BPCI Advanced CMS Voluntary Bundled Payment Program: Overview May 2019 - Date - Tower Health

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BPCI Advanced             Date

CMS Voluntary Bundled Payment Program: Overview
May 2019

CONFIDENTIAL
Table of Contents

                            I.       Introduction

                          II.        Program Details

                        III.         Strategic Considerations

                                     Appendix A: Episode Detail

                                     Appendix B: Target Price Detail

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I. Introduction

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I. Introduction
                                                                                  BPCI Advanced

        CMS recently announced that it would be opening up its second application period
        for BPCI Advanced in April, for a program start date of January 1, 2020.

    ECG’s introduction to BPCI Advanced includes:

                                                         Description of program features, important
              Program
                                                         application deadlines and other dates, clinical
               Details                                   episodes, pricing structure, and additional details

       Strategic                                         Strategic considerations regarding next steps,
     Considerations                                      staffing models, and other ECG recommendations

    Note: Prospective Payment System–exempt cancer hospitals, inpatient (IP) psychiatric facilities, critical access hospitals, hospitals in Maryland, hospitals participating in the Rural
          Community Hospital Demonstration, and participant hospitals in the Pennsylvania Rural Health Model cannot participate in BPCI Advanced.

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I. Introduction
                                                                       Current Participation

                1,295 Participants                                     715 Acute Care Hospitals   580 Physician Group Practices
                                                                               (ACHs)                            (PGPs)

                Participation by Service Line
                                                                                                           534
                                   Kidney                                                                  479
               Neurology             4%                                                                    469
                   4%                                                                                      434
     Gastrointestinal                                                                                      371
          (GI)                                                                                             359
                                                                                                           354
           8%                                                                                              353
                                                                                                           345
                                                 Spine, Bone,                                              344
                                                  and Joint                                                344
                 Pulmonary                           31%                                                   315
                    10%                                                                                    313
                                                                                                           260
                  Infectious                                                                               235
                   Disease                                                                                 232
                     13%                                                                                   221
                                                                                                           218
                                     Cardiovascular                                                        206
                                          30%                                                              198
                                                                                                           189
                                                                                                           184
                                                                                                           165
                                                                                                           143
                                                                                                           111
                                                                                                           100
                                                                                                           93
                                                                                                           70
                                                                                                           63
   Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.

                                                          On March 1, 2019, 16% of participants
                                                     (295 providers) dropped out of BPCI Advanced.
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I. Introduction
                                       Program Benefits

                                                          Offers an opportunity to
                                                          learn how to manage
   Qualifies as an                                        total cost of care
   Advanced APM;
   physicians eligible for
   bonuses under MACRA

                                                          Fosters a collaborative
                                           BPCI           clinical culture across
                                                          settings and functional
   Engages and aligns                    Advanced         areas
   physicians and provides
   certain gainsharing
   waivers

   Provides historical
   benchmark data for                                     Reduces costs and
   episodes, within and                                   improves care delivery
   outside the organization                               across the episode

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II. Program Details

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II. Program Details
                                                                       BPCI Advanced Overview

                    Program Features                                                  Key Stakeholders                                                   Eligible Participants

    » BPCI Advanced is a voluntary bundled                            » Convener Participants bring together                            » ACHs and PGPs may take part as Convener
      payment model with a single risk track.                           multiple downstream entities and facilitate                       or Non-Convener Participants.
    » It includes 33 IP episodes and 4 outpatient                       coordination; they bear and apportion                           » Other entities may take part as Convener
      (OP) episodes.1                                                   financial risk.                                                   Participants only.
    » The program runs from January 1, 2020,                          » Non-Convener Participants bear financial
      through December 31, 2023.                                        risk only for themselves, not on behalf of
                                                                        multiple downstream entities.
    » It qualifies as an Advanced APM.

                    Reconciliation and
                                                                                      Target Price                                                       Quality Measures
                    Payment

    » A single retrospective payment includes a                       » A 3% discount is applied to historical                          » Participants can choose between two
      triggering IP stay or OP procedure and the                        Medicare FFS expenditures for each                                quality measures sets: (1) claims-based
      90-day period starting on the day of                              episode.2                                                         measures used in MYs 1 and 2 including
      discharge.                                                      » Preliminary TPs will be provided for each                         advance care plan, all-cause readmissions,
    » The total Medicare fee-for-service (FFS)                          episode in advance of the first                                   and other episode-specific metrics, or
      payment for the episode is reconciled against                     performance period of each MY.                                    (2) claims- and registry-based measures yet
      target prices (TPs) on a semiannual basis                                                                                           to be defined.
      and adjusted for quality performance.                                                                                             » Participants will be accountable for no more
                                                                                                                                          than five measures per episode.

    1 Participants that start in Model Year (MY) 3 (January 1, 2020) may not add or drop clinical episodes until the start of MY 4 (January 1, 2021). Active participants as of March 2019 will not
      be allowed to make any changes until the start of MY 3 (January 1, 2020).
    2 The 3% discount is a continuation from MYs 1 and 2. However, CMS may make slight adjustments to this amount in future MYs.

    Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.

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II. Program Details
                                                                                Clinical Episodes

        Starting Model Year 3, there are a total of 37 clinical episodes (4 outpatient and 33
        inpatient). New episodes for 2020 are indicated in bold font.
                     Cardiovascular                                               Spine, Bone, and Joint                                                  Gastrointestinal
    » Acute myocardial infarction                                     » Back and neck except spinal fusion (OP                           » Disorders of the liver (excluding
    » Cardiac arrhythmia                                                episode)                                                           malignancy, cirrhosis, and alcoholic
    » Cardiac defibrillator (OP episode)                              » Cervical spinal fusion                                             hepatitis)
    » Cardiac valve                                                   » Combined anterior posterior spinal                               » GI hemorrhage
    » Congestive heart failure (CHF)                                    fusion                                                           » GI obstruction
    » Coronary artery bypass graft                                    » Double joint replacement of the lower                            » Inflammatory bowel disease1
                                                                        extremity                                                        » Major bowel procedure
    » Pacemaker
                                                                      » Fractures of the femur and hip or pelvis
    » Percutaneous coronary intervention
      (PCI) (OP episode)                                              » Hip and femur procedures except major                                                 Neurology
                                                                        joint
    » Transcatheter aortic valve                                                                                                         » Seizures1
      replacement (TAVR)1                                             » Lower extremity/humerus procedure
                                                                        except hip, foot, and femur                                      » Stroke
                            Kidney                                    » Major joint replacement of the lower
                                                                        extremity (IP and OP1 episodes)
                                                                                                                                                              Pulmonary
    » Renal failure
                                                                      » Major joint replacement of the upper                             » Chronic obstructive pulmonary disease
                                                                        extremity                                                          (COPD), bronchitis, asthma
                  Infectious Disease                                  » Spinal fusion (noncervical)                                      » Simple pneumonia
    » Cellulitis
    » Sepsis                                                                                                                                                   Bariatrics
    » Urinary tract infection (UTI)                                                                                                      » Bariatric surgery1
    1  New clinical episode for MY 3.
    Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.
    Note: Participants that start in MY 3 (January 1, 2020) may not add or drop clinical episodes until the start of MY 4 (January 1, 2021). Active participants as of March 2019 will not be allowed
          to make any changes until the start of MY 3 (January 1, 2020).
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II. Program Details
                                                             Timeline

                                                                        November 2019
                                                                  »   CMS Selects Second
 October 1, 2018                                                      Cohort
    BPCI Advanced                            June 24, 2019        »   Participation Agreements    January 1, 2020
     Starts for First                  Deadline: Applications         and Participant Profiles   BPCI Advanced Starts
        Cohort                           Are Due to CMS               Are Due                     for Second Cohort

                         April 24, 2019                 September 2019                 December 2019
                           Application for          »   Historical Claims and           Submit All Other
                           Second Cohort                TPs Are Distributed to             Q1 2020
                              Begins                    Applicants                      Deliverables to
                                                    »   CMS Distributes                      CMS
                                                        Participation Agreements

                                             The BPCI Advanced program ends for both
                                                  cohorts on December 31, 2023.
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II. Program Details
                                                        Exclusions and Precedence Rules

                A Medicare FFS beneficiary receives an anchor service for a BPCI
                Advanced clinical episode at a participating acute care hospital.

    Is the beneficiary                              Is the anchor                        Is the                              Is the
    aligned to:                                     service a joint                      attending                           operating
    »   A Next Generation                           replacement,                         physician part                      physician part                        The clinical
        Accountable Care                            and was it                           of a PGP                            of a PGP                               episode is
        Organization (ACO)?               No        performed at a            No         participating in          No        participating in           No
                                                                                                                                                                   attributed to
    »   Medicare Shared                             Comprehensive                        BPCI                                BPCI                                   the ACH.
        Savings Program                             Care for Joint                       Advanced?                           Advanced?
        ACO Track 3?                                Replacement
    »   An ESRD Seamless                            (CJR) hospital?
        Care Organization with
        downside risk?                                       Yes                                 Yes                                  Yes
    »   An ACO participating in
        the Vermont Medicare                           The clinical
        ACO Initiative?                                                                    The clinical                         The clinical
                                                        episode is
                                                                                            episode is                           episode is
                  Yes
                                                     excluded and
                                                                                         attributed to the                    attributed to the
                                                    attributed1 to the
                                                                                               PGP.                                 PGP.
                                                     CJR hospital.
             The clinical
             episode is
              excluded.
    1 Attributed to the entity that is at risk.

    Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.
    Note: CMS has not released details regarding the overlap between BPCI Advanced and Pathways to Success models. Entities may participate in both BPCI Advanced and the Oncology Care
            Model; however, CMS will adjust Oncology Care Model payments based on episode overlap.
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II. Program Details
                                                                                      Target Price

          To determine program savings, CMS will compare Medicare FFS expenditures in
          the clinical episode against the TP for that episode. Preliminary TPs will be
          provided in advance of the first performance period of each MY.

          Standardized
                                                             Patient Case Mix                                                Peer-Adjusted
        Baseline Spending
                                                            Adjustment (PCMA)                                                 Trend Factor
              (SBS)
         Historical efficiency of                          Adjusts for varying levels                                   Adjusts for persistent                                  Benchmark
         ACHs based on risk-                                 of severity1 in ACHs’                                      differences in episode                                    Price
        and peer-standardized                              patient case mix that are                                   spending levels across
        episode spending in the                             outside their control                                        ACH peer groups2
            baseline period

                                                     Benchmark                              3%
                                                                                                                                   TP
                                                       Price                             Discount3
    1 Patient characteristic categories used to adjust risk include Hierarchical Condition Categories (HCCs), HCC interactions, HCC severity, recent resource use, demographics, long-term
      institutional, Medicare Severity Diagnosis Related Group (MS-DRG)/Ambulatory Payment Classification (APC), comprehensive APC (C-APC), and clinical episode category–specific
      adjustments.
    2 Peer groups will be determined by geographical and hospital characteristics, including classifications such as academic medical center, urban/rural, safety net hospital, census division,

      and bed count.
    3 The 3% discount is a continuation from MYs 1 and 2. However, CMS may make slight adjustments to this amount in future MYs.

    Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.

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II. Program Details
                                                           Reconciliation and Stop-Gain/Loss

        CMS will apply a 20% stop-gain/loss provision to the net payment reconciliation
        amount (NPRA); a participant may only earn up to 20% of its target spending if
        savings are achieved.
                                                 Example: Stop-Gain Applied to Total Savings (NPRA)

                        Spending across All Episodes                                  The difference      Target Spend:                 $1,000,000
   $1,200,000                                                                      between the target
                                                                                      spend and the       Actual Spend:                    (750,000)
   $1,000,000                                                                         actual spend is     Savings/NPRA:                 $ 250,000
                                                                                       known as the
                                    $1,000,000

                                                                                       NPRA. In this      Quality Adjustment:             (25,000)
      $800,000
                                                                                   example, the NPRA      (+/- 10%)                     $ 225,000
                                                                        $750,000

                                                                                   is $250,000 across
      $600,000
                                                                                    all episodes. This    Stop-Gain
                                                                                   amount is adjusted     (20% of Target Spend):        $ 200,000
      $400,000                                                                         for (1) quality
                                                                                   performance, up to       The participant earns the lesser of the
      $200,000                                                                        10%, and (2) a        stop-gain or the quality-adjusted NPRA.
                                                                                   stop-gain provision.   Net Program Earnings:          $ 200,000
               $0
                        Target Spending                   Actual Expenditures
                      (determined by CMS)                        (FFS)

    Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.

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II. Program Details
                                                                         Waivers

                                                                  Payment Policy Waivers
    If the participant wishes to furnish services to BPCI Advanced beneficiaries pursuant to the policy waivers
    below, the participant must submit to CMS its intent to use the waivers in its Participant Profile.

          Three-Day                           » Waives: Three-day rule for SNFs with overall rating of three stars or better
           SNF Rule                           » Implications: Beneficiaries who meet clinical criteria discharged to a more
           Payment                              appropriate care setting earlier (must enter into a written agreement with a
         Policy Waiver                          qualified SNF to qualify)

        Postdischarge                         » Waives: Direct supervision requirement
         Home Visits
          Payment                             » Implications: In-home postdischarge visits from a nurse without a physician
        Policy Waiver                           present

    Telehealth Payment                        » Waives: Geographic and originating site requirements
       Policy Waiver                          » Implications: Delivery of telehealth services to beneficiaries in their homes

    Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.

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III. Strategic Considerations

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III. Strategic Considerations
                                           Key Resources

        Preliminary discussions with select team members will help to frame initial
        responses for each application question.

     Quality                                                        Case Management

     Care Coordination                                                          Finance

     Legal and Compliance                                                       Strategy

     Data and IT                                                         Medical Affairs

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III. Strategic Considerations
                                                          Key Questions
        As organizations analyze their historical claims data and preliminary TPs, they should
        keep in mind these considerations when determining which episodes to select.

    Financial
                     Is the volume in the selected episode(s) sufficient?
                     How do readmissions and/or post-acute utilization rates drive cost in the episode?
                     How does episode cost compare to the TP? Will there be a savings opportunity?
    Strategic
                     What is the organization’s appetite for moving from volume to value? Is the organization ready for value-
                     based payments?
                     Would the organization benefit from enhanced physician alignment through an initiative focused on
                     gainsharing of the savings associated with bundled payments?
                     Are there service lines that may benefit from additional efforts to either develop care pathways or further
                     refine and operationalize existing pathways?
                     Would the organization benefit from a more aligned and preferred post-acute care provider network?
    Operational
                     What type of organizational and governance structures would need to be implemented to effectively
                     manage the bundled payment program?
                     Does the hospital have the appropriate administrative and physician leadership and support?
                     What type of analytics and performance reporting capabilities exist?
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III. Strategic Considerations
                                                                 Episode Selection Analytics
        ECG provides detailed analysis by episode in order to determine the participant’s greatest
        opportunity for program success. A blinded client example in the first BPCI Advanced
        cohort is shown below.
                                                                            Average           Average Variance               Average                       Average PAC Cost
                                        Average         Preliminary           Cost                                         Annual Dollars    Average PAC     as Percentage
              Episode                   Episodes             TP           per Episode             $              %         Earned/(Lost)         Cost          of Episode
  Sepsis                                   135            $31,272           $30,435            $837           2.7%            $112,676        $20,126           66%
  CHF                                       88            $27,444           $27,728           $(284)         (1.0%)          $(24,978)        $20,897           75%
  COPD                                      80            $22,136           $21,433            $703           3.3%             $55,989        $15,482           72%
   Pneumonia                                 77            $24,665           $27,981          $(3,316)       (11.9%)          $(254,258)       $20,640           74%
  UTI                                       68            $26,760           $27,571           $(810)         (2.9%)          $(55,361)        $21,953           80%
  Stroke                                    51            $30,166           $31,442          $(1,275)        (4.1%)           $(65,474)       $24,514           78%
  Cardiac Arrhythmia                        44            $18,570           $18,414            $156           0.8%              $6,857        $13,222           72%
  GI Bleed                                  40            $22,287           $21,395            $892           4.2%             $35,979        $14,326           67%
   MJRLE                                     40            $30,688           $35,087          $(4,399)       (12.5%)          $(174,482)       $21,337           61%
  PCI (IP)                                  38            $30,925           $29,037           $1,887          6.5%             $72,347        $13,942           48%
  Cellulitis                                37            $23,996           $24,403           $(407)         (1.7%)          $(15,065)        $18,871           77%
  Renal Failure                             36            $27,410           $27,551           $(140)         (0.5%)            $(5,046)       $20,956           76%
  AMI                                       30            $26,225           $24,867           $1,358          5.5%             $41,199        $17,308           70%
  PCI (OP)                                  30            $21,182           $18,707           $2,475         13.2%             $73,420         $7,783           42%
   Hip and Femur Except Joint                23            $45,973           $48,501          $(2,528)        (5.2%)           $(57,299)       $35,823           74%
  Spinal Fusion (noncervical)               17            $46,400           $48,107          $(1,707)        (3.5%)           $(29,021)       $20,774           43%
  Pacemaker                                 15            $31,516           $32,843          $(1,327)        (4.0%)           $(19,902)       $16,309           50%
       Selected by leadership for further analysis.
        Green = Positive variance from TP.
        Yellow = Further consideration of market dynamics and strategic priorities required.
        Red = Eliminated from consideration given negative variance from TP.
    Source: CMS BPCI Advanced preliminary TPs (2013 to 2016) and raw claims (2014 to 2016); received from CMS on July 9, 2018.
    Notes: Figures may not be exact due to rounding. Episodes with fewer than 15 cases were excluded. PAC cost includes professional fees.
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III. Strategic Considerations
                                            Next Steps

    » Determine the level of organizational readiness for value-based payments.
    » Decide if BPCI Advanced aligns with the overarching organizational strategy.
    » Evaluate the potential for physician alignment.
            › Consider a gainsharing arrangement with your physicians.
    » Move forward with the application process—CMS will provide the financial
      performance of all 37 episodes.
    » Review the financial results of the episodes.
    » Identify the episodes with the greatest strategic and financial value.
    » Decide on Participation or Not.
    » If participating, then:
            › Complete the application process.
            › Implement gainsharing.
            › Develop a post-acute care network.
            › Manage and monitor program performance.

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Appendix A
                                     Episode Detail

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Episode Detail
                                                                              Episode Definitions
                                  Inpatient Clinical Episode                     DRG 1           DRG 2         DRG 3         DRG 4        DRG 5   DRG 6   DRG 7   DRG 8
    Acute myocardial infarction                                                    280            281            282
    Back and neck except spinal fusion                                             518            519            520
    Bariatric surgery1
    Coronary artery bypass graft surgery                                           231            232            233          234          235     236
    Cardiac arrhythmia                                                             308            309            310
    Cardiac defibrillator                                                          222            223            224          225          226     227
    Cardiac valve                                                                  216            217            218          219          220     221     266     267
    Cellulitis                                                                     602            603
    Cervical spinal fusion                                                         471            472            473
    Combined anterior posterior spinal fusion                                      453            454            455
    Congestive heart failure                                                       291            292            293
    COPD, bronchitis/asthma                                                        190            191            192          202          203
    Disorders of liver except malignancy, cirrhosis, or alcoholic hepatitis        441            442            443
    Double joint replacement of the lower extremity                                461            462
    Fractures, femur and hip/pelvis                                                533            534            535          536
    GI hemorrhage                                                                  377            378            379
    GI obstruction                                                                 388            389            390
    Hip and femur procedures except major joint                                    480            481            482
    Inflammatory bowel disease1
    Lower extremity and humerus procedure except hip, foot, femur                  492            493            494
    Major bowel procedure                                                          329            330            331
    Major joint replacement of lower extremity                                     469            470
    Major joint replacement of upper extremity                                     483
    Pacemaker                                                                      242            243            244
    Percutaneous coronary intervention                                             246            247            248          249          250     251     273     274
    Renal failure                                                                  682            683            684
    Seizures1
    Sepsis                                                                         870            871            872
    Simple pneumonia and respiratory infections                                    177            178            179          193          194     195
    Spinal fusion (noncervical)                                                    459            460
    Stroke                                                                         61              62            63            64          65      66
    TAVR1
    Urinary tract infection                                                        689            690

                       New clinical episode for MY 3.
                            1

                                                                                                                                                                    A-1
CONFIDENTIAL         Note: CMS has indicated that the MS-DRGs and HCPCS codes that are included will be made available at a later time.
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Episode Detail
                                                              Episode Definitions (continued)
                                                              HCPCS       HCPCS      HCPCS      HCPCS     HCPCS     HCPCS    HCPCS   HCPCS   HCPCS HCPCS HCPCS HCPCS HCPCS
                    Outpatient Clinical Episode                 1           2          3          4         5         6        7       8       9     10    11    12    13

   Back or neck except spinal fusion                           62287       63005      63011     63012      63017     63030   63040   63042   63045   63046   63047   63056   63075

   Cardiac defibrillator                                       33262       33263      33264     33249      33270

   TKA1

   Percutaneous coronary intervention                          92920       C9600      C9604     92924      92937     92928   92943   C9606   92933   C9602   C9607

    1 New clinical episode for MY 3.
    Note: CMS has indicated that the MS-DRGs and HCPCS codes that are included will be made available at a later time.

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Appendix B
                                     Target Price Detail

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Target Price Detail
                                                                           TP Key Features

       Efficiency Measure: Historic spending is incorporated into
       the target price (TP), where higher-than-peer-group
1      spending results in a higher efficiency measure and,
       therefore, higher TP.

                                                                         Peer Group Trends: Clinical episode spending for participant
                                                                         and peer groups is determined prospectively, to allow the
                                                                         participant to achieve savings after accounting for differences    2
                                                                         in case mix.

       Patient Case Mix: More-complex, high-acuity patients lead to
3      a higher price adjustment, and a healthier patient population
       drives a lower price adjustment.

                                                                         Reward for Improvement: The pricing will reward
                                                                         improvement over time, and participants must reduce spending
                                                                         to achieve this savings.
                                                                                                                                            4

       Reward for High-Quality Care: The combination of TP
5      methodology and the composite quality score promotes
       savings to Medicare while also providing high-quality care.

                                 Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.
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Target Price Detail
                                                          Patient Case Mix Adjustment

  Patient Case Mix Is Accounted for in Multiple Ways

  1      MS-DRG and C-APC assignment
                                                                        2   Patient Characteristics
                                                                            Demographic characteristics (e.g.,
                                                                            age, gender), long-term institutional
                                                                            status, dual eligibility, HCCs,
                                                                            interactions, counts, and recent

  3      HCCs                                                               resource use
         Individual diagnoses grouped by similar
         diagnoses and illness severity; individual
         HCC categories used to account for
         clinical conditions in the BPCI Advanced
         model

                                      This methodology accounts for interactions between conditions. For
                                      example, heart failure is more difficult to manage if paired with renal
                                      impairment. The case mix will differ depending on the complexity of
                                      patients attributed to the clinical episode in the performance year.
    Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.

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Target Price Detail
                                                       Standardized Baseline Spending

    Spending in the Baseline Period                                              Suburban
                                                                                                                            Urban Academic
    » CMS adjustments are removed when                                           Hospital
                                                                                                                            Medical Center
      calculating historical clinical episode
      costs and making comparisons to other                              Rent          Teaching                     Rent               Teaching Costs
      ACHs. This allows for comparison of
                                                                                       Proportion of                                   Disproportionate
      the intensity of services provided,                                Labor         Uninsured                    Labor
                                                                                                                                       Share
      independent of context.
    » These adjustments are reapplied in the                          CMS adjusts payments for:
      final step of setting ACH benchmarks.                           » Regional labor costs and practice expenses (i.e., hospital wage indexes and
                                                                        geographic practice cost indexes).
                                                                      » Graduate medical education and indirect medical education.
                                                                      » Serving a large population of poor and uninsured patients (i.e.,
                                                                        disproportionate share payments).

    Historical Efficiency
    The efficiency calculation quantifies the                              Hospital A                                Hospital B
    relationship between resources utilized                                Excellent Outcomes                        Excellent Outcomes
    to achieve an outcome and outcomes
                                                                                              Low                                            High
    achieved. In this example, hospital A is                             Testing              Unit                    Testing                 Unit
    more efficient because it uses less                                                     Volumes                                         Volumes
                                                                         Inpatient Days                               Inpatient Days
    services but achieves the same clinical
    outcome as hospital B.                                               Post-Acute Care Days                         Post-Acute Care Days
                                                                         Readmissions                                 Readmissions
  Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.

                                                        Cost alone does not reflect efficiency.
CONFIDENTIAL
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Target Price Detail
                                                                  Peer-Adjusted Trend Factor

        Hospitals are not compared to specific peer hospitals. Instead, these factors are
        accounted for in a multivariate model.
  Bundled Clinical Episodes Compare Peers on the Basis of the Type and
  Quantity of Services Provided
  Factors considered in identifying ACH peers include:

               Bed Count                                                             Safety Net Status

               Rural/Urban Setting                                                   Census Division

               Academic Medical Center Status

      If all your peers achieve more-efficient care, over time you’ll be held to that same standard.
      » Example: More-efficient use of post-acute care in orthopedic bundles

      Conversely, if all your peers start using a new treatment that changes costs and outcomes, it will adjust
      your TP.
      » Example: New, expensive curative treatment
    Source: https://www.innovation.cms.gov/initiatives/bpci-advanced.

CONFIDENTIAL
1678.010\480360(pptx)-E2 DD 5-7-19                                                                                B-4
Target Price Detail
                                                                 Implications

        The final TP will not be determined until the end of October 2019. While most
        changes will be linked to the Medicare fee schedule through the SBS, adjustments
        to the PCMA could have a greater impact on the final TP.

                                                 Methodology                                             Implication

                               » Historic spending is adjusted by an efficiency
                                                                                     » Actual spending will be updated quarterly to
                                 measure that is a ratio of observed to predicted
                                                                                       reflect changes to the Medicare fee schedule.
                                 spending.
            SBS                » Observed spending that is higher than
                                                                                     » Adjustments to this component are expected to
                                                                                       be minor.
                                 predicted spending will increase the SBS.

                               » PCMA is the ratio between average case mix–
                                                                                     » PCMA will be adjusted at the end of the MY to
                                 adjusted spending and average predicted
                                                                                       reflect performance year case mix
                                 baseline spending across all hospitals.
          PCMA                                                                       » If case mix changes relative to the average, TP
                               » A higher PCMA indicates a higher-acuity case
                                                                                       will also be affected.
                                 mix and a higher TP.

                               » This factor adjusts for persistent differences in
                                 the peer group trends through the end of MY 1.
         Peer                                                                        This factor will not exhibit large fluctuations, either
                               » Factors considered in identifying peers include     in increases or decreases in spending, that cannot
      Adjustment                 bed count, rural/urban setting, academic/           be expected to persist.
     Trend Factor                nonacademic status, safety net status, and
                                 census division.

CONFIDENTIAL
1678.010\480360(pptx)-E2 DD 5-7-19                                                                                                       B-5
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