Post on 23-Jun-2020
1© 2018. All Rights Reserved.
www.openminds.com15 Lincoln Square, Gettysburg, Pennsylvania 17325
Phone: 717-334-1329 - Email: info@openminds.com
#OMInnovation
The 2018 OPEN MINDS Strategy & Innovation InstituteJune 5, 2018 | 2:30 – 3:45 PM
Ken Carr, Senior Associate, OPEN MINDS
Paul Duck, Principal & Consultant, Paul M. Duck, LLC
How To Develop A Case Rate: A Guide To Bundled Payments
2© 2018. All Rights Reserved.
I. Overview of Bundled Rates
II. Examples of Successful Case Rate Contracting Models
III. A Guide To Developing Case Rates - Paul Duck, Principal &
Consultant, Paul M. Duck, LLC
IV. Questions & Discussion
Agenda
Overview Of Bundled Rates
4© 2018. All Rights Reserved.
Emerging Framework For Integrated Care Coordination
Behavioral health system optimization is central to success –
and value-based reimbursement key to that optimization
Managed Care
Programs & Health
Plans
Accountable Care
Organizations
Medical Homes &
Specialty Medical
Homes
Specialized Disease
Management Program
‘At Risk’ For
Population
Health
Management
‘At Risk’ For
Individual
Health
Management
Bundled payments
create payment
flexibility to
implement
integration and
care coordination
5© 2018. All Rights Reserved.
Capitation +
Performance
-Based
Contracting
CapitationShared RiskShared
Savings
Bundled &
Episodic
Payments
Performance
-Based
Contracting
Fee-for-
service
Transition From Volume To Value Payments For Provider Organizations
Compensation By Level Of Financial Risk
No Financial Accountability Moderate Financial Accountability Full Financial Accountability
Passive Involvement Provider Engaged Provider Active In Management Provider Assumes Accountability
Management Via 100% Case By
Case External Review
Internal Ownership Of Performance
Using Internal Data Management
Small % Of Financial Risk Moderate % Of Financial Risk Large % Of Financial Risk
Bundled payments reflect a moderate
level of provider risk and accountability
for outcomes within the contracted
bundled rate.
6© 2018. All Rights Reserved.
How Does A Provider Use Value-Based Reimbursement In Market Positioning?
Case Rates
& Bundled Rates
Medical Homes & Specialty
Medical Homes
Capitation &/Or Population
Health Gainsharing Arrangements
Wit
h V
alu
e-B
ase
d R
eim
bu
rsem
en
t
Co
mp
on
en
ts
Specialist
positioning
Comprehensivist
positioning
7© 2018. All Rights Reserved.
What Is A Bundled Payment?
A single
payment for a
specific
“episode of
care” – for a
specific
treatment, or
services during
a defined
period of time
Bundled Rate – a single
comprehensive payment for a
group of related services
Case Rate – a form of bundled
payment to cover services of a
specific consumer based on the
average cost of all services
Episodic Rate – includes payment
for services for treatment of a
specific condition over time in
one rate
Example:
Comprehensive
ayment for entire
MAT course of
treatment
Example:
Behavioral Health
Home per diem
rate
Example: Monthly
rate for Assertive
Community
Treatment services
8© 2018. All Rights Reserved.
Steps To Develop A Case Rate
1. Define The Service The Payer Wants
2. Build The Components Of The Service
3. Identify The Cost Drivers
4. Tie Cost Drivers To Costs
5. Calculate The Unit Rate
6. Create Productivity Standards
7. Perform Scenario Analysis To Reduce Costs
9© 2018. All Rights Reserved.
Step #1: Define The Service The Payer Wants
Need to understand the service the payer wants to build the cost of the
service, including:
Service definition
Staffing ratio requirements
Credentialing requirements
Authorizations and billing method
Reporting
Collaboration and integration expectation (drive technology)
Marketing
10© 2018. All Rights Reserved.
Step #1: Define The Service The Payer Wants
Service Requirement Impact On Unit CostsStaffing ratio If not defined by the payer, can give flexibility to
the provider in balancing quality and costs.
Credentialing Can give direction to the types of staffing costs
required, with a focus on licensed staff “working at
the highest level of their license”.
Authorizations & Billing Methods Payer requirements for authorizations can drive
additional staffing costs; bundled case rates take
fewer resources to implement than hourly rates.
Reporting Payer defined reporting requirements may take
additional technology resources.
Collaboration & Integration Additional costs will be incurred for HIPAA and
technology to implement collaboration and
integration requirements.
Intake
Marketing Reaching the full market will require marketing
efforts – call center, website, marketing initiatives.
11© 2018. All Rights Reserved.
Step #2: Build The Components Of The Service
Salaries
– Types of positions
– Staffing ratios for each position
– Market rates for each position – need to attract quality candidates
– Fringe benefits and payroll taxes – identify as a percentage of salaries
Position Staff/Client
Ratio
Market
Salary
Benefits
LCSW 50 $60,000 $15,000
Care Coordinator 25 $30,000 $7,500
12© 2018. All Rights Reserved.
Step #2: Build The Components Of The Service
Expenses Tied To Staff
– Mileage reimbursement
– Cell phone reimbursement
– Laptop
– Access to EHR
Expense Driver Unit Cost
Mileage 100 miles per client per month $.55
Cell Phone Per month $60
Laptop Cost allocated over 36 months $1,200
EHR Fee per staff member per month $25
13© 2018. All Rights Reserved.
Step #2: Build The Components Of The Service
Other Expenses
– Supplies
– Office space
– Program support – direct or as a percentage of direct costs
– Management & general expenses
When building a new program, be careful not to build in excessive
infrastructure costs
– Fully-loaded costs
– Marginal costs
14© 2018. All Rights Reserved.
Step #3: Identify The Cost Drivers
Driver Jan Feb Mar Apr
Clients 50 75 100 125
LCSW 1 2 2 3
Care
Coordinator
2 3 4 5
Mileage 5000 7,500 10,000 12,500
Cell 3 5 6 8
15© 2018. All Rights Reserved.
Step #4: Tie Cost Drivers to Costs
Tie drivers to costs
– Identify the number of clients to be served each month
Separate by start-up/buildup period, and fully implemented timeframes
– Tie staff FTEs needed to clients served
– Build costs based on staff FTEs needed
Fringe - % of staff
Working space – based on number of staff needed at maximum number of clients served
Oher expenses – tied primarily to staffing
– Identify types of expenses
Variable expenses
Fixed expenses
16© 2018. All Rights Reserved.
Step #4: Tie Cost Drivers To Costs
Driver Jan Feb Mar Apr
Clients 50 75 100 125
LCSW $60,000 $120,000 $120,000 $180,000
Care
Coordinator
$60,000 $90,000 $120,000 $150,000
Mileage $2,500 $3,750 $5,000 $7,500
Cell $180 $300 $360 $480
17© 2018. All Rights Reserved.
Step #5: Calculate The Unit Rate
What is the basis of the unit rate?
– Clients served per month – Per Member Per Month
– Hours by CPT code
– Bundled or Episodic rate based on time period (day, month)
Description Start-Up Period
(Average Per Month)
Fully Implemented
(Average $ Per Month
Costs $50,000 $75,000
Clients 500 1,000
Cost Per Member Per
Month
$100 $75
18© 2018. All Rights Reserved.
Step #6: Create Productivity Standards
Create Productivity Standards
– Benchmark to other organizations
– Benchmark to best practices
– Model productivity relationship to revenue
19© 2018. All Rights Reserved.
Step #7: Perform Scenario Analysis To Reduce Costs
Identify the least amount of activity for the expected level of quality
Assess the impact of differing staffing levels and client service ratios
Identify efficiencies with other expenses
– Just In Time staffing
– Route planning technology for community visits
Identify excess productivity at specific client service/client ratios levels –
especially during the start-up phase of a new service
Paul M. Duck, LLC
Paul Duck, Principal & Consultant, Paul M. Duck, LLC
How To Develop A Case Rate:
A Guide To Bundled Payments
My Goals:1. Provide an overview of the new payment
models
2. Define and explain case rates
3. Talk about case rate rate setting
4. Discuss things to consider when managing
under a case rate
5. Talk about a couple of case studies with
care rates
6. Talk about the risks under case rates and
new payment models
In an era of rapid
change, do you ever
feel like …
this guy…?
Payment Models
Overtreatment Under-treatment
INCENTIVE-BASED TREATMENT RISK
CO
MP
LE
XIT
Y
VALUE-BASED PURCHASING OPTIONS
Behavioral Health Capitation
• Risk for providers
• Full behavioral health payment
• Defined coverage set
Fee-for-service• One service
• One payment
Case Rate• Group of services
• Combined payment
• Monthly/weekly payment
Episode Bundle• Group of services
• Combined payment
• Quality goals
• Defined time period
Total Health Outcomes
• Shared risk on total member experience
Pay for Performance (P4P)• “Upside only”
• Key process measures
Case Rate Defined
Definition: A Case Rate represents a predetermined amount of money
paid to a provider organization to cover the average costs of all
services needed to achieve a successful outcome for a given defined
episode of care for an individual over an agreed upon time period.
Example: An orthodontist charges $5,000 for Phase 1 care
Goal: Aligned teeth
Treatment: Spacers, braces and retainers
Length: 1 to 3 years (depending on the patient’s compliance
with treatment)
Cost: Based on the average length of care and type of
treatment
Example: 100 patients will require 1 year of care
100 patients will require 2 years of care
100 patients will require 3 years of care
What Case Rates are NOT
Case Rates are NOT a fixed budget for an
individual consumer.
Case Rates are an AVERAGE payment for all of
the consumers to be served at a given level of
care.
By definition, some individuals will require MORE care
at a given Case Rate Level and some will require
LESS care in order to achieve the intended outcomes.
Case Rates are meant to provide flexibility to the
provider and consumer, not lock them into a rigid
box.
Examples
Example: A substance abuse agency is paid $3,500 per
person for six months to provide recovery services for
people stepping down from an inpatient treatment center.
Expected short-term outcomes: Sustained sobriety,
improved coping skills, no emergency room services
Expected long term outcomes: Zero recidivism
What is the payer strategy and
motivation? Fee for service billing is difficult to manage
and financially sustain
For payers like Medicaid, there is a set
amount of money budgeted, and a set
number of people to cover
Case rate math:
Total amount of spending
Total # of covered lives
Average cost per
case=
Case Rates Versus Fee for Service
Fee for Service
Payment for services
regardless of outcomes
Fixed reimbursement by
payer
The most units – the
higher the payment
No financial incentive to
provide good outcomes
Service array restricted
by payer
Case Rates
Payment is the same no
matter how many
services are rendered
Service array is flexible
Services can be
adjusted to better met
the needs of the patient
If a provider can achieve
outcomes with fewer or
less expensive services,
provider profits
Understanding Rate Setting
Key Questions:
What is the defined population being served?
How much of the population will you serve?
How much reimbursement are you currently
receiving by client?
What outcomes are you measuring?
What service array are leading to good
outcomes?
Checklist for Setting Case Rates
1. Define the Population
2. Estimate the Penetration Rate
3. Define the Categories of Care/Episode Types
4. Estimate the Case Mix
5. Estimate the Utilization at Each Level of Care
6. Estimate the Cost per Unit of Service
7. Run the Calculations and Set the Case Rates
8. Identify the Performance Metrics
How to Manage Under Case Rates
Part A: Clinical Design
Part B: Clinical-Financial Modeling
Part C: Implementation and Ongoing
Operations
Part A: Clinical Design
Step A1: Assessment and Level of Care
Design
Step A2: Evidence-based and Promising
Practices Research
Step A3: Clinical Intervention Design
Step A4: Utilization Management Guidelines
Step A5: Outcome-based Care Model Design
Step A6: Training and Coaching Program
Part B: Clinical-Financial Modeling
Step B1: Clinical-Financial Model Development
Consumers and Consumer Mix
Service Hours
Caseload Sizes
Full Time Equivalents
Staffing Costs
Overhead Costs
Projected Revenue
Capacity/Demand and Revenue/Expense Dashboard
Part B: Clinical-Financial Modeling
(Continued) Step B2: Clinical-Financial Modeling
Step B3: Clinical-Financial Tracking System
Design
Part C: Implementation and Ongoing
Operations Systems will need to be developed
Training
Coaching
Change management process
Utilize a continuous quality improvement framework
Use Rapid Cycle Improvement methods
Stay flexible
Use of analytics CRITICAL SUCCESS FACTOR
Two Case Studies
Two case rates developed for two geographies for similar treatments
In both cases, there was massive over utilization for treatment of
SUD in step-down program
In both cases, the payer and provider (both were single providers
covering very large geographies) came together and negotiated a
case rate.
The provider knew they could reduce utilization and the payer
wanted to get rid of the financial burden.
Under the case rate model, the providers simply increased the
number of patients, reduced the services and got the same marginal
outcomes.
The payers ended canceling the contract in both cases.
The moral of the story – if someone is trying to cheat the
system, moving to a case rate does not solve it!
Real-life Assessment: Provider confidence in taking on financial risk is
notably low
Data quality, balance sheet, systems, population size, geography, lack of control
Provider’s may be overly conservative, but conservative is better than the alternative
Helpful distinction between “insurance risk” and “performance risk”
Higher confidence around performance risk on things you know how to do
Be realistic about the trade-offs between risk and administrative flexibility or
simplification
A deal predicated mostly on “performance risk” is less likely to yield administrative
simplification than a deal predicated on “financial risk”
Sets up a natural partnership opportunity between MBHOs and CMHCs
On Payment Model Shifts
life = risk
#leadershipmatters
Paul M. Duck | paul@paulduck.com | www.paulmduck.com
@paulmduck
paulmduck
@paulduck
paulduck
www.openminds.com 15 Lincoln Square, Gettysburg, Pennsylvania 17325 717-334-1329 info@openminds.com
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