A Peak Into the Future Healthcare Systems & Hospitals by Steven Lash

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A Peak Into the FutureHealthcare Systems
Hospitals

• August, 2016

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Need to Know Where the Puck is Going
3
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

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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

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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

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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?

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Physicians will Follow the Money
Merit-based Incentive Payments (MIPs)
Alternative Payment Models (APMs)
Bonuses may be higher
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Performance Category Weights for MI PS
COST 10 CLINICAL PRACTICE IMPROVEMENT
ACTIVITIES 15 (
Quality 50
ADVANCING CARE INFORMATION 25
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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

2024
2025
2020
2021
2023
2019
2017
2018
2022
I
I
I
50
75
25
10
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)

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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

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Putting it all together
Fee Schedule
Max Adjustment (/-)
MIPS
5 bonus (excluded from MIPS)
Advanced APMs
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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