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1. {Bundled Payments.}

2. Agenda • OUR DISCUSSION TODAY • Define Bundles • Creating a Successful Bundle • The Commercial Movement • Impact on Revenues and Operations • Questions

3. Define Bundles

4. Define Bundles • PACKAGED SERVICES Pre-Admit Inpatient Recovery Follow-Up Excludes charges through surgeon evaluation Includes specific pre-surgical workup expenses Includes all physician hospital charges Includes physician, hospital charges for complications and re-admissions and PT, HHC, SNF, IP Rehab Excludes Hospice, Outpatient Rx, ESRD 3 Days 30 - ??? Days Post-Window Pre-Window

5. Define Bundles • CMS BPCI – MODEL 1 participants 15 representing 15 providers clinical condition episodes Most Medicare FFS discharges bundle coverage Hospitals, physicians payment arrangement Retrospective episode trigger Acute hospital stay episode duration Acute hospital LOS

6. Define Bundles • CMS BPCI – MODEL 2 participants 656 representing 2,150 providers clinical condition episodes 48 bundle coverage Hospitals, physicians, post-acute, re-admissions, lab, DME, Part B Rx payment arrangement Retrospective episode trigger Acute hospital stay episode duration 30 or 90 days after discharge

7. Define Bundles • CMS BPCI – MODEL 3 participants 287 representing 4,617providers clinical condition episodes 48 bundle coverage Physician, SNF, IRF, LTAC, HHA, re-admissions, lab, DME, Part B Rx payment arrangement Retrospective episode trigger Acute hospital stay, and begins at initiation of post-acute services episode duration 30, 60 or 90 days after initiation of episode

8. Define Bundles • CMS BPCI – MODEL 4 participants 17 representing 18 providers clinical condition episodes 48 bundle coverage Hospitals, physicians payment arrangement Prospective episode trigger Acute hospital stay episode duration Acute hospital LOS

9. Define Bundles • INCLUSIONS / EXCLUSIONS • What constitutes an Episode Family • Similar services by DRG, across an acuity • Necessary ‘n’ • What occurrences (claims) should not be included within an Episode Duration • Irrelevant readmissions • Principle diagnosis code exclusions

10. Creating a Successful Bundle

11. Creating a Successful Bundle • Required Partners • CHOOSING WISELY Target $ Price

12. Creating a Successful Bundle • EXISTING VARIABILITY

13. Creating a Successful Bundle • EXISTING VARIABILITY • Length of Reconciliation Period • Risk Assessment • Qualification of the Bundle Family of Episodes

14. Creating a Successful Bundle • VALID PLAN FOR PROTOCOLS Source: HCI3 – Prometheus Model

15. Creating a Successful Bundle • VALID PLAN FOR PROTOCOLS Source: HCI3 – Prometheus Model

16. Creating a Successful Bundle • VALID PLAN FOR PROTOCOLS Care re-design Care Coordination – elimination of redundant testing, readmission prevention, improved follow-up care Clinical Practice Improvement – Reduction of preventable errors, clinical best practice guidelines in concordance with evidence based medicine Supply Chain – reduce variation in supply costs Patient Centered Interventions – improve engagement of patients in their care

17. Creating a Successful Bundle • VALID PLAN FOR PROTOCOLS Care re-design examples Proven Care – Geisinger Health System CABG Integrated Healthcare Association – Orthopedic Procedures Iowa Health System St. Luke’s – Heart Failure Prometheus – Total Knee Replacement Toolkit

18. Creating a Successful Bundle • Controllable Costs • CONTROLLABLE COSTS • Valid Plan for Protocols Operating Costs less than Target Price Target $ Price Historic Claims Paid less 3%

19. Creating a Successful Bundle • Controllable Costs • CONTROLLABLE COSTS • Valid Plan for Protocols • Process Change • Labor • Supply Standardization Target $ Price • Duplication • Unnecessary • Least Acute

20. The Commercial Movement

21. The Commercial Movement • EMPLOYER AND COMMERCIAL

22. The Commercial Movement • EMPLOYER 2,200,000 160,000 343,000 250,000

23. The Commercial Movement • COMMERCIAL Source: Bailit Healthcare Purchasing

24. Impact on Revenue & Operations

25. Impact on Revenue & Operations • CLINICAL + - Discount on FFS Source: Adapted from The Advisory Board

26. Impact on Revenue & Operations • CLINICAL + - Start-Up Costs Discount on FFS Source: Adapted from The Advisory Board

27. Impact on Revenue & Operations • CLINICAL + - Start-Up Costs Discount on FFS Process Improvement Source: Adapted from The Advisory Board

28. Impact on Revenue & Operations • CLINICAL + - Start-Up Costs Discount on FFS Process Improvement Device Management Source: Adapted from The Advisory Board

29. Impact on Revenue & Operations • CLINICAL + - Start-Up Costs Discount on FFS Process Improvement Device Management Physician Gainsharing Source: Adapted from The Advisory Board

30. Impact on Revenue & Operations • CLINICAL + - Start-Up Costs Discount on FFS Process Improvement Device Management Change in Utilization Practices on % Of Charge Agreements Physician Gainsharing Source: Adapted from The Advisory Board

31. Impact on Revenue & Operations • CLINICAL + - Start-Up Costs Volumes Discount on FFS Process Improvement Device Management Change in Utilization Practices on % Of Charge Agreements Physician Gainsharing Source: Adapted from The Advisory Board

32. Questions

33. {Bundled Payments.}