Michael J. Soisson , MS, MHA Senior Vice President, Vibra Healthcare

1. Post Acute Network Development in the Era of Healthcare ReformRCPA Annual ConferenceOctober, 2014 Michael J. Soisson, MS, MHA Senior Vice President, Vibra Healthcare

2. Agenda • Post Acute Care: Definition • Post Acute Care History and Evolution • Regulatory and Financial Environment • Post Acute Partnerships • Demonstrating Value • Keys to Success

3. Post Acute Definition LTACH IRF Medical SNF HHA Hospice LTC CCRC Residential Asst Living Indep. Living Group Home Home

4. Post Acute Care (PAC) by the Numbers PAC 25% 20-25% of the total medical expense for a Medicare beneficiary. PAC spending, with annual growth in the last decade outpacing other service categories by 50% or more, now accounts for a significant portion of overall Medicare expenditures. $65 Billion

5. Post Acute Care (PAC) by the Numbers Up to 40% $10 Billion Over 8% • Over-utilization of SNF days • 25% of SNF admits could go home • Amount Saved by Medicare annually if patients utilize the appropriate PAC setting • The rate at which Medicare spending for SNF, LTC, and Home Health grew annually from 2001-2012 CMS Believes

6. Post Acute Care (PAC) by the Numbers Percent spending by Medicare on Post Acute $13.1 billion Medicare’s Annual Post-acute Expenditures: $65 billion $4.5 billion $8 billion Medicare PAC Spending 2012

7. CMS Spending • In 2010, 57% of all spending was on 10% of the enrollees • 82% of all spending was on the top 25% of the enrollees • 27.3% of the enrollees were in the 75 – 84 age group but this group accounts for 32.1% of the cost. • And Enrollment in Medicare is going to EXPLODE • 47.4 million enrollees in 2010 • 63.9 million by 2020 (35% increase) • And Medicaid grow is projected at 20%

8. Financial/Reimbursement • Historical Payment (HCFA – CMS) • TEFRA • PPS This model promotes silos of care • Today • LTACH $40,000/case • IRF $14,500/case • SNF $450 per day ($10,000 per case) • HHA $2800 per episode of care (60 days)

9. Current Regulatory Environment • LTACH Revised Patient admission criteria (2015) • IRF Presumptive compliance change (2015) • SNF Readmission Penalties

10. Acute Care Hospitals • Value Based Purchasing (quality metrics) • Readmission Penalties • Penalties for poor outcomes/hospital acquired conditions • Reduced/elimination of DSH payments • Physician shortage and employment wars • Pressure to merge/acquire or be acquired

11. Post Acute Need

12. Post Acute Partnership Evolution • Phase I Build it and they will come • Phase II Preferred Providers • Phase III Hospital within Hospital • Phase IV Joint Venture Facilities • Phase V Post Acute Networks • Future Shared Risk/Reward

13. The Future Is Now

14. ACA = ACO • 338 Medicare Shared Savings ACO’s (end of 2013) • 4.9 million assigned beneficiaries in 47 states • In 2014 15.4 Million Medicare enrollees shifted to Medicare Advantage plans • 20 Million Medicare Enrollees are now in some kind of “managed” plan • Managed Medicare is very different from managed commercial (healthy) care • Medicare patients = managing chronic disease • Chronic disease management = post acute need

15. Post Acute Projects (CMS) • Bundled Payments • Model 2 • Hospital + MD + Post Acute Provider + readmissions • Model 3 • Post Acute Provider + readmissions • Medicare CARE Tool • Common Assessment Tool for Post Acute • IMPACT Legislation • Coordination of Standardized Post Acute data • Requirement of a Standardized Assessment Tool • Define Reporting Provisions and Quality measures • Define Post Acute Payment Systems

16. STAC Hospital Choices • Develop their own Post Acute Continuum and prepare to go at risk • Partner with Post Acute Providers who would manage the Post Acute Process and go at risk • Preferred Provider Agreements • Joint Ventures (Shared risk/reward) • Partner with Payer Sponsored ACO’s and let them manage the care

17. Post Acute Provider Options • Do Nothing and hope to be included in all equations • Establish Preferred Provider affiliations with STACH and growing local ACO’s • Be proactive and present Post Acute Management to STACHs and ACOs. • Options • Bundled Payment (part of Model 2 with STACH) • Bundled Payment (Model 3 Just for Post Acute) • Case Rate for ALL post acute service including home • Capitation for all post acute service • CREATING VALUE WILL BE KEY TO SUCCESS

18. PAC Value Calculation

19. Post Acute Partnership:Value • Shorten LOS • Reduced Costs • Improve patient throughput • Reduce Readmissions • Keep patients within the system • Manage chronic disease

20. LOS Impact Analysis Reducing LOS reduces census. Cost savings are on variable cost and requires actual reduction in staff/supplies; etc to achieve savings New Patient replacement assumes additional patients are available to fill beds that are open due to reduced LOS. (Estimate 1151 new patients (at ALOS of 5 days)

21. Reduce Readmission Impact ACO 35,900 Total MC & MA Discharges 16,000 Total PAC Discharges 44% % MC & MA Discharged from IP to PAC 1334 # Touched per Month 16% % Readmitted from PAC 2560 # Readmitted from PAC $ Saved by Readmission Avoidance of 1% (ACO savings potential) $24,000 per case, savings $3.8 mil 1% savings

22. Reduced Readmission (STACH Impact) • Medicare Discharges 11,189 • Total Medicare Payment $77,204,832 • Payment at Risk (3%) $2,316,145 • Readmissions previous Year 1,902 (17%) • Readmission Penalty per discharge $1,218 • Readmission Savings if reduce 1% $135,744 1% Reduction in readmissions = 1702 v 1902. 112 fewer readmissions @ $1,218 penalty per readmission = $135,744

23. Keys to Success • Shared Goals/Shared Philosophy • Clinical Information;- at the patient level • Understanding cost;- at the facility level and at the patient level • Control (or at least a seat at the table) of Acute Care Discharge Planning Process

24. Today • STAC Hospital is paid on per discharge basis • +/- $6,000 per case regardless of LOS (until cost outlier) • Penalized for readmission within 30 days • Incentive is to discharge the patient (ANYWHERE) as quickly as possible while avoiding 30 day readmission • Discharge to home if possible and manage there or discharge to Post Acute Facilities that can best manage patient and not readmit Example: If patient can be discharged in 4 days, hospital receives $6,000 payment ($1,500 per day) vs discharged in 6 days or $1,000 per day

25. FutureUnder a managed care, per member per month, or in the ACO model • If paid per member per month basis: • Incentive is to: • Avoid acute care admissions if possible • Only critically ill patients will be admitted • If admitted, shortest LOS possible (again, avoiding readmissions) and ideally, discharged HOME. • If not home, discharge (as quickly as possible) to the Post Acute Bed that is the BEST VALUE • Discharge to facility that will get the patient home and keep them home as quickly and as low cost as possible • Key to success will be MANAGING the Care

26. Some Examples for the Future Now • SNF @ $600 per day and it takes 20 days to get the patient home ($12,000) • Average SNF discharge to home = 35% • Average SNF readmission rate is 30% • IRF @ $13,000 per case (ave for orthopedic case) with ALOS of 12 days • Average IRF discharge to home = 75% • Readmission Rates for IRF nationally are < 10%

27. Future (Catastrophic Cases in Acute) • Patients on Vents for longer time or in the ICU, consider: • LTCH • ICU cost is $3,000 per day v LTCH at $1,800 per day for a ventilator dependent patient • Goal would be to keep moving patient to lower cost service that will get and keep the patient home • LTCH, IRF, SNF, Home Example:

28. Post Acute Definition LTACH IRF Medical SNF HHA Hospice LTC CCRC Residential Asst Living Under ACO will Residential be included? Indep. Living Group Home Home Ultimately: Case Rate of $___ from STACH D/C to 90 days at Home

29. The Future Is Now

30. The Future is Now? • Bundled Payment for Post Acute Care By Diagnostic (chronic) condition • Part of a Bundled Payment for Diagnostic Condition with STACH from admission to home • Case Rate for ALL post acute care by Diagnostic Condition • Capitation for all care?

31. Questions? Mike Soisson SVP Vibra Healthcare msoisson@vibrahealth.com 717-798-1278