Risk-Based Payment Models

© 2019 Association of International Certified Professional Accountants. All rights reserved.
Risk-Based Payment
Models
2019 Health Care Industry Conference
November 6-8, 2019 Coronado, CA
David W. McMillan, Principal
AICPA Health Care Industry Conference #AICPAhealth

David McMillan
David leads strategic planning exercises, physician-
hospital alignment and network development projects,
mergers & acquisitions, and provides advisory services
to executives and boards of directors. David’s
experience includes the design and valuation of many
payment models, distribution formulas, joint ventures,
and other transactions. David also serves as PYA,
P.C.’s Chief Financial Officer. David McMillan CPA
PYA, P.C.
Managing Principal,
Strategy and
Integration
CFOAICPA Health Care Industry Conference

How We Got Into This Mess
• FFS system incentivized(s) utilization due to volume-
based reimbursement
– Sick care v. healthcare
– Duplicative, uncoordinated care
• Over-regulation in a futile attempt to prevent
overutilization and control costs
• Fragmentation among consumers, payers,
purchasers
• “Data blind”

The $3.5 Trillion Question
What happens when
the buyer wants to buy
health instead of
healthcare?
Sick
Care
Recovery
Care
Well
Care

Fee-for-Service Reimbursement
INCENTIVES
MEASURES
PROVIDERS
PATIENTS
RISK
REGULATORS
 Maximize patients
 Maximize services
 DRGs and APCs
 CPTs
 Fraud and abuse laws
 Reimbursement rules
 Silos
 Destination orientation
 Unmanaged chronic conditions
 Uninvolved in care
 Resides with payer
 Increasing costs
$
$
Bank
!

Value-Based Reimbursement
Risk-
Based
Payment
Models
emerge
from VBR
INCENTIVES
MEASURES
PROVIDERS
PATIENTS
RISK
REGULATORS
 Manage patient population
 Optimize health
 Quality
 Efficiency
 Network participation
 Continuum of care
 Retail orientation
 Educated
 Engaged
 Moves to providers
$
$
Bank
!

CMS – New Models and Initiatives
2018 Report to Congress
• Bundled Payments for Care Improvement Advanced
• Integrated Care for Kids Model
• Maryland Total Cost of Care Model
• Medicare ACO Track 1+ Model
• Pennsylvania Rural Health Model
• Vermont All-Payer Accountable Care Organization Model
• Accountable Health Communities
• ACO Investment Model
• Bundled Payments for Care Improvement (Models One-
Four)
• Comprehensive Care for Joint Replacement Model
• Comprehensive End-Stage Renal Disease Care Model
• Comprehensive Primary Care Initiative
• Comprehensive Primary Care Plus Model
• Health Care Innovation Awards Health Care Payment
Learning and Action Network
• Home Health Value-Based Purchasing Model
• Initiative to Reduce Avoidable Hospitalizations Among
Nursing Facility Residents
• Maryland All-Payer Model
• Medicaid Innovation Accelerator Program
• Medicare Advantage Value-Based Insurance Design
Model
• Medicare Care Choices Model
• Medicare Diabetes Prevention Program Expanded Model
• Medicare-Medicaid Financial Alignment Initiative and
State Demonstrations to Integrate Care for Dual Eligible
Individuals
• Medicare Prior Authorization Model: Non-Emergent
Hyperbaric Oxygen Therapy
• Medicare Prior Authorization Model: Repetitive
Scheduled Non-Emergent Ambulance Transport
• Million Hearts®: Cardiovascular Disease Risk Reduction
Model
• Next Generation Accountable Care Organization Model
• Oncology Care Model

Focus and Simplicity
“Simple can be harder than complex.
You have to work hard to get your thinking
clean to make it simple.
But it’s worth it in the end because once
you get there,
you can move mountains.”
– Steve Jobs

Organizing the Chaos – What Really
Matters?

The Health Care Payment Learning &
Action Network (LAN)
• A public-private partnership with a mission to accelerate the care
system’s transitions to alternative payment models (APMs)
• The LAN’s purpose is to facilitate the shift from the fee-for-service
(FFS) payment model to a model that pays providers for quality care,
improved health, and lower costs
• The LAN is led by a Guiding Committee that provides executive
leadership and strategic direction to accelerate achieving the goals
• The LAN offers stakeholders a broad portfolio of resources to facilitate
that transition, such as:
‒ APM Framework
‒ Primary care and maternity care APM resource banks
‒ White papers on a wide range of topics related to designing episode-
based and population-based alternative payment models
• Launched – 2015
• By – HHS
• Guiding
Committee
members include
policy-makers,
payers, providers,
academicians,
and others

SOURCE: The Health Care Payment Learning & Action Network
The APM
Framework
helps to
make sense
of the
dizzying
array of
risk-based
models and
options

Category 2 – FFS Link to Quality and
Value
The
definition of
“Risk-Based
Model”
depends on
application
and context
There are so many Category 2 programs – too many to list
among federal, state, local, and private payers; to focus on
a few of those that are well-known:
• Merit-Based Incentive Payment System (MIPS)
• Hospital Readmissions Reduction Program
• Hospital Value-Based Purchasing
• Hospital-Acquired Condition Reduction Program

Value
The
definition of
“Risk-Based
Model”
depends on
application
and context
• Other 2B and 2C examples - P for P and P for Q
‒ Often found in Medicare Advantage and Commercial plans
‒ Payer highlights gaps in care for provider’s attention
‒ Payer receives:
‒ Enhanced data – interfaces to EMRs still lacking
‒ Better star ratings – enhanced premium payments
• 2A – Foundational Payments for Infrastructure and
Operations
‒ Ambulatory Care Management
‒ Remote Patient Monitoring
‒ Chronic Care Management (sort of…)

Value
• Operates in 18
regions across
US
• 2,912
participating
primary care
practices
• Five-year
participation
agreements
• 2A, 2B, and 2C - Comprehensive Primary Care Plus
‒ Launched in two rounds – January 2017 and January 2018
‒ No new entrants
‒ Goals
‒ Access and Continuity of Care
‒ Care Management
‒ Comprehensiveness and Coordination
‒ Patient and Caregiver Engagement
‒ Planned Care and Population Health
‒ Different risk tiers provide for differing payment amounts
‒ Care Management Fee
‒ Prospective Performance-Based Incentive Payment
‒ Payment under Medicare FFS Schedule

Category “2-ish” – What’s Next?
• First application
date - April 2020
• Round 2 in 2021
• Who depends in
part on where; 18
CPC+ regions plus
8 new regions
• Providers receive
quarterly data
reports
• NOIA are required,
but not binding
• Primary Care First
‒ Five-year model
‒ Based loosely on PCP+
‒ Two Tracks
‒ Payment Model Option
‒ PBPM Population-Based Payments
‒ Flat Primary Care Visit Fee
‒ Performance-Based Adjustment
‒ High Needs Payment Model Option (for seriously ill
populations)
‒ One-Time Payment on First Visit
‒ PBPM Payment
‒ Flat Fee per Visit
‒ Potential Quality Payment
‒ No FQHC or RHC participation

Knowing Your Population’s Needs
ClinicalSocial Behavioral
High Cost Patients
5% - Complex/comorbidities
15%-35% - Rising Risk – May
not be “under control”
60% - 80% - Low Risk – Keep
patient healthy and “loyal”
Adapted from Advisory Board Company
Priorities –
where to
focus limited
infrastructure

Category 3 - Bundled Payments
• Definition: An amalgamation of healthcare services
in a professional healthcare setting for a single
fixed price
‒ Example: Cardiac bypass surgery
• Such services are typically conducted by two or
more providers
• The goal of these bundled payments is to improve
the quality and efficiency of care

Category 3 – APMs Built on FFS
Architecture • Original
entrants began
participation
October 1,
2018
• New entrants
will join
January 1,
2020
• No additional
entry dates
announced
• Bundled Payments for Care Improvement – Advanced (BPCI-A)
‒ Triggered by qualifying IP admission or OP code – Anchor Stay
‒ Typically 90 days post Anchor Stay
‒ Included services
‒ Physician Services
‒ Inpatient Admissions
‒ Long-Term Care Hospitals
‒ Inpatient Rehab, Skilled Nursing, Home Health
‒ Lab
‒ Durable Medical Equipment
‒ Part B Services
‒ Hospice Services
‒ There are certain excluded services
• Commercial Payers are also participating in Bundled Payment
options

Category 3 - BPCI-A Reconciliation
Process
BundledPayments
CMS compares the fee-for-service amounts from
Episodes to Target Prices
After applying payment adjustments and capping
outliers, amounts are represented by a Net
Payment Reconciliation Amount (NPRA) OR
Repayment Amount
The Episode Initiator is to review the
reconciliation to ensure payment adjustments,
exclusions, and outliers are properly accounted for,
then notify CMS of any errors
In addition to calculating reconciliation amounts,
CMS performs true-up calculations to update initial
reconciliation amounts; this occurs 6 and 12
months after the initial reconciliation
Finally, for each Participant, CMS calculates and
monitors Post-Episode spending between days 91
and 120 of the post-anchor period, referred to as
the Post-Episode Monitoring Period
SOURCE: Centers for Medicare and Medicaid Service

Pause - Data Needs are Significant
Data is Essential to success in all APMs
• Risk stratify patient populations
• Identify outliers to make interventions
• Hold providers accountable throughout the care
continuum to provide the appropriate level of care
• Reduce readmissions and improve outcomes
If you can’t measure it, you can’t improve it
-Peter Drucker
BundledPayments

Automate Data Processing
Having the ability and infrastructure to automate the transformation
and integration of data allows organizations to:
• Quickly adapt to changes in data feeds
• Spend more time acting on actionable insights from the
data, rather than manually processing mountains of data
BundledPayments

Architecture • Annual
Application
cycles
• Annual
January 1
entry dates
• Three-year
participation
agreements
• Shared Savings
‒ Populations not episodes
‒ Retrospective or prospective
‒ All services vs carve-outs
‒ Category 2 proficiency and necessary to succeed at
Category 3
• Medicare Shared Savings Models – Pathways to
Success
• Commercial Payers are also participating in Shared
Savings Arrangements

Shared Savings – Understanding
Health Influencers
BundledPayments

Category 3 – Pathways to Success
• Upside only
agreements
are fading into
the past
• Scales of
diminishing
returns
• What is next?
(Category 4?)

Architecture
• Shared Savings Infrastructure Needs
‒ Data-to-Timely-Information for Providers
‒ Distribution Methodology
‒ Care Management and Coordination
‒ Means to Address Significant Social Determinants
• Lessons Learned from MSSP:
‒ Do not underestimate the learning curve
‒ Less than 25% of the ACO’s earn shared savings in the first
year
‒ Physician-led ACO’s fare better than health-system-led
ACO’s
‒ Post-acute care often emerges as an opportunity for
savings – achievement of those savings can be difficult
BundledPayments

SOURCE: The Health Care Plan Learning & Action Network

Decisions on when and how to transition to APM strategies and underlying
operational platforms must be timed appropriately
Too Slow Too Fast
On Time
 Leave FFS $ “on the
table”
 Incur expenses that
may not be reimbursed
 Consume time/effort of
management
talent/human resources
 Frustrate physicians
 Risk payment penalties
 Risk losing key
populations to other
networks
 Risk financial
opportunity related to
upside risk
 Fail to transform
mindset of the medical
community to operate
efficiently
Concluding Thoughts - Timing Is Everything:
Transitioning to APMs and Risk-Based Models

The Ultimate APM –
Thoughts Regarding a Single-Funder System

Thank you
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Risk-Based Payment Models

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