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System News

Friday, February 23, 2018 - Projecting our 2017 performance on our CIN contracts

As a Clinically Integrated Network (CIN), the Roper St. Francis Health Alliance (RSFHA) can enter into population-level, risk-based shared savings contracts with payors and local employers.

RSFHA is monitoring 2017 performance for its three CIN/ACO contracts. Preliminary claims data indicates 2017 performance for two of the contracts is favorable, while performance under the remaining contract likely will result in a relatively small amount of shared savings.

The RSFHA’s contracts are: to serve Boeing teammates and their families; to serve Roper St. Francis Healthcare teammates and their families; and to serve local Medicare beneficiaries who use RSFHA providers for the majority of their healthcare needs.

The CIN serves a total of approximately 42,000 Lowcountry residents under these three contracts.

These contracts generally work in this manner:

  • An actuary, who is an analyst for insurance products, uses historical claims costs (usually medical and pharmacy) to project future year costs for a given population. The estimated claims cost becomes the CIN’s target cost.
  • CIN providers typically are eligible for shared savings if they keep total claims costs below target and meet quality metrics.
  • CIN contracts do not impact independently negotiated Fee For Service (FFS) rates. Providers continue to independently negotiate their own FFS rates with carriers. Shared savings are calculated annually on an aggregate population level.
  • Below is a basic depiction of CIN contract math*: 

*This is a hypothetical example. The depiction above is grossly oversimplified meant to illustrate basic concepts. It doesn’t depict core CIN contracting elements, such as converting costs to a per member per month basis (PMPM), how to estimate and project annual percentage increases in claims expense or adjustments for outlier high cost members. In addition, it’s important to consider the timing of the shared savings calculation described above. The calculation, often referred to as an annual reconciliation, typically occurs between April and June of the year following the performance year. This delay allows ample time for all claims from the performance year to be processed and paid. 

Below is an overview of our projected 2017 performance. 

Medicare Shared Savings Program:

The actuarial model used by the Centers for Medicare & Medicaid to set MSSP baselines and targets has been criticized for making it more difficult for lower cost providers to achieve shared savings. Critics say it’s far easier for providers with higher costs to lower theirs compared to providers who already have low costs.

CMS has improved future MSSP models to better account for relatively low historical costs.

Additionally, there is a tremendous amount of regional variation in Medicare spending.  Price-adjusted Medicare reimbursements varied twofold in 2014, from about $7,000 per enrollee in the lowest spending region to more than $13,000 in the highest spending region, according to the Dartmouth Atlas, which is a an effort to describe and understand variation in utilization of medical resources. Charleston is near median of national Medicare FFS spending per beneficiary.

That means because of our historical performance as a relatively efficient and low cost provider, it will be more difficult than easy for RSFHA to achieve MSSP shared savings. But significant MSSP shared savings opportunity exists.

For example, another ACO/CIN in a relatively low cost region, Cone Health of Greensboro, NC, has generated more than $10 million in MSSP shared savings.

Cone focused on improving care of COPD patients. RSFHA has contracted with the same actuarial analytics firm used by Cone. Analytics have identified CHF and COPD as areas of opportunity for RSFHA.     

We look forward to providing you with more information about our contracting, budgeting and clinical initiatives in future newsletters. If you have any questions, please contact us.

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