OSI Proprietary and Confidential Information Comparative Reimbursement Analysis and Contract...

OSI Proprietary and Confidential Information

Comparative Reimbursement Analysis and Contract Optimization

MCDA

Prepared forTampa General Hospital

Tampa, FLJuly 26, 2000

Managed Care Decomposition Analysis


Goal of MCDA: To clearly define and quantify the MCO expected reimbursement process in terms of patient characteristics (master attributes) and related expected reimbursement (reimbursement attributes) so that potential contract modifications can be revealed.

Result: Increased net income

Introduction



Clinical Product Lines Marketing Product Lines

Hospital Patient PopulationCharge Master

MCO Contract Master

Predicted Managed CareProduct Lines (MCPL’s)

MCO Contract Accepted (Payor Specific)

Shift to ManagedCare

MCO brings in New Patientsand Proposed Contract

Inherent MCPL’s

Market Space


MCO ContractMaster

Patient Characteristics Reimbursement Characteristics

What are the MCPL’s definedby the contracts?

How are the MCPL’s reimbursed?

A patient or patient group can havemore than one characteristic.

A patient or patient group can havemore than one reimbursement possibility

based on characteristics.

How Contracts Are Interrelated


The Three Theoretical Stages of MCO Management

Stage 1: Contract Negotiation

Stage 2: Contract Monitoring

Stage 3: Contract Optimization


Stage 1: Contract Negotiation

Predicted Patients

Offered Contract Rules

Predicted Reimbursement


Stage 2: Contract Monitoring

Actual Patients

Contract Rules

Expected Reimbursement


Actual Patients

AlternativeCharacterization

Possible Net Revenue

OSI MCDA

AlternativeReimbursement

and/or

Impacts

MCO Contract Modifications

OSI evaluates the Financial impact, both

gross and net, of all findings.

Stage 3: Contract Optimization


What is the OSI “MCO Contract Master”?

Hospital’s Contract Management System

OSI extracts and standardizes MCO contract specifications

MCO ContractMaster

Patient CharacteristicsManaged Care Product Lines or MCPL’s Reimbursement Characteristics

•DRG•UB-92 REV Code•CPT-4 Code•ICD-9-CM Code•Covered Charges•APC’s•Age/Sex

•Percent of Charges•Per Diem•Time Sensitive Per Diem•Discharge Amount•Line Item Amount

What?Howmuch?

Managed Care Decomposition Analysis MCDA


Reimbursement Characteristics

Actual Patients

Contract Rules

ExpectedReimbursement

MCO ContractMaster

Master Attributes Reimbursement Attributes

Managed Care Product Lines

MCDA Data Base

Patient Characteristics

What is being purchased? How is it being purchased?



Contract 1 Contract 2 Contract 3 Contract n

Hospital Contract Management System

MCO Contract MasterMCDA

Patient Master Attributes Patient Reimbursement AttributesProcess:

1. Standardize the hospital’s MCO contracts to allow for modeling and future comparative analysis2. Reveal alternative reimbursement scenarios that, if implemented, would increase net income3. Reveal alternative patient characterizations that, if implemented, would increase net income4. Quantify all alternative scenarios in terms of net income



Actual Patients

AlternativeCharacterization

Possible Net Revenue

OSI MCDA

AlternativeReimbursement

and/or

Impacts

MCO Contract Modifications

OSI evaluates the Financial impact, both

gross and net, of all findings.

Managed Care Decomposition Analysis Contract Optimization


25th$800

35th$1040

Median$1250

75th$1400

90th$1550

Hospital Starting Reimbursement per Day

$20,000 $32,000

Starting Classification: DRG 370-375, PerDiem=$1040, 500 Cases

Example: Aetna Open Choice

Change in Net Income

Net Income is enhanced by

increasing PerDiem rate to the 50th or

75th Percentile

Normal Distribution for allPayor’s per diem rates for DRG 370-375

Simulations within same payment type across payors

Percentile


Starting Classification: DRG 370-375, PerDiem=$1040, 500 Cases

Simulations within differing payment types across payors

Case Rate Charges

Starting Reimbursement = $2200 per case (Avg.)

35th 42nd 30th

Per Diem

Simulate each different Payment type at the Median for 500 caseswith the same classification, DRG 370-375


$20,000 $15,000 $35,800

Example, Cont.


Simulations involving re-classification to new Master AttributeExample, Cont.

Starting Classification: DRG 370-375, PerDiem = $1040, 500 Cases

190 CasesDRG 370-371

310 CasesDRG 372-375

New Master Attribute

Per Diem

28th

85 Cases of 370@ 1230 per day105 Cases of 371@ 1145 per day

Case Rate

190 Cases of 370-371 @ 3000 per case Median310 Cases @ 2000

25th32nd

Case Rate

60th Percentile310 Cases @ 2130

$49,500

$38,988


Simple DRG un-bundling


Aetna Open Choice pays $1040 per day for DRG 370-375, 500 Cases

Old ContractStep 6- If DRG 370-375, Per Diem=1040.00

New ContractStep 6- If DRG 370, Per Diem=1230.00Step 7- If DRG 371, Per Diem=1145.00Step 8- If DRG 372-375, Case Rate= 2130.00

MCDAContract

Optimization

MCDA Alternative 1

Unbundle DRGs and Pay Case RatesDRG 370-371 @ $3000 Per CaseDRG 372-375 @ $2000 Per Case CHANGE IN NET=$38,988*Supported by attributes in Lifeguard HMO

MCDA Alternative 2

Unbundle DRGs and Pay Per Diems and Case RatesDRG 370 @ $1230 Per DayDRG 371 @ $1145 Per DayDRG 372-375 @ $2130 Per Case CHANGE IN NET=$49,500*Supported by attributes in Blue Shield HMO, Cigna HMO, and One Health PPO

CHANGE IN NET=$49,500

Example, Cont.Final Simulation Results Simple DRG un-bundling


MCO Contract Master: Optimization ExampleMCDAOPTIMIZATION OF CONTRACTS

By pulling all patients with a 72 group (obstetrical/neonatal), we will be able to see how the reimbursements will change by changing the defining attribute on the contract.

Contract NumberCurrent Contract

Preferred Index

From Contract

1 500 patients with ICD-9 72.00 also have DRG 387 with LOS>2 0.25 0.45 Contract 32 300 patient with ICD-9 72.01 also have Rev Code 173 0.21 0.47 Contract 13 250 patients with DRG 375 also have ICD-9 72.03 0.31 0.49 Contract 4

REIMBURSEMENTOSI Code Standard Master Attribute Contract 1 Contract 2 Contract 3 Contract 4 Contract 5 METHOD ROLLUP

00000000072000000001 DRG 370-389 0.29 0.33 PerDiem00000000072000000002 DRG 370-389 Charges00000000072000000003 DRG 370-389 0.39 CaseRate00000000072000000004 DRG 370-389 0.45 TimeSensPerDiem00000000072000000005 DRG 370-389 w/ ICD-9 72.00 PerDiem00000000072000000006 DRG 370-389 w/ Rev Code 172 0.23 0.34 PerDiem00000000072000000007 DRG 387-391 PerDiem00000000072000000008 DRG 374-377 w/ Rev Code 172 0.25 0.37 TimeSensPerDiem00000000072000000009 DRG 389-391 PerDiem00000000072000000010 DRG 389-391 w/ Rev Code 172 0.27 0.35 PerDiem00000000072000000011 DRG 390 PerDiem00000000072000000012 DRG 390 w/ Rev Code 172 0.21 0.32 PerDiem00000000072000000013 DRG 370-391 PerDiem00000000072000000014 DRG 370-391 w/ Rev Code 171 PerDiem00000000072000000015 DRG 370-375 0.34 0.41 CaseRate00000000072000000016 DRG 371-375 0.47 0.43 TimeSensPerDiem00000000072000000017 DRG 370-372 0.42 0.38 PerDiem00000000072000000018 DRG 373-380 0.48 0.37 TimeSensPerDiem00000000072000000019 DRG 374-375 0.31 0.45 PerDiem00000000072000000020 DRG 373-375 0.25 PerDiem00000000072000000021 REV 173 0.29 LineItemAmt00000000072000000022 ICD-9 72.00-73.00 w/ Rev Code 0.21 PerDiem00000000072000000023 ICD-9 73.01-74.99 w/ Rev Code 0.29 PerDiem00000000072000000024 ICD-9 72.00-73.00 0.25 CaseRate00000000072000000025 ICD-9 73.01-74.99 0.29 CaseRate00000000072000000026 ICD-9 72.00-73.00 with Rev code 171 0.33 CaseRate00000000072000000027 ICD-9 72.00-73.00 with Rev code 172 0.38 CaseRate00000000072000000028 ICD-9 72.00-73.00 with Rev code 173 0.49 CaseRate

INDEXES


Cigna HMO pays $1155 per day for ICD-9 72.01, 300 Cases

Old ContractStep 8- If ICD-9 72.01, Per Diem=1155

New Contract

Step10-If REV 173, Line=975.00

MCDAContract

Optimization

Managed Care Decomposition

MCDA Optimum Alternative

Pay 300 Cases Based on Rev Code 173 and Line Item AmountREV 173 @ $975 Per Line Item CHANGE IN NET=$12,620*Supported by attributes in Blue Shield HMO

CHANGE IN NET=$12,620

Final Simulation Results Complete Attribute Optimization

DRG Attributes REV Attributes

Per DiemAlternatives

Case RateAlternatives

Case RateAlternatives

Line ItemAlternatives

Per Diem Line Item Case RateCase Rate

Optimization Example, Cont.

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