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Overview
Strategic Contracting Getting the Business you Desire with Desirable Trading Partners
Presented by
Patrick Gauthier, Director
Objectives
1. Explore the Contracting Environment
2. Review Options
3. Discuss Strategy
4. Questions
The New Business Environment
Brief Review of Contracting Environment
• Environmental Drivers:– Parity
• Self-insured employers• Large group insurance• CHIP and Medicaid managed care plans
– Health Care Reform• Medicaid expansion• Health Insurance Exchange• More managed care
– Block Grant • Integrated application• Addresses wrap-around and remaining uninsured
Big Pictures: Now & ThenPrivate
InsurancePublicly-Funded
TreatmentFederal
Agencies
State Agencies
Counties and Cities
Insurance
Managed Care
Employers
Networks
Brokers
DOI
Managed Care
Networks
Corrections & Courts
Prevention
Housing & Jobs
Standards & Science
75% - 90%
10% -25%
32+ Million Uninsured
Health Insurance
Exchanges
Medicaid Managed Care
Plans
Parity & Scope of Services
• MHPAEA does not stipulate what specific conditions, disorders or diagnoses must be covered.
• Parity law does not mandate covered services except to say that parity applies to all six categories of service if it applies to any
• Parity law does not mandate specific kinds of providers be covered
Deciding what conditions, services and providers are eligible for coverage – until we see a Final Rule with clear direction – is left to health plans and State regulators enforcing your State law and regulations.
Take a Stand on Scope of Service
1.Covered Conditions
2.Covered Services
3.Covered Providers
4.Medical Necessity Guidelines
Where to take it• Health plans
• MCOs
• MBHOs
• Employers
• PPOs and HMOs
• Dept of Insurance
• Medicaid
• Attorney General
• Governor
• Legislators
Reform & ACOs• Q: What is an “accountable care organization”? • A: An Accountable Care Organization, also called an “ACO” for
short, is an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.
• For ACO purposes, “assigned” means those beneficiaries for whom the professionals in the ACO provide the bulk of primary care services. Assignment will be invisible to the beneficiary, and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue to seek services from the physicians and other providers of their choice, whether or not the physician or provider is a part of an ACO.
ACO
Population Health Home
Structure, Governance and Shared Savings
IT Infrastructure and Data Management
Public Health
Home Care
& Hospice
Rx & Lab
Primary Care
Mental Health
Substance Use
Disorder
Surgical & Specialty
Hospital & Rehab
Long-Term Care
ACO Functions
Managed Care
LeadershipBusiness Operations
Enrollment
QualityAssurance
CustomerService
Utilization Mgmt
ProviderRelations
Case Mgmt
IT & Data Analysis
ClaimsProcessing
Compliance
ACO Goals• Promote development of new systems of care• Change provider culture and incentives from fragmented
FFS• Lower costs while improving population health• Measure both quality and financial performance• Hold provider systems accountable for both cost and
quality of care for assigned patient populations
ACO Innovations
Minimize “barriers to entry” for patients and providers:• Patients attributed, not enrolled• No benefit or network restrictions; no lock-in; no prior-auth
Flexibility for providers to form different kinds of ACOs• Flexible payment model (e.g., can include bundling, Medical Homes)• “Bonus only” shared savings• “Symmetric risk” shared savings• Partial capitation and shared savings
Receiving shared savings requires first achieving quality threshold
ACO Reimbursement• Under the proposed rule, Medicare would
continue to pay individual providers and suppliers for specific items and services as it currently does under the fee-for-service payment systems.
• The proposed rule would require CMS to develop a benchmark for savings to be achieved by each ACO if the ACO is to receive shared savings, or be held liable for losses.
ACOs – Two Tracks• To provide an entry point for organizations with varied
levels of experience with and willingness to take on risk, the proposed rule would allow an ACO to choose one of two program tracks.
• The first track would allow an ACO to operate on a shared savings only track for the first two years, but would then require the ACO to assume the risk for shared losses in the third year.
• The second track would allow ACOs to share in savings and risk liability for losses beginning in their first performance year, in return for a higher share of any savings it generates.
ACO
• Q: What forms of organizations may become an ACO?
• A: The statute specifies the following:
1. ACO professionals (i.e., physicians and hospitals meeting the statutory definition) in group practice arrangements,
2. Networks of individual practices of ACO professionals,
3. Partnerships or joint ventures arrangements between hospitals and ACO professionals, or
4. Hospitals employing ACO professionals.
5. Other Medicare providers and suppliers as determined by the Secretary
ACO• Q: What are the types of requirements that such an
organization will have to meet to participate?
• A: The statute specifies the following:
1) Have a formal legal structure to receive and distribute shared savings
2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)
3) Agree to participate in the program for not less than a 3-year period
4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.
5) Have a leadership and management structure that includes clinical and administrative systems
6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care
7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.
ACO – requirements cont’d
ACO• Q: How would such an organization qualify for shared
savings?
• A: For each 12-month period, participating ACOs that meet
specified quality performance standards will be eligible to receive a share of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below their specified benchmark amount. The benchmark for each ACO will be based on the most recent available three years of per-beneficiary expenditures for Parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO.
ACO• Q: Will beneficiaries that receive services
from a health care professional or provider that is a part of an ACO be required to receive all his/her services from the ACO?
• A: No. Medicare beneficiaries will continue to be able to choose their health care professionals and other providers
ACO• Q: When will this program begin?
• A: January 1, 2012. Agreements will begin for
performance periods, to be at least three years, on or after that date.
Goals & ObjectivesImprove Inpatient
Care Efficiency
Use Lower CostTreatments
Reduce Adverse Events
Reduce PreventableReadmissions
Improve Prevention& Early
Diagnosis
Improve PracticeEfficiencies
Reduce Unnecessary
Testing & Referrals
Reduce PreventableER Visits &Admissions
Hospitals & Specialists
Primary Care
Improve Management of Complex Cases
Use Lowest-CostSettings and
Providers
Lower TotalHealthcare
Costs
Improve HealthOutcomes
Population Health Management• ACOs must develop a process for identifying patients who
have complex needs (multiple chronic conditions) or are at high risk of developing such needs and provide them with wellness and prevention programs, disease management, and complex case management, as indicated
• ACOs must make available or support providers’ use of electronic prescribing, electronic health records systems, registries, and self-management tools
• MH/SUD providers must be prepared to work in this environment and develop the necessary tools and resources
Incentives to Participate in an ACO
• Identified population/market share• Some administrative fees for administrative
duties• Reliable referral sources within network • Common values and objectives (coordination,
cooperation, collaboration)• Shared information (whole health)• Shared savings (financial incentives)
Block Grants• SAMHSA's proposed changes to the FY
2012/2013 Block Grants seeks to get State behavioral health systems ready for 2014 when more people will be insured through Medicaid or 3rd party insurance. Under this new approach States and territories will have the opportunity to use block grant dollars for prevention, treatment, recovery supports and other services that supplement services covered by Medicaid, Medicare and private insurance.
Multiple Chronic Conditions
• The proportion of Medicaid beneficiaries with disabilities who are diagnosed with three or more chronic conditions ranges between 35% and 45%.
• The frequency of psychiatric illness among Medicaid beneficiaries with disabilities ranges from 29% to 49%.
• Psychiatric illness is represented in three of the top five most prevalent pairs of diseases, or dyads, among the highest-cost 5% of Medicaid beneficiaries.
2009 17.6% of GDP
1999 13.8%
1989 11.8%
1979 8.6%
1969 6.7%
The Cost of Health Care in America
Source: CMS, Office of the Actuary, National Health Statistics Group
Reviewing Your Options
Options are a Function of Market• Self-Insured Plans (ERISA)• Traditional Indemnity (fully-insured)
– Open access, higher coinsurance
• Managed Care Plans– MBHO (carve-out)– HMO (network-centric, referral-based)– PPO (wider network, medical necessity standards)– POS (combines HMO and PPO with coinsurance differentials)
• Consumer-Directed Health Plans– High deductible, catastrophic claims– Health Savings Accounts (HSA), Health Reimbursement
Accounts (HRA) and Flexible Spending Accounts (FSA)
Market ResearchSources of Valuable Information
• Health Plans and Managed Care Organizations– State Department of Insurance– AHIP and State Associations of Health Insurance
Plans
• Self-Insured Employers– National and Regional Business Group on Health– Employers’ Health Coalitions
• Federal and State Agencies– HRSA, SAMHSA, NIDA, DOL, CMS, DOJ web sites
Market Segments
• Commercial Insurance / Public Funding• Voluntary / Involuntary• Geographic Markets• Age• Gender• Specialty / Generalist / One-Stop Shop• Race / Culture / Language• Stand-Alone / Integrated / Joint Venture /
Partnership• Faith-Based
Market Segmentation• What kinds of markets appeal to your
organization?
• What suits your vision and mission?
• In what market segments do you have a good reputation? Market share/penetration?
• In what market segments do you/can you make a reasonable profit?
Opportunity Matrix Tool
Market Segments and Services
Segment 1
Segment 2
Segment 3
Service 1
Service 2
Service 3
Rank each according to:
1. Market Maturity/Longevity
2. Brand equity or reputation
3. Revenue share (%)
4. Share of profits
5. Qualifications, skills, subject matter expertise and capacity to grow
6. Weaknesses, competitors and threats
7. Cost of entry
8. Legislative/regulatory opportunities
New Conversations
• Hospitals• Health Plans and MCOs/MBHOs• Primary Care• Third-Party Administrators• Brokers• Networks• Employers• Other Medical Specialists• Others?
New Conversations1. Professional
2. Face-to-face
3. Expressing willingness and interest
4. Demonstrating big picture understanding and prospect of synergies
5. Eager to develop viable, marketable, attractive solutions
6. Promoting new services and potential new business model
7. Clear, distinct, customer value proposition
8. Potential collaborator? Investor? Partner? Buyer?
9. Benefits and advantages more important than features and functions
10. Always Branding
Reimbursement and Fee Schedules
Variety of Approaches and Methodologies• Usual, Customary and Reasonable (UCR)• Diagnosis Related Grouping (DRG)• Resource-Based Relative Value Scale (RBRVS)• Innovations including:
– Sub-capitation– Bundled case rates and episode rates– Administrative fees for additional services like Case Management– Bonuses for performance– Shared savings
Global Payment• Definition. Global payments are fixed-fee payments for
the care and services that patients might receive in a given span of time such as a month, quarter or year. Global Payments are akin to Case Rates and Episode Rates. Global payments put providers at-risk financially for the occurrence of conditions as well as the management of those conditions.
• Purpose. Global payments are designed to contain costs and reduce the incidence of unnecessary services, promote integration and coordination of services. Global payments can also feature incentives to improve the quality of care.
Global Payment
• Potential Issues. Global payments might induce providers to cut back on necessary care and to admit/select less expensive patients into their programs.
• Global payments involve significantly more complex financial management, requiring infrastructure and personnel to manage risk.
• Small providers may not be able to take on risk due to this complexity and any state regulations concerning financial solvency where risk exists.
Contracting Imperatives
• Know your costs and cost structures
• Know your profit model. At what point can a contract become profitable?
• Don’t contract at rates lower than your costs if your model doesn’t absolutely demonstrate a reasonable point in time when you become profitable
Contracting Imperatives
• Review contracts from multiple perspectives:– Legal– Financial– Clinical– Ethical– Practical Operational– Strategic
Strategic ConcernsWhat makes your decision to contract
“strategic?”
• The contract reflects your vision, your image of what it is you’re becoming
• It supports your mission, how it is that you will strive to realize your vision
• It helps you accomplish organizational goals and objectives
Examples: Strategy• New market segment
– Medicaid– Self-insured employer– Impaired professionals program
• Gains in % share of the market
• Competitive advantage
• Visibility and brand-image
• New services in the same market– Addition of IOP, for example
Examples: Strategy
• New location/geographic expansion
• New reimbursement methodology
• Secure funding (sub-capitation for defined population, for example)
• Joint venture/revenue share
• Building credibility, loyalty, confidence in a step-wise growth plan
• Goodwill in the community
Examples: Goals• Increased overall revenues• Improved profit• Admissions• Bed-days• Transitions in care• Integration (vertical and horizontal)• Number of payers (diversification)• Sustainability of other programs
Factors and Variables
• Service mix (billing codes)
• Bundling/unbundling services
• Rate of reimbursement
• Reimbursement methodology
• Incentives/Pay-for-Performance
• Shared Savings
Factors and Variables
• Utilization Management terms and conditions
• Credentials
• Preferred Status/Exclusivity
Planning
1. Conduct Market Research
2. Conduct Strategic Planning
3. Gather Intelligence
4. Assess Market Conditions
5. Develop Customer Value Proposition
Planning6. Develop clear sense of what you
a) desire, b) want, c) will accept, and d) need
7. Practice concise pitch
8. Develop your allies
9. Talk to the right person
10. Approach with respect and professionalism and tell them what’s in it for them
