Presentation by Kirby Farrell, President and CEO, Broad Axe Technology Partners and Andy Archer, MSc, MBA, Vice President, Broad Axe Technology Partners

1. MAKING THE BUSINESS CASE
FOR HOSPITAL RPM / CARE
COORDINATION PROGRAMS
March 2013
MATRC Telehealth Summit

2. Agenda
1

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

3. Who We Are
2

Virginia-based Telehealth Services firm providing Care
Coordination Services via Remote Patient Monitoring





Founders are serial entrepreneurs with significant experience
in:




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
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

4. Our Approach to Hospital-Based RPM
3
Patient Risk
Stratification
and Selection
Care Coordination Center
Patient targeting/best practices
Home
Health
Nurse Case
Manager
Regular reporting
Key Transition Activities:
• Hub/device home install
• Patient training
• Med reconciliation/PCP appt
• Connection established with
RN monitor
Alert intervention
Over time:
Highest-Risk
Frequent
Readmits
Provider Coordination via Clinical
Review Software and Reporting
Primary
Care
Physician
Biometric/symptom data
Heart Failure
AMI
Pneumonia
COPD
CABG
PTCA
Other vascular
Transition to Home: “Activation”
and Daily Monitoring
Coordination w/
Hospital
Discharge
Hospitalbased
Clinic
Outcomes
Reporting:
• Readmissions
• Population
health
• Costs
• Satisfaction

5. Evidence for RPM Efficacy
4
Commonwealth Fund RPM Case Studies: January 2013

Centura Health (Colorado): Centura Health at Home program reduced 30day readmission rates for patients with target conditions CHF, COPD, and
diabetes by 62% in 2010/11 one-year pilot


Partners HealthCare (Boston): Connected Cardiac Care Program has
consistently reduced CHF-related readmission rates by ~50% and nonrelated readmission rates by 44%


200 patients enrolled, generating cost savings of $1,000-1,500 total cost per
patient
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
Source: Commonwealth Fund publications 1654-1657, Jan 2013

6. Why RPM for Hospitals?
5
Value Drivers
 Financial: Lower patient readmissions and avoid penalties (Shortterm 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)

7. Hospital Readmissions Context
6

CMS Hospital Readmission Reduction Program (HRRP)
penalties effective as of October 1, 2012




CMS penalties expected to grow meaningfully




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
New conditions added
Penalty caps increased
Higher hurdles for “expected” readmission rates
Other payers expected to follow CMS in assessing penalties

8. Readmissions Penalties in MATRC Region
7

3 MATRC states and D.C. in highest penalty quartile nationally for CMS 30day 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

9. Key Insights for Penalty Estimation
8
 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

10. CMS Penalty Formulas
9

Estimated penalties depend on:

Excessive readmissions in each key condition

How “costly” the condition is
CMS Medicare Penalty: Calculation Methodology
1.
Excessive payments for each condition are calculated as:
Hospital’s
Actual
Rate
1
X
Hospital’s
Expected
Rate
2.
Discharges in
each condition
X
Base DRG
payment for each
condition
Calculate the sum of excessive payments for all conditions (currently: AMI, HF, Pneumonia)
Sum of excessive payments
3.
Excess readmissions penalty rate
Aggregate payments for all discharges
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
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

11. Projected CMS Penalty Calculation:
Illustrative Hospital Case (Current)
10

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
Hospital Compare Expected 30-day
Key
30-day
Readmit Rate
Condition
Readmit Rate
(=US Nat'l Rate)
AMI
Heart Failure
Pneumonia
22.0%
24.8%
19.5%
19.7%
24.7%
18.5%
Excess
Excess
Readmission Readmission "Stick
Percentage
RATIO
Factor"
2.3%
0.1%
1.0%
11.7%
0.4%
5.4%
5.1
4.0
5.4
Projected Penalty Calculations
Excess
Key
Readmission
Condition
RATIO
AMI
Heart Failure
Pneumonia
11.7%
0.4%
5.4%
Total DRG
cost per
condition
$1,299,887
$1,844,822
$541,357
Penalty
Estimate
$151,763
$7,469
$29,263
$188,495
Annual
Discharges
÷
97
209
97
403
Average
Penalty per
Patient:
$468

12. Projected CMS Penalty Calculation:
10% Decline in “Expected Rate”
11

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
Hospital Compare
NEW
Key
30-day
Expected 30-day
Condition
Readmit Rate
Readmit Rate
AMI
Heart Failure
Pneumonia
22.0%
24.8%
19.5%
17.7%
22.2%
16.7%
Excess
Excess
Readmission Readmission "Stick
Percentage
RATIO
Factor"
4.3%
2.6%
2.9%
24.1%
11.6%
17.1%
5.6
4.5
6.0
Projected Penalty Calculations
Key
Condition
Excess
Readmission
RATIO
AMI
Heart Failure
Pneumonia
24.1%
11.6%
17.1%
Total DRG
cost per
condition
$1,299,887
$1,844,822
$541,357
Penalty
Estimate
$313,058
$213,279
$92,665
$619,002
Annual
Discharges
÷
97
209
97
403
Average
Penalty per
Patient:
$1,536

13. Value of Penalty Avoidance
Often Underestimated
12

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

14. “Costing” an RPM/CC Solution: Components
13
 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)

15. Costing a Turnkey Solution: Illustrative
14




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
100%
90%
21%
80%
Other
70%
Technology
60%
Field Staff
11%
50%
20%
40%
Clinical Monitoring Staff
30%
Program Mgmt and
Hospital Interface
30%
20%
10%
18%
0%
RPM Cost Components
50% of
costs in
monitoring/
field staff

16. Making the Business Case:
MATRC Hospital Illustrative Case
15
Value of avoided
penalties
(per patient)
>
At 10% lower “expected”
~$1,500
30-day readmit rates:
At 5% lower “expected”
30-day readmit rates”:
~ $975
Estimated cost of
RPM solution
(per patient)
~$900

17. Making the Business Case:
Positioned for the Future
16
 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)

18. 455 Second St SE
Charlottesville, VA 22902
Kirby Farrell
kfarrell@broadaxepartners.com
Andy Archer
aarcher@broadaxepartners.com
March 2013
MATRC Telehealth Summit