workbook. 3 Lazerow, Rob and David Clain. "BPCI surpasses MSSP as the largest Medicare accountable care program." The Advisory Board Company Daily Briefing, 1 February CMMI s term Phase II refers to the status of an Episode as risk-bearing. By comparison, Phase I is the initial period of participation in which participants prepare for implementation and assumption of financial risk. (Centers for Medicare & Medicaid Innovation)
3 gainshare other parts of Medicare revenue. Participation in BPCI includes an opportunity to appropriately share Medicare savings with physicians and other providers during the episode of care which encourages coordination of care among otherwise uncoordinated healthcare entities. BPCI also allows for separate internal cost sharing arrangements between hospitals and physicians that can be used to drive additional efficiencies and incentives. Many organizations are applying the same principle to post-acute care partnerships for the benefit of Value-Based Purchasing (VBP) scores and narrow network contracting. OPTIONAL PREPARATION FOR ACCOUNTABLE CARE The healthcare marketplace has been moving toward greater provider accountability for decades. The shift to accountable care will happen at different paces in different geographies, but it is nearing a national tipping point. Forward thinking BPCI applicant organizations are enrolling in BPCI to learn valuable accountable care strategies before commercial payer pressures mandate more rapid shift of risk to the providers. THIRD-PARTY CONVENERS BPCI s organizational architecture allows for both risk-bearing Awardee Conveners and non-risk-bearing Facilitator Conveners to participate with healthcare organizations. Some for-profit Convening Organizations have enrolled hundreds of healthcare organizations, though very few 5 have transitioned from Phase I to Phase II as of July We anticipate a small percentage somewhere in the range of 5% to 15% of admitted will transition to Phase II; the transition rate for healthcare organizations affiliated with third-party Awardee Conveners will likely be even smaller given their lack of direct control over clinical and operational changes. Convening Organizations and other outsourced administrative service providers are selling focused and comprehensive BPCI services both of which can provide significant value to healthcare executives. However, there is a fine line between seeking simplicity and missing financial, strategic, and growth opportunities as a result of comprehensive outsourcing. Further, as markets pressure providers to take more risk, healthcare organizations will need to further outsource risk capabilities or duplicate the outsourced risk capabilities in-house. The best third-party Conveners will work with healthcare executives and managers to collaboratively build a sustainable approach to BPCI and other episodic bundling opportunities. Stage 1: Applying for BPCI To date, CMMI has required healthcare organizations interested in BPCI to submit an application during a CMMI BPCI Open Period. There have been two such Open Periods, with the most recent being February 14 through April 18, Generally speaking, BPCI application has become more straightforward and simple over time. The recent 2014 Open Period application was far more streamlined than the original application. Given this low barrier to entry, the advantages of applying are substantial: No BPCI Application Fees or Deposits. The only cost of applying for BPCI is time spent. Organizations May Withdraw At Any Time Without Penalty. There is no formal or informal CMS or CMMI disincentive to applying and withdrawing later. 5 Fewer than 1% of all admitted in Models 2, 3 or 4 have transitioned to Phase II as of July 31, 2014.
4 Most Models 2, 3 and 4 Organizations Applied for All Applying for just one Episode, all 48, or somewhere in between requires approximately the same amount of effort. At the time of application for BPCI, healthcare organizations must ask several questions. The answers to these questions will dictate the breadth of the BPCI opportunity, how risk will be attributed, and to whom communication will flow. Which should I include in the application? DHG Healthcare advised clients to apply for all 48 ; organizations may narrow the scope of implementation after receiving and analyzing the data. If my healthcare organization has multiple sites of care, which of them should be included? Generally speaking, healthcare organizations should apply for all sites of care. CMMI distinguishes healthcare organizations by the CMS Certification Number (CCN), so multiple sites using the same CCN must be included together. As there is both no downside to applying for multiple facilities and minimal incremental effort in the application stage, we recommend applying for all possible sites of care. For which model(s) should we apply? Some types of healthcare organizations may choose which of the four BPCI models for which it will apply. Nationwide application volume suggests that Models 2 and 3 are vastly more popular than Models 1 and 4. We would tend to agree with these national trends; the combination of financial opportunity and ease of implementation clearly favor Models 2 and 3. What organization would take risk in BPCI? Third-party Conveners, administrative service organizations or clinically integrated networks may take risk for. The risk-bearing entity must have either an Employer Identification Number (EIN) or Tax Identification Number (TIN), but does not need to be a healthcare organization with a National Provider Identifier (NPI) or CCN. Who will be the organization s primary contact person for BPCI? This person will receive mostly communication from CMMI and BPCI administrators. We often see personnel such as COO, CFO, strategy officer, or managed care officer listed as the primary contact. There is no universally perfect position to coordinate BPCI; regardless of title the person should have broad organizational perspective, power and authority to implement change, and a clinical orientation to understand the details of care delivery. Fig 2 THE FOUR BPCI MODELS Model 1 Model 2 Model 3 Model 4 Model Name Retrospective Acute Care Hospital Stay Only Retrospective Acute Care Hospital Stay plus Post- Acute Care Retrospective Post-Acute Care Only Acute Care Hospital Stay Only Scope of Entire Hospital Up to 48 Up to 48 Up to 48 Services Included in All Part A services paid as part of the MSDRG All nonhospice Part A and B services during All nonhospice Part A and B services during All nonhospice Part A and B services (including the 6 At least 91% of Models 2, 3, or 4 organizations applied for all 48.
5 payment the initial inpatient stay, post-acute period and readmissions the postacute period and readmissions hospital and physician) during initial inpatient stay and readmissions Payment Retrospective Retrospective Retrospective Prospective BPCI Discount 0.5%, and increasing over time 2-3% 3% % Number of Admitted BPCI Healthcare Organizations as of 7/31/ ,055 4, Note: Model 1 is on a different implementation timeline than Models 2, 3 and 4. Answering the preceding five questions will give an organization the technical guidance to complete the BPCI application comprehensively. This would check the correct boxes for BPCI application, but will not lead to absolute success unless the applicant seeks to not only maximize its strategic and financial opportunities but also learn from the valuable and unique experiences of BPCI. Consider these questions that will help shape the future direction and value of the endeavor: What is the long-term strategy for entering at-risk contracts? The answer to that question may impact which entity should serve as the Convener on the BPCI application. This is one of the great challenges with any build or buy decision: if a healthcare organization outsources BPCI to a third-party Convener, its success in BPCI may not make the organization riskready for the future. What alignment initiatives (e.g., clinical co-management, medical directorships) are currently underway that may be enhanced through BPCI participation? Many healthcare organizations are using BPCI as a means to enrich existing relationships and build new ones. What is the strategic vision for services at the healthcare organization? And further, how can healthcare services be improved through future risk-sharing agreements? What are my competitors doing regarding BPCI? Delaying application may give precedence to competitors in this program and yield greater opportunities to competitors. Stage 2: Risk Capability and Bundled Payments Increasingly, all members of the provider community are being challenged to accept more value-based payments including bundled payments. In essence, this increase in reliance on value-based payments is a direct increase to the risk being absorbed by the provider. Whether through the mandatory Medicare programs, voluntary programs or the commercial products, each decision to accept a value-based payment can be boiled down to an assessment of a readiness of risk capability.especially with bundled payments. As the healthcare industry continues to transform and evolve, the future survival and success of providers will depend on the extent to which they can become risk capable by developing the capabilities to manage new financial and performance-based risk. There are three key areas of assessment in seeking a provider s risk capability: Business Intelligence, Clinical Enterprise Maturity and Revenue Transformation. Providers should perform a gap analysis of each area to understand the opportunities for improvement and necessary action plans to be ready to maximize and operationalize the value-based programs.
6 What should you be looking for regarding Business Intelligence? Providers should be taking full inventory of all data-based systems that support patient management and care protocols across the care continuum. Is the provider able to assess the spend and the costs of the care of patients across that continuum to the level necessary to manage the patient in the right place at the right time in the most efficient manner with appropriate monitoring? This type of data also includes understanding all discharge trends and current post-acute care performance as this is a key contributor to financial success in BPCI. What do you look for when assessing Clinical Enterprise Maturity? Key considerations are around the formal and informal networks that exist along the continuum as well as the patient care delivery methods. What considerations are key for Revenue Transformation? Initial considerations should be around how the provider is performing with other value-based programs, particularly those that involve readmissions, hospital complications, and reducing the post-acute care spend, such as Medicare Spend per Beneficiary. For example, with hospitals, the performance of the mandatory programs of Value- Based Purchasing and Readmissions are leading indicators for competencies with bundled payments. When gaps are identified in these three areas of risk capability, the next decision is whether to fill those gaps through building, partnering or buying. Each market is unique and therefore there are numerous options in the bundled payment arena due to new technologies and a variety of partners in or entering the market. Stage 3: Data Analytics and Decision Support One of the most compelling benefits of participating in BPCI is the data provided by CMMI to all successful applicants for admitted : Baseline Files and Monthly Claims Files. While Monthly Claims Files have absolute value, Baseline Files provide the greatest value when making decisions on transitioning into Phase II for risk bearing. BASELINE FILE The Baseline File (which is actually a series of files requiring advanced data interpretation) provides the best opportunity for historical data regarding the admitted. A broad spectrum of data analyses and reports can be derived from this data set, so broad that it may appear limitless and daunting. DHG Healthcare has experienced success analyzing based on nine reports listed below: Target Price Calculation Discharge Trends Core Measurements, such as Readmission rate, Mortality rate, ED Visit rate, and Complication rate Service Type and Cost Drilldown Readmission Summary Readmission Detail SNF, HHA, IRF, LTCH Summary Comparison of Physicians Utilization and Outcomes Physician Part B Distribution Ultimately, historical performance measured in nine reports can help healthcare organizations determine which represent the best BPCI opportunities. Once organizations are prepared with relevant analyzed data on, executives must decide which (if any) to transition from Phase I to Phase II. Under recently published guidelines from CMMI, each admitted healthcare organization (identified by a unique CCN) must transition at least one Episode to Phase II by April 1, 2015 to maintain eligibility of other ; failure to do so will result in withdrawal from BPCI.
7 Lessons Learned in BPCI Decision Making DHG Healthcare is energized by the significant number of healthcare providers that are seizing the BPCI opportunity to advance their strategies to deliver high quality healthcare at the most affordable cost. Many providers have achieved financial reward, competitive advantage, and lasting organizational change through BPCI and other initiatives like it. However, the process to achieve the aforementioned success is not easy, and organizations should learn from others experiences along their paths to success. Some of the lessons we have learned in working with our clients include the following: Managing and analyzing Baseline Files is not a function with which most provider-based healthcare organizations have experience. Simply put, these are not your everyday Excel Workbooks. Not only are the files technically complex, but also the breadth of potential analyses can be debilitating. It will be critical to partner with healthcare data analytics experts to avoid, at best costly time delays and, at worst inaccurate data leading to suboptimal decisions. Organizing the BPCI effort around the right implementation structure is fundamental to maximizing early success. Identifying the right team of operational, financial, clinical, and external executives with the right combination of experience and sponsorship from the highest levels of the organization is critical. Given the short period of time between receiving Baseline Files and making decisions on Phase II transitions, efficiency of decision making has and will be a differentiating factor for successful organizations. Physicians are the centerpiece to the BPCI success story. Healthcare organizations that have long been their own individual silos are being called to work together in BPCI. It will come as no surprise that physicians are the quarterbacks of clinical care; their efforts to coordinate care and reduce Medicare spending are material. Sharing data with and/or involving physicians in Episode decision making is a best practice and should lead to more seamless implementation. DHG Healthcare has experience helping several BPCI organizations involve physicians in early decision making, which has led to more appropriate patient discharges, fewer readmissions, better post-acute utilization, and effective implementation of pharmacy programs. The decision to transition to Phase II is only the beginning of a long journey of implementation. For good reason, healthcare organizations admitted to BPCI are focused on data and making decisions on which to move to Phase II. However, once those decisions are made, CMMI requires significant time be spent to document future care plans, safeguard against inappropriate medical practices, prepare secondary repayment sources, and several more documentation requirements. DHG Healthcare s next article in its Bundled Payments series will focus on implementation, education, patient engagement, and ongoing program management. The article will be available in November 2014; send an to bundledpayments@dhgllp.com for a free advanced copy.
8 The DHG Healthcare team of BPCI professionals is eager to share their lessons learned and connect organizations that are just beginning their BPCI journeys with organizations who have already advanced their strategies. Taking advantage of lessons from others is fundamental to success in this rapidly changing healthcare environment.
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