Performance Measurement

Developing measures and reporting strategies for pay-for-performance programs

Kennell developed and implemented a performance measurement system, the Strategic Healthcare Incentive Program (SHIP), that is used by Navy Medicine to distribute bonus incentive payments to military treatment facilities (MTFs) in exchange for good performance. There are 20 measures separated into three domains: readiness, health care, and value. Kennell's support of this initiative included nominating measures for inclusion, briefing stakeholders, preparing measures, assisting in development of an award strategy, documentation, and development of a reporting strategy to make information about SHIP measures readily available to MTFs.

Assessing appropriate access measures for Medicare beneficiaries

Kennell completed a major performance measurement project for CMS that included the design, interpretation, and implementation of a timely and geographically-sensitive monitoring system capable of alerting CMS to potential reductions in access to care experienced by Medicare beneficiaries. Kennell determined what measures of access were appropriate and feasible to alert CMS to potential access problems; developed rules and programming code for extracting data from the CMS Chronic Conditions Warehouse (CCW), a claims-based data source, to generate an analysis file for the AMS tool; and established methodologies for how multiple measures should be weighted, how the system should deal with conflicting results, and what level of change should be considered significant. Kennell designed and implemented a tool interface that could present results on many individual and aggregate measures in a way to provide meaningful information to decision makers about potential access problems at national, regional, state, county, and local levels.

Reviewing access to care measures and monitoring approaches for TRICARE beneficiaries

In response to a mandate from the Secretary of Defense, the Defense Health Agency (DHA) asked Kennell to conduct a broad review of access to care for TRICARE beneficiaries. Kennell analyzed a broad range of access measures for care provided by military treatment facilities (the direct care system) and also for care from civilian providers (TRICARE’s purchased care system). Kennell also compared TRICARE’s standards for access to care and DoD’s processes for monitoring access with best practices in civilian health plans, and the study provided recommendations for improvements in monitoring access to care within both the direct and purchased care systems

Assessing an appropriate hospital readmission measure

As part of our task order work with DHA, Kennell provided design input and data analysis to support a new MHS metric regarding 30-day inpatient readmission rates. This included providing analysis of various index event definitions, follow-up timeframes (e.g., 15-day, 30-day, 60-day), and methodologies for all-cause vs. diagnosis- specific readmission events, as well as making recommendations for measure algorithms based on this analysis.

Cost Estimation and Budget Support

Modeling mental health costs

The costs of treating the mental health conditions of Service members returning from deployment to Afghanistan and Iraq increased sharply in the mid-2000s. An important question for DoD was what the future level of the costs was likely to be. We analyzed the costs of cohorts of Service members returning from deployment based upon the year of their return and the number of times they had been deployed. We used these patterns of costs to estimate the future costs of mental health care for these cohorts as they age.

Preparing cost estimates for new health benefits

For DoD, we prepare cost estimates for proposed new TRICARE benefits including both direct health care costs and any potential indirect health care costs or savings. Some examples include fertility cryopreservation, all medical aspects of transgender transformation, new human genome laboratory developed tests (e.g. BRCA gene testing), provisional coverage of emerging medical technology (e.g. FAI hip replacement surgery), intraocular lens transplants, and a vast array of preventive benefits (conformity to the Affordable Care Act, school physicals, male and female cancer screenings, cardiovascular disease screenings, infectious disease screenings, and immunizations/vaccinations).

Estimating the costs of proposed legislation

DoD routinely requests Kennell to provide quick-turnaround estimates of the cost impacts of proposed legislation affecting TRICARE and the Military Health System, such as new or expanded benefits, changes in government and beneficiary cost-sharing, changes in provider payment policies, and changes in the structure of the TRICARE program. Kennell also provides estimates for DoD for the Department’s own legislative proposals and also proposals originating in Congress or elsewhere, such as TRICARE proposals from the Congressionally-mandated Military Compensation and Retirement Modernization Commission. DoD also relies on Kennell to estimate the cost impacts for all TRICARE-related provisions in the House and Senate bills for the annual National Defense Authorization Act, often within 24-48 hours of the legislative language becoming available. In addition to analyzing cost impacts, Kennell also identifies potential implementation issues or risks raised by proposed legislation.

Analyzing the costs of demonstration programs

Kennell has provided support for 15 demonstration projects for DoD. For example, we estimated the budgetary costs of creating a new comprehensive Autism Care Demonstration by projecting use rates under the new comprehensive demonstration. This information was critical for budgetary review requirements of DHA, OMB, and Congress.

Supporting DoD annual budget estimates for the Defense Health Plan

For more than a decade Kennell has provided extensive support for DoD’s estimates of budgetary requirements for the purchased care component of the Defense Health Plan, currently amounting to approximately $15 billion per year. Types of support include analyzing component drivers of historical health cost trends, estimating the impact of population and program changes on future cost trends, and tracking the administrative costs of purchased care contracts. Kennell also developed a consensus model structure for conducting sensitivity analysis of TRICARE purchased care forecasts that was agreed upon by the TRICARE Management Activity, the DoD Comptroller’s office, DoD’s office of Program Analysis and Evaluation, and OMB.

Program Design and Implementation

Supporting the design and implementation of disease management programs

Kennell assisted the MHS in developing disease management (DM) programs for TRICARE beneficiaries with asthma, diabetes, and congestive heart failure. Kennell analyzed claims data to assess the prevalence and DoD expenditures for each condition of interest in the TRICARE population. Kennell also identified design and implementation issues and estimated the cost of each DM program under different program design alternatives such as the level of patient severity to target for DM participation and whether enrollment in the program would be on an “opt-in” or “opt-out” basis. With the DM programs now implemented, Kennell continues to provide operational support by analyzing claims data each month to identify new TRICARE patients who meet the criteria for enrollment in each DM program.

Assessing policy impacts of health savings accounts

Kennell has worked with DoD to identify areas where the design of the TRICARE program could be modified to improve results. One such example involved the evaluation of a proposal to implement a health savings account in conjunction with a high-deductible health plan. This would have had the effect of introducing significantly higher levels of beneficiary cost sharing, but also providing an opportunity for lower-utilization beneficiaries to save money for health care spending later in life.

Assessing payment options for the chronically critically ill population

For CMS, Kennell developed a definition of the chronically critically ill (CCI) and medically complex (MC) populations and identified the number of Medicare beneficiaries who are CCI/MC. We then analyzed whether there were systematic payment problems for the CCI/MC in acute care hospital and long-term care hospital (LTCH) settings. Kennell and its subcontractor, RTI, reviewed the literature on the CCI population and identified the characteristics of the CCI/MC using MedPAR claims data. We also analyzed payments associated with treating the CCI/MC population over the course of their episode of illness. We used MedPAR data to analyze margins to determine whether there are Medicare payment inequities/problems for these populations. We then worked with CMS to develop payment recommendations for the CCI/MC and non-CCI populations, and subsequently, conducted several simulations to estimate the impact of the proposed payment policy changes on both populations in the LTCH and acute care hospital settings. The findings from the project were published in the CMS FY14 Notice of Proposed Rulemaking (NPRM) and the FY14 Final Rule.

Developing facility/patient criteria for Medicare Long-Term Care Hospitals

Kennell assisted CMS in preparing and submitting a Report to Congress on the feasibility of establishing patient and facility criteria for Long-Term Care Hospitals (LTCHs). Kennell and its subcontractor, RTI, analyzed differences in Medicare payments and utilization between patients referred to LTCHs and patients with similar conditions and level of acuity who do not use LTCHs but remain in acute care hospitals for longer periods of time. Kennell/RTI used Propensity Score Matching (PSM) to control for the selection of sicker patients into LTCHs. We then estimated the impact of referral to LTCHs using the difference between LTCH users and clinically similar non-LTCH users. As part of this project, Kennell/RTI developed a structured interview instrument and conducted over 100 interviews with clinical and financial staff at more than 20 LTCHs and ACHs in seven markets to understand referral patterns for LTCH patients.

Managed Care Contracting

Analyzing options for purchased care contracting

Kennell provided actuarial and analytical support to a high-level DoD workgroup responsible for assessing a range of options for a next-generation strategy for TRICARE’s purchased care contracts. Kennell identified and collected a variety of MHS and external data sources to analyze options requested by the workgroup such as downsizing the geographic scope of TRICARE’s HMO benefit (TRICARE Prime), standing up a civilian network of TRICARE-dedicated primary care clinics, outsourcing administration of certain TRICARE benefits to FEHBP or Medicare, and introducing a high-deductible benefit in TRICARE.

Assisting DoD in negotiating appropriate capitation rates for HMOs

Almost 150,000 TRICARE beneficiaries are enrolled to six HMO-line plans in various locations in the U.S. We have supported the calculation of full-risk capitation rates for these enrollees using TRICARE and Medicare data for both medical-surgical and pharmacy costs to ensure that DoD pays no more then what it would have paid for these enrollees if they had not been enrolled to these plans.

Developing health care contract pricing incentives

Kennell has been DoD’s principal consultant for development of health care pricing incentives for four generations of regional TRICARE MCS contracts. For the first generation of MCS contracts, Kennell developed a Bid Price Adjustment formula which adjusted contract prices over time for changes in the number of TRICARE beneficiaries, the shares of health care utilization provided by military treatment facilities and civilian providers, trends in TRICARE’s provider payment rates, and risk-sharing on the variance between actual health care costs and the contractor’s adjusted bid price. Kennell also assisted DoD in administering these pricing adjustments. For the second generation of MCS contracts, Kennell assisted DoD in negotiating annual prospective health care cost targets for each contractor, which were then retrospectively compared to actual costs incurred for a risk-sharing calculation. For the third and fourth generations of MCS contracts, Kennell helped DoD design more focused underwriting incentive provisions such as a contractor-guaranteed level of network discount savings and a comparison of contractor cost trends with adjusted trends from the National Health Expenditures data reported by CMS.

Designing value-based payment incentives

Kennell has assisted DoD in identifying how value-based payment measures could be introduced into DoD’s reimbursement systems for both hospital and physician care. We have helped identify appropriate measures used by Medicare and private payers and which measures would be most appropriate for TRICARE beneficiaries and care.

Providing analytic support for strategic planning of health care contracts and program

Kennell’s support to the high-level workgroup studying strategic options for how to structure future purchased care arrangements in TRICARE . This support included: briefing workgroup members on the evolution of prior generations of purchased care contracts; analyzing utilization patterns and savings opportunities in local TRICARE markets; and analyzing government and beneficiary cost impacts and DoD implementation issues for strategic alternatives including outsourcing TRICARE to the Federal Employee Health Benefit Program, outsourcing TRICARE to Medicare, replacing current TRICARE benefits with a DoD-funded Health Savings Account, establishing a network of government-operated primary care clinics staffed with civilian providers, and negotiating value-based purchasing arrangements with local integrated delivery systems.

Evaluation of Reimbursement Changes

Developing a hospital payment calculator

The TRICARE Diagnosis-Related Group (DRG) system is similar in many ways to Medicare’s DRG system. The payments that a hospital receives for inpatient care depend on a large number of variables, including the patient’s age, diagnosis, procedures performed, the type and location of the hospital, and whether or not the hospital stay is an outlier in terms of costs. To help analysts and providers determine the appropriate level of payment for an individual hospital stay, we developed an online tool that can be used to calculate the level of hospital payment. This tool is used on the TRICARE website and updated annually.