Building a Fiscally Healthy VAD Program: Ensuring Financial Success

and GrowthPavan Atluri, M.D

Assistant Professor of SurgeryDirector, Mechanical Circulatory Support

and Heart TransplantationDirector, Minimally Invasive and Robotic

Cardiac Surgery Program

Division of Cardiovascular SurgeryDepartment of Surgery

University of Pennsylvania

9th Annual INTERMACS MeetingSaturday, May 16th, 2015

Navigating Hospital Administrators

• Growth is a factor of financials• Strong financials = more support• VAD therapy is expensive…..but, can be

profitable• VAD programs are profitable only if quality is

excellent – Limited complications

– Limited LOS

Review of profitability measurement at UPHS

PAYMENT BASICSCMS Centers for Medicare & Medicaid Services

Medicare payment basics

$ Medicare payment

Hospital base determined by several factors

$ Hospital-specific base rate

Indirect medical education

Disproportionate share

Regional wage rate adjustment

others

Determined by CMSx MS-DRG weight

As a result:

• HUP rates are 61% higher

• PPMC rates are 38% higher

• Medicare payments are 17% higher at HUP than PPMC for the same procedure.

HUP - #8

PPMC - #185

University of Michigan - #24

New York-Presbyterian - #86

Massachusetts General - #97

Mayo St Mary - #150

Northwestern Memorial - #187

Medicare MS-DRG Payments Vary by Institution

FY 2013 CMS Median Payment for MS-DRG 1 ≈ $202,000High cost cases may qualify for outlier payments

Medicare pays hospitals by MS-DRG

Typical MCS MS-DRGs

1 2 3 215

ECMO Replace or repair component of implantable VAD

Trach Implant BIVAD external

Vent 96+ w O.R. procedure

Insert temporary non-implantable extracorporeal circulatory device

with MCC wo MCCImplant single ventricular (extracorporeal) external heart assist system

Repair heart assist system

Heart or Heart/Lung Transplant

Implant total heart or internal VAD

Remove and replace/repair external VAD

MS-DRG 1 (higher payment) versus 2 depends on presence of at least

one MAJOR co-morbidity

Capturing MCCs critical to financial success• MS-DRG 1 (higher payment) or MS-DRG 2 (lower payment)?

– depends on presence of at least one “Major Complication and/or Co-morbidity” (MCC)

• MCCs– Medicare-defined list– Changes every year– Must be SECONDARY to primary dx

• A co-morbid condition

• NOT an exacerbation of the primary dx

– Usually describes an acute manifestation of disease rather than chronic disease states

Best Practice: Create a process to review all MS-DRG 2 assignments prior to claim submission

What are the common VAD MCCs?

* These diagnosis codes are on the MCC list, but are not considered MCCs when the primary diagnosis is heart failure.

Source: FY 2013 IPPS final rule MedPAR file (contains all hospital inpatient claims for Medicare beneficiaries from FY 2011)

Code Description N% of

Claims785.51 Cardiogenic shock 654 16.6%428.23 Acute on chronic systolic heart failure 574 14.5%518.81 Acute respiratory failure 327 8.3%584.5 Acute kidney failure with lesion of tubular necrosis 241 6.1%570 Acute and subacute necrosis of liver 170 4.3%

428.43 Acute on chronic combined systolic and diastolic heart failure 157 4.0%038.9 Unspecified septicemia 142 3.6%995.92 Severe sepsis 136 3.4%486 Pneumonia, organism unspecified 128 3.2%427.41 Ventricular fibrillation 107 2.7%785.52 Septic shock 86 2.2%348.30 Encephalopathy, unspecified 71 1.8%995.91 Sepsis 66 1.7%056.01 Encephalomyelitis due to rubella 57 1.4%262 Other severe protein-calorie malnutrition 54 1.4%507.0 Pneumonitis due to inhalation of food or vomitus 53 1.3%427.5 Cardiac arrest 50 1.3%

Courtesy of Thoratec

Medical records defines cardiogenic shock

as: inotrope dependence

OR Cardiac index > 2.2

*

*

MCC examplesPrimary Dx Secondary Dx

Acute on chronic heart failure

Cardiogenic shockMS-DRG 1:Cardiogenic shock qualifies as a secondary & major co-morbid condition

Primary Dx Secondary Dx

Chronic Systolic HF Acute on chronic heart failure

MS-DRG 2:Acute heart failure is not secondary to chronic HF and does not qualify as a co-morbid condition

Most common MS-DRG 1

Primary Dx Secondary Dx

Chronic Systolic HF Severe Malnutrition NOS

MS-DRG 1:Severe malnutrition qualifies as a secondary & major co-morbid condition

Primary Dx Secondary Dx

Acute on chronic heart failure

Pulmonary collapseMS-DRG 2:Pulmonary collapse is secondary, but not a major co-morbid condition

Primary Dx Secondary Dx

Acute on chronic heart failure

Acute kidney failureMS-DRG 2:Acute kidney failure no longer on the CMS list of major co-morbid conditions

What difference does it make?it pays…

MSDRG Code

60% of MSDRG 1

70% of MSDRG 1

58% of MSDRG 1

Why MSDRG 1 is so important

2013 MedicareBTT and DT Cases only

MSDRG 1 MSDRG 2 DeltaALOS 27.5 20.5 7.0 Avg Payment 196,396 125,606 70,791 Average Direct Cost 166,741 152,293 14,448 Average Contribution 29,655 (26,687) 56,342

Medicare DRG 1 & 2 rates are largley modelled on transplant cases,but most of the VAD case cost is in the device:MSDRG 2 is much less profitable than MSDRG 1$70 thousand dollars for the 7 extra days

Pro Fee Coverage

• Procedural payment-unique operation in that follow–up daily care is billable

• Daily rounds– Day One

– Acute

– Less acute

– Discharge day

• VAD interrogation

2012 MPFS Final Rule RVUs (CY 2012 Addenda) https://www.cms.gov/PhysicianFeeSched/downloads/Addenda.zip

Varies depending on: •LOS•Number & type of procedure(s)•Number of interrogations

PRIVATE PAYORS

Payments vary widely by payor

• Medicare sets their own rates• Managed care and commercial rates are

negotiated– Often include a device pass-through– Occasionally global arrangement for post-

operative care– Can be significantly higher than Medicare

• Balancing the payor mix is an important component of financial success

Negotiate carve out contracts with private payers

• “Carve-out “contracts are one of the keys to making VAD program financially healthy

• “Carve-outs” pay a “better” rate for certain items• Generally, carve outs include:

– All implantable prosthetic devices– All accessories to implantable prosthetics

• Avoid payers bundling VADs into any transplant global package payments

• If not covered under a carve out contract, negotiate rate for outpatient VAD accessories and supplies, or outsource

COSTS

Three primary cost factors

1. Device cost ─ can vary widely• Heartmate II and Heartware $80–90K per kit

• Syncardia 100K

• R-VAD $34K

• ECMO – minimal device cost vs Impella /Tandem

2. Length of Stay ─ varies widely

3. Site of Stay ─ ICU days versus Med/Surg days• SICU days are twice as costly

Daily cost of the five basic phases of VAD care

Post-Op 1SICU

Post-Op 2Med/Surg

Example: Patient GFNote: Implant cost omitted to clarify scale

Pre-Op 1 Cath Lab (optional)

Pre-Op 2CCU or Med/Surg

Implant

Implant day literally “off the charts”

VAD financial profileMedicare MSDRG#1 Heart Transplant/VAD w MCC

Net LossPayment Profitable range of

length of stay

Pre-op

ImplantDay 7

SICUMed/Surg

QUALITY

Quality has a direct impact on financial viability due to decreased LOS, decreased ICU days, fewer drugs, fewer OR returns....

Bleeding during primary admission seems to increase post-operative LOS

Source: Intermacs

Infection during stay increases post-operative LOS

45% had some infection during stay

Keys to Success• Decrease risk through:

– Appropriate patient selection– “Right-time” implant

• Intermacs II – IV rather than I

– Document to achieve appropriate reimbursement• MS-DRG 1 versus 2

– Improve payor mix by outreach and affiliation strategy– Improve quality

• Fewer total days, ICU days, drug, and complications

• Minimize re-hospitalizations for HF, GI bleeding, thrombosis

• Minimize pump exchanges