Alternative Payment Models: The Good, the Bad, and the Ugly from an Operational, Compliance, and Valuation Perspective

Angie Caldwell, PYA
Martie Ross, PYA
Earl Anderson, Tennessee Orthopaedic Clinics
March 26–29, 2018
2018 CONGRESS ON HEALTHCARE LEADERSHIP
Alternative Payment Models:
The Good, the Bad, and the Ugly from an Operational,
Compliance, and Valuation Perspective

Prepared for 2018 Congress on Healthcare Leadership Page 1
Disclosure of Relevant Financial Relationships
The following faculty of this continuing education activity
has no relevant financial relationships with commercial
interests to disclose:
 Angie Caldwell
 Martie Ross
 Earl Anderson

Faculty
 Angie Caldwell, PYA
 Martie Ross, PYA
 Earl Anderson, Tennessee Orthopaedic Clinics

Learning Objectives
Session attendees will …
Recognize the challenges and
benefits of alternative payment
models
Employ the knowledge gained
to administer alternative
payment models compliantly
and in consideration of fair
market value

Agenda
 Introduction to Alternative
Payment Models (APMs)
 Life Inside an APM
 Compliance and Valuation
Concerns for APMs

Introduction to APMs
Martie Ross, PYA

Triple Aim
Improved
Quality
Patient

Taking Aim

Fee-For-Service Reimbursement
 Maximize patients
 Maximize services
 DRGs and APCs
 CPTs
 Fraud and Abuse Laws
 Reimbursement rules
 Silos
 Competitors
 Unmanaged chronic conditions
 Uninvolved in care
 Resides with payer
 Increasing costs
INCENTIVES
MEASURES
REGULATORS
PROVIDERS
PATIENTS
RISK

Value-Based Reimbursement
 Manage patient population
 Coordinate continuum of care
 Quality
 Efficiency
 Network participation
 Continuum of care
 Collaborators
 Educated
 Engaged
 Moves to providers
INCENTIVES
MEASURES
REGULATORS
PROVIDERS
RISK
PATIENTS

Alternative Payment Model Framework
Image Source: Health Care Payment Learning and Action Network, http://hcp-lan.org/workproducts/apm-framework-onepager.pdf

Progress To Date
*Source: Health Care Payment Learning & Action Network 2016 Commercial Payer Survey (respondents represent over 128 million covered lives, or nearly 44% of the combined
commercial, Medicare Advantage, and Medicaid markets)
One-quarter of commercial plan payments
now flow through Category 3/4 APMs*

Medicare Shared Savings Program
Authorized under the Affordable Care Act
2012 2018
 114 ACOs serving 2 million
beneficiaries
 561 ACOs serving 10.5
million beneficiaries
 18% increase over 2017
 9% drop-out rate (mergers;
failed partnerships)
 82% in Track 1 (upside only)
 55 ACOs in new Track 1+
(downside risk)

Quality Payment Program
Advanced APMs
5 percent bonus on all Part B payments
Exempt from MIPS reporting if “Qualifying Participant”
(based on degree of risk)
Downside risk in traditional Medicare program

Advanced APMs
2018
Medicare Shared Savings Program
(Tracks 1+, 2 & 3 Only)
Comprehensive Care for Joint
Replacement
(CEHRT Track)
Next Generation ACO Model
Comprehensive ESRD Care
(LDO arrangement and Two-Sided Risk)
Comprehensive Primary Care Plus
Oncology Care Model
(Two-Sided Risk)
New in 2019?
BPCI Advanced
(voluntary bundled payment program)
All Payer Combination Option
(Traditional Medicare + Other Payer)
Medicare Advantage
(would require legislative action)

Clinical Integration
• Collectively define
and enforce
standards of care
• Coordinate patient
care
Providers accountable
to each other and to
community to deliver
high-quality care in
efficient manner

Clinically Integrated Network
Clinically Integrated
Network
Lean infrastructure to
support provider
accountability
Governance
Management
Participation
Core Functions
Evidence-Based
Medicine
Care Coordination
Care Management

Life Inside an APM
Earl Anderson, Tennessee Orthopaedic Clinics

Tennessee Orthopaedic Clinics
Knoxville, Tennessee
 25-physician single-specialty
practice
 9 locations in Eastern
Tennessee
 Full ancillary offerings
 3 ASC partnerships
 3 hospital systems in the
market
 2 not-for-profit, 1 for-profit

Our Current Status
 Hangovers from
 Overhead Creep
 EMR Transition
 Regulatory Compliance (MU, PQRS, ICD-10, etc.)
 New Regulatory Stresses (MACRA)
 Renewed Uncertainties in Healthcare
 Managing Volume and Value Strategies
 Recognizing the Need for Change and Driving the
Change

TPC Status

Value-Based Care
Clinical Co-
Management
Bundling
Pay for
Performance
P4P
Episodes of
Care
Gainshares CJR ACO
Population
Health
Clinically
Integrated
Networks
Patient-
Centered
Medical Home
MACRA-MIPS

Our Current Status
 Alignment Strategies
 Gainshare (Completed)
 Clinical Co-Management
 CIN (??)
 Payor Strategies
 MACRA/MIPS
 Bundles
 Site of Service

NOI per MD 2010–2016
$400,000
$450,000
$500,000
$550,000
$600,000
2010 2011 2012 2013 2014 2015 2016
8.7%(17%)

NOI per MD 2010–2016
$400,000
$450,000
$500,000
$550,000
$600,000
2010 2011 2012 2013 2014 2015 2016
Additional 8.2%
From Shared Savings
8.7%(17%)

Alignment Spectrum
Gainshare
Co-
Management
Clinical
Integration
 Quick hit
 Short term
 Focus on implants/supplies
 Minimal operational
standardization
 Quality Metric Improvement

Alignment Spectrum
Gainshare
Co-
Management
Clinical
Integration
 Focus on processes
 Higher level of collaboration
 Standardization becomes a primary focus
 Operational
 Clinical
 Financial gains based on hours worked
and incentives

Alignment Spectrum
Gainshare
Co-
Management
Clinical
Integration
 Requires common clinical, IT
and outcome strategies and
measures
 Sets clinical protocols that
must be followed
 HIGH level of standardization
 Sets up for taking risk with
payors
 Group retains independence

Assessing Physician’s Readiness
for Alignment
Willingness to standardize
Ability to make data-driven decisions
Accepting transparency
Trusting data (esp. hospital data)

Assessing Hospital Readiness
for Alignment
Willingness to share control with doctors
and carve out operations by specialty
Capturing appropriate data
Long-term vision
Culture change

BPCI Program Overview
• Basic steps of BPCI participation include….
 Application to the program
 3 year look back from CMS
 Establishment of “target prices” for each relevant DRGs
 Selection of episodes, episode duration and desired “risk tracks”
 Start of participation – retrospective “true-up” occurs as CMS
collects relevant claims
 Most participants use Awardee Convener
 Providing analytics support to manage relevant data

Keys to BPCI Success
• Appropriate Analysis and Management of CMS Data
• Identify Low-Hanging Fruit
• Post-Acute Utilization/LOS
• Re-Admissions
• Pre-Selection/Management
• Protocol Development/Review
• Care Navigators and Navigation Software
• Collaboration and Coordination with Partner Providers
 Acute Care
 Post Acute Care

TOC Bundles – 2017
TNCR
TNCR
State Empl.
Net S- Self Fun.

Our Results
 $1.5M in total savings first 27 months of
BPCI
 Savings on commercial bundles
 40% reduction in SNF utilization
 22% reduction in SNF LOS
 Formation of IPUs (Integrated Practice
Units) internally
 Selection criteria and wellness options
introduced

The Future of Bundles
 BPCI Advanced
 Application deadline closed March 12 with 10/1
go live
 Similar structure to BPCI
 Qualifies as APM (MACRA Year 3)
 29 inpatient episodes, 3 outpatient episodes
 Introduction of quality measures

The Future of Bundles
 Commercial plans still trying to re-design
their systems for value-based payments
 Prospective bundling
 Will give way to new types of partnerships
 How do bundles fit into broader value
platforms (e.g., ACO)

Compliance and Valuation Concerns for
APMs
Angie Caldwell, PYA

APMs – Compliance Concerns
 CMS concluded that current fraud and abuse laws may
serve as an “impediment to innovative programs that
align providers by using financial incentives to achieve
quality standards, generate cost savings, and reduce
waste”
 CMS and the OIG created waivers for participation in
Medicare APMs

Continued
 Until the rules change, APMs with commercial payers
must be structured to comply with the Anti-Kickback
Statute and the Stark Law
Best
Practice
Even if the APM is protected under a Medicare APM
waiver, demonstrating FMV may be prudent

Continued
 More value is assigned to quality and efficiency in care
delivery, NOT productivity
 New and different concerns
Best
Practice
The more the APM in question is structured similarly to
Medicare programs and their associated waivers, the
better the argument that payments made under those
models are incentives and rewards to deliver high-
quality, efficient care and NOT to induce referrals

FMV and CR Considerations – P4P
 Little market data or consistent practice
 Traditional approaches make no sense
 The physician may spend LESS time and effort
 The physician may spend MORE time and resources that cannot
be measured by wRVUs

FMV and CR Considerations – P4P
 Measures for compensation should be
appropriate
 Reasonable relationship between behavior
incentivized and value of the payment
 Criteria for payment should be
communicated in advance

Levels of Fund Distribution

Levels of Fund Distribution: Level 1

FMV and CR Considerations
Shared Savings – Individual Distributions
Best
Practice
 Gatekeeper measures
 Distributions based on patient attribution –
reasonable substitute for wRVU production

Shared Savings – Individual Distributions (continued)
Best
Practice
 Distributions based on performance of selected
measures – where metrics are tied to reductions in
costs, a portion of the distribution could be rewarded
to the best performers on those metrics
 Cap on individual distributions – may prevent
significant inequality between effort and reward

Shared Savings – Caution
 IRS Private Letter Ruling 201615022
 Denied tax-exempt status to a non-MSSP ACO
comprised of a tax-exempt health system and
independent community physicians

Compliance Considerations
Case Study
 Background
 Ambulatory surgery center (Center) enters into a prospective
bundled payment arrangement (BPA) with orthopedic
“Physicians,” holding partial ownership interest in the Center
 Center negotiates BPA contracts with commercial insurance
“Payers” in which the Payer will pay a flat, per-case fee for
Physician professional services, facility fees, supplies, and most
other expenses related to a case
 Center is responsible for billing and collecting all fees at the
contracted Payer’s rates as well as distributing an agreed-upon
portion of the payment to the rendering Physician

Case Study (continued)
 Problems
 The Center incurred significant time and expenses in negotiating and
implementing the BPAs, including the professional expenses associated with
regulatory legal opinions
 Professional fair market value appraisal analyses must be custom tailored for
the Center due to the lack of available, pertinent benchmark data
 Physicians must exhibit incredibly
high level of expertise to safely
conduct the specific orthopedic
surgeries in the ambulatory
surgical setting, as these services
are typically performed on a
hospital inpatient basis

Case Study (continued)
 Solutions
 The BPA enabled a win-win-win-win scenario for the Payers, Center,
Physicians, and the patients
 The Center negotiated more profitable Payer rates, enabling the Physicians
and the Center to receive a greater economic benefit than would be possible
under similar FFS arrangements
 The Payers benefit from
substantial savings under the
BPAs as compared to alternative
hospital (e.g., inpatient)
reimbursement rates
 Patients benefit from less
expensive, faster, and increased access to
services

Bibliography/References
 Health Care Payment Learning and Action Network, http://hcp-
lan.org/workproducts/apm-framework-onepager.pdf
 Health Care Payment Learning & Action Network 2016 Commercial
Payer Survey (respondents represent over 128 million covered
lives, or nearly 44% of the combined commercial, Medicare
Advantage, and Medicaid markets)
 IRS Private Letter Ruling 201615022
 Alternative Payment Model Valuation for Compliance, Success
Under APMs (http://www.pyapc.com/alternative-payment-model-
valuation-compliance-success-apms/)
 BVR/AHLA Guide to Valuing Physician Compensation and
Healthcare Service Arrangements, Second Edition, Chapters 78
through 81
 CMS website on BPCI Advanced,
https://innovation.cms.gov/initiatives/bpci-advanced/

Recommended Reading
 Commercial Reasonableness: Defining Practical Concepts and
Determining Compliance in Healthcare Transactions for Physician
Services (http://www.pyapc.com/pya-white-paper-explores-
commercial-reasonableness-healthcare-transactions/)
 MSSP ACO Road Map, updated April 2017
(http://www.pyapc.com/pya-releases-updated-medicare-aco-road-
map-white-paper/)

Questions

Faculty Biography
Martie Ross, PYA, P.C.
Principal – Healthcare Consulting
mross@pyapc.com
(800) 270-9629 | www.pyapc.com
Following a successful two-decade career as a healthcare transactional
and regulatory attorney, Martie now serves as a trusted advisor to
providers navigating the ever-expanding maze of healthcare regulations.
Her deep and wide understanding of new payment and delivery systems
and public payer initiatives is an invaluable resource for providers
seeking to strategically position their organizations for the future. Martie
can identify opportunities and develop realistic plans of action where
others can only see obstacles.
Martie has an uncanny ability to synthesize complex regulatory
schemes and explain in straightforward and practical terms their impact
on providers. She has made hundreds of presentations to professional
and community organizations on a broad range of industry topics.
Martie provides dynamic, customized educational and planning sessions
for directors, executives, and managers, as well as employee
compliance training programs.

Faculty Biography
Earl Anderson, Tennessee Orthopaedic
Clinics
Executive Director
AndersonE@tocdocs.com
865-694-0062 | www.tocdocs.com
Earl Anderson has worked in the field of orthopaedics for over 30 years
as both a clinician and administrator in both private physician practice
and hospital settings. He has extensive experience in new program
development and has received several awards for his pioneer work in
orthopaedic and sport medicine initiatives. Since beginning his current
position at Tennessee Orthopaedic Clinics 15 years ago, group revenue
has grown by almost 250% and is now one of the largest orthopedic
groups in Tennessee with 25 physicians, 16 advance practice providers
and 10 locations. He currently plays an active role in various clinical
integration, shared savings, and other value based initiatives with other
physician practices and hospital systems. He has provided talks on
these programs to various groups including The Advisory Board and the
Tennessee MGMA.

Faculty Biography
Angie Caldwell, PYA, P.C.
Principal – Healthcare Consulting and Financial Audit Services
acaldwell@pyapc.com
(800) 270-9629 | www.pyapc.com
A member of the PYA team since 1998, Angie consults with physician
practices and healthcare systems in the areas of fair market value
compensation, commercial reasonableness, and contract compliance.
She advises clients relative to physician/hospital economic alignment
models and assists physician practices with strategic, financial, and
operational issues. Angie also provides a full range of auditing and
review services for various entities, including hospitals, health systems,
community mental health centers, health insurance companies,
employee benefit plans, and not-for-profit organizations. The owners
are pleased to have Angie serving as principal-in-charge of our Tampa
office.

PYA, P.C.
800.270.9629 | www.pyapc.com

Alternative Payment Models: The Good, the Bad, and the Ugly from an Operational, Compliance, and Valuation Perspective

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Alternative Payment Models: The Good, the Bad, and the Ugly from an Operational, Compliance, and Valuation Perspective

Similar to Alternative Payment Models: The Good, the Bad, and the Ugly from an Operational, Compliance, and Valuation Perspective (20)

More from PYA, P.C.

More from PYA, P.C. (16)

Recently uploaded

Recently uploaded (20)

Alternative Payment Models: The Good, the Bad, and the Ugly from an Operational, Compliance, and Valuation Perspective