How We Look at Big Data and Bundled Payments in Healthcare

“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.

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!

FY 2020 IPPS Proposed Rule: Wage Index Changes

The FY 2020 IPPS Proposed rule introduces a new approach to the hospital wage index to address payment differences between low and high wage index hospitals.  CMS proposes to increase the wage index for hospitals with a wage index value below the 25^thpercentile (.8482 for FY 2020) and decrease the wage index for hospitals with a wage index value above the 75^thpercentile (1.0351 for FY 2020) as well as changing the calculation of the rural floor.  CMS also proposes these policy changes be effective for at least 4 years.

To what extent is Wage Index changing from FY 2019 to FY 2020?

Regardless of whether the proposed quartile policies are implemented or not, the clear majority of hospitals will expereince an increase or decrease less than 5% or no change at all (86%and 92%).  CMS states in the proposed rule that addressing the wage index disparities at the high and low ends ensures those hospitals in the middle do not have their wage index values affected by this proposed policy.    

Why should hospitals be aware?

Although the proposal to address wage index disparities between high and low wage index hospitals is intended to be budget neutral, the effect to the overall change in payment to an individual hospital could be significant. 

Case Hospital Example:  Urban California Teaching Hospital with Wage Index > 75^thPercentile

Reviewing an example hospital illustrates a change in payment from 2019 to 2020 using the proposed FY 2020 wage index and the FY 2020 wage index prior to the policy change. In this example, the volume and case mix index remain static to isolate wage index changes.  The other key ingredients to payment include the labor-related operating base rate and the wage index.

• FY 2020 Proposed Wage Index = 1.8263
• FY 2020 Wage Index (Prior to Proposed Policy Change) = 1.8619
• FY 2019 Wage Index = 1.7827

The increase in the labor-related operating base rate as well as the increase in wage index from FY 2019 to FY 2020 drives an overall increase in payment for this facility.  However, payment is $4.3M less than it would have been prior to adjustments to the FY 2020 wage index.

Interested to comment to CMS on the IPPS Proposed Rule?

Be sure to review Table 2 of the proposed rule to see where your facility stands regarding wage index changes.  Comments must be received no later than 5 p.m. EDT on June 24^th, 2019.  CMS encourages electronic submission of comments to https://www.regulations.gov.  Follow the instructions under the “submit a comment” tab.

Data Sample: Hospital Charge Index®

Pricing is certainly a hot topic right now with the disclosure requirement becoming effective on January 1, 2019.  The Hospital Charge Index® helps hospitals understand how high or low they are relative to peers for both inpatient and outpatient charges.  The metric utilizes total claim charges and is adjusted for resource intensity and cost of living.  Because the new requirement includes a provision to display average charges by MSDRG, the Hospital Charge Index® can help busy executives evaluate encounter-level charge comparisons for their hospital to any other in the country in one central place.  As seen in the data display, there are several low-charge states and MSAs in the New England area.  Maryland – and the Baltimore MSA – continue to be the lowest charge benchmarks nationally as the state has strict price and payment regulations.  Still, these low charges don’t always translate to lower payments as Maryland and Massachusetts are two of the top three highest payment states as measured by Net Patient Revenue per Equivalent Discharge™.  The State of the Hospital Industry publication highlights several other interesting points about relative charge positions nationally.  Among them, higher charge hospitals tend to be larger, urban facilities that also tend to have a less favorable payer mix which creates upward price pressure to recover payment deficiencies.  Proprietary facilities, as a group, also have higher median charge levels than other organization types.  And, finally, while many in the industry question the connection between gross charges and net revenue, there are significant charge differences between high and low operating margin groups.   

To see more detail on the data above and more than 80 other metrics of hospital performance, click here for the 2018 – State of the Hospital Industry”