Lessons Learned and Opportunities Ahead for Bundled Payment

Presenter Mark Montoney, M.D., M.B.A.

EVP/CMO Vanguard Health Systems

I do not have, and have not had, in the last 12 months, any relevant financial

or other relationship with any proprietary entity producing health care goods or services including the

manufacturer of any commercial product or device I will discuss during my presentation.

Vanguard Today

Spectrum of Payment Models – Shifting Performance Risk to Providers

FFS All Services

Full Cap

De

gre

e o

f F

ina

nci

al R

isk

Degree of Clinical Integration

Po

ten

tia

l in

cre

ase

d V

alu

e

PCPFFS All Services

Full Cap

De

gre

e o

f F

ina

nci

al R

isk

Degree of Clinical Integration

CA Delegated Model

Shared Savings

FFS + P4P

Po

ten

tia

l in

cre

ase

d V

alu

e Selective Capitation

PCP

Episodic Bundling

• Current Medicare pilot programs focus on episodic payments (bundling pilot) and shared savings (ACO pilot)

ACO Pilot

Bundled Payment Pilot

Bundled Payments 101

IP Acute Stay Surgeon RehabAnesth. ReadmitPrimary

Care

Projected Episode Cost

Actual Episode Cost Savings

Hosp MD MD

Actual Episode Cost

Discharge

Sample “Bundle” Payment

Most episodes can be generalized in this fashion; Differentiation occurs at the point of incentives

• Alignment Strategy

• Improve Quality and Lower Costs

• Move towards Evidence Based Medicine

• Shift Market Share

• Shape Policy / Gain Experience

Rationale for ACE

ACE Components

• Competitive Bidding Process

• 28 Cardiac & 9 Ortho DRGs

• Gain Sharing Opportunity

• Beneficiary Incentive

• Bundled Payment

Bundled Payment per caseBundled Payment per case

ACE Funds Flow

Gain Share ExampleGain Share Example

DRG 470Major Joint Replacement of Lower Extremity w/o

MCCVOLUME 710 Medicare Admissions

PHYSICIAN PAYMENT Part B $1,065,000

DRG 470 – Major Joint Replacement or Reattachment of Lower Extremity w/o MCC

Gain Share Example

• SCIP 1 – Antibiotic Received 1 Hour Prior to Incision

• SCIP 2 – Appropriate Antibiotic Selection

• SCIP 3 – Antibiotic Discontinued 24 Hours After Surgery

• VTE Prophylaxis Ordered

• Smoking Cessation Ordered (for active smokers)

Orthopedic Quality Metrics: Orthopedic Quality Metrics:

Significant Process ImprovementsSignificant Process Improvements

Quality Improvements in Quality Improvements in

Orthopedics Orthopedics

Quality Improvements in Quality Improvements in

Orthopedics Orthopedics

Applied to Bundled Payment

Pilot (BPCI)

• Improvements in quality and evidenced based practice possible with correct alignment and attention to mechanics

• Prepare to distribute gain sharing on a consistent and

routine basis

• Increased transparency & robust information systems an enabler to building healthy partnership – although it is more expensive and time consuming than expected

• Labor intensive to administer program – so we need to be able to identify and measure the largest drivers of quality and cost

• Improved process and management has a halo effect to

other business lines -- it is imperative we capitalize on the opportunity

Collaborate on Bundled Payments

• Bundled payments one

strategy to reducing costs

• Requires improved

coordination, but can

effectively drive margin

improvements

• Medicare bundled

payment strategy

presents an immediate

opportunity

Overview of CMS Bundled

Payments

Vanguard’s BPCI Participation

Phoenix

Model 4

•Effective 7/2013•Cardiology (Arizona Heart)

•Total Joints

San Antonio

Model 4

•In Place (ACE)•Total Joints

Model 2 (30 Day)

•Effective 7/2013•Heart Failure

Valley Baptist

Model 4

•Effective 7/2013•Total Joints•Cervical & Non-Cervical Spinal Fusion

Chicago

Model 2 (90 Day)

•Effective 1/2013*•Multiple Clinical Episodes and Includes

Primary Care Redesign

Detroit

Model 2 (30 Day)

•Effective 1/2013*•Total Joints

*Hold harmless from January 1, 2013 – June 30, 2013

Key Components of Bundled Payments

for Care Improvement (BPCI) Program

Key Components

• 3 year agreement scheduled to start 1/1/13

• Required 2-3% discount to Medicare compared to historical claims

• Detailed bundled payment design, including list of DRGs, inclusion and exclusion criteria, episode trigger and window, and risk adjustment mechanism

• Detailed action plan to redesign care to maximize coordination, patient-centeredness, efficiency, and improved quality

• Detailed physician gain sharing model (up to 50% of professional fees), including criteria for participating, methodology and frequency of sharing gains, and safeguards and quality control mechanisms to ensure that medically necessary care is not reduced

• Detailed set of performance metrics to monitor quality and

Necessary to Continue Progress

Post-ACE

� Reach Beyond Low Hanging Fruit

� Focus on Clinical Outcomes (vs. Process

Measures)

� Further Leverage Pricing Power

� Prepare for Post-Acute Bundling

� Drive Care Redesign and Efficiencies in Clinical

Bundling to Achieve Care Reliability