Production & Inventory Management - Pendulum Health€¦ · clients to research, design, build and manage customized care models including clinically integrated networks, bundled

Introduction

Pendulum HealthCare Development Corporation is a leading

provider of integrated business management and technology

service solutions. PHDC supports physicians pursuing value-

based initiatives, helping them achieve clinical and financial

rewards for more effectively managing their patient populations.

With over 40 years of health care experience, we work with

clients to research, design, build and manage customized care

models including clinically integrated networks, bundled

payments, accountable care organizations and physician-

sponsored health plans.

The Big Picture

Alan Greenspan thinks major investors who understand Global population changes will rethink

their long term bond bets

“Once foreign creditors digest the extent of the population shift

that is turning Medicare and Social Security into fiscal time

bombs-and its negative implications for the broader US

economy- they will demand higher returns for their money and

be far less willing to accept the current low rates of 20 and 30

year US treasurys”.

“The cost of public pensions and health benefits is on track to

double to 24% of the Gross Domestic Product by 2040.”

“Three countries in even greater peril Japan, Germany and China”

Source; Wall street Journal June 2006 thinking Global Fredrick Kempe

Health benefits Ail as Pensions Heal

“While traditional pension plans often are contractual obligations at companies that have them, health benefits are not. Thus most companies are trimming their post retirement health care spending”

“Under funded pensions at US Auto makers have gotten a lot of ink but their health plans are in worse shape”.

“Of the 110 Billion total pension and healthcare under funding at the start of this year at GM and Ford more than 97 Billion of that amount was accounted for by retiree health care costs” according to Standard and Poors.

Source WSJ June 6th Tracking Numbers by Ian McDonald

What employers are looking for

Large self funded employer group have (TPA Outsourced) systems to

track and pay claims, conduct traditional UR are changing.

This accounting approach is usually retrospective and helps identify where

the money went but does not help identify the future. Medical expense %

for most self funded companies are in the 90 to 95% of premium range.

Most health plans understand prospective payment and the need to

anticipate costs and frequency of illness . To date actuarial modeling of

claims behavior per 1000 and using various forms of case management

has helped keep the medical expense ratio at 85% to 90% of premium

To remain competitive the goal for both is to move to 85% to 90% of

premium and that requires non traditional medical management.

Beyond trends,

from buying benefits to managing

benchmarks

As employers move away from the defined benefit approach to buying insurance ( one benefit) to a defined contribution approach (one cost) and attempt to give employees choice of new plans, cafeteria selection and include Medical savings accounts the quest of managing benfits comes to the forefront.

Many of the techniques used by healthplans in terms of medical management are now part of what employers are curious about. They see charges and utilization that points out problems of inconsistency and also see the government taking a role in standardizing quality measures for Medicare Contracting health plans .

These measure or benchmarks are key to stabilizing/projecting risk and cost.

Predicted

Cost

Risk Level:

Low 165 $750

5,445 $690

12,843 $687

Risk Level:

Moderate 94 $1,300

2,513 $1,220

6,317 $1,198

Risk Level:

High 34 $6,500

419 $5,700

1,223 $5,600

Employer Risk Profile

PHDC Population Profiling System

Survey Statistics

Number

Surveyed

Number

Responding

Response

Rate

Employer: 150 78 52%

Population: 8,377 2,240 27%

Benchmark: 20,383 5,450 27%

PCPPCP PopulationPopulation BenchmarkBenchmark

To manage and predict benchmarks requires

a return to a focus on the

patient physician relationship

Discounting physician care after the fact only makes physicians angry at the insurer /employer and the patient.

In many cases we are seeing the shrinking of physician care reimbursement actually shrinking the availability of PCP and up to date hospital care.

Patients who get caught short by non covered benefits and angry docs usually do not follow treatment that’s recommended so Patients sometimes only receive a small fraction of the VALUE of care employers purchased.

Solution is to build a plan that changes behavior of the physician and patient through new incentives to re create value. to swing back the Pendulum in favor of comprehensive care at affordable and predictable costs.

PHDC Population Profiling SystemProvider Ranking - Total Dollars

Develop Tiered Networks

Compare Risk Adjusted Cost

Population: The Universe

Benchmark: N/A

PROVIDER POPULATION

Rank ID Name Mbrs Seen

Actual Paid Amt

Expected Paid Amt

Diff Perf

Index

phdc

3899 6636498 Provider 6636498 183 $127,190 $75,642 $51,547 1.68 0.90

3905 6636492 Provider 6636492 350 $229,000 $166,453 $62,547 1.38 1.03

3876 6631410 Provider 6631410 165 $99,304 $72,703 $26,600 1.37 0.95

3897 6637732 Provider 6637732 354 $214,405 $167,368 $47,037 1.28 1.02

3883 6636491 Provider 6636491 336 $176,154 $141,255 $34,900 1.25 0.91

3813 6637895 Provider 6637895 150 $83,074 $75,027 $8,047 1.11 1.08

3823 6636495 Provider 6636495 232 $120,429 $111,345 $9,084 1.08 1.04

3776 6636242 Provider 6636242 157 $79,036 $74,498 $4,538 1.06 1.03

3387 6637765 Provider 6637765 265 $96,586 $96,279 $307 1.00 0.79

315 6634381 Provider 6634381 219 $111,192 $119,540 -$8,348 0.93 1.18

99 6633835 Provider 6633835 525 $170,727 $211,799 -$41,072 0.81 0.87

147 6633712 Provider 6633712 280 $101,897 $127,628 -$25,731 0.80 0.99

RedirectPatients

Include Provider in

Select Network

Estimated Savings From Redirection

REDIRECTION

ID NameMbrsSeen

ActualPaid Amt

ExpectedPaid Amt

DiffPerf

Index25% 50% 75% 100%

6636498 Provider 6636498 183 $127,190 $75,642 $51,547 1.68 $12,886.75 $25,773.50 $38,660.25 $51,547.00

6636492 Provider 6636492 350 $229,000 $166,453 $62,547 1.38 $15,636.75 $31,273.50 $46,910.25 $62,547.00

6631410 Provider 6631410 165 $99,304 $72,703 $26,600 1.37 $6,650.00 $13,300.00 $19,950.00 $26,600.00

6637732 Provider 6637732 354 $214,405 $167,368 $47,037 1.28 $11,759.25 $23,518.50 $35,277.75 $47,037.00

6636491 Provider 6636491 336 $176,154 $141,255 $34,900 1.25 $8,725.00 $17,450.00 $26,175.00 $34,900.00

Total Redirection: $55,657.75 $111,315.50 $168,973.25 $222,631.00

Total Redirection:

$55,657.75 $111,315.50 $168,973.25 $222,631.00

Tiered Network Example

0%

20%

40%

60%

80%

100%

Tiers

Par

tici

pat

ing P

hysi

cian

s Regular

100%

Premium

75%

Ultra

50%

A value higher than 1.0

indicates actual deaths

exceed expected deaths

Risk Adjustment In Action

Source: Pendulum, Copyright © 2002 Learning and Knowledge Resources.

1.01.0 indicates actual

deaths are equal to

expected deathsA value lower than 1.0

indicates actual deaths are

lower than expected,

which is the ideal situation

Risk-Adjusted

Mortality Index

Sum of Observed Mortality

Sum of Expected Mortality=


Risk-Adjusted Mortality Index:

Leveling The Playing Field

Risk-Adjusted Mortality Index (RAMI) attempts to account for all factors that may

explain variations in patient mortality outcomes, other than the health care or the

process of care itself. RAMI allows comparison over time within your own

organization and other health care organizations. Adjusting for risk in this manner

levels the playing field and can help you identify trends and target areas for

performance improvement.

The RAMI model looks at:

Relationships between principal and secondary diagnosis

Demographic factors (such as age and sex)

Validity of the data

Facility characteristics like geography (urban or rural) and function (teaching or

non-teaching)

65 Year Old Male 90 Year Old Male65 Year Old Male 90 Year Old Male


Risk Adjustment In Action

Two male patients with the same principal diagnosis (congestive heart failure) are

admitted to different emergency rooms. Though medical intervention does its best

for both patients, the reality is that advanced age and serious secondary diagnoses

put the 90 year old at a much higher risk of death. It would be unfair to compare

mortality outcomes of the two without risk adjustment. Therefore, risk adjustment

provides a better comparison.

Congestive Heart Failure with Diabetes Mellitus

with Hypertension

Congestive Heart Failure with COPD with Mitral Valve

Insuffic with Aortic Valve Stenosis

This patient’sexpected mortality is 8.0 times

the expected mortality forthe 65 year old

===

PatientDischarge

Disposition

Observed

Mortality

Expected

Mortality

DRG 127 Heart Failure and Shock

1 Deceased 1 0.74

2 Alive 0 0.20

3 Alive 0 0.11

Total 1 1.05

RAMIObserved Deaths

Expected Deaths

1.00

1.050.95


Obtaining RAMI: Sample

Visualizing An Annual >>2.5% Gain In

Cost Efficiency

2.5%/year2.5%/year

2.5%/year2.5%/year

50th %ile50th %ile

50

th%

ile5

0th

%ile

MD

Qu

alit

y I

ndex

(ou

tco

mes

of

% a

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eren

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o Q

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les)

MD

Qu

alit

y I

ndex

(ou

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mes

of

% a

dh

eren

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o Q

ru

les)

L

ow

erH

igh

er

L

ow

erH

igh

er

Lower Longit. Efficiency/ Higher Total CostLower Longit. Efficiency/ Higher Total Cost

Higher Longit. Efficiency/ Lower Total Cost

Higher Longit. Efficiency/ Lower Total Cost

Low Longit. Efficiency Low Quality (Worst)

Low Longit. Efficiency Low Quality (Worst)

High Longit. Efficiency High Quality (Best)

High Longit. Efficiency High Quality (Best)

High Longit. Efficiency Low QualityHigh Longit. Efficiency Low Quality

Total Cost of Care Index for Seattle MDs(total cost per case mix-adjusted treatment episode)

Total Cost of Care Index for Seattle MDs(total cost per case mix-adjusted treatment episode)

Low Longit. Efficiency High QualityLow Longit. Efficiency High Quality

New level of insight for hospitals

The system actually rewards providers who let patients get sicker.

The more complex the patient the more the providers can charge.

When hospitals become more efficient and more effective they

lower costs, save lives but also lower revenue projections .

Right now the more efficient and effective the hospital is , the

more money the insurance company makes.

The only way to harvest these savings from improvements is to

share risk in carefully constructed performance driven

agreements.

CAP Protocol Compliance

Source: Intermountain Healthcare, Dr. Brent James, .

Pro

po

rtio

n C

om

pli

ant

Pro

po

rtio

n C

om

pli

ant

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

-23 -21 -19 -17 -15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 17

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8Baseline ImplementationBaseline Implementation

Month Relative to CPM ImplementationMonth Relative to CPM Implementation

Implementation Group – Loose Abx Compliance

Community Acquired Pneumonia

Source: Intermountain Healthcare, Dr. Brent James,.

Without

Protocol

With

Protocol

‘Outlier’ (complication)

DRG at Discharge15.3% 11.6% 24.7% p<0.001

In-hospital Mortality 7.2% 5.3% 26.3% p=0.015

Relative Resource Units

(RRUs) per case55.9 49.0 12.3% p<0.001

Cost per Case $5211 $4729 9.3% p=0.002

CAP: Cost Vs. Reimbursement


Act

ual

vs.

Exp

ecte

d R

eim

bu

rsem

ent

($)

Act

ual

vs.

Exp

ecte

d R

eim

bu

rsem

ent

($)

0

5000

10000

15000

-37 -35 -33 -31 -29 -27 -25 -23 -21 -19 -17 -15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 17 19 21 23

0

5000

10000

15000

Expected Cost projected from risk-adjusted history, controls

Actual Cost as complication rate fell

Actual Reimbursement

Expected Cost projected from risk-adjusted history, controls

Actual Cost as complication rate fell

Actual Reimbursement

Month Relative to Protocol IntroductionMonth Relative to Protocol Introduction

Impact On Net Income


Payment Mechanism

Improvement to Cost

Structure

Discounted

FFS

Per

Case

Per

Diem

Shared

Risk

Decrease Cost per Unit

Decrease # Units per Case

Decrease other units per case

Decrease LOS (# nursing hours)

Decrease # of Cases

(45%) (40%) (0%) (15%)

Impact On Net Income


Payment Mechanism

Improvement to Cost

Structure

Discounted

FFS

Per

Case

Per

Diem

Shared

Risk

Decrease Cost per Unit

Decrease # Units per Case

Decrease other units per case

Decrease LOS (# nursing hours)

Decrease # of Cases

(45%) (40%) (0%) (15%)

Strategies To Harvest

Quality Savings

1. Target specific improvement projects

Project likely medical and cost improvements

Track to final budgets

Select projects with internal savings

2. Use in contract negotiations

E.g., demonstrate that clinical improvement has produced a

superior total cost compared to competitors, even with a lower fee-

for-service discount

Always looks worse within current budget cycle, but savings

appear in subsequent cycles

3. Partner with purchasers: ‘shared risk’ contracts


0

10000

20000

30000

40000

Identifying

Profitable Service Lines

Source: HealthLeaders, March 2003.

Cardio/VascularThoracic Surgery Orthopedics General Surgery

Complications Tot

Pats Tot Pay Avg

Tot Cost Avg

Tot Profit Avg

Tot Pats

Tot Pay Avg

Tot Cost Avg

Tot Profit Avg

Tot Pats

Tot Pay Avg

Tot Cost Avg

Tot Profit Avg

None

838 13732 30505 3227 925 5688 6702 -1014 842 8473 9410 -937

Single CoC 350 16672 16585 87 152 7100 9728 -2628 346 13608 36293 -2685

Multiple CoCs 180 17649 27080 -9431 80 8296 12530 -4234 335 23910 36270 -12360

Grand Total 1368 14999 14241 758 1157 6054 7503 -1449 1523 13035 16882 -3847

Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost AvgTot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg

None

Single CoC

Multiple CoCs

None

Single CoC

Multiple CoCs

Cardio/Vascular/Thoracic Surgery Orthopedics General SurgeryCardio/Vascular/Thoracic Surgery Orthopedics General Surgery

Merit Based Payment Incentive (MIPS)

Replaces SGR

Consolidates Physician Quality reporting System (PQRS), Value Based

Modifier ( VBM )and Meaningful use payments for EMR under one program

effective 2019

Medicare payment increases are limited to 5% increase in 2015 to 2019 then

all Medicare rates are frozen until 2025.

Quality measures will expand as will reporting requirements at the practice

level and professionals not making improvements in quality could receive

negative or zero increases

To be exempt from the freeze physician are encouraged to participate in

Alternative Payment Models( APM) . These include Medicare Advantage (

MA) and Accountable Care Organizations (ACO) whose payment from CMS

will not be frozen.

CMS has announce that 80% of all Medicare payments will be done under

APM by 2019. This includes bundled payments, Capitation and similar global

payment models .

New organizational arrangements now

emerging

Traditional physician/insurer relationships changing and physicians create their own database and use it to negotiate fees and feedback as clinically integrated groups.

IPAs evolving to new MSO arrangements directly contracting with larger employers and in some cases directly contracting with Medicare for larger amounts of the premium creating physcisn managed savings pools and potential for additional shared overhead.

Employers and providers co venturing to develop better understanding of GOOD benchmarks and fostering better communications with consumers and third parties.

All of this requires new technology and data-measurement tools that were not available 3 years ago.

Organization Variations

In 2015 Health Care

Mass Customization/Lifestyle management

Insurance and banking alliances manage assets of consumer health funds,

credit cards, consumer loans and lines of credit can include physician practice

working capital and equipment financing bringing consumer and physicians

closer through debt management and prospective budgeting.

“This financing the product” is not new, the product is!!.

The Dell Mass Customization approach where a consumer index based upon

health risk and needs, customizes bundles of products and services across the

spectrum of services and builds a total solution based on you and your family’s

needs and benefits plan, income and cost of care

Not there yet but Aetna and Cigna are working it


In 2015 Health Care

Physician sponsored/brokered health plans

Community based plans are remerge in order to create differentiation in a crowded market

By taking best of class services from area communities and linking them together with low cost, more efficient health plans, on line selection technology, integrated transaction services and links with ancillary services to compete with the big boys

In some cases these are provider based, and in some cases, employers begin to drive the transformation armed with infomatics and specialized tools to build high performance tiered networks by sharing transparency of price and quality with patients.

Employers ARE willing to support a local plan/network as a means to keep price competition between providers in motion. This becomes a critical element to cost control.

This also means the single carrier theory is dead.


In 2015 Health Care

Benchmarking Consortiums,

Integration of health plan like standards, clinical information, drug benefits, reimbursement, geographic databases and similar source data and combines the offering with data analysis tools and services to support outcome studies and training of medical staff to improve outcomes against regional and national standards

Links together exchange networks of best providers for employers and consumers to select from based upon outcomes and cost.

Moves care management to the life sciences industry grouping and away from insurance

Integrates health, DM, Case Management ,Disability and Workers Comp, wellness, behavioral health, End of Life issues into a dashboard that models and measures changes.

Employers Now See The Single Carrier

Theory Is Flawed

Employers have discovered by offering a single carrier managed care insurance program, that there is no competitive tension to lower pricing or innovate new programs to improve quality outcomes as there is when you offer several HMOs

Employers are now looking for local options to keep costs in check against the big guys, but with no local options they are offering high deductibles with discount networks as a quick fix.

Brokers are being replaced by data companies. Some of these new generation data companies are owned by physicians who are buying a franchise from a data company that acts as the independent and objective performance data measurement source.

This next step evolution IPAs and MSOs creates an answer to harvesting savings and reward as well as meeting federal integration guidelines

Employer

PhysiciansJVCO Hospital

New Structure of Community- based

Benchmarking Consortium/ Health Plan

Pendulum Health Care Structured

arrangement as an service bureau for

several community based enterprises

GoldStar

Alliance for

Health

Local Accountable

Care Organization

Local Integrated Delivery System

Local Community

Based Health Plan

Pendulum Health Care

Development Corporation

Services

Formulates provider network

Provider sponsored entity joins Goldstar Alliance for health LLC

Agrees to specific conditions and commitments to be a member

Selects specific services Pendulum can provide through GoldStar

Administrative Services

Staffing

Assistance in capital formation

Information technology

ACO or HMO licensure

Clinical decision support

Summary

Large employers and regional health plans are in a hurry to manage benchmarks not just benefits

Building benchmarks creates new interest in the minds of buyers to tier providers and design benefits to incent use of top providers

The governments pay for performance demo projects , new payment formulas under Merit-based Incentive Payment System MIPS and risk adjusters is a driving force that is not going away

These changes create new opportunities for providers to collaborate and harvest savings through performance arrangements

Technology is changing in favor of supporting these more sophisticated models of care improvement and reimbursement improvement.

Documents

Production & Inventory Management - Pendulum Health€¦ · clients to research, design, build and manage customized care models including clinically integrated networks, bundled