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1 The Changing Healthcare Environment Medicare Implications and Impact on Commercial Payor Contract Negotiations for Spine, Orthopedics, and Pain Management June 9, 2016
2 About ECG ECG partners with providers to create the strategies and solutions that are transforming healthcare delivery. With more than 40 years of service to the industry, we can help organizations thrive in a valuebased world. In October 2015, ECG and Eveia Health joined forces to create a firm with unparalleled domain expertise in ambulatory surgery in addition to our skills in strategy, finance, operations, and technology. 1
3 Current Environment 2
4 Current Environment Medicare for ASCs Orthopedic Reductions and Inadequacies Packaged and Disallowed Codes for Payment Impact on Spine and Pain Management 3
5 2016 Biggest Winners Sample Eveia Procedure Category 2015 CPT 2016 CPT 2016 Description 2015 Medicare ASC Rate 2016 Medicare ASC Rate $ Diff % Diff Ortho - Foot/Ankle Closed treatment of posterior malleolus fra $92.65 $ $ % Pain Pumps Implantation or replacement of device for in $2, $12, $10, % Exclude - Radiology MRI Magnetic resonance (eg, proton) imaging, $ $1, $1, % Ophthalmology - Other Removal of foreign body, intraocular; from p $ $ $ % Ophthalmology - Other Paracentesis of anterior chamber of eye (s $ $ $ % Ophthalmology - Other Iridotomy by stab incision (separate proced $ $ $ % Ophthalmology - Cataract Discission of secondary membranous cata $ $ $ % Ortho - Other Application of multiplane (pins or wires in m $1, $7, $6, % Ortho - Other Excision or curettage of bone cyst or benig $1, $7, $6, % Ortho - Shoulder Closed treatment of scapular fracture; with $ $ $ % Ortho - Shoulder Closed treatment of shoulder dislocation, w $ $ $ % Ortho - Other Closed treatment of humeral shaft fracture; $ $ $ % Ortho - Other Closed treatment of supracondylar or trans $ $ $ % Ortho - Other Closed treatment of humeral epicondylar fr $ $ $ % Ortho - Other Closed treatment of humeral condylar fract $ $ $ % Ortho - Other Closed treatment of radial head or neck fra $ $ $ % Ortho - Other Closed treatment of ulnar fracture, proxima $ $ $ % Ortho - Other Closed treatment of radial shaft fracture an $ $ $ % Ortho - Other Closed treatment of radial and ulnar shaft f $ $ $ % Source: ASC Payment (2016), retrieved from 4
6 2016 Biggest Losers Sample Eveia Procedure Category 2015 CPT 2016 CPT 2016 Description 2015 Medicare ASC Rate 2016 Medicare ASC Rate $ Diff % Diff Ophthalmology - Retina Repair of retinal detachment; by injection o $1, $ ($1,258.45) -73.5% GI/Colo-Rectal Esophagoscopy, flexible, transnasal; diagn $ $ ($277.16) -67.8% Ortho - Arthros Arthroscopy, elbow, diagnostic, with or wit $2, $ ($1,567.41) -65.8% Ortho - Arthros Arthroscopically aided treatment of interco $2, $ ($1,567.41) -65.8% Ortho - Shoulder Capsulorrhaphy, anterior; Putti-Platt proced $3, $1, ($2,125.03) -61.3% Ortho - Shoulder Capsulorrhaphy, anterior, any type; with bo $3, $1, ($2,125.03) -61.3% Ortho - Other Flexor-plasty, elbow (eg, Steindler type ad $3, $1, ($2,125.03) -61.3% Spine - Fusion Arthrodesis, posterior or posterolateral tech $7, $3, ($4,310.97) -55.0% Ortho - Other Osteochondral allograft, knee, open $7, $3, ($4,310.97) -55.0% Ortho - Foot/Ankle Reconstruction (advancement), posterior ti $2, $1, ($1,520.28) -53.2% Ortho - Arthros Arthroscopy, shoulder, surgical; with remo $2, $1, ($1,041.59) -43.7% Ortho - Arthros Arthroscopy, shoulder, surgical; synovecto $2, $1, ($1,041.59) -43.7% Ortho - Arthros Arthroscopy, shoulder, surgical; debrideme $2, $1, ($1,041.59) -43.7% Ortho - Arthros Arthroscopy, shoulder, surgical; distal clav $2, $1, ($1,041.59) -43.7% Ortho - Arthros Arthroscopy, elbow, surgical; synovectomy $2, $1, ($1,041.59) -43.7% Ortho - Arthros Arthroscopy, wrist, surgical; internal fixatio $2, $1, ($1,041.59) -43.7% Ortho - Arthros Arthroscopy, hip, diagnostic with or withou $2, $1, ($1,041.59) -43.7% Ortho - Arthros Arthroscopy, hip, surgical; with removal of $2, $1, ($1,041.59) -43.7% Source: ASC Payment (2016), retrieved from 5
7 Common Orthopedic and Pain Procedures Packaged ASC Medicare-Approved Add-On Code Examples arthroscopy shoulder, in addition to primary add l level injection, cervical or thoracic add l level, lumbar or sacral add l level injection, 2nd level, cervical or thoracic add l level injection, 3rd or more, cervical or thoracic add l level injection, 2nd level, lumbar or sacral add l level, injection, 3rd or more, lumbar or sacral 6
8 Common Spine Procedures Disallowed or Packaged 20930, , allograft autograft each additional interspace (cervical fusion) each additional vertebral segment (lumbar fusion) application of cage Spine Add-On Code Examples anterior instrumentation for 2 to 3 vertebral segments spinal disk surgery add on decompress spine add on 7
9 ACDF Example 1 and 2 Level Without Cage Case Pricing Analysis CASE PRICING FOR SELECTED CPT COMBOS - SPINE 2015 Medicare Area-Adj ASC Rates 2016 Medicare Area-Adj ASC Rates * Medicare does not pay separately for implants * Medicare does not pay separately for implants Case Type CPT CPT Description CPT Rate Eligible for Mcare ASC MultPx Adj MultPx Adj ProjNR Note CPT Rate Eligible for Mcare ASC MultPx Adj MultPx Adj ProjNR Note 1 Level ACDF, w/o cage Arthrodesis, anterior interbody, including disc sp $7,844 Y 100% $7,844 $7,887 Y 100% $7, Anterior instrumentation; 2 to 3 vertebral segme $0 N/A N/A $0 $0 N/A N/A $ Allograft, structural, for spine surgery only (List $0 N N/A $0 $0 N/A N/A $0 Implant $0 * $0 * Case Total $7,844 $7,887 2 Level ACDF, w/o cage Arthrodesis, anterior interbody, including disc sp $7,844 Y 100% $7,844 $7,887 Y 100% $7, Arthrodesis, anterior interbody, including disc sp $0 N/A N/A $0 $0 N/A N/A $ Anterior instrumentation; 2 to 3 vertebral segme $0 N/A N/A $0 $0 N/A N/A $ Allograft, structural, for spine surgery only (List $0 N N/A $0 $0 N/A N/A $ Allograft, structural, for spine surgery only (List $0 N N/A $0 $0 N/A N/A $0 Implant $0 * $0 * Case Total $7,844 $7,887 Source: ASC Payment (2016), retrieved from 8
10 ACDF Example 1 and 2 Level With Cage Case Pricing Analysis CASE PRICING FOR SELECTED CPT COMBOS - SPINE 2015 Medicare Area-Adj ASC Rates 2016 Medicare Area-Adj ASC Rates * Medicare does not pay separately for implants * Medicare does not pay separately for implants Case Type CPT CPT Description CPT Rate Eligible for Mcare ASC MultPx Adj MultPx Adj ProjNR Note CPT Rate Eligible for Mcare ASC MultPx Adj MultPx Adj ProjNR Note 1 Level ACDF, with cage Arthrodesis, anterior interbody, including disc sp $7,844 Y 100% $7,844 $7,887 Y 100% $7, Anterior instrumentation; 2 to 3 vertebral segme $0 N/A N/A $0 $0 N/A N/A $ Application of intervertebral biomechanical devic $0 N/A N/A $0 $0 N/A N/A $ Allograft, morselized, or placement of osteoprom $0 N N/A $0 $0 N/A N/A $0 Implant $0 * $0 * Case Total $7,844 $7,887 2 Level ACDF, with cage Arthrodesis, anterior interbody, including disc sp $7,844 Y 100% $7,844 $7,887 Y 100% $7, Arthrodesis, anterior interbody, including disc sp $0 N/A N/A $0 $0 N/A N/A $ Anterior instrumentation; 2 to 3 vertebral segme $0 N/A N/A $0 $0 N/A N/A $ Application of intervertebral biomechanical devic $0 N/A N/A $0 $0 N/A N/A $ Application of intervertebral biomechanical devic $0 N/A N/A $0 $0 N/A N/A $ Allograft, morselized, or placement of osteoprom $0 N N/A $0 $0 N/A N/A $ Allograft, morselized, or placement of osteoprom $0 N N/A $0 $0 N/A N/A $0 Implant $0 * $0 * Case Total $7,844 $7,887 Source: ASC Payment (2016), retrieved from 9
11 ACDF Example Important Facts The majority of codes in the case are packaged and/or not allowed for payment in the ASC setting. Case reimbursement does not change with or without cage attributed to disallowed Code for payment in the ASC setting. Implants are included in the payment. Reimbursement rates are not adequate; shifting Medicare volume to ASC is unlikely. 10
12 Pain Management CASE PRICING FOR SELECTED CPT COMBOS - PAIN MANAGEMENT 2015 Medicare Area-Adj ASC Rates 2016 Medicare Area-Adj ASC Rates * Medicare does not pay separately for implants * Medicare does not pay separately for implants Case Type CPT CPT Description CPT Rate Eligible for Mcare ASC MultPx Adj MultPx Adj ProjNR Note CPT Rate Eligible for Mcare ASC MultPx Adj MultPx Adj ProjNR Note Interlaminar Epidural - Cervical or Thoracic Injection(s), of diagnostic or therapeutic $368 Y 100% $368 $327 Y 100% $327 Case Total $368 $327 Interlaminar Epidural - Lumbar or Sacral Injection(s), of diagnostic or therapeutic $368 Y 100% $368 $327 Y 100% $327 Case Total $368 $327 2 Level Transforaminal Epidural - Lumbar or Sacral Injection(s), anesthetic agent and/or st $368 Y 100% $368 $327 Y 100% $ Injection(s), anesthetic agent and/or st $0 N N/A $0 $0 N/A N/A $0 Case Total $368 $327 2 Level Facet Joint Injection - Cervical or Thoracic Injection(s), diagnostic or therapeutic a $368 Y 100% $368 $460 Y 100% $ Injection(s), diagnostic or therapeutic a $0 N N/A $0 $0 N/A N/A $0 Case Total $368 $460 3 Level Facet Joint Injection - Cervical or Thoracic Injection(s), diagnostic or therapeutic a $368 Y 100% $368 $460 Y 100% $ Injection(s), diagnostic or therapeutic a $0 N N/A $0 $0 N/A N/A $ Injection(s), diagnostic or therapeutic a $0 N N/A $0 $0 N/A N/A $0 Case Total $368 $460 Source: ASC Payment (2016), retrieved from 11
13 Pain Management Interesting Observations HOPD Versus ASC CASE PRICING FOR SELECTED CPT COMBOS - PAIN MANAGEMENT 2016 Medicare Area-Adj ASC Rates 2016 Medicare Area-Adj HOPD Rates * Medicare does not pay separately for implants * Medicare does not pay separately for implants Eligible for Case Type CPT CPT Description Note CPT Rate Mcare ASC MultPx Adj MultPx Adj ProjNR Note CPT Rate Mcare HOPD SI Eligible for Mcare HOPD MultPx Adj MultPx Adj ProjNR Note Spinal Neurostimulator Implant - 2 Leads Insertion or replacement of spinal neurostimul $21,259 N 100% $21,259 $26,728 J1 C-APC 100% $26, Percutaneous implantation of neurostimulator $3,994 N 100% $3,994 $5,244 J1 Bundled 0% $ Percutaneous implantation of neurostimulator $3,994 N 100% $3,994 $5,244 J1 Bundled 0% $0 Implant * $0 * $0 * Case Total $29,246 $26,728 Spinal Neurostimulator Implant with Laminectomy Insertion or replacement of spinal neurostimul $21,259 N 100% $21,259 $26,728 J1 C-APC 100% $26, Laminectomy for implantation of neurostimula $14,797 N 100% $14,797 $17,359 J1 Bundled 0% $0 Implant * $0 * $0 * Case Total $36,056 $26,728 Source: ASC Payment (2016), retrieved from Hospital Outpatient PPS, retrieved January 26, 2016, from 12
14 Payor Strategy and Negotiation 13
15 What Does it Take to Add New Codes to the Payor s ASC List? Moving Services to ASC Market Considerations Contract Term» Payor due diligence» Payor support» Hospital relationships with payors» Variations by market» National payors» Is your contract in the middle of a term?» Will the payor amend? 14
16 Opportunities and Risks With Commercial Payors O p p o r t u n i t i e s R i s k s Approved codes on Medicare list enable commercial payors to add codes (e.g., spine and GYN codes). When Outpatient Prospective Payment System (OPPS) is greater than the commercial payor methodology, it enables ASC to negotiate rate. Multiple procedure logic can favorably impact commercial payor opportunity when multiples are not reduced by Medicare. When commercial payors follow current Medicare ASC payment methodology, automatic adjustments to payments could be favorable. Implants included with Medicare translate to commercial payors. Add-on codes packaged by Medicare translate to commercial payor payment policy. When commercial payors follow current Medicare ASC payment methodology, automatic adjustments to payments could be unfavorable. If Medicare does not approve the code, commercial payors will not approve the code \362366(pptx) 15
17 Key Questions to Answer Does the payor follow CMS or does it have its own payment policy rules for add-on codes? Is the ASC contract methodology based upon a percentage of Medicare? What year? Area-adjusted or National Medicare payment rates? Are there any payment implications when approved codes are billed with codes that are not approved in a single case? Is the payor open to negotiating with carve-outs or another methodology? 16
18 Presenting Opportunity to the Payor What information do you need? Hospital Volume that is ASC eligible Physicians Hospital location Market dynamics CPT codes Implants Outcomes data from other payor experience 17
19 Negotiation Multiple Procedures Does the contract pay multiple procedures based on Medicare or on a payor-defined method? Some CPT codes under Medicare are not subject to multiple procedure reductions. You should review the value of multiple procedures based on Medicare logic and compare it to payor logic at the case level. If multiple procedures generate greater value on Medicare methodology, higher rates to capture the case-level value are justified. 18
20 Payor Medical Director Review May Be Required! What is a payor medical director looking for to approve the addition of new codes to the payor s ASC list? Protocols for patient selection Journal articles Discharge criteria Review of post-op management and extended recovery care 19
21 How to Achieve Success With Your Payors How should Medicare s expanding ASC reimbursement terms be utilized in your contracting? Understand the market (what range are payors commonly expecting?). Identify procedures and cases that fall below CMS allowables. Identify procedures and cases that CMS now allows but payor methodologies do not. Investigate options with each payor (carve-outs, case rate methodology conversion, bundled payments, etc.). 20
22 Other Implications From the Changing Environment 21
23 Migration of Higher Acuity Surgery Inpatient HOPD ASC K E Y D R I V E R S Advancements in clinical technologies that allow for smaller incisions and shorter stays, enabling higher acuity cases to be performed safely in the ASC setting Medicare and commercial payor cost pressures Physician motivation financial and efficiency 22
24 Payor Implications and Ambulatory Surgery Medicare» Inpatient-to-HOPD code approval» HOPD-to-ASC code approval» OPPS for HOPDs and ASCs» Closure of gap on reimbursement methods and rates» Device-intensive codes» Bundling logic Commercial Payors» CMS approvals to HOPD validate medical director approvals for ASC lists» Expansion of commercial payor ASC-approved list is growing beyond the CMS-approved list» Inpatient-to-outpatient cost-saving opportunities with outcomes data validate medical director approvals» Alignment of commercial payors with ASCs to move volume 23
25 Value of Hospital-ASC JVs ASC POSITION» Is there potential for increased reimbursement?» Hospital JVs may or may not result in a favorable impact to reimbursement.» Physicians want to maintain their independence.» Hospital JVs can enhance physician relationships. HOSPITAL POSITION» There is an increased demand for ambulatory care networks.» Transparency is becoming more important.» Value-based pricing opportunities are emerging.» There are increased operating margins for select services.» The gap is closing on reimbursement for HOPDs versus ASCs. 24
26 Key Anecdotes We Expect to Become Trends» In a Western market, a health plan has agreed to pay an orthopedic group double-digit rate increases for several years, contingent upon the group moving total joint replacements out of the hospital and into its ASC.» The hospital is not aware of this agreement.» A major national payor is launching a plan to contact patients before authorizing a surgery to educate them on the benefits of ASCs and inform them about out-of-pocket differentials.» UnitedHealthcare is redirecting outpatient surgery to ASCs; HOPDs will not be paid without prior authorization. 25
27 Things to Remember Medicare is increasing its approval of higher acuity orthopedic and spine cases for the ASC setting. Total joint replacements are becoming more commonly approved by commercial payors. It is crucial to develop a business case and collect the clinical information necessary to seek approval from commercial payors on higher acuity cases that may not be approved. Medicare changes are impacting commercial payor reimbursement, logic, and rates. Alignment with payors is critical to future success! Hospitals are developing comprehensive strategies for partnering with ASCs due to value-based pricing objectives. Payors are creating meaningful incentives via benefit designs and policies to redirect volume to ASCs. 26
28 QUESTIONS & DISCUSSION Naya Kehayes Matt Kilton
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