The Michigan Value Collaborative

Helping Michigan hospitals achieve their best possible patient outcomes at the lowest reasonable cost

Tag: episode cost (page 1 of 4)

Unpacking Medicare’s MACRA Resource Use measure

Paige VonAchen

Paige is a MVC Research Intern and MD/PhD candidate at the University of Michigan Medical School

The Medicare Access and CHIP Reauthorization ACT (MACRA) Merit-based Incentive Payment System (MIPS) will begin payment adjustments beginning 2019, resulting in approximately $199 million in payment adjustments and $500 million in additional bonuses across physicians nationally each year. The program scores physicians based on their performance in four areas: quality, improvement activities, advancing care information and resource use. While the Resource Use category comprises 0% of the overall weighting in 2019 (based on performance year 2017), the weighting will rise to 10% in 2020 (based on performance year 2018), and then to 30% beginning 2021. Therefore, understanding how the new measure is determined and adapting accordingly will be critical to providers’ success under the new payment system.

So, what does Resource Use really mean? And how is it calculated?

First, let’s establish who is not being scored…clinicians participating in the Advanced Alternative Payment Models (AAPM) and clinicians that are non-patient-facing (e.g., pathologists and radiologists) will also not be scored (instead, the weights of the other categories will increase).

For those that are being scored, it’s important to know the three measures that comprise the Resource Use category:

  • Total per capita costs: this measure represents the total yearly costs (for Parts A and B) for all patients assigned to a physician, divided by the total number of patients assigned to that physician. Patients are attributed to the physician or physician group that delivers the plurality of “primary care services” (under Part B) to the beneficiary as compared to any other practice, and includes admissions due to COPD, CHF, CAD, and Diabetes Mellitus.
  • Medicare Spend per Beneficiary (MSPB): this is a measure of combined Part A and B spend incurred around a hospitalization beginning 3 days prior to admission through 30 days post-discharge. MSPB is attributed to the provider submitting the majority of Part B claims during the index hospitalization. The total cost of care for such an episode is attributed to the physician or physician group that spends the most time with the patient during the initial admission.
  • Condition- and Episode-Based Measures: this measure looks at episodes of care triggered by a specific diagnosis of procedure. Many episodes are surgical (e.g., hip or knee replacement); however, there are medical as well (e.g., CHF, and COPD exacerbation). Any physician that provides over 30% of inpatient E&M codes during the index event (inpatient stay) will have the Part A & B costs of that episode attributed to them. This is currently reported in today’s Quality and Resource Use Report (QRUR); however, now it impacts reimbursement.

Needless to say, the Resource Use category of MACRA is complex and the implications for individual physicians depend on their type of practice and compilation of patients. Understanding and monitoring the payment and utilization of your own services will help you identify the most efficient services and allow you to adapt to MACRA’s new payment system.

Read more about MACRA at:


Optimizing Post-Acute Care Spending: Care Setting or Intensity?

Scott Regenbogen

Dr. Regenbogen is a Co-Director of MVC and an Assistant Professor of Surgery at the University of Michigan.

MVC hospitals confronting the CMS Episode Payment Models, BCBSM Hospital P4P metrics, and other episode-based measures ask themselves (and us): “Where can we find opportunities to reduce episode spending?” A publication in last month’s Health Affairs authored by several members of the MVC Leadership, may help. This study suggests that hospitals can most effectively address post-discharge ancillary care costs by examining how frequently they choose to send their patients to inpatient rehabilitation care facilities after discharge.

In the past, we have found the greatest point of leverage in overall episode spending involves post-acute care services. An often cited paper from our previous MVC Director and current Associate for Strategy, David Miller, found that post-acute care was responsible for the greatest share of variation in episode payments after inpatient surgery, ranging from 31% for coronary bypass (CABG) to 85% for hip replacement (THR). However, it is less obvious how a hospital would set about addressing their patients’ post-acute care spending if they found themselves to be high utilizers.

This new study — authored by MVC Associate Director Lena Chen, Economist Edward Norton, and Co-Director Scott Regenbogen — asks a simple question: do high post-acute care expenditures result from (i) the decision to use any post-acute care; (ii) the choice of what kind of post-acute care to use; or (iii) the quantity of services used once enrolled in post-acute care.

To answer these questions, the study identified hospitals nationwide in the highest and lowest quintiles of post-acute care spending for fee-for-service Medicare beneficiaries undergoing colectomy, CABG, and THR. It then performed both price standardization and risk-adjustment, as we do in MVC data, to allow uniform comparisons of the spending that would be expected if all hospitals treated clinically similar patients under similar regional price and wage constraints. Next, it evaluated the degree to which remaining differences in utilization and spending could be explained by the choice of setting (home without services, home with visiting nursing or in-home rehabilitation, inpatient skilled nursing, inpatient rehabilitation etc.) versus the intensity of care (the quantity of services billed within the chosen modality of care). This analysis used the Oaxaca-Blinder decompensation method to identify the separate contributions of factors within and between the care settings.

The choice to use any inpatient rehabilitation explained the largest share of all variation in adjusted post-acute care spending, ranging from 26% for colectomy to 52% for CABG. The intensity of use of inpatient rehabilitation, in contrast, explained 3% or less of differences. Choice of skilled nursing was responsible for 16-25% of variation, and choice of home health accounted for another 8-13%. The only site and condition for which the intensity of care made a meaningful contribution was in skilled nursing facilities after colectomy, where the quantity of billed services contributed to 20% of variation.

These findings suggest that hospitals seeking to reduce their post-acute care costs after major inpatient surgery should first examine the proportion of their patients that enter the most expensive types of care after discharge. In general, they need worry less about the quantity of services that get used once the patients arrive there.

The research was supported by the National Institute of Aging (Grant No. P01AG019783-0751). Dr. Chen was also supported by the Agency for Healthcare Research and Quality (Grant No. K08HS020671).

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