A peak into the future healthcare systems & hospitals by steven lash

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