Carolinas HealthCare
Towards an Economics of Value
©2013 THE ADVISORY BOARD COMPANY
Making a Case For Quality
Eric Fontana, Practice Manager, Data and Analytics Group
analytics@advisory.com
2
Toward an Economics of Value
Adapting to New Rules of Competition
Description
Key Success
Factors
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Competitive
Dynamics
Inpatient
Performance
Metrics
Critical IP
Infrastructure
Health System Strategy, c. 2003
Health System Strategy, 2013-2023
“Price-Extractive Growth”
“Value-Based Growth”
Grow by being bigger: Leverage market dominance
to secure prime pricing, network status
Grow by being better: Leverage cost, quality, service
advantage to attract key decision makers
• Expand market share
• Strengthen service lines
• Exert pricing leverage
• Solidify referrals
• Secure physicians
• Increase utilization
• Expand covered lives
• Compete on outcomes
• Minimize total cost
• Assemble network
• Offer convenience
• Expand access
• Service line competition
• Centers of excellence
• Referral channels
• Physician loyalty
• Comprehensive care
• Patient engagement
• Clinical quality
• Service quality
• Discharges
• Service line share
• Fee-for-service revenue
• Pricing growth
• Occupancy rate
• Process quality
• Readmission rates
• Outcomes quality
• Cost per discharge
• Patient satisfaction
• Guideline
adherence
• Inpatient capacity
• Outpatient imaging
centers
• Clinical technology
• Ambulatory surgery
centers
• EBP Infrastructure
• Care management staff
and systems
• IT analytics
• Post-acute care
network
Source: Physician Executive Council interviews and analysis.
3
Delivering Next-Generation Acute Care
Evolution of Acute Care Performance Standards
Workshop of Choice
Targeted Quality
Improvement
• High-Performance
OR and ED
• Proactive, effective
quality department
• Streamlined admission
and discharge processes
• Productive hospitalist
program
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• Top-tier performance on
publicly reported metrics
Baseline Expectations
Next-Generation Acute
Care
• Comprehensive
infrastructure supporting
evidence-based practice
• Patient-centered care
• Integration with crosscontinuum care
management
Emerging Priorities
4
EBP the Key to All Value-Based Payment Models
Population Health Management
Focus: Utilization Management
• Chronic Care Management
Bundled Pricing
• Disease Prevention
Focus: Efficiency
• Throughput
• Supply Management
• Contract Negotiation
Pay for Performance
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Focus: Quality Improvement
• Adherence to
Evidence-Based
Practice
• Reduced Readmissions
• Patient Experience
Degree of Provider Cost Accountability
Source: Advisory Board and Physician Executive Council interviews and analysis.
5
Real-World Consequences for Poor EBP Adoption
LA Times, 2011
Sepsis Guidelines Effective,
but Underutilized
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25%
From 2000-2010.
Nearly 70,000 Americans
die needlessly each year
because they are not
given optimal heart failure
therapy
Mortality reduction
with introduction of
sepsis bundle
19%
Physicians who follow
pediatric sepsis guidelines
17%
Increase in sepsis
inpatient hospital
death rates in the past
decade1
Physicians have been slow to
implement many of the procedures
called for in the guidelines…
Source: Paul R, Neuman MI, Monuteaux MC, Melendez E, “Adherence to PALS Sepsis Guidelines and Hospital Length of Stay,” 2012,
Pediatrics; Los Angeles Times, http://articles.latimes.com/2011/jun/06/news/la-heb-heart-failure-06062011, June 6, 2011;CDCNCHS,
National Hospital Discharge Survey, 2000-2010; Lisa Stoneking and Kurt Denninghoff, Sepsis Bundles and Compliance with Clinical
Guidelines, 26, 3, Journal of Intensive Care Medicine, 2011; Physician Executive Council interviews and analysis.
6
Inpatient Medicare Margins Remain Under Pressure
Quality Based Payment Contributes to Price Deceleration
Four Forces Shaping Future Margins
Medicare Acute Inpatient PPS Margin
2002-20111
6.6%
Decelerating
Price Growth
Continuing Cost
Pressure
Shifting Payer
Mix
Deteriorating
Case Mix
2.4%
-0.3% -0.5%
-0.4%
-2.2%
-2.3%
-1.7%
-3.7%
-4.8%
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2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
The Medicare Breakeven Project
• www.advisory.com/MedicareBreakeven
• Ongoing initiative to support margins in an
era of increasing financial pressures
• Available to all Health Care Advisory Board
members at no extra cost
1) Margins calculated as revenue minus cost divided by revenue. Data based on Medicare-allowable costs and
exclude critical access hospitals. Includes services covered by the acute care inpatient PPS
Source: “Health Care Spending and the Medicare Program” June 2012, MedPAC, Accessed 0917-2013. http://www.medpac.gov/documents/Jun13DataBookEntireReport.pdf, Advisory Board
Analysis
7
Three Programs You Need to Know
Financial Incentives Take More of a Stick Than Carrot Approach
Comparing Major Pay For Performance Programs
Discharge
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30 day Readmit
Maximum Penalty
FY 2013 – 1%
FY 2014 – 2%
FY 2015 onward – 3%
1% Penalty for top
quartile of HACs
from FY 2015
Hospital Readmissions
Reduction Program
Hospital Acquired Condition
Program
Hospital Inpatient
Value Based Purchasing
Program
Payment
Impact Begins:
FY 2013 Payments
(October 1, 2012)
FY 2015
(October 1, 2014)
FY 2013 Payments
(October 1, 2012)
Incentive
Structure:
Penalty only,
1% cap for FY 2013
Penalty only, 1% maximum
for FY 2015
Bonus or penalty, depending on
performance
“Base Operating DRG Payment
Amount”
Revenue after adjustment for
Readmissions and VBP programs
Base Operating DRG Payment
Amount
Compares your facility to national
average performance based on
retrospective three year period
Most program details finalized in FY
2014 IPPS Final Rule, specific
payment adjustment methodology
subject of future rule
Budget neutral, creates winners vs.
losers scenario
Payment Unit to
be Modified:
Comment:
Source: CMS, Advisory Board Analysis
8
Future Dollars on the Line
What You’re Doing (Or Not Doing) Today Has Financial Ramifications
Performance Periods Currently In Progress
For Fiscal Years (FY)1
2014
2015
2016
2017
VBP1
Readmissions2
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HAC
Payment Adjustments
Can No Longer be
Inflected
Data Collection
In Progress
1) As of October 2013
2) Performance periods
3) Assumes readmissions performance judged on timeframe of July 1, 2011 – June 31st, 2014
Data Collection Not
Yet Started
Source: CMS, Advisory Board Analysis
9
Program #1: Hospital Acquired Conditions
HAC Program Mechanics
1% Penalty For Worst Performing Quartile on Defined HAC Measures
Overview of HAC Program
Who is Included?
HAC Performance Assessment
Penalty Allocated
Penalty
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• Inclusion of all subsection (d) hospitals,
HAC program will include Maryland
hospitals
• Excludes LTCH, Cancer Hospitals,
Children’s Hospitals, IRFs, IPFs, Critical
Access Hospitals, Hospitals in Puerto
Rico or US Territories
• Finalized methodology assesses HAC
performance on two distinct domains
• Patient Safety Measures
• CDC NHSN Measures
• Points assigned based on decile performance
compared to other facilities, the higher the
points the worse the performance.
• Two domain system, individual domain scores
weighted and combined to form overall HAC
score.
• Statutorily mandated penalty is a 1%
cut to what “otherwise would be paid”
for hospitals in top (worst) performing
quartile.
• Penalty would apply to payments after
the readmissions and value based
purchasing program adjustments have
been made
• Payment adjustment specifics TBD,
likely in FY 2015 IPPS Proposed Rule
Source: CMS, Advisory Board Analysis
10
Program #1: Hospital Acquired Conditions
Two Domain Quality Structure Finalized
Targeting Patient Safety and Infection Measures
Two Domain Structure for HAC Reduction Program
Domain 1: Patient Safety
Measures
35%
July 1, 2011 - June 30, 2013
+
Domain 2: CDC/NHSN Surveillance
Measures
65%
CY2012 & CY2013
PSI-90
Metric
FY 2015
FY 2016
FY 2017
Composite Metric
CLABSI



CAUTI



SSI – Colon


SSI –
Abdominal
Hysterectomy


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Including component indicators:
• PSI #3 Pressure Ulcer Rate
• PSI #6 Iatrogenic Pneumothorax Rate
• PSI #7 Central Venous CRBSI Rate
• PSI #8 Postoperative Hip Fracture Rate
• PSI #12 Perioperative PE DVT Rate
• PSI #13 Postoperative Sepsis Rate
• PSI #14 Postoperative Wound Dehiscence Rate
• PSI #15 Accidental Puncture or Laceration Rate
MRSA

C. Difficile

Source: CMS, Advisory Board Analysis
11
Program #2: Hospital Readmissions Reduction
Readmissions Program Mechanics
Capped Penalty to Hit 3% Maximum from FY 2015 Onwards
Overview of Readmissions Program
Who is Included?
Readmissions Performance
Assessment
Penalty Allocated
2013
2014
2015
-1%
-2%
-3%
• Assesses whether hospital had excess
readmissions compared to national
• Excludes LTCH, Cancer Hospitals,
performance on a set of NQF-endorsed, 30Children’s Hospitals, IRFs, IPFs, Critical
day risk-standardized readmissions rates:
Access Hospitals, Hospitals in Puerto
Rico or US Territories
• Acute Myocardial Infarction
• Heart Failure
• Maryland hospitals participation subject
• Pneumonia
application for exemption. Top date
• COPD (from FY 2015)
exempted for FY 2013 and FY 2014.
• THR/TKR (from FY 2015)
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• Inclusion of all subsection (d) hospitals
• Payment adjustment will apply for all
inpatient discharges, not just the
associated patient populations
• Penalty capped at maximum levels in
given fiscal year; 1% in FY 2013, 2%
in FY 2014, 3% in FY 2015 onward.
• Unlike VBP, no opportunity for high
performers to earn bonus payments
• Being assessed as worse than expected in any
one of the defined conditions will result in a
financial penalty
Source: CMS, Advisory Board Analysis
12
Program #2: Hospital Readmissions Reduction
Improvement in Readmissions Year 2
Estimated Readmissions Penalties - Carolinas HealthCare
Estimated
Penalty Percentage
Readmissions 2013
340084
Anson Community Hospital
$
(22,764)
0.76%
340064
Wilkes Regional Medical Center
$
(70,418)
0.57%
340113
Carolinas Medical Center
$
(842,844)
0.53%
340008
Scotland Memorial Hospital
$
(98,863)
0.51%
340130
Carolinas Medical Center - Union
$
(50,981)
0.16%
340145
Carolinas Medical Center - Lincoln
$
(19,394)
0.15%
340075
Grace Hospital
$
(16,343)
0.10%
340160
Murphy Medical Center
$
(6,073)
0.07%
340119
Stanly Regional Medical Center
$
(10,895)
0.06%
340001
Carolinas Medical Center - NorthEast
$
(28,805)
0.03%
340070
Alamance Regional Medical Center
$
(9,589)
0.03%
340068 Columbus Regional Healthcare System
$
(5,872)
0.03%
340166
Carolinas Medical Center - University
$
(1,246)
0.01%
340091 The Moses H. Cone Memorial Hospital
No Penalty
0.00%
340098
Carolinas Medical Center - Mercy
No Penalty
0.00%
340184
MedWest-Haywood
No Penalty
0.00%
420104
Roper St. Francis Mount Pleasant
No Penalty
0.00%
420027
AnMed Health Medical Center
No Penalty
0.00%
340037
Kings Mountain Hospital
No Penalty
0.00%
340016
Harris Regional Hospital
No Penalty
0.00%
340021
Cleveland Regional Medical Center
No Penalty
0.00%
420087
Roper Hospital
No Penalty
0.00%
340055
Valdese Hospital
No Penalty
0.00%
Total Estimated Impact
$ (1,184,087)
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Provider
Name
Estimated
Readmissions 2014
$
(17,384)
$
(93,926)
$
(452,166)
$
(76,160)
$
(13,853)
$
(25,088)
No Penalty
$
(11,956)
$
(23,750)
No Penalty
$
(37,520)
$
(58,513)
$
(8,185)
No Penalty
No Penalty
$
(12,413)
No Penalty
No Penalty
$
(1,725)
$
(8,982)
$
(46,573)
No Penalty
No Penalty
$
(888,194)
Penalty Percentage
0.70%
0.75%
0.29%
0.42%
0.05%
0.21%
0.00%
0.17%
0.15%
0.00%
0.13%
0.33%
0.07%
0.00%
0.00%
0.07%
0.00%
0.00%
0.03%
0.09%
0.14%
0.00%
0.00%
13
Program #3: Hospital Inpatient Value Based Purchasing
VBP Program Mechanics
Incentive Payment Based on Quality Performance
Quality Performance Assessment
Payment Withhold
FY13
-1.0%
FY14
FY15
FY16
Redistribution of Payment
FY17
-1.25%
-1.5%
-1.75%
-2.00%
• Payment withhold applies to base
operating DRG payment
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• Withhold applies only to roughly 3,000
hospitals meeting VBP inclusion criteria
• Assesses performance on quality measures
including (FY started in parenthesis):
•
•
•
•
Clinical process of care (2013)
Patient experience of care (2013)
Outcomes (2014)
Efficiency (2015)
• Payment directly proportional to TPS
score
• Budget neutrality results in “winners
vs. losers” roughly half of hospitals
earn back more than withhold, others
earn back less
• Scored on achievement relative to national
benchmarks and improvement compared to
historical baseline
• Quality measure scores combined to form
single figure Total Performance Score (TPS)
Source: CMS, Advisory Board Analysis
14
Program #3: Hospital Inpatient Value Based Purchasing
Overall a Positive VBP Result Projected for FY 2015
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Estimated Value Based Purchasing Incentive Payment
Provider
340113
340130
Name
Carolinas Medical Center
Carolinas Medical Center - Union
420087
Roper Hospital
$
(144,673)
-0.21%
340166
Carolinas Medical Center - University
$
(5,572)
-0.05%
340064
340021
420027
340070
Wilkes Regional Medical Center
Cleveland Regional Medical Center
AnMed Health Medical Center
Alamance Regional Medical Center
$
$
$
$
(4,972)
1,491
34,719
17,500
-0.04%
0.00%
0.04%
0.06%
340091
The Moses H. Cone Memorial Hospital
$
141,725
0.08%
340075
340098
Grace Hospital
Carolinas Medical Center - Mercy
$
$
14,200
94,450
0.10%
0.15%
340084
340016
340184
340119
340068
340037
340160
340145
340001
340008
420104
Anson Community Hospital
Harris Regional Hospital
MedWest-Haywood
Stanly Regional Medical Center
Columbus Regional Healthcare System
Kings Mountain Hospital
Murphy Medical Center
Carolinas Medical Center - Lincoln
Carolinas Medical Center - NorthEast
Scotland Memorial Hospital
Roper St. Francis Mount Pleasant Hospital
$
$
$
$
$
$
$
$
$
$
$
4,565
18,087
45,718
48,320
59,872
20,588
25,733
59,466
638,465
225,298
42,819
0.18%
0.18%
0.26%
0.31%
0.34%
0.36%
0.37%
0.50%
0.70%
1.23%
1.36%
$
835,177
Total Estimated Impact
1) Valdese Hospital had insufficient case volume to calculate VBP score using current most recent Hospital Compare data
Estimated VBP Incentive
$
(430,531)
$
(72,092)
Incentive Percentage
-0.28%
-0.26%
15
Program #3: Hospital Inpatient Value Based Purchasing
Final Performance Periods For FY 2016
Mortality and Patient Safety Measures Finalized in Previous Rules
2012
Oct 1
Jan 1
Clinical Process of Care
Dec 31
Jan 1
Patient Experience of Care
Dec 31
Jan 1
Efficiency
Dec 31
Jan 1
Outcome: CAUTI/CLABSI/SSI
Dec 31
Mortality
June 30
AHRQ
June 30
Oct 15
We are here:
November 1, 2013
Finalized Measures
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2014
2013
Proposed Measures
Domain Weights Under Four Domain Structure
Domain
FY 2013
FY 2014
FY 2015
FY 2016
Clinical Process of Care
70%
45%
20%
10%
Patient Experience of Care
30%
30%
30%
25%
Outcomes of Care
-
25%
30%
40%
Efficiency
-
-
20%
25%
Outcomes measures
proposed in CY 2014
HOPPS Proposed
Rule, not yet final
Source: CMS, Advisory Board Analysis
16
Program #3: Hospital Inpatient Value Based Purchasing
Finalized Performance Periods FY 2017- FY 2019
October 1 Kickoff for FY 2017 and FY 2018 Performance Periods
2013
2014
2015
October 1
FY 2017 - Mortality
June 30
October 1
FY 2017 – AHRQ PSI
June 30
FY 2018 - Mortality
October 1
July 1
2017
June 30
FY 2018 – AHRQ PSI
July 1
June 30
FY 2019 - Mortality
July 1
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2016
June 30
FY 2019 – AHRQ PSI (Not Finalized)
June 30
All finalized baseline periods
are already completed and are
of the same duration as the
performance periods
Source: CMS, Advisory Board Analysis