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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A Big Week for ACOs

Given that this Friday is the deadline for applying for CMS ACO “Pioneer” status and is also the assumed release date for the final ACO regulations, this is sure to be a busy week for ACO news.

And as if we needed more proof that still no one knows how ACO adoption is going to shake out, we took note of the following last week:  on August 19^th, Forbes published a blog post titled “How ObamaCare is Destroying Accountable Care Organizations.”   (This was based on a post by noted healthcare policy analyst John Goodman: “Health Care Schizophrenia” )

As a key argument, the post cites how an innovative medical group in Texas called IntegraNet wouldn’t qualify for CMS ACO status, despite all the good work they are doing around measuring practicing evidence-based medicine and driving down costs because they rely on a Fee-for-Service model.

One week later, on August 26th, guess what happens?  IntegraNet became one of the first groups in the country to formally apply for ACO designation.  (To be completely fair to Goodman and to Forbes, IntegraNet clearly states that they are applying early in order to have some influence on the “burdensome rules” imposed in the regulation).

However this drama plays out, we here at TripleTree have been thinking a bit about the broader picture.  While most of the drama and headline news (and criticism!) is happening at the federal level of the CMS ACO program, there are a number of hospitals and physician groups that have quietly undertaken their own shared savings and bundled payments experiments.

In fact, Modern Healthcare published its first survey of accountable care organizations this week, identifying 13 ACOs respondents around the country (this despite the fact that CMS ACO program does not launch until 2012). To us, these experiments are the real market opportunity for ACOs, and one that has finally gotten some deserved attention on the back of the government’s healthcare reform legislation.

In fact, a great example can be seen here in our backyard with Fairview Health System’s developing relationship with the payer Medica.  A case study can be found here, but in short:  Fairview, a seven-hospital system with 49 clinics and 450 employed physicians, and Medica, with 1.6m members in the upper Midwest, decided that they could seek a more mutually beneficial relationship.  In 2009, they entered into a contract that pays Fairview based on the achievement of defined outcomes for quality and total risk-adjusted cost of care based on Fairview’s performance on certain diabetes and vascular care measures.  Essentially, if Medica members have better outcomes and lower costs than the community at large, Fairview shares in those savings.  Preliminary data is encouraging, though the relationship is requiring a “total cultural transformation” on the hospital system’s part, including a total redesign of workflow, compensation, and responsibilities. (Just think of what kind of transformation will be required to measure and achieve CMS’s 65 proposed quality measurements!)

While these quiet moves will never get the attention that Highmark’s acquisition of West Penn Alleghany that we profiled recently, this the real story of the ACO debate going on right now.  These experimental relationships between providers and payers are the ones that will prove if shared savings and bundled payments can truly bend the proverbial cost curve.

Let us know what you think.

Conor Green

Conor Green is a Vice President at TripleTree covering the healthcare industry, and specializing in revenue cycle management and tech-enabled business services. You can email Conor at cgreen@triple-tree.com.

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Linking Value Based Purchasing & the Realities of Tracking Care Provider Accountability

On April 29^th the Department of Health and Human Services (HHS) officially launched the Value Based Purchasing (VPB) initiative originally proposed by Centers for Medicare and Medicaid Services (CMS) in January.  The current form of the VBP rule was created in response to the enactment of the Patient Protection and Affordable Care Act (PPACA) in 2010, and was derived to ensure that providers are held accountable for the quality and type of care provided. What’s not as well-known is that although the VBP initiative won’t begin to impact reimbursement until the beginning of the federal fiscal year 2013 (Oct. 1, 2012), providers’ performance scores will begin being tracked this July.  This means the care being provided beginning on July 1, 2011 will have an impact on Medicare reimbursement in late 2012.

Because CMS will evaluate two separate clinical scores (achievement and improvement), CMS must establish a benchmark for each provider so that it can determine the improvement portion of each clinical measurement (score).  Then effective in 2012, CMS will track the performance of each qualifying provider from July 1, 2011 to March 31, 2012 to set the respective baselines for improvement. Given that this measurement period is quickly approaching, and the dollars that will be at risk for providers (estimated at $850 million in the first year) are so significant, we are puzzled to find a lack of VBP activity in the market (we note that there is a fair amount of patient satisfaction improvement initiatives and solutions, but few specific VBP offerings).

As a reference and based on the March 15 post by my colleague Adam Link, the graphic below represents key VBP data points that should be top of mind for hospital administrators:

source: TripleTree

While we continue to hear “value-based purchasing” thrown around a great deal, the impact of the initiative with regards to timing, structure and implementation schedule is widely unknown.  Further, it has become increasingly from our research and advisory based briefings that there are few technology enabled assets able to offer a comprehensive VBP reimbursement improvement platform.  Solutions do exist that can help providers assess “at-risk” reimbursement dollars and improve their HCAHPS scores and decision support solutions; which may be able to help providers improve their VBP clinical care scores/measurements.

However, we are unaware of any comprehensive, end-to-end VBP solution that will not only help providers measure and assess at-risk reimbursement, but can also analyze the relevant measures to help providers maximize Medicare reimbursement.  As we’ve opined in previous blog posts, we believe that such a solution will be highly valuable and coveted by providers as they appreciate the magnitude of the reimbursement dollars VBP will impact.  We’ll continue to watch this area and seek briefings with organization espousing market-ready VBP solutions. Let us know what you think and 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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Sentiment 2010: Consolidation, Platforms and Compliance

Our team of analysts and senior bankers are taking stock of the past few quarters as we look ahead to 2011.  As such, we thought it might be useful to quickly summarize of our most popular posts below:

TripleTree’s Top 10 Posts – 2010

1. Humana’s Acquisition of Concentra Is A Multi-Pronged Move
2. Tech Platform Innovations in Healthcare Will Rely on “hCloud”
3. Understanding the Transition From ICD-9 to ICD-10
4. An Acute Focus on the CFO is Feeding IBM’s Appetite for Analytics
5. Risk Adjusted Payment Models for Medicare Advantage – New Markets and Business Opportunities
6. Health Plans & Provider Networks Seek Optimized “Channel to the Chart”
7. Prospective Payment Review: The MLR “Silver Bullet” for Health Plans
8. Seven Considerations for the Impact of Open Source on Healthcare
9. Is a Healthy Workforce a Competitive Advantage?
10. Reading the Tea Leaves: The HITECH Act & Health Reform in the Wake of the Election

Our research agenda and current sell-side mandates have taken shape, and include assessments of where best in class businesses can take advantage of opportunities in the Senior’s market, the growth of consumerism, content management, decision analytics and compliance platforms.  As expected, we’ll stay laser focused on delivery models like cloud, outsourcing and mobile.

We look forward to reconnecting and wish you a prosperous New Year!

Chris Hoffmann

Chris Hoffmann is a Senior Director at TripleTree covering Cloud, SaaS and enterprise applications and specializes in CRM, loyalty and collaboration solutions across numerous industries. Follow Chris on Twitter or e-mail him at choffmann@triple-tree.com.

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Risk Adjusted Payment Models for Medicare Advantage – New Markets and Business Opportunities

In 2007 the Centers for Medicare & Medicaid Services (CMS) fully implemented its “HCC Risk-Adjustment Reimbursement” model for capitated Medicare Advantage (M.A.) plans.  This model was put in place to align member premiums with the condition of the individual member (i.e. M.A. plans would receive higher monthly premiums for a member with several chronic conditions than a healthy member).  So, how could health plans prove to CMS the condition of members through the prevalence of certain risk factors?

Two categories of companies have arose, both helping to solve this problem for the health plans, albeit from a very different approach:

Retrospective Chart Reviews:  Companies that pull patient charts from provider facilities and then perform clinical audit reviews to validate the presence of certain clinical codes.  Companies in this group include Leprechaun, Outcomes, The Coding Source, Health Risk Partners and others.

Prospective Medical Assessments:  Companies that actually go into the member’s home and spend time assessing the mental and physical health of the member.  This form of risk adjustment does not rely on reacting to episodes of care but rather using clinically validated surveying to prospectively identify existing conditions.  Companies in this group include Matrix Medical, Inspiris, Censeo and EMSI.

So, while it’s clear the incentive is for M.A. plans to maximize revenue by uncovering risk factors, CMS countered by announcing the Risk Adjustment Data Validation (RADV) pilot program in July of 2008 to audit M.A. plan’s risk adjusted payments more extensively.  The initial pilots found an average discrepancy rate of 35% which has lead to a system wide roll-out of RADV audits.  This now puts significant pressure on M.A. plans to ensure the HCC data submissions are accurate as plans are subject to a downward adjustment in risk scores and serious financial penalties if the audits show discrepancies.  For plans, it’s not about getting more or less risk adjusted reimbursement revenue; it’s about getting the right amount of revenue (Revenue Integrity).

So this leads us to a debate as to how M.A. plans can ensure data accuracy.  Is it more accurate and effective to utilize retrospective chart reviews for risk adjustment or utilize prospective in-person medical assessments to survey the health of the member or is it a blend of the two?  CFO’s of M.A. plans across the country are wrestling with this very same question as they evaluate their revenue integrity and compliance.

Let us know what you think 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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Health Plans & Provider Networks Seek Optimized “Channel to the Chart” – 08/30/2010

Our definition of Healthcare Compliance spans a variety of topics that include ICD-10 conversion, Meaningful Use, Medical Necessity, Clinical Auditing and others.

Relative to clinical auditing, the healthcare industry continues to rely on a payment system where coding needs to be compliant, accurate, and complete in order to maximize reimbursement.

Market forces and change in this arena abound.  The convergence of Healthcare Effectiveness Data and Information Set (HEDIS) – a set of standardized performance measures for managed care organizations – and risk adjustment – a Medicare Advantage plan reimbursement methodology based on the patient’s health acuity – has led to an emerging new sector, Clinical Auditing.

Mandated by National Committee for Quality Assurance (NCQA) and the Medicare Modernization Act (MMA) respectively, HEDIS and Medicare risk adjustment have legitimized clinical auditing as a new industry, creating opportunities for emerging tech-enabled outsourcers with a myriad of relevant solutions.

With Clinical Auditing top of mind, payers and providers must find an efficient, accurate, and scalable “channel to the chart” with a vendor who can effectively acquire, analyze, mobilize, and aggregate clinical data to improve payment integrity. While member targeting, chart extraction, data management reporting, and clinical coding are each critical to reimbursement for healthcare, the merging of these features into one suite provides an “one-stop-shop” solution for clinical auditing services.

Recently we announced that Parthenon Capital was investing in our client, The Coding Source, LLC a clinical auditing firm at the forefront of this emerging sector.

Health reform and an evolving set of challenges at Centers for Medicare & Medicaid Services (CMS) is causing the clinical auditing landscape to change. This change is evident as businesses like The Coding Source grow, and dynamics drive change across the marketplace with:

• Technology firms seeking services businesses,
• Services businesses seeking technology firms, and
• The industry seeking a scalable, “full service” alternative to the mega-vendors like MedAssurant.

If your business is seeing a similar transformation thanks to healthcare compliance, let us know.

Have a great week!

Joanna Roth

Joanna Roth is an 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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