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Key Thoughts on Managed Care Contracting and Opportunities with Bundled Payments
Becker’s ASC 23rd Annual Meeting
The Business and Operations of ASCs
October 27, 2016
1
Current Environment
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Current Environment
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ASC Hospital JVs
Hospital Consolidation
Ambulatory Care Networks
Payor Consolidation
Physician Employment and Mega
Groups Affordable
Care Act
Payor Environment
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Important Facts
The payor environment in the U.S. is changing and extremely complex!
Virtually no two payors pay providers equitably or use the same exact
payment system in any given market.
Providers that do not understand the cost of their business relative to a
payor’s methodology can easily go out of business.
Inadequate reimbursement and payor dominance motivates consolidation
among providers.
Changing payment methodologies enables payors to reduce reimbursement
without negotiating a new contract.
Payor Environment (continued)
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Access to reimbursement is becoming limited without a payor contract due to
benefit designs targeted at changing consumer behavior.
The growing Medicare population increases the need for enhanced
reimbursement rates from commercial payors.
Understanding cost is critical to negotiating reasonable and adequate
reimbursement.
Payors are working with employers to reduce premiums by limiting access to
high-dollar, out-of-network providers and encouraging price sensitivity among
employees.
Payor consolidation is rampant and diminishes provider ability to negotiate
rates.
Traditional fee-for-service reimbursement is diminishing.
Payor Implications and
Ambulatory Surgery
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MEDICARE
» Inpatient-to-HOPD code approval
» HOPD-to-ASC code approval
» Outpatient Prospective Payment System (OPPS) for
HOPDs and ASCs
» Closure of gap on reimbursement methods and rates
» Device-intensive codes
» Bundling logic
COMMERCIAL
PAYORS
» CMS approvals to HOPD validate medical director
approvals for ASC lists
» Expansion of commercial payor ASC-approved lists is growing
beyond CMS-approved list
» Inpatient-to-outpatient cost-saving opportunities with outcomes
data validate medical director approvals
» Alignment of commercial payors with ASCs to move volume
6
Five Key Thoughts on Managed Care
Contracting
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1 — Assess Payor Value
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» Do your physician users have a contract with the
payor?
» Alignment with payors enhances access.
» How much volume does each payor represent?
» What is the overall average cost per case of
providing surgery?
» What is the average net revenue per case
represented by the contract?
» Does the value of the contract represent a loss?
» How does the payor compare against other payors
the ASC is doing business with in the market?
» Do not sign a contract just to get access to
patients!
» A contract must represent revenue value that
makes it economically feasible to provide services.
Assess the
Value of the
Payor
1
2 — Evaluate Payor Mix
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What Is
Payor Mix
Analysis?
2 Ranking Among Payors
1 What percentage of business does the payor
represent and how do they rank against other
payors?
Volume Charges Receipts
2 What Product lines are you contracted for?
3 Will a contract create access to new volume
or increased volume?
HMO/PPO Medicare/
Medicaid Exchange
3 — Assess ASC Value in the Market
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» What value does the surgery center provide to
the payor’s network?
» How many other ASCs are there in the market?
» What is your Case Mix?
» Do you provide services other ASCs do not
offer?
» How many hospitals are there in the market?
» What makes your surgery center different?
› Doctors
› Special equipment
› Multispecialty versus single specialty
Assess ASC
Value in the
Market
3
4 — Develop a Strategy and Demonstrate
Value
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Build a business case Existing business
concerns
» Determine ASC volume
that can shift from
hospital.
» Present concerns with
facts relative to
reimbursement
» Collect EOBs to
demonstrate cost in
hospital setting versus
ASC proposed rates.
» Quantify the value to the
payor.
» If you are subsidizing the
payor, STOP!
» Educate payor about the
implications of payment
methods and inadequate
reimbursement.
» Provide surgeons with
talking points for
communications to payor
medical directors.
1 2
Develop a
Strategy and
Demonstrate
Value
S T E P
4
4 — Develop a Strategy and Demonstrate
Value (continued)
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Do not do cases that you
are losing money on until
contracts are in place!
Provide data carefully
» First contracts are the
most important!
» Actions speak louder
than words!
» Do not subsidize the
insurance company.
» Only so many losses will
be made up on volume
» Provide hospital volume
by surgeon that will move
to the Center.
» Provide total projected
savings to the payor and
benefit of the contract.
» Use cost data when you
are subsidizing the payor.
» Provide proof of
inadequate
reimbursement.
» Demonstrate savings to
payor by maintaining and
enhancing contract rates
and methodology.
» Demonstrate impact of
changes in payment
methodologies.
1 2
Develop a
Strategy and
Demonstrate
Value
S T E P
4
5 — Assess Payment Methodologies
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» What questions should you ask the payor about
payment methodologies?
› Current Medicare or Medicare groupers?
› Payor defined methodology mappings?
› What year APCs?
› Area adjusted or national?
› Date of publication?
› Multiple-procedure logic or add-ons?
› Implants?
› Extended Recovery Care/Overnight Stay?
› Flexibility with payment method?
› Carve outs?
› Annual escalators?
Assess
Payment
Methodologies
5
5 — Assess Payment Methodologies (continued)
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» Why is this critical to your success?
› Empowers you to collect the data and structure
a proposal for the services provided
› Reduces timeline for negotiation
› Asking payors for a method or logic they
cannot administer is typically a waste of time
What about alternative payment systems?
Bundled Payments ?
Assess
Payment
Methodologies
5
14
Opportunities with Bundled
Payments in ASCs
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Acknowledgements
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Political Landscape: Blowing in the Wind
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Make Good Choices
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Bundled Payment Experience
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Our industry-leading team helps to develop and implement
customized strategies that position organizations to reduce costs,
improve care delivery, and foster a truly collaborative clinical
culture across multiple sites and disciplines. Our team has a
demonstrated track record of success with projects involving:
Medicare Medicaid Commercial
Payors
Direct-to-Employer
Arrangements
» ACE
» BPCI
» CJR
» ESRD
» OCM
» EPM
» NY Medicaid
» Arkansas
Medicaid
» Arkansas
BlueCross
BlueShield
» Empire Blue
Cross
» United
Healthcare
» Aetna
» Cigna
» EmblemHealth
» Walmart
» Icahn
Enterprises
» SEIU
» DaVita
HealthCare
Partners
19
National Bundled Payment
Landscape
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The History
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» CMS Heart Bypass
» CMS Cataract Surgery
Alternate Payment
» CMS Centers of Excellence
» CMS Cardiovascular
and Orthopedic
Centers of
Excellence
» Geisinger Health
System
» PROMETHEUS Payment Method
» ACE Demonstration
» UHC Oncology
» IHA California Commercial Bundles
» Horizon Blue Cross Blue Shield of New
Jersey Orthopedic Bundles
» CMS BPCI Initiative
» CMS CJR Mandate
» CMS OCM
» CMS EPM Proposed Mandate
1 9 9 0 s
2 0 0 0 s
2 0 1 0 s
The Evolution
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N o w
Better Care.
Smarter Spending.
Healthier People. As Goes Medicare,
So Goes Healthcare…
Obamacare: The Gazillion-Dollar Startup
Machine
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$1.1
$1.5
$2.0
$4.3 $4.5
2011 2012 2013 2014 2015
U.S. Digital Healthcare Funding ($ in Billions)
Source: “Obamacare: The Gazillion-Dollar Startup Machine,” Inc., April 2016.
S E E N I N
Funding for digital healthcare companies—which blend tech and health-related
services—has quadrupled since the Affordable Care Act passed in 2010.
Four Bundle Domains
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Commercial Medicaid Medicare Employer Commercial
National Bundled Payment Landscape
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Medicaid
Employer
CJR MSA
2012 2014 2015 2016
Commercial BPCI Model 2
Source: Adapted from CMS.
Medicare Model Comparison
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BPCI
Model 2
669 Participants
884 Participants
BPCI
Model 3
11 Participants
BPCI
Model 1
10 Participants
794 Participants
BPCI
Model 4
CJR
(Mandatory)
196 Participants
OCM
Transplants and end-stage renal disease are already paid through a bundled payment.
800+ Participants
EPM
(Mandatory)
900+ Participants
Source: CMS proposed rule as of July 25, 2016.
NOTE: On July 25, 2016 CMS announced mandatory bundled payment models for AMI, CABG, and SHFFT that are scheduled to start July 2017.
ASCs—The Lowest-Cost Alternative
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Source: http://www.ascaconnect.org/HigherLogic.
$16,736
$9,493
$7,851
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
Inpatient Outpatient Ambulatory SurgeryCenter
Medicare Pacemaker Reimbursement Variation by Facility Setting
Ambulatory Surgery Centers
Offer Savings of
53%
Over an Inpatient Setting for
Pacemaker Insertion
Bundled Payments and CJR
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1 2
3
It’s happening.
Commercial payors and employers
are rapidly following CMS.
It’s mandatory.
Previously bundled payments
were voluntary.
Regional pricing.
Understanding and
managing the implications.
Opt in Opt out
Regional Pricing
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Source: CMS regional target prices
provided by DataGen on April 20,
2016.
469 Fracture
469 Non-Fracture
470 Fracture
470 Non-Fracture
Pacific
$51,129
$36,049
$38,359
$21,256
Mountain
$51,001
$35,959
$38,263
$21,203
West South Central
$57,910
$40,830
$43,446
$24,075
East South Central
$55,247
$38,953
$41,449
$22,968
South Atlantic
$55,000
$38,779
$41,263
$22,866
Mid Atlantic
$58,753
$41,425
$44,079
$24,426
New England
$57,303
$40,402
$42,991
$23,823
East North Central
$55,803
$39,345
$41,866
$23,200
West North Central
$52,847
$37,260
$39,648
$21,970
29
The Shift to Outpatient Bundles
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Outpatient Bundle:
Orthopedics
30
Includes:
» Surgeon fees
» facility fees
» anesthesia fees
» supplies and implants
» and any uncomplicated follow-up care
Does not include:
» MRI or X-rays
» Postoperative rehabilitation
» Home health services
» Physical therapy
» Durable medical equipment
» Postoperative medication
Source: Modern Healthcare, June 2016, Midwest Orthopaedics at Rush
30
Direct to Consumer Bundle Payments
ACL repair:
Hip arthroscopy:
Knee arthroscopy:
Rotator cuff repair:
Shoulder arthroscopy:
Midwest Orthopaedics at Rush
$10,800
$13,250
$5,000
$11,300
$10,000
According to the Ambulatory Surgery Center Association, as of May 2016 there are
40 centers around the country performing outpatient joint replacements.
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Outpatient Orthopedics Bundle: Orthopedic
Surgery Center of Orange County
31
Includes:
» Surgeon fees
» Facility fees
» Anesthesia fees
» Supplies and implants
» Radiology used during procedure
» Overnight stay (for certain procedures)
Source: Becker’s ASC Review, January 2016.
Direct-to-Consumer Bundled Payments
ACL repair:
Hip arthroscopy:
Knee arthroscopy:
Rotator cuff repair:
Open rotator cuff repair::
$13,250
$11,800
$11,600
$10,475
$7,925
Minimally invasive hip replacement
and 23-hour stay:
Partial knee replacement and
overnight stay:
$20,250
$20,250
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Outpatient Spine Reimbursement
» Of the 700,000 spine procedures performed in 2015, 300,000 were performed on
an outpatient basis.
› There has been a 40% growth in outpatient spine procedures over the last
10 years (5% of all spine procedures were done in the outpatient setting during
2005).
» CMS reimburses certain surgical spinal procedures in both the outpatient and ASC
settings.
› CMS added nine new procedure codes effective in 2015, which helped drive
historic inpatient volume to the outpatient setting.
» There is an increasing interest in outpatient spine bundled payments from
commercial payors.
32
Sources: “Spinal Surgery: Variations in Health Care Costs and Implications for Episode-Based Bundled Payments,” Spine, July 2014; Ambulatory Surgery
Center Association, October 2015; Becker’s Spine Review, February 2016.
There is a large variation in spine surgery costs, as 30-day bundles can range from
$11,180 to $107,642. The majority of spine payments go toward the hospital stay.
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Outpatient Spine Bundle: Orthopedic
Surgery Center of Orange County
33
Includes:
» Surgeon fees
» Facility fees
» Anesthesia fees
» Supplies and implants
» Radiology used during procedure
» Overnight stay (for certain
procedures)
Source: Becker’s ASC Review, January 2016.
Direct-to-Consumer Bundled Payments
Discectomy, laminectomy, laminotomy:
2-level discectomy, laminectomy, laminotomy:
1-level lumbar fusion and overnight stay:
2-level lumbar fusion and overnight stay:
Facet joint injection, cervical/thoracic at one level:
Transforaminal epidural lumbar/sacral:
Radiofrequency ablation, cervical:
$14,225
$16,200
$30,000
$38,000
$2,100
$2,100
$2,475
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ASC Colonoscopy Bundle: DIGESTIVE
HealthCare Center
34
21 Days Post Days of Service 7 Days Pre Prospective bundle contract with small payor
» Bill for contracted, pre-established bundle price
» Practice distributes payment among providers involved in
episode of care
» Initial in-office
consultation
» Prep
» Professional
endoscopy fee
» ASC facility fee
» All pathology fees
» All anesthesiology
fees
» Follow-up
appointment in
office
» Post-polypectomy
bleeding
» Repeat
colonoscopy if
prep was
inadequate
Retrospective bundle contract with large payor
» Negotiated pre-established bundle price based on 2-year
retrospective analysis of practice’s cost for services
» Practice continues to receive fee-for-service payments
» Every quarter, retrospectively calculate the total
reimbursement paid for each patient participating in bundle
and compare to pre-establish bundle price
» Practice receives and distributes savings among providers if:
‒ Actual costs were below pre-established bundle price
‒ Quality targets and patient satisfaction targets were met
30 Days Post
Colonoscopy
(triggering Event) 7 Days Pre
» Initial in-office
consultation
» Prep
» Professional
endoscopy fee
» ASC facility fee
» All pathology fees
» All anesthesiology
fees
» Follow-up
appointment in
office
» Post-polypectomy
bleeding
» In process of
negotiating
potentially
avoidable
complications
Source: American Gastroenterological Association.
Currently engaged in two bundled payment
contracts for colonoscopy with two payors
6 Member GI Group
Own one ASC in NJ
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Designing Outpatient and ASC Bundles
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Select elective procedures.
Ensure a clear and defined care pathway.
Minimize clinical variation.
1
2
3
Failure Tolerance is Essential
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Failure Tolerance is Essential (continued)
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What did you fail
at this week.” -Sarah Blakely’s dad
Failure Tolerance is Essential (continued)
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Failure Tolerance is Essential (continued)
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Discussion
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Q A & Q U E S T I O N S & A N S W E R S
Contact Information
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Deirdre Baggot, Ph.D. Principal Washington, D.C.
303-335-7047
dbaggot@ecgmc.com
I. Naya Kehayes, MPH Principal Seattle
206-689-2200
nkehayes@ecgmc.com
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