A Peak Into the Future Healthcare Systems & Hospitals
August, 2016
Need to Know Where the Puck is Going
What is driving the outlook for the next 3-5 years
Consolidation of Health Plans 5 major plans down to 3 Regional consolidations Health Systems starting their own plans Moving the financing “upstream”
Federal and State Governments MACRA legislation Bundling of major surgical services Presidential & Congressional election
Physician Practice Arrangements Currently more than 200,000 employed Accenture projects 67% will be employed within 3 years
Health Plans
The Big 5 become the Big 3 Aetna (acquiring Humana) Anthem (acquiring CIGNA) United 131 Million covered lives
Reasons for mergers Scale Economics Negotiating leverage with hospitals & physicians Diversification (more MA plans)
The consequence for Hospitals & Systems Anthem has access to national Blues rates; typically lower Anthem converts all CIGNA agreements to BCBS rates Margins drop for hospitals
Hospital Headwinds Declining
Hospital I/P margins Increasing complexity of patient population Medical inflation (CMS projects 4.9% - next 3 years) Niche players taking profitable lines Increasing regulatory developments & scrutiny Health Plan negotiating leverage dropping New payment models Bundled payments – CMS Ortho & Cardiac Commercial payers to follow Advanced Alternative Payment Models NextGen ACOs
Physician Headwinds
MACRA replaces The Sustainable Growth Rate (SGR) Will impose 4-9% reimbursement reductions on physicians who do not move to value based payment methodology Annual reimbursement increases are prescribed
MACRA charts the path for physician compensation for the next 10 years in 2 separate tracks Merit Based Incentive Payments (MIPs) Alternative Payment Models (APMs)
Physicians will wonder the following: “How can I avoid the 4-9% cuts in reimbursement under MIPs?” “How can I get exempted from MIPs and lock in the annual bonus payment of 5% under the APM track “How do I join an APM?”
Physicians will Follow the Money Merit-based Incentive Payments (MIPs)
Alternative Payment Models (APMs)
2015-2018
0.5% annual updates
2019-2025
4-9% penalties/bonuses*
5% lump sum bonus
*Bonuses may be higher 2026 and beyond
0.25% annual updates
0.75 annual updates
P e r f o r m a n c e C a t eg o r y W e i g h t s f o r MI PS COST 10%
CLINICAL PRACTICE IMPROVEMENT ACTIVITIES 15%
( ADVANCING CARE INFORMATION 25%
Quality 50%
MI PS Performance Period All MIPS performance categories are aligned to a performance period of one full calendar year 2017 performance measurement period 2019 1st payment year
2017
2018
2019
2020
2021 2022 I
I
I
25%
50%
202 3
75%
2024
2025
Advanced APMs Requires Participants (physicians & hospitals) to use certified EHR technology Bases payment on Quality measures comparable to MIPS quality performance category The APM either:
Requires APM entities (hospitals and physicians) to bear more than nominal risk for monetary losses Is a Medical Home Model expanded under CMMI
What are the current APMs under MACRA MSSP (Track 2 and 3) NextGen ACO ESRD CPC+ OCM (2 sided risk beginning in 2018)
Next Generation Accountable Care Organization (NGACO) Newest
of ACO models; went live in July 2016 with 21 organizations participating This is the 3rd version of ACOs Pioneer (2012- part of ACA) 32 participants; 9 left Burdensome reporting, limited upside, difficult quality measures
Medicare Shared Savings Program (MSSP) 404 participants; most successful Fixed some flaws of Pioneer model 2 tracks for cost management; 1/3 received any bonus payments
NGACO Financial risk of care coupled with quality measures 2 tracks – 80% of savings or losses of 100% 2nd year move to capitation aka a Medicare Advantage Plan
Putting it all together
Fee Schedule
MIPS
Max Adjustment (+/-)
Advanced APMs
+5% bonus (excluded from MIPS)
Hospital Risk
Financial performance Improve eroding I/P margins through efficiency & supply chain productivity Add new services that are higher in margin Improve cash flow through enhanced contracting and denials recovery Effective Population Health Management including risk stratification
Compete on the basis of “Demonstrated Value” Best customer experience Best price Best service Documented best outcomes
Failure to build a robust & viable physician organization Ensures the ability to compete in new payment models Counterbalance to commercial payors contracting leverage Locks in referrals to hospitals By sharing risk and quality profitability improves For the most part, Physicians are seeking the comfort of the hospital