Making the Business Case for Hospital RPM/Care Coordination Programs

MAKING THE BUSINESS CASE FOR HOSPITAL RPM / CARE COORDINATION PROGRAMS

MATRC Telehealth SummitMarch 2013

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

2

Who We Are3

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

Care Coordination Center

Primary Care

Physician

Home Health

Nurse Case Manager

Heart FailureAMIPneumoniaCOPDCABGPTCAOther vascular

Over time: Highest-Risk Frequent Readmits

Patient RiskStratification and Selection

Coordination w/Hospital

Discharge

Transition to Home: “Activation” and Daily Monitoring

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

RN monitor

Biom

etric/symptom

data

Alert intervention

Provider Coordination via Clinical Review Software and Reporting

Referral to Care

Coordination Center

Regular reporting

Outcomes Reporting:• Readmissions• Population

health• Costs• Satisfaction

Patient targeting/best practices

EH

R

Hospital-based Clinic

Our Approach to Hospital-Based RPM4

Evidence for RPM Efficacy5

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?6

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 Context7

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 Region8

3 MATRC states and D.C. in highest penalty quartile nationally for CMS 30-day readmissions, and all except Delaware in the top half

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

FY13 HRRP Penalty Percentage Map

Source: CMS; Kaiser Health News

Key Insights for Penalty Estimation9

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 Formulas10

Estimated penalties depend on: Excessive readmissions in each key condition How “costly” the condition is

Hospital’s ActualRate

Hospital’s Expected

Rate

1

1. Excessive payments for each condition are calculated as:

X Discharges ineach condition

XBase DRG

payment for each condition

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

4. 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

3. Excess readmissions penalty rateSum of excessive payments

Aggregate payments for all discharges

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

CMS Medicare Penalty: Calculation Methodology

Projected CMS Penalty Calculation: Illustrative Hospital Case (Current)

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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

problemExcess Readmission Ratio Calculations

Key Condition

Hospital Compare 30-day

Readmit Rate

Expected 30-day Readmit Rate (=US Nat'l Rate)

Excess Readmission Percentage

Excess Readmission

RATIO"Stick

Factor"AMI 22.0% 19.7% 2.3% 11.7% 5.1

Heart Failure 24.8% 24.7% 0.1% 0.4% 4.0

Pneumonia 19.5% 18.5% 1.0% 5.4% 5.4

Projected Penalty Calculations

Key Condition

Excess Readmission

RATIO

Total DRG cost per

conditionPenalty

EstimateAnnual

DischargesAMI 11.7% $1,299,887 $151,763 97Heart Failure 0.4% $1,844,822 $7,469 209Pneumonia 5.4% $541,357 $29,263 97

$188,495 403

Average Penalty per

Patient: $468

÷ =

Projected CMS Penalty Calculation: 10% Decline in “Expected Rate”

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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

Key Condition

Hospital Compare 30-day

Readmit Rate

NEWExpected 30-day

Readmit Rate

Excess Readmission Percentage

Excess Readmission

RATIO"Stick

Factor"AMI 22.0% 17.7% 4.3% 24.1% 5.6

Heart Failure 24.8% 22.2% 2.6% 11.6% 4.5

Pneumonia 19.5% 16.7% 2.9% 17.1% 6.0

Projected Penalty Calculations

Key Condition

Excess Readmission

RATIO

Total DRG cost per

conditionPenalty

EstimateAnnual

DischargesAMI 24.1% $1,299,887 $313,058 97Heart Failure 11.6% $1,844,822 $213,279 209Pneumonia 17.1% $541,357 $92,665 97

$619,002 403

Average Penalty per

Patient: $1,536

÷ =

Value of Penalty Avoidance Often Underestimated

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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

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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: Illustrative15

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

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

18%

30%

20%

11%

21%

Other

Technology

Field Staff

Clinical Monitoring Staff

Program Mgmt and Hospi-tal Interface

RPM Cost Components

50% of costs in

monitoring/ field staff

Making the Business Case: MATRC Hospital Illustrative Case

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Value of avoided penalties (per patient)

>Estimated cost of

RPM solution (per patient)

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

~$900~$1,500

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

~ $975

Making the Business Case:Positioned for the Future

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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 SummitMarch 2013

455 Second St SECharlottesville, VA 22902

Kirby [email protected]

Andy [email protected]