North Carolina Community Health Center Association
March 2, 2011
Michael Holton, [email protected]
Impact of Health Reform on Health Center Finance
Overview
Health Reform and Opportunities for CHCs
Health Care Delivery System Reform and Roles for CHCs
Current Financial Health Measures of your CHC
Impending Payment Reform and How to Succeed
Are you Prepared for 2014?
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Overview - Federal Health Reform
Expansion of Primary Care Access:
New Funding for Community Health Centers - $11B over 5 years (dedicated funding), over and above the current annual funding level of $2.2B- $9.5B for CHC operations
• FY 2011 = $1B• FY 2012 = $1.2B• FY 2013 = $1.5B• FY 2014 = $2.2B• FY 2015 = $3.6B
- $1.5B for capital over 5 years
Current FY 2011 funding opportunities- New Access Points
- Expanded Medical Capacity
- Others ???
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Overview - Federal Health Reform
CHC Workforce Opportunities: New Funding for NHSC - $1.5B over 5 years (also dedicated funding), over
and above the current annual funding level of $142M New Funding for Community-Based Residency Training – Provides funding
for the establishment of freestanding “Teaching Health Centers”- Term of not more than 3 years and the maximum award may not be more than $500,000
- May be used for curriculum development; recruitment, training and retention of residents and faculty; accreditation by recognized bodies (ACGME, ADA, AOA); and faculty salaries during the development phase
- Annual appropriation - $25M for FY 2010; $50M for FY 2011 and 2012
Payments for Graduate Medical Education Expenses to “Teaching Health Centers”- Direct GME will be based on an updated national per resident FTE amount
- Indirect GME will be based on indirect training costs capped per regulation
- Aggregate appropriation of $230M for FY 2011 through FY 2015
Additional demonstration grants for Family Nurse Practitioner training programs
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Overview - Federal Health Reform
Delivery System Reform:
Participation in Medicaid and Medicare demonstration programs
- Patient-Centered Medical Home (PCMH)- Accountable Care Organizations (ACOs)- Bundled payment pilot programs
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Delivery System Reform
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Medicare Medical Home Demonstration Program for FQHCs
– Three-year demonstration, to be launched in January 2011, to evaluate the impact of the advanced primary care practice model on access, quality and cost of care to Medicare beneficiaries
– FQHCs must demonstrate that their clinic sites have the capacity to deliver continuous and coordinated care across providers and settings, including improving access to care by expanding service hours, facilitating referrals and managing medications prescribed by different physicians
– Demo sites will receive a monthly care management fee for each Medicare FFS beneficiary enrolled
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State Option for Medicaid Patients with Chronic Conditions
– Applies to patients with”:
• Two chronic conditions
• One chronic condition and risk of developing another
• At least one Serious and Persistent Mental Illness (SPMI)
– Patient picks a provider or provider team as their health home
– Health home would be responsible for providing: comprehensive care management, care coordination and health promotion, comprehensive transitional care, patient & family support, referral to community and social support services. The health home is expected to use information technology to link services where appropriate.
– State develops payment mechanism, feds match 90% for first 2 years
– CMS can also fund planning grants to the states
Delivery System Reform
Delivery System Reform
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Medicare ACO Demonstration Program
– No later than January 1, 2012, the HHS Secretary must establish a shared savings program specifically relating to Accountable Care Organizations (ACOs)
– ACO is defined as an organization of health care providers that agrees to be accountable for the quality, cost and overall care of assigned Medicare beneficiaries who are enrolled in the traditional fee-for-service program
– ACO participation requirements include:• Formal legal structure and common governance to receive and distribute shared
savings• Sufficient number of primary care physicians for a minimum of 5,000 patients
– Upon satisfaction of quality standards, eligible to receive a percentage (determined by HHS Secretary) of any savings
Payment Reform – Bundling (potentially part ofACO model)
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Primary Care
Physicians
Primary Care
Physicians
Specialty Care
Physicians
Specialty Care
Physicians
Outpatient Hospital Care and
ASCs
Outpatient Hospital Care and
ASCs
Inpatient Hospital
Acute Care
Inpatient Hospital
Acute Care
Long Term Acute
Hospital Care
Long Term Acute
Hospital Care
Inpatient Rehab
Hospital Care
Inpatient Rehab
Hospital Care
Skilled Nursing Facility
Care
Skilled Nursing Facility
Care
Home Health Care
Home Health Care
Post Acute Care Episode BundlingPost Acute Care Episode Bundling
Acute Care Episode with PAC BundlingAcute Care Episode with PAC Bundling
Acute Care BundlingAcute Care Bundling
Medical HomeMedical Home
Overview - Federal Health Reform
FQHC Coverage/Reimbursement Reform: Health Insurance Exchanges (FY 2014):
- Exchange insurers must include all 340B eligible providers in network, including FQHCs
- Exchange insurers must pay FQHCs their FQHC PPS payment rate
Medicare – New, Modified Medicare PPS for FQHCs (eff. October 14, 2014)- Inclusion of Medicare preventive benefits as FQHC services, effective January 1, 2011- The new PPS rate system shall establish payment rates for specific payment codes
on such appropriate description of services, including type, intensity and duration of services, and include geographic variations
- Beginning January 1, 2011, FQHCs to submit such information required to develop and implement new PPS system, including reporting of services using HCPCS codes
- This new PPS system will insure that during the initial year, the estimated aggregate amount of rates paid will equal 100% of reasonable costs without the application of payment caps and productivity screens.
- Subsequent year rates will be trended by a new FQHC market basket factor or the MEI if the FQHC market basket in not available
Medicaid coverage expansion to 133% of FPL (FY 2014)10
Other Major Changes
EHR Incentive Payments (remnant of economic stimulus package) – Meaningful Use
ICD-10
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The Question for 2010 - 2014
HOW DO CHCS TAKE ADVANTAGE OF, RATHER THAN BECOME A VICTIM OF, THESE CHANGES?
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Preparing for 2014
CHCs must first ensure that their current financial position is strong and their operational performance is positive
Health Reform will require CHCs to strengthen internal systems and processes to be successful in this changing world through strategic planning. Planning goals could include:
– Improve clinical documentation and coding – improve CPT coding and implement ICD-10
– Improve practice management system reporting – operational reporting such as cycle time; data quality strategy
– Electronic health record meaningful use and health information exchange
– Improve customer service to prepare for increased competition for patients
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Preparing for 2014
Strategic goals (cont):– Achieve PCMH certification (at least Level 2). Develop
full patient paneling– Fully integrate medical, behavioral health and dental– Develop and implement a real corporate compliance
program– Develop and/or strengthen relationships with other
“strategic” partners, including ACOs– Growth strategy (recruit soon-to-be insured uninsured
patients in 2013?)
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Preparing for 2014 – The “Delicate Balance”
To be successful, CHCs must manage a “delicate balance” of key cash flow and operating measures –
If one of these indicators strays from “the balance”, adverse financial impact may occur if not detected and addressed in a timely manner
In preparing for Health Reform, CHCs must change their mind-set to “drive-change” while at the same time creating a positive bottom-line and building a reserve!
Cash Flow Measures– Days unrestricted cash on hand– Days in accounts receivable– Days in working capital– Days in reserve
Operating Measures– Patient base (patients and visits)– Payor mix– Reimbursement rates and collection %– Subsidies for uncompensated care– Provider productivity– Cost per visit
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Preparing for 2014 – The “Delicate Balance”
The delicate balance is going to be upset by 2014:– Payor mix shift – more Medicaid, less uninsured– Potential drastic reductions in uncompensated care
funding– Change in payment methodology: in the future, more
visits per patient may not be a good thing– Opportunity for growth (or shrinkage)– Increased operating costs: EHR, PCMH, more
compliance, ACO governance/connectivity
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Preparing for 2014 - Financial
Hopefully at this point the CHC has built some level of reserves
Building infrastructure may require investments that eat into reserves
Health centers can more confidently invest reserves when:– The organization is profitable– The organization’s operations are cash flow positive– Not all organizational net assets are tied up in the building
ACOs may also require insurance reserves
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Preparing for 2014 – Financial
Revenue enhancement opportunities– Are we monitoring trends in our patient base, ensuring that patients are
seen when required? What’s the relationship between provider productivity, no-show rates, and third next available appointment?
– Are changes in payor mix being monitored, and internal systems reviewed to ensure that patients are being properly registered?
– Are we effectively managing the components of patient services revenue by payor: are we billing and collecting appropriately, and is revenue real?
– Are we aware of the level of uncompensated care we are providing to the community and do we have the resources to subsidize this cost?
– Do we have a sense of how many of our uninsured patients will become insured in 2014?
– Do we have an opportunity to increase our Medicaid rate through a change of scope (does our state even allow it?)?
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Preparing for 2014 - Financial
Cost containment opportunities
– Are we monitoring provider productivity and staffing ratios versus patient demand?
– Do we have a facilities plan, so that valuable capital can be spent on improving operations, so that we are not stuck in inefficient buildings?
– Do we have a cost-based charge structure and are we comparing it to rates negotiated with insurers or rates included in global payment rate structures?
– Are we preparing departmental profit and loss statements, and evaluating performance versus the mission of the CHC?
– Is your CHC considering the implementation of incentive compensation programs? For providers and/or staff? (may want to consider re-aligning your compensation program with that of a global payment system’s success factors.)
– Cost containment and utilization management on a “per unit of service” basis will be the wave of the future.
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Payment Reform - PCMH
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There are various payment models currently in demonstration across the country reimbursing providers for the PCMH including Enhanced Fee-for-service payment rates, Monthly Per Member Per Month (PMPM) payments, P4P payments, Bonus payments or a combination thereof
Regardless of the payment model, CHCs participating in PCMHs need to understand the “true” cost of operating a PCMH
This cost analysis must include the practice’s service capability (e.g. based on the NCQA PPC-PCMH recognition process)
– Physician and non-physician work that falls outside of a billable visit
– System infrastructure (e.g. health information technologies)
Payment Reform - PCMH
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Basic PCMH Rate Equation:
Basic steps in the construction of a reimbursement rate– Definition of the “covered services”, or the services to be included in the
rate (e.g. PCMH Services)
– Determination of the total cost of “covered services”
– Determination of “billable” units of service (e.g. Member Months)
– Monthly PMPM rate equation:
Monthly PCMH Payment =Total Cost of PCMH
Services
Total Billable Member Months
Payment Reform - PCMH
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Defining PCMH “Covered Services”:
“Covered Services” identified in the “Joint Principles of the PCMH” for payment are as follows:
– Value of physician/non-physician care management work that falls outside the face-to-face visit
– Coordination of care for both within and outside the practice
– Enhanced communication access
– Use of health information technology for quality improvement
– Physician work associated with remote monitoring of clinical data using technology
PCMH payment rates may also take into consideration case mix differences of the patients
Payment Reform - PCMH
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Shift from a visit maximization model to a care coordination model.
– Manage patient utilization, by type of service, on a PMPY basis
Still need to manage provider productivity levels, but new focus will be to manage a patient panel. It is good for patients, the community, and the health center’s mission if instead of churning existing patients, the CHC is able to care for more patients through panel management.
Need to expand the cost per unit systems we have in place:
– Use of a cost-based charge structure
– Managing cost on a PMPY basis
Payment Reform – Global Payments & ACOs
Global payments prospectively compensate providers for all or most of the care that their patients require over a contract period, usually estimated from past cost experience and an actuarial assessment of future risk
Providers are at ‘financial risk” for their clinical performance and coordination of care (“performance risk”) for patient-level health care for a specified period of time
“Insurance risk” (the occurrence of health problems over which providers do not have control) ) to be covered through –
– Risk-adjustments to global payments to reflect the underlying health conditions of patients
– Carriers might also develop stop-loss or risk corridor arrangements with providers
In the global payment environment, CHCs will need to manage the budget for health care services for which they have assumed the responsibility and are “at-risk”
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Keys to Success in Global and PCMH Payments
Must completely understand the “inputs” into the construction of the rates, by first understanding “covered services:
– Global payments – primary care services, PCMH services, specialty services, administration/health information technology, other ?
– PCMH payments – care management services, additional clinical staff, health information technology
Then must understand the cost drivers for these services:– Global payments – utilization monitoring, cost per unit management– PCMH payments – drivers of care coordination services, cost per unit management
Design management reporting capabilities to manage utilization and costs as financial success will be managed by patient utilization management and improved cost efficiencies
Health information technology will be critical to success in this new environment!
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Contact Information
www.mcgladrey.com
Michael Holton
Manager
919-571-3266
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