CALIFORNIA HEALTHCARE FOUNDATION September 2015 Five Ways to Pay: Palliative Care Payment Options for Plans and Providers Q uality palliative care can be delivered in Examples a variety of settings, and can be transi-  Cambia Health Solutions in the Pacific Northwest tioned throughout the continuum of care as provides comprehensive palliative care coverage needed. To enable such services, payers and provid- across all of its insurance products, including FFS ers must have a structure and process for expanding and PPO products.1 the payment beyond the traditional definition often  Highmark, Inc., in Pittsburgh, provides FFS reim- tied to hospice care. Payment for the extended use bursement for specific palliative care procedure of palliative care services can be arranged in a num- codes. The program has also built in value-based ber of ways. This issue brief describes five examples reimbursements related to specific hospital-based of payment models and how they impact health metrics for the impacted population.2 plans and providers. Payer Considerations 1. Fee for Service FFS allows easy-to-demonstrate savings attributed In the FFS model, specific codes and fee schedules to inclusion of palliative care services. For example, must be developed to submit claims for palliative the increased cost of offering palliative care can be services. These become part of the contract with compared to savings due to reductions in ER visits or the purchaser (an employer or individual). The payer hospital readmissions. agrees on negotiated payments with palliative care providers, which could include pre-authorization While FFS requires the establishment of claims requirements for palliative care. Beyond that it codes, payment schedules, and benefit definitions is a straightforward transaction; there are no ret- upfront, it is often a fast way to initially reimburse the rospective determinations for shared savings or cost of palliative care services. Payers and provid- outcomes-based metrics. ers may consider moving to approaches with more shared savings when they have data and experience with palliative care reimbursement. Issue Brief 1 Provider Considerations pre-determined metrics, additional payment flows 3. Pre-Paid/Capitated In straight FFS models providers are reimbursed for to the providers on a retrospective basis. With the capitated reimbursement approach, the the care that is provided, not for how well they man- payer offers the provider a fixed, or capitated, fee age overall patient care or the outcomes. This means that is intended to cover all or a specific portion of Examples that providers have incentives to provide more ser- care provided to a member. The provider assumes Aetna’s Compassionate Care Program pro- vices rather than to contain or manage care. responsibility to pay for palliative care services vides value-based or P4P reimbursements. For members enrolled in the program, Aetna has according to the Division of Financial Responsibility From a provider perspective, FFS limits their risk demonstrated an 81% decrease in acute days, (DOFR).5 The provider organization, now the payer, because they get paid for services provided. 86% decrease in ICU days, increased member can pay the palliative care provider in several ways: Because payment for palliative care is identified and and family satisfaction, and average cost reduc- (1) a sub-capitation on a per member, per month easily measured, it is straightforward for providers tions of $12,000/member.3 (PMPM) basis; (2) via fee for service based on an because they don’t have to administer or reserve established fee schedule; or (3) via a shared risk funds for capitation, pay for performance, bundled Excellus BCBS in NY provides enhanced payments or outcomes-based methodology. In any of these care, or shared services, as some other payment to providers who have completed a Physician approaches, the financial risk for providing palliative models require. Orders for Life-Sustaining Treatment (POLST) care services resides with the providers. training program, and makes payments based on It is a challenge to manage patient care across mul- results related to the Excellus Hospital Performance tiple treatment modalities for delivery systems that Incentive Program (HPIP). Specific metrics are tied Examples are not integrated. It is also difficult to coordinate to the provision of palliative care services, not the Kaiser Permanente established initial pilots in capitation, bundled payments, and shared savings reduction of other acute care services.4 Kaiser of Colorado and the TriCentral Service across treatment settings. As payer-provider rela- tionships evolve, the ability to transition away from Area in Southern California. Palliative care has now been incorporated across service areas in FFS will increase. Until both payers and providers Payer Considerations are comfortable with the impact of adding palliative both Southern and Northern California regions.6 This approach can be easily measured once the care services, an FFS approach provides a baseline metrics are defined and a baseline is established. CareMore, a Division of WellPoint, built a care for evaluation and the development of future pay- However, gaining agreement on the metrics can be model that extended covered benefits to include ment options. difficult. It can also be challenging to determine how palliative care for its Medicare population. It has to account for the funds that are withheld and used continually demonstrated increased patient satis- faction and reduction in key acute care services.7 2. Outcomes-Based in the P4P payments. Reimbursement (Pay for Performance) Provider Considerations Payer Considerations Outcomes-based reimbursement, also known as pay Payment is in large part based on attaining goals Including coverage for extended palliative care for performance (P4P), rewards doctors, hospitals, that are tied to improved outcomes, efficiency, and services in a pre-paid or capitated model is often and other providers for attaining targeted service reductions in certain types of utilization; it is not nec- desirable from a payer perspective for a number of goals such as quality or efficiency standards. Similar essarily driven by financial results. As with shared reasons: to the shared savings model described below, a savings and capitated arrangements described portion of the health care premium is placed in a below, providers may find it difficult to determine separate fund and, based on the achievement of what services to offer at what cost. Five Ways to Pay: Palliative Care Payment Options for Plans and Providers 2 Lack of experience in payment for these services This model requires alignment of incentives within The Affordable Care Act (ACA), section 3023, outside of a traditional hospice environment the provider network due to changes in compen- allows for pilot tests to explore the impact a makes it difficult to predict what the claims expe- sation. The use of extended palliative care services single “bundled” payment for all aspects of an rience in a FFS arrangement would be. can lower the overall cost of care for the capitated episode of care would have on overall quality network in addition to providing more appropriate and cost. It encourages coordinated community  The payer does not have to set up the CPT codes for claims payment in its systems. patient care. The risk for providing the care rests care services and aligns incentives to reduce use entirely with the delivery system, and there are few of the most expensive setting for care. However, It better supports the management of care on models from which to base the cost of palliative care the ACA does not identify programs specific to the part of the contracted provider organization in a capitated arrangement. palliative care. across the continuum of care versus an incremen- talized approach in a FFS claims model. Payer Considerations 4. Bundled Payments Based on a lack of experience in extended palliative Bundled payment is a hybrid approach between care being included within the scope of services, the With this model, a bundled payment is made for fee for service and capitation in that it allows for the health plan may not be able to accurately determine patient care related to the diagnosis or condition single payment for a treatment or condition versus the impact of extended palliative care on the overall as part of the fee schedule negotiation for specific a global capitation for a broader range of health capitation payment. Some capitation arrangements diagnoses or conditions. The provider organization care services. Bundled care payments better isolate may include clauses to review reimbursement is given the flexibility to offer the appropriate levels the conditions and treatments where palliative care levels once the impact of palliative care on costs is of care, including extended palliative care services. would be appropriate, beneficial to the patient, and experienced. By accepting a bundled payment, the provider apt to yield the greatest potential for cost savings. assumes some financial risk for the specific condition or treatment. Under the ACA, reimbursement models such as Provider Considerations bundled payments and medical homes are likely to The network is the beneficiary of savings that result move forward. However, bundled payments are still Examples from offering palliative care earlier in a patient’s in their early stages of development; as yet there are treatment plan, which may reduce the use of other Geisinger Health System has implemented a no standardized bundles for palliative care. Payers acute care services such as ER visits. Capitated sys- performance-based bundled payment system, may also find bundled payments difficult to plan for tems have the financial and organizational flexibility ProvenCare, as a way to reimburse providers and administer. to integrate all elements of care — from physicians for coronary artery bypass graft (CABG) surgery. to financing — into a coherent whole. This model ProvenCare achieved notable results for CABGs, may facilitate care coordination across various pro- including a 10% reduction in readmissions, shorter Provider Considerations vider specialties and programs. Any metrics that average length of stay, and reduced hospital The difference between a broad capitation and a are developed and used for measurement are the charges. Since the program’s inception in 2006, bundled payment approach is that the bundled property of the network, which allows the provider Geisinger has added the following diagnoses to payment focuses on specific patients with specific to determine the approach and setting of palliative ProvenCare: elective coronary angioplasty (also conditions or diagnoses, not the entire insured care that is needed. known as PCI); bariatric surgery for obesity; peri- population. This strategy is easier to monitor and natal care; and treatment for chronic conditions.8 measure from an outcomes basis versus a full capita- tion arrangement. Similar to capitation, the overall California HealthCare Foundation 3 responsibility for managing patient care is in the Advocate Health ACO program with BCBS of Provider Considerations hands of providers. This offers them greater discre- Illinois is an example of an early successful ACO in Even though palliative care would be paid for on tion in determining the appropriate care needed, the Metro Chicago market. It focuses on several an FFS schedule, there would still be aligned incen- but bundled payments also increase the risk of man- efforts including strengthening and expanding tives between the payer and providers based on aging complicated cases and could be difficult to palliative care medical leadership and practitio- outcomes. The patient overlap that palliative care administer. ner education (nurses, doctors, care managers, providers have with providers in other specialties chaplains, and social workers). It provides incen- means that gaining the buy-in of specialists could tives to primary care physicians to have their be particularly challenging. It could be difficult for 5. Shared Savings patients’ power of attorney for health care loaded specialists to give up independence and be interde- In the shared savings model, a percentage of the pre- into the electronic health record. It also educates pendent with other physicians and hospitals. mium for a covered population is earmarked to be its skilled nursing facility (SNF) partners, and is withheld in a pool to be paid out to the contracted implementing a home-care-to-hospice program. provider organizations if certain pre-determined These efforts have helped to reduce readmis- Endnotes metrics are met that can be tied back to the exten- sions, avoidable admissions, ventilator days, and 1. Johnson, SR. “Palliative-care Medical Home Pilot Starting in West,” Modern Healthcare, June 20, 2014. sion of palliative care services. SNF length of stay, and increase hospice census and length of stay.10 2. Center to Advance Palliative Care. “Improving Care for This form of reimbursement is being incorporated People with Serious Illness Through Innovative Payer into a number of ACO models. A portion of the pre- Provider Relationships.” A Palliative Care Toolkit and Payer Considerations Resource Guide, 2014. mium is set aside — beyond the FFS payment — to be shared between the payer and the ACO. The This model can be a transitional approach before the 3. Krakauer, R, et al. “Opportunities to Improve the Quality payer and provider move into a capitated arrange- of Care for Advanced Illness,” Health Affairs, Volume 28, amount is based on agreed-upon metrics for finan- ment. It allows the payer and the providers to isolate Number 5, 2009. cial results, patient satisfaction, and overall quality the extension of palliative care and measure the 4. Ibid. measures. In an ACO model, the contribution of palliative care in improving patient satisfaction, impact it has made on the pre-determined metrics. 5. A Division of Financial Responsibility (DOFR) is a tool used in the contracting process by health plans, achieving quality/utilization metrics, and reducing The shared savings model requires establishing a physician organizations, and hospitals in capitated costs can contribute to the overall success of the payment arrangements to define which party is financially “withhold pool” to be distributed between the payer ACO and increases its shared savings payments. responsible for services rendered. and provider based on mutually agreed metrics. The withhold pool will need to be determined to be part 6. Brumley, RD and Hillary, K. TriCentral Palliative Care of the percentage of premium that is allocated to Program Toolkit, 2002. Examples health care expenditures as part of the medical loss 7. Beresford, L and Kerr, K. “Next Generation of Palliative A Wall Street Journal article from February 2014 Care: Community Models Offer Services Outside the ratio calculations. If the shared savings pool is not quoted Thomas J. Smith, director of the Johns Hospital,” California HealthCare Foundation, November, part of the 80% or 85% mandated medical loss ratio, Hopkins Palliative Care Program, saying that 2012. it will create further challenges. Because extending $5,000-$7,000 is the annual patient savings when 8. Delbanco, S. “Payment Reform Landscape: Bundled palliative care benefits is relatively new, the ability palliative care is incorporated into a patient’s care Payments,” Health Affairs Blog, July 2, 2014. to appropriately determine the division of financial program.9 9. Landro, L. “Patients Turn to Palliative Care for Relief from responsibility can be difficult. Serious Illness,” Wall Street Journal, December 22, 2014. 10. Interview with William Santulli, chief operating officer, Advocate Health Care, December 18, 2014. California HealthCare Foundation 4 About the Authors Nancy Wise, MBA, MPH, is senior vice president of strategic consulting and regulatory support with the health care consulting firm HTMS, an Emdeon Company. She specializes in assisting with the tran- sition toward a retail marketplace, implementation of health care reform, and aiding organizations as they distribute insurance through public and private exchanges. Dave Briere, MHA, is senior consulting manager with HTMS’ strategic planning practice. He has over 30 years in the health plan and health care management field, including marketing and operations, medical group and hospital administration, and public health policy development. About the Foundation The California HealthCare Foundation (CHCF) is lead- ing the way to better health care for all Californians, particularly those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford. CHCF informs policymakers and industry leaders, invests in ideas and innovations, and connects with changemakers to create a more responsive, patient- centered health care system. For more information, visit www.chcf.org. © 2015 California HealthCare Foundation Five Ways to Pay: Palliative Care Payment Options for Plans and Providers 5