Getting Fee-for-Service Fundamentals RightGetting Fee-for-Service Fundamentals Right Presentation at CHCS Webinar on Medicaid Payment Reform June 28, 2010 ... markets for health care

Getting Fee-for-Service Fundamentals Right Presentation at CHCS Webinar on Medicaid Payment Reform

June 28, 2010

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The New Fortune 500

$4

$7

$9

$10

$13

$15

$18

$24

$34

$42

$44

$51

$- $20 $40 $60

491 CT Medicaid

328 Coventry

259 NJ Medicaid

250 Schering-Plough

180 FL Medicaid

148 Eli Lilly

124 TX Medicaid

84 HCA

60 CA Medicaid

45 Walgreen

41 NY Medicaid

31 Pfizer

2006 Revenue in Billions

24 Medicaid programs would

rank in the Fortune 500


80% of Medicaid Spending Is Fee for Service

$-

$20

$40

$60

Man

aged

car

e

HCBS

Inpat

ient h

osp

Nursin

g faci

lity

Outpat

ient h

ospDSH

Pharm

acy

Other

car

e

ICF/M

R

Physic

ian

Med

icar

e

Other

acu

te c

are

Men

tal h

ealth

Amounts in Billions

Source: Holahan et al, Medicaid Expeditures Increased By 5.3% in 2007, KCMU 2009

Total Spending

2000 $206 Billion (Light Green)

2007 $331 Billion (Dark Green)


Does this patient

need a CT scan or not?

Payment Methods Matter in an Uncertain World

How much therapy is warranted?

Should I discharge the

patient today or tomorrow?

Do I really need to coordinate with Dr. Jones?

Our average set-up time for the cardiac cath lab is 2 hours. Good enough?


Provider Responses to Payment Methods

Medicare DRG Implementation 1983

Controlled Medicare spending and increased hospital profits

―The most effective cost-containment program ever enacted‖—Michael Bromberg, Federation of American Hospitals, 1985

Providers Re-Organize in Response to Medicare Incentives

Transitional care units

Specialty cardiac hospitals

Long-term acute care hospitals

IDTFs

Incentives in Physician Payment

Procedures more profitable than evaluation and management

8,000 separate billable services

No payment for phone or email

No incentive to coordinate care or minimize re-testing

High fees and low variable costs of imaging reward heavy use

―Watchful waiting‖ pays zero


A Short History of Payment Methods

“Pay More to Those Who Do More”

In the beginning:

More = more charges, more cost

Fee for service philosophy:

More = more care

The DRG revolution in 1983:

More = treat sicker patients

The next revolution:

More = better results


Medicaid’s Varying Roles in the Market

Hospital inpatient

Prescription drugs

Hospital outpatient

Physician

Inpatient MH facility

Community MH center

Dental

Other

Subtotal acute care

Nursing facility

Personal assistance

ICF-MR

Adult day services

Case management

Residential support

Skilled home health

Other

Subtotal long-term care

Managed care--full

Managed care--carveouts

Subtotal managed care

Total

Provider Type

Medicaid Payments as Percentage of Provider Revenue, FFY 2003

20% 40% 60% 80%


Medicaid IN the Market Medicaid IS the Market

Examples: Hospitals, physicians, dental, drugs

Examples: Pediatrics, obstetrics, HCBS, DD services, MH, AIDS/HIV

Client needs similar to those of general population

Clients may be special populations

Physician-driven, care increasingly high tech

Physician in background, care often “high touch”

Lots of data available on industry organization and other payers

Data may be hard to come by

Other payers have significant influence on cost, access, quality

Medicaid has significant influence on cost, access, quality

The Two Roles of Medicaid (A Bit Exaggerated)


The Eight Basic Health Care Payment Methods

Also Known As Examples (with Casemix Adjustors)

1 Per time period Budget State psychiatric hospital, public health clinic

2 Per eligible person Capitation MCOs (DCGs, ACGs, CDPS, CRGs)

3 Per recipient Contact capitation Physician specialist services

4 Per episode

Per stay (hospital),

case rates

Hosp. inpat. (DRGs), home health (HHRGs), surgeries

(RBRVS), multi-provider (ETGs, MEG)

5 Per day Per diem Nursing facilities (RUGs), hospital outpatient (APGs)

6 Per service Fee for service Physicians (RBRVS), hospital outpatient (APCs)

7 Per dollar of cost Cost reimbursement Critical access hospitals, state-owned providers

8 Per dollar of charges By report Any

For example, total charges for inpatient hospital care for 1,000 people may equal $324,000. This sum can be decomposed

into eight financial risk factors that correspond to alternative units of payment. The time period is one year, 1,000 people are

eligible for care, and 10% actually receive care. On average, those 100 people have 2 inpatient stays (episodes of care) a

year, with an average length of stay of 3 days. On average, 6 services are received per day at an average cost of $60 per

service. The hospital sets its charges as 1.5 times cost. That is, $324,000 = 1 x 1000 x 10% x 2 x 3 x 6 x $60 x 1.5. The

choice of a unit of a payment determines which risk factors Medicaid is responsible for and which risk factors the hospital is

responsible for.

Pro

vid

er f

inan

cial

ris

k --

->M

edicaid

finan

cial risk ---->

Unit of Payment


Criteria to Select a Payment Method

Criterion Explanation Implication

Access

Gear payment to expected

resource cost

Adjust payment for patient acuity to head off

access problems for high-acuity patients

Efficiency Reward lower cost for same care

Set prospective rates that do not depend on

individual provider costs or charges

Policy control Overall and for specific priorities

Provide levers over payment overall and for policy

priorities

Admin ease For Medicaid and providers

Think carefully before adding complexity; think

through operational implementation

Data integrity Base calculations on good data

Avoid reliance on vague or hard-to-verify Dx, Px,

charge or cost values

Purchasing clarity Enable understanding of services

Use clinically meaningful groupings and publish

data on rates and utilization

Fairness

Similar pay for similar care; reflect

uncontrollable cost differernces

Standardize rates for services; consider variable

payment for uncontrollable cost variation

Quality Specifically facilitate improvement Few current methods inherently promote quality


The Choice of the Unit of Payment

Per Time

Period

Per Eligible

Person

Per

Recipient Per Episode Per Day Per Service

Per Dollar

of Cost

Per Dollar

of Charges

Managed care

HCBS

Inpatient hosp

Nursing facility .

Outpatient hosp

Pharmacy .

ICF/MR .

Physician .

Clinic

Dental/other prof. .

. Best practice (arguable) for the unit of payment for a given provider type

Other units of payment commonly used by Medicaid and other payers

UNIT OF PAYMENT


Themes for Coming Years

Pay for quality

Still rare in Medicaid, especially outside managed care

Very promising but very contentious

More bundling

Within provider type (e.g., Medicare composite APCs)

Across provider types (e.g., physician + hospital)

Longer time periods (e.g., admission + readmission)

Never-ending search for better casemix adjustors

Data, coding, clinical expertise more important

ICD-10 will expand the policy possibilities

Coping with the challenge of more and more complexity


Near-Term Value Purchasing Opportunities?

1. ―Lower of‖ pricing for Medicare crossover claims

2. Drug pricing, especially on generics

3. Hospital outpatient therapy and imaging services

4. Hospital outpatient observation services

5. Payments to ―provider-based‖ clinics

6. Hospital inpatient services paid per diem or cost

7. Hospital outpatient services paid a percentage of cost

8. Hospital inpatient complications and readmissions

9. Any services paid at a percentage of costs or charges

10. Revisiting fees and MMIS edits on most common services


Seven Keys to Success in Payment Projects

1. Not just a systems job, certainly not ―plug and play‖

2. Close collaboration between policy staff, systems staff, providers, other stakeholders

3. Extensive analysis of claims dataset in order to set budget target and simulate impacts

4. Think twice before adding complexity

5. Early start on approvals as needed: APD, state plan amendment, regulation, legislation

6. Extensive MMIS testing

7. Good provider education


Implications for the Agency

1. Push down responsibility and authority for value purchasing

2. Increase staff expertise in claims data, data analytics, health care coding, and evidence from outside sources

3. Gather evidence and analyze payments before the crisis hits

4. Be mindful of Medicaid’s different roles in the different markets for health care

5. Shift financial risk to the provider where feasible

6. 5% of the population accounts for half of health spending, so accurate acuity adjustment is essential

7. Whatever the unit of payment is, expect providers to increase the number of units and decrease their own cost per unit


Notes to the Slides

Slide 1 – This presentation is part of a webinar organized by the Center for Health Care Strategies. For further information, see Deborah Bachrach, Payment Reform: Creating a Sustainable Future for Medicaid , available at www.chcs.org.

Slide 5 – On the lessons that can be learned from the success of DRGs, see:

R. Mayes and R. A. Berenson, Medicare Prospective Payment and the Shaping of U.S. Health Care (Baltimore, Johns Hopkins Press, 2006, pp. 51-53, 68

R.F. Averill, N.I. Goldfield, J.C. Vertrees et al., ―Achieving Cost Control, Care Coordination and Quality Improvement Through Incremental Payment System Reform,‖ Journal of Ambulatory Care Management 33:1 (January-March 2010), pp. 2-23.

K. Quinn, ―Achieving Cost Control, Care Coordination and Quality Improvement in the Medicaid Program,‖ Journal of Ambulatory Care Management 33:1 (January-March 2010), pp. 38-49.

Slides 7 and 8 – On the role of Medicaid as a purchaser, see K. Quinn and M. Kitchener, ―Medicaid’s Role in the Many Markets for Health Care,‖ Health Care Financing Review 28:4 (Summer 2007), pp. 69-82, and K. Quinn, ―How Much Is Enough? An Evidence-Based Framework for Setting Medicaid Payment Rates,‖ Inquiry 44 (Fall 2007), pp. 247-256.

Slide 13 – For additional discussion of some of these ideas, see Medicaid Value Purchasing: Ten Ideas for Controlling Cost while Maintaining Access, available at www.acs-inc.com/healthcare.aspx under ―Payment Method Development‖

Slide 15 – On the concentration of spending (point 6), see M.W. Stanton and M. Rutherford, The High Concentration of U.S. Health Care Expenditures (Rockville, MD: AHRQ, 2005).


Useful Websites on Medicaid Payment Topics

Center for Health Care Strategies (www.chcs.org)

Kaiser Commission on Medicaid and the Uninsured (www.kff.org)

Medicare Payment Advisory Commission (www.medpac.gov)

Despite a focus on Medicare, MedPAC’s analytical work can be a model for Medicaid ACS Government Healthcare Solutions (www.acs-inc.com/healthcare.aspx)

Payment method descriptions, tables on how states pay for hospital care, and other information about Medicaid is available under ―Payment Method Development‖

New England States Consortium Systems Organization (www.nescso.org)

This website includes a series of video tutorials intended for Medicaid managers, including Medicaid payment methods and the basics of claim forms and codesets

State Health Access Data Assistance Center (www.shadac.umn.edu)

National Academy for State Health Policy (www.nashp.org)

Medicaid Statistical Information System (http://msis.cms.hhs.gov)

An excellent tool that deserves to be better known

HHS Office of Inspector General (www.oig.hhs.gov/reports.html)

CMS reports (www.cms.hhs.gov/ResearchGenInfo)

Government Accountability Office (www.gao.gov)

Drug Effectiveness Review Project (www.ohsu.edu/drugeffectiveness)

http://www.shadac.umn.edu/

http://www.nashp.org/

http://msis.cms.hhs.gov/

http://www.oig.hhs.gov/reports.html

http://www.cms.hhs.gov/ResearchGenInfo

http://www.gao.gov/


Contact Information

Kevin Quinn

Vice President, Payment Method Development

ACS Government Healthcare Solutions

34 N. Last Chance Gulch

Helena, MT 59601

406-457-9550

[email protected]

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Getting Fee-for-Service Fundamentals RightGetting Fee-for-Service Fundamentals Right Presentation at CHCS Webinar on Medicaid Payment Reform June 28, 2010 ... markets for health care