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MCDA Comparative Reimbursement Analysis and Contract Optimization Managed Care Decomposition Analysis Prepared for Tampa General Hospital Tampa, FL July 26, 2000
Introduction 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
Market Space Clinical Product Lines Marketing Product Lines Hospital Patient Population Charge Master Shift to Managed Care Predicted Managed Care Product Lines (MCPL’s) MCO brings in New Patients and Proposed Contract MCO Contract Master Inherent MCPL’s MCO Contract Accepted (Payor Specific)
How Contracts Are Interrelated MCO Contract Master Patient Characteristics Reimbursement Characteristics What are the MCPL’s defined by the contracts? How are the MCPL’s reimbursed? A patient or patient group can have more than one reimbursement possibility based on characteristics. A patient or patient group can have more than one characteristic.
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
Stage 3: Contract Optimization OSI MCDA Actual Patients Alternative Reimbursement Alternative Characterization and/or Possible Net Revenue Impacts OSI evaluates the Financial impact, both gross and net, of all findings. MCO Contract Modifications
OSI extracts and standardizes MCO contract specifications Managed Care Decomposition Analysis MCDA What is the OSI “MCO Contract Master”? Hospital’s Contract Management System MCO Contract Master Patient Characteristics Managed 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 How much? What?
Managed Care Decomposition Analysis MCO Contract Master Actual Patients MCDA Data Base Contract Rules Reimbursement Characteristics Patient Characteristics Managed Care Product Lines Expected Reimbursement Master Attributes Reimbursement Attributes What is being purchased? How is it being purchased?
Managed Care Decomposition Analysis Contract 2 Contract 3 Contract 1 Contract n Hospital Contract Management System MCO Contract Master MCDA Patient Reimbursement Attributes Patient Master Attributes • Process: • 1. Standardize the hospital’s MCO contracts to allow for modeling and • future comparative analysis • 2. Reveal alternative reimbursement scenarios that, if implemented, • would increase net income • 3. Reveal alternative patient characterizations that, if implemented, • would increase net income • 4. Quantify all alternative scenarios in terms of net income
Managed Care Decomposition Analysis Contract Optimization OSI MCDA Actual Patients Alternative Reimbursement Alternative Characterization and/or Possible Net Revenue Impacts OSI evaluates the Financial impact, both gross and net, of all findings. MCO Contract Modifications
Example: Aetna Open Choice Simulations within same payment type across payors Starting Classification: DRG 370-375, PerDiem=$1040, 500 Cases Normal Distribution for all Payor’s per diem rates for DRG 370-375 Percentile 25th $800 35th $1040 Median $1250 90th $1550 75th $1400 Net Income is enhanced by increasing PerDiem rate to the 50th or 75th Percentile $32,000 $20,000 Hospital Starting Reimbursement per Day Change in Net Income
Per Diem Change in Net Income Example, Cont. Simulations within differing payment types across payors Starting Classification: DRG 370-375, PerDiem=$1040, 500 Cases Starting Reimbursement = $2200 per case (Avg.) Case Rate Charges 30th 42nd 35th Simulate each different Payment type at the Median for 500 cases with the same classification, DRG 370-375 $20,000 $15,000 $35,800
Case Rate Case Rate Per Diem Change in Net Income Example, Cont. Simulations involving re-classification to new Master Attribute Starting Classification: DRG 370-375, PerDiem = $1040, 500 Cases Simple DRG un-bundling 190 Cases DRG 370-371 310 Cases DRG 372-375 New Master Attribute 28th 32nd 25th 85 Cases of 370@ 1230 per day 105 Cases of 371@ 1145 per day Median 310 Cases @ 2000 60th Percentile 310 Cases @ 2130 190 Cases of 370-371 @ 3000 per case $38,988 $49,500
Example, Cont. Final Simulation Results Simple DRG un-bundling Aetna Open Choice pays $1040 per day for DRG 370-375, 500 Cases Old Contract Step 6- If DRG 370-375, Per Diem=1040.00 MCDA Alternative 1 Unbundle DRGs and Pay Case Rates DRG 370-371 @ $3000 Per Case DRG 372-375 @ $2000 Per Case CHANGE IN NET=$38,988 *Supported by attributes in Lifeguard HMO MCDA Contract Optimization MCDA Alternative 2 New Contract Unbundle DRGs and Pay Per Diems and Case Rates DRG 370 @ $1230 Per Day DRG 371 @ $1145 Per Day DRG 372-375 @ $2130 Per Case CHANGE IN NET=$49,500 *Supported by attributes in Blue Shield HMO, Cigna HMO, and One Health PPO Step 6- If DRG 370, Per Diem=1230.00 Step 7- If DRG 371, Per Diem=1145.00 Step 8- If DRG 372-375, Case Rate= 2130.00 CHANGE IN NET=$49,500
MCDA Optimum Alternative Pay 300 Cases Based on Rev Code 173 and Line Item Amount REV 173 @ $975 Per Line Item CHANGE IN NET=$12,620 *Supported by attributes in Blue Shield HMO Optimization Example, Cont. Final Simulation Results Complete Attribute Optimization Cigna HMO pays $1155 per day for ICD-9 72.01, 300 Cases Old Contract Managed Care Decomposition Step 8- If ICD-9 72.01, Per Diem=1155 REV Attributes DRG Attributes MCDA Contract Optimization Per Diem Alternatives Line Item Alternatives Case Rate Alternatives Case Rate Alternatives Case Rate Line Item Per Diem Case Rate New Contract Step10-If REV 173, Line=975.00 CHANGE IN NET=$12,620