Transcript Policy Brief - Trinity University

David Martin and Annie Russell
7
Low
Low cost
Low Cost
Low
Quality
High Quality
COST
High Cost
High Cost
Low
Quality
High
Quality
High
Low
QUALITY
High
Characteristics of
Low cost and high
Quality….
Safe, Efficient and
Effective care
Goals
 to incentivize towards high quality, low cost care
 To reduce the overall spend of care
Major Components
 Reward Better performing providers
 Value Based Purchasing

Reducing payment for poor outcomes
 Readmissions, hospital acquired conditions, infections, serious
preventable adverse events

Encourage collaboration across the continuum
 Bundling of payments

Hospital Acquired Conditions (HACs)
 Federal: PPACA imposes financial penalties on hospitals with high HAC
rate.
▪ Beginning October 2014, hospitals with HAC rate in bottom quartile of
national average (i.e. high rate) will suffer a 1% payment reduction for all
Medicare inpatient DRGs.
▪ Projected savings: $1.5 billion/10 years
 Other HAC provision
▪ Requires reporting of hospital specific information on HACs to the public
via Hospital Compare
▪ Public reporting was scheduled for September 23, 2010 but has been
indefinitely delayed due to a discrepancy in the calculation of HAC rates
by CMS.
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
Over the next five years, approximately 6% of inpatient Medicare reimbursements to
hospitals will be linked to clinical performance (exclusive of Meaningful Use
incentives).
•

CMS has stated its intention to extend the performance-based reimbursement to the staterun Medicaid program.
This is not only federal administrative intent, it is law.
•
Affordable Care Act mandates “Value-Based Purchasing” in the Medicare program and
stipulates:
▪ Payment tied to hospital performance on core measures and HCAHPS.
▪ Decreased reimbursement for high readmission rates.
• Proposed rule pending
▪ Decreased reimbursement for high rates of HACs.
• Proposed rule pending
2011
2012
2013
2014
2015
2016
2017
2018
2019
Hospital Value-Based Purchasing (1-2%; Phased in over 4 Years)
1.00%
1.25%
1.50%
1.75%
2.00%
Hospital Readmissions (1-3%; Phased in over 3 Years)
1.00%
2.00%
3.00%
Hospital Acquired Conditions (1%)
1.00%
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
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
Complete overhaul of hospital-physician
relationships.
Physicians aren’t vendors or customers; they
have to be partners in this new era.
Reduce variability where evidence supports
it. Keep up with and follow the evidence.
Reimbursements must be linked.

Continuum of strategies available
 Private practice with hospital affiliations
 Medical Director contracts for service lines
 Exclusive Coverage contracts
 Clinical Integration physician group
 Gain sharing agreements
 Formal Co-management LLP
 Full Employment
Co-Management
Opportunity

Multi-party management services agreement
to provide specific duties to a hospital service
line (inpatient and outpatient)
Length: 1 year with renewal option for
multiple years
Compensation: fixed monthly stipend
(20%); incentive pool (80%) based on
achievement of set of performance indicators


A management company, typically a LLC, is
formed either as a joint venture between a
hospital and group of physicians, or between
various physicians, to provide defined
management services to the hospital.
The LLC is designed to achieve organizational
outcomes.
Hospital
Physicians
Hospital pays the
LLC for:
Service Contract
to manage
service line
51
%
49
%
Management
Company
LLC
Management
contract
•Base Mgmt fees
•Incentive comp.
Quality
Satisfaction
Operational
efficiency

Financial incentives are linked to the
achievement of specific outcomes related to
service, quality, resources and growth goals,
e.g.:
 Complication and infection rare benchmarks
 Development and implementation of clinical
pathways
Efficiency and standardization
Patient safety improvement and satisfaction

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Outcomes
Readmission rates
Patient safety
National quality indicators
Efficiency
Standardization
Length of stay
Patient satisfaction
Documentation

The Co-Management structure provides for
oversight by a team of representatives from
the Managers and the Hospital

Each participating physician is assigned to
one of the teams focused on a set of
performance indicators
Compensation is determined through a third party
valuation based on the scope of required
management duties. The process includes a
scoring algorithm comparing the proposed
duties to other market agreements.
▪ Expressed as a percentage of program net revenues generally
around 2 percent split between a fixed amount and
performance bonus.
▪ The typical split is:
 --20% is paid out as a fixed monthly stipend based on the
anticipated hours to perform the duties
 --80% is then distributed as a performance bonus based on the
achievement of preset indicators

Pay for Performance Example
 If the total payout is $100, then roughly $20 is the
FIXED component paid out monthly in a stipend. The
balance of $80 is the PERFORMANCE BONUS paid
out to the Operation Team members.
 The PERFORMANCE BONUS is paid to the
Participating Physicians on each operations team.
The bonus is evenly distributed to each indicator and
is paid out if the indicator achieves the target and
stretch goals.
 NOTE: Failure to meet the goals results in no payout
for that specific indicator.
No
Indicator
Definition
1
Adm to OR-Fractures
LOS between admission and OR day
2
SCIP Inf 3—Prophylactic Antibiotics Disc
w/in 24 hrs after surgery end time
Per CMS definition
3
Direct Cost/Case-TJR
Average direct variable cost per case
for primary total joints
4
Joint Camp Use
Percentage of total joint
replacements who use Joint Camp
prior to surgical date
5
% if on time starts—first case
Wheels in at surgical time for first
case
6
Block Time Utilization
Percentage of cases done in
scheduled block time (all phys)
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Patient Satisfaction
Percentile ranking by MSDRGs
(MDC8)

St. Mary’s Health Center, Missouri
 Formed 3 Co-Management LLC’s (surgery,
musculoskeletal, cardiovascular)
 50/50 Ownership
 Joint and equal governance on LLC Board
 MD’s manage each other
 Compensation based on performance
 Now ranked within top 1% of 4,400 hospitals
nationally by the Commonwealth Fund

Orthopedic and Neuro Spine Institute:
Providence Hospital Northeast
Before: only 5 surgeons, 2of 4 OR’s utilized, no
neurosurgery or orthopedic ED coverage
Post Co-Management
24/7 ED coverage without stipends (year 1)
OR usage up to 6 used (year 1)
Linked offices to hospital electronically
Joint and Spine Centers (years 2-4)
Ortho cases; 1,000 to 3,000

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Define service lines
Conduct baseline clinical and operational
assessment to determine opportunities
Form a steering committee (Docs and suits)
Define incentives (weighting methodology,
tie incentives to measures, establish tiers and
associated payments)
Establish a governance model
Select and contract with valuation firm


Preparation of legal agreements
Implementation:
Finalize legal, operating, and management
agreements
Hold steering committee meetings
Facilitate a town hall meeting-all eligible MD’s
Begin private placement process
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Perfection is unobtainable. But if we chase it,
we can catch excellence.
Vince Lombardi