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Sg2 Forecast: Shift to Value-Based Care Redefines Growth Opportunities

Each year at Sg2, we debut the latest health care projections from our Impact of Change® (IoC) demand forecast. Recent historical data are showing a slowdown in inpatient growth, largely attributed to a shift to observation and outpatient surgery status. Despite a growing elderly population, Sg2 projects this downward impact on inpatient utilization rates to continue. In fact, over the next 10 years Sg2 projects a 3% decline in adult inpatient discharges and 16% growth in outpatient volumes across the US.

Shifts in Payment and Policy, Increased Consumerism Drive Changes in Forecast
Two key areas of focus in Sg2’s 2016 Impact of Change are: 1) the dynamic changes brought forth by CMS in terms of policy and payment; and 2) the increasing role of consumerism in determining the when and where of price-sensitive treatment for select conditions.

CMS’s 2016 legislative trajectory points to the advancement of US Department of Health and Human Services (HHS) Secretary Sylvia M Burwell’s vision to incentivize high-quality, lower-cost care through payment change. Of note are the expansion of bundled payment through the Comprehensive Care for Joint Replacement (CJR) Model, the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT) site-neutral payment proposal, and the recent Medicare Access and CHIP Reauthorization Act (MACRA) proposed rule intended to move physicians to a value-based payment system. When combined with the growing proportion of Medicare Advantage enrollees, these policy changes will drive direct and measurable change in utilization and shifts in site of care.

The rise of consumerism in health care, propelled by high-deductible health plans, new market entrants offering low-cost convenient care, price transparency and national steerage programs, will further drive changes in utilization for a growing list of price-sensitive services. Sg2’s Impact of Change accounts for these dynamic changes in its Policy and Economy Impact Factors.

New to the 2016 IoC!
The Impact of Change’s success is based on its foundation in disease-based forecasting. Sg2 groups ICD diagnosis and procedure codes and CPT codes into clinically meaningful CARE Families (diseases) and CARE Procedures (services) in the Sg2 CARE Grouper for easy understanding of growth opportunities across the full care continuum. The CARE Grouper is now ICD-10 ready, with complete ICD-10 native mappings. This will allow for a seamless transition of baseline data from ICD-9 to ICD-10.

Also new to the 2016 IoC forecast, we added several important outpatient procedures to our CARE Grouper including intensive outpatient therapy, tonsillectomy and/or adenoidectomy, bone density/DEXA scan, and low-dose lung CT screening. These additions will enable a more granular view of current utilization and growth opportunities for key clinical services.

We are also excited to share our segmentation enhancement for IP market and organization forecasts. Because patients with chronic or behavioral health conditions are frequently hospitalized for an acute event, their principal diagnosis tells only part of the story. Identifying segments by looking at all diagnosis fields is important to truly size demand. Sg2 experts have developed chronic disease and behavioral health segmentation flags that capture all patient discharge volumes with either a principal diagnosis and/or a nonprimary diagnosis of either a chronic or behavioral health condition. These flags help to segment the IP population to more accurately quantify the demand for chronic disease or behavioral health. These market and organization demand estimates can be compared to Sg2 national benchmarks and used to identify opportunities within your System of CARE to prepare for taking on payment risk.

Efforts to Optimize Care Will Shape Utilization
The industry’s shift to value is expected to accelerate in the next 5 years. HHS’s announcement that it had met its goal of shifting 30% of Medicare fee-for-service payments to alternative payment models 12 months in advance of its original timeline is telling. This trajectory impacts care utilization by discouraging inappropriate or unnecessary care and shifting care to lower-cost settings, while driving select growth in outcomes-based, proven, appropriate care. Descriptions of some of the larger impacts follow.

  • IP growth is expected for cardiac surgery and advanced treatments for stroke.While overall IP discharges are expected to decline, volumes for select IP surgeries will grow. Cardiovascular (CV) surgeries* will grow by 9% over the next 5 years due in part to a rebound in coronary bypass surgery as evidence shows improved outcomes over percutaneous coronary intervention for patients with comorbid conditions. Electrophysiology and vascular procedures also are projected to grow because of increased awareness and care coordination driving appropriate referrals. Transcatheter valve procedures are expected to experience the highest growth among CV procedures (60% in 10 years), as the minimally invasive procedure expands treatment to broader patient populations.Access to advanced stroke treatments broadens, with the build out of stroke networks, telestroke and mobile stroke units driving IP demand for thrombolytic infusion therapy (tissue plasminogen activator) to grow by 80% in 10 years. Evidence showing improved clinical outcomes with embolectomy for treatment of ischemic stroke will fuel growth in niche IP neurosurgery, with cerebral endovascular procedures projected to grow by 59% in the next 10 years.
  • ED utilization will soften. Urgent and emergent visit types each represent about half of total ED visits, and, combined, their volumes are expected to remain flat over the next 10 years. While emergent visits are projected to grow (tracking closely with population growth) lower-acuity urgent visits are expected to decline by 2% in the next 5 years. Conditions such as injuries and infections are forecasted to shift to lower-cost, convenient sites of care, including urgent care centers, physician offices and emerging virtual health alternatives. In addition, new payment incentives such as patient-centered medical homes emphasize coordination, access and adherence to evidenced-based guidelines, all of which may help reduce avoidable ED visits over the long-term. Despite these national trends, keep in mind that an organization’s unique case mix may result in increased ED demand. Because behavioral health and complex emergency ED visits are forecasted to grow, EDs with higher proportions of these conditions should anticipate increased demand.
  • Observation visits grow, but a slowdown is expected. Significant growth in observation visits has occurred over the past 5 years, leaving less opportunity for additional shift from the IP setting to observation status. As a result, Sg2’s 5-year forecast for observation visits has been dampened to 10%, down from 15% last year. CMS’s update to the 2-midnight rule further supports this change. In response to extensive stakeholder input, CMS softened its stance, replacing mandatory RAC audits with sample chart reviews by clinician-led Quality Improvement Organizations. For stays less than 2 midnights that are supported by documentation and clinical indications, inpatient payment will be allowed.
  • Post-acute care is scrutinized. Post-acute spend has been shown to be the largest driver of  overall variation in CMS spend, and its price tag for treatment of chronic conditions nearly mirrors that of the hospitalization itself. Targeting reductions in variation has been a goal of CMS—we will see significant utilization shifts due to alternative payment models (bundles and shared savings programs) and proposed policy such as site-neutral payment. Expect declines in costly IP rehab days as patients shift to skilled nursing facilities (SNFs) and eventually home-based care and OP rehab. IP rehab discharges are expected to decline by 7% in the next 5 years, while SNF and home health volumes are projected to grow by 13% and 12%, respectively.
  • Behavioral health services grow. Expanded payer coverage, pent-up demand and expanded mental health parity rulings under the Patient Protection and Affordable Care Act will drive demand for psychiatric services across the continuum. Sg2 projects significant growth (17%) in urgent and emergent visits to the ED for behavioral health over the next 5 years. Expansion of partial hospitalization and intensive outpatient therapy programs will help address demand and access issues; strong growth is projected over the next 10 years, with a 25% increase in partial hospitalization programs and 26% increase in intensive outpatient therapy programs.

*Cardiovascular surgeries are defined based on the DRG-based sub–service line grouping.

Sources: Impact of Change® v16.0; HCUP National Inpatient Sample (NIS). Healthcare Cost and Utilization Project (HCUP). 2013. Agency for Healthcare Research and Quality, Rockville, MD; OptumInsight, 2014; The following 2014 CMS Limited Data Sets (LDS): Carrier, Denominator, Home Health Agency, Hospice, Outpatient, Skilled Nursing Facility; The Nielsen Company, LLC, 2016; Sg2 Analysis, 2016.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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