Hospital Readmission Stats Can Have a Meaningful Impact on Reimbursement

With the New Year fast approaching, and the start of the Centers for Medicare & Medicaid Services’ (CMS) fiscal year shortly behind us (it began October 1, 2011), it seems appropriate to evaluate the major initiatives implemented by CMS in FY 2012.  When doing so, one program stood out more than many others—the implementation of the hospital readmission reduction program. In short, CMS has implemented a program—consistent with its value-based purchasing program—designed to improve the quality of medical treatment provided to patients by penalizing hospitals that are deemed to have an excessive number of Medicare inpatient readmissions.

CMS’ program to curb readmissions, which began in 2009 when it started publicly reporting 30-day readmissions, is part of its overall effort to reduce costs and improve the quality and coordination of patient care.  The premise of the campaign against readmissions is to punish and dissuade providers from releasing patients that will likely need follow-up care for the same ailment as they were just treated, which, theoretically, will cause providers to make sure patients are provided with the necessary treatment the first time they are treated and, as a result, reduce the number of expensive follow-up trips to emergency rooms.  The program, which currently only covers readmissions for pneumonia, acute myocardial infraction (AMI) and heart failure, takes a step forward in FY 2012 from being a program that is intended to “shame” providers by making the 30-day readmission information publically available, as was done until now with CMS’ pay-for-reporting program, to being a true “penalty” program.

Beginning October 1, 2011, providers’ 30-readmission data will be collected and used to generate an overall score for each hospital for FY 2012.  This score will then be used to determine if a hospital’s readmission rate is higher than the Medicare-calculated “baseline” readmission rate (which was calculated by CMS using reported readmission information from July 1, 2008 through June 30, 2011).  If so, the total operating payments due to the hospital will be reduced by CMS, with the maximum reductions being as follows: FY 2013 =1%, FY 2014 = 2%, and FY 2015 = 3%. In addition, beginning in FY 2015, CMS can expand the list of covered conditions to broaden the impact of the program.

While the reimbursement risk associated with this program may seem insignificant to some, many providers are operating under very thin margins, which will make even a 1% reduction in Medicare reimbursement meaningful.  For example, if a hospital’s total inpatient operating payments for FY 2012 were $25mm, that hospital will have $250k at risk for reimbursement reduction pursuant to this program. With the maximum penalty increasing 1% per year until FY 2015, the penalty and dollars at risk will undoubtedly heighten providers’ focus on their readmission rates. It stands to reason that many will also look to new solutions, technologies, and programs to help them avoid being penalized. New solutions aimed at patient engagement as well as remote-patient monitoring are areas of opportunity that we think will continue to be instrumental in addressing the readmission dilemma providers are facing.  

Have a great week.

Jamie Lockhart

Jamie Lockhart is a Vice President with TripleTree covering healthcare software and service providers with a focus on consumer directed healthcare.  You can contact him at jlockhart@triple-tree.com

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Humana Bolsters Care Management Capabilities with Acquisition of SeniorBridge

Humana announced an agreement this past week to acquire SeniorBridge, a New York-based provider of in-home care services to the chronic care and senior populations. The acquisition marks the latest example of Humana’s attempt to position itself as a more retail-focused company through a series of acquisitions and strategic initiatives.

Over the past eleven years, SeniorBridge has established itself as a leader in managing complex chronic conditions for seniors in the self-pay (or private-pay) market. Through the acquisition, Humana will be presented with a host of opportunities to leverage SeniorBridge’s model across a broader market base:

• Medicare – upon receipt of Medicare certification, Humana will be able to leverage SeniorBridge’s suite of care management capabilities across its nearly 2 million Medicare plan members.
• Humana Cares – SeniorBridge bolsters the Humana Cares segment of the company, which provides on-the-ground care management services to over 185,000 chronically ill plan members. The Humana Cares segment of the company has been vital to Humana’s emergence as a leader in the Medicare Advantage Special Needs Plan (MA-SNP) market.
• Other Payer Groups – several reform related initiatives, such as reimbursement reform and medical loss ratios, have positioned in-home care to be a large growth area for SeniorBridge given its significance to payers as a cost-saving tool (managed care has traditionally only contributed to a small portion of SeniorBridge’s overall business).

Humana has been among the most progressive payers in promoting member self-management and wellness through a number of initiatives, including:

• Humana Guidance Centers – “store-front” hubs located in select cities provide members with access to a suite of wellness and self-management products.
• Remote Medical Monitoring – provides real-time condition monitoring solutions to help address member health challenges in real-time.
• Humana Center for Health & Well-being – Humana’s LifeSynch subsidiary provides face-to-face health coaching resources to plan members. In addition, the Company has established a partnership with MinuteClinic to provide quick-access to routine treatments.

In addition, Humana’s recent acquisition of Concentra, along with several urgent care clinics from NextCare, signaled their entrance into the provider marketplace. These strategic moves have provided Humana with a mechanism to execute on their strategy to become more consumer-facing and the flexibility to adapt to some of the new realities established through health reform as they are implemented over the next few years.

Other recent investment activity in the payer marketplace signals that Humana might not be alone in their efforts to diversify and establish an “on-the-ground” presence (for example, UnitedHealth’s purchase of Inspiris, BlueCross Blue Shield of Florida’s investment in CareCentrix).  Payers appear to have realized the disconnect that has existed historically between themselves and their customer base. Given the “bets” that payers have made across the landscape, it is clear that payers are seeking to re-orient themselves around the consumer and provide consumers with an opportunity to take a greater role in controlling their healthcare. While a variety of strategies are being used, payers have been prioritizing investments and services around the “consumer experience” to increase overall access and transparency.

Let us know what you think.

Joe Long

Joe Long is an analyst at TripleTree covering the healthcare sector, with a focus on the approaches and technologies surrounding health insurance exchanges.  You can email him at jlong@triple-tree.com.

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Can Consumer-Centric Technologies ‘Hang Ten’ on the Silver Tsunami?

In 2011, the first wave of the baby boomers will turn 65, and by 2030, there will be >70 million elderly Americans, more than double the number in 2000.  It has been well discussed that the current health care system does not have the necessary infrastructure to adequately support the complex needs of our aging population.  We continue to hear about the new and innovative technologies that are poised to fix our healthcare delivery system by keeping the seniors well monitored and living in their homes longer.  While technologies for senior care have clearly evolved, many of the challenges that have kept it from widespread adoption over the past twenty years still remain including:

• Slow adoption among seniors:  Seniors are slower-than-average adopters of technology, and this has contributed to a sense of untapped opportunity in the market.  The underlying reasons for this are not complicated – most products are not designed with the senior population in mind.  It is certainly plausible that seniors would use technology more readily if it were designed to meet their needs, but there is a natural avoidance from this population today.
• Out-of-pocket costs:  A lack of Medicare reimbursement for remote monitoring of patient care has pushed the costs to the consumers.  Emerging technologies must be able to provide outcomes and ROI studies which prove the value of their product/solution before reimbursement will be considered.
• Lack of defined sales channels: Because of reimbursement issues, almost all of these products have yet to penetrate a highly visible sales channel.  Until consumer electronics retailers, such as Best Buy start prominently displaying senior care technology solutions, most of these products will remain available only through a distributor or direct from the manufacturer.
• Regulation and lack of interoperability: The FDA has indicated that it intends to regulate the flow of health information and a lot of confusion still exists around what is and what is not health information.  A lot of attention is focused on the Continua Health Alliance, which will hopefully sort out some of the interoperability issues.
• Products instead of solutions:  In our view, a key problem in this market is that there are now dozens – if not hundreds – of technology products for the elderly and their caregivers, but very few full solutions.  Every day brings a new press release about a new product.  It seems to me that the future leaders in this market will be those that find a way to offer a fully integrated technology-enabled solution rather than a list of products.

Our team is assessing this pending “Silver Tsunami “and preparing a research publication for release later this quarter.  We’re still early in the seniors-focused technology curve and many ideas/companies will struggle (and fail) amid the challenges described above.  Those organization fortunate enough to grasp it, will thrive in this extremely large and underserved market. Thanks and have a great week.

Judd Stevens

Judd Stevens is an associate at TripleTree covering the healthcare industry, specializing in the impacts and transformation of health plans in a post-reform world.  Follow Judd on Twitter or e-mail him at jstevens@triple-tree.com.

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Perpetuating the Increased Quality of Care Cycle through Value-Based Purchasing

With the majority of talk about healthcare reform centered on the individual / consumer mandate and universal coverage, many are missing another positive change proposed by CMS: value-based purchasing.

Value-based purchasing (VBP) has underlying implications on five themes:

• Measuring the patient experience
• Measuring clinical quality
• Market pricing, especially local market pricing
• Executive and clinician compensation
• The changing role of technology and technological requirements

The essence of VBP is that buyers of healthcare (including individuals and plans) should hold providers accountable for the quality of care provided.  Much like consumer satisfaction and pay-for-performance in other industries, healthcare providers are now being held accountable for not only providing the required care, but providing a quality product.  However, the question of rating the quality of care is a bit more difficult than showing compliance with a “Six Sigma” type of program.  By bringing together outcomes-based data with cost data, it is possible to show an improvement ratio such that increasingly positive outcomes are equated with reduced or targeted spending – below are a few considerations:

• Linking patient satisfaction and quality: Measuring the patient experience is trending toward monitoring key outcomes in 17 clinical measures (including patients’ views on communication with staff and doctors, cleanliness and quietness of the hospital and pain management) across five healthcare categories, including acute myocardial infarction, heart failure, pneumonia, healthcare associated infections and surgical care improvement.  Based on a hospital’s score across these measures and categories, this will impact diagnostics-related group (DRG) payments as soon as 2013.  By 2014, mortality outcome measures for additional health conditions and hospital-acquired conditions will be included.
• Clinical quality – another important VBP benchmark:   As providers are measured and compensated accordingly, top tier providers will begin to quickly separate from the pack.  However, critical access hospitals will need to remain accessible, regardless of their quality measurement.
• Market pricing and VBP:  With provider compensation schedules initially being implemented as a penalty rather than a bonus, areas with poor outcome metrics will see the cost of providing care rise. Additionally adding to the skewing of local market pricing, an incentives algorithm will be implemented, meaning high performing hospitals will continue to perform better than those being penalized, due to the financial incentives providing new resources for a high performing hospital.

The link between quality of care, the provider’s income statement, and executive and clinician compensation also becomes much more clear and real. As the provider receives additional incentives for increased quality of care, the employees of the provider will likely see performance compensation tied to the quality of care metrics for the hospital. A higher performing provider will attract higher paid experts with better backgrounds, perpetuating the increased quality of care cycle.

Underpinning all of this is the increasing role that technology will play in the healthcare system. In order to document the quality of care metrics, a clear link to data will need to be established at the point of care. This means that data warehousing and analytics will be paramount. Sophisticated pricing and measurements of quality and satisfaction will be derived from the data and technology in use.

Value-based purchasing has the potential to radically alter how both providers and patients view healthcare.  Our team is actively advising business leaders and investors with some thinking about how healthcare will cease to be an intangible product that is provided at any cost, focusing instead on how to plan the market dynamics or “rankings” and “customer service”.

Have a great week.

Adam Link

Adam Link is an analyst at TripleTree covering healthcare delivery models, specializing in software and wireless health.  Follow Adam on Twitter at AdamJLink or email him at alink@triple-tree.com.

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Unseen Costs of Chronic Care Management & the Leapfrog of Third Party Reimbursement

Back in 2007, a study from the Milken Institute stated that U.S. caregivers were treating over 109 million Americans and their 162 million cases of chronic disease (including one or more combinations of the seven most common – cancer, diabetes, heart disease, hypertension, stroke, mental disorders, and pulmonary conditions).

More recently, data offered by the likes of the National Family Caregivers Association and Gallup underscore that care-giving in and of itself takes just as meaningful a toll on the population of 50 million care-givers (professionals, family members and friends) who look after the chronically ill.

The Gallup-Healthways Well-Being Index cites that full time care-givers are substantially more likely to experience physical health issues than those who aren’t.   For instance, they have a 63% greater likelihood for high blood pressure and 61% greater likelihood of recurring neck or back pain. Often times, care-givers are unpaid volunteers (friends and family members) and may face the unfortunate scenario of balancing caring for someone else and themselves.

A few innovative firms are offering products and services that are helping these care-givers provide care while simultaneously reducing their own stress levels.  Most interesting is that the latest approaches to self-care aren’t likely to ever be reimbursable by a third party (i.e. health plans), despite offering real health benefits.  Traditionally, a healthcare product or service without a corresponding reimbursement code was a non-starter as a growth strategy for new products and services in healthcare…but those days are dwindling.  In fact, there are a growing number of relevant healthcare companies who are taking the initiative of going direct to the consumer regardless of reimbursement.

• BodyMedia collects information on activity, calorie burn, and sleep patterns through an armband monitor and either connected of via Bluetooth, syncs with a web based tracking system.  Obesity is a massive problem, and often has correlating co-morbid conditions.  BodyMedia markets its product through retailers like Amazon.com, Best Buy, CVS, Costco, and Target and channel partners like 24 Hour Fitness, dotFIT, and Jenny Craig.

• Cellnovo is a UK- based diabetes management technology with a solution that ties together a cell phone, insulin pump and computer to monitor and control blood glucose levels in diabetics.  This product’s ability to remotely update care-givers through texting or other mobile communications alleviates the stress put on a care-giver when they are not in direct contact of their loved one.  Cellnovo intends to sell to the consumer market in the UK in early 2011 with US market entry in late 2011.

• Healthsense provides integrated systems to monitor aging independent living population through remote monitoring systems which include bed, toilet, motion, and contact sensors.  As caregivers go about their daily jobs and other tasks, this technology eases concerns of potential risks of independent senior citizens.  Healthsense relies on direct sales to consumers including seniors and their caregivers.

Relative to costs associated with chronic illness, the 80/20 rule applies – 80% of the costs come from 20% of the population.  Vendors can’t and shouldn’t wait for reimbursement models to justify their go to market strategies and today, we’re watching literally scores of of vendors like those listed above blaze new channels straight to the consumer.

We’d like to know what you think.

Joanna

Joanna Roth is a Senior Analyst at TripleTree covering the healthcare and technology industry, specializing in education solutions. Follow Joanna on Twitter or e-mail her at jroth@triple-tree.com.

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Data Management Strategies for ACO’s Will Be a Good Harbinger of Success

With many providers currently assessing the viability and strategy to become an Accountable Care Organization (ACO), our team has been gauging what a successful ACO might look like in the post-healthcare reform world.

To know what one might look like, denotes having a handle on its core IP. And while many healthcare consultancies (both large and boutique) are attempting to map out strategic plans for their provider clients; the capabilities, resources and systems that providers must implement to become true risk-bearing entities is complex. Yet, we’ve boiled it down to two core competencies which will be table stakes for success.

• Care management/care coordination – Leveraging capabilities that extend the providers reach into the day-to-day lifestyles of their patients:
  • Prospective medical home assessments
  • Chronic care coordination
  • Critical care interventions
  • Remote-patient monitoring
  • Data-driven healthcare communities
  • Provider network coordination

• Data analytics/decision support – Establishing a 360° view of the patient condition to establish appropriate, patient-centric profiles
  • Data mining
  • Decision support
  • Evidence-based medical rules
  • Behavior-based messaging
  • Real-time analytics monitoring

While these two competencies have generally been managed by health plans – with the help of many third-party technology-enabling solutions – we think they will need to become core components for providers interested in sustaining a successful ACO. Beyond the sub-components listed above, our research also underscores risk for these providers, and moreover their ability to manage it.

The risk bearing providers of the future will likely address these components similar to the way health plans do it today, but the ACO model will promote better utilization. We’re in the midst of finalizing our research agenda our informatics and decision support for a formal Report Q2’11…it would be great to know what you think about this dynamic, high growth arena.

Jamie Lockhart

Jamie Lockhart is a Vice President with TripleTree covering healthcare software and service providers with a focus on consumer directed healthcare.  You can contact him at jlockhart@triple-tree.com

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