A CFO’s Perspective on Quality

1. A CFO’s Perspective on Quality

2. CMS’ New Focus on Quality CMS QUALITY IMPROVEMENT ROADMAP EXECUTIVE SUMMARY VISION: The right care for every person every time. CMS believes that this vision is realistic and substantially achievable and that recent developments create unprecedented opportunities and need for that achievement: • 1. A growing body of evidence shows that there are major opportunities to improve carewith major potential benefits for patients. • 2. The growing complexity of medical knowledge and the growing number of participants, technologies, and specialties create both enormous rewards for better careand enormous challenges in continuing our current path. • 3. Stakeholders from many sides are showing a new willingness to come together in partnerships to achieve improvement and are looking to CMS for leadership and broadening recognition that highest quality care is the only care anyone can afford.

3. Quality Oriented • VBP Program Goals • Improve clinical quality • Reduce adverse events and improve patient safety • Encourage more patient-centered care • Avoid unnecessary costs in the delivery of care • Stimulate investments in effective structural components or systems • Make performance results transparent and comprehensible • To empower consumers to make value-based decisions about their • health care • To encourage hospitals and clinicians to improve quality of care

4. CMS Quality Initiatives: Wolf in Sheep's Clothing? Mission / Vision / Values ? The CMS Quality Improvement Roadmap represents a major, agency-wide effort to use the new Medicare law and other new opportunities to work in partnership with the rest of the health care system to achieve major improvements in the quality of health care. This is a shared mission. It is up to all of us – government officials and health care stakeholders, and especially patients and health professionals – to work together to achieve the major quality improvements that should be possible today.

5. Improved Quality may be a welcomed byproduct. Currently the only industry where you pay for a product/service with no regard for product/results Also the only industry where $ =/= $ Medicare 50% Medicaid 20% Third Part Contract 20% Private (nothing) 10%

6. Medicare’s History Net of inflation, all produced reimbursement reductions IPPS DRG Reimbursement Cost Adjusted, Blended, Fixed Marketbasket Reductions MS-DRGs Outliers Medicare Advantage Plans 2003 Medicare Modernization Act Social Security Act Amendments of 1983 DSH Reductions DRG Congress’ Intention Vs. CMS Interpretation RACs 5 Years Later Core Measures APCs IPPS 09 43 new Quality Indicators Post Acute Transfer Policy Introduced for 10 in 99 Increased to 29 in 2004 Increased to 182 in 2006 IPPS 09 9 new HACs Never Events SNF 09 $770m Recalibration OP 09 Quality Measures 7-11 RACs SNF RUGs Hospital Acquired Conditions OPPS Fee Schedule-Blended Fee schedule-Fixed 1997 Balanced Budget Act 2005 Deficit Reduction Act 24 Hour Observation VALUE BASED PURCHASING Medical Necessity

7. Medicarepreparesfor theboomers

8. Boomers 1920 Many Pay For Few 65 2Mil Charts by CalculatedRisk (http://calculatedrisk.blogspot.com)

9. Boomers 1920 1940 1960 1980 2000 2005 Charts by CalculatedRisk (http://calculatedrisk.blogspot.com)

10. Boomers 2005 65 2.8Mil Charts by CalculatedRisk (http://calculatedrisk.blogspot.com)

11. Boomers 2005 Fewer Pay For More 65 Years old in 2025 Charts by CalculatedRisk (http://calculatedrisk.blogspot.com)

12. Boomers

13. More enrollees times more spending per recipient

14. Medicare’s Future Program Deficit Grows

15. Medicare’s Future

16. No Hope For Survival Under the Current Approach Medicare Trustees estimate that it would require a gradual tripling of the payroll tax, a reduction in Part A expenditures by one-third, or some combination of the two approaches to restore the solvency of the Medicare Trust Fund over the very long run (75 years)

17. Quality As A New Approach • Core Measures – data mining • Hospital Acquired Conditions (HACs) and Present on Arrival (POA) • Never Events • Value Based Purchasing

18. Hospital Acquired Conditions (HAC) Reporting 2009 CMS Proposed Rule • Core Measures • Initially defined as a bonus program based on performance • in 10 core measures • The “bonus” was to simply allow you to keep your annual • 3% Market Basket (inflation) increase. • Quality Indicators • Adds 43 new IP conditions for 2010 bringing the total to 73 • Adds 4 OP conditions bringing total to 11 • HACs Present on Admission • 8 conditions in 2008 • 9 additional proposed for 2009 • No payment for “U”s • Value Based Purchasing • Payments to high-performing hospitals would be larger than • those to lower performing hospitals. • Financial incentives to drive improvements in clinical quality, patient-centeredness, and efficiency. • Note: See SCHA comments online.

19. The Medicare Hospital Value-Based Purchasing (VBP) Plan Section 5001(b) of the Deficit Reduction Act (DRA) of 2005 (P.L.109-171) authorizes the Secretary of Health and Human Services to develop a plan to implement a value-based purchasing program for payments under the Medicare program to subsection (d) hospitals beginning with Fiscal Year 2009. By statute, the plan must include consideration of at least the following design issues: 1. The on-going development, selection, and modification process for measures of quality and efficiency in hospital inpatient settings. 2. The reporting, collection, and validation of quality data. 3. The structure of value-based payment adjustments, including the determination of thresholds or improvements in quality that would substantiate a payment adjustment, the size of such payments, and the source of funding for the value-based payments. 4. The disclosure of information on hospital performance. Note: IP Proposed Rule addresses no plans for the implementation of VBP .

20. Value Based Medicine Case Study Vol. 297 No. 21, June 6, 2007 Conclusions  Among hospitals participating in a voluntaryquality-improvement initiative, the pay-for-performance programwas not associated with a significant incremental improvementin quality of care or outcomes for acute myocardial infarction.Conversely, we did not find evidence that pay for performancehad an adverse association with improvement in processes ofcare that were not subject to financial incentives. Additionalstudies of pay for performance are needed to determine its optimalrole in quality-improvement initiatives.

21. Core Measures Never Events HAC/POA

22. Overview of a Potential Performance Assessment Model • A hospital must submit data for all VBP measures that apply to its patient population and service mix. The measures could be used for incentive payment, public reporting, or measure development. • A hospital receives a performance score on each measure for incentive payment for which it has a minimum number of cases. • Measures are grouped into “domains” a score is calculated for each domain by combining the measure scores within that domain, weighting each measure equally. • A hospital’s VBP Total Performance Score is determined by aggregating the scores across all domains. Domains could be weighted equally or unequally. • The Total Performance Score is translated into the percentage of VBP incentive payment earned using an “exchange function,”

23. VBP DRG Example http://www.aishealth.com/Compliance/ResearchTools/RMC_CMS_DRG_Reimbursement.html For the purpose of this example, the VBP incentive payment amount is set at 5 percent of the base operating DRG payment, clinical process measures are weighted at 0.7, and HCAHPS is weighted at 0.3 in calculating the Total Performance Scores, and we assume that Hospital B and Hospital A both have a wage index of 1. The hospital-specific incentive payment earned by each hospital is taken from the Figure 1 table in the VBP Plan. Hospital B earns 100 percent of the incentive payment; as a result, its VBP payment for DRG 498 is the same as the base operating payment for the DRG. Hospital A earns 82 percent of the incentive payment; as a result, its VBP payment for DRG 498 is $132.42 less than the base operating payment for the DRG.

24. More Details on the CMS VBP Plan U.S. Department of Health and Human Services REPORT TO CONGRESS: Plan to Implement a Medicare Hospital Value-Based Purchasing Program November 21, 2007 http://www.cms.hhs.gov/CouncilonTechInnov/downloads/qualityroadmap.pdf

26. Fear of the Unknown • “Not Billing” for Never Events • “Not charging” vs. “not billing” • Other third parties (e.g.. Aetna) not paying for never events • Other third parties expanding their lists • Carriers not paying by ICD-9 • Related CPTs • Misrepresentation of the bill • Legal risk of “not billing” • Accounting and finance • Compliance • SCHA Response: “…please ensure that the new quality incentives are not utilized by carriers of lesser value and intention as a new vehicle used to deny or reduce payments.”

27. If no one bills for never events already, why is CMS so interested? $13,662,632,508

28. Is Quality the Next RAC Encounter? • Recovery Audit Contractors • $30,000,000 in SC recoveries • Medically necessity • No Appeals • Statewide lawsuit

29. What’s Next? Value Based Purchasing “These Premier results show that Value-Based Purchasing can achieve excellent results in Medicare,” said CMS Acting Administrator Kerry Weems.  “Given these results, it is time to take the next step and implement hospital Value-Based Purchasing for the Medicare program, so that citizens across the nation can benefit from improved safety and quality get the right care, every time.” K erry Weems CMS Acting Director

30. What’s Next? • HACs that are not clinically avoidable • Increased “never event” listing that may not be distinguishable as the hospital’s fault • Physician RACs? (already have data from hospital charts) • Outpatient RACs? • Clinical result RACs? • Quality RACs? • Penalties, fines, accreditation risks….

31. How to Prepare • IMPROVE DOCCUMENTATION • Facility and Physician • Train nursing Staff on increased importance of documentation • Avoid “U”s (CMS is tracking) • Have coders request additional documentation • Sample documentation (Quality Team) • Track current POAs (Ns and Us)

32. How to Prepare • Reevaluate quality team membership • Educate CEO • Educate Physicians(Now’s the time, July payment delay and 10.5% decrease ) • Educate Quality Team • Involve CFO • Involve HIM • Involve PAS

33. Barney Osborne VP of Finance and Reimbursement (803) 744-3544 bosborne@scha.org Help SCHA maximize the potential quality improvements while minimizing the financial risks.