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Presentation by Kirby Farrell, President and CEO, Broad Axe Technology Partners and Andy Archer, MSc, MBA, Vice President, Broad Axe Technology Partners
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MAKING THE BUSINESS CASE FOR HOSPITAL RPM / CARE COORDINATION PROGRAMS
MATRC Telehealth SummitMarch 2013
Agenda
Who We Are/Our Approach
Remote Patient Monitoring for Care Coordination: Value Drivers
Readmissions and the Value of Avoided Penalties
Costing an RPM/CC Solution
Making the Business Case
2
Who We Are3
Virginia-based Telehealth Services firm providing Care Coordination Services via Remote Patient Monitoring Lower patient readmissions Improve outcomes for key patient populations Position health systems strategically for new environments (ACO, shared risk, etc) Enhance and better leverage data analytics
Founders are serial entrepreneurs with significant experience in: Design and operation of secure networks and operation centers for health care and defense Public/Private Partnerships Health care market research and analytics
Key Clients Commonwealth of Virginia University of Virginia University of Virginia Medical Center New College Institute – Southside Telehealth Training Academy and Resource Center (STAR) Virginia Tobacco Commission – Special Projects
Care Coordination Center
Primary Care
Physician
Home Health
Nurse Case Manager
Heart FailureAMIPneumoniaCOPDCABGPTCAOther vascular
Over time: Highest-Risk Frequent Readmits
Patient RiskStratification and Selection
Coordination w/Hospital
Discharge
Transition to Home: “Activation” and Daily Monitoring
Key Transition Activities:• Hub/device home install• Patient training• Med reconciliation/PCP appt• Connection established with
RN monitor
Biom
etric/symptom
data
Alert intervention
Provider Coordination via Clinical Review Software and Reporting
Referral to Care
Coordination Center
Regular reporting
Outcomes Reporting:• Readmissions• Population
health• Costs• Satisfaction
Patient targeting/best practices
EH
R
Hospital-based Clinic
Our Approach to Hospital-Based RPM4
Evidence for RPM Efficacy5
Centura Health (Colorado): Centura Health at Home program reduced 30-day readmission rates for patients with target conditions CHF, COPD, and diabetes by 62% in 2010/11 one-year pilot 200 patients enrolled, generating cost savings of $1,000-1,500 total cost per
patient
Partners HealthCare (Boston): Connected Cardiac Care Program has consistently reduced CHF-related readmission rates by ~50% and non-related readmission rates by 44% 1,200 patients enrolled since 2006, generating cost savings of more than $10m
(Chronic Disease Management) Veterans Health Administration: Care Coordination/Home Telehealth program decreased total healthcare resource utilization (hospital days of stay) by ~25% for both single/multiple diagnoses across 8 target conditions between 2004-07 Currently more than 70,000 enrollees
Commonwealth Fund RPM Case Studies: January 2013
Source: Commonwealth Fund publications 1654-1657, Jan 2013
Why RPM for Hospitals?6
Financial: Lower patient readmissions and avoid penalties (Short-term ROI)
Quality: Improve health outcomes and satisfaction for key patient populations
Efficiency: Enhance and better leverage information and analytics between providers to provide more effective care
Strategic: Position health systems for new environments (ACO, shared risk, etc)
Value Drivers
Hospital Readmissions Context7
CMS Hospital Readmission Reduction Program (HRRP) penalties effective as of October 1, 2012 30-day readmission measures for three key conditions (AMI, HF,
Pneumonia) ~70% of U.S. hospitals penalized Average FY13 penalty: 0.3% of aggregate inpatient payments
CMS penalties expected to grow meaningfully New conditions added Penalty caps increased Higher hurdles for “expected” readmission rates
Other payers expected to follow CMS in assessing penalties
Readmissions Penalties in MATRC Region8
3 MATRC states and D.C. in highest penalty quartile nationally for CMS 30-day readmissions, and all except Delaware in the top half
First Quartile (highest penalty rates)
Second Quartile
Third Quartile
Fourth Quartile (lowest penalty rates)
Note: Maryland does not participate in HRRP program due to CMS allowance of its state-based program
FY13 HRRP Penalty Percentage Map
Source: CMS; Kaiser Health News
Key Insights for Penalty Estimation9
Future penalties are being “accrued” based on recent/current lack of action on readmission reduction No action now = a deeper hole
The penalty “stick” is roughly 5x greater than than Medicare payments for the readmissions themselves Excess readmissions ratio (actual rate ÷ expected rate) drives penalty
CMS-measured 30-day readmission rates often higher than hospital-measured “raw” rates Due to “all cause” readmission methodology and readmits to other acute care
hospitals
Excess readmission rates characterized as “No Different from the U.S. National Rate” per Hospital Compare (confidence intervals) are still penalized
CMS Penalty Formulas10
Estimated penalties depend on: Excessive readmissions in each key condition How “costly” the condition is
Hospital’s ActualRate
Hospital’s Expected
Rate
1
1. Excessive payments for each condition are calculated as:
X Discharges ineach condition
XBase DRG
payment for each condition
2. Calculate the sum of excessive payments for all conditions (currently: AMI, HF, Pneumonia)
4. Penalty rates imposed for each year:• FY13: the lower of 1% or the penalty rate• FY14: the lower of 2% or the penalty rate• FY15: the lower of 3% or the penalty rate
3. Excess readmissions penalty rateSum of excessive payments
Aggregate payments for all discharges
Notes:• Actual Rate
calculated over trailing 3-year period (currently FY2009-11)
• Actual Rates are “risk-adjusted”
• Expected Rate = U.S. national rate over same period
CMS Medicare Penalty: Calculation Methodology
Projected CMS Penalty Calculation: Illustrative Hospital Case (Current)
11
Hospital Facts: Medium-sized MATRC-region hospital with ~350 beds Higher 30-day readmit rate than National Rate in all three conditions; AMI a particular
problemExcess Readmission Ratio Calculations
Key Condition
Hospital Compare 30-day
Readmit Rate
Expected 30-day Readmit Rate (=US Nat'l Rate)
Excess Readmission Percentage
Excess Readmission
RATIO"Stick
Factor"AMI 22.0% 19.7% 2.3% 11.7% 5.1
Heart Failure 24.8% 24.7% 0.1% 0.4% 4.0
Pneumonia 19.5% 18.5% 1.0% 5.4% 5.4
Projected Penalty Calculations
Key Condition
Excess Readmission
RATIO
Total DRG cost per
conditionPenalty
EstimateAnnual
DischargesAMI 11.7% $1,299,887 $151,763 97Heart Failure 0.4% $1,844,822 $7,469 209Pneumonia 5.4% $541,357 $29,263 97
$188,495 403
Average Penalty per
Patient: $468
÷ =
Projected CMS Penalty Calculation: 10% Decline in “Expected Rate”
12
Key Assumptions: National Average rate improves and/or CMS imposes more stringent “expected” rate hurdles
so that expected rates decline by 10% Hospital does not take sufficient action to reduce readmissions in key conditions
Excess Readmission Ratio Calculations
Key Condition
Hospital Compare 30-day
Readmit Rate
NEWExpected 30-day
Readmit Rate
Excess Readmission Percentage
Excess Readmission
RATIO"Stick
Factor"AMI 22.0% 17.7% 4.3% 24.1% 5.6
Heart Failure 24.8% 22.2% 2.6% 11.6% 4.5
Pneumonia 19.5% 16.7% 2.9% 17.1% 6.0
Projected Penalty Calculations
Key Condition
Excess Readmission
RATIO
Total DRG cost per
conditionPenalty
EstimateAnnual
DischargesAMI 24.1% $1,299,887 $313,058 97Heart Failure 11.6% $1,844,822 $213,279 209Pneumonia 17.1% $541,357 $92,665 97
$619,002 403
Average Penalty per
Patient: $1,536
÷ =
Value of Penalty Avoidance Often Underestimated
13
The “Accrual Effect”: penalties being paid now are lower than penalties actually being
accrued, if no improvement is made Penalty estimates with Hospital Compare based on 3-year look back, so penalties paid now
based on actions not taken in FY09-11
What hospitals do now has a delayed impact on penalty avoidance but is critical to avoid
“deeper hole”
“Expected” Readmissions rate will continue to fall As other hospitals improve, reducing raw national rate
If CMS unilaterally sets more aggressive target rates
New conditions will be added Four new conditions (COPD, PTCA, CABG, other vascular) included in FY15 penalty
Assume same 3-year look-back methodology
Penalty caps will be increased each year 1% currently 2% in FY14 3% in FY15
“Costing” an RPM/CC Solution: Components
14
Staff-related monitoring costs: Patient : staff monitor ratios – from 75:1 to 150:1 depending on type of solution, 30-day readmissions vs. chronic
disease management Use of RNs vs. health coaches/social workers Hours of center operation
Staff-related field costs: Installation/refurbishment
Depends on population targeted – 30-day readmits vs. chronic disease management (i.e .shorter monitoring
periods mean higher amount of patient “churn”)
Depends on region covered (i.e. location of monitoring center relative to patients)
Technology-related costs: Hardware and software typically bundled, peripherals can vary
Leasing more common than owning
EMR Integration extra
Other costs: Project management
Integration with key provider departments (case management, clinical, home health)
Costing a Turnkey Solution: Illustrative15
Primary cost drivers are in centralized monitoring and field support staff
Don’t forget PCP and departmental interfaces, as well as program management
Technology only 10-15% of total cost bar
Estimated cost of $700-$1,100 per patient – some scale required
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
18%
30%
20%
11%
21%
Other
Technology
Field Staff
Clinical Monitoring Staff
Program Mgmt and Hospi-tal Interface
RPM Cost Components
50% of costs in
monitoring/ field staff
Making the Business Case: MATRC Hospital Illustrative Case
16
Value of avoided penalties (per patient)
>Estimated cost of
RPM solution (per patient)
At 5% lower “expected” 30-day readmit rates”:
~$900~$1,500
At 10% lower “expected” 30-day readmit rates:
~ $975
Making the Business Case:Positioned for the Future
17
Quality: Improve health outcomes and satisfaction for key patient populations
Efficiency: Enhance and better leverage information and analytics between providers to enhance collaboration and provide more effective care
Strategic: Position health systems for emerging environments (ACO, shared risk, etc)
MATRC Telehealth SummitMarch 2013
455 Second St SECharlottesville, VA 22902
Kirby Farrellkfarrell@broadaxepartners.com
Andy Archeraarcher@broadaxepartners.com
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