How We Look at Big Data and Bundled Payments

“Big Data” is a buzz word in a lot of industries right now, so what do we mean when we talk about big data in healthcare? We know that big data is, well, big – usually very, very big. When we talk about big data in any context we’re usually discussing something that is more than a single person can analyze and parse. In fact, it might need a team or specialized equipment,and is assembled from multiple data sources.

Of course, those of us in healthcare, and especially healthcare finance, know that more and more, big data is being used to guide health policy decisions.  Our challenge is how to leverage big data as a tool to support decision making.  A very pertinent and timely example is measuring bundled payments as payment trends continue toward multiple variations of bundled payment approaches. 

Bundled payments, put simply, are a method of shifting payment risk between healthcare providers and healthcare consumers, usually third party payers.   Unless a hospital arranges for risk-sharing, it is responsible for controlling costs of care, even in settings over which they do not have any direct control.  Bundled payment methodologies range from individual service arrangements, where each specific service provided is paid separately, to episodic and capitation methodologies.  Service arrangements and encounter arrangements can often be measured within an organization, however assessing and defining costs associated with episodic payments clearly falls into the area of big data.  An episodic payment is made for all encounters associated with a defined episode of care across all providers.

Using big data analytics from Medicare data files we can measure the cost as the sum of all providers involved in providing care.   Once we understand the variation and driving factors of cost we can better understand how much individual providers have control over those costs and whether the reviewed product line or service is likely to be profitable, will require subsidization, or is in a space to consider limiting or exiting.

Clearly big data isn’t going anywhere, so it is imperative that we find ways to access and analyze big data to develop and support our strategies and decision making.  If you have questions, let us know at 888.779.5663. We discuss this issue (with examples) in our whitepaper here.

What Would Die Hard Cost John McClane (and His Hospital)

Every year, as the winter holiday season rolls around, the greatest debate of our time resurfaces – is Die Hard a Christmas movie?

We at Cleverley + Associates believe that the answer to this question may be beside the point. What’s important are the traditions we make for ourselves, especially around the holidays, that bring us together and make us feel happy and fulfilled.

But also, yes. Yes, it’s a Christmas movie.

It’s also a totally awesome action movie, which means injuries…a lot of injuries. That got us thinking – we assume that John McClane went to a hospital eventually, and considering what he’d gone through, what would his treatment cost him and the hospital?

Now, we’re not doctors at Cleverley + Associates, so our diagnosis and treatments are probably only tangentially related to real life medical advice. Definitely don’t try any of this at home. That said, let’s speculate wildly!

Our hero’s first injury (or probably injuries) probably occur as he falls down the stairs while also engaged in a fist fight. There are a lot of injuries that can occur from both a fall and a fight, but since Mr. McClane goes on to punch several other people, we can rule out fractures, spinal injuries, and basically anything that would put in him in traction.

But we can’t rule out a concussion, or a subdural hematoma.

He’d probably get an MRI and CT scan (Let’s go ahead and do both, since he’s a hero.)

We’d also want to do an ImPACT test.

Next up, the most famous injury, deep lacerations to our hero’s feet, because he walked across glass.

Ow.

So we’re talking lacerations to the feet.

We’re going to need a lot of antiseptic, bandages, and probably stiches. Also foreign body removal from the wounds.

Again, ow.

Next up, poor McClane is straight up shot in the shoulder. The following scenes, where he still manages to win in hand-to-hand combat with the villain, show that the bullet probably grazed him. Of course, we can’t rule out that the bullet is still there, or a shard of it. So, we’re going to have to explore the wound to make sure it’s clean, and probably take an x-ray to make sure we got all the bullet bits out.

Lastly, in the grand finale, John McClane wraps a fire hose around himself and bungee jumps off the building. This is, generally speaking, a terrible idea. He then breaks through a window using his own body. Again, not usually a great idea.

This could, of course, cause a lot of injuries, but let’s go ahead and just assume the worst – a fracture of the vertebrae and ribs. There would probably also be internal damage as well, but considering he’s still walking around and making quips, let’s assume he’s miraculously okay-ish.

The end of the movie seems to suggest that McClane rides off into the sunrise with his wife, triumphant and filled with the Christmas spirit, but probably not. More likely they stopped at the ER to at least make sure he wasn’t bleeding internally.

So here’s everything all together! Happy Holidays everyone! Yippee-ki-yay!

What We Can Learn About Hospital Finance from the First Space Pirate

Recently, NASA verified that they are investigating what might be the first crime in space. The short version is that Anne McClain accessed her ex-wife’s bank account while stationed aboard the International Space Station. It should be noted that Ms. McClain denies any wrongdoing, but the incident has raised some interesting questions about crime in space.

Specifically, what do we do about crimes in space?

In case you’re curious, the short answer here is that the offender would be subject to the laws of the country from which they originated. The five nations involved in the ISS have also set up laws dealing with any cross over, including extradition.

So what does this teach us about hospital finance? Well, as you can read in the above paragraph, NASA, and indeed all the space agencies, weren’t caught completely off guard by this event. A group of people placed, literally, under pressure in a tiny space was going to produce chaotic results at some point. NASA has long expected some kind of ill intent in space, and conversations about it date back to long before the agency was even called NASA. This type of forward thinking, trying to anticipate issues and planning fixes ahead of time, is exactly the kind of thing we should be doing in our own organizations.

Hospital finance strategy, data acquisition and storage, bundled payment impact testing, competition from non-hospital institutions, employer group challenges, constantly shifting healthcare law, can all be nebulous obstacles with a variety of consequences. It is always worth the time and effort to sit down and try to plot out the possible pitfalls of any new situation or complication.

If this is something you think we can help with, give us a call at [X]. (Unfortunately, at this time, our international space consultations are extremely limited.)

What You Need To Know About The Federal Surprise-Billing No-Surprises Act

The No-Surprises Act, currently under consideration, would prohibit providers from balance-billing. It would also establish rates for payments from commercial health plans, based on the local market. There is a process (added on July 17) that includes a third-party arbitration process for resolving certain disagreements. 

The main focus of the bill, as with other recent surprise billing legislation attempts, the goal is to protect patients from large, surprise bills, especially from unexpected out-of-network care.

There are several important elements:

  • Health plans are required to treat out-of-network services as if they’re in-network in cost sharing cases, for deductibles, and out-of-pocket limits.
  • Out-of-network providers are prohibited from “balance billing” patients. Meaning, they cannot bill patients above the in-network cost-sharing limit.
  • Sets guidelines for determining how much health plans must pay to the out-of-network provider.

The act was co-authored by  Energy and Commerce Committee leaders Reps. Frank Pallone, D-N.J., and Greg Walden, R-Ore. It passed the Senate health committee on June 26th. The basic concept of the legislation, to protect patients by allowing them to settle out-of network payment disputes, is generally supported by hospital and physician groups.

Insurers, on the other hand, are generally in favor of arbitration and payment benchmarks. This may allow reimbursement for out-of-network care.

Reigning in surprise billing is clearly a focus of multiple legislative bodies. It will be interesting to see the changes that occur to the act over the next few months.  Understanding the scope of the at risk payment for providers and developing mitigation strategies may become important as we watch the legislation progress through Congress. 

Price Change, a Strategic Approach

As many hospitals are nearing the start of their next fiscal year, we thought it would be interesting to look at pricing strategies selected by a significant national sample during the first half of 2019.

Hospitals may take one of two approaches when setting prices by following either an across-the-board (ATB) price change or a strategic approach. The ATB method assumes all prices in the chargemaster change by a constant percentage. For example, targeting a 5% overall price increase would be achieved through increasing each item code in the CDM by 5%. Alternatively, a strategic approach suggests impacting service line specific rate changes based on local market sensitivities and associated financial implications.

Through our strategic modeling approach here at Cleverley, related groups of services may decrease/increase/remain constant based on considerations such as competitive position, payer mix, and overall goals. The summary below highlights selected strategies and the estimated results of our large national sample.

STRATEGIC ASSUMPTIONS

Overall Rate Increase– The median overall rate increase selected was 5% which is also consistent with the average at 4.7%. We observed fairly consistent rates of change for outpatient and inpatient.

Rate Corridor Range and Competitive Constraint– Rate corridors indicate how much groups of related services are permitted to decrease/increase/remain constant. The median rate corridors selected were 0% to 14%, which means prices for services could be frozen or increase by as much as 14% (while as we learned above, still achieving an overall rate increase of 5% for the hospital).

Rate corridors may work together with a competitive constraint to improve pricing position relative to peers. On average, we see 5 peers in the constraint group. In general, this implies that hospitals are defining their market with an average of 5 peer hospitals.

Room Rates and Surgery Assumptions– The observed median routine room & observation rate increased 5%, while surgery related areas increased 6%.

Financial Implications– Please note that high charges do not necessarily correlate with high payment. Performing a scenario analysis can help hospital finance leaders better understand overall payment and net revenue impact prior to implementing changes.

Other Key Findings – During our review, we also look at service line specific rates of change. These vary significantly by hospital. Many hospitals are evaluating patient-sensitive services in light of transparency disclosure requirements. We welcome the opportunity to talk with you about your specific strategy.