New Payment Models under Health Reform: Accountable Care

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NEW PAYMENT MODELS UNDER HEALTH REFORM: ACCOUNTABLE CARE ORGANIZATIONS, MEDICARE SHARED SAVINGS AND HEALTH CENTERS

National Center for Health in Public Housing 2012 Health Care for Residents of Public Housing National Training Conference P r e s e n t e d b y: Scott D. Morgan, Director May 2012

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WHY ARE WE HERE? HEALTH REFORM OBAMACARE GOVERNMENT TAKEOVER

SINGLE PAYOR SYSTEM ACA

THE PATIENT PROTECTION AND AFFORDABLE CARE ACT

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INTRODUCTION AND BACKGROUND  There have been many changes in the way health care is delivered in the United States.  1965 – Medicare and Medicaid programs created.  Medicare, a public insurance program paid for by the Federal government, was developed to cover costs for the elderly and disabled populations.  Medicaid, a public insurance program paid jointly by the Federal and State governments, was developed to cover costs for the poor.

 1965 – First Community Health Center funded by the Federal government.  1973 – Federal law passed for an experimental program to create health maintenance organizations (HMOs), a proposal backed by corporations alarmed by rising healthcare costs.  1997 – State Children’s Health Insurance Program (CHIP) created to increase funds paid to states in order to expand coverage of low-income children.

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INTRODUCTION AND BACKGROUND  However, in 2010 a historic Federal law was passed that introduced sweeping changes to the health care industry. The way health care is delivered today will look drastically different by 2014.  Community Health Centers/Federally Qualified Health Centers (FQHCs) and other providers are faced with the daunting task of sifting through the multitude of reform efforts to assess whether the initiatives create an opportunity for growth or a threat to their existence, and develop a strategy to both survive and thrive during these new times.

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OVERVIEW–NATIONAL HEALTH REFORM  $11B in new, dedicated funding for CHCs over the next 5 years  $9.5B to expand operational capacity to serve nearly 20 million new patients  Total annual CHC funding, in addition to existing discretionary funding, to increase from $2.19B to $5.79B  $1.5B dedicated to capital needs of the CHCs

 Medicaid coverage expansion 133% of FPL  Creation of health insurance exchanges with the requirement that FQHCs get paid no less than their FQHC Medicaid PPS rates*  Creation of a “new” FQHC Medicare Prospective Payment System  Funding for CHC-based teaching/residency programs  Medicare and Medicaid Accountable Care Organization (ACO) and Patient-Centered Medical Home (PCMH) demonstration projects

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HEALTH CARE SYSTEM

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YOUR NEW HEALTH CARE SYSTEM

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OVERVIEW OF HEALTH CARE SYSTEM What is a health care system? A health system consists of all organizations, people and actions whose primary intent is to promote, restore or maintain health. This includes efforts to influence determinants of health as well as more direct healthimproving activities. A health system is therefore more than the pyramid of publicly owned facilities that deliver personal health services. It includes, for example, a mother caring for a sick child at home; private providers; behaviour change programmes; vector-control campaigns; health insurance organizations; occupational health and safety legislation. It includes inter-sectoral action by health staff, for example, encouraging the ministry of education to promote female education, a well known determinant of better health. - The World Health Organization

WHO, 2007. Everybody's business. Strengthening health systems to improve health outcomes: WHO’s framework for action. Available on http://www.who.int/healthsystems/strategy/everybodys_business.pdf

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OVERVIEW OF HEALTH CARE SYSTEM What is a health care system?  Organization of people and resources to deliver health care services to meet the health needs of various types of target populations such as: the Elderly, Children, Developmentally Disabled, HIV/AIDS, etc…  Goal is to provide quality health care services at a reasonable cost that achieves good health outcomes

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BASIC COMPONENTS OF A HEALTH CARE SYSTEM Patients

Providers

Payers

Suppliers

• People receive medical care or treatment • “Utilizers” of health care services • • • • •

Federally Qualified Health Centers (CHCs) Hospitals Ambulatory Care Outpatient Facilities Private Physician Groups Long Term Care Facilities/Nursing Homes/Home Health

• Public Insurance Programs: Medicaid, Medicare, VA & CHIP • Private Insurance: BC/BS; Aetna; self-insured employers • Self Pay / Uninsured

• Pharmaceutical and Drug Manufacturers • Health Devices and Equipment

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OVERVIEW OF THE HEALTHCARE INDUSTRY Payors

Hospitals Continuing Care Providers

Ambulatory Care Providers

Patients

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HOW DOES IT WORK? Financing of U.S. Health Care System

 The financing of health care centers around two streams of money:  the collection of money for health care (money going in), and  the reimbursement of health service providers for health care (money going out).

 In the United States, the responsibility for these two functions is shared among private insurance companies and the government(s), both of which are known in policy terms as “payors.” As such, the United States can be thought of as a “multi-payor” system.

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FINANCING MODEL Individuals/ Business

Direct or Out-Of-Pocket Payments

Taxes

Providers

Medicaid; Medicare; S-CHIP, VA

Government Premiums Gov’t Employee Premiums

Provider Payments

Private Insurers The government also uses tax dollars to pay private insurers a health insurance premium for federal employees and other public employees.

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BASIC FACTS ON U.S. HEALTH CARE 

Compared to other industrialized countries, the United States spends the most on health care. Approximately 23% or $805 Billion 

Medicare spending was approximately 15% of the Total Federal Spending ($3.5 Trillion) in FY 2010. This equates to $525 Billion.



Medicaid/CHIP spending was approximately 8% of the Total Federal Spending ($3.5 Trillion) in FY 2010. This equates to $280 Billion.



Total expenditures were over $2.5 Trillion dollars over the last 2 years. Most of these expenses were related to the pharmaceutical/drug industry and Inpatient acute hospital care



More than 45 Million people have no health insurance or uninsured



We rank 42nd for life expectancy and 72nd for overall health and last in the quality of health care among similar countries

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Country Rankings 1.00–2.33

WHY HEALTH REFORM?

2.34–4.66 4.67–7.00

AUS

CAN

GER

NETH

NZ

UK

US

OVERALL RANKING (2010)

3

6

4

1

5

2

7

Quality Care

4

7

5

2

1

3

6

Effective Care

2

7

6

3

5

1

4

Safe Care

6

5

3

1

4

2

7

Coordinated Care

4

5

7

2

1

3

6

Patient-Centered Care

2

5

3

6

1

7

4

6.5

5

3

1

4

2

6.5

Cost-Related Problem

6

3.5

3.5

2

5

1

7

Timeliness of Care

6

7

2

1

3

4

5

Efficiency

2

6

5

3

4

1

7

Equity

4

5

3

1

6

2

7

Long, Healthy, Productive Lives

1

2

3

4

5

6

7

$3,357

$3,895

$3,588

$3,837*

$2,454

$2,992

$7,290

Access

Health Expenditures/Capita, 2007

Note: * Estimate. Expenditures shown in $US PPP (purchasing power parity). Source: Calculated by The Commonwealth Fund based on 2007 International Health Policy Survey; 2008 International Health Policy Survey of Sicker Adults; 2009 International Health Policy Survey of Primary Care Physicians; Commonwealth Fund Commission on a High Performance Health System National Scorecard; and Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009).

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FEDERAL HEALTH CARE REFORM

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YOUR NEW HEALTH CARE SYSTEM

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PATIENT PROTECTION AND AFFORDABLE CARE ACT (PPACA OR ACA)  Health reform policy objectives  Improve the health status of our country’s citizens  Reduce overall health care spending

 On March 23, 2010, President Obama signed comprehensive health reform – The Patient Protection and Affordable Care Act – into law.

 ACA builds upon our current health insurance system and focuses on provisions to:  Expand insurance coverage,  Control health care costs, and

 Improve the health care delivery system.

 ACA will cost the Federal government $938 Billion over 10 years.  ACA will save the Federal government $124 Billion over 10 years.

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PATIENT PROTECTION AND AFFORDABLE CARE ACT (PPACA OR ACA) Basic principles for Health Reform  Reduce long-term growth of health care costs for businesses and government.

 Protect families from bankruptcy or debt because of health care costs.  Guarantee choice of doctors and health plans.  Invest in prevention and wellness.  Improve patient safety and quality care.  Assure affordable, quality health coverage for all Americans.  Maintain coverage when you change or lose your job.  End barriers to coverage for people with pre-existing medical conditions.

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SELECT HEALTH REFORM INITIATIVES FOR CHCs  ARRA (Economic Stimulus) Funding  $2B of Stimulus funding awarded to CHCs for 2009–2011  Significant Medicare and Medicaid funding to begin to flow in 2010 for the implementation of Electronic Health Records (EHRs)  Evolution of “Meaningful Use” of EHRs and health information exchanges

 Federal Health Reform (ACA)  Coverage expansion through health insurance exchanges and increase in Medicaid eligibility thresholds  CHCs to receive $11B in funding over 5 years to expand access  $9.5B - operations / $1.5B - capital expansion

 Heightened compliance activities around fraud and abuse  Payment reform – creating new methodologies for paying for the provision of health care (“value-based” purchasing, PCMHs, ACOs)

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SELECT ACA INITIATIVES TO TEST PROVIDER OPERATIONS 

Certain ACA initiatives serve as pressure points requiring providers to “re-envision” their operations to thrive in a post-reform environment (e.g., Medicare Shared Savings and Accountable Care Organizations)

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OVERVIEW – PAYMENT REFORM  Development of ACOs–composed of hospitals, CHCs, physicians and/or other providers that accept responsibility for all or most of the care that enrollees need  Medicare Shared Savings Program  PCMH–ACOs to undergo the necessary practice redesign to become effective PCMHs  Patient’s selection of a primary care provider will direct insurer payments to the ACO with which the patient’s primary care physician is affiliated  Use of Pay-For-Performance (P4P) incentives to ensure appropriate access to care, and encourage quality improvement and care coordination among providers  Global payments will be adjusted to reflect patient demographics and health conditions

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OVERVIEW – PAYMENT REFORM Payment Mechanisms         

Fee-for-service Wraparound Capitation Fee-for-service add-ons PMPM add-ons Risk adjusted add-ons Shared savings Care coordination (PCMH/Health Homes) Pay for performance (P4P - cost and outcome)

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OVERVIEW – PAYMENT REFORM Health System Structure (Restructuring)     

Individual Provider Group Practice Patient Centered Medical Home (PCMH) Accountable Care Organization (ACO) Health Home

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WHAT IS AN ACCOUNTABLE CARE ORGANIZATION?

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WHAT IS AN ACCOUNTABLE CARE ORGANIZATION?

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ACO FINANCING/GOVERNANCE  Who “owns” the ACO? (or Health Home)  Board representation

 Internal payment distribution  Payment for services  Shared savings/performance incentives

 Patient attribution (MSSP model)

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ACO FINANCING/GOVERNANCE

Primary Care Physicians

Specialty Physicians

Outpatient Hospital Ambulatory Surgery

Acute Care: Inpatient

Long Term Acute Hospital

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Rehab Hospital

SNF

Home Health Care

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MANAGING GLOBAL PAYMENTS  Global payments prospectively compensate providers for all or most of the care that their patients require over a contract period, usually estimated from past cost experience and an actuarial assessment of future risk  Providers are at “financial risk” for their clinical performance and coordination of care (“performance risk”) for patient-level health care for a specified period of time  “Insurance risk”(the occurrence of health problems over which providers do not have control) to be covered through:  Risk-adjustments to global payments to reflect the underlying health conditions of patients  Carriers might also develop stop-loss or risk corridor arrangements with providers

 In the global payment environment, CHCs will need to manage the budget of services for which they have assumed the responsibility and are “at-risk”

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MANAGING GLOBAL PAYMENTS Sample Construct of a Global Payment Rate: Expected Utilization

Service Description

Unit Cost

Cost Per Patient Per Year

Inpatient care

1

$320 per discharge

Specialty Care

1

$100 per visit

100

Primary Care

3

$65 per visit

195

Laboratory

8

$10 per lab test

80

Radiology

4

$25 per x-ray

100

Pharmacy

5

$25 per script

125

PCMH Services

$

320

120

Patient Transportation

6

Administration/HIT

$10 per trip

60 100

TOTAL

$ 1,200

In this example, the ACO would be paid $100 PMPM to cover all health care services provided to the patient! We turn expertise into results.

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MANAGING PCMH PAYMENTS  There are various payment models currently in demonstration across the country reimbursing providers for the PCMH     

Enhanced Fee-for-service payment PMPM payments P4P payments Bonus payments Shared Savings

 Regardless of the payment model, CHCs participating in PCMHs need to understand the “true” cost of operating a PCMH  This cost analysis must include the practice’s service capability (e.g., based on the NCQA PPC-PCMH recognition process)  Physician and non-physician work that falls outside of a face-to-face visit  System infrastructure (e.g., health information technologies)

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MANAGING PCMH PAYMENTS Components of PCMH “Covered Services”: Resource Element

Description

Physician Work

Physician care management and care coordination work that falls outside of the face-to-face visit

Clinical Staff Work

Additional staff required to provide care coordination and other services required by the NCQA-PCMH

Medical Supplies

Cost of health education brochures to patients

Medical Equipment (HIT)

Operating costs of required health information technology including staff time

Malpractice Insurance

Cost of additional malpractice, if appropriate

NOTE: The “Resource Elements” are consistent with those utilized by the American Medical Association/Specialty Society RVS Update Committee (RUC) for consideration with the development of the Medicare Medical Home Demonstration.

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KEYS TO SUCCESS IN GLOBAL AND PCMH PAYMENTS  Must completely understand the “inputs” into the construction of the rates  By first understanding “covered services:  Global payments – primary care services, PCMH services, specialty services, administration/health information technology, other?  PCMH payments – care management services, additional clinical staff, health information technology

 Then must understand the cost drivers for these services:  Global payments – utilization monitoring, cost per unit management  PCMH payments – drivers of care coordination services, cost per unit management

 Design management reporting capabilities to manage utilization and costs  Financial success will be achieved by patient utilization management and improved cost efficiencies

 Health information technology will be critical

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KEYS TO SUCCESS IN GLOBAL AND PCMH PAYMENTS  Shift from a visit maximization model to a care coordination model.  Manage patient utilization, by type of service, on a PMPY basis

 Still need to manage provider productivity levels, but new focus will be to manage a patient panel  Need to expand the cost per unit systems we have in place:  Use of a cost-based charge structure  Managing cost on a PMPY basis

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QUESTIONS

Scott Morgan, Director J.H. Cohn Healthcare Industry Practice 646.254.7480 [email protected]

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New Payment Models under Health Reform: Accountable Care

NEW PAYMENT MODELS UNDER HEALTH REFORM: ACCOUNTABLE CARE ORGANIZATIONS, MEDICARE SHARED SAVINGS AND HEALTH CENTERS National Center for Health in Publ...

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