HSMP 587 - Health Care Fin. Mngmt 11/20/17

HSMP 587 - Health Care Fin. Mngmt 11/20/17

Fall 2017 Dr. Neal Wallace

Problem Set # 6 Answer Sheet

1) What are the three general types of reimbursement, what is there (general) basis for calculation, and what is a current example of each?

1. Unit of Service (aka Fee for Service or FFS):

Basis: Allocated costs of service or good /units of service (i.e. number of goods or time units of service)

Current Example: Resource Based Relative Value Unit (RBRVU or RVU) reimbursement

2. Episodic or Case rate:

Basis: Allocated costs of episode or case/# of episodes or time units of case activity -typically person (served)-months.

Current Example: Knee Replacement Bundled payment

3. Population based rates:

Basis: allocated costs of providing defined services to a population/population time units, typically person (in population) months

Current Example: CCO Global Budgets (based on PMPM payments for covered population)

2) What are examples of the benefits, risks and limitations of these three reimbursement types from a provider and payer perspective?

1. Unit of Service (aka Fee for Service or FFS):

Benefits: Providers&Payers – can reimburse any scale provider e.g. regardless of amount of units or variety of services provided.

Risks: Providers – not everything has a unit or service reimbursement. Payors – often ends up with too much or too little of specific services provided.

Limitations: Payers&Providers: administratively complex, defining units or service not always easy or feasible (think e-mailing/phoning provider)

2. Episodic or Case rate:

Benefits: Provider & payer – supports production (and producers) of “complete” healthcare within case/episode structure

Risks: Provider – managing and completing successful episodes. Payers – assuring providers don’t just pick easy cases/episodes

Limitations: Payer/Provider – identifying/defining meaningful cases/episodes that can be measured for payment.

3. Population based rates:

Benefits: Providers – ease of payment/billing & little restriction on how resources are spent/applied to get job done. Payers: Population basis provides incentives t providers to actually keep people well as opposed to wait for them to get sick.

Risks: Providers – adverse selection – population assigned is sicker than expected. Payors – positive selection or shirking – population is either more well then expected or providers don’t provide level of service expected.

Limitations: Payor and provider – transparency in effort and quality – not readily apparent how provider shows or payer knows when enough services or sufficient quality are being provided.

3) What are the two types of quality-based reimbursement mechanisms and how do they “fit” with the three general reimbursement types in Q #1?

1. Pay for Performance: (Additional) bonus payment paid out for hitting quality metric targets. This can fit with any of the three reimbursement types but is most salient for population rates where transparency of what is being done is (potentially) lowest.

2. Shared Savings: Bonus payments based on a portion of savings that accrue from reductions in services outside the reimbursed service (e.g. bonus payments to primary care based on reduced ED or inpatient expenditures). Shared savings are implicitly part of the benefits of “full” population rates – if you make savings in one place by investing in another you get the benefit. Otherwise they fit where one can attribute the savings to the “investment”. This is difficult for unit of service as its hard to figure out which units or combination create the “savings”. It works better with case/episode or partial population rates where you are more likely to be able to attribute “cause and effect”.

4) Suppose we wanted to estimate a unit of service reimbursement rate for the RN phone case management that we provide (and is not currently directly reimbursed). How might we approach this using the financial modeling we have developed or our business.

For the “basis” for unit of service rates you’d need to redo our cost allocation process to identify the fully allocated costs of RN case management as a ”new” final product and then divide that by some measure of “units” – e.g. number of phone calls.

5) What is an example of how moving our business from FFS to episode/case or population-based reimbursement might affect the way we value different parts of our business model (or differently value existing parts)?

If we moved to episode/case or population-based reimbursement we are likely to better value (or have external parties better recognize the value we see) in things like RN case management, consultants and CHWs. These are either indirectly (RN/CHW) or less well (consultants) reimbursed elements of what we do under our current FFS reimbursement but are likely critical elements in assuring that patients get and complete comprehensive care (episode/case) and/or that we connect with our community to assure that those who are in need actually get services (population-based).