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Funding Adjustment Models How Do You Incentivize Value?

Funding Adjustment Models How Do You Incentivize Value?. Bob Opsut/Greg Atkinson OASD (HA) Health Budgets and Financial Policy. What is Value in Health Care?. Volume (Activities, Episodes, Population) + Outcomes (Readiness, Population Health, Customer satisfaction).

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Funding Adjustment Models How Do You Incentivize Value?

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  1. Funding Adjustment ModelsHow Do You Incentivize Value? Bob Opsut/Greg Atkinson OASD (HA) Health Budgets and Financial Policy

  2. What is Value in Health Care? Volume (Activities, Episodes, Population) + Outcomes (Readiness, Population Health, Customer satisfaction) Resources (MilPers, appropriations, reimbursements) How Much? How Well? At What Cost?

  3. Background • PPS initiated in 2005 to rationalize the direct care budget adjustments • Presidents Management Agenda • Budget to follow performance • Declining workload • Care shifting to PSC • Provide way to offset Efficiency Wedge • Budget could be stable if more work done • Provide funds for recapture • Way to move PSC funds to Direct Care

  4. Background (cont.) • Initially proposed as a capitated system • Considered too risky and too large a leap • Fee for service (FFS) system seen as simpler to implement and necessary to familiarize the staff with workload measures • SMMAC decided to start as a Fee for Service system with capitation some time in the future • Concern remains that MTFs would have difficulty managing under capitation • However, higher growth in PMPM for MTF enrollees creates budget pressures to go to capitation

  5. Transition In Both Payment & Delivery Systems Delivery System Ideal? Fully Integrated Delivery System Co-evolution of organization and payment Transition PCMH Level 2/3 Medical Homes Today Primary Care Sub-Capitation Volume-driven fragmented care Full Population Prepayment Fee-for-service Medical Home Payments Payment System Adapted From “From Volume To Value: Better Ways To Pay For Health Care”, Health Affairs, Sep/Oct 2009.

  6. How Much? • Answering “How much” is not enough. • Unintended side effects can reduce value.

  7. How Well?

  8. Three Examples • Current PPS • Navy Performance Planning Pilot Sites • CMS Comprehensive Care Initiative

  9. Current PPS – How Much? • The Current Performance Based Funding Adjustment • Value of MTF Workload • Fee for Service rate for workload produced • Rates based on price at which care can be purchased • TMAC rates • Not MTF costs • Computed at MTF level but allocated to services • Rolled up to Services

  10. Civilian Inpatient Institutional Hospital (MS-DRG) Including ancillaries, pharmacy Professional (RVU) Surgeon Anesthesiologist Rounds Consultants Outpatient Professional (RVU) Institutional (APC) Outpatient Ancillary (RVU/Fee Schedule) Direct Care PPS Inpatient (RWP, i.e. MS-DRG) All Institutional and Professional Hospital Including ancillaries, pharmacy Surgeon Anesthesiologist Internist Consultants Outpatient Professional (RVU) Institutional (APC) Outpatient Ancillary (Pass Thru) None TMAC versus PPS

  11. Current PPS Workload • Inpatient – MEPRS A Workcenters • Non-Mental Health – Severity Adjusted DRGs Relative Weighted Products (MS-RWPs) • Mental Health - Bed Days • Outpatient – MEPRS B Workcenters • Provider Aggregate Relative Value Units (RVUs) • Non-credentialed providers get appropriate Practice Expense RVU credit • Ambulatory Payment Classification (APCs) • Facility location now identified in CAPER records • Consistent with TRICARE change for CY09

  12. Valuing MHS Workload Fee for Service Rates FY12 Value per MS-RWP - $8,688 (MEPRS A codes) Average amount allowed Including institutional and professional fees Excluding Mental Health (MH)/Substance Abuse (SA) Adjusted for local Wage index and Indirect Medical Education Adjustment Value per Mental Health Bed Day - $803 (MEPRS A codes) Average amount allowed Including institutional and professional fees Adjusted for local Wage index and Indirect Medical Education Adjustment Value per RVU - $33.97 (MEPRS B codes) Standard Rate – like TMAC/CMS Adjusted for local geographic price index both Work and Practice Value per APC - $69.61 (Facility records) Standard Rate

  13. How Well? - HEDIS • Paying for additional performance beyond workload • In past this has been adjustment if MHS had additional dollars available at Mid-year • Method is really a performance based allocation of excess dollars • Does not match external P4P programs where dollars are at risk

  14. P4P HEDIS • Values for standard set of measures * Excludes Pilot Sites that are funded based on Service unique methods.

  15. Current PPS Summary

  16. Mid-year FY2012 Navy Pilots Performance Funding Adjustment

  17. Performance Funding Items • How Much? • Care Management Fee • Primary Care Sub-capitation • Traditional FFS for care outside of Sub-Capitation • How Well? • HEDIS Quality adjustment • Colorectal/Cervical/Mammogram/Diabetes • Access/Continuity of care adjustment • 3rd Available Appointment • Continuity of Care • Satisfaction • Not available, due to change in Survey instrument • ER Utilization adjustment • PMPM adjustment Balanced Bonus Eligible Items

  18. Care Management • An increase in enrollment is awarded with $2.50 per increased enrollee per month. • NCQA Level 2 Certified MTFs can earn $5 per increased enrollee. • Pensacola earned $33,250 • Quantico earned $75,860

  19. Traditional PPS compared to PPS + Primary Care Sub-Capitation MTF PPS Overall Funds (A) Everything outside of Primary Care Product Line (D) Same MTF Other than Team (ie ER Office Vst) (C) Team care for own Enrollees Primary Care Sub-Capitation (B) Primary Care Product Line (E) MCSC/ Other MTF

  20. Funding of Primary Care Sub-Capitation Rolling 12MTF PPS Overall Funds Baseline MTF PPS Overall Funds (A1) Everything outside of Primary Care Product Line (A2) Everything outside of Primary Care Product Line (D2) Same MTF Other than Team (ie ER Office Vst) (D1) Same MTF Other than Team (ie ER Office Vst) (C1) Team care for own Enrollees (C2) Team care for own Enrollees • Traditional PPS Earnings: • MTF PPS (A1+B1+C1+D1) • Baseline Sub-capitation Value: (C1+D1+E1) • Capitation rate: (C1+D1+E1)/Eq Lives1 • Revised Pilot PPS Earning Calculation • Rolling 12 (A2+B2+D2) + Net Sub-capitation • Sub-Capitation Total value = (Capitation Rate x Eq Lives2) • Net Sub Capitation Earnings = Total value – (D2+E2) (B1) Primary Care Product Line (B2) Primary Care Product Line (E1) MCSC/ Other MTF (E2) MCSC/ Other MTF Team currently represents entire Primary Care Product Line for same MTF Enrollee.

  21. Sub-Capitation • Adjusted for Provider Aggregate RVUs • Standardized across years to prevent weight changes causing utilization increases • Using current Conversion factor without GPCIs • Team concept currently based on Primary Care Product Line with adjustments for new PCMH clinics (BAZ/BDZ) • Equivalent Lives • Based on Age/Gender/Bencat • Safe Harbor • Between 25th and 75th Percentile No adjustment • Above 75th Percentile reduction of 0.5 RVUs per Eq Life • Below 25th Percentile growth permitted of 0.5 RVUs per Eq Life • Base on number of Enrollees not Enrollment sites

  22. Provider Aggregate RVU per Primary Care Equivalent Life 8.54 7.19 Range based on Total Enrollees

  23. Provider Aggregate RVU per Primary Care Equivalent Life Safe Harbor Upper 8.54 Target Pensacola Quantico 7.19 Safe Harbor Lower Baseline

  24. Primary Care Sub-Capitation Pensacola (D2) Same MTF Other than Team (ie ER Office Vst) 12,796 RVUs $434,672 8.76 RVUs/ Eq Life 8.49 RVUs/ Eq Life (D1) Same MTF Other than Team (ie ER Office Vst) 10,465 RVUs $355,480 (C2) Team care for own Enrollees 326,658 RVUs PPS $11,096,576 (C1) Team care for own Enrollees 309,291 RVUs $10,506,613 (E2) MCSC/ Other MTF 35,740 RVUs $1,214,088 (E1) MCSC/ Other MTF 36,688 RVUs $1,246,302 • Baseline Sub-capitation Value: (C1+D1+E1) • Capitation rate: (C1+D1+E1)/Eq Lives1 • Capitation Value = $12,108,395 • Capitation Rate = $12,108,395/41,961 Eq Lives • $289/Eq Life • Net Sub-capitation • Sub-Capitation Total value = (Capitation Rate x Eq Lives2) • Net Sub Capitation Earnings = Total value – (D2+E2) • Sub-Capitation Total Value • = ($289 x 42,807 Eq Lives) = $12,352,476 • Net Sub Capitation Earnings • $12,352,476 – $1,648,760 = $ 10,703,716 Net Sub-Capitation Earning change: $10,703,716-$10,506,613 = $197,103 (On a per Eq Life basis MTF earnings decreased from $250.39/Eq Life to $250.05/Eq Life) Team currently represents entire Primary Care Product Line for same MTF Enrollee.

  25. Primary Care Sub-Capitation Quantico (D2) Same MTF Other than Team (ie ER Office Vst) 4,243 RVUs $144,125 7.61 RVUs/ Eq Life 8.10 RVUs/ Eq Life (D1) Same MTF Other than Team (ie ER Office Vst) 1,452 RVUs $49,328 (C2) Team care for own Enrollees 134,163 RVUs PPS $4,557,512 (C1) Team care for own Enrollees 138,613 RVUs $4,708,675 (E2) MCSC/ Other MTF 30,882 RVUs $1,049,064 (E1) MCSC/ Other MTF 23,846 RVUs $810,055 • Baseline Sub-capitation Value: (C1+D1+E1) • Capitation rate: (C1+D1+E1)/Eq Lives1 • Capitation Value = $5,568,059 • Capitation Rate = $5,568,059/20,241 Eq Lives • $275/Eq Life • Net Sub-capitation • Sub-Capitation Total value = (Capitation Rate x Eq Lives2) • Net Sub Capitation Earnings = Total value – (D2+E2) • Sub-Capitation Total Value • = ($275 x 22,256 Eq Lives) = $6,122,542 • Net Sub Capitation Earnings • $ 6,122,542 – $1,193,189 = $4,929,353 Net Sub-Capitation Earning change: $4,929,353-$4,708,675 = $220,103 (On a per Eq Life basis MTF earnings decreased from $232.64/Eq Life to $221.48/Eq Life) Team currently represents entire Primary Care Product Line for same MTF Enrollee.

  26. How Well - HEDIS • Eligibles determined by measure, valued on a sliding scale • $10.00/properly managed enrollee if enrollment site manages to meet the 90th percentile • $5.00/properly managed enrollee at 50th percentile • $2.50/properly managed enrollee below the 50th percentile • Performance Period (Rolling 12 months) • FY11 FM4 to FY12 FM3 • FY10 Q4 months inferred • Baseline • FY09

  27. How Well - Third Available Acute • Pensacola earned $30,250. • Quantico lost $34,568 • Earnings are calculated monthly. • By crossing above 60%, Pensacola began earning $0.50/enrollee month versus $0.25 prior to crossing 60%. • Conversely, Quantico dropped to $0.25/enrollee in most months, causing a significant earnings decline from 2009.

  28. How Well - Third Available Routine • Pensacola lost $228,522. • Quantico earned $36,097 • Earnings are calculated monthly. • In 2011, Pensacola decreased in raw performance from 92% to 84% • Additionally, they also dropped below 80% in some of the months of 2011, which caused them to earn an additional dollar less per enrollee ($1.50 - $0.50) in those months. • In the months that the performance dipped below 80%, earnings fell almost 33%. • By passing above 60%, Quantico began earning $0.50 per enrollee per month instead of only $0.25.

  29. How Well - Continuity • Pensacola earned $79,067 • Quantico earned $163,090 • Earnings are calculated monthly. • Pensacola increased performance but was also able to cross the 50% threshold in some months, earning $10 per PCM appointment. • Quantico increased performance and was also able to earn $20 per PCM appointment by crossing above the 60% threshold.

  30. How Well - ER Visits / 100 • ER roughly calculates the difference in PPS earnings based on utilization that would be expected and then disperses a portion of the savings (or costs). • ((Enrollees2011 * ER2009) – (Enrollees2011 * ER2011)) * 300 * X % • Where X % is based on the performance year ER Rate • < 30.0, 20% • < 35.0, 10% • >35.0, 5% • Increase above baseline -5%

  31. ER Continued • Pensacola increased their expected visits by approximately 82. • 43,095*(.4774-.4755) • 82 visits * 300 * 5% = ~$1,237 decrease • Quantico increased their expected visits by approximately 1,011 • 22,138 * (.3861-.3404) • 1,011 * 300 * 5% = ~$15,172 decrease

  32. How Well - PMPM • PMPM earnings are based on the savings (or cost) from the MHS target. • The 2 year target from 2009 to 2011 is a 9.38% increase. Anything within +/- 2% of that falls into the safe zone. • 10% of the savings (or cost) is awarded to those that beat the target by 2% or more. • 20% of the savings (or cost) is awarded to those that beat the target by 4% or more.

  33. PMPM Continued • Pensacola fell within the safe zone and was neither awarded nor penalized financially. • Quantico increased by well over 4% of the target and thusly was penalized 20% of the increased cost. • Enrollees2011 * ((PMPM2011 – PMPMTarget) * 12) * 20% • 22,138 * ((347-311)*12) * 20% = $1.9million

  34. Summary for Sites Both sites had a negative Non-Workload Performance Sub-Total, so there is no Balanced Bonus. Balanced Bonus is only applied if Performance results are positive.

  35. Centers for Medicare and Medicaid InnovationComprehensive Primary Care Initiative

  36. Practice and Payment Redesign Through the CPCI – Overview • Tests two models simultaneously • Practice redesign Targeting 5 key primary care functions (does not equal PCMH specific model) • Payment redesign – 2 key components of program • PMPM care management fee • Shared savings • First program to focus on reduction of overall cost of beneficiary • Better use of data • Ongoing, regular reports to providers

  37. Reasons/Purpose for MHS Participation 1. Test new model of care for MCSC enrollees 2. Investing in PC providers may --> increase in network (Oregon state reps highlighted especially) 3. Partnering with CMS 4. Partnering with state • Establishing roadmap for future such US-wide demonstrations with other federal partners • Helps inform future TRICARE contracts. • Does this payment mechanism reduce overall cost per beneficiary? One of goals of CPCI is to build a medical neighborhood with providers and payers

  38. MHS Selection Criteria: Population • MHS Criteria: populations eligible for demonstration • Prime enrollees to MCSC (does not include standard care) • Care for non-enrolled beneficiaries (standard patients) potentially acquired at multiple providers • Demonstration is testing management of enrollee care to PCMs • Active duty family members, retiree and retiree family members • Potential geographic relocations of ADFMs may impact significance of results • Outside a prism and catchment area • If in a prism or catchment area, referrals to MTFs would occur • Cost of care in MTFs highly variable and presents problem with study review

  39. MHS Selection Criteria: Regions • 7 regions selected by CMMI • 4 with population too small for MHS participation • Arkansas, Oregon (whole state); Oklahoma (only Tulsa area) • Allows for testing model in rural and metropolitan areas

  40. How Much? • Management Fee • Risk adjust using Medicare model; revise in future as MHS-specific model evolves • Average year 1 & 2 estimates • ADFM - ~$7 per enrollee per month • Retirees, NADFM - ~$9 per enrollee per month • Potential liability first year of 31,712 eligibles, assuming 20% participation: 6,343 enrollees = $652,150 • Fee for Service for any care provided

  41. How well? • Quality measures throughout initiative • Core set of measures • “Not later than year 2” shared savings as performance bonus, with reduction in care management fee • Calculated at total area level(state for Arkansas & Oregon; Tulsa region for Oklahoma) • Calculation • Actual risk-adjusted PMPM(including management fee) compared to • Projected risk-adjusted PMPM (based on baseline inflated) • Catastrophic individuals excluded • Shared saving for distribution – 50%

  42. Shared Savings: Distribution • As performance bonuses • Based on individual practice performance • Calculated on quality & utilization metrics – formula TBD

  43. Tentative Timeline • Commitment finalized with CMMI – May 31, 2012 • Start of demonstration for MHS: September 1, 2013 • Major mileposts from June 1, 2012 – August 31, 2013 to develop TRICARE specific requirements. No later than • June 2012: Prepare Decision Memorandum for Director, TMA to establish approval to for the TRICARE demonstration project • May 1, 2013: Develop and Publish Federal Register Notice of Demonstration • July 1, 2013: Develop and issue contract modification to TMA contractors by July 15, 2012 to ensure implementation by September 1, 2013

  44. So… • Has FFS PPS outlived its usefulness? • Concern that FFS induces: • Over-utilization • Upcoding • Treatment over prevention • Considerable discussion each year on mid-year adjustments • Competition/rancor between services • MTFs strong focus only on PPS earning areas • Qulaity has ot been focus of performance adjustments • Only used to distribute excess funds

  45. Future PPS?? (Performance Payment system) FFS with Performance Bonus?Primary Care Sub-capitation with Specialty FFS?Full capitation with Shared Savings?Stay Tuned

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