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Making the business case for hospital RPM / Care Coordination programs. MATRC Telehealth Summit. March 2013. Agenda. Who We A re/Our A pproach Remote Patient Monitoring for Care Coordination: Value Drivers Readmissions and the Value of Avoided Penalties Costing an RPM /CC Solution

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making the business case for hospital rpm care coordination programs

Making the business case for hospital RPM / Care Coordination programs

MATRC Telehealth Summit

March 2013

agenda
Agenda
  • Who We Are/Our Approach
  • Remote Patient Monitoring for Care Coordination: Value Drivers
  • Readmissions and the Value of Avoided Penalties
  • Costing an RPM/CC Solution
  • Making the Business Case
who we are
Who We Are
  • Virginia-based Telehealth Services firm providing Care Coordination Services via Remote Patient Monitoring
    • Lower patient readmissions
    • Improve outcomes for key patient populations
    • Position health systems strategically for new environments (ACO, shared risk, etc)
    • Enhance and better leverage data analytics
  • Founders are serial entrepreneurs with significant experience in:
    • Design and operation of secure networks and operation centers for health care and defense
    • Public/Private Partnerships
    • Health care market research and analytics
  • Key Clients
    • Commonwealth of Virginia
    • University of Virginia
    • University of Virginia Medical Center
    • New College Institute – Southside Telehealth Training Academy and Resource Center (STAR)
    • Virginia Tobacco Commission – Special Projects
our approach to hospital based rpm
Our Approach to Hospital-Based RPM

Patient Risk

Stratification and Selection

Coordination w/

Hospital

Discharge

Transition to Home: “Activation” and Daily Monitoring

Provider Coordination via Clinical Review Software and Reporting

Primary Care Physician

EHR

Home Health Nurse Case Manager

Hospital-based Clinic

Alert intervention

Biometric/symptom data

Regular reporting

  • Key Transition Activities:
  • Hub/device home install
  • Patient training
  • Med reconciliation/PCP appt
  • Connection established with RN monitor

Heart Failure

AMI

Pneumonia

COPD

CABG

PTCA

Other vascular

Over time: Highest-Risk Frequent Readmits

Referral to Care Coordination Center

Care Coordination Center

  • Outcomes Reporting:
  • Readmissions
  • Population health
  • Costs
  • Satisfaction

Patient targeting/best practices

evidence for rpm efficacy
Evidence for RPM Efficacy
  • Centura Health (Colorado): Centura Health at Home program reduced 30-day readmission rates for patients with target conditions CHF, COPD, and diabetes by 62% in 2010/11 one-year pilot
    • 200 patients enrolled, generating cost savings of $1,000-1,500 total cost per patient
  • Partners HealthCare (Boston): Connected Cardiac Care Program has consistently reduced CHF-related readmission rates by ~50% and non-related readmission rates by 44%
    • 1,200 patients enrolled since 2006, generating cost savings of more than $10m
  • (Chronic Disease Management) Veterans Health Administration: Care Coordination/Home Telehealth program decreased total healthcare resource utilization (hospital days of stay) by ~25% for both single/multiple diagnoses across 8 target conditions between 2004-07
    • Currently more than 70,000 enrollees

Commonwealth Fund RPM Case Studies: January 2013

Source: Commonwealth Fund publications 1654-1657, Jan 2013

why rpm for hospitals
Why RPM for Hospitals?
  • Financial: Lower patient readmissions and avoid penalties (Short-term ROI)
  • Quality: Improve health outcomes and satisfaction for key patient populations
  • Efficiency: Enhance and better leverage information and analytics between providers to provide more effective care
  • Strategic: Position health systems for new environments (ACO, shared risk, etc)

Value Drivers

hospital readmissions context
Hospital Readmissions Context
  • CMS Hospital Readmission Reduction Program (HRRP) penalties effective as of October 1, 2012
    • 30-day readmission measures for three key conditions (AMI, HF, Pneumonia)
    • ~70% of U.S. hospitals penalized
    • Average FY13 penalty: 0.3% of aggregate inpatient payments
  • CMS penalties expected to grow meaningfully
    • New conditions added
    • Penalty caps increased
    • Higher hurdles for “expected” readmission rates
  • Other payers expected to follow CMS in assessing penalties
readmissions penalties in matrc region
Readmissions Penalties in MATRC Region
  • 3 MATRC states and D.C. in highest penalty quartile nationally for CMS 30-day readmissions, and all except Delaware in the top half

FY13 HRRP Penalty Percentage Map

First Quartile (highest penalty rates)

Second Quartile

Third Quartile

Fourth Quartile (lowest penalty rates)

Note: Maryland does not participate in HRRP program due to CMS allowance of its state-based program

Source: CMS; Kaiser Health News

key insights for penalty estimation
Key Insights for Penalty Estimation
  • Future penalties are being “accrued” based on recent/current lack of action on readmission reduction
    • No action now = a deeper hole
  • The penalty “stick” is roughly 5x greater than than Medicare payments for the readmissions themselves
    • Excess readmissions ratio (actual rate ÷expected rate) drives penalty
  • CMS-measured 30-day readmission rates often higher than hospital-measured “raw” rates
    • Due to “all cause” readmission methodology and readmits to other acute care hospitals
  • Excess readmission rates characterized as “No Different from the U.S. National Rate” per Hospital Compare (confidence intervals) are still penalized
cms penalty formulas
CMS Penalty Formulas
  • Estimated penalties depend on:
    • Excessive readmissions in each key condition
    • How “costly” the condition is

Excessive payments for each condition are calculated as:

CMS Medicare Penalty: Calculation Methodology

Hospital’s Actual

Rate

Base DRG

payment for each condition

Discharges in

each condition

  • Notes:
  • Actual Rate calculated over trailing 3-year period (currently FY2009-11)
  • Actual Rates are “risk-adjusted”
  • Expected Rate = U.S. national rate over same period

X

X

1

Hospital’s Expected Rate

Calculate the sum of excessive payments for all conditions (currently: AMI, HF, Pneumonia)

Sum of excessive payments

Excess readmissions penalty rate

Aggregate payments for all discharges

  • Penalty rates imposed for each year:
  • FY13: the lower of 1% or the penalty rate
  • FY14: the lower of 2% or the penalty rate
  • FY15: the lower of 3% or the penalty rate
projected cms penalty calculation illustrative hospital case current
Projected CMS Penalty Calculation: Illustrative Hospital Case (Current)
  • Hospital Facts:
    • Medium-sized MATRC-region hospital with ~350 beds
    • Higher 30-day readmit rate than National Rate in all three conditions; AMI a particular problem

Excess Readmission Ratio Calculations

Projected Penalty Calculations

Average Penalty per Patient: $468

=

÷

projected cms penalty calculation 10 decline in expected rate
Projected CMS Penalty Calculation: 10% Decline in “Expected Rate”
  • Key Assumptions:
    • National Average rate improves and/or CMS imposes more stringent “expected” rate hurdles so that expected rates decline by 10%
    • Hospital does not take sufficient action to reduce readmissions in key conditions

Excess Readmission Ratio Calculations

Projected Penalty Calculations

Average Penalty per Patient: $1,536

=

÷

value of penalty avoidance often underestimated
Value of Penalty Avoidance Often Underestimated
  • The “Accrual Effect”: penalties being paid now are lower than penalties actually being accrued, if no improvement is made
    • Penalty estimates with Hospital Compare based on 3-year look back, so penalties paid now based on actions not taken in FY09-11
    • What hospitals do now has a delayed impact on penalty avoidance but is critical to avoid “deeper hole”
  • “Expected” Readmissions rate will continue to fall
    • As other hospitals improve, reducing raw national rate
    • If CMS unilaterally sets more aggressive target rates
  • New conditions will be added
    • Four new conditions (COPD, PTCA, CABG, other vascular) included in FY15 penalty
    • Assume same 3-year look-back methodology
  • Penalty caps will be increased each year
    • 1% currently
    • 2% in FY14
    • 3% in FY15
costing an rpm cc solution components
“Costing” an RPM/CC Solution: Components
  • Staff-related monitoring costs:
    • Patient : staff monitor ratios – from 75:1 to 150:1 depending on type of solution, 30-day readmissions vs. chronic disease management
    • Use of RNs vs. health coaches/social workers
    • Hours of center operation
  • Staff-related field costs:
    • Installation/refurbishment
    • Depends on population targeted – 30-day readmits vs. chronic disease management (i.e .shorter monitoring periods mean higher amount of patient “churn”)
    • Depends on region covered (i.e. location of monitoring center relative to patients)
  • Technology-related costs:
    • Hardware and software typically bundled, peripherals can vary
    • Leasing more common than owning
    • EMR Integration extra
  • Other costs:
    • Project management
    • Integration with key provider departments (case management, clinical, home health)
costing a turnkey solution illustrative
Costing a Turnkey Solution: Illustrative
  • Primary cost drivers are in centralized monitoring and field support staff
  • Don’t forget PCP and departmental interfaces, as well as program management
  • Technology only 10-15% of total cost bar
  • Estimated cost of $700-$1,100 per patient – some scale required

50% of costs in monitoring/ field staff

making the business case matrc hospital illustrative case
Making the Business Case: MATRC Hospital Illustrative Case

Value of avoided penalties (per patient)

Estimated cost of RPM solution (per patient)

>

At 10% lower “expected” 30-day readmit rates:

~$1,500

~$900

At 5% lower “expected” 30-day readmit rates”:

~ $975

making the business case positioned for the future
Making the Business Case:Positioned for the Future
  • Quality: Improve health outcomes and satisfaction for key patient populations
  • Efficiency: Enhance and better leverage information and analytics between providers to enhance collaboration and provide more effective care
  • Strategic: Position health systems for emerging environments (ACO, shared risk, etc)
matrc telehealth summit

455 Second St SE

Charlottesville, VA 22902

Kirby Farrell

kfarrell@broadaxepartners.com

Andy Archer

aarcher@broadaxepartners.com

MATRC Telehealth Summit

March 2013