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2010-2011 SC HFMA - Annual Institute

Columbia, SC July 30, 201 0

Jason Sanders, Budget and Reimbursement, Sisters of Charity Providence Karen Reeves, VP Quality Compliance and Risk Management, SCHA Barney Osborne, VP Finance, SCHA

Institute of Medicine and AHRQ RHQDAPU and HCAHPS Pay for Reporting Never Events Hospital Acquired Conditions

Quality and Finance: The Stars Align

MS DRGs ARRA HITECH Meaningful Use Value Based Purchasing Bundling 30 Day Readmissions Medicaid HACs

Quality or Finance

• The DRG and Case Management – Case management: clinical – Medical Records: clinical – Forced hospitals manage physicians • Counterbalance – Hospital’s risk: physician discharge • Value Based Purchasing – Hospitals manage physicians and hospital – Shared risk

Before the math, a brief summary of VBP … just in case you haven’t heard

A Brief History of Pay for Performance (P4P)

• 1980s and 1990s – Increase in HMOs and managed care • Capitated payment models – Physician incentives based on financial performance • 2000-Present – Institute of Medicine reports • To Err is Human and Crossing the Quality Chasm • Rewarding provider Performance – Physician and hospital incentives based on clinical performance – Legislated changes – Pay for Reporting (2% penalty) – Senate and CMS models for value-based purchasing

What are the simple rules for the 21

Century Healthcare Sys tem

What Patients Sometimes Receive What Patients Should Expect (IOM Crossing the Quality Chasm, p. 67)

Care is fragmented Care is beyond the patient visits, wherever you need it Individualization Care can be confusing and repetitive Transparency Information is a record and yours to know Decision-making is based on science “Do no harm” Communication and information sometimes minimal Integrated Electronic Health Records rarely exist; minimal and disjointed information given to patients Is care based on evidence-based practices?

Is patient safety at the core of quality?

Never Events

1. Wrong Surgical or Other Invasive Procedure 2. Surgical or Other Invasive Procedure Performed on the Wrong Body Part 3. Surgical or Other Invasive Procedure Performed on the Wrong Patient Medicare will not cover hospitalizations and other services related to these non-covered procedures. All services provided in OR when an error occurs are considered related and therefore not covered. All providers in OR who could bill individually are not eligible for payment. All related services provided during same hospitalization are not covered. http://www.cms.gov/transmittals/downloads/R101NCD.pdf

Hospital-Acquired Conditions

These are conditions that are: high cost/volume, resulting in higher paying DRG when present as a secondary diagnosis, and which could reasonably have been prevented 1. Foreign Object Retained After Surgery 2. Air Embolism 3. Blood Incompatibility 4. Pressure Ulcers (Stage III and IV) 5. Falls and Trauma (Fractures, Dislocations, Intracranial Injuries, Crushing Injuries, Burns, Electric Shock)

Hospital-Acquired Conditions

6. Manifestations of Poor Glycemic Control (Diabetic Ketoacidosis, Nonketotic Hyperosmolar Coma, Hypoglycemic Coma, Secondary Diabetes with Ketoacidosis, Secondary Diabetes with Hyperosmolarity) 7. Catheter-Associated Urinary Tract Infection (UTI) 8. Vascular Catheter-Associated Infection 9. Surgical Site Infection Following: Coronary Artery Bypass Graft (CABG), Bariatric Surgery, Certain Orthopedic Procedures 10. Deep Vein Thrombosis (DVT)/Pulmonary Embolism (PE) Following total hip/knee replacement

POA Indicator Descriptor

• • • •

•

W N U 1 Indicates that the condition was present on admission.

Affirms that the provider has determined based on data and clinical

judgment that it is not possible to document when the onset of the condition occurred.

Indicates that the condition was not present on admission.

Indicates that the documentation is insufficient to determine if the condition was present at the time of admission.

ignifies exemption from POA reporting. CMS established this code as a workaround to blank reporting on the electronic 4010A1. A list of exempt ICD-9-CM diagnosis codes is available in the

ICD-9-CM Official

Source: Federal Register

CMS Example

MS-DRG Assignment (Examples for a single secondary diagnosis)

Principal Diagnosis: Stroke 

Without

CC/MCC Principal Diagnosis: Stroke 

With

secondary CC Injury due to a fall (code 836.4) • Principal Diagnosis: Stroke

With

secondary CC - Injury due to a fall (code 836.4)

POA Status of Secondary Diagnosis Average Payment Y Y Y N $5,347.98

$6,177.43

$5,347.98

(829.45)

Source: CMS’ Progress Toward Implementing Value-Based Purchasing: Lisa Graberth

Payment Implications

• More impact on accounts where the HAC was a CC/MCCs • More impact on accounts with few CC/MCCs – Heavier impact on small/rural facilities – Less impact on accounts with many other CC/MCCs • Impact on large facilities will increase as more CC/MCCs become HACs

SC Example With Few MCC/CCs

Primary Procedure: Incisional hernia repair Diagnoses:

Ventral hernia w/ obstruction Infection and inflammatory rcn due to indwelling catheter (CC) UTI (CC) Diabetes mellitus w/o complication Essential hypertension Unspecified hypothyroidism Other unspecified hyperlipidemia Coronary atherosclerosis of unspecified type vessel Venous insufficiency, unspecified Spondylosis w/o myelopathy Overweight Other chronic non alcoholic liver disease Constipation Esophageal reflux Gout, unspecified MSDRG weight Base rate

POA

Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 1.4092

$4,990.60 $ 7,032.75 Impact:

POA

Y N N Y Y Y Y Y Y Y Y Y Y Y Y 1.0147

$4,990.60 $ 5,063.96 $ (1,968.79)

28%

Source: SC ORS

SC Example With Many MCC/CCs

Primary Procedure: Other Enterostomy Diagnoses:

Pneumonitis due to inhalation of food/vomitus Toxic encephalopathy (CC) Decubitis ulcer, lower back (CC) (MCC) Grand mal status (CC) Other protein-calorie malnutrition (CC) UTI (CC) Deep vein thrombosis (CC) Mechanical complication of vascular device (CC) Dsphagia Hypotension, unspecified (MCC) Dehydration (CC) Mental d/o due to conditions classified elsewhere Parkinson's Electrolyte and fluid d/0 (CC) S. aureus Y Y Y Y Y

POA

Y Y Y Y Y Y Y Y Y Y

POA

Y Y

Y Y Y N Y Y Y Y N HAC HAC MSDRG weight Base rate Source: SC ORS 1.8444

$4,990.60 $9,204.66 1.8444

$4,990.60 $9,204.66 No Impact

Hypothetical With Many HACs

Primary Procedure: Other Enterostomy Diagnoses:

POA

Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y

POA

Y Y

Y Y Y N N Y Y N Y Y Y Y HAC HAC HAC HAC HAC MSDRG weight Base rate 1.8444

$4,990.60 $9,204.66 1.8444

$4,990.60 6136.44

$3,068.22

Pay-for-Reporting Quality Measurements

Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) and Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS)

RHQDAPU: Heart Attack

Hospital Compare 10/01/2008 to 09/30/2009

RHQDAPU: Heart Attack

Hospital Compare 10/01/2008 to 09/30/2009

RHQDAPU: Heart Failure

Hospital Compare 10/01/2008 to 09/30/2009

RHQDAPU: Pneumonia

Hospital Compare 10/01/2008 to 09/30/2009

RHQDAPU: Surgical Care

Hospital Compare 10/01/2008 to 09/30/2009

RHQDAPU: Surgical Care

Hospital Compare 10/01/2008 to 09/30/2009

HCAHPS

Hospital Compare 10/01/2008 to 09/30/2009

HCAHPS

Hospital Compare 10/01/2008 to 09/30/2009

Full APU: August 15 Deadline!

• As of July 27, 30% of hospitals had not submitted form indicating: – Registry participation (cardiac surgery, stroke, nursing sensitive measures) – Attestation of accuracy and completeness of quality data • 2% APU at risk; participation in registry not required, but form must be submitted through QNet Exchange

New Measures and Changes (total = 46 for FY 2011 APU)

•Participation in registries (stroke, cardiac surgery) •Re-admissions: 30-day readmissions for heart attack, heart failure and pneumonia. • Re-admission payment reductions start in 2013 and will apply to

all

Medicare discharges •Beginning in FY 2015, the Secretary is able to expand the list of conditions to include chronic obstructive pulmonary disorder and several cardiac and vascular surgical procedures, as well as any other condition or procedure the Secretary chooses. •2015 Hospitals in top quartile for Hospital-acquired conditions will have payment reduction for all Medicare discharges. Will be posted to CMS Hospital Compare website before 2015. •Physician Quality Reporting System-$ incentive for reporting through 2014. Penalty of 1.5% in 2015, and 2% penalty in 2016.

The Patient Protection and Affordable Care Act (PPAC)

Health Care Reform Act 2013

Senate Committee Apr. 29, 2009, Page 4 Hospitals that meet or exceed performance standards would receive value based “bonus” payments. The incentive payments would apply to all MS-DRGs under which a hospital provides services.

PPAC 2010 •

Support comparative effectiveness research by establishing a non-profit Patient-Centered Outcomes Research Institute.

•

Reauthorize and amend the Indian Health Care Improvement Act.

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

PPAC 2011 •

Prohibit federal payments to states for Medicaid services related to health care acquired conditions.

•

Develop a national quality improvement strategy that includes priorities to improve the delivery of health care services, patient health outcomes, and population health.

•

Prohibit federal payments to states for Medicaid services related to health care acquired conditions.

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

PPAC 2011 •

Rewards physicians for participation in the Physician Quality Reporting Initiative (PQRI).

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

PPAC 2012 • Allow providers organized as accountable care organizations (ACOs) that voluntarily meet quality thresholds to share in the cost savings they achieve for the Medicare program.

• Reduce Medicare payments that would otherwise be made to hospitals by specified percentages to account for excess (preventable) hospital readmissions.

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

PPAC 2012 •

Reduce annual market basket updates for home health agencies, skilled nursing facilities, hospices, and other Medicare providers.

•

Establish an acute hospital value based purchasing program in Medicare on or after October 1, 2012.

–

The baseline data for the initial FFY 2013 calculation in 2013 is April 1, 2010 to March 31, 2011.

–

The measurement data for FFY 2013 calculations is April 1, 2011 to March 31, 2012.

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

PPAC 2012 •

Develop plans to implement value based purchasing programs for skilled nursing facilities, home health agencies, and ambulatory surgical centers.

•

Establish VBP demonstration programs for CAHs and hospitals excluded from the VBP program because of insufficient volumes.

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

PPAC 2012 •

Develop plans to implement value based purchasing programs for skilled nursing facilities, home health agencies, and ambulatory surgical centers.

•

Establish VBP demonstration programs for CAHs and hospitals excluded from the VBP program because of insufficient volumes.

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

ARRA HITECH 2011-2015 •

Meaningful Use

–

Ability to retrieve and accumulate new patient data electronically

• • • •

ePrescriptions Patient demo Lab results Patient conditions

–

Ability to communicate quality measures electronically

–

Additional Quality Measures

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

South Carolina Medicaid • • •

HACs structured by MS-DRG, SC Medicaid still codes by Medicare DRG codes. Since FFS pays per diem, current MMIS could not simply remove the HAC and recalculate the DRG.

Plan is for a third party to crosswalk the DRG to a MS-DRG, recalculate without the HAC and take a percent of total to the original total and apply that percentage to the per diem.

Mandatory MCOs will not completely solve the problem. MHNs remain FFS.

BASED ON: HEALTH REFORM IMPLEMENTATION TIMELINE, THE HENRY J. KAISER FAMILY FOUNDATION

2013 Implementation

• “Bonus” – 2% of annual Marketbasket Update set aside to be earned back as a “reward”.

– Budget Neutral

Translating Performance Score into Incentive Payment: Example Percent Of VBP Incentive Payment Earned

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0%

57% performance 76% Reimbursement

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Full Incentive Earned Hospital Performance Score: % Of Points Earned

Source: CMS’ Progress Toward Implementing Value-Based Purchasing: Lisa Graberth 18

Percent Of VBP Incentive Payment Earned

Translating Performance Score into

Earned

Incentive Payment: Example

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0% Savings due to penalties 10% 20% 30% 40% No Bonuses ?

50% 60% 70% 80% 90% 100%

Hospital Performance Score: % Of Points Earned

Source: CMS’ Progress Toward Implementing Value-Based Purchasing: Lisa Graberth 18

Budget Neutrality

How will savings be distributed?

• Reimburse above 100% to high ranking hospitals • Fund programs for underachieving hospitals • Fund CMS expansion of the VBC program • Other

Madness to the Method

VBP Math

Actual Chart Extracted Data

Base Period National Scores

Scoring

Base Period Actual Scores for Period Hospital Scores for Improvement Comparisons Score Higher of

Case count < 100 is not computed Improvement does not apply once Attainment is maxed out at 19 Higher of Attainment or Improvement

Attainment Score

Reeves-Osborne Memorial Process Measures Score Details Base Period: April 2007 - March 2008 National Hospital - Base Year Hospital - Scoring Year Indicator Heart Attack Patients Given ACE Inhibitor or ARB for Left Ventricular Systolic Dysfunction (LVSD) Benchmark Threshold Case Count Performance Case Count Performance 90.0% 60.0% 95 67% 120 78% Attainment Score Improvement Score Final Score 6 5 6 Performance Threshold 78 -60 18 Benchmark Threshold 18 / 30 = .6

.6 x 10 = 6 90 -60 30 (Period Performance - Threshold) / (Benchmark-Threshold) x 10

The amount you exceeded the threshold compared to the amount the national benchmark exceeded the threshold

Improvement Score

Reeves-Osborne Memorial Process Measures Score Details Base Period: April 2007 - March 2008 National Hospital - Base Year Hospital - Scoring Year Indicator Heart Attack Patients Given ACE Inhibitor or ARB for Left Ventricular Systolic Dysfunction (LVSD) Benchmark Threshold Case Count Performance Case Count Performance 90.0% 60.0% 95 63% 120 78% Attainment Score Improvement Score Final Score 6 5 6 Performance Base Period 78 -63 15 Benchmark Threshold 15 / 30 = .5

.5 x 10 = 5 90 -60 30 (Period Performance – Base Period Performance) / (Benchmark-Threshold) x 10

The amount of your improvement from base compared to the amount the national benchmark exceeded the threshold

Combining Clinical Process and HCAHPS Scores for a Total Performance Score

CMS EXAMPLE Performance Score on RHQDAPU Process Measures (PSPM) Performance Score on Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) (PSH) Total Performance Score (TPS) (.7*PSPM) + (.3*PSH) Hospital A 58% 54% 57% The Proration: PSPM 58% X .7 = 0.406

PSH 54% X .3 = 0.162

TPS 0.568

Source: CMS’ Progress Toward Implementing Value-Based Purchasing: Lisa Graberth 17

Percentage recovery of 2% Withhold

CMS Model

Percentage recovery of 2% Withhold

Senate Model

Time to share the sandbox.

Current SCHA Reports

Annual Clinical Results HCAHPS

Hospital, State Top 10 Percentile, US Top 10 Percentile HCAHPS Measures CMS National Averages Hospital Specific Scores State Comparatien Data Urban/Rural, Teaching/Non-teaching, Bed Size

Annual Clinical Results HACs

Actual Occurrences Potential Cases Rate per Thousand (Actual/potential X 1000) 1.69 of every 1000 patients are at risk of some HAC 1.36 of every 1000 patients are at risk of a fall/trauma 6.21 of every 1000 patients are at risk of surgical site infection

Risk This worksheet was reduced to show just categories with occurrences for simplicity’s sake

Medicare HACs Reported Using POA Indicator (Numerator)

Occurrences

Medicare Discharges Related to the HAC Category (Denominator)

Falls & Trauma Catheter Associated UTI Surgical Site Infection 8 5,902 1 5,902 1 161 All Cases Total 10 5,902 All Cases Certain Ortho Procedures, Bariatric Surgery and CABG Cases All Cases

Estimated Medicare HAC Rate per 1,000 Discharges

Cost

Discharges Subject to Reduced Medicare Payment Because the HAC Reported was the Only Qualifying CC/MCC

1.36 1 0.17 0 6.21 0 1.69 1

This indicates the number of occurrences that not only impacted your quality score, but the HAC was the only paying diagnosis, so no payment was made for the entire account

Occurrences (Percent of Total)

Distribution of Medicare HACs by DRG Product Line, Top Cases: Back & Spine 10,0% Gastroenterology 10,0% Orthopedics 40,0% Other 20,0% Thoracic Surgery 10,0% Vascular Surgery 10,0%

Risk (Cases pr Thousand) 2,5 2 1,5 1 0,5 0

Estimated Medicare HAC Rates Rate per 1,000 Discharges 1,59 1,69 US Average Sample Hospital

Quarterly Outcomes and Financial Impact

RHQDAPU Scores

HCAHPS Scores

CMS Model

Assumes No Distribution of Excess Pool Dollars

Piedmont Medical Center Process Measures Score: 82% HCAHPS Score: 33% Overall VBP Score: 67% Dollars Contributed to VBP Expected Payment from VBP FFY 2013 1% Carve-Out $564,000 FFY 2014 1.25% Carve Out $728,000 $506,961 $654,375 Payment Percentage: 90% Excess Pool Dollars ($57,039) ($73,625) FFY 2015 1.5% Carve Out $728,000 $654,375 ($73,625) FFY 2016 1.75% Carve Out $876,000 FFY 2017 2% Carve Out $1,033,000 $787,408 ($88,592) $928,530 ($104,470) South Carolina State Process Measures Score: 84% HCAHPS Score: 34% Overall VBP Score: 69% Dollars Contributed to VBP Expected Payment from VBP FFY 2013 1% Carve-Out $18,722,000 FFY 2014 1.25% Carve Out $24,152,000 $17,057,667 $22,004,955 Payment Percentage: 91% Excess Pool Dollars ($1,664,333) ($2,147,045) FFY 2015 1.5% Carve Out $24,152,000 $22,004,955 ($2,147,045) FFY 2016 1.75% Carve Out FFY 2017 2% Carve Out $29,050,000 $34,263,000 $26,467,536 $31,217,115 ($2,582,464) ($3,045,885)

Senate Model

Problems with current reports

• Only preparing and reporting quarterly • Hospitals are not tracking and trending • Age of data • No longer actionable • Hospitals with purchased software have data available but don’t use it • Small hospitals can’t afford software

The VBP time bomb...

…the clock is already ticking.

Data Applicatio

n Baseline Period For Comparative data to use as a based for measuring improvement Measurement Period For determination of current score Application Period Calculated adjustment applied to reimbursement

Data Applicati

on Measurement Data: 2011 Score Determinations: 2012 2013 Application U.S. Department of Health and Human Services REPORT TO CONGRESS: Plan to Implement a Medicare Hospital Value-Based Purchasing Program November 21, 2007

The South Carolina Hospital Association Value Based Care Pilot Pro

ject March, 2010 Funding provided by The University of South Carolina Arnold School of Public Health Centers for Health Policies and Policy Research A²HA Finance Spring Meeting, March 22, 2010 A²HA Quality Spring Meeting, May 24, 2010 Barney Osborne and Karen Reeves

Purpose

To help our members prepare for healthcare reform and VBP, we established the SCHA finance-quality pilot. VBP will require hospital finance departments and hospital clinical quality staff to work closely together. The Workgroup had three primary goals:

Purpose

The Workgroup had three primary goals:

• Identify best practices and models in S.C. hospitals that promote the

alignment

of finance and quality, • • Develop a model financial-quality

dashboard

to be used by hospitals to track monthly quality outcomes.

Identify the data report elements

that all S.C. hospitals can easily utilize in their finance-quality work.

End Products

•

Document

on Characteristics and

Best Practices

at Hospitals with Quality-Finance-Clinical Alignment for VBP • Compilation of best practices,

policies

and procedures • • Computer program to model and project

data linking quality and finance

on a monthly basis • Sample

dashboards

benchmark data which include statewide

Educational program

collateral

Expected Outcomes

•

Pilot sites adopt dashboards

, computer program • 10 additional hospitals implement improvement activities (adopting tools, establishing joint quality and finance team meetings) • Surveys show improvement and identified needs met. Opportunities for future activities identified. • Positive financial impact of implemented changes occurred.

Observations

Lack of “actionable data” – MySCHospital.org and HospitalCompare data is too old to be used to resolve real-time problems –

“Ahead of your time” – Michael T. Rapp, MD, JD, FACEP CMS Director. Quality Measurement and Health Assessment Group

– High cost of quality data tracking systems – No cooperation from vendors – No peer comparisons outside of purchased reports or multi hospital systems

Observations

CFOs are unaware of the financial risk of VBP – No joint efforts between the quality and finance departments – Most quality teams do not include a financial specialist – Most CFOs do not attend quality meetings and have little coordination with the clinical departments except for issues relating to finance – Few cost accounting departments evaluate the additional cost of care due to quality errors – added LOS, higher level of care for corrective measures, legal risks – Little comparison of hospital staffing levels outside of multi hospital systems

Observations

Quality directors are uninformed about the financial risks of VBP – Few directors had knowledge of the Medicare cost reporting structure – Few had an understanding of how CMS proposes to penalize for non-compliance – Few had communicated the need for additional attention to quality results during the budgeting process

Observations

Small and rural hospitals have the greatest risk of non-compliance – The

lack of funds

to purchase the necessary software and support services –

Dependency on paper records

gathering quality measures data and totally manual – Lack of budgetary allocations to provide the

staff

necessary to perform analysis, recognize weaknesses and create recovery plans – The lack of

built-in edits

of reported data –

Dependency on CMS data

results which are no longer actionable because of their age.

The Reports

• Real-time actionable data • Brainless, seamless and effortless

Jason’s Sanders, Reimbursement and Budget Analyst

The Next Level

Put on your big girl panties and deal with it.

Implementation

CMS

Quality as a Key Component of Finance

• Component of reimbursement – Determines annual increases • Component of cost – Poor quality has a defined cost Must measure costs relative to quality

Internal Approaches

•

Cost Accounting / Reporting

– Never Events and HACs • Lost reimbursement (net) • Cost of initial visit/procedure – Cost of corrective visit/procedure • Cost of increasing quality compared to the potential lost reimbursement

Internal Approaches

• Include quality as a component of productivity – Comparing costs not only to volume and charges but to quality outcomes.

– Does quality suffer if cost (staff) is reduced?

• Re-evaluate the value of your quality department – now is a revenue department.

The Next Level: Quality as a Component of Productivity

Manhours per Adjusted Discharge CMI Neutral Manhours per Adjusted Discharge

Find New Approaches

Measurement / Comparison Internally

• Staffing has usually been “negotiated” in budget based on history and demands rather than justified like all other expenses.

• There is little measurement of how staffing relates to outcomes in order to require accountability • No predefined standards for data or calculations • Difficult to measure and evaluate because of variance in staffing needs for sicker patients: Severity is a determinate of staffing intensity

Challenge: New Ways of Thinking

• Comparing to other distinct units • Comparing to other facilities

Acute 1 Acute 2 Acute 2 Oncology ICU Average Mnhrs/APD 150 160 175 260 330 154

Actual

350 300 250 200 150 Acuity Quality 100 50 0 Acute 1 Acute 2 Acute 2 Oncology ICU Average Actual

Neutralize Severity

Medicare Case Mix index • Average of DRG weights • Used to apply cost of care based on severity of the “average” patient based on extensive national reviews • Adjusting by CMI can convert the denominator to a relative amount for both acute and specialties

Acute 1 Acute 2 Acute 2 Oncology ICU Average Mnhrs per Patient Day

150 160 175 260 330 154

CMI

0.96 1.02 1.15 1.60 2.10

Mnhrs Per Adjusted Patient Day

156 157 152 163 157 156

Net of Severity No correlation: Investigate productivity and process

Adjusted

Adjusted Acute 1 Acute 2 Acute 2 Oncology ICU Average Mnhrs per APD 150 160 175 260 330 154 CMI 0.96 1.02 1.15 1.60 2.10 Adjusted Mnhrs Per Apd 156 156 152 162 157 156 164,00 162,00 160,00 158,00 156,00 154,00 152,00 150,00 148,00 146,00 Acute 1 Acute 2 Acute 2 Oncology ICU Average There may be a correlation: Investigate staffing level

Compare

350 300 250 200 150 100 50 0 Acute 1 Acute 2 Acute 2 Oncology ICU Average Actual CMI Adjusted

Use of results

• Identify productive and less-productive departments • Review strengths and weaknesses of each notable variances to identify focus areas to either reduce cost by improved productivity and/or improve quality outcomes • Highlight focus areas for monitoring and evaluation through use of value stream mapping (LEAN, Toyota, Six Sigma) or other technology/functional approaches • Maintain routine measurements to identify successes, failures and new potential improvements

Lean and Related Trends

Waste Reduction Targets (National Priorities Partnership)

• Inappropriate medication use • Unnecessary laboratory tests • Unwarranted maternity care interventions • Unwarranted diagnostic procedures • Unwarranted procedures

Waste Reduction Targets (National Priorities Partnership)

• Preventable emergency department visits and hospitalizations • Inappropriate non-palliative services at end of life • Potentially harmful preventive services with no benefit

CMS: Don Berwick

Per Capita Cost Population Health Experience of Care

Any questions before we close?

Closing

• The time is now: 2011 quality results will be a component of the first VBP adjustments in 2013 • Tracking real-time is imperative to intercept problems and reduce the length of impact • Quality is now a component of productivity • New quality focused approach to cost accounting • Quality Department as a financial function • Quality Department as a revenue department

Closing

• Beware of contractions • Preventative medicine – CPT reimbursement • Defensive medicine – VBP waste reduction • Tort reform – Defensive medicine • Bundling – Starke law • Outcomes - ALOS • Readmissions – ALOS • This is just the beginning of a new era.

Thank you.

Value Based Purchasing: Combining Cost and Quality Michael T. Rapp, MD, JD, FACEPDirector, Quality Measurement and Health Assessment GroupOffice of Clinical Standards & Quality Centers for Medicare & Medicaid Services http://www.ncvhs.hhs.gov/09101 4p4.pdf

Hospital Acquired Conditions: Projected Costs savings •

Savings estimates for the next 5 fiscal years are shown below: Year Savings (in millions)

FY 2009 ...................................$21 FY 2010 .................................... 21 FY 2011 .................................... 21 FY 2012 .................................... 22 FY 2013 .................................... 22

Distribution of AMI Readmission by HRR

Distribution of HF Readmission by HRR 4

Distribution of Pneumonia Readmission by HRR 43

CMS’ ultimate goal is to shift the curve