Rural Health Innovation: Pennsylvania Global Budget

November 8, 2018Brock Slabach, MPH, FACHESr. Vice-PresidentNational Rural Health AssociationLeawood, KS

Innovation Imperative:Global Budget Program

• History of Rural Health• Market Realities• Chronic Disease• Alternative Payment Models/VBP• Population Health

• Social Determinants of Health

• Alignment Imperative• Global Budget Details

A History (short) of Rural Health

• War on Poverty in the 60’s• Community Health Centers, created in the War on Poverty• Rural Health Clinics –38 Years Old (1978), 4,100 nationwide• Result of PPS 1983: 440 hospital closures• Policy Response 1992-2003:

– State Office of Rural Health (SORH– Medicare Dependent Hospitals (MDH)– Critical Access Hospital (CAH) 1997– Medicare Rural Flexibility Program (1997)– Low-Volume Hospital (LVH) Adjustment (2003 and 2010)

• Patient Protection and Affordable Care Act (ACA) 2010• Medicare Access and Chip Reauthorization Act (MACRA) 2015

Rural Innovation History• Montana Medical Assistance Facilities (MT-MAF)• Essential Access Community Hospital (EACH)/Rural Primary

Care Hospital (PeaCH)• “Declining hospital utilization has created excess hospital capacity in rural

areas, has depressed occupancy rates, and threatens the financial viability of rural hospitals.” J Rural Health, Fall, 1991

• Both HCFA Demos precursor to Critical Access Hospital (CAH) in BBA 1997, essential to this sweeping legislation

• Frontier Extended Stay Clinic (FESC), 2010-2013• Frontier Community Health Integration Project (FCHIP), 2016-

2019• Rural Community Hospital Demonstration Program (REACH)

Common Denominator• All are volume-based, fee for service models• With variant payment provisions, for example:

• Fee schedules (DRG, PFS, etc.)• Cost-based Reimbursement (CBR)• Hybrids of the two

• Variations on a flawed theme

But wait…What about “Value-Based Payment?”

• You’ve heard the programs: • payment reform/MACRA• practice transformation• accountable care organizations• bundled payments• Medicaid Managed Care

• Wharton researchers say “curb your enthusiasm,” what if transformation is simply hype?

• Evidence is lacking on the results of these programs:• That’s for the “large hospitals,” what about rural hospitals? Even a

more remote possibility:• Low volume• Lack of organizational capacity• Sheer complexity is overwhelming

The transformation from ‘volume to value’ appears to be driven more by ideology and aspiration than by evidence. Lawton R. Burns and Mark V. Pauly

Value-Based Payment and Vulnerable Populations

• Vulnerable Populations• People living in poverty• People living with disabilities• Aging populations• High rates of un-insured and under-insured

• Rural populations are generally vulnerable populations• NEJM, March 15, 2018 noted the negative impact of

Alternative Payment Models (APSM) on vulnerable populations:

Effect of VBP Programs on Providers That Serve the Poor

Why?• Incremental, piece-meal change with marginal benefit• Misalignment between Delivery System Reform (DSR) and

payment arrangement incentives• Risk adjustment is inadequate to properly protect the vulnerable• Multiple payers with differing incentives toward transformation (if

they exist at all):• Medicare: Bundling, MACRA, VBP, HRRP, HCAHPS, etc.• Medicaid: Managed Care (cost), PCPs, DSRIPs, etc.• Commercial Insurance: ACOs, Utilization Review, ED retroactive denials,

narrow networks, etc.• Uninsured/Underinsured

• Medicare single largest payer in rural hospitals• CAHs exempt from quality reporting requirements• Fee for Service (FFS) payment system• Volume dependent (even though CBR)• Little incentive to change delivery system features

First Things FirstDelivery System Reforms (DSR)

• PCMH• Transitions of Care• Chronic Care Management• Post-acute Care• EHR• Network Formation

Care redesign should not outpaceChanges in payment

New Payment Arrangements

• MACRA• Care Transformation Costs• Care Management Payments• Shared Savings• Episodes of Care Payments• Global Payments

Population Health

Transformation

Source: Joseph F. Damore, Premier Health Alliance, March, 2015

MARKET REALITIESNRHA

Rural Hospital Closures: 1983-97

Utilization Trends

Rural Hospital Closures and Risk of Closures

35%Percent Vulnerable X

90

CHRONIC DISEASENRHA

Chronic Disease Growth Projections

Prevalence of Medicare Patients with 6 or more Chronic Conditions

SOCIAL DETERMINANTS OF HEALTHNRHA

19

Taxes, Clean Indoor Air Policies

Menu labeling, School Food Policies

Reduce alcohol outlet density

Partner referral services

Work force development

Minimum wage, Paid family/medical leave

Expand early childhood programs

Nurse home visiting programs

Zoning/incentives for mixed-use development

Reducing bus emissions

Pedestrian/cycling in master plans

Coverage, medical homes

EHRs, Public Reporting, Payment Reform

Tobacco Use

HEALTH BEHAVIORS (30%)

Diet & Exercise

Alcohol & Drug Use

Sexual Activity

CLINICAL CARE (20%)Access to Care

Quality of Care

SOCIAL & ECONOMIC FACTORS (40%)

Education

Employment

Income

Family & Social Support

Community Safety

PHYSICAL ENVIRONMENT (10%)

Air & Water Quality

Housing & Transit

LENGTH OF LIFE: 50%

QUALITY OF LIFE: 50%

HEALTH OUTCOMES

HEALTH FACTORS

POLICIES & PROGRAMS

NRHA Future of Rural HealthPolicy Paper, 2013• The ability to adapt current systems to allow payment for preventive

health measures and care coordination is central to future success.• Hospitals and physicians/clinics are characterized as a focal point,

looking beyond bricks and mortar to their role as a physical or virtual hub of service delivery.

• Flexibility is essential. Whether outlining incremental change through transitional approaches to current frontier and rural programs, or transformational models designed to capitalize on the primary care foundation of rural health delivery, all require the ability to maneuver.

• Perhaps most importantly, the need for transitional support cannot be over emphasized, noting rural payment and delivery policies must “preserve what we have until we have clarity of where we are going.”

Designing Rural Systems that at least provide for…

Integrating and coordinating Care Across ContinuumAligning Incentives for Value and Quality

Reducing the Cost Curve

PENNSYLVANIA GLOBAL BUDGETNRHA

Why PA? Why global budgeting?

▪ Challenges faced by rural hospitals are significant a true opportunity to create impact.

▪ PA had the right state leadership and expertise in former Secretary of Health Dr. Karen Murphy. She led the design phase from July 2015 – January 2017.

– Dr. Murphy was founding SIM director at CMMI.

– Dr. Murphy helped negotiate MD’s Total Cost of Care model that improved upon its existing global budget model.

– Important to create a model that can be disseminated to other states.

– CMMI has been a key partner throughout for technical assistance, financial support, and for its Medicare waiver.

Contrasting the PA and MD models

▪ The PA Rural Health Model is not the same model as in Maryland, but it was informed by it.

▪ MD has rate-setting (stemming from 1971 Medicare waiver exempting MD from IPPS and OPPS system).

▪ Differences in goals:

– MD = cost containment

– PA = financial stability and delivery system transformation

▪ Differences in rural:

– MD rural hospitals tend to be much larger (beds and revenue)

▪ Availability of transformation support versus infrastructure funding

Key design principles for the PA Rural Health Model

▪ Broadly applicable and nationally scalable model

– Acute care and critical access hospitals

– Independent and systems-affiliated

– Diversity re: geography, size, service lines, operating margins

▪ Solutions aligned with goals

– Financial stability (global budget)

– Delivery system transformation (transformation support through – ultimately – the Rural Health Redesign Center)

▪ Engage wide variety of stakeholders and employ best practices

The Model lets hospitals invest in promoting health

Achieve financial stability through stable payments

Currently, hospitals focus on providing sick care (filled hospital beds are

good for business!)

Through this Model, hospitals can use a portion of their stable payments

to promote health and safety (i.e., vaccinations, check-ups, transportation,

home repairs)

Keep the local community healthy through transformation

Requires a change in thinking and strong, proactive community

partnerships focused on local solutions (not one-size-fits-all)

Through this Model, hospitals are financially rewarded to keep their

communities healthy and well

This Model allows hospitals to pursue two key goals

The Model lets hospitals invest in promoting healthCalculating the global budget: Determining the baseline

For the first year of implementation, the baseline is calculated as the larger of the following: Average of latest 3 years of net patient revenue data with unit price (and

demographic adjustment for Medicate FFS) taken into account. The latest year of net patient revenue data with unit price (and

demographic adjustment for Medicare FFS) taken into account.

For the first year of implementation, CMS will use FY 2015 (Oct 2015 – Sep 2016) – FY 2017 (Oct 2016 – Sep 2017) data for the Medicare FFS population and commercial payers will use CY 2015 – CY 2017 data.

For subsequent years, the baseline is calculated using the actual global budget of the prior year, incorporating any reconciliation and adjustment (e.g., the CY2020 global budget will be based on the CY2019 global budget).

The overall global budget is calculated starting with this baseline, and adjusted for unit rate changes, demographic shifts, planned changes in hospital service lines, unplanned shifts in provider market share, and sharing of savings generated from reducing potentially avoidable utilization (PAU).

The Model lets hospitals invest in promoting healthCalculating the global budget: Introducing PAU

Potentially avoidable utilization (PAU) = hospital utilization that can be avoided, either through better care delivered by the hospital or by the broader health care system. In the context of the global budget, reduction of PAU results in additional financial resources for participating hospitals.

For the global budget model, there are five types of PAU that are of interest: Avoidable ED utilization (using the New York University’s classification of ED visits)

Non-emergent (care not needed w/in 12 hours)

Emergent/primary care treatable (care needed w/in 12 hours but could have been provided in a primary care setting)

Emergent – ED care needed (ED care needed but could have been avoided if the patient had access to effective primary care)

Ambulatory care sensitive inpatient hospitalization (using AHRQ’s Prevention Quality Indicator 90 [PQI 90] metric)

Comprehensive list of hospitalizations that could be avoided with better ambulatory care, including such conditions as diabetes- , COPD- , HTN-, urinary tract infection-related, etc., admissions

The Model lets hospitals invest in promoting healthCalculating the global budget: Introducing PAU

For the global budget model, there are five types of PAU that are of interest: Readmission (using NCQA’s HEDIS’ Plan All-Cause Readmissions [PCR] measure

definition to identify this type of PAU) Readmissions for any cause within 30 days of discharge are considered avoidable for the

purpose of the global budget.

Short inpatient hospitalization While not all short inpatient stays are necessarily avoidable, they do represent a potential

opportunity. Hospitalizations with length of stay of fewer than 2 days and fewer than 3 days will be measured.

Inpatient length of stay adjusted by case mix (using HEDIS’ Inpatient Utilization –General Hospital / Acute Care [IPU] measure definition)

The methodology to set PAU targets and benchmarks will be determined with participating payers and providers for year 3+ budgets. History will be key to set appropriate targets.

The Model lets hospitals invest in promoting healthCalculating the global budget: Key Medicare notes for CAHs

• Cost-based reimbursement methodology for CAHs remains intact.

• Additional quarterly payments will be made to CAHs if the reconciliation process shows funds are owed to the hospital (provided the cost report process is completed).

Growth potential for the PA Rural Health Model

Exciting momentum and possibilities:

• Expanded services w/in PA as Model scales

• Expanded services to other states

• Potential for this to become a national Model

Nearly 20 other states have reached out to PA to learn more about the work we are doing. PA and CMMI are

pleased with the interest!

Pennsylvania Global Budget Model

• Game changer as APMs go• Daydream: “what if, someday?” scenario• Harmonize disparate payment systems and their attendant

incentives (sometimes conflicting incentives)• Enables clinical system to fully transform to emphasize

prevention and chronic disease management • Jump over ITERATIONS of change to a sustainable, long-term

model• Solves the paradox of changing your payment arrangements to

keep pace with your delivery system reforms

Transformation Vision Ideas• Assessment of Community health challenges, for example:

• Infant mortality rates high• Preventable asthma related admissions are too frequent• Opioid related overdoses are rising

• Services to consider:• Comprehensive primary care strategy• Evidence-based home visiting• Hospital at Home (HaH)• Behavioral health treatment• Care coordination for high-risk, complex patients (high-risk stratification)• Data analytics to identify high-need, high-cost patients• Coordination with local public health agencies and related community resources

around primary prevention and addressing social determinants of health• Network formation between rural hospitals • Expansion of tele-health services/project ECHO• Take advantage of Medicare COP waivers

Pennsylvania Rural Healthcare Transformation

Current Fee for ServiceSystem

Value-Based FFSPayment Models:

Global Budget Model

BundlingACOsNo payer

alignment

Summary• NRHA will enthusiastically support this sole rural innovation

project which fulfills longstanding policy goals of the Association.

• Potential to alleviate the need for new provider types by giving communities tools to harmonize payment systems and radically transform delivery systems with COP waivers

• A program that has the possibility of stabilizing rural hospital payment structures, giving assurance that the hospital won’t “save itself out of business”

• Allow rural hospital leaders the ability to “do the right thing” for their communities by improving population health status while lowering the cost

• The eyes of the entire country are looking to Pennsylvania and a model that will one day be known as THE transformation project to scale nationwide

T H A N K Y O U

Questions?

Brock SlabachSenior Vice President National Rural Health Associationbslabach@nrharural.org