Collin-Fannin County Medical Society
May 24, 2011
Payment Reform and Physician Realignment:
The Road Ahead
Annual Increase in per Capita Health Spending
vs. Increase in Consumer Price Index
National Health Expenditures per Capita
Healthcare spending in 2010 was $2.6 trillion, over17% of GDP.
Per capita spending has increased 70% over the past decade.
3
Growth in Total Per Capita Health Expenditure
$8,000
Per Capita Spending - PPP Adjusted
$7,000
$6,000
United States
$5,000
Switzerland
Canada
$4,000
OECD Average
Sweden
$3,000
United Kingdom
$2,000
$1,000
$0
1970
1975
1980
1985
1990
1995
2000
2005
Distribution of Healthcare Expenses for the U.S. Population
Percent of U.S. Population
Ranked by Expenses
1977
1987
1997
2007
Top 1 Percent
27%
28%
28%
23%
Top 5 Percent
55%
56%
56%
50%
Bottom 50 Percent
3%
4%
3%
3%
The Five Most Costly Medical Conditions





end of life
heart disease
pulmonary disease
mental disorder
cancer
5
Mean Healthcare Expenditure per Person
by Spending Group - 2008
6
Mandated Medicare Payment Reductions
2012 - 2019
Current law mandates almost $900 billion in cuts to provider
payments over the next 8 years.
SGR - $380 Billion

Cut payments for physician services under the Sustainable Growth Rate Formula.
Scheduled 27% reduction in 20013.
ACA - $500Billion

reduce physician and hospital payments based on private, non-farm business
productivity growth.

reduce disproportionate share hospital (DSH) payments

reduce Medicare Advantage payments

eliminate Medicare Improvement Fund
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Simulated Comparison of Relative Medicare, Medicaid and
Private Health Insurance Prices Under Current Law
Price as a percentage of PHI rates
125%
100%
PHI
75%
Medicaid
50%
Medicare
25%
0%
2010
2020
2030
2040
2050
Calendar year
Source: Office of the Actuary, Centers for Medicare and Medicaid Services
2060
2070
2080
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What are the Alternatives?
1. Congress allows the mandated cuts to take effect, and by 2019 over 20%
of US hospitals have negative operating margins and a large percentage of
physicians have dropped out of Medicare.
2. Congress allows the cuts to take effect and implements “all-payer” ratesetting to prevent the gap between Medicare and commercial payers from
becoming too wide.
3. Congress serially acts to delay and postpone mandated cuts in the name
of preserving Medicare which, coupled with the projected $875 billion cost
of expanded coverage, causes healthcare inflation and pressures on the
federal budget to accelerate.
4. Congress acts to fundamentally change how healthcare is paid for, e.g.,
bundled and global payments.
9
United States Income Statement FY 2012
FY2012 Revenue
$2.47 Trillion
Discretionary
Non-Defense
$450B
Other
$226B
Corporate
Income Tax
$237B
FY2012 Expenses
$3.80 Trillion
9%
Net Interest
$225B
Social Security
$773B
6%
12%
10%
47%
20%
Individual
Income Tax
$1,165B
23%
34%
Social
Insurance Tax
$841B
19%
Security +
Defense
$868B
20%
Unemployment Insurance
+ Other Entitlements
$746B
Medicare +
Federal
Medicaid
$733B
How Healthcare is Currently Purchased
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How Physician Payments are Determined
HOW PHYSICIAN PAYMENTS ARE DETERMINED BY MEDICARE
Volume of
Services
Sustainable
Growth Rate
SGR
Formula
Non-MD
Wages
Office Space
Expense
Pract. Exp.
GPCI
Pract. Exp.
RVU
Conversion
Factor
Svc Vol./Mix
Per Physician
PHYSICIAN
PAYMENT
Provider/
Location
Medical
Home
PQRI
Performance
P4P
Work
Professional
Liability
Payment
Adjustments
HPSA
Bonus
PLI
RVU
Cost Share
Weights
Practice
Fee Areas
Billable
Services
Practice
Expense
Relative Pmt.
Per Service
Equipment
& Supplies
PLI
GPCI
Work
RVU
RUC
Weighting
Work
GPCI
Professional
Earnings
Variation
Share
Floor
Practice
Fee Areas
Gain
Sharing
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Payment Reform Alternatives
Fee-forservice
Pay for performance
bonuses for quality
penalties for inefficiency
Capitation
Areawide
budgets
Pay for performance
bonuses for quality
Episode based
payments
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Current Payment Reform Initiatives
Major CMS payment reform initiatives currently under way include:

Medicare Shared Savings Program (MSSP)

Pioneer Accountable Care Organization (ACO) Model

Value Based Purchasing Initiative

Bundled Payments Initiative
The market is moving away from utilization based reimbursement.
The momentum of change is now mandating effective clinical
integration, regardless of participation in any of these current CMS
programs.
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Candidates for Episode Based Payment
Any medical condition that meets the following criteria would be a potential
candidate:

has a high cost per event

is subject to wide variation in treatment

requires services that are currently not adequately reimbursed,
e.g., case management, provision of patient care outside an office
setting, etc.

has clear beginning and end points that could readily be documented by
clinicians

has generally agreed upon clinical practice guidelines
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Episode Based Payment Options
Type of
Case
Trigger
Time Window
Examples
Chronic
Medical
Outpatient
Professional
One year from trigger
Diabetes, CHF, COPD
Asthma, CAD, HTN
Acute
Medical
Inpatient
Facility
3-day look-back;
30-day look-forward
AMI, Stroke,
Pneumonia
Inpatient
Procedural
Inpatient
Facility
30-day look-back;
180-day look-forward
Hip/Knee Replacement,
Bariatric Surgery,
CABG
Outpatient
Procedural
Outpatient Fac./
Professional
30-day look-back;
180-day look-forward
PCI, Hernia, Knee
Repair, Ligaments
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Current Practice
Pre-Admission
PHYSICIANS
Hospitalization
Post-Acute Care
Readmission
PCP
PCP
PCP
PCP
Surgeon
Surgeon
Surgeon
Surgeon
Other Specialist
Other Specialist
Imaging
Imaging
Implants, etc
Imaging
Imaging
Drugs
Drugs
Drugs
Drugs
NON-MD
STAFF
Hospital
Staff
Home Care
FACILITY
Hospital
Rehab Facility
Hospital
DRG
Long-Term Care
DRG
DEVICES/
EQUIPMENT
DRUGS
PCP Care Mgr
Hospital
Staff
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Episode Based Payment
Hospital “Warranty”
Pre-Admission
PHYSICIANS
Hospitalization
Post-Acute Care
Readmission
PCP
PCP
PCP
PCP
Surgeon
Surgeon
Surgeon
Surgeon
Other Specialist
Other Specialist
Imaging
Imaging
Implants, etc
Imaging
Imaging
Drugs
Drugs
Drugs
Drugs
NON-MD
STAFF
Hospital
Staff
Home Care
PCP Care Mgr
FACILITY
Hospital
Rehab Facility
Hospital
DRG
Long-Term Care
DRG
DEVICES/
EQUIPMENT
DRUGS
Hospital
Staff
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Episode Based Payment
All Inpatient Services
Pre-Admission
PHYSICIANS
Hospitalization
Post-Acute Care
Readmission
PCP
PCP
PCP
PCP
Surgeon
Surgeon
Surgeon
Surgeon
Other Specialist
Other Specialist
Imaging
Imaging
Implants, etc
Imaging
Imaging
Drugs
Drugs
Drugs
Drugs
NON-MD
STAFF
Hospital
Staff
Home Care
FACILITY
Hospital
Rehab Facility
Hospital
DRG
Long-Term Care
DRG
DEVICES/
EQUIPMENT
DRUGS
PCP Care Mgr
Hospital
Staff
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Full Episode Based Payment
Pre-Admission
PHYSICIANS
Hospitalization
Post-Acute Care
Readmission
PCP
PCP
PCP
PCP
Surgeon
Surgeon
Surgeon
Surgeon
Other Specialist
Other Specialist
Imaging
Imaging
Implants, etc
Imaging
Imaging
Drugs
Drugs
Drugs
Drugs
NON-MD
STAFF
Hospital
Staff
Home Care
FACILITY
Hospital
Rehab Facility
Hospital
DRG
Long-Term Care
DRG
DEVICES/
EQUIPMENT
DRUGS
PCP Care Mgr
Hospital
Staff
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The Patient-Centered Medical Home




Personal physician - each patient has an ongoing relationship with a
personal physician trained to provide first contact, continuous and
comprehensive care.
Physician directed medical practice – the personal physician leads a
team of individuals at the practice level who collectively take responsibility
for the ongoing care of patients.
Whole person orientation – the personal physician is responsible for
providing for all the patient’s health care needs or taking responsibility for
appropriately arranging care with other qualified professionals. This includes
care for all stages of life; acute care; chronic care; preventive services; and
end of life care.
Care is coordinated and/or integrated across all elements of the complex
health care system (e.g., subspecialty care, hospitals, home health
agencies, nursing homes) and the patient’s community (e.g., family, public
and private community-based services).
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The Care Triad
Primary Care Medical Home
Acute Illness
Management
Preventive
Care Services
Chronic Condition
Management
Acute illness
visits
Well child visits
Identification and
monitoring (registry)
Emergency
room care
Immunizations
Screening and
identification
Care plans and
care coordination
CCM office visits
Hospitalizations
Telephone triage
Co-management
with specialists
Other (patient education,
advocacy, outreach)
Treatment of Stage III Colorectal Cancer
Activity
Person
Counseling on need for colonoscopy
Primary care provider
Colonoscopy
Gastroenterologist
Biopsy
Pathologist
Visit to review biopsy
Gastroenterologist
Appointment regarding surgery
Surgeon
Resection
Pathologist
Hospital stay and surgery (3-5 days)
Hospital, Surgeon and hospital staff
Review data for stage III disease
Medical oncologist
Visit social worker
Social worker
Visit chemo nurse for teaching
Chemotherapy nurse
Decide on drug therapy
Medical oncologist
Lab for pre-chemo CBC, CMP, liver, CEA
Lab
Meet with clinical trial staff regarding protocol
Trial staff
Chemotherapy and follow-up visit every two weeks (24 visits)
Medical oncologist, chemo nurse
Evaluate and treat potential problems: nausea, diarrhea, fever, etc.
Medical oncologist, nurse
One month post therapy, review drug therapy and survivorship likelihood
Medical oncologist
Follow-up visit every 3 months
Medical oncologist
Ongoing disease and case management
Medical oncologist and/or PCP
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Key Implementation Issues
New types of organizations will need to be established to receive and
distribute bundled payments and to determine:
♦
How evidence-based standards of appropriate care will be determined.
♦
How adherence to clinical guidelines will be monitored and enforced.
♦
How the performance of individual service providers will be monitored
and evaluated.
♦
How clinical outcomes data will collected and reported.
♦
What new billing and collections systems will be needed.
♦
What new information technology capabilities will be required.
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Trend of Payment Reform
Fee for
Service
P4P
Value
Based
Purchasing
Episode
Based
Payments
Global
Capitation
Level of financial risk borne by payer
Level of financial risk borne by provider
Physician-Hospital Alignment
Low
Degree of Alignment
clinical co-management of
service lines, centers or
institutes
 focus on practice management
quality and safety initiatives

medical directorships
 department/program chairs
 committee participation

Leadership
minimal financial linkages or
risk sharing
 group practice contracts
 on-call contracts

Financial
common HIT limited but
growing
 MSO/PHOs provide support
services to affiliated physicians
gainsharing in specific
programs
 ambulatory and ancillary joint
ventures

volume focused
 quality and safety
management programs in
place

Clinical
Services
physicians active on board
and executive team
 dyad leadership models
 shared strategic objectives

bundled reimbursement
 common payer contracting
strategy

integrated information
management
 service line management
across the organization
 shared effectiveness/efficiency
goals


Operations
High
integrated/interfaced EHR
 shared service agreements for
select business functions

delivery system provides
continuity of care
 organizational commitment to
quality and safety

value based ACO delivery
model
 clinical protocol management
is core competency
 continuous quality
improvement

Physician – Physician Integration
Trend of Physician Realignment
Large Virtual
Multi-Specialty
Medical Group
Large MultiSpecialty Group
Practice
Large Single
Specialty Group
Practice
Virtual or
Clinically
Integrated Group
Independent
Practice Group
Solo or
Small Practice
Independent
Medical Staff
PhysicianHospital
Organization
EMR Clinical
Integration
Employed
Medical Group
Physician – Hospital System Integration
Virtual
Clinical
Integration
Everybody On the Bus …
but Who’s Driving?
Hospitals and Clinics
PCPs
Specialists
Nurses
Imaging
Pharmaceuticals
Rehab
Home Health
Social Workers
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This presentation can be downloaded from the
Collin-Fannin County Medical Society
webpage under the Events/Announcements tab.
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