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1. Paying by the Bundle: How Bundled Payments create Value and Market Share February 23, 2011 HFMA- San Diego San Diego, Calif

2. Case Study Approach

3. Bundled Payment: Nothing New Conceptually

4. The Future of Bundling

5. The Future of Bundling �Newly installed Medicare chief Donald Berwick, keeping a low public profile after encountering controversy over his appointment, is moving quickly behind the scenes to seed the US health care system with 100 to 300 sites to test new models of caring for patients.� Boston Globe Bundled Payment Article

6. ��if we could actually get our health-care system across the board to hit the efficiency levels of a Kaiser Permanente� we actually would have solved our problems.� -President Obama, 2010 Looking Ahead

7. Research Question The research question CMS is attempting to answer: Do financial incentives for patients and physicians influence value, quality, and provider of choice decisions?

8. What is a Bundled Payment? A Bundled Payment is the process of making a single payment for all the care and services for a specific procedure.

9. Building the Foundation for Shared Risk

10. Estimated Cumulative Percentage Changes in National Health Care Expenditures, 2010 through 2019, Given Implementation of Possible Approaches to Spending Reform. HIT denotes health information technology, NP nurse practitioner, and PA physician assistant.Estimated Cumulative Percentage Changes in National Health Care Expenditures, 2010 through 2019, Given Implementation of Possible Approaches to Spending Reform. HIT denotes health information technology, NP nurse practitioner, and PA physician assistant.

11. Goals of the ACE Demonstration Project Improve overall quality by moving beneficiaries to participating ACE demonstration providers Drive physician collaboration as a mechanism to improve efficiency Reduce or stabilize growing costs to Medicare for acute care services by maximizing the use of available capacity in high quality providers Transparency of cost/quality data, collaboration, cost savingsTransparency of cost/quality data, collaboration, cost savings

12. ACE Surgeon, anesthesiologist, radiologist, consulting physicians, and all assistants H and P, all postoperative care, and procedures Room and board including ICU Hospital ancillary services Medical and surgical supplies Medications, laboratory, x-rays, etc. All routine charges Specialists are responsible for 90 days post-procedure consistent with current fee for service guidelines Hospital: ACE pilot does not include complications, different DRG readmissions, or post acute services as currently written

13. Why Bundled Payments Are Being Promoted Reduce variation in cost and quality and, thus, overall Medicare costs Standardize care�reduce unnecessary variation Improve quality and efficiency Improve patient satisfaction with increased care coordination and communication

14. Per Capita Medicare Spending, 2007 (Age-Sex-Race Adjusted)

15. Mechanisms to Drive Quality and Efficiency A Market Approach: Bundling or global payments Competitive bidding Gainsharing with physicians Shared savings with beneficiaries

16. Application Process Meet required volume thresholds (200 CV and 90 Joints) Capacity to take on greater case volumes Current quality and efficiency metrics Organizational structure and capabilities Financial viability Marketing plan to beneficiaries

17. Participating Hospitals

18. Taking a BIG Risk either way: Why We Did It� Method to grow market share Pre-emptive and did not want to lose existing business Way to affordably add Surgeons Method to add payers to our existing portfolio Allowed us to build upon the value we deliver to our patients Raise brand awareness

19. Scope and Responsibility �Bundle� includes all services related to the inpatient stay Demonstration length: three years Inclusion criteria: Medicare Fee-for-service beneficiaries 28 Cardiovascular and 9 Orthopedic DRGs: Cardiac DRGs: 216-221 Valves 226-227 Defibrillators 231-236 CABG Ortho DRGs: 461-462, 469-470 Joints 466-468, 488-489 Hips and Knees

20. Inclusion Criteria for Beneficiaries Fee-for-service Medicare ONLY (Excludes Medicare Advantage [risk], Medicare managed care, KP, etc.) Inpatient procedures only although post acute may be included going forward Patients must have Medicare Part A and B coverage Patients with Medicaid as secondary insurance are included but DO NOT qualify for shared savings payment (eligibility implications)

21. The Difference with ACE Shared savings payment: CMS will share 50 percent of its savings with Medicare beneficiaries (not to exceed their annual part B premium, up to approx. $1,160)

22. Sample Orthopedic Bundled Payment Scenario Part A: Hospital Payment MS-DRG 470�$11,080 Currently, CMS generally pays the hospital a single prospectively-determined amount under the Inpatient Prospective Payment System (IPPS) for all the care it furnishes to the patient during an inpatient stay.� The physicians who care for the patient during the stay are paid separately under the Medicare Physician Fee Schedule for each service they perform. The separate payment systems can lead to conflicting incentives that may affect decisions about what care will be provided. The current bundled payment will cover all Part A and Part B services, including physician services, pertaining to the inpatient stay for Medicare fee-for-service beneficiaries. MS-DRG 470 (primary total joint, without complications): FY 2009 payment is $11,080 (source:ONN) CPT 27447 (total knee): 2009 payment is $1,456 (source: ONN) Note: bundled payment may also be referred to as �global case rate reimbursement� Need to make a statement on shifting of risk under these models Highmark is hesitant to jump into bundled payment pilots, and is going to wait and see what happens with CMS�s ACE demonstration, says Carey Vinson, M.D., Highmark�s vice president of quality and medical performance management.Currently, CMS generally pays the hospital a single prospectively-determined amount under the Inpatient Prospective Payment System (IPPS) for all the care it furnishes to the patient during an inpatient stay.� The physicians who care for the patient during the stay are paid separately under the Medicare Physician Fee Schedule for each service they perform. The separate payment systems can lead to conflicting incentives that may affect decisions about what care will be provided. The current bundled payment will cover all Part A and Part B services, including physician services, pertaining to the inpatient stay for Medicare fee-for-service beneficiaries. MS-DRG 470 (primary total joint, without complications): FY 2009 payment is $11,080 (source:ONN) CPT 27447 (total knee): 2009 payment is $1,456 (source: ONN) Note: bundled payment may also be referred to as �global case rate reimbursement� Need to make a statement on shifting of risk under these models Highmark is hesitant to jump into bundled payment pilots, and is going to wait and see what happens with CMS�s ACE demonstration, says Carey Vinson, M.D., Highmark�s vice president of quality and medical performance management.

26. What�s In It for Physicians? Potential volume increase Protect current market share Sponsor can pay physicians faster than Medicare today Co-management of clinical services affecting them to create effective and integrated care Improved quality and patient experience Incentive: up to a 125 percent of Medicare

27. What�s In It for Hospitals? Develop management intelligence around bundling and ready organization for ACO development Grow clinical program and leverage existing brand and market position Gain market share because of unique physician and beneficiary incentives Be on the leading edge of reimbursement reform to develop a broader non-Medicare payer strategy

28. What�s In It For CMS? They desire to test �alternative payment methodologies� resulting in transparency, predictability, reduction in variance, better alignment between hospitals and physicians, and significant shifting of risk to providers They want to see if economic incentives will move market share They want to create a consolidation of tertiary services for sustainable savings

29. Bundled Payment Example: Geisinger Health System CABG reduced: Hospital costs by five percent (average length-of-stay by 0.5 days) Post-acute care costs by 50 percent Thirty day re-admission rates by 44 percent (over 18 months) Outcomes Use of 40 best practice steps: 59 percent increased to 100 percent in six months Reduced complications by 21 percent Reduced sternal wound infection by 25 percent

30. Typical Financial Results

31. Bundled Payment: Financial Impact Our Experience Increase one+ Medicare cases per day volume growth and 3 + Commercial cases/day Ten percent decrease in actual cost/case Ten percent increase in efficiency Depending upon current cost/case, realize $2 to $4 million annually in total effect*

32. Infrastructure: What it Takes Interdisciplinary Teams Developed internal work teams: Patient identification and notice of admission Care coordination Quality and Patient Safety Billing and Claims Supply chain Physician oversight System Oversight Documentation and Coding Identify processes to be redesigned, data needs, accountabilities, gaps, and performance measurements Set performance standards RIGOROUS Accountability

33. Organization of an Assessment of Readiness

34. ACE Required Cardiovascular Quality Metrics

35. ACE Required Cardiovascular Quality Metrics Quarterly Calculation by RTI CMS Contractor

36. Exempla Saint Joseph ACE Report Card

37. Exempla Saint Joseph ACE Report Card

38. Baptist Hospital Cardiac, Vascular, and Thoracic Surgeons Quality Gainsharing Metrics

39. Baptist Hospital PCI Quality Gainsharing Metrics

40. Baptist Hospital EP/ICD Quality Gainsharing Metrics

42. Why do it? Re-engineer clinical care protocols to produce greater value Improve quality by adherence to best evidence Improved patient experience Heighted our profile in the community Greater volume and retain existing Develop intelligence around bundling Re-alignment of incentives readying for ACO

43. Keys to Success Under Bundling

44. Bundling Leads to Integration Since the Hospital is the payer, it can incent participating physicians to: Develop and follow best practice protocols Develop and follow a true team approach to care (by developing Hospitalist programs to receive care responsibilities from specialists) Eliminate waste in orders, supply usage, and time while adding capacity in the Cath Lab and Operating Room Experience the discipline needed to provide higher levels of clinical value in a fixed budget environment while improving compensation This work, when executed successfully, results in higher trust levels with the physicians and the sponsoring Hospital which can help in integration conversations

45. Your Next steps: Measure your Gaps to CMS requirements-

46. Assembling a Bundled Payment Bid is Complex Key Elements Must contain both pre- and post-hospitalization technical and professional fees (Medicare parts A and B) Must identify all caregivers in the episode-of-care and quantify their fees Use the data to contract with independent physicians

47. Questions and Discussion