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Should You Consider the Accountable Health Communities Model?

Posted by Matthew Smith on Feb 22, 2016 1:53:44 PM

By Tawnya Bosko, DHA, MS, MHA, MSHL, Vice President, and Megan Calhoun, MS, MSW, Manager,                   GE Healthcare Camden Group

questions.jpgOver the past five years, CMS has developed numerous innovative models, grants, and initiatives aimed at providing high-value care to vulnerable populations such as Medicaid and Medicare beneficiaries. CMS recently announced its most recent model, a five-year test named the Accountable Health Communities (“AHC”) Model. The underlying premise of this model is the assumption that enhanced coordination between providers and community-based social service organizations for Medicaid and Medicare patients can help to achieve the central tenets of the Triple AimTM: higher patient satisfaction, lower overall costs of care, and better clinical outcomes. With the introduction of each new model, organizations often wonder whether they would benefit from participation. 

Questions to Ask

If your organization answers “YES” to any of the questions below, you may want to consider application for the AHC Model!

  • Do you have a high volume of Emergency Department “frequent fliers” due to poorly managed psychosocial issues?

OR

  • Are healthcare services generally being mis-utilized due to the lack of sufficient psychosocial services?
  • Are there community-based organizations in your service area or surrounding neighborhoods that are not integrated into patient care plans or whose services are not fully utilized?
  • Does your payer mix consist of a high proportion of frail, underserved, or complex patients, such as Medicaid and/or Medicare patients or those dually eligible for Medicare and Medicaid?
  • Have you participated in or tried other care coordination initiatives (through CMS or otherwise) and been unable to successfully curb the cost curve?
  • Would you benefit from additional funding to integrate medical and behavioral care with social services?
  • Would your providers be open and willing to greater collaboration and coordination of care outside the four walls of current healthcare delivery sites?

It is clear that socioeconomic issues play a major role in the health of populations. According to CMS award recipients under the AHC model, referred to as “bridge organizations,” will oversee the screening of Medicare and Medicaid beneficiaries for social and behavioral issues, such as housing instability, food insecurity, utility needs, interpersonal violence, and transportation limitations, and help them connect with and/or navigate the appropriate community-based services.

If your organization struggles to manage the health of patient populations that have significant social support challenges, this program may be right for you. Up to 44 bridge organizations will be selected for the AHC model, which will deploy a common, comprehensive screening assessment for health-related social needs among all Medicare and Medicaid beneficiaries accessing care at participating clinical delivery sites.

Three Scalable Approaches

CMS has explained that the model will test three scalable approaches to addressing health-related social needs and linking clinical and community services – community referral, community service navigation, and community service alignment. Bridge organizations will inventory local community agencies and provide referrals to those agencies as needed. They may also provide intensive community service navigation such as in-depth assessment, planning, and follow-up until needs are

To measure the effectiveness of the model on impacting total cost of health care utilization and quality of care, the primary evaluation will focus on reduction in total health care costs, emergency department visits, and inpatient hospital readmissions.

Eligible applicants for the AHC model according to CMS are community-based organizations, hospitals and health systems, institutions of higher education, local government entities, tribal organizations, and for-profit and not-for-profit local and national entities with the capacity to develop and maintain a referral network with clinical delivery sites and community service providers.

Applications for the AHC model are due March 31, 2016.

Accountable Health Communities Model


bosko_headshot.pngDr. Bosko is vice president at GE Healthcare Camden Group and has over 20 years of experience in healthcare management and strategy. Her areas of focus and expertise include healthcare reform, market forces, and strategic analysis, specifically around hospital-physician alignment, emerging reimbursement and incentive models, performance optimization, payer strategy, and the intersection of health policy and delivery system transformation. Dr. Bosko is a nationally-recognized speaker on healthcare market trends and insights, focusing on the financing and delivery of care. She frequently presents at industry conferences and is the author of multiple articles for leading industry journals and publications on the transition to value-based reimbursement and health system strategy. She may be reached at Tawnya.Bosko@ge.com or 310-320-3990.

Megan.pngMs. Calhoun is a manager with GE Healthcare Camden Group and specializes in the areas of care management strategy and design, strategic and business planning analysis, accountable care organization applications, development and implementation, and the development of clinically integrated organizations. Ms. Calhoun has supported numerous clients with the completion of Medicare Shared Savings Program (“MSSP”) applications and implementation strategy and planning. Her experience includes care model design and implementation that spans the continuum. She may be reached at Megan.Calhoun@ge.com or 310-320-3990. 

 

Topics: CMS, Triple Aim, Tawnya Bosko, Megan Calhoun, Accountable Health Communities

Moving from Utilization Management / Referral Authorizations to True Population Health Management

Posted by Matthew Smith on Feb 9, 2016 4:28:16 PM

By Tawnya Bosko, DHA, MS, MHA, MSHL, Vice President, and Megan Calhoun, MS, MSW, Manager,                   GE Healthcare Camden Group

population_health.jpgHistorically, many organizations managing care in a risk-bearing structure such as independent practice associations, medical groups, or related enabling entities such as management services organizations have primarily concentrated on utilization management, referral authorization, and claims processing, with attention to cost containment and ensuring all compliance standards are met. These functions have served as an "operational core," focused on getting the job done and meeting necessary requirements.

As they evolve, these organizations realize that simply "getting it done" will not suffice; they need to increase the focus on the clinical delivery process in order to affect the health outcomes of their populations.

To read this article in its entirety, please click the button below to immediately access CAPG Health.

  Population Health

Topics: Population Health, Risk-Based Contracting, Healthcare Analytics, Tawnya Bosko, Megan Calhoun

Best of 2015: Top 10 Considerations When Transitioning Physicians to Payment-for-Value

Posted by Matthew Smith on Dec 28, 2015 10:51:59 AM

Tawnya  Bosko, DHA, MS, MHA, MSHL, Vice President, GE Healthcare Camden Group

change-ahead-sign.pngLeading into the new year, GE Healthcare Camden Group will be re-publishing the most shared and popular blog posts of 2015.

With increased focus on payment based on value, physician practices and those involved with physician practices need to plan for how to transition to new reimbursement models. Here are the top considerations to keep in mind when implementing value-based structures:

1. How do you define value? 

For all the talk of compensating physicians based on value as opposed to volume, there is no consistent methodology for measuring “value.” Often, payers define value in different ways, making it difficult for physician practices to understand what is required of them in order to meet criteria. Leadership should define what value means to the practice with insight from key payers. Typically, initial steps in measuring value are based on compliance with designated measures from the Healthcare Effectiveness Data and Information Set, but depending on the program, different criteria may be used. Further, the practice may include measures that it has identified as needing improvement, such as patient access, completing notes, meeting meaningful use, or responding to lab results in a timely manner.

2. How do you report on value?

Once the practice has determined the clinical measures or other criteria that will define value, it must proactively assess information system readiness for reporting on these measures. Historically, many payers have tracked these values based on claims data. Practices must be able to monitor, track, and report on performance related to value metrics. Assess the system, and ensure that necessary data can be extracted efficiently and accurately for reporting. Build custom fields within the electronic health record (“EHR”), or consider an add-on reporting tool if needed.

3. How do you document value?

Just as important as determining how to generate reports to measure the value metrics, practices must determine how physicians and other providers should document their work within the EHR in order to ensure their results are captured. Often, EHRs have several ways and areas in which documentation of a certain procedure or services can be documented. Best practice is determining the field or area to document each measure so that it is clearly communicated to physicians and easily reported on, retrospectively.

4. Incentive program - carrot or stick?

Once the metrics to measure value have been determined, what is the incentive (carrot) or penalty (stick) for meeting or failing to meet value as defined by the group? There must be enough incentive to gain buy-in so that physicians do not feel as though extra work is being added without additional benefit. And, there must be enough penalty at stake for the program to be taken seriously. It is about finding the right balance. Is it a withhold on revenues with the opportunity to earn X times the withhold in return if measures are met? Is there a “direct” line of sight between the incentive earned by physicians and the impact on their compensation? There are many models that could be implemented to meet the practice’s needs.

5. Educate, educate, educate

This point cannot be emphasized enough. Often, healthcare leaders think the difficulty is in defining value, measuring value, and designing the incentive program. While those can be complex, educating the physicians on the measures, model, and how to document them is a very important step and could make or break your program. Remember that these situations often involve changing the way a physician has practiced and/or documented and that it takes time, education, and re-education. Ensure the appropriate processes and tools are in place to communicate and educate effectively.

6. Living in a grey world/burden of value

Understand that during this transition to payment-for-value, physicians are living in a grey zone. They are expected to take extra steps to meet value criteria, but the majority of reimbursement may still be based on a fee-for-service or volume-based methodology. Essentially, they are asked to spend extra time with patients and on documentation in order to meet quality measures but also to continue to meet their productivity targets in order to sustain the viability of the practice. Typically, the burden of many of the value-based measures falls hardest on primary care physicians. Be aware of this when designing incentive models. Do not do too much at once and overwhelm physicians to the point where they give up.

7. Transparency of data

Physicians, rightfully so, are often skeptical of performance-related data. They have questions...make sure tyou have answers. Be transparent with data. If a physician asks for the names of patients where they failed on a certain measure, ensure the information is provided. It is important to not only be transparent with data but to build confidence in results.

8. Timeliness of results

Be timely with reporting. Provide information to physicians in a timely and regular manner so that they are able to improve any deficiencies in the measurement period. Do not wait until the point where it is too late to correct issues for the current performance year. It is in the practice’s interest to improve each physician’s performance. Use the data and reporting to provide feedback and to help them be successful in the program.

9. Impact on total compensation

Understand the impact that the design of the incentive program has on total compensation. What percentage of total compensation does the incentive (or withhold) represent? Does the physician employment agreement need to be revised to incorporate the incentive model? If physicians are on salary guarantees, how is that addressed so that the incentive/penalty falls on them and not the employer?

10. Engage payer partners

Work with payer partners and do it early. Discuss their needs when measuring value and pursue discussions on how they can support the transition. Make it a collective effort where initiatives are streamlined and convergent. It is not practical for practices to have multiple different models for multiple different payers; be open with major payers, and develop a program that is supported uniformly.


bosko_headshot.pngDr. Bosko is vice president at GE Healthcare Camden Group and has over 20 years of experience in healthcare management and strategy. Her areas of focus and expertise include healthcare reform, market forces, and strategic analysis, specifically around hospital-physician alignment, emerging reimbursement and incentive models, performance optimization, payer strategy, and the intersection of health policy and delivery system transformation. 

Dr. Bosko is a nationally-recognized speaker on healthcare market trends and insights, focusing on the financing and delivery of care. She frequently presents at industry conferences and is the author of multiple articles for leading industry journals and publications on the transition to value-based reimbursement and health system strategy. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

Topics: Value-Based Care, Physician Compensation, Payment Models, Tawnya Bosko, Volume-Based Reimbursement

Super Clinically Integrated Networks Offer Unique Opportunities

Posted by Matthew Smith on Dec 8, 2015 2:09:45 PM

Tawnya  Bosko, DHA, MS, MHA, MSHL, Vice President;  Graham Brown, MPH, Vice President and Clinical Integration Practice Leader; Marc Mertz, MHA, FACMPE, Vice President and Physician Services Practice Leader, GE Healthcare Camden Group

Super CINAs organizations assess their capabilities, resources, and infrastructure to succeed in evolving value-based reimbursement structures, many health systems have begun to partner with other health systems in a manner that allows organizational independence but fosters collaboration in areas where synergies may exist, specifically around population health management.

The creation of super clinically integrated networks ("SCINs") reflects this trend. For some, these SCINs are merely a stepping stone to full integration or merger, but to most, these affiliations are viewed as a vehicle to strengthen each of the independent members by collectively joining forces to improve healthcare value.

These SCINs could have significant strategic potential if they are able to organize appropriately, prioritize initiatives, and advance to the level of jointly assuming risk, developing effective care models, and positioning the members as an attractive option to healthcare purchasers.

Often, SCINs embark on relatively low risk activities at the outset such as optimizing the supply chain, sharing services and overhead, sharing clinical knowledge around best practices, and improving patient access (particularly when organizations are in different markets).

While these may be reasonable starting points that help to garner trust and build momentum, they will not be solid long-term strategies on their own to support sustainability of the SCIN or lead to return on investment for its members.

Establishing goals and objectives of the SCIN at the outset with cohesive strategy formulation and buy-in, as well as ensuring that it is properly resourced, will be integral to their success.

As mentioned, most SCINs that have been formed have a goal of developing joint population health management infrastructure. Defining exactly what this means and responsibilities of the SCIN versus responsibilities of each individual member is a key initial step.

Certainly, there is extensive cost associated with developing the proper infrastructure to support population health. Thus, the economic opportunities to the SCIN should be evident when compared to resourcing population health initiatives as individual organizations.

Ultimately, as the population health infrastructure is built and care model effectuated, there are many opportunities to better manage care and impact overall value. Many SCINs endeavor to offer an attractive, efficient delivery network to self-funded employers via direct to employer contracting; and this activity often begins with their own collective employee health benefits programs. More advanced SCINs progress to joint payer contracting but will need to have achieved clinical and/or financial integration to an acceptable level.

Shifting of financial risk from major payers to the SCIN through a plan-to-plan type arrangement or global capitation are other alternatives as the SCIN evolves and is better equipped to manage risk. Further, the individual exchange marketplaces and Small Business Health Options Program (“SHOP”) allow these advanced delivery networks to access individuals and small groups in an efficient manner and compete more quickly with larger carriers.

Depending on the overall goals, objectives, market characteristics, and current capabilities of each individual member and the SCIN, a provider sponsored health plan may be another opportunity to consider. Between 2012 and 2015, 54 percent of the new Medicare Advantage plan entrants were provider owned.

There is great risk in starting a health plan, but sharing this risk across organizations in the SCIN could be a mechanism to diffuse risk and share collective resources. Additionally, the mere scale in size of the SCIN provides a larger pool of lives than any individual system would have on its own. While the task seem to daunting, particularly at a time when the healthcare system is changing rapidly, embarking on these initiatives collectively may prove to be the best strategy.

There is significant opportunity for super clinical integrated networks to chart their own path and truly transform the delivery system in a positive manner. However, coordinating efforts across multiple large organizations that remain independent is not without its challenges.

Starting with the basics is a reasonable first step so long as there is a well thought out strategy and plan to more fully develop the organization to its potential.

Each individual organization will have its separate priorities. Determining how the SCIN moves forward as “one” while supporting the independence and priorities of the individual organizations will be key to their success.

An effectively designed governance structure of the SCIN that includes the chief executive officer of each member, along with one other key leadership position, is recommended. This will allow nimbleness of the SCIN in decision-making, but will also foster effective communication and alignment of strategies.

Those organizations that can pull it all together could easily set themselves apart and have significant strategic advantage in their respective market(s). Developing a detailed strategic framework for the SCIN that all parties support and holding each other accountable will serve as a foundation of success for these organizations.

This article was originally published by Modern Healthcare Executive, November 27, 2015


bosko_headshot.png

Ms. Bosko is a vice president with GE Healthcare Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization and MSO development, managed care strategy, and physician alignment. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

 

Mr. Brown is a vice president and clinical integration practice leader with GE Healthcare Camden Group and has over 25 years of experience in the areas of payer negotiations, program administration, and change management with healthcare provider, payer, government, and human service clients. He is an experienced leader in business planning and implementation for clinical integration and accountable care organization development across the U.S. He may be reached at gbrown@thecamdengroup.com or 585-512-3905.

 

mertz_headshot.pngMr. Mertz is a vice president with GE Healthcare Camden Group and has 18 years of healthcare management experience. He has 15 years of experience in medical group development and management, physician-hospital alignment strategies, physician practice operational improvement, practice mergers and acquisitions, medical group governance and organizational design, clinical integration, and physician compensation plan design. He may be reached at mmertz@thecamdengroup.com or 310-320-3990.    

 

 

Topics: CIN, Clinically Integrated Networks, Clinically Integrated Network, Tawnya Bosko, Marc Mertz, Graham Brown, Super CIN

The Bottom Line Impact of Hospital Readmissions

Posted by Matthew Smith on Sep 18, 2015 10:03:14 AM

By Tawnya Bosko, DHA, MS, MHA, MSHL, Vice President and Tina Pike, RN, MSN, MBA, HCM, Senior Manager, The Camden Group

Hospital ReadmissionsYes, there is controversy surrounding the Hospital Readmissions Reduction Program (“HRRP”). Many hospitals feel that the costs to effectively manage readmissions are more than the penalty that is incurred, thus making readmission reduction efforts a net loss; and still others feel that the formula is flawed and disproportionately impacts certain facilities such as academic medical centers and those hospitals serving communities of lower socioeconomic status.

While either of these scenarios may be true, the reality is that reducing readmissions is in the best interest of all hospitals as an initial step in transitioning to a more population health-based delivery system. Potentially avoidable readmissions result in approximately $17 billion in excess spending by Medicare alone. Additionally, potentially avoidable readmissions are a reflection of the quality of care provided across the continuum. Understanding your hospital’s current performance, the performance of care providers in the delivery network, and identifying solutions to reduce readmissions are of significant importance. Acting now will prevent larger revenue impacts in the future and will position the hospital for success.

Although readmission rates have been declining overall, 75 percent of all hospitals eligible for the HRRP (i.e., 2,610 hospitals) are receiving a penalty this year, which is an increase of 433 hospitals receiving penalties over the previous year. The average penalty is .63 percent of their Medicare reimbursement for every Medicare stay, not just those readmitted. Overall, the hospitals receiving penalties will experience an estimated $428 million reduction in Medicare reimbursements, with the largest readmissions penalty to any hospital being approximately $13.3 million.

While the financial implications are important, hospitals need to be aware of the data collection and reporting periods that impact their penalty. This year brings the maximum penalty allowed by law (3 percent) as well as additional measures, but the data for this year’s penalty was collected July 1, 2010 through June 30, 2013. This means that hospitals cannot impact their penalty for 2016 at this point in time and have only four months remaining to make any impact for 2017, which will bring a new diagnosis (Coronary Artery Bypass Graft [“CABG”]). Of importance is taking action now to protect revenue in 2018 and beyond.

Readmissions_Table1-resized-600

If a hospital is subject to a penalty and/or attempting to improve current performance, a detailed analysis stratifying readmitted patients by payer, diagnosis, and source of the readmission should be completed in order to identify priority areas. From there, hospitals should assess the internal organizational processes related to care delivery and care management. This not only includes assuring high quality care during the hospitalization, but incorporates the preparation, planning, and communication needed for a successful transition of care to a post-acute or home-based setting. 

Paths_ReadmissionsDetermination of process effectiveness includes incorporating patient goals into discharge planning and instructions, including medication reconciliation with easy to use patient tools, as well as other tailored patient and caregiver education and programs focused on certain medical conditions. Coordination with community physicians for follow-up visits is imperative. Qualitative factors such as short patient or caregiver interviews at the time of readmission may also shed light on non-obvious reasons for readmission. Additionally, the hospitalist program should be assessed from a coordination perspective with care management, discharge planning, and primary care physicians. Paths for controlling readmissions include: pre-discharge processes internal to the hospital, performance of the post-acute network, and factors associated with discharge to home. Assessing and improving these pathways is recommended.

As the U.S. healthcare system continues its transition from volume to value, readmissions penalties appear to be here to stay. The penalties will impact each hospital in a different manner, and the costs and benefits of reduction efforts must be weighed. However, controlling and reducing avoidable readmissions is a solid first step toward delivering more accountable care. Hospitals should be aware of the penalties, the impact to their facility, and the drivers of potentially avoidable readmissions. Deploying proactive and effective strategies for improvement is necessary for success in today’s healthcare marketplace.

The Camden Group, Hospital Readmissions, Readmissions Reduction


Ms. Bosko is a vice president with The Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization and MSO development, managed care strategy, and physician alignment. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

 

Ms. Pike is a senior manager with The Camden Group with over 25 years of clinical, business, and management experience in the healthcare industry. Ms. Pike’s areas of expertise include business development, strategic planning, operations management, Lean strategies, and performance and process improvement. She may be reached at tpike@thecamdengroup.com or 585-512-3900.

 

 

Topics: Hospital Readmissions, Tawnya Bosko, Readmissions Reduction, HRRP, Tina Pike, Hospital Readmissions Reduction Program

Mergers and Acquisitions: Key Considerations for Creating Efficiencies Through Consolidation

Posted by Matthew Smith on Aug 11, 2015 4:36:39 PM

By Tawnya Bosko, DHA, MS, MHA, MSHL, Vice President, and                                                                      Brandon Klar, MHSA, Senior Manager, The Camden Group

Originally published in the August 2015 issue of Compliance Today. Used with permission.

As a result of the Affordable Care Act ("ACA"), healthcare mergers and acquisitions ("M&A") have increased dramatically as providers attempt to consolidate to achieve economies of scale and provide a full continuum of services in support of population health. However, at the same time, there are specific anti-trust regulations that must be considered when contemplating a merger or acquisition ("M/A"), and recent compliance and enforcement activity shows that it is not just hospital-to-hospital consolidation that creates a concern; acquisition of physician practices can also be subject to anti-trust enforcement action. Healthcare providers must conduct effective due diligence and analyses to ensure that the efficiencies and business justifications for the M/A support the transaction, and that the benefit to the market in terms of quality and cost of care are apparent and fully achievable. Integrating anti-trust compliance into the due diligence phases of M&A considerations is imperative.

Incentives associated with the ACA, growing financial pressures, and infrastructure needs have led hospitals and other providers to seek partners in order to survive in the new healthcare delivery system. As shown in Graph 1 (below), hospital transactions have risen significantly during the post-ACA years. In this period, hospitals have attempted to align in order to provide the full continuum of care and capture the maximum patient population needed to transition to population health-based methodologies, all while seeking to create greater efficiencies from consolidation.

At the same time, hospital acquisitions of physician practices have increased for many of the same reasons, but particularly because of the financial needs of the practices and the desire of hospital systems to employ physicians as an alignment strategy in the population health transition. According to the American Medical Association, as of 2012, 53 percent of physicians were self-employed as compared to 76 percent in 1983.1 Simultaneously, the Medical Group Management Association reports that annual financial losses per provider (all multi-specialty) have increased from $143,834 in 2013 (based on 2012 data) to $235,866 in 2014 (based on 2013 data), representing a 64 percent increase in annual losses per provider. Historically, hospitals have not excelled at managing physician practices. Concurrent with the rapid increase in hospital-hospital M&As and hospital-physician group acquisitions is the evolution of healthcare antitrust laws in the post-reform era. Long-standing evidence shows that consolidation of hospitals reduces competition and drives up market prices in a fee-for-service environment. This effect is counter to the goals of the ACA and thus has received increasing scrutiny from the Federal Trade Commission (FTC). In fact, Edith Ramirez, Chair of the FTC, recently stated:

The success of health care reform in the United States depends on the proper functioning of our market-based health care system. The current consolidation wave could have substantial consequences for health care reform efforts that depend heavily on competition to control costs and improve quality.… Consolidation risks upsetting this competitive dynamic and harming consumers.2

In line with the FTC’s concerns, there have been more challenges to consolidation activities, including the Promedica-St. Luke’s case in which the U.S. Court of Appeals for the Sixth Circuit upheld the FTC decision to block the hospital merger of ProMedica and St. Luke’s Hospital in the Toledo, Ohio market due to the reduction in competition and likelihood of increasing prices in the way of premiums and copays for consumers.3 Further, in a historic case the FTC challenged the acquisition of Saltzer Medical Group ("Saltzer") by St. Luke’s Health System in Idaho based on the tenet that it would violate federal and state anti-trust laws. Although St. Luke’s argued that the acquisition created better coordination of care and supported the goals of the ACA, they could not show that the efficiencies would decrease the overall costs of care while improving quality.4

Although consolidation by way of M&As may be the best alternative in some cases in order to succeed under value-based payment and population health based models, it is imperative that hospitals and medical groups are able to demonstrate the efficiencies of the consolidation outweigh the risks under reduced competition. Ultimately, these systems must show not only the improved quality and reductions in costs associated with the M/A, but also illustrate how the efficiencies and cost reductions are translated to reduced cost of care that is passed on to consumers, and why these efficiencies can only be gained through M/A. Key considerations when considering new mergers or acquisitions include:

  • In hospital-hospital transactions, what efficiencies can be created between the entities that will reduce overall costs, and how can that translate to reduced costs of care for consumers?
  • In hospital-medical group transactions, what efficiencies can be created between the hospital and medical group that will reduce overall costs, and how can that translate to reduced costs of care for consumers?
  • Is the merger or acquisition the only way to accomplish the stated goals? Is there another structure that can produce similar results while keeping the organizations independent?

Hospital-Hospital Transactions

Efficiencies associated with hospital-hospital transactions are regularly cited by the organizations’ boards and senior leadership as a fundamental driver to formally merge operations, yet many newly formed firms are ill prepared to achieve and sustain these savings without significant planning or external consultation. It is for this reason that the FTC has increased its scrutiny of submitted Business Plans of Operational Efficiency ("BPOE") associated with proposed transactions as a means by which to overcome the potential anticompetitive effects of the transaction.

Successfully merged firms have achieved efficiencies across the myriad of administrative, support, infrastructure, and clinical hospital functions while demonstrating their ability to enhance quality through care model redesign and clinical programmatic alignment. Efficiency plans for such integrations were framed and constructed pre-transaction with the support of external healthcare experts, respecting each party’s inability to share competitively sensitive information. The plans were further refined and enhanced post-transaction with dedicated multidisciplinary teams composed of representatives of the transacting parties focusing on specific functional integrational plans. These efficiency plans were built around a clearly articulated vision for the merged firm and maintained well-defined action plans specifying how and when each efficiency would be achieved, the likelihood of achieving each efficiency, the associated quantifiable savings, and any related capital or operating costs of implementation. When well-constructed plans are developed and implemented, the operational and financial benefits are often the first advantages illuminated. But with time, these efforts drive cultural alignment that regularly translates into further collaboration and efficiencies beyond those previously highlighted.

Short-term efficiency savings opportunities can be achieved by integrating back-office functions such as finance, human resources, and legal services. Full consolidation of staff and contract services will lead to substantial savings, because these efficiencies can be clearly achieved and sustained through a merger. The centralization of management and joint contracting for services and supplies represent efficiencies in the support and infrastructure departments that can be achieved in the shortto mid-term range post-transaction. These efficiencies are often challenged by regulatory agencies, because hospitals are frequently unable to provide reasonable means to verify or quantify efficiencies savings pre-transaction. Clinical efficiencies have been proven to yield the largest efficiencies of merged firms, but the likelihood of achieving such efficiencies varies greatly, because they will often require further vetting and stakeholder support that is unattainable pre-transaction, leaving these efficiencies speculative to a degree.

Despite the challenges with identifying and quantifying efficiencies associated with mergers, BPOEs have been able to translate to lower costs of care for patients in two principle ways. First, the alignment of both administrative and clinical operations of two previously independent hospitals into a merged firm has provided a platform by which to reduce unnecessary, duplicative testing. Integrated electronic health records (EHR) and alignment of clinical programs across locations can reduce unnecessary utilization and subsequent out-of-pocket expenses for patients. Second, the merged firm’s efficiencies, driven by the cumulative effect of lowering the per-case costs of services by way of achieving multiple efficiencies, can be significant enough to prevent commercial plan price increases in a market that may be sought if the existing cost structures of the two independent hospitals were to remain in place.

Hospital-Medical Group Transactions

When hospitals acquire medical practices, it is often done with the good intention of fully integrating the practice(s) and supporting the transition to population health-based models. However, it is common practice for the acquired medical groups to continue to operate autonomously, with limited integration into the hospital system for efficiency gains. In fact, acquired medical groups frequently perform worse under a hospital-employed structure than when they were independent. Part of the reason is that integration is not easy, and most hospital systems are either in the early stages of population health transition or have not started, and thus put medical group acquisition at the forefront of their population health strategy. Consequently, acquisitions are occurring and often driving up prices in the market, because competition is being reduced. Larger systems have greater leverage to negotiate favorable reimbursement in the market, and the benefits of population health and value-based contracting are not yet realized.

The economics of medical practice change significantly when a physician transitions from independent practice to hospital employment. Not only are payer contracts negotiated by the hospital, which often has greater negotiating power, but cost structures may rise from more robust benefits structures, staff wage ranges, and physician compensation. Additionally, when operating as an independent practice, physicians have to cover their overhead expenses—there is no subsidy. When they are employees, their salary is negotiated with the hospital and may not reflect their productivity or contain incentives to keep expenses in check. Changes in reimbursement related to the site or type of service also occur when medical groups are acquired by hospitals— specifically, hospitals are able to charge facility fees or move ancillary services from medical practices to the hospital, thereby increasing costs. And, historically, hospitals have not efficiently managed physician practices overall.

Furthermore, the St. Luke’s-Saltzer decision shows that even when systems are taking initial steps toward value-based care, such as sharing an integrated EHR, it is not enough to justify an acquisition. And, although systems need aligned primary care physicians in order to grow their patient base and capture attributed lives under value-based contracting, the St. Luke’s-Saltzer case also shows that is not reason enough to promote acquisition of medical groups, because other alignment structures could produce similar results without harming competition. When considering an acquisition of a medical group in the post-reform era, hospital systems and their compliance team need to have a clear plan for how the acquisition will increase quality and reduce costs. This proposal must include consideration of not only how the action will reduce operating costs of the medical practice and make it more efficient, but also how the acquisition will reduce overall costs to the consumer. For that, a much more detailed financial impact analysis, managed care strategy, and operational implementation plan are necessary.

Merger and Acquisition Alternatives

Although M&As once dominated healthcare transactions, today many healthcare entities are looking for innovative affiliation models that do not require fully relinquishing their independence, but still offer operational efficiencies. Accordingly, new models are becoming more prevalent that allow these entities to seek partners that can satisfy their unique financial, operational, and quality needs, while still maintaining a level of control, in an effort to meet their key strategic objectives.5 The details of these alternative affiliation models will vary from transaction to transaction, but the basic principles of three increasingly common models will remain consistent.

Joint Operating Agreements

Within a joint operating agreement ("JOA"), the assets and governance of the two partners are not merged, but considerable management and financial authority is transferred to the joint operating entity. This model provides the platform for the partners to achieve significant efficiencies by way of the integration of operational and financial results, while also protecting the partners’ rights to religious directives and major corporate decisions, including the sale of assets. This model is highly complex in nature, but allows the joint operating entity to collectively borrow to satisfy the capital needs, undertake care model redesign to enhance quality, and achieve operational efficiencies that will drive cost savings for the partners. Operational efficiencies within a JOA can, in some instances, reach levels attainable through full mergers or acquisitions. In addition, the FTC does not deem these arrangements to be anti-competitive and thus, the two partners may be able to contract jointly.

Joint Ventures

In addition to JOAs,non-profits are also looking to pursue joint ventures to attain needed capital infusions and operational expertise while maintaining a reduced level of control. With the non-profit contributing its assets and business operations to the joint venture, a partner organization contributes capital to ascertain a majority share within the joint venture. The joint venture is then overseen by the majority stakeholder by way of a management contract, while the non-profit provides clinical services to the joint venture. This model yields moderate operational efficiency outside of consolidated administrative services offered by the majority stakeholder, and gives the non-profit the ability to ascertain the expertise and capital required to sustainably maintain operations to fulfill the community need.

Clinically Integrated Networks

Another model being pursued more frequently in light of the ACA are clinically integrated networks ("CINs"). This model provides the platform for healthcare entities to develop collaborative networks that support care coordination throughout the continuum while sharing in the infrastructure costs associated with managing a defined population. In a CIN the partners do not merge their assets or relinquish control of their organizations. Instead, the partners establish an alliance that maximizes the existing clinical expertise of their independent organizations, while sharing the costs of infrastructure and information technology required to participate in new accountable care payment plans and in preparation for population health. This model often maintains its own board and management team, which is directly responsible for clinically integrating the two partners and reducing cost (both operational and capital) through the achievement of clinical and operational efficiencies.

Conclusion

As health systems prepare for success in the new value-based world, M&As are often a major part of their strategy. However, federal anti-trust laws must be considered, not only in hospital-hospital transactions, but in hospital-medical group transactions as well. The BPOE and assessment of efficiencies must demonstrate the need for the M/A and how those efficiencies will lead to reduction in the cost of care, not just improvement in the system’s cost structure and bottom line or overall improved quality of care for the market. There are significant opportunities to improve the cost structure when organizations come together—those must be explored, verified, and ultimately, have a succinct implementation plan as well as a plan for translating savings to consumers. Further, alternative structures must be reviewed to determine if the stated goals and efficiencies may be accomplished in another manner. These considerations should be included in the due diligence phase of planning to assure ongoing compliance in a rapidly consolidating environment.

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Hospital Consolidation, Mergers and Acquisitions, The Camden Group


  1. Carol K. Kane and David W. Emmons: “New Data on Physician Practice Arrangements.” The American Medical Association. Available at http://bit.ly/1dbtuoP
  2. Edith Ramirez: “Anti-trust Enforcement in Health Care — Controlling Costs, Improving Quality.” The New England Journal of Medicine, December 11, 2014; 371:2245-2247. Available at http://bit.ly/1QM65q5
  3. Marlene Harris-Taylor: “Promedica ordered to drop St Luke’s: Court declares merger anticompetitive.” Toledo Blade, April 22, 2014. Available at http://bit.ly/1RpDR62 
  4. Jonathan L. Lewis, Lee H. Simowitz, and Sean T. Hartzell: “In the Wake of the FTC’s St. Luke’s Victory in Idaho, What Does the Future Hold for Hospital-Physician Acquisitions?” ABA Health eSource, vol 10, no.7. Available at http://bit.ly/1Je71Gg
  5. Jonathan Spees: “Choosing the Right Affiliation Structure.” Hospital and Health Networks Daily, October 9, 2014. Available at http://bit.ly/1Lw59WP

Ms. Bosko is a vice president with The Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization and MSO development, managed care strategy, and physician alignment. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

 

Mr. Klar is senior manager with The Camden Group with over 12 years of experience in healthcare management.  He specializes in strategic and business planning advisory services, including service line planning, master facility planning, and transaction work (e.g., mergers, acquisitions, affiliations, joint ventures). He may be reached at bklar@thecamdengroup.com or 617-936-6905

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Topics: Clinically Integrated Network, Tawnya Bosko, Mergers, Acquisitions, Hospital mergers and acquisitions, Brandon Klar, Mergers and Acquisitions

CMS Issues FY 2016 IPPS Final Rule: Signals Continued Transition to Value-Based Reimbursement

Posted by Matthew Smith on Aug 3, 2015 3:07:54 PM

By Tawnya Bosko, DHA, MS, MHA, MSHL, Vice President, The Camden Group

value-based reimbursementsOn July 31, CMS issued the FY 2016 Inpatient Prospective Payment System (“IPPS”) final rule, which will take effect October 1, 2015. The final rule includes a payment update of 0.9 percent, a slight decrease from the proposed increase of 1.1 percent.

This 0.9 percent update applies to those acute care hospitals that participate in the inpatient quality reporting (“IQR”) program and are meaningful users of a certified electronic health record (“EHR”). The actual market basket update is 2.4 percent but is adjusted by the factors in Table 1:

 


 Table 1: FY 2016 IPPS Final Rule Payment Update

Market Basket Update 2.4%
Less Multi-Factor Productivity -.5%
Less ACA Mandated -.2%
Less Documentation and Coding Recoupment -.8%
TOTAL IMPACT 0.9%

The final rule also impacts disproportionate share hospital (“DSH”) payments in that the 75 percent of what otherwise would have been paid to hospitals based on their relative share of the total amount of uncompensated care is being adjusted to approximately 63.69 percent of the amount to reflect changes in the percentage of individuals that are uninsured and additional statutory adjustments. Ultimately, CMS projects this impact to be a downward payment adjustment of approximately 1 percent as compared to the Medicare DSH payments and uncompensated care payments distributed in FY 2015.

Hospitals that do not participate in IQR are subject to a penalty of 25 percent of the market basket update and those that are not meaningful users of a certified EHR are subject to a penalty of 50 percent of the market basket update. Additionally, the FY 2016 IPPS final rule updates and continues penalties for Readmissions, Hospital Acquired Conditions (“HACs”), and bonuses or penalties for hospital-Valued Based Purchasing (“VBP”).

  • Readmissions: While no changes were made to the current or planned readmission measures (see table 2) in the FY 2016 IPPS final rule, the pneumonia readmission measure has been refined to expand the measure cohort for FY 2017 and subsequent years. The modified version will include patients with a principal discharge diagnosis of pneumonia or aspiration pneumonia and with a principal diagnosis of sepsis with a secondary diagnosis of pneumonia. Patients with a principal discharge diagnosis of respiratory failure or severe sepsis are not included as had been previously proposed.

Table 2: Current and Planned Readmissions Measures

Fiscal Year Readmissions Measures Maximum Penalty
2013 Acute Myocardial Infarction, Heart Failure, and Pneumonia 1%
2014 Same as FY 2013 2%
2015 FY 2014 Measures plus: 1) Hip/Knee Replacement and 2) COPD 3%
2016 Same as FY 2015 3%
2017 FY 2015 Measures plus: Coronary Artery Bypass Graft ("CABG") 3%

  • HACs: The 1 percent payment reduction will continue to apply to those hospitals that rank in the top quartile relative to the national average of all applicable hospitals for HACs. The FY 2016 IPPS final rule changes the HAC program in several ways. First, it expands the population covered by the central line-associated bloodstream infection (“CLABSI”) and catheter-associated urinary tract infection (“CAUTI”) measures to include patients in select non-intensive care units, including pediatric and adult medical wards, surgical wards, and medical/surgical wards locations beginning in FY 2018. It also changes the relative contribution of each measure within domain 2 and the domain weighting of the total HAC score, which could impact the mix of hospitals receiving the HAC penalty.
  • VBP: In the final rule, the program has been expanded to include additional measures. Specifically, the rule adds a care coordination measure beginning with the FY 2018 program year and a 30-day mortality measure for chronic obstructive pulmonary disease beginning with the FY 2021 program year. Additionally, the rule signals future policy changes that will affect certain National Health Safety Network measures beginning with the FY 2019 program year.

Further, CMS has added seven new measures for the IQR: three new claims-based measures and one structural measure for the FY 2018 payment determination and subsequent years; and three new claims-based measures for the FY 2019 payment determination and subsequent years.

While acute care hospitals are continuing to see limited increases in reimbursement and an increasing focus on reimbursement tied to value and quality based metrics, long-term care hospitals were more drastically impacted by the FY 2016 IPPS final rule with a projected negative payment update of -4.6 percent.

CMS was clear in its final rule that it is committed to increasingly shifting Medicare payments from volume to value. When we discuss “value” in healthcare, we typically mean the quality of healthcare received per dollar spent on achieving that outcome. In essence, hospitals’ focus needs to be on providing the highest quality healthcare at the lowest relative price. Government and commercial payers alike are signaling the decline of per unit reimbursement. All hospital leaders should be taking the necessary steps now to understand and improve quality, understand and decrease the cost of care, both while managing in a blended reimbursement environment. Future success depends on actions taken now.

Source: The Center for Medicare and Medicaid Services (2015): https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-07-31-4.html, accessed August 2, 2015.


Ms. Bosko is a vice president with The Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization and MSO development, managed care strategy, and physician alignment. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

Topics: CMS, Acute Care Hospitals, Hospital Readmissions, Tawnya Bosko, IPPS Final Rule

Survive Today, Thrive Tomorrow: From Volume- to Value-Based Worlds

Posted by Matthew Smith on Jun 19, 2015 10:54:23 AM

By Tawnya Bosko, MHA, MSHL, MS, Senior Manager, The Camden Group (Via AMGA's Group Practice Journal)

volume_value1.pngHealthcare delivery in general, and physician reimbursement specifically, are undergoing unprecedented transformation. While most physician practices still operate largely in a fee-for-service ("FFS") world, government and commercial payers alike have signified their intent to reimburse physicians and other providers based on value.

Many physicians recognize that the FFS system is imperfect at best, but the evolving value-based reimbursement system is ill defined, leaving physicians facing a great deal of uncertainty. During this time of uncertainty, medical practices have opportunities to improve performance and position themselves for success in the rapidly changing healthcare market. It is natural to begin focusing on clinical measures and outcomes as a means for proving value, but it is just as important to remain financially viable during the transition. By understanding the structures of evolving reimbursement methodologies, changing health plan dynamics, and developing market trends, we can thrive in this uncertain world.

To read this article in its entirety, please click the button below for an instant PDF download of this article:

Volume-Based Reimbursement, The Camden Group

Topics: Tawnya Bosko, Volume-Based Reimbursement, Fee-for-Service, Healthcare Delivery

The Medicare Shared Savings Program Final Rule: What You Need to Know

Posted by Matthew Smith on Jun 8, 2015 1:59:00 PM

By Tawnya Bosko, MHA, MSHL, MS, Senior Manager, The Camden Group

mssp_news.pngOn December 1, 2014, the Centers for Medicare and Medicaid Services (“CMS”) published proposed changes to the Medicare Shared Savings Program (“MSSP”) regulations, with the final rule being announced on June 4, 2015. While the timing of the release of the final rule isn’t optimal for those that may have considered participating in the upcoming round of entrants, the final rule further clarifies CMS’ intent to facilitate the movement to value-based payment methodologies. Many of the changes were adopted as proposed, while some others were altered from the proposed changes. Here are highlights of some key changes in the final rule and what it means to accountable care organizations (“ACOs”).

Extending the Time Period for Participation in Track 1

Previously, Track 1 ACOs (no downside risk) were limited to one three-year agreement period before converting to a risk-based track. The final rule allows participants to remain in Track 1 for an additional 3-year performance period, or a maximum of two three year periods without the reduced sharing rate that CMS had proposed. This proposal allows those ACOs who have seen modest improvements in their ACO operations and performance and/or those who are not ready for performance-based risk a little more time to implement and execute.

Assignment of Beneficiaries

The assignment of beneficiaries was historically a two-step process based on provision of primary care services by 1) Primary Care Physicians and 2) Specialists and Advanced Care Practitioners (“ACPs”) (e.g., nurse practitioners, physician assistants and clinical nurse specialists). The final rule revises the process to include ACPs in Step 1 and removes specialties which are unlikely to provide primary care services. This proposal effectively moves the beneficiary assignment toward the provision of primary care and allows the specialists who want to participate in multiple ACOs the flexibility to do so. Further, through rulemaking in the 2017 Physician Fee Schedule, CMS expects to propose that beneficiaries may attest that their main doctor is participating in a performance-based risk track ACO and be assigned to that ACO. Assignment methodology and fluctuations have been a pain point for many ACOs.  While this may not be a cure, it does work to address many of the concerns.

Sharing of Data

CMS previously shared certain claims data with ACOs only after ACOs had 1) notified their beneficiaries of that data sharing via direct mail or at the time of service and 2) provided them an opportunity to opt out of data sharing. This time-consuming process was onerous for the ACO and its providers and delayed the receipt and review of data which is key to the success of the ACO. It was also confusing for beneficiaries who received letters in the mail and at the point of care. The final rule allows ACO providers to post signs in their facilities with template notification language that will notify beneficiaries of their right to opt out by calling CMS directly. The proposal removes the ACO from the data sharing consent process – a win for current ACOs who have found the beneficiary notification process to be exceedingly burdensome and a distraction from the primary work of population health management.

Revisiting the Methodology for Establishing, Updating, and Resetting the Financial Benchmark

The current methodology based on the ACO’s past performance that CMS uses for setting, updating, and resetting the ACO’s financial benchmark is flawed. It gives increased opportunity to those ACOs with high utilization and costs and inadvertently penalizes those that have already moved to improve quality and manage costs. Additionally, the method gives diminishing returns over time as ACOs succeed in achieving savings year over year. Once the cost curve has reset, there will be little to no savings left to share. CMS sought comment on alternative ways of benchmarking ACOs for shared savings, including options of comparing ACO providers to the spending patterns of non-ACO providers within their region. In the final rule, CMS formalized the process to equally weight the historical benchmark years, as opposed to weighting those years 10% for benchmark year (“BY”) 1, 30 percent for BY2, and 60 percent for BY3 at the start of the second or subsequent agreement period; and indicated intent to commence rulemaking later this year to implement a methodology that would reset ACO benchmarks in part based on trends in regional fee-for-service costs rather than solely on an ACOs’ own recent spending. The consideration of a revised method that can better reflect the underlying health of the population to reset the benchmark is encouraging. A more precise and accurate reflection of the health of the assigned population will further improve patient experience and enhance the value of the care provided while achieving savings for CMS.

Incentivizing ACOs to Move Toward Risk-Based Models

CMS has finalized the creation of a new Track 3, a performance risk-based model, which will have a higher sharing rate than Tracks 1 or 2 at 75 percent of all savings or losses and would offer prospective assignment of beneficiaries rather than preliminary assignment with retrospective reconciliation. Additionally, CMS modified Track 2 to allow ACOs to choose from a selection of options for setting their minimum savings rate (“MSR”) and minimum loss rate (“MLR”) in an equilateral manner, with either no MSR/MLR, equilateral MSR/MLR in .5 percent intervals between .5 and 2 percent or equilateral MSR/MLR to vary based on the number of assigned beneficiaries as in Track 1. In the final rule, the new Track 3 will follow the same methodology as Track 2.

CMS also indicated its intent to further test the billing and payment requirements for telehealth services via its newly created Next Generation ACO model. It is anticipated that a telehealth waiver may be available to ACOs in the Track 3 model by January 1, 2017.

Additional refinements include minor changes to the eligibility for participation in the MSSP, including removal of the requirement that the ACO’s medical director be an ACO provider/supplier; and a more streamlined process for Pioneer ACOs to apply for program participation, among others.

While it remains to be seen if the proposed changes will encourage more provider organizations to join the MSSP, it is clear that CMS is creating various models to fit the needs of different types of organizations. Determining which model is appropriate considering the unique characteristics of your organization will be key to success.

Table. 1. MSSP Final Rule Changes and Characteristics of MSSP Tracks 1-3

(Note: Click here for a PDF download of the table or here for an image file.)

MSSP_Final_Rule-1.png

Source: The Centers for Medicare and Medicaid Services, 2015


bosko_headshot.pngMs. Bosko is a senior manager with The Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization  and MSO development, managed care strategy, and physician alignment. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

 

 

 

Topics: ACO, MSSP, Medicare Shared Savings Program, Accountable Care Organizations, Tawnya Bosko, MSSP ACO, MSSP Final Rule

The Push for Hospital Pricing Transparency: How is Your Organization Responding?

Posted by Matthew Smith on Jun 2, 2015 11:15:00 AM

By Tawnya Bosko, MHA, MSHL, MS, Senior Manager, and Matthew Briskin, MPH, Senior Consultant, The Camden Group

Post-image-transparency.pngIt is evident that government officials, policymakers, and others believe in the power of access to clear pricing to help reduce healthcare costs in the United States.The Center for Medicare and Medicaid Services (“CMS”) took steps in the fiscal year (“FY”) 2015 Inpatient Prospective Payment System (“IPPS”) final rule to implement the Affordable Care Act’s (“ACA”) provision requiring hospitals to “establish and make public a list of its standard charges for items and services”[i]. In the final rule, CMS reminded hospitals of this requirement and reiterated that they encourage providers to move beyond just the required charge transparency and assist consumers in understanding their ultimate financial responsibility. Beyond the federal government requirements, many states have implemented rules around disclosure of charge and sometimes price information. Further, all payer claims databases (“APCD”) have been established and stakeholders continue to build apps and other databases to assist consumers in assessing hospital pricing information, and as more consumers enroll in high deductible health plans—in other words, the out-of-pocket costs for healthcare services are becoming more of a driver in consumer decision-making—those resources (APCDs, apps, and other databases) are becoming increasingly popular. The trend is clearly moving toward increased transparency of price and quality information, yet many hospitals lag behind and have yet to address the antiquated chargemaster (“CDM”) and incorporate pricing into their overall strategic plan.

Legislation Surrounding Price Transparency

Coupled with the ACA and FY 2015 IPPS final rule requirements for hospitals to disclose charge information to consumers, CMS also continues to publish individual hospital charge, utilization, and reimbursement information for the most common inpatient and outpatient services. Additionally, 28 states have legislation around price transparency with various requirements of hospitals and other providers[ii]. While most states do not have robust systems in place for transparency, the majority are beginning to pursue these initiatives, with Colorado, Maine, Massachusetts, Vermont, and Table1_DRG.pngVirginia making the strongest push[iii]. For example, Table 1 shows an excerpt from the Colorado Hospital Price Report, which reflects volume, average length-of-stay and the range of charges for DRG 470, major joint replacement or reattachment of lower extremity without major complications. The site also provides average reimbursement information by payer and diagnostic category, though it does not get to the level of individual hospital.

Pricing transparency initiatives are clearly not specific to federal regulations and Medicare information. In addition to the state regulations around transparency, many states are engaging in initiatives to bring APCDs to their state. Figure 1 (note: click here for interactive map) shows the status of APCDs by state as provided by the All Payer Claims Database Council.

Figure1_APCD.pngAs shown, 12 states have existing, required participation APCDs and another 6 are in the implementation phase of a required APCD, which typically are able to provide charge and reimbursement information, though reimbursement information at the individual hospital level by payer is not always disclosed.

Why Is This Important?

Transparency initiatives are being pushed from the federal government, state governments, employers, consumers, and other stakeholders. People want to understand the costs of care in order to make better purchasing decisions.

 

Key Considerations as Part of a Hospital Pricing Strategy Include:

Cost Structure

If the move to value-based reimbursement isn’t enough of a push to get a better understanding of your cost structure, add transparency to the list of reasons why hospitals must understand what it costs for them to provide a service. You can’t ‘right price’ your services if you don’t know what your costs are.

Quality Scores and Performance

In the new era of healthcare, quality is extremely important. Not only is it be linked to value-based reimbursement, but as in most markets, the supplier (hospital) should understand the quality of their product or service and integrate that information into their pricing strategy and payer negotiations.

The CDM

It is important to ‘right price’ your services. The old ways of setting charges to capture maximum reimbursement but not considering costs will soon be extinct. A revitalized strategy around the hospital CDM and coordination with costs, quality and reimbursement will become a necessity.

Payer Strategy and Reimbursement

Updating the CDM and becoming more transparent with prices cannot happen without consideration of the payer strategy and the impact of changes on reimbursement. Engaging payer partners in this process early is important to success.

The Market

Hospitals should be aware of how quickly their market is moving on transparency initiatives, both from state regulations and payer initiatives, as well as staying aware of how their pricing compares to their peers and competitors for key services.

Whether or not hospitals are ready to disclose this information, the push for transformation is steady and strong. Hospitals should be at the forefront of understanding their cost structure and how that relates to the often antiquated CDM and ultimately to reimbursement, quality, and patient financial responsibility. Making this connection and transition won’t be easy, but hospitals that are able to master their pricing strategy early on and convey this information to consumers will be competitively positioned for success in the post-reform era.

[i] The Center for Medicare and Medicaid Services, 2014
[ii] The National Conference of State Legislatures, 2015
[iii] Healthcare Incentives Improvement Institute, 2014

bosko_headshot.pngMs. Bosko is a senior manager with The Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization  and MSO development, managed care strategy, and physician alignment. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

 

Briskin_headshot.pngMr. Briskin is a senior consultant with The Camden Group specializing in finance. He has extensive experience working with both payers and providers. Mr. Briskin specializes in revenue enhancement initiatives related to chargemaster pricing optimization and managed care strategy. He may be reached at mbriskin@thecamdengroup.com or 714-263-8206.

Topics: Tawnya Bosko, Chargemaster, Matt Briskin, Charge Information, APCD, Hospital Pricing Transparency, Pricing

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