improving health care quality and reducing costs through payment and delivery system reform harold...

Improving Health Care Qualityand Reducing Costs

through Payment and Delivery System Reform

Harold D. MillerExecutive Director

Center for Healthcare Quality and Payment Reformand

President and CEO Network for Regional Healthcare Improvement

2© 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement

Health Care Costs are the Coreof the National Budget Problem

“Our health-care problem is our deficit problem.

Nothing else even comes close.”

President ObamaSeptember 2010


But Federal Healthcare Costs AreJust The Tip of a Bigger Iceberg…


What Makes Our % of GDP High is Private Expenditures on Health

Source: Organisation for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database)Notes: Data from Australia and Japan are 2007 data. Figures for Canada, Norway and Switzerland, are OECD estimates. Numbers are PPP

adjusted.


Large Size and Growth in Costs for Both Employers & Workers

$318 $899 $1,543

$3,997$1,878

$4,150$4,247

$9,773

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

Single Coverage1999

Single Coverage2010

Family Coverage1999

Family Coverage2010

Average Annual Contributions to Health Insurance Premiums1999-2010

Employer Contribution

Worker Contribution

11 Years


Insurance Cost Growth Quadruplethe Rate of Wages and Inflation

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010. Bureau of Labor Statistics, Consumer

Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2010; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-

2010 (April to April).

Cumulative Changes in Health Insurance Premiums,Inflation, and Workers’ Earnings, 1999-2010


Health Care Costs Have Wiped Out Real Income Gains

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

1999 2009

Monthly Income for Typical U.S. Family of Four

Inflation on Non-Health Care GoodsHealth Care Taxes, Premiums, ExpensesNet Available Income

Source: "A Decade of Heallth Care Cost Growth Has Wiped Out Real Income Gains For an Average US Family," Health Affairs, September 20011

$ 95 for spending

$ 945 for health care

$ 870 for inflation

$1910 more income


From a Manufacturing Economyto Dependence on Healthcare

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Jobs

in T

hous

ands

U.S. Jobs in Manufacturing and Health Care, 1990-2010

Manufacturing

Health Care


Challenge: Can We Reduce Costs Without Rationing?


Reducing Costs Without Rationing:Prevention and Wellness

HealthCondition

ContinuedHealth

HealthyConsumer


Reducing Costs Without Rationing:Avoiding Hospitalizations

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode


Reducing Costs Without Rationing:Efficient, Successful Treatment

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode

Efficient Successful Outcome

Complications,Infections,

Readmissions

High-CostSuccessfulOutcome


Reducing Costs Without Rationing:Is Also Quality Improvement!

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions


Better Outcomes/Higher Quality


How is Cleveland Doing?

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions



Cleveland Has 6th HighestHospital Spending Per Person

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Port

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San

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Medicare Hospital Spending Per Beneficiary, 2008(Price, Age, Sex, & Race-Adjusted for Top 40 Metros)

Cleveland


Cleveland is Below U.S. Averagein Physician Spending Per Person

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Port

land

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Medicare Physician Spending Per Beneficiary, 2008(Price, Age, Sex, & Race-Adjusted for Top 40 Metros)


0

20

40

60

80

100

120

140

CA-S

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All Surgical Discharges per 1,000 Medicare Enrollees (2007)

Cleveland Residents Get More Surgeries Than Other Regions

Cleveland


Worse Hips and Hearts, Better Backs and Prostates in Cleveland?

-40% -30% -20% -10% 0% 10% 20% 30%

Radical Prostatectomy

Back Surgery

Knee Replacement

Coronary Artery Bypass Grafting (CABG)

Valve Replacement

Coronary Angiography

Percutaneous Coronary Interventions

Hip Replacement

All Surgical Discharges

Surgeries Per 1000 Medicare Beneficiaries% By Which Cleveland Exceeds U.S. Rate, 2007


0

20

40

60

80

100

120

WA-

Seatt

leCA

-San

Jose

CA-S

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ranc

isco

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Port

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Discharges for Ambulatory Care Sensitive Conditions per 1,000 Medicare Enrollees (2007)

Cleveland Has 8th Highest Rate of Preventable Hospitalizations

Cleveland


Chronic Disease Patients More Likely to Be Admitted in Cleveland

0% 10% 20% 30% 40% 50% 60% 70%

Bacterial Pneumonia

Congestive Heart Failure

Diabetes

Kidney/Urinary Infection

COPD

Dehydration

Asthma

Ambulatory Care Sensitive Conditions

All Medical Discharges

Hospital Discharges Per 1000 Medicare Beneficiaries% By Which Cleveland Exceeds U.S. Rate, 2007


1 Out of 4 Hospitalized Patients is Readmitted Within 30 Days

0% 5% 10% 15% 20% 25% 30% 35%

ST JOHN MEDICAL CENTER

FAIRVIEW HOSPITAL

EUCLID HOSPITAL

HILLCREST HOSPITAL

ST VINCENT CHARITY MEDICAL CENTER

PARMA COMMUNITY GENERAL HOSPITAL

LUTHERAN HOSPITAL

MARYMOUNT HOSPITAL

METRO HEALTH MEDICAL CENTER

UNIVERSITY HOSPITALS OF CLEVELAND

SOUTH POINTE HOSPITAL

UHHS RICHMOND HEIGHTS HOSPITAL

LAKEWOOD HOSPITAL

SOUTHWEST GENERAL HEALTH CENTER

HURON HOSPITAL

CLEVELAND CLINIC

UHHS BEDFORD MEDICAL CENTER

30 Day Readmission Rate for Heart Failure Patients


Are There Similar Issues WithCommercial/Medicaid Patients?


Are There Similar Issues WithCommercial/Medicaid Patients?

• The only way to know is to get data on all patients in Cleveland/NEO and analyze it

• Data from Electronic Medical Records/HIE– provides most comprehensive, accurate information on the

care a patient received from an individual provider and characteristics of the patient

– but only covers services from providers on EHRs and who are linked to an HIE

• Data from Health Insurance Claims– provides most complete information on all services a patient

received from all providers + cost of services– but does not provide clinical data on nature of services or

characteristics of patients

• Both Are Needed, Particularly in the Short Run


What You Can Learn from Claims:Prometheus Analysis of PACs

www.HCI3.org

Significant Spending on Potentially Avoidable Complications

for Chronic Disease Patients


Current Payment Systems Reward Bad Outcomes, Not Better Health

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions

High-CostSuccessfulOutcome$


Are There Better Ways to Pay for Health Care?

PreventableCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions

High-CostSuccessfulOutcome$ ?


“Episode Payments” to Reward Value Within Episodes

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions

High-CostSuccessfulOutcomeEpisode

Payment$A Single Payment

For All Care Needed From All Providers in

the Episode, With a Warranty For

Complications


Yes, a Health Care ProviderCan Offer a Warranty

Geisinger Health System ProvenCareSM

– A single payment for an ENTIRE 90 day period including:• ALL related pre-admission care

• ALL inpatient physician and hospital services

• ALL related post-acute care

• ALL care for any related complications or readmissions

– Types of conditions/treatments currently offered:• Cardiac Bypass Surgery• Cardiac Stents• Cataract Surgery• Total Hip Replacement• Bariatric Surgery• Perinatal Care• Low Back Pain• Treatment of Chronic Kidney Disease


Payment + Process Improvement = Better Outcomes, Lower Costs


What a Single Physician and Hospital Can Do

• In 1987, an orthopedic surgeon in Lansing, MI and the local hospital, Ingham Medical Center, offered:– a fixed total price for surgical services for shoulder and knee problems– a warranty for any subsequent services needed for a two-year period,

including repeat visits, imaging, rehospitalization and additional surgery.

• Results:– Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer

rehospitalizations– Health insurer paid 40% less than otherwise

• Method: – Reducing unnecessary auxiliary services such as radiography and

physical therapy– Reducing the length of stay in the hospital– Reducing complications and readmissions.


The Weakness of Episode Payment

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions

High-CostSuccessfulOutcomeEpisode

Payment

How do you preventunnecessary episodes

of care?(e.g., preventable hospitalizations

for chronic disease, overuse of cardiac

surgery,back surgery, etc.)


Comprehensive Care PaymentsTo Avoid Episodes

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions


A Single Payment

For All CareNeeded ForA Condition

$ ComprehensiveCare

Paymentor

“Global”Payment


Payment Levels Adjusted Based on Patient Conditions

Providers Lose Money On Unusually

Expensive Cases

Limits on Total RiskProviders Accept forUnpredictable Events

Providers Are Paid Regardless of the

Quality of Care

Bonuses/PenaltiesBased on Quality

Measurement

Provider Makes More Money If

Patients Stay Well

Provider Makes More Money If

Patients Stay Well

Flexibility to DeliverHighest-Value

Services

Flexibility to DeliverHighest-Value

Services

No Additional Revenuefor Taking Sicker

Patients

CAPITATION (WORST VERSIONS)

COMPREHENSIVE CARE PAYMENT

Isn’t This Capitation?No – It’s Different


Example: BCBS MassachusettsAlternative Quality Contract

• Single payment for all costs of care for a population of patients– Adjusted up/down annually based on severity of patient conditions– Initial payment set based on past expenditures, not arbitrary estimates– Provides flexibility to pay for new/different services– Bonus paid for high quality care

• Five-year contract – Savings for payer achieved by controlling increases in costs– Allows provider to reap returns on investment in preventive care,

infrastructure

• Broad participation– 14 physician groups/health systems participating with over 400,000

patients, including one primary care IPA with 72 physicians

• Positive first-year results– Higher ambulatory care quality than non-AQC practices, better patient

outcomes, lower readmission rates and ER utilizationhttp://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html

http://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html


Comprehensive Care & Episode Payment Can Be Complementary

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions


$ Comp.Care/

Global Payment

EpisodePayment

E.g., annual pmtto manage an individual’s chronic disease, includinghospitalizations

E.g., the payment madewhen the individualhas an exacerbationrequiring hospitalization


Payment Reform Allows Pursuing a Different “Triple Aim”

• Better Care for Patients (Win)• Lower Costs for Purchasers/Payers (Win)• Equal or Better Margins for Providers (Win)


Example: $10,000 Procedure

Cost of Procedure

$10,000


Actual Average Payment for Procedure is Higher than $10,000

Cost of Procedure

AddedCost of

InfectionRate of

InfectionsAverage

Total Cost

$10,000 $20,000 5% $11,000


Starting Point for Warranty Price:Actual Current Average Payment

Cost of Procedure

AddedCost of

InfectionRate of

InfectionsAverage

Total CostPrice

Charged

Change in Net

Revenue

$10,000 $20,000 5% $11,000 $11,000 $0


Limited Warranty Gives Financial Incentive to Improve Quality

Cost of Procedure

AddedCost of

InfectionRate of

InfectionsAverage

Total CostPrice

Charged

Change in Net

Revenue

$10,000 $20,000 5% $11,000 $11,000 $0

$10,000 $20,000 4% $10,800 $11,000 $200

ReducingAdverseEvents…

…ImprovesThe Bottom

Line

...ReducesCosts...


Higher-Quality Provider Can Charge Less, Attract More Patients

Cost of Procedure

AddedCost of

InfectionRate of

InfectionsAverage

Total CostPrice

Charged

Change in Net

Revenue

$10,000 $20,000 5% $11,000 $11,000 $0

$10,000 $20,000 4% $10,800 $11,000 $200

$10,000 $20,000 4% $10,800 $10,800 $0

EnablesLowerPrices


A Virtuous Cycle of QualityImprovement & Cost Reduction

Cost of Procedure

AddedCost of

InfectionRate of

InfectionsAverage

Total CostPrice

Charged

Change in Net

Revenue

$10,000 $20,000 5% $11,000 $11,000 $0

$10,000 $20,000 4% $10,800 $11,000 $200

$10,000 $20,000 4% $10,800 $10,800 $0

$10,000 $20,000 3% $10,600 $10,800 $200

ReducingAdverseEvents…

…ImprovesThe Bottom

Line

...ReducesCosts...


Win-Win-Win for Patients, Payers, and Providers

Cost of Procedure

AddedCost of

InfectionRate of

InfectionsAverage

Total CostPrice

Charged

Change in Net

Revenue

$10,000 $20,000 5% $11,000 $11,000 $0

$10,000 $20,000 4% $10,800 $11,000 $200

$10,000 $20,000 4% $10,800 $10,800 $0

$10,000 $20,000 3% $10,600 $10,800 $200

$10,000 $20,000 3% $10,600 $10,600 $0

$10,000 $20,000 0% $10,000 $10,600 $600

Quality is Better......Cost is Lower...

...Providers More Profitable


In Contrast, Non-Payment Alone Creates Financial Losses

Cost of Procedure

AddedCost of

InfectionRate of

InfectionsAverage

Total CostAmount

Paid

Change in Net

Revenue

$10,000 $20,000 5% $11,000 $11,000 $0

$10,000 $20,000 5% $11,000 $10,000 -$1,000

$10,000 $20,000 3% $10,600 $10,000 -$600

$10,000 $20,000 0% $10,000 $10,000 $0

Non-Payment

forInfections

Causes Losses While

Improving


Not Just Better Acute Care,But Reducing the Need for It

HealthCondition

ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions



Significant Reduction in Rate of Hospitalizations Possible

Examples:• 40% reduction in hospital admissions, 41% reduction in ER visits for

exacerbations of COPD using in-home & phone patient education by nurses or respiratory therapists

J. Bourbeau, M. Julien, et al, “Reduction of Hospital Utilization in Patients with Chronic Obstructive Pulmonary Disease: A Disease-Specific Self-Management Intervention,” Archives of Internal Medicine 163(5), 2003

• 66% reduction in hospitalizations for CHF patients using home-based telemonitoring

M.E. Cordisco, A. Benjaminovitz, et al, “Use of Telemonitoring to Decrease the Rate of Hospitalization in Patients With Severe Congestive Heart Failure,” American Journal of Cardiology 84(7), 1999

• 27% reduction in hospital admissions, 21% reduction in ER visits through self-management education

M.A. Gadoury, K. Schwartzman, et al, “Self-Management Reduces Both Short- and Long-Term Hospitalisation in COPD,” European Respiratory Journal 26(5), 2005


ERVisits

Lab Work/Imaging

HospitalStay

Health Insurance Plan

PhysicianPractice

$ $

We Don’t Pay for the Things That Will Prevent OverutilizationCURRENT PAYMENT SYSTEMS

Avoidable

Avoidable

Avoidable

OfficeVisits

NurseCare Mgr

PhoneCalls

$

No payment for

services that can prevent utilization...

...No penalty or reward for

high utilizationelsewhere


ERVisits

Lab Work/Imaging

HospitalStay


PhysicianPractice

$ $

Option 1: Add New Fee Codes for Unreimbursed PCP Services

MEDICAL HOME PROGRAM

Avoidable

Avoidable

Avoidable

OfficeVisits

NurseCare Mgr

PhoneCalls

$Higher payment for primary care

$


ERVisits

Lab Work/Imaging

HospitalStay


PhysicianPractice

$ $

Option 2: Pay for Monthly “Care Mgt” to Cover Missing Services


Avoidable

Avoidable

Avoidable


OfficeVisits

RN Care Mgr

PhoneCalls

MonthlyCare MgtPayment

$


ERVisits

Lab Work/Imaging

HospitalStay


PhysicianPractice

$ $

More $ for PCPs, But Any Savings Elsewhere?


Avoidable

Avoidable

Avoidable


...But no commitment

to reduceutilizationelsewhere

OfficeVisits

RN Care Mgr

PhoneCalls


$


SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice

$ $

Option 3: “Shared Savings” (More $ Only If Total Costs Decrease)

SHARED SAVINGS MODEL

Avoidable Avoidable

Avoidable$Portion of savings from reducedspending in other areas...

...Returnedto physician

practice aftersavings

determined...

...but no upfront $for better care

OfficeVisits

NurseCare Mgr

PhoneCalls

$


Weaknesses of “Shared Savings”

• Provides no upfront money to enable physician practices to hire nurse care managers, install IT, etc.; additional funds, if any, come years after the care changes are made

• The underlying fee for service incentives continue; losing less (via shared savings) is still losing compared to FFS

• Requires TOTAL costs to go down in order for the physician practice to receive ANY increase in payment, even if the practice can’t control all costs

• Gives more rewards to the poor performers who improve than the providers who’ve done well all along

• I.e., it’s not really true payment reform



PhysicianPractice

$ $ $

Option 4: Resources + Accountability

CARE MGT PAYMENT + UTILIZATION P4P

ERVisits

Lab Work/Imaging

HospitalStay

Avoidable Avoidable

Avoidable

P4P Bonus/PenaltyBased on Utilization

$OfficeVisits

$

$ $

$

RN Care Mgr

PhoneCalls


More $for PCP

Targets forReduction

In Utilization

$


Example: Washington State Medical Home Pilot Program

• Payers will pay the Primary Care Practice an upfront PMPM Care Management Payment for all patients ($2.50 first year, $2.00 future years)

• Practice agrees to reduce rate of non-urgent ER visits and ambulatory care-sensitive hospital admissions by amounts which will generate savings for payers at least equal to the Care Management Payment (targets are practice specific)

• If a practice reduces ER visits and hospitalizations by more than the target amount, the payer shares 50% of the net savings (gross savings minus the PMPM) with the practice

• If a practice fails to meet its ER/hospitalization targets, thepractice pays a penalty equivalent to up to 50% of Care Management Payment


PRIMARY CARE PRACTICEPCPs 4 ER Visits/1000 200

Patients/Physician 2,000 % Preventable 40%PMPY Primary Care Cost $140 Per ER Visit $1,000

Annual Revenue $1,120,000 ER Visit Cost to Payer $640,000Overhead Costs $400,000Physician Salary $180,000

Cost of Nurse Practitioner $80,000 Reduction in Prev. ER Visits 40%Other Costs $10,000 Savings $256,000Total Costs $90,000

Upfront Payment $90,000 Payment to Practice $90,000Net Savings to Payer $166,000

Share of Savings $83,000 Share to Practice 50%New Physician Salary $200,750 Net Savings to Payer $83,000

Increase in Phys. Salary 12% % Savings to Payer 13%

Example: A Hypothetical Underpaid PCP Practice


PRIMARY CARE PRACTICE HEALTH PLAN ER EXPENSESPCPs 4 ER Visits/1000 200







Many Patients Are Going to ER Due to Difficulty Seeing PCPs









PCPs Could Reduce ER Expenses With Right Resources


Upfront Money Could Enable PCPs to Change, If Willing









Payer Can Reward PCP for Results and Still Save Money









Win-Win-Win forPCPs, Patients, & Premiums









But Upfront Payment Reform is Needed So Care Can Be Changed









And Outcome Targets Need to Be Things Physicians Can Influence









Option 4a: CMS Comprehensive Primary Care Initiative

• Demonstration project for 7 practices in 5-7 markets• Upfront Care Management Payment for PCPs

– Monthly care management payment for each Medicare beneficiary and Medicaid recipient

– Payment ranges from $8-40 based on severity of patients’ conditions

– Average of $20 in Years 1-2; reduced to $15 in Years 3-4

• Shared Savings Payment for PCPs– If total cost of care for Medicare patients decreases for ALL

practices in the market in Years 2-4, PCPs receive a share of those savings

– Quality/patient experience performance required in order for savings to be shared


Not Just PCPs, But The Medical Neighborhood, Too

Primary CareMedical Home

(Non-Primary Care)

Specialists

PATIENT

FFS Payment Based on Volume,

Procedures, & Office Visits

Resources &Incentives for

More CoordinatedCare


Pay Both PCPs & Specialists for Outcomes & Coordination

Primary CareMedical Home

(Non-Primary Care)

Specialists

PATIENT

Resources &Incentives for

More CoordinatedCare

Payment for Consultation w/ PCP;

Outcomes-BasedPayment


Minnesota’s DIAMOND Initiative

• Goal: improve outcomes for patients with depression• Convened all payers in Minnesota (except for

Medicare) to agree on common payment changes for PCPs & specialists

• Payment changes:– Support for a care manager in the primary care practice– Psychiatrists paid to consult with PCP on how to manage

patient’s care comprehensively, rather than patient having to see psychiatrist separately

• Result: Dramatic improvement in remission ratehttp://www.icsi.org/health_care_redesign_/diamond_35953/

http://www.icsi.org/health_care_redesign_/diamond_35953/



PhysicianPractice

$ $

Option 5: Partial Comprehensive Care Payment

PARTIAL GLOBAL PMT (Professional Svcs)

ERVisits

Lab Work/Imaging

HospitalStay

Avoidable Avoidable

Avoidable

$

$

Condition-Adjusted

Per PersonPayment

Flexibility and accountabilityfor a condition-adjusted budget

covering all professional services

OfficeVisits

NurseCare Mgr

PhoneCalls

$ $P4P Bonus/PenaltyBased on Utilization


ERVisits

Lab Work/Imaging

HospitalStay


PhysicianPractice/

ACO

Option 6: Risk-Adjusted Full Comprehensive Care Payment

COMPREHENSIVE CARE/YEAR-LONG EPISODE

Avoidable Avoidable

Avoidable

$

$Condition-

AdjustedPer PersonPayment Office

Visits

NurseCare Mgr

PhoneCalls

$ $

P4P Bonus/PenaltyBased on Quality


Transitioning to Accountable Care Payment


PhysicianPractice

$ $ $

CARE MGT PAYMENT + UTILIZATION P4P

ERVisits

Lab Work/Imaging

HospitalStay

Avoidable Avoidable

Avoidable

P4P Bonus/PenaltyBased on Utilization

$

$

OfficeVisits

$ $

$

RN Care Mgr

PhoneCalls


More $for PCP

Targets forReduction

In Utilization

$


PhysicianPractice

$ $

PARTIAL GLOBAL PMT (Professional Svcs)

ERVisits

Lab Work/Imaging

HospitalStay

Avoidable Avoidable

Avoidable

$

$

Condition-Adjusted

Per PersonPayment

Flexibility and accountabilityfor a condition-adjusted budget

covering all professional services

OfficeVisits

NurseCare Mgr

PhoneCalls

$

$ $P4P Bonus/PenaltyBased on Utilization

ERVisits

Lab Work/Imaging

HospitalStay


PhysicianPractice/

ACO

FULL COMP. CARE/GLOBAL PMT + QUALITY P4P

Avoidable Avoidable

Avoidable

$

$Condition-

AdjustedPer PersonPayment Office

Visits

NurseCare Mgr

PhoneCalls

P4P Bonus/PenaltyBased on Quality

$ $


A Critical Element isShared, Trusted Data for Pricing

• Provider needs to know what its current utilization rates, preventable complication rates, etc. are to know whether an episode or global payment amount will cover its costs of delivering care

• Purchaser needs to know what its current utilization rates, preventable complication rates, etc. are to know whether an episode or global payment amount is a better deal than they have today

• Both sets of data have to match in order for both providers and payers to agree!


Short-Term Payments Focus on Short-Term Costs/Outcomes

HealthCondition

Hospitalization Episode

Readmission

No HospitalizationHealthy

Consumer

ContinuedHealth

PreventionServices

Episode PaymentMedical Home/Year-Long Episode


Where is the Incentive for Prevention?

HealthCondition


Readmission


Consumer

ContinuedHealth

PreventionServices

Episode PaymentMedical Home/Year-Long Episode


Global Payment Can Help, But Only If It’s a Multi-Year Contract

HealthCondition


Readmission


Consumer

5+ Years

ContinuedHealth

PreventionServices


What Skills Do Physicians Need to Take Accountability?

PhysicianPractice ? Patient

UnneededTesting

InpatientEpisodes


Resources/Capabilities Neededfor MDs to Take Accountability

Patient

UnneededTesting

InpatientEpisodes

MD w/ time for diagnosis,treatment planning, and followup

Resources for patient educ. & self-mgt support (e.g., RN care mgr)

Method for targeting high-riskpatients (e.g., predictive modeling)

Capability for tracking patient care and ensuring followup (e.g., registry)

Coordinated relationships with other specialists and hospitals

Data and analytics to measure and monitor utilization and quality

PhysicianPractice


Capabilities Exist Today, But Don’t Coordinate w/ Physicians

Physician w/ time for diagnosis,treatment planning, and followup


Coordinated relationships withother specialists and hospitals


PhysicianPractice

HealthPlanorDiseaseMgtVendor



Patient

UnneededTesting

InpatientEpisodes


Medical Home Initiatives Expand MD Capacity, But Not Enough





Patient-CenteredMedicalHome

HealthPlan



Patient

UnneededTesting

InpatientEpisodes


Global/Episode Payment RequiresROI Analysis & Targeting

• Return on Investment (ROI; Cost-Effectiveness)– Cost of intervention

vs.– Savings from reduced utilization

• Timeframe for Return– Short-term: readmission, ER reduction, complex patients– Long-term: prevention, early-stage chronic disease patients

• Targeting Services/Patient Segmentation– Focusing additional services on high-utilization patients

vs.– Providing services to all patients as a general “benefit”


Goal: Give MDs the Capacityto Deliver “Accountable Care”







PhysicianPractice+Partners=ACO

Patient

UnneededTesting

InpatientEpisodes


Should We Just Focus Changeson the Highest Cost Patients?


Some Savings Will Just BeRegression to the Mean


Patients With Chronic Disease Will Be the Future “High-Cost” Patients

High Cost in 1997

Hospital Admission

in 1997

Multiple Chronic

Conditions in 1997

Random Sample of

Beneficiaries

Average Spending in 1997 $22,990 $24,890 $16,940 $6,180

Average Spending Over Next 4 Years $12,038 $11,545 $11,855 $6,870

% Change -48% -54% -30% 11%

Share of Total Medicare Spending

Over Next 4 Years 29% 28% 28%

Source: "High-Cost Medicare Beneficiaries," Congressional Budget Office, May 2005


Benefit Design Changes AreAlso Critical to Success

ProviderPatient

Payment System

Benefit Design

Ability and Incentives to:

•Keep patients well•Avoid unneeded services•Deliver services efficiently•Coordinate services with other providers

Ability andIncentives to:

•Improve health•Take prescribed medications•Allow a provider to coordinate care•Choose the highest-value providers and services


Lack of Effective Incentives for Value-Based Choice by Patients

• Copays, Co-insurance, and High Deductibles can discourage patients from getting preventive treatments they need


Example: Important to Coordinate Pharmacy & Medical Benefits

Hospital Costs

PhysicianCosts

OtherServices

Medical Benefits

DrugCosts

Pharmacy Benefits

Single-minded focus onreducing costs here...

...could result in higherspending on hospitalizations

• High copays for brand-nameswhen no generic exists

• Doughnut holes & deductibles

Principal treatment for mostchronic diseases involves regular use

of maintenance medication


Lack of Effective Incentives for Value-Based Choice by Patients

• Copays, Co-insurance, and High Deductibles can discourage patients from getting preventive treatments they need

• Copays, Co-insurance, and High Deductibles do little to encourage patients to be cost-conscious in choosing among high-cost providers and services


Where Will You Get Your Knee Replaced?

Consumer Shareof Surgery Cost

Price #1$23,000

Price #2$28,000

Price #3$33,000

Knee JointReplacement


Copayment? Use High Price Provider


Price #1$23,000

Price #2$28,000

Price #3$33,000

$1,000 Copayment: $1,000 $1,000 $1,000



Coinsurance?Use High Price Provider


Price #1$23,000

Price #2$28,000

Price #3$33,000

$1,000 Copayment: $1,000 $1,000 $1,000

10% Coinsurancew/$2,000 OOP Max:

$2,000 $2,000 $2,000



High Deductible?Use High Price Provider


Price #1$23,000

Price #2$28,000

Price #3$33,000

$1,000 Copayment: $1,000 $1,000 $1,000


$2,000 $2,000 $2,000

$5,000 Deductible: $5,000 $5,000 $5,000



Pay the Difference in Price?Use the High-Value Provider


Price #1$23,000

Price #2$28,000

Price #3$33,000

$1,000 Copayment: $1,000 $1,000 $1,000


$2,000 $2,000 $2,000

$5,000 Deductible: $5,000 $5,000 $5,000

Highest-Value: $0 $5,000 $10,000



Blue Cross/Blue Shield of MAHospital Choice Cost-Share

BenefitLow-CostHospitals

High-CostHospitals

PCP $20 $20SPC $35 $35Inpatient Hospital $500 $1500*Outpatient Hospital Day Surgery $250 $1250High Tech Radiology $50 $500Laboratory $0 $35X-Rays/Other Imaging Tests $0 $100PT/OT/ST $35 $70

*LOWER INPATIENT COPAY APPLIES IF EMERGENCY ADMISSION


What Would Happen If Consumers Chose Health Systems on Value?

• Minnesota Patient Choice– started by the Buyers Health Care Action Group (BHCAG)

in the 1990s– “care systems” bid on risk-adjusted (total) cost of patient

care (i.e., risk-adjusted global payment)– care systems are divided into cost/quality tiers based on

their relative bids– consumers pay the difference in the bid price to select a

care system in a higher cost tier

• Results– Many consumers switched to lower cost providers– High cost providers reduced their costs to retain/attract

patients


How to Encourage Patients to Use a Medical Home?

CONSUMERS/PATIENTS CAN

CHANGE OR USE MULTIPLE

PROVIDERSAT WILL

CONSUMERS/PATIENTS ARE

“LOCKED IN”TO A SINGLEGATEKEEPER

PROVIDER

ROCK HARD PLACE





PROVIDERSAT WILL



PROVIDER

CONSUMERS/PATIENTS AREENCOURAGEDTO CHOOSE &

USE AN ACO ORMEDICAL HOME

MIDDLE GROUNDROCK HARD PLACE





PROVIDERSAT WILL



PROVIDER




OPTION 1: Charge patients more for using providers outside the ACO or medical home (requires changing benefits)





PROVIDERSAT WILL



PROVIDER




OPTION 1: Charge patients more for using providers outside the ACO or medical home (requires changing benefits)

OPTION 2: Give patients high quality, coordinated care by using the providers inside the ACO or medical home (requires payment change)


Developing The Right Quality Measures at the Community Level

• Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care

• Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs

• Ideal: Develop quality measures with participationof physicians andhospitals, as agrowing number of regions do

Massachusetts Health Quality Partners

Wisconsin Collaborative for Healthcare Quality

Better Health Greater Cleveland


Both Payment & Benefits Are Controlled by the Payer

ProviderPatient

Payment System

Benefit Design

PAYER






But Purchaser Support is Needed Particularly for Benefit Changes

ProviderPatient

Payment System

Benefit Design

PAYER

Purchaser Purchaser Purchaser






Challenge: Gaining Support from a Critical Mass of Payers

Payer

Provider

Payer Payer

Patient Patient Patient

Provider is only compensated for changed practices for the subset of patients covered by participating payers

Better Payment

System

CurrentPaymentSystem Current

PaymentSystem


Payers Need to Truly Align to Allow Focus on Better Care

Payer

Provider

Payer Payer


Better Payment System A

BetterPaymentSystem B Better

PaymentSystem C

Even if every payer’s system is better than it was, if they’re all different, providers will spend too much time

and money on administration rather than care improvement


Purchasers Must SupportMulti-Payer Payment Reforms

Payer

Provider

Payer Payer


Better Payment

System

BetterPaymentSystem Better

PaymentSystem

Purchaser Purchaser Purchaser Purchaser


Payer Coordination Is Beginningto Occur Around the Country

• Examples of Multi-Payer Payment Reforms:– Colorado, Maine, Michigan, Minnesota, New York, North Carolina,

Oregon, Pennsylvania, Rhode Island ,Vermont, and Washington all have multi-payer medical home initiatives

• A Facilitator of Coordination is Needed– State Government (provides anti-trust exemption)– Non-profit Regional Health Improvement Collaboratives

• Medicare Needs to Participate in Local Projects as Well as Define its Own Demonstrations– Center for Medicare and Medicaid Innovation (CMMI) created under

PPACA provides the opportunity for this– Medicare is now participating in eight of the state-led multi-payer

medical home initiatives


Opportunity for Northeast Ohio to Pursue Multi-Payer Reform

• CMS Comprehensive Primary Care Initiative– $20 PMPM + Shared Savings for PCPs– 75 PCP practices selected in each market (must use EHR/registry)– Potential for ~$40 million in Medicare/Medicaid for PCPs in Cleveland

• REQUIRES Participation of Private Payers– 2 markets with highest penetration by aligned plans in HHS Region 5

(Ohio + IN, IL, MI, MN, WI) will be selected for further discussion– 5-7 markets nationally selected from top 2 in each of 10 HHS Regions

based in part on (1) meaningful use of EHRs, (2) state participation, (3) 50% of practices in rural areas

• IMMEDIATE Action Required– Health plans must submit letter of intent (LOI) by November 15 and an

application by January 17 describing market area, payment support they’ll provide to PCPs

– LOI and application are not binding, but Cleveland region cannot compete if LOIs are not submitted by deadline


Many Different Activities Needed for Success

Value-DrivenPayment & Benefits

Quality/Cost/ Experience Analysis& Reporting

PublicReporting

Business Case

Analysis

Value-DrivenDeliverySystems

TechnicalAssistanceto Providers

Design &Delivery of

Care

PatientEducation/Engagement

Value-BasedChoice

EducationMaterials

Engagementof

Purchasers

Alignment ofMultiplePayers

PaymentSystemDesign

BenefitDesign

ProviderOrganization/Coordination

Claims, Clinical &

Patient Data

Wellness &Adherence

ReducingCosts

WithoutRationing


How Can These Functions Be Delivered in a Coordinated Way?

PublicReporting

Business Case

Analysis

Design &Delivery of

Care

Value-BasedChoice

Engagementof

Purchasers


PaymentSystemDesign

BenefitDesign


Claims, Clinical &

Patient Data

Wellness &Adherence


EducationMaterials

?


Role of Regional Health Improvement Collaboratives

PublicReporting

Business Case

Analysis

Design &Delivery of

Care

Value-BasedChoice

Engagementof

Purchasers


PaymentSystemDesign

BenefitDesign


Claims, Clinical &

Patient Data

Wellness &Adherence

BetterHealthGreater

Cleveland


EducationMaterials


...With Active Involvement of All Healthcare Stakeholders

RegionalHealth

Improve-ment

Collab.

HealthcareProviders

HealthcarePayers

HealthcareConsumers

HealthcarePurchasers


For More Information on Payment and Delivery Reforms

www.PaymentReform.org

For More Information:

Harold D. MillerExecutive Director, Center for Healthcare Quality and Payment Reform

andPresident & CEO, Network for Regional Healthcare Improvement

[email protected]

(412) 803-3650

www.CHQPR.org

www.NRHI.org

www.PaymentReform.org


Healthcare Redesign in Cleveland:Today’s Work Session Topics

1. Improving Outcomes and Reducing Costs for Patients With Chronic DiseaseA. What should payment/delivery/benefits look like in Cleveland in 5 years? B. How should Cleveland transition to the desired stucture?

2. Improving Outcomes and Reducing Costs for High-Cost PatientsA. What should payment/delivery/benefits look like in Cleveland in 5 years?

B. How should Cleveland transition to the desired stucture?

3. Improving Outcomes and Reducing Costs for “Well” Patients (Without Chronic Conditions)A. What should payment/delivery/benefits look like in Cleveland in 5 years?

B. How should Cleveland transition to the desired stucture?


Guidelines for Work Sessions

• Goal A: Design payment systems for ~5 years in the future– It won’t be possible to make significant broad-based changes within a year

or two– The need for change is too urgent to wait 10-20 years

• Goal B: How should the transition be made• You’ll get a list of options as a starting point, but you’re free to

modify them or add new ones• There is no “right answer” -- a compromise that everyone

supports is better than an ideal approach that nobody is willing to implement

• Don’t just rehash the problems or recommend more studies – work to forge agreement on solutions

• There are win-win solutions, but everyone will have to change to achieve them; preserving the status quo is impossible

• Be nice to your facilitator – they’re a volunteer and this is a challenging assignment!

improving health care quality and reducing costs through payment and delivery system reform harold...

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