OSHE Panel Discussion
THE FINANCIAL IMPACT OF HEALTH REFORM
Presented By:
Dan Smith, FHFMA, CPA
Vice President, Chief Financial Officer
Samaritan Health Services
Survey Of Finance Leaders Top Concerns*
Top Concerns:
1.
Formulating a financially viable Accountable Care
strategy
2.
Understanding the impact of up-coming payment
reforms (e.g. Value Based Purchasing)
3.
Risk-based contracting (e.g. bundled payment)
* Health Care Advisory Board: www.advisory.com
FORMULATING A FINANCIALLY VIABLE ACO STRATEGY
Steady Progression to Accountable Care
Provider Cost Accountability
The Challenge:
How best to compete in the ACO era while protecting
hospital profitability in the transition to total cost
accountability
PAYMENT REFORM IS HERE
Value-Based Purchasing (VBP) FINAL RULE ISSUED ON 4/29/2011
Mechanics:
1.
Payment withheld each year on increasing scale over next five
years

2.
Applies to base operating DRG payment
Quality performance assessment


Will undergo quality measure assessment
across two domains:
 Process of care (12 measures)
 Patient experience (8 measures)
Quality measures combined to form Total Performance Score (TPS)
Redistribution of payment
3.



Payment directly proportional to TPS score
The bigger the TPS  bigger the incentive payment
Budget neutrality: ½ of hospitals earn back more than withhold, others earn
back less
A 3-DOMAIN SCORING SYSTEM FOR QUALITY
MEASUREMENT
Value-Based Purchasing (VBP)
1.
Process of Care (70%)
Score based on
Achievement OR Improvement
12 Measures




2.
Acute Myocardial Infarction (2)
Pneumonia (2)
Heart Failure (1)
Surgical Care Improvement (7)
Experience of Care (30%)
8 HCAHPS Survey Measures
3.
Score based on
Achievement OR Improvement
AND Consistency
Outcomes (FY 2014 Payment)
13 Measures
 Mortality Measures (3)
 AHRQ Patient Safety Indicators(PSIs), Inpatient
Quality Measures (IQIs) Composite Measures (2)
 Hospital Acquired Condition Measures (8)
KEY DATES FOR VBP IMPLEMENTATION
Value-Based Purchasing (VBP)
Still time available to prepare for performance periods!
July 1, 2009–Mar 31, 2010
Clinical Process &
Patient Experience
Baseline period
July 1, 2011–Mar 31, 2012
Clinical Process &
Patient Experience
Performance period
July 1, 2011 – June 30, 2012
30-Day mortality measures for
FY2014 VBP payments
Performance period
A PROACTIVE PURSUIT TO RISK-BASED CONTRACTING
BUNDLED PAYMENT
Definition:

Provides a single global fee covering hospital &
physician services for 1)discrete hospitalization or
2)care episode
CMS- Acute Care Episode (ACE) 3-year
demonstration under way



5 hospitals participating
Bundles payment for cardiac & orthopedic DRGs
Likely to expand bundled payment through national
pilot in 2013: EPISODIC BUNDLING
KEY DATES FOR BUNDLED PAYMENT
5 participants selected by CMS
to begin 3-Year Demonstration
bundling hospital & physician
payments for inpatient acute
care
Bundled Services
Pre-Acute Care
Inpatient Acute Care
30 Days Post Acute Care
30-Day Readmissions
Medicare will launch expanded
Bundled Payment Pilot, a 3-year
program expanding bundled
payment across entire episode
of care
Acute Care Episode
Demonstration (ACE)
Medicare to expand Bundled
Payment program if pilot
successful before Jan. 1, 2016
2013 National Pilot on
Payment Bundling
KEY DATES FOR BUNDLED PAYMENT
5 participants selected by CMS
to begin 3-Year Demonstration
bundling hospital & physician
payments for inpatient acute
care
Pre-Acute Care
3 Days Prior to
inpatient stay
Medicare will launch expanded
Bundled Payment Pilot, a 3-year
program expanding bundled
payment across entire episode
of care
Inpatient Acute
Care
30 Days Post
Acute Care
Episode of Care
Medicare to expand Bundled
Payment program if pilot
successful before Jan. 1, 2016
30 Day
Readmissions
A PROACTIVE PURSUIT TO RISK-BASED CONTRACTING
BUNDLED PAYMENT
Risk-Based Contracting may have financial
benefits if you currently have:
High implant & device costs
 High length of stay
 High variation in care processes
 Weaker relationships with Specialists
 Case Rate/DRG reimbursement for Commercial
Patients (spill-over effect)

A PROACTIVE PURSUIT TO RISK-BASED CONTRACTING
BUNDLED PAYMENT
Key Factors Driving Bundled Payment Profitability
Cost
Physician
Reduction Gainshare
Price
Discount
Program
Costs
Spillover
Effects
Hospital
Gainshare
Market
Share
Gains
Profits
Losses
COST ACCOUNTABILITY: FOCUS ON THE CARE PROCESS
Medicare Margin Analysis
Service Line
Orthopedics
General Medicine
General Surgery
Cardiac Services
DRG
481
193
330
291
DRG Description
HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT W CC
SIMPLE PNEUMONIA & PLEURISY W MCC
MAJOR SMALL & LARGE BOWEL PROCEDURES W CC
HEART FAILURE & SHOCK W MCC
Medicare
Margin %
-26.7%
-21.7%
-14.3%
-9.4%
HEALTH REFORM IS SETTING US ON A NEW PATH
Strategic Implications:

Persistent downward reimbursement pressure

Cost containment an ongoing imperative to balance
reimbursement pressure

A new focus on productivity (not wages) to control
cost

Manage patient mix with shift to greater percentage
of Medicare patients
FOCUS ON FUNDAMENTALS
Success under Reform will
require:




Quality Improvement
Standardized Care Processes
Cost Control
Robust Reporting
Operations
IT
Finance
Quality
Care
Process
QUESTIONS?
ANSWERS?