Sec I Provider Payments

Question 1

Principles for designing provider profiling reports

Answer 1

1. Identify high-volume and costly clinical areas to profile
2. Involve appropriate internal and external customers (including providers) in developing and implementing the profile
3. Compare results with published performance (external vs internal norms)
4. Report performance using a uniform clinical data set
5. When possible, employ an external data source for independent validation of the provider’s data 6. Consider onsite verification of data from the provider’s information system
6. Present comparative performance using clinically-relevant risk stratification
7. Require statistical significance for comparisons and establish thresholds for minimum sample size
8. Adjust performance measurements for severity

Question 2

Users of provider profiles

Answer 2

1. Health plans - e.g., provider relations and medical directors
2. Consumers - effective dissemination of profiles to members is still under development
3. Employers - most are more interested in cost control than quality, so approaches should integrate cost control with quality
4. Providers - most providers are willing to change their behavior if methods to measure their performance are well grounded in scientific evidence or professional consensus

Question 3

Contracting considerations for different types of physician groups

Answer 3

1. Individual physicians - advantage is the direct relationship with the physician. Disadvantage is the effort to maintain the relationship is large for just one physician
2. Medical groups - advantage is the same contracting effort yields a higher number of physicians. Disadvantage is that if the relationship is terminated then there is greater disruption in patient care.
3. Independent practice associations (IPAs)
   a) Advantages: a large number of providers come along with the contract, the IPA may accept more financial risk, and some IPAs perform network management, credentialing, and medical management.
   b) Disadvantages: the IPA can hold a considerable portion of the delivery system hostage to negotiations, and the plan’s ability to select and deselect individual physicians is limited.
4. Faculty practice plans (medical groups that are organized around teaching programs)
   a) Advantages: these programs provide highly specialized care and they add prestige to the plan by virtue of their reputation for quality care.
   b) Challenges include: tend to be less cost effective in their practice styles, and they are not set up for case management, so care is not well coordinated. 5. Physicians in integrated delivery systems (IDSs) - there are 2 types:
   a) Hospital systems that affiliate with private physicians.
   b) Hospital systems that employ physicians - these often have substantial negotiating leverage.
5. Patient-centered medical homes - these coordinate all care for a group of patients.
6. Specialty management companies - these focus on managing very specialized services using physicians (e.g. single-specialty case management of neonatal care).

Question 4

Capabilities of a well-functioning contract management system

Answer 4

1. Identify network gaps or where provider recruiting is most needed
2. Track recruiting efforts, provide reminders, and generate recruiting reports
3. Generate new contract blanks and new contracts with information filled in
4. Store copies of different versions of any provider’s contract
5. Track and report contract changes for each provider
6. Track and manage permissions and sign-offs on contracts
7. Store images of signed documents and convert imaged documents into machine-readable formats 8. Support an entirely paperless contracting process
8. Provide early notification or reminders for upcoming actions such as recredentialing or renegotiations
9. Direct electronic feed of required demographic information to other internal functions
10. Direct electronic feed of market-facing systems such as internet physician searches
11. Be searchable on multiple attributes
12. Analyze the potential impact of changes in contract terms

Question 5

Reasons why a provider wants to contract with a health plan

Answer 5

~also referred to as contracting goals

1. Obtain favorable pricing when in a strong negotiating position
2. Ensure that it will not be excluded from the network of a large payer
3. Receive direct payment from the plan, thereby avoiding the need to collect from the patient
4. Receive timely payment (usually 30 days or less) 5. Have plan members directed or steered to it
5. Not lose business (or medical staff) as a payer steers members to other who are contracted providers
6. Receive defined rights around disputing claims and payments

Question 6

Reasons why a health plan wants to contract with providers

Answer 6

~also referred to as contracting goals

1. Obtain favorable pricing (less than full billed amounts)
2. Obtain payment terms that result in an underwriting gain
3. Get the provider to agree to provide services to the plan’s members
4. Meet service area access standards required by the states and Medicare
5. Obtain contractual agreement for several clauses, many of which are required by the states and Medicare. The provider agrees to:
   a) Submit claims directly to the plan, not the member
   b) Not balance bill the member for any amount above the agreed-upon payment terms
   c) Hold harmless the member (not bill for any amounts owed by the plan)
   d) Cooperate with the plan’s utilization management program
   e) Cooperate with the plan’s quality management program
   f) Give the plan the right to audit clinical and billing data for care provided to plan members
   g) Not discriminate (and other similar requirements)

Question 7

Types of risk associated with payment arrangements, from the provider’s perspective

Answer 7

1. Utilization risk - the risk that changes in utilization will impact provider profitability
2. Technical risk - the risk of appropriately structuring the technical elements of a contract
3. Insurance risk - the risk of variation in demand for medical services over time and the risk of differences in utilization within segments of the insured population. Egs include:
   a) Age, gender, and acuity differences
   b) Number of high-cost cases vs average
   c) Year-to-year variation in patient demand for services
   d) Proportion of the population that has zero claims in a year
4. Performance risk - the risk of inefficiency, sub optimal quality, and high cost of care

Question 8

Major issues with pay-for-performance methods

Answer 8

1. Unintended incentive to avoid the most severely ill patients
2. Gaming the system by miscoding diagnoses or services
3. Selecting patients on the basis of the likelihood of a positive outcome
4. Compliance with treatment protocols rather than need
5. Unmeasured objectives could be ignored

Question 9

Elements of a DRG contract

Answer 9

1. DRG/case rate schedule - shows the case rate for each DRG for an initial length of stay and the per diem for days beyond that level
2. Maximum days - the number of days for which the case rate applies. Cases that exceed that length of stay are then paid a per diem rate for each additional day
3. Carve-outs for specialty drugs and implant devices - additional payments may be made for these items
4. Stop loss - a contract may also have a stop loss to be applied on a case level
5. Transplants - payment for transplants is usually negotiated separately
6. Readmissions - the contract must state whether payment will be made for readmissions

Question 10

Formula for determining Medicare allowed amounts

Answer 10

1. Weights are determined based on:
   a) Relative value units (RVUs) - these are categorized by Current Procedural Terminology codes. There are 3 components for each RVU: work/practice cost (w), facility/cost of living (f), & malpractice (m).
   b) Geographic Practice Cost Index (GPCI) - these are based on provider ZIP codes 2. Medicare allowed amount = (GPCIw * RVUw + GPCIf * RVUf + GPCIm * RVUm) * conversion factor
2. Payments are also adjusted for various reasons, such as who performs the service (e.g. professional surgeon vs assistant surgeon) and where the service is performed

Question 11

Factors to consider when modeling payments and cash flows for a provider payment model

Answer 11

1. What types of unintended behaviors may occur due to incentives created by the payment model?
2. What other factors would jeopardize achievement of forecasted results?
3. How will results achieved during the model test be replicated?
4. Will the structure and the dimensions of the payment model change over time?
5. Will there be a phased-in approach?
6. How will the payment model promote continuous improvement of the service delivery model?
7. What key factors, including other delivery and payment reforms, may affect this progression?

Question 12

Elements of a typical physician credentialing application

Answer 12

1. Demographics, licenses, and other identifiers (like national provider identifier)
2. Education, training, and specialties
3. Practice details - such as services provided and office hours
4. Billing and remittance information
5. Hospital admitting privaleges
6. Professional liability insurance
7. Work history and references
8. Disclosure questions - such as suspension from government programs or felony convictions
9. Images of supporting documents - such as a state license certificate

Question 13

Types of provider payment models

Answer 13

1. FFS - providers are paid for each service they perform, either through a fee schedule or as a percent of charges
2. Global capitation - providers are paid a fixed rate for each member they agree to service. The payment is based on the average costs of the population, rather than services provided.
3. Share savings - providers typically get reimbursed using FFS, but they also receive a percentage of the savings they create by reducing utilization below a benchmark. Usually, providers only receive the bonus if they meet certain quality targets
4. Diagnoses-related groups (DRGs) and case rates - the hospital is paid a single price, or case rate, for an admission rather than a price per day or for each service provided during the stay. There is often an outlier adjustment where the provider gets paid an outlier per diem rate if the admission exceeds a certain number of days.
5. Bundled payments - a single payment is made for an episode of case, which usually starts with a specific DRG or a surgery and extends for a specific future period (typically 30, 60, or 90 days)
6. Reference pricing - a benefit limit (ie the reference price) is established for a specific medical procedure or device. The patient must pay the difference between the allowed charge and the reference price
7. Provider exceless loss (PEL) reinsurance - protects the provider from high-cost outliers. It is generally paired with one of the previous payment models.
8. Pay-for-performance (P4P) - any payment arrangement can include a P4P aspect by including incentives for higher quality of care or disincentives for lower quality. This adds performance risk.

Question 14

Risks to the provider under global capitation

Answer 14

1. Utilization risk - changes in utilization have the opposite impact as in a FFS model. Profit increases for providers as utilization decreases
2. Technical risk - this risk is quite high. A provider organization will need complex structures in place to allocate money among various providers
3. Insurance risk - all of the insurance risk is transferred to the provider. The provider takes on the risk that members will need more services than was expected when negotiating the capitated rate
4. Performance risk - the provider is at high risk since it takes on the financial responsibility for all of the care the patient receives

Question 15

Risks to the provider under FFS

Answer 15

1. Utilization risk - for most services, the provider’s profit increases as utilization increases
2. Technical risk - this risk is low because FFS is easy to implement, design & monitor
3. Insurance risk - providers have very little insurance risk. They are not at risk for the year-to-year variation in claims cost of a specified population
4. Performance risk - this risk may exist if the claims administrators do not carefully monitor nonspecific codes

Question 16

Risks to the provider under shared savings

Answer 16

1. Utilization risk - because of the complexity of contracts, this risk is hard to quantify
2. Technical risk - this risk is high due to the complexity of calculating benchmarks, reconciling savings, measuring quality, and distributing savings and losses
3. Insurance risk - there is a risk that year-to-year variation in claims costs will result in claims costs that are different than the benchmark
4. Performance risk - there is significant risk regarding whether care management efficiencies can be achieved and whether the benchmark can be met

Question 17

Steps for pricing bundled payments

Answer 17

1. Obtain claims data
2. Select DRGs or conditions - look for enough volume, a population that will have similar treatment patterns, and potential for savings that is due to variation in care. Knee and hip procedures are popular selections.
3. Define the episode - specify the full time period and mix of services for which the organization is financially responsible and at risk. Typically includes:
   a) Anchor stay - period of time between admission and discharge
   b) Post-discharge period or post-anchor event period - typically covers 30, 60, or 90 days from teh discharge date
   c) Post-episode period - covers 30 days past the episode end date as a quality control to make sure providers are not waiting until the end of the episode to provide services
4. Define exclusion criteria - should be easy to implement and not overly specific
5. Estimate cost of the bundle - done by analyzing claims data
6. Identify savings opportunities - these will be different for every episode and every organization. For e.g., discharging more knee replacement surgery patients to their home instead of a rehabilitation center will lead to savings

Question 18

Risks to the provider under bundled payments

Answer 18

1. Utilization risk - when the number of episdoes increases, provider profits can increase. But within an episode, the provider will need to decrease medically unnecessary services in order to make a profit
2. Technical risk - this risk is quite high due to challenges such as defining conditions, coordinating care, and partnering among different providers
3. Insurance risk - the provider is at risk for members who have higher allowed costs than the average episode
4. Performance risk - there is risk related to proper discharge planning and communication

Question 19

Risks to the provider under reference pricing

Answer 19

1. Utilization risk - members will be less likely to use provider services as their out-of-pocket share increases
2. Technical risk - there is risk related to educating the policyholder on reference pricing
3. Insurance risk - some patients may need high-cost care, in which case the insurance risk is shifted to the patient and away from both the insurer and the provider
4. Performance risk - patients who are charged high amounts for procedures may be unhappy with both their providers and their insurers

Question 20

Risks to the provider under provider excess loss (PEL) reinsurance

Answer 20

1. Utilization risk - this risk is shifted to a reinsurer
2. Technical risk - this risk will vary with the structure of the stop-loss contract. The most common approach is a coinsurance arrangement, which has low technical risk
3. Insurance risk - the provider’s risk of high outlier costs is somewhat mitigated
4. Performance risk - this risk is highly dependent on the structure of the reinsurance policy

Question 21

Risks to the provider under DRG/case rates

Answer 21

1. Utilization risk - increased admissions lead to increased profits. But the provider has an incentive to reduce the length of stay because for longer stays the provider has additional costs but no additional reimbursement
2. Technical risk - this risk is low to medium because DRGs have existed for some time and there are established models for creating DRG groupings
3. Insurance risk - the provider is at risk for longer lengths of stay, but not for incidence risk
4. Performance risk - the hospital must be cautious of discharging patients too early. That could increase the risk of readmissions, which carries financial penalties from Medicare

Question 22

Considerations in contracting for bundled payments

Answer 22

• These include the key financial, operational, & quality issues*
  1. Defining the episode - what is the trigger date and when does the case end? Which services are included?
  2. Evaluating catastrophic risk - need to do an outlier risk analysis that includes a classical stop loss analysis
  3. Financial stability for low case loads - random fluctuation may be greater for provider groups with low case loads
  4. Determining provider allocation of funds - the allocation should consider financial incentives for physicians to encourage them to promote more cost-effective care
  5. Distinguishing case severity - could limit risk by removing higher-severity patients from the bundled payment approach
  6. Quality outcome requirements - minimum thresholds may be needed to ensure quality is not compromised as services are reduced
  7. Administrative complexity of supporting the contract
  8. Risk-sharing alternatives - contracts that share financial risk between the provider and payer may be more viable than pure bundled payments
  9. Potential for increased utilization - contracts for individual providers should not give them inventives to increase utilization to get a larger share of the bundled rate

Question 23

Sources of data for provider profiling

Answer 23

1. Lab test results
2. Biometric information
3. Feeds from electronic health records
4. Patient satisfaction measures
5. Operational information on vendor programs
6. Claims system data is the major source. Before it can be used, it must be standardized and stored in a data warehouse

Question 24

Data to include in a data warehouse for provider profiling purposes

Answer 24

• Provider profiling is the identification, collection, collation, and analysis of data to develop a characterization of the provider’s performance*
  1. Unique patient identifier
  2. Diagnostic information (e.g. ICD-10 codes)
  3. Procedural information (e.g. CPT and HCPCS codes)
  4. Level of service information
  5. Paid and allowed dollar amounts from services ordered by the physician or health care facility
  6. Unique provider identifier

Question 25

Desired characteristics of provider profiles

Answer 25

1. Accurately identify the provider - is not easy to do when members use multiple providers. Also consider whether to profile at the physician level (which has credibility issues) or at the clinic or group level
2. Accurately identify the provider’s specialty - can be difficult because many specialists provide a lot of primary care. So consider a specialist’s mix of routine and complex cases
3. Help to improve the process and outcome of care
4. Have a firm basis in scientific literature and professional consensus
5. Meet certain statistical thresholds of validity and reliability - definitions
   a) Validity - the extent to which the data actually means what you think it means
   b) Reliability - the extent to which data in consistent and means the same thing from provider to provider
6. Compare the provider to a norm - can compare to total health plan average results, results from peers (such as all network physicians or those of the same specialty), or budgeted amounts
7. Cost the minimum amount possible to produce
8. Respect patient confidentiality and obtain patient consent when necessary