ACOs Not Ahead of Others on Compensation for Quality Outcomes

Primary care physicians in accountable care organization (ACO) practices, on average, received similar compensation arrangements to those of physicians not in ACOs, and did not have substantial risk for primary care costs, according to a study published in the Annals of Family Medicine and reported in HFMA Weekly News.

 

On average, compensation for ACO primary care physicians (PCPs) was based 49 percent on salary, 46 percent on productivity, 3.4 percent on quality and 1.5 percent on other factors. Compensation for PCPs was shown to vary considerably across physician practices, irrespective of models of payment.

 

PCPs who were not in ACOs but who participated in other payment arrangements with substantial risk for primary care costs had an average compensation breakdown of 66.6 percent from salary, 32.2 percent from productivity, 0.8 percent from quality and 0.4 percent from other factors. The authors of the report acknowledged the greater role of salaries among such physicians. (“Physician Compensation: Study Shows Wide Variation, But Little Connection to Quality Outcomes,” HFMA Weekly News, July 24, 2015)

 

The variation in PCP compensation across practices probably reflected different financial incentives and a lack of consensus about the most appropriate ways to pay PCPs, according to the study.

 

The ACO physician results and conclusions were similar to the findings of separate research by consulting firm Bailit Health. A Bailit executive noted that providers still are being paid based on volume, so their employed physicians would also be paid on volume. Being paid based on value is gaining traction, but is a long way from wide implementation. (“Physician Compensation: Study Shows Wide Variation, But Little Connection to Quality Outcomes,” HFMA Weekly News, July 24, 2015)

 

With many of the new payment models in their early stages, and many providers still deriving only a small share of their revenue from such models, there is less incentive for physician compensation models to align with new payment models until the shift in payment has occurred, the Bailit executive said.

 

The slower transition to linking physician compensation and value-based care identified in the study also reflected a necessary self-preservation strategy by provider organizations, according to another expert. If compensation is too heavily quality- or salary-based and the contracts don’t exactly reflect that, there will be problems.

 

Some of the physician compensation challenges of include:

  • The continuing lack of value-based payment from many private payers
  • For ACOs, the inclusion of independent practices with compensation policies over which health system participants in the ACO have little control.

 

A 2015 HFMA survey showed less than one quarter of hospitals and health systems described their organizations as either highly or extremely capable of compensating physicians in a way that accommodates both fee-for-service and value-based models. But 42 percent of respondents said flexible models for physician compensation are “extremely important” capabilities to have over the next three years. (“Physician Compensation: Study Shows Wide Variation, But Little Connection to Quality Outcomes,” HFMA Weekly News, July 24, 2015)

 

In addition to physician compensation, ACOs have other ways to control costs including effective use of electronic health records, use of nurse care managers to coordinate care for high risk patients and the production of internal reports on physician performance.

 

 

 

Consumerism: Strategic and Financial Implications, Part One is in your library now. In this course, Mark Grube (Kaufman Hall), Marian Jennings (M. Jennings Consulting) and Nathan Kaufman (Kaufman Strategic Advisors) discuss the move to consumerism in health care and some of its effects. Part Two will be in your library soon.

 

 

 

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Medicare Proposes Mandatory Bundled Payment Model for Joint Replacements

Medicare has proposed a mandatory payment model that would require acute care hospitals to participate. Hospitals would experience either pay cuts or bonuses based on their quality and cost outcomes for joint replacement patients through 90 days post-discharge.

 

CMS said the proposed five-year Comprehensive Care for Joint Replacement model would generate $153 million in savings.

 

Not all hospitals would be part of the program. However, “most hospitals” in 75 selected geographic areas would have to participate. (“Medicare Proposes First Mandatory Comprehensive Pay Model,” HFMA Weekly, July 17, 2015)

 

CMS focused this first mandatory payment model on joint replacements because it said the current approach to this care “leads to more post-surgery complications, high readmission rates, and inconsistent costs.”

 

The new proposed model would address this fragmentation by focusing on coordinated, patient-centered care, thus improving the care experience for the growing numbers of Medicare patients who receive joint replacements.  (Comprehensive Care for Joint Replacement, CMS Fact Sheet, July 9, 2015)

 

The proposed model will use a retrospective bundled payment, under which CMS will continue to pay all providers involved in an episode of care individually and then reconcile total payments at the end of the year against target prices. Those that exceed the target would owe money back to CMS, while those that beat the target would get bonus payments. (“Medicare Proposes First Mandatory Comprehensive Pay Model,” HFMA Weekly, July 17, 2015)

 

A healthcare analyst noted that the biggest challenges for participating providers will fall on hospitals in their role as the “accountable entity.” If spending exceeds the target, the hospital would have to repay CMS. “So, much like we see in readmission penalties, hospitals are being held accountable for broader system reform.” (“Medicare Proposes First Mandatory Comprehensive Pay Model,” HFMA Weekly, July 17, 2015)

 

To make this work, hospitals will have to work with their orthopedic surgeons on ways to improve quality in hip and knee replacements. Savings during the inpatient portion of the episode would come from reductions in the cost of medical devices—achieved through aggressive negotiations with vendors.

 

Once the patient leaves the hospital, there must be close coordination with post-acute providers to reduce spending post-discharge. If the hospital doesn’t own the post-acute provider, it may not have exact figures on post-acute spending for an episode of care.

 

HFMA noted that, “hospitals also will need to figure out gainsharing arrangements to incentivize increased efficiency among the other providers involved in the episode of care.” The model will waive federal antitrust laws that would normally limit gainsharing arrangements.

 

Comments are due on the proposed payment model by Sept. 8.

 

 

Consumerism: Strategic and Financial Implications, Part One is in your library now. In this course, Mark Grube (Kaufman Hall), Marian Jennings (M. Jennings Consulting) and Nathan Kaufman (Kaufman Strategic Advisors) discuss the move to consumerism in health care and some of its effects.

 

 

 

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Distressed Hospitals Turn to Capital Partners to Avoid Payment Default

Because of significant changes in reimbursement, consolidation continues to accelerate. Small, distressed hospitals are seeking large partners to meet the demands of the evolving hospital/system market and to fund capital needs. A June Sector-in-Depth report from Moody’s Investors Service details why the authors expect merger and acquisition activity to remain high over the next one to two years.

 

  • Distressed not-for-profit providers often consider consolidation with larger for-profit entities to avoid payment default.

Distressed not-for-profit hospitals with revenues less than $500 million may view consolidation with a larger provider as a means to avoid payment default, bankruptcy or to fund capital needs. Moody’s notes that in many instances the acquirer is a for-profit hospital operator looking for growth opportunities. “As a result, for-profit entities have achieved greater market penetration over the last several years.”

 

  • As smaller providers face increasing financial challenges, consolidation becomes more widespread.

All hospitals are dealing with reductions in reimbursement, shifting patient volumes (for example, inpatient to outpatient) and increasing capital needs, especially IT upgrades. Larger providers have greater economies of scale so they can more effectively address industry challenges. Small, distressed hospitals can benefit from acquisition by a large provider that is well equipped to handle these challenges.

 

  • However, the complexity of mergers and acquisitions sometimes results in failed attempts to consolidate, which often leads to smaller providers looking for new partners.

Mergers & acquisitions are complicated and sometimes do not result in the desired outcome. “For distressed hospitals, the inability to execute an M&A strategy may increase the probability of payment default or bankruptcy.”

 

(Under Threat of Default, Distressed Hospitals Turn to Mergers and Acquisitions, Moody’s Investors Service, June 22, 2015)

 

 

 

 

Consumerism: Strategic and Financial Implications, Part One is in your library now. In this course, Mark Grube (Kaufman Hall), Marian Jennings (M. Jennings Consulting) and Nathan Kaufman (Kaufman Strategic Advisors) discuss the move to consumerism in health care and some of its effects.

 

 

 

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Proposed Changes to Two-Midnight Rule Generate Optimism, Praise

CMS plans to tweak the two-midnight short hospital stay policy, according to its proposed rule issued last week. The proposed changes include “allowing hospitals to admit—and bill under Part A—Medicare patients whose stay is expected to last less than two midnights ‘on a case-by-case basis.’” (“Two-Midnight Rule Changes Proposed,” HFMA Weekly News, July 2, 2015)

 

CMS also proposed moving enforcement of the standard from the Recovery Audit Program to the Quality Improvement Organizations (QIOs). Recovery Audit Contractors (RACs) will focus only on those hospitals with consistently high denial rates. CMS noted that, “QIOs have a significant history of collaborating with hospitals and other stakeholders to ensure high-quality care for beneficiaries.” (From the CMS Fact Sheet: Two-Midnight Rule, July 1, 2015)

 

Background

 

CMS adopted the two-midnight rule for admissions beginning on or after October 1, 2013. This rule established Medicare payment policy that should be used when determining whether inpatient admission is reasonable and payable under Medicare Part A. Implementation has been delayed because of industry pushback.

 

In general, the Two-Midnight rule stated that:

  • Inpatient admissions will generally be payable under Part A if the admitting practitioner expected the patient to require a hospital stay that crossed two midnights and the medical record supports that reasonable expectation.

 

  • Medicare Part A payment is generally not appropriate for hospital stays not expected to span at least two midnights.

 

The proposed CMS changes for stays expected to last less than two midnights are as follows:

  • For stays for which the physician expects the patient to need less than two midnights of hospital care (and the procedure is not on the inpatient only list or otherwise listed as a national exception), an inpatient admission would be payable under Medicare Part A on a case-by-case basis based on the judgment of the admitting physician. The documentation in the medical record must support that an inpatient admission is necessary, and is subject to medical review.

 

  • CMS is reiterating the expectation that it would be rare and unusual for a beneficiary to require inpatient hospital admission for a minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for a period of time that is only for a few hours and does not span at least overnight. CMS will monitor the number of these types of admissions and plans to prioritize these types of cases for medical review.

 

For hospital stays that are expected to be two midnights or longer, CMS’s policy has not changed; that is, if the admitting physician expects the patient to require hospital care that spans at least two midnights, the services are generally appropriate for Medicare Part A payment. This policy applies to inpatient hospital admissions where the patient is reasonably expected to stay at least two midnights, and where the medical record supports that expectation that the patient would stay at least two midnights. This includes stays in which the physician’s expectation is supported, but the length of the actual stay was less than two midnights due to unforeseen circumstances such as unexpected patient death, transfer, clinical improvement or departure against medical advice.

(From the CMS Fact Sheet: Two-Midnight Rule, July 1, 2015)

 

Hospital and health policy analysts applauded the proposed changes, some noting that the shift in policy gives physicians decision-making authority over the best and most appropriate setting of care based on patient needs.

 

An executive from the Healthcare Financial Management Association said that the proposed switch to QIOs performing the first review of all cases of less than two midnights with RAC follow-up on hospitals with high denial rates is “an improvement” and “generally favorable.”

 

CMS intends to keep a 0.2 percent cut to inpatient payments as well as a 0.2 percent net decrease in outpatient prospective payments as part of the two-midnight policy.

 

Comments on the proposed changes will be accepted by CMS until August 31. A final rule is expected around November 1.

 

You can read the CMS fact sheet here.

 

 

Consumerism: Strategic and Financial Implications, Part One is in your library now. In this course, Mark Grube (Kaufman Hall), Marian Jennings (M. Jennings Consulting) and Nathan Kaufman (Kaufman Strategic Advisors) discuss the move to consumerism in health care and some of its effects.

 

 

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.