Kalkhof Final Va Dc Hfma Strat Mgd Care And Hc Reform 9 28 12

virginia-washington dc chapter

STRATEGIC MANAGED CARE PRICING,
CONTRACTING AND THE IMPACT OF
HEALTHCARE REFORM ON BOTH
SUMMER 2012 EDUCATION CONFERENCE
Hilton Virginia Beach Oceanfront – Virginia Beach, VA
September 28, 2012

Christopher J. Kalkhof, FACHE
Director, Healthcare Industry Group - Alvarez & Marsal, New York Office

© Copyright 2012. Alvarez & Marsal Healthcare Industry Group, LLC. All Rights Reserved. Confidential. For discussion purposes only.

TODAY’S PRESENTATION
I. ACA/Medicare/State Reform – Doing More
With Less?
II. Changing Managed Care Pricing Environment
and Payment Methodologies
III. Cost Shifting Among Payers and Impact on
Managed Care Pricing
IV. Strategic Managed Care Applied to Building
and Pricing Service Lines
V. Impact of Physician Integration on Different
Risk Models and Payer Contracting Strategy
VI. Appendix
 Aligned Delivery Networks, Shared Savings Synergy
Areas and Presenter Bio

© Copyright 2012 Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®,
© Copyright 2012. Alvarez & Marsal Healthcare Industry Group, LLC.
® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.
All Rights Reserved. Confidential. For discussion purposes only.

I. ACA/Medicare/State Reform:
Doing More With Less?

© Copyright 2012 Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®,
© Copyright 2012. Alvarez & Marsal Healthcare Industry Group, LLC.
® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.
All Rights Reserved. Confidential. For discussion purposes only.

I. ACA / MEDICARE / STATE REFORM – DOING MORE WITH LESS?

ACA Post-Supreme Court Ruling: What Has Changed?

From a provider’s perspective… not much…
 There will be fewer uninsured individuals covered under
(some) state Medicaid programs.
 Medicaid expansion costs will still shift to states.
 Major health plans will still resist cost shifting.
 You will still have to address how you will strategically
reposition your organization for leaner times ahead while
still delivering available, accessible, high quality, patient
and physician centric care across patient populations.
 You will still be expected to do more with less!

© Copyright 2012. Alvarez & Marsal Healthcare Industry Group, LLC. All Rights Reserved. Confidential. For discussion purposes only. 3


ACA Post-Supreme Court Ruling: Uncertainty Remains

Plan for…
 An increase in “insured” patients… payment levels will be… what?
 Medicaid expansion and State and/or Federal HIEs.
 Medicare and Medicaid to increase < CPI, freeze or cut payments.
 Increased pressure to reduce the total cost of care/patient.
 Emerging payment models across all major financial classes.
 Non-traditional strategic alliances and collaborations.
 Transformative changes to traditional care delivery models.
 Significant capital and IT investments to support models of care.
 Challenges in balancing physician alignment strategies with uncertain
reimbursement (e.g., S.G.R.) and increased physician shortages.
 Increased uncertainty with respect to Congress and sequestration cuts,
what may/may not change post-November elections.



What are Health Plans Doing Re: Strategic Repositioning Post-ACA?

August 11, 2011
Anthem Blue Cross, provider group launch ACO in Silicon
November 09, 2011 Valley
FOSTER CITY, CA – Touting it as the first of its kind ACO in Northern California,
Highmark to Pay $300M in Loans to Anthem Blue CrossAetnaIndividualInova Association System of Santa
and the And Practice Health Medical Group
Acquire West Penn Allegheny in Clara County (SCCIPA) have announced a contract to provide accountable care to
Pittsburgh tens of thousands of Anthem PPO membersHealth Plan Partnership
Establish New in the Silicon Valley.
March 15, 2011 In Northern Virginia
…Terms of the acquisition were recently revealed
in the organizations' Form A filing with the Anthem Blue Cross, Sharp HealthCare JuneSan Diego-area
FALLS CHURCH, Va., pilot 22, 2012 — Inova
ACO Health System and Aetna (NYSE: AET) today
Pennsylvania Insurance Department. Highmark will
SAN DIEGO – Anthem Blue Cross an exclusivegroups from Sharp establish
announced and two medical partnership to
pay $475 million in full to acquire the health Innovation Health Plans, a jointly owned health
HealthCare will launch a pilot accountable care organization focused on serving
system…
affiliation Anthem’s San Diego-based group, small group and individual plan PPO
plan serving Northern Virginia…
Highmark
EO says
members
Premier C ch more people Aetn
American Medical News
rea a CE
w ill let it z ette E O xtin
Physicians wonder about United's IPA deals
h Post-Ga ction :H ealth
Pittsburg FE B
Insu Sept. 22, 2011
arly this
2
0 12 … sp 1, 2 012 1 rers
April 29, 2 on th at battle e n
ea
Vega kin g at t :11pm E
0 Face …UnitedHealth Group subsidiary Optum is
… Highma
rk w hysicia s
Berto , Aetn a C e HIMSS
h T

it acquir ed the 63-p l E
th e w in i, said… O, C h a 2 Con fer
1 taking over the management of three
year when avoiding a a ir
h ere y w e’ve “Th e en m an an d n ce in L
e

ialty g roup, thus .”… ru n t d of in Pres as independent practice associations in Southern
multispec r and its … So he b
u sin su ran ce iden t Ma
the insure
wh a
ack for n
f u tu r
e
t w ill
th
ess in c
th e p om panie
rk
California, as health plans continue to find
major setb iting, the West Pen
acco ? Bertolin e h ealth ast, is s,
u
-w a … “W n table h i off ered in su rers ways to get into the clinical side of the health
partner-in
e ne ealth a stro l o ok
ystem…
risk t o n li
o m a ed to m o rgan izat g en dor ke in th e

Alleghen y Health S n a gi
ng p
ve th
e
ion m
opu la system odel…
se m
en t o
f th e
care business…
tions from
,”… u n de
rw riti
ng
5


My Top Ten List: Big Picture - What to Expect Over Next Few Years?
1) Perform or perish.

2) Reform favors… horizontal and vertical integration, distributed care
models across service lines and P-4-P reimbursement… be proactive.
3) Care setting focus is increasingly ambulatory / aligned w/Physicians.
Integrated care,
4) Implications for
Medicare / Medicaid cost shifting willacross
coordinated increase.
5) your strategic
care continuums,
More difficult payer contract negotiations… exclusion risks increase.
6) care model
CMS and State budgetmanaged care
challenges… more provider margin pressure.
7) redesign and
State innovations… e.g., NYS Medicaid Redesign Team and CMS
pricing and
physician
waiver request… will increase once savings are demonstrated.
8) business model?
alignment are at
Increasing Medicare, Commercial and “Medicaid” ACO roll-outs and
provider/payer strategicheart of reform
the alliances.
9) Access to Capital… continued credit market-working capital pressure.
10) Some providers will be unable to transition to a post-reform business
model… increase in M&As, strategic alliances and bankruptcies.

II. Changing Managed Care
Pricing Environment and
Payment Methodologies


II. CHANGING MANAGED CARE PRICING ENVIRONMENT
AND PAYMENT METHODOLOGIES
Planning for an Uncertain Post-Reform Future?

 STRATEGIC MANAGED CARE:
– Integrated payer/organizational planning
to strategically re-position the organization,
optimize net revenues, grow market share
and manage patient populations.
– Pricing of services for post-ACA managed
care contracts requires a detailed
knowledge of your services, associated
costs and the competitiveness of your care
delivery business model.

What Does “Managed Care” Mean to My Care Delivery Model?
MULTI-YEAR
CONTRACTS
Implications
for…

 F-F-S… rewards regardless of  Risk oriented payments

Your Organization?
Your Organization?
quality/outcomes  Population management
 Acute-centric model w/many across care continuums
non-aligned interests  MCR-MCD value-based pay
 MCR-MCD F-F-S payments  Chronic care management
 Payers manage costs through  Tiered provider networks
unit price, rules and access  Srvc. disaggregation... facility
 Care decisions often made w/o to non-facility to based care
patient understanding options  Limited ability to shift costs…
 Providers incentivized to provide perform or perish
highest reimbursing services  Few charge based payments

“Managed Care” Impact on Business Model Sustainability?
MULTI-YEAR
CONTRACTS
Implications
for…

 Short-term and long-term strategic and capital planning?
 Core service lines as well as staff and physician recruitment/retention?
 Hospital-physician alignment strategies?
 Collaboration or lack thereof with select payers?
 Competitive market positioning and growth?
 Information technology needs, planning and implementation?
 Formation of aligned networks and new care delivery models… e.g.,
ACOs, PHOs, IPAs; physician employment; and hospital alliances?
 Business model sustainability?


Key Future Scenario Business Model Planning & Pricing Assumptions

The underlying core strategy questions can be categorized into
three basic future planning assumptions:
1. Reimbursement will decrease and financial risk will increase.
2. Effective physician alignment and integration is the
cornerstone from which all future service mix and patient
strategies must be built and the core goal of “reform.”
3. The core care delivery model must account for the above two
pivotal factors.

Reimbursement Physician Alignment Care Delivery Model
and Financial Risk and Integration


Payment Models will Impact Alignment Model and Strategies
Care Delivery and Financial Risk Continuum
Full Global
D g e fP o id rA c u t b y
a dS a e rF llF a c lR k

High Competitive Markets
e r eo P v e c o na ilit

Capitation
n h r do u in n ia is

Episodes of Care &
Gain Sharing 3rd Party Required
l

Fixed Payments Payer focus? Care Delivery
w/Gain Sharing Model?
Linked to Outcomes/
Fixed Payments
w/Gain Sharing Low High
Blended F-F-S
w/Up-Down Gain Low
r

Sharing Competitive Emerging Required
F-F-S w/Risk Markets – Care Delivery
Withholds & P-4-P Provider Risk Model?
Hospital PPS (IP/OP) Uncommon
Low
FFS Charges

Degree of Clinical integration


Managing Populations Under Financial Risk?

 Risk Payments… e.g., health plan commercial contracts…
– Encompasses a complete range of hospital, physician, ancillary and Rx
drug services (e.g., global capitation or % of premium), a complete
episode of care (e.g., CMS ACE) or a blended P-4-P model.
– Full risk allows the “contract holder” to use funding to pay for services
necessary to manage population health vs. a covered benefit.
– Methodologies are linked to quality and financial performance metrics…
P&L focus is no longer on highest reimbursement setting.
– Shared risk aligns provider-payer clinical and business interests.
– Financial success requires an integrated provider network which…
 Integrates and coordinates care around the needs of the patients
rather than service types or organizational structures while also
organizing “what” and “where” care settings around patient clinical
risk/complexity as well as patient and physician preference.


Managing Populations Under Non-Financial Risk Arrangements?
 Non-Risk Payments… e.g., One-Sided CMS Shared Savings Model…
– F-F-S Medicare payments maintained… no risk for first 3 year contract…
renewal requires two-sided risk model. One-sided CMS model highlights:
 Benchmark established with shared savings cap at 10%.
 After CMS MSR, 50% of savings available for distribution.
 Shared savings payments linked to 33 quality metrics, spread across
four quality metric domains.
 FTC and OIG regulatory relief allows gain sharing and the ACO
determined distribution model can align hospital and physician
clinical/business interests.
– Upside only P-4-P and gain sharing models with commercial payers.
 Financial success… the same integrated network as with risk payments.


Re-Emergence of Global Capitation
Hospital Financial Proposal Review - HMO/Capitation Proposal
Medical Budget - IPA/Hospital - Joint Managed Care Product IPA/Hospital Network
10/1/20XY - Small Urban Market
COMMERCIAL MEDICAL BUDGET -- AVE. COSTS 1-1-XW TO 12-31-XW

Utilization Average Gross Deduc. Net
Category Of Service PMPY Cost PMPM or Copay PMPM
HOSPITAL
Inpatient 0.0860 $ Do you have the
7,664.40 $ 54.93 0.00 $ 54.93
Ambulatory Surgery 0.0520 1,057.96 4.59 0.00 4.59
Emergency Room 0.1530 data to price3.54
276.90 50.00 2.91
Outpatient Radiotherapy 0.0433 212.67 0.77 0.00 0.77
Hospital Outpatient 0.1537 correctly? 7.64
595.73 0.00 7.64
SNF 0.0001 1,953.00 0.02 0.00 0.02
Ambulance
Dialysis/Chemo/Private Nurse
0.0170
0.0461 How do you know if
612.56
374.40
0.87
1.44
0.00
0.00
0.87
1.44
Home Care
Home Care Supplies
0.0035
0.0340 it is correct and
306.47
1,271.90
0.09
3.61
0.00
0.00
0.09
3.61
Surgery/Major
Misc. Office Serv.
0.0060
0.0335 actuarially valid?
2,755.96
348.41
1.38
0.98
0.00
0.00
1.38
0.98
(HMO CoPay/COB adjust.
factors & above changes) 0.0052 400.00 0.18 10.00 0.18
TOTAL HOSPITAL 0.6282 $ 1,527.49 $ 80.04 $ 0.63 $ 79.41


Re-Emergence of Global Capitation
Hospital Financial Proposal Review - HMO/Capitation Proposal
Medical Budget - IPA/Hospital - Joint Managed Care Product IPA/Hospital Network
10/1/20XY - Small Urban Market
COMMERCIAL MEDICAL BUDGET -- AVE. COSTS 1-1-XW TO 12-31-XW

OTHER OUTPATIENT
Other Hosp Outpatient
Radiotherapy
How will you 151.64 $ and pay 5.00 $
0.0020
0.0010
$ manage 0.05
483.87
0.03 0.00 0.03
0.05
DME
Pharmacy
for patient care which45.56 15.00
0.0430
7.5300
296.48
72.60
goes 0.00
1.07 1.07
36.15
Ambulance
Home Visits
0.0010
0.0010
“out of135.23
network”?0.02 20.00
697.15 0.06 50.00 0.06
0.02
0.0110 345.02 0.32 0.00 0.32
Impact on Revenue Cycle? 0.00
Home Health Supplies
X-Ray 1.6060 162.78 21.79 21.79
High Risk Int. Care 0.0010 175.35 0.02 0.00 0.02
Optical Dispensing
Alcohol Abuse
Impact on contracting process?0.00
0.0130
0.0730
108.11
142.36
0.12
0.87 0.00
0.12
0.87
Physical Therapy 0.1560 101.75 1.33 15.00 1.14
WITH GLOBAL CAP… YOU CANNOT
TOT. OTHER O/P 9.4380 $ 90.50 $ 71.24 $ 9.60 $ 61.64

TOTAL MEDICAL COSTS
IT WRONG 1,739.39 OUT THE GATE!
GET 19.3087 $
GOING $ 244.83 $ 16.86 $ 227.97

IPA Desired Medical Mgt. Fee For Physician Services @ 2% of Medical = $ 1.74
TOTAL GLOBAL CAPITATION REQUIRED = $ 229.71

Global Capitation – O/P & Ancillary Services

Illustration – BCBS MA Alternative Quality Contract (Commercial)
The Global Cap Model
 Payment covers all services
 P-4-P incentives based on
quality/safety metrics
– Up to 10% above global
payment
– Protection against
withholding needed care
 Savings opportunities by
addressing underuse,
misuse and overuse within
global payment level:
– Inflation factor derived
from CPI
– At controlled and
predictable level
Source: Blue Cross Blue Shield of Massachusetts - The Alternative Quality Contract


Illustration – NYS Medicaid Redesign Team

Where do the
claim dollars go?
≈ 17% of recipients
drive 60% of $$

NYS clinical
risk group
assignment
(see 3M
“Clinical Risk
Group” product
for more
information)



Illustration – Episodes of Care Payment Methodology

Bundled payments have been
around for years in the form of
payments such as DRGs.
The difference with EoC
payment methodologies of the
future is what is included in the
EoC (e.g., all services across
a specific disease condition, at
a set, fixed price).
EoCs are still in pilot mode.

The key challenge for providers will be their ability to align and integrate
community care standards, care coordination and referral management for
a specific EoC, while also providing clinical/operational support.


Illustration - Large Health Plan Commercial ACO Contract

Commercial Payer – ACO P-4-P Payment Model
 50% of incentive based upon:
 “ABC” Appropriate Care Measures (25%)
 Hospital Acquired Infection Rates (25%)
 30 Day Preventable Readmission Rates (50%)
 50% of incentive based upon:
 Medical Cost Management vs. Baseline PMPM
 Cost Savings Methodology Specific to Assigned Patient
Population/Risk
ACO Contract only available for Integrated
and Aligned Hospital-Physician Networks


Illustration - Large Health Plan Commercial ACO Contract

Commercial Payer – ACO P-4-P Payment Model
 Performance measures linked to overall performance of
“integrated” provider network (e.g., a PHO, an IPA, etc.)
 Specific to each Health Plan Benefit Product.
 Eligible P-4-P Providers are expected to have a legal
structure that supports provider integration/collaboration of
clinical care and be able to distribute gains/cost savings to
physicians within regulatory allowances.
 PCPs may only participate in one health plan P-4-P
contract… specialists may participate with multiple
hospitals and associated P-4-P contracts.


Changing Provider and Payer Contracting Processes

 How will emerging payment methodologies impact
agreements between providers and payers?
– Providers & Payers will be entering into unchartered waters.
– Non-traditional strategic alliances will be formed.
– Capabilities needed to track and monitor performance data.
– There will be multiple payment models emerging over the
next few years… global cap is one model that works.
– There will be winners and losers in the provider community.
– Some critical success factors?
 Ability to manage patient populations (risk/non-risk).
 Physician alignment and clinical integration.
 Collaborative vs. adversarial relationships w/payers.

III. Cost Shifting Among Payers
and Impact on Managed
Care Pricing


III. COST SHIFTING AMONG PAYERS AND IMPACT ON
MANAGED CARE PRICING
Pre-Post Reform Low/Negative Margin Cost Shifting
Large Teaching Hospital Payer
 Pre-Reform Pricing Mix and Payment-To-Cost Ratios
Strategy… shift low 1.80
Pre-Reform Strategy… Shift
margin or negative 1.60 Negative Financial Class

To-Cost Ratio
margin Medicare,

Other Comm. – Rental PPOs & Other
Margins to Commercial Payers
1.40
Medicaid & uninsured
Breakeven – All Financial Classes
payments to health plans. 1.20

Actual Payment-To-
1.00
 Post-Reform Pricing

All Other + Med. Advantage
Breakeven Gap

Managed Care
Strategy… P-4-P value & 0.80 = $29.6 Million

Medicare FFS
Commercial
outcome based. 0.60

Mgd. Medicaid
Medicaid

Self-Pay
 Threshold level on cost 0.40

FFS
shifting to health plans in 0.20
Patient shift to ACOs?
your market? What 0.00

actions will they take? 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of Total I/P and O/P Case Volume

Cost Shifting Across Financial Classes - How To Make Margin?
Health System
Managed Care Model - Physician
Organization Exhibit 3 - Health System: Contracted Payer Analysis
Annualized

Gross Charges
FY XY
FYXX- SystemWide Hospital Revenue (HospitalsOnly)
Gross Charges
Total Gross Charges Total IP/OP Total Net Net Net %of Tot. %of Change Required
Net Revenue
Net Professional
PayerFinancial Class Cases Charges Payments Income Margin NetIncome ChargesPaid for3%NetMargin
Revenue
Total Net Revenue Medicare 137,658 $ 922,349,016 $ 262,028,726 $ 4,829,477 1.8% 29% 28.4% 1.2%
Expenses Salaries -
Physician
Clinical Medicaid and Medicaid Pending 30,818 271,702,345 75,578,829 (12,918,085) -17.1% -78% 27.8% 20.1%
Support Salaries

Asking for higher rate476,180 1,733,321,217 528,521,141 57,036,776 10.8% 343% 30.5%
Physician Incentives
Benefits
Commercial Managed Care increases -7.8%
Medicare Advantage 216,103 1,158,906,455 287,568,903 (25,575,184) -8.9% -154% 24.8% 11.9%
alone will not be enough… the 23,286,889 (8,976,904) -38.5% -54% 20.4%
Professional Fees and
Purchased Services
System Wide Services Managed Medicaid 35,214 114,427,894 41.5%
businessWorkers Comp must15,640 63,509,719 23,367,455 5,056,136 21.6% 30% 36.8%
model change?
Patient Care Supplies
Drugs and Blood
Non Patient Care Supplies -18.6%
OtherPayers 34,536 138,309,917 37,959,755 2,194,827 5.8% 13% 27.4% -2.8%
Leases
Other General Expenses
Utilities
Insurance
Depreciation and
Self-Pay 52,087 67,486,843 23,000,944 (5,023,370) -21.8% -30% 34.1% 24.8%
Amortization
Provision for Bad Debts Totals 998,236 $ 4,470,013,406 $ 1,261,312,642 $ 16,623,673 1.3% 100% 28.2% 1.7%
Interest Expense

Financially distressed health system, $1+ BB of total
Total Operating
Expenses $ -
Incremental MD Incentives
Operating Income
$
$
-
-
patient revenues from Managed Care contracts…
Phys Org Operating
Margin >($100 mm)
$ (117,076,846) acute centric model of care… large % Medicare

Post ACA Strategic Pricing and Business Strategy Considerations

 How flexible/adaptable is your current managed care strategic
pricing approach to account for alternate and future payment
methodologies?
The most likely future
 Can you accurately price your services across a care
payment environment
continuum to achieve an overall net patient margin targets?
in your primary
– IDNs, ACOs, Clinical Integration and other network models?
competitive market
– Strategic alliances?

area will require you to
– P-4-P and other risk models?
– Build in support costs (e.g., patient navigation, Case Mgt.)?
prepare for… WHAT?
 How/where will you obtain the data that you need for modeling
across a care continuum?
 How will you price in-network/out-of-network care?

IV. Strategic Managed Care
Applied to Building and
Pricing Service Lines


IV. STRATEGIC MANAGED CARE APPLIED TO BUILDING
AND PRICING SERVICE LINES
Limitations in Traditional Hospital Services Pricing Approach

 Lack of a Reliable Measure of Success... e.g., Patients do not “buy”
a "med/surg" bed yet we contract for med/surg per diems.
 Inability to see the “Big Picture”... Many hospital organizational
structures consist of care delivery/management “silos” of activity.
 “Hospital-Centric” focus… concentrates on providing services to
patients… without addressing how to bring patients to the
hospital to begin with or whether the services can be delivered
closer to home… whom is responsible for growing the business?
 Focus on Cost Management and Benchmarks vs. Growth, Improving
Quality or Maintaining a Flexible Care Delivery Model...
– Too much focus on cost cutting can paralyze an organization to a
level of inaction and can result in “in-fighting” for resources.
TRADITIONAL VS. SERVICE LINE APPROACH AT YOUR ORGANIZATION?

Common Service Line Organizational Models

 Matrix Organization (e.g., organized around Depts.,
Service Line and Dept. Manager dual management)
 Modified Service Line Division (e.g., self contained
service line, focus on growth, shared resource conflicts)
 Divisional Structure (e.g., complete divisional focus,
across entire care continuum, hospital is focused factory)
 Business model focus… “growth” or “protection” of
market share strategy?
ORGANIZATIONAL APPROACH SETS THE STAGE FOR DEFINING
SERVICES TO BE INCORPORATED WITHIN A SERVICE LINE AS
WELL AS THE HUMAN AND CAPITAL RESOURCES REQUIRED…
WHICH WILL IMPACT SERVICE LINE PRICING FRAMEWORK

Basic Service Line Planning and Pricing Questions

 What patient populations do we serve?
 What are the core service needs of these patients relative to
the services that we provide?
 What is the associated care continuum relative to our service
capabilities and capacity (I/P, O/P & off-campus ambulatory)
and what does that vertically integrated care continuum look like
at a procedural level (i.e., all the diseases and conditions to be
treated within a service line, regardless of setting)?
 What care is needed that we do not provide today and how do
we incorporate those services into our service line and our “in-
network” care management capabilities?
 How do we price all of the above for our own organization and
on a F-F-S or global capitation basis?

Basic Service Line Planning and Pricing Analyses

Service Line Administrative Support and Accountability:
 Credible, meaningful, accurate, reliable, timely and actionable
information… financial, statistical and clinical metrics.
– A hospital needs to accurately track resources… in effect,
create a service line financial statement.
– Metrics also serve as the basis for establishing cost
allocations, which in turn will impact managed care pricing.
 Before you can accomplish the above… you need to first
define what your service line care continuum will be… at a
procedural and revenue code level… as well as what services
will be considered “in-network” vs. “out-of-network.”


Illustrative Example – Oncology Service Line Analyses and Pricing

 I/P Care component of Oncology Service Line, “current state” care continuum
and associated clinical code groupings/descriptions
 I/P range of services as defined by oncology related MS-DRGs (V-28)
 I/P range of services as defined by ICD-9 codes for neoplasms (e.g., 140 - 239)
 MS-DRGs and ICD-9 codes linked to inpatient services provided by either an
Oncologist or an Oncologist Surgeon (e.g., non-cancer specific DRGs with
patients discharged by an Oncologist Surgeon such as: MS-DRG 003 TRACH W
MV 96+ HRS OR PDX EXC FACE, MOUTH, & NECK DX W/MA)
 MS-DRGs and ICD-9 codes linked to cancer related inpatient services provided by
"Other Specialists" (e.g., ortho surgeon, ENT, thoracic surgeon, radiologist, etc.)
 Other not captured in above coding, to span the cancer care continuum: inclusive
of screening, history, and other V-codes (regardless of physician or location)

 Extract from data warehouse, the above clinical code groupings as separate
revenue and usage data, applied across financial classes



Revenue and Usage Data (UB-04 Data Fields) – Facility Analyses:
Inpatient Hosp. Facility Payer Product (e.g., Internal Billing Billed Rev Code MS-DRG
commercial, Medicare System Payer Revenue MDC MS_DRG Description
Top 10 Payer Name Description (V-28)
Adv., Managed Medicaid) Plan Code Code

Outpatient Hosp. Facility Payer Product (e.g., Internal Billing Billed Primary
Rev Code
commercial, Medicare System Payer Revenue CPT/HCPCS CPT/HCPCS Code Description
Top 10 Payer Name Description
Adv., Managed Medicaid) Plan Code Code Code
CY or FY Total Total Total
Primary ICD-9 Facility DRG % share Total Net
Primary ICD-9 Description From: To Patient Charges Expected
Code Discharges of Dicharges Payments
Time Period Days Billed Payments
“Inpatient”

CY or FY Total No. of CPT Total
Primary ICD-9 Total Charges Total Net
Primary ICD-9 Description From: To CPT Visits/ Visits/Cases % Expected
Code Billed Payments
Time Period Cases Share of Total Payments
“Outpatient”


 O/P Care component of Oncology Service Line, current state care continuum and
associated clinical code groupings and code descriptions, billed by hospital
Profit &Loss MCPayerDataFormat (Illustrative DataFieldFormat Template)
(irrespective of hospital O/P campus or freestanding ambulatory facility)

 O/P Rev or CPT of TOTAL ALL OUTPATIENTS definedVisits Charges Contract Net
O/P range services as Total Indirect Contrib Indirect Net
Cases by oncology related Hospital Revenue Codes,
ICD-9 and CPT Codes for diag., proceduralRevenue therapeutic related services
Codes Revenue and Direct Variable Margin Fixed Income

 Hospital O/P servicesand G0340)
RC 0333 CyberKnife (CPTs G0339 provided by either an Oncologist or an Oncologist Surgeon
(e.g., such as chemo and non-cancer specific outpatient services )
RC 0333 Particle Beam, Gamma Ray orLinerarAcceleratorStereotactic Radiosurgery (CPT Codes 61796-61800, 63620-63621, 77371, G0173, G0251)
 Hospital O/P Revenue, CPT & ICD-9 codes linked to cancer related O/P services
RC 0331-0332, 0335 Chemotherapy Administration(ChairFee + Chemo Drug Admin.)
provided by "Other Specialists" (e.g., gynecologist, urologist, radiologist, etc.)
RC 0260, 0269 IV Therapy
 Other services not captured in above coding, to span the care continuum: inclusive
RC 0280, 0289 Oncology Treatment
of screening, history, and other V-codes (regardless of physician or location)
RC 0320-0324, 0329 OtherDiagnostic Radiology
 Extract from data warehouse, the above clinical G0339-G0340)groupings as a separate
RC0330,0333,0339 RadiationTherapy (withoutCPT Codes 6179-61800, 63620-63621, 77371, G0173, G0251, code
RC 0404 PET Scans

Revenue and Usage Data (UB-04 Data Fields) – Professional Analyses:
Revenue & Usage Data Format (Illustrative Data Field Format Template)
Data/Report Run 1 is for the most recent full calendar or fiscal year in which all service dates have been fully accounted for
in the paid claims data (NOTE: Data should be retrievable from CMS 1500 Claim Form Fields, Billed to Each Managed Care Payer)

Data/Report Run 2 is for the most current calendar or fiscal year YTD (e.g., through end of ]Date])
Professional Fees Payer Product (e.g., Internal Billing CPT/HCPCS
commercial, Medicare System Payer Codes (Box CPT/HCPCS Code Description
Top 10 Payer Name Adv., Managed Medicaid) Plan Code 24, CMS 1500)

ICD-9Code CYorFY Total No.of Total
CPT/HCPCS % Total ChargesBilled Total Net
(Box 21, CMS PrimaryICD-9Description From:To Units (Box 24 Expected
Share of Total (Box 24 F, CMS 1500) Payments
1500) Time Period G, CMS 1500) Payments


 Professional Services component of Oncology Service line, current state care
continuum and associated clinical code groupings/code descriptions (for employed
physicians/mid-level practitioners eligible for payment)
 I/P and O/P range of services as defined by related MS-DRG, Revenue Codes,
ICD-9 and CPT Codes for diag., procedural and therapeutic related services
 Hospital I/P & O/P services (cancer clinical groupings) provided by Oncologists or
an Oncologist Surgeons (e.g., cancer/non-cancer specific services)
 Hospital I/P and O/P MS-DRG, Revenue, CPT and ICD-9 codes linked to cancer
related services provided by "Other Specialists" (e.g., gynecologist, orthopedic
surgeon, urologist, ENT, radiologist, etc.)
 “Other” not captured in above cancer care continuum, e.g., radioactive seeds
and Pharmacy J/Q-codes (regardless of physician or location)
 Extract from data warehouse, the above clinical code groupings as a separate



Illustrative E.G. – Oncology Service Line: Care Settings & Access Gaps

Oncology Service Line Care Setting Decision Criteria Clinical Risk
Frequency of Frequency of demand (cancer surgery vs
Care setting
Access? weekly chemo or radiation therapy)
sorting
Invasive Anatomic invasiveness, sedation, vascular
criterion
Noninvasive? access, potential for complications
relative to
Likelihood of
Disease/injury w/high potential for admission need for I/P,
Admission?
O/P (on
Facilitates physician and patient compliance
Clinical Pathways? campus) vs.
with clinical pathways
freestanding
Capital Intensity? Tech requiring capital or high level support ambulatory
Large fixed resources placed near statistical care setting…
Market Demand?
median areas of demand info used for
Operational both strategic
Reduces variability/improves quality of care
Efficiency? planning &
Cost Reduction? Reduces hospital costs vs. shifts costs budget
preparation
Physician Alliance? Aligned vs. misaligned incentives

Service Line Care Continuum – How to Price?

Patient-Centric Population Management Model

Tier 1 – Primary Care Physicians Ambulatory, direct care
providers, medical home
N a v ig a t io n / C a r e M a n a g e m e n t L in k a g e s

D e m a n d Volu m e
“ In - N e t w o r k ” R e f e r r a l C o o r d in a t io n
Tier 2 – Specialists, Home Care, Ambulatory, more
S u p p o rtive H o u s ing
V a lu e N e t w o r k H IE - E H R - P a t ie n t

Allied Health and Telemedicine specialized focus
Tier 3 – Single and Multi-Service
O/P Facility or Compre.
Ambulatory Care Centers
Amb. Care Center
Tier 4 – Community Hospital, Sub-

A c u ity / C lin ic a l R is k
I/P Facility On/Off Acute
acute and Skilled Nursing Campus

Tier 5 – Tertiary/Quaternary Trauma, Regional I/P Facility,
Acute, LTAC and IRF High Acuity/Complex
Chronic Care

Goals: Clinical Integration… High Efficiency…
Optimized Revenues by Care Setting

Illustrative E.G. – Oncology Service Line: Admin/Tech/Support Costs

Service Line – Identifiable Direct Expenses
 Clinical and Administrative Human Resources
 Network Infrastructure (IT and Clinically Related Medical Equipment)
 Community Outreach and Service Line Promotion
 Facility Requirements (consider demand, capacity & location factors)
 Certifications, Accreditations, and Memberships
Service Line – Indirect Expenses
 Cost Accounting System:
– Extract patient level detail across the revenue and usage data
evaluated in defining current state service line capacity.
 No Cost Accounting System:
– Allocate indirect expenses based on cost report RCCs adjusting
for patient level revenue/usage by department cost center to
develop a hybrid cost allocation methodology for the service line.

Pricing and Managed Care Contracting

 Incorporate service line care continuums into overall pricing
strategy with floor (full costs+ adjustments), target (full costs +
target profit margin) and ceiling (maximum pricing at which cost
exceeds value) prices as well as alternate reimbursement
methodologies (i.e., a revenue neutral cross walk table).
– Use a “pay me right” vs. “pay me more” strategy in
negotiations.
 Seek to minimize the need for interpretation on reimbursement
for a specific service… leave nothing out to avoid multiple
points of revenue leakage.
 Develop a detailed revenue code/procedure code specific rate
template with corresponding pricing by payer product type… a
key consideration for ensuring payment compliance.

V. Impact of Physician Integration
on Different Risk Models and
Payer Contracting Strategy


V. IMPACT OF PHYSICIAN INTEGRATION ON RISK MODELS

Emerging Physician Alignment Models Post-ACA

Physician
Integration
Continuum

Joint
Venture
Purchase • PHO/IPA/PO
• Asset Purchase • MSO/PSO
• Non-Competes • Surgery, Urgent &
Imaging Centers
Employment • Employment
• Hospital
• Employment Syndication &
• Independent Ownership
Contractors • Patient Centered
Cooperation Medical Home
• Accountable Care
• Medical Directorships Organization
• On-Call Coverage • Strategic Alliances


V. IMPACT OF PHYSICIAN INTEGRATION ON RISK MODELS

Why Is Physician Alignment and Integration Important for Hospitals?
 Physician alignment is critical for…
– Better managing the care delivery process and essential in the
development of innovative care delivery models to respond to
emerging payment methodologies.
– Gaining added resource efficiencies.
– Expanding profitable patient service volume and service lines.
– Improving bed management turnover and ALOS.
– Optimizing managed/contracted care net revenue potential which
is becoming the principal source of revenues.
– Sustaining I/P services and on-campus O/P programs.
– Developing a sustainable competitive advantage.
– Widening the ambulatory funnel which leads to facility referrals.
– MANAGING FINANCIAL RISK.
– A financially sustainable business model post 2014.

PRESENTATION CLOSE
Lessons Learned
 Your business strategy/capital needs should drive payer pricing and
negotiation strategies… stick to your strategy.
 Senior level officer involvement and commitment is required.
 Do all the necessary upfront analytics… build and use a
consistent pricing strategy… quantify your business case.

Thank You
 Know your market, the range payers reimburse competitors and your
costs at a detailed level… be prepared to validate/justify yours.
 Only agree to pricing and payment rules that you can administer.
 Understand your value proposition to payers.
 Look for payers with which to collaborate and align services.
 Engage area employers/brokers… be more than a cost.
 Your core service lines must be financially sustainable.

APPENDIX
 Examples – Physician Alignment Business
Models and Aligned Delivery Networks
 Where Will the “Savings” in Shared
Savings P-4-P Come From?
 Presenter Bio


APPENDIX: ALIGNED DELIVERY SYSTEM BUSINESS MODEL
E.G., Clinical Services Integration and Care Continuum for Seniors in
ACO Model – Repurposing and Realigning Services

CMS SHARED SAVINGS ACO – FUTURE ACUTE / Multi-Hospital /
POST-ACUTE CARE NETWORK Multi-County ACO
HIGH Range of Acute and Post-Acute Services for
Network Model
Seniors with Varying Degrees of Care Complexity
Acute Full Medicare Part A
Patient Service Intensity and Cost of Care

Hospital & B with Chronic
Future Care Models – LTCHs Care Emphasis Focus
Ambulatory-Intensive
Therapy Alternative to IRFs
Sub-Acute I/P Setting SNFs
Future Care Models –
[Rehab Only Complex/High
included] Future Care Models – Risk I/P

O/P & Asst. An Expanded Severity/
Complexity Role
CORF Living Future Care Models – Physician and Professional
Community Integrated Services Integration
& Transitional Living
Home Hospice Aging Well Services
Health Future Care Models – Specialty
Neuro-Spine Rehab Services…
Integration

Adult may become SNF/IRF substitute Community Aging
Services Integration
DayC Future Care Models –
LOW Medical Home Component

LOW Patient Severity/Complexity HIGH


E.G., Health System Proposed Hybrid PACE Model: ACO/PACE
Innovation Demonstration Pilot – Repurposing/Realigning Services

HIGH Proposed System Acute, Post-Acute, Supportive Housing and Ambulatory Services for
Higher Risk/More Complex Care Medicare and Medicaid Patients – PACE Hybrid Model
Patient Service Intensity and Cost of Care

Multi-Hospital /
Single County
Acute Hybrid PACE/ACO
Ambulatory-Emergent Hospitals
Care, D&T, Intensive
Network Model
Therapy Alternative to
Sub-Acute I/P Setting, IRFs Medi-Medi Dual
Co-located/Shared
Service Practices SNFs Complex/High Risk I/P
Eligible Focus
(Rehab and Higher Risk O/P
included)
Compre. Asst. An Expanded
Amb Care Living Severity/
Centers Program Complexity Role

Home Community Physician and Professional
Health Integrated & Services Integration
Transitional Living
Adult Aging Well Services
Structured to allow
Day HC IRF/LTAC/Acute services to
Integration
Support. transition to more community Community Aging
Housing integrated setting Hospice Services Integration

Independence at Home, Medical
LOW Home & ADHC Medical Models

LOW Patient Severity/Complexity HIGH

E.G., Paradigm Shift: Creating an Integrated Care Continuum for
Seniors – Repurposing/Realigning Services
Strategic Re-Purposing: Integrated Comprehensive Ambulatory Care, Supportive
Housing, Acute Care and Post Acute Care Continuum and Physician Alignment

Community-Based Care Outpatient Services & General Acute Care &
& Ambulatory Clusters Senior Supportive Housing Tertiary/Quaternary Care
 Comprehensive Med Ctr Acute Bed DEF
Ambulatory
ABC Other
Pharmacies Care Center Conversion
Physician
Practices

 Comprehensive Physician
Physician Practices
Practices
 Comprehensive Ambulatory
Care Center
 Transfers from Medical Center
 Ind. Homes Ambulatory
Physician
Care Center E/D and Observation Unit for
 Senior Housing Practices
 Indept. Living  O/P Emergent Care, Acute and Post-Acute Care needs
 NORCs Diagnostic, Procedures
and Therapeutic Services
Other Post-Acute
 Small Short Stay/ & Rehab Care
 Independent Physician Practices aligned with Med Ctr. and System Observation Unit System
 Med Ctr Employed PCPs in Comprehensive ACCs which have leased Schaffer
Rehab-
 Assisted Living ECC
Sub-
space to specialists and operate as medical home model of care Acute-
 Senior Housing SNF
– Includes a service mix appropriate range diagnostic, therapeutic, Facility
 Medical Office Building
procedural and rehab services targeted for chronic care patients
– Incorporated E/D Level 1 – 3 (stabilization/transfer protocols) and  Home Care Service providers
possible observation beds  Rehab Care at Medical Home
– Possible medical adult day care Value Network - Enabling Practices and Comprehensive ACCs
 After/before hours urgent care network across affiliated PCP HIE/EHR/communications  Rehab/Stroke/Other service Inpatient
practices technology linkages for transfers from Med Ctr to facilities in
patient care coordination/ the System or other post-acute
 Patient care coordination, navigation, transfers and referrals managed
navigation/clinical integration providers as medically appropriate
across the System-Med Ctr continuum of care network
 Coordinate community reintegration


Kalkhof Final Va Dc Hfma Strat Mgd Care And Hc Reform 9 28 12

Kalkhof Final Va Dc Hfma Strat Mgd Care And Hc Reform 9 28 12

Recommended

Recommended

More Related Content

What's hot

What's hot (12)

Viewers also liked

Viewers also liked (20)

Similar to Kalkhof Final Va Dc Hfma Strat Mgd Care And Hc Reform 9 28 12

Similar to Kalkhof Final Va Dc Hfma Strat Mgd Care And Hc Reform 9 28 12 (20)

Kalkhof Final Va Dc Hfma Strat Mgd Care And Hc Reform 9 28 12