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FROM VOLUME TO VALUE: Better Ways to Pay for Health Care, and How to Get There Harold D. Miller Executive Director Center for Healthcare Quality and Payment.

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Presentation on theme: "FROM VOLUME TO VALUE: Better Ways to Pay for Health Care, and How to Get There Harold D. Miller Executive Director Center for Healthcare Quality and Payment."— Presentation transcript:

1 FROM VOLUME TO VALUE: Better Ways to Pay for Health Care, and How to Get There Harold D. Miller Executive Director Center for Healthcare Quality and Payment Reform and President and CEO Network for Regional Healthcare Improvement

2 2 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement What is an “Accountable Care Organization?”

3 3 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement What is an “Accountable Care Organization?” A group of providers who are “accountable for the quality, cost, and overall care” of patients Section 3022, Patient Protection and Affordable Care Act The Official Definition

4 4 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement What is an “Accountable Care Organization?” A group of providers who can figure out how to save money in health care The Real Definition

5 5 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How Will ACOs Generate All These Savings? ACO (“the “Black Box”) Financial Risk Patients Lower Costs Organizational Structure

6 6 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ACO (“the “Black Box”) What’s In That Black Box Can’t Be Good For Consumers, Can It? RATIONING Patients Lower Costs Financial Risk Organizational Structure

7 7 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement REDUCING COSTS WITHOUT RATIONING Focus Should Be On Improving Care to Reduce Costs Patients Lower Costs

8 8 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Can It Be Done??

9 9 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Prevention and Wellness Preventable Condition Continued Health Healthy Consumer

10 10 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Avoiding Hospitalizations Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode

11 11 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Efficient, Successful Treatment Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome

12 12 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Is Also Quality Improvement! Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome Better Outcomes/Higher Quality

13 13 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Current Payment Systems Reward Bad Outcomes, Not Better Health Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome $

14 14 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Are There Better Ways to Pay for Health Care? Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome $ ?

15 15 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement “Episode Payments” to Reward Value Within Episodes Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome Episode Payment $ A Single Payment For All Care Needed From All Providers in the Episode, With a Warranty For Complications

16 16 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Yes, a Health Care Provider Can Offer a Warranty Geisinger Health System ProvenCare SM –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

17 17 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Payment + Process Improvement = Better Outcomes, Lower Costs

18 18 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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.

19 19 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement The Weakness of Episode Payment Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome Episode Payment How do you prevent unnecessary episodes of care? (e.g., preventable hospitalizations for chronic disease, overuse of cardiac surgery, back surgery, etc.)

20 20 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Comprehensive Care Payments To Avoid Episodes Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome A Single Payment For All Care Needed For A Condition $ Comprehensive Care Payment or “Global” Payment

21 21 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Payment Levels Adjusted Based on Patient Conditions Providers Lose Money On Unusually Expensive Cases Limits on Total Risk Providers Accept for Unpredictable Events Providers Are Paid Regardless of the Quality of Care Bonuses/Penalties Based on Quality Measurement Provider Makes More Money If Patients Stay Well Flexibility to Deliver Highest-Value Services No Additional Revenue for Taking Sicker Patients CAPITATION (WORST VERSIONS) COMPREHENSIVE CARE PAYMENT Isn’t This Capitation? No – It’s Different

22 22 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Example: BCBS Massachusetts Alternative 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 utilization

23 23 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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)

24 24 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement A Deeper Dive into Episode Payments and Implications Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome $ Episode Payment

25 25 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Episode Payment = Bundling + Warranty Bundling: Making a single payment to two or more providers who are currently paid separately –e.g., services of both a hospital and a physician –e.g., both hospital and post-acute care services Warranty: Not charging/being paid more for costs of treating hospital-acquired infections, problems caused by errors, etc.

26 26 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Current Episode-of-Care Initiatives Medicare Acute Care Episode (ACE) Demonstration –single amount for hospital & physician services for cardiac, orthopedic DRGs –combined payment lower than current Medicare payments –patients receive share of Medicare’s savings through lower copays –Bundled payment goes to a Physician-Hospital Organization which then divides the payment between the hospital and the physicians –Congressional authorization allows CMS to waive restrictions on gain-sharing, so hospitals can share internal savings with physicians –Physicians eligible to receive up to 25% more than current payment levels Prometheus Payment TM –covers full episode of care and all providers –estimates the appropriate payment amount based on historical costs and any guidelines for evidence-based care –“virtual bundling”: no provider receives the money for another provider’s services; each provider receives a share of the total episode payment in proportion to the services they’ve billed –Pilot sites in Rockford, IL; Michigan; Minneapolis; Philadelphia; Utah

27 27 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How Can Physicians, Hospitals, and Payers Benefit from Bundling?

28 28 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Example: Reducing Cost of Implantable Defibrillators COST TYPETODAY Physician Fee$ 1,200 Device Cost$20,000 Other Hospital Cost$ 9,100 Hosp. Margin (3%)$ 900 Total Hospital Pmt$30,000 Total Cost to Payer$31,200

29 29 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Physicians Could Help Hospitals Reduce Cost of Medical Devices COST TYPETODAYCHANGE Physician Fee$ 1,200 Device Cost$20,000-10% ($2,000) Other Hospital Cost$ 9,100 Hosp. Margin$ 900 Total Hospital Pmt$30,000 Total Cost to Payer$31,200

30 30 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Today: All Savings Goes to the Hospital, No Reward for Physician COST TYPETODAYCHANGESPLIT Physician Fee$ 1,200+ 0% Device Cost$20,000-10% ($2,000) Other Hospital Cost$ 9,100 Hosp. Margin$ % ($2000) Total Hospital Pmt$30,000 Total Cost to Payer$31,200-0%

31 31 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Bundling Allows Savings Split Among Docs, Hospital, Payers COST TYPETODAYCHANGESPLIT Physician Fee$ 1, % ($600) Device Cost$20,000-10% ($2,000) Other Hospital Cost$ 9,100 Hosp. Margin$ % ($450) Total Hospital Pmt$30,000 Total Cost to Payer$31, % ($950)

32 32 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement So Defibrillator Implantation is Cheaper But More Profitable COST TYPETODAYCHANGESPLITNEW Physician Fee$ 1, % ($600)$ 1,800 Device Cost$20,000-10% ($2,000)$18,000 Other Hospital Cost$ 9,100 Hosp. Margin$ % ($450)$ 1,350 Total Hospital Pmt$30,000$28,450 Total Cost to Payer$31, % ($950)$30,250 Win-Win-Win

33 33 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Won’t Bundling Encourage More Procedures?

34 34 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Bundling Can Provide a Path to Reducing Overutilization COST TYPETODAY200 Cases Physician Fee$ 1,200$240,000 Device Cost$20,000 Other Hospital Cost$ 9,100 Hosp. Margin$ 900$180,000 Total Hospital Pmt$30,000 Total Cost to Payer$31,200$6,240,000

35 35 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement What If There is Evidence of Overutilization? COST TYPETODAY200 Cases Physician Fee$ 1,200$240,000 Device Cost$20,000 Other Hospital Cost$ 9,100 Hosp. Margin$ 900$180,000 Total Hospital Pmt$30,000 Total Cost to Payer$31,200$6,240,000 Assume a study finds that 20% of procedures are unnecessary or can be avoided through medical management

36 36 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Appropriateness Guidelines Alone Can Hurt Hospitals & Physicians COST TYPETODAY200 CasesTODAY160 CasesChg Physician Fee$ 1,200$240,000$ 1,200$192,000-20% Device Cost$20,000 Other Hospital Cost$ 9,100 Hosp. Margin$ 900$180,000$ 900$144,000-20% Total Hospital Pmt$30,000 Total Cost to Payer$31,200$6,240,000$31,200$4,992,000-20%

37 37 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Bundling + Guidelines Can Avoid Harming Providers While Saving $ COST TYPETODAY200 CasesNEW160 CasesChg Physician Fee$ 1,200$240,000$ 1,800$288,000+20% Device Cost$20,000$18,000 Other Hospital Cost$ 9,100 Hosp. Margin$ 900$180,000$ 1,350$216,000+20% Total Hospital Pmt$30,000$28,450 Total Cost to Payer$31,200$6,240,000$30,250$4,840,000-22%

38 38 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Bundling Can Also Allow Benefits From Changes in Settings

39 39 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Under Today’s Separate Facility and Physician Fees… Physician Fee Hospital DRG INPATIENT Payer

40 40 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement …Savings From Shifts to Lower Cost Settings All Accrue to Payer Physician Fee Hospital DRG INPATIENTOUTPATIENT Physician Fee Outpatient APC Payer Savings Payer

41 41 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement …Savings From Shifts to Lower Cost Settings All Accrue to Payer Physician Fee Hospital DRG INPATIENTOUTPATIENTOFFICE Physician Fee Outpatient APC Physician Fee Practice Exp. Payer Savings Payer

42 42 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement But if the Physician Is Accepting a Bundled Payment… Physician Fee Hospital DRG INPATIENTOUTPATIENTOFFICE Physician Fee Outpatient APC Physician Fee Practice Exp. Payer Savings Physician Fee Hospital Cost Payer Bundled Payment

43 43 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement …The Physician Can Be Paid More But Still Charge Less to the Payer Physician Fee Hospital DRG INPATIENTOUTPATIENTOFFICE Physician Fee Outpatient APC Physician Fee Practice Exp. Payer Savings Physician Fee Hospital Cost Physician Fee Outpatient Cost Physician Fee Office Costs Payer Savings Payer Bundled Payment

44 44 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How Can Physicians, Hospitals, & Payers Benefit from Warranties?

45 45 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Prices for Warrantied Care Will Likely Be Higher

46 46 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Prices for Warrantied Care Will Likely Be Higher Q: “Why should we pay more to get good-quality care??” A: In most industries, warrantied products cost more, but they’re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty

47 47 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Prices for Warrantied Care May Be Higher, But Spending Lower Q: “Why should we pay more to get good-quality care??” A: In most industries, warrantied products cost more, but they’re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty In healthcare, a DRG with a warranty would need to have a higher payment rate than the equivalent non-warrantied DRG, but the higher price would be offset by fewer DRGs w/ complications, outlier payments, and readmissions

48 48 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Example: $10,000 Procedure Cost of Procedure $10,000

49 49 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Actual Average Payment for Procedure is Higher than $10,000 Cost of Procedure Added Cost of Infection Rate of Infections Average Total Cost $10,000$20,0005%$11,000

50 50 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Starting Point for Warranty Price: Actual Current Average Payment Cost of Procedure Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue $10,000$20,0005%$11,000 $0

51 51 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Limited Warranty Gives Financial Incentive to Improve Quality Cost of Procedure Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue $10,000$20,0005%$11,000 $0 $10,000$20,0004%$10,800$11,000$200 Reducing Adverse Events… …Improves The Bottom Line...Reduces Costs...

52 52 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Higher-Quality Provider Can Charge Less, Attract More Patients Cost of Procedure Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue $10,000$20,0005%$11,000 $0 $10,000$20,0004%$10,800$11,000$200 $10,000$20,0004%$10,800 $0 Enables Lower Prices

53 53 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement A Virtuous Cycle of Quality Improvement & Cost Reduction Cost of Procedure Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue $10,000$20,0005%$11,000 $0 $10,000$20,0004%$10,800$11,000$200 $10,000$20,0004%$10,800 $0 $10,000$20,0003%$10,600$10,800$200 Reducing Adverse Events… …Improves The Bottom Line...Reduces Costs...

54 54 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Win-Win-Win for Patients, Payers, and Providers Cost of Procedure Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue $10,000$20,0005%$11,000 $0 $10,000$20,0004%$10,800$11,000$200 $10,000$20,0004%$10,800 $0 $10,000$20,0003%$10,600$10,800$200 $10,000$20,0003%$10,600 $0 $10,000$20,0000%$10,000$10,600$600 Quality is Better......Cost is Lower......Providers More Profitable

55 55 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement In Contrast, Non-Payment Alone Creates Financial Losses Cost of Procedure Added Cost of Infection Rate of Infections Average Total Cost Amount Paid Change in Net Revenue $10,000$20,0005%$11,000 $0 $10,000$20,0005%$11,000$10,000-$1,000 $10,000$20,0003%$10,600$10,000-$600 $10,000$20,0000%$10,000 $0 Non- Payment for Infections Causes Losses While Improving

56 56 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Is P4P Easier Than a Warranty? Payer-Driven P4PProvider-Driven Warranty Payer defines what level of performance is acceptable to determine bonus or penalty Physicians define feasible level of performance and have incentive to do better Payer defines which cases will be include/excluded Physicians have incentive to improve on all potential cases P4P bonus/penalty may not offset loss in revenues/margin from fewer admissions, visits, procedures Physicians set price of successful care to adequately cover costs with fewer admissions/visits P4P bonus/penalty may not cover costs of extra services needed to improve performance Physicians set price of successful treatment to cover costs of additional services needed Payer must spend more to incent greater performance improvements beyond the minimum level Physicians have incentive to improve as much as possible to reduce costs and to reduce prices in order to attract more patients Payer decides which providers (hospital, physicians, post-acute care) to reward/penalize Hospital, physicians, and other providers decide themselves how to divide accountability

57 57 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Not Just Better Acute Care, But Reducing the Need for It Preventable Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome

58 58 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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), % 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), % 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

59 59 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $$ We Don’t Pay for the Things That Will Prevent Overutilization CURRENT PAYMENT SYSTEMS Avoidable Office Visits Nurse Care Mgr Phone Calls $ No payment for services that can prevent utilization......No penalty or reward for high utilization elsewhere

60 60 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice/ ACO Global Payment Can Solve That, But It’s a Big Jump from FFS FULL COMP. CARE/GLOBAL PAYMENT Avoidable $ Flexibility and accountability for a condition-adjusted budget covering all services $ Condition- Adjusted Per Person Payment Office Visits Nurse Care Mgr Phone Calls

61 61 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $$ What Might a Transitional Payment System Look Like? CURRENT PAYMENT SYSTEMS Avoidable Office Visits Nurse Care Mgr Phone Calls $

62 62 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $ $$ Typical Medical Home “Solution”: Pay More for Physician Services (TYPICAL) MEDICAL HOME PROGRAM Avoidable $ Higher payment for primary care... RN Care Mgr Phone Calls Monthly Care Mgt Payment Office Visits

63 63 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $ $$ Weakness: More $ for Physicians, But Any Savings Elsewhere? (TYPICAL) MEDICAL HOME PROGRAM Avoidable $ Higher payment for primary care......But no commitment to reduce utilization elsewhere RN Care Mgr Phone Calls Monthly Care Mgt Payment Office Visits

64 64 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $$ Is Shared Savings the Answer? SHARED SAVINGS MODEL Avoidable $ Portion of savings from reduced spending in other areas......Returned to physician practice after savings determined......but no upfront $ for better care Office Visits Nurse Care Mgr Phone Calls $

65 65 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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 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 The underlying fee for service incentives continue; losing less (via shared savings) is still losing compared to FFS I.e., it’s not really true payment reform

66 66 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Health Insurance Plan Physician Practice $ $$ Better Approach: Simulate Flexibility/Incentives of Global Pmt CARE MGT PAYMENT + UTILIZATION P4P ER Visits Lab Work/ Imaging Hospital Stay Avoidable P4P Bonus/Penalty Based on Utilization $ Office Visits $$ $ RN Care Mgr Phone Calls Monthly Care Mgt Payment More $ for PCP Targets for Reduction In Utilization $

67 67 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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, the practice pays a penalty via a reduction in its FFS conversion factor equivalent to up to 50% of Care Management Payment

68 68 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Not Just PCPs, But The Medical Neighborhood, Too Primary Care Medical Home (Non-Primary Care) Specialists PATIENT FFS Payment Based on Volume, Procedures, & Office Visits Resources & Incentives for More Coordinated Care

69 69 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Pay Both PCPs & Specialists for Outcomes & Coordination Primary Care Medical Home (Non-Primary Care) Specialists PATIENT Resources & Incentives for More Coordinated Care Payment for Consultation w/ PCP; Outcomes-Based Payment

70 70 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Today: Underpaid PCPs, Underused Specialists, High Costs 500 Moderate/Severe Chronic Disease Patients

71 71 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Today: Underpaid PCPs, Underused Specialists, High Costs 500 Moderate/Severe Chronic Disease Patients 6.7% of the money goes to the physicians

72 72 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Pay PCPs & Specialists to Provide More Coordinated, Proactive Care 500 Moderate/Severe Chronic Disease Patients Pay for Patient Care, Not Visits

73 73 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Higher Medication Expenses, But Lower Hospital Costs 500 Moderate/Severe Chronic Disease Patients Pay for Patient Care, Not Visits Better Outcomes Better Medication Compliance

74 74 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Win-Win-Win Through PCP/Specialist Coordinated Mgt 500 Moderate/Severe Chronic Disease Patients Fewer HospitalizationsMore Revenue for DocsLower Total Costs

75 75 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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 rate

76 76 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Health Insurance Plan Physician Practice $ Phase 2: More ACO-ness: Partial Global Payment PARTIAL GLOBAL PMT (Professional Svcs) ER Visits Lab Work/ Imaging Hospital Stay Avoidable $ $ Condition- Adjusted Per Person Payment Flexibility and accountability for a condition-adjusted budget covering all professional services Office Visits Nurse Care Mgr Phone Calls $$ P4P Bonus/Penalty Based on Utilization

77 77 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice/ ACO And Then Transition to a Full Global Payment System FULL COMP. CARE/GLOBAL PAYMENT Avoidable $ $ Condition- Adjusted Per Person Payment Office Visits Nurse Care Mgr Phone Calls $$ P4P Bonus/Penalty Based on Quality

78 78 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Transitioning to Accountable Care Payment

79 79 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How Does All This Fit Into Accountable Care Organizations??

80 80 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Heart Disease Back Pain Pregnancy PATIENTS Primary Care Practice Orthopedic Group OB/GYN Group Cardiology Group If Physician Practices Want to Manage a Patient Population...

81 81 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement MEDICARE/HEALTH PLAN Heart Disease Back Pain Pregnancy PATIENTS Primary Care Practice Orthopedic Group OB/GYN Group Cardiology Group Heart Episode Pmt Back Episode Pmt Pregnancy Episode Pmt Care Mgt Pmt +P4P...Should They Hope Payers Will Make the Right Payment Changes?

82 82 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement MEDICARE/HEALTH PLAN Condition-Adjusted Comprehensive Care (Global) Payment Heart Disease Back Pain Pregnancy PATIENTS Primary Care Practice ACO Orthopedic Group OB/GYN Group Cardiology Group Heart Episode Pmt Back Episode Pmt Pregnancy Episode Pmt Care Mgt Pmt +P4P Or Take a Single Payment & Work Out Internal Pmts Themselves?

83 83 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Challenge: Giving Physicians the Skills to Take Accountable Pmts Physician Practice ? Patient Unneeded Testing Inpatient Episodes

84 84 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Resources/Capabilities Needed for Docs to Take Accountable Pmts Patient Unneeded Testing Inpatient Episodes Physician w/ time for diagnosis, treatment planning, and followup Resources for patient educ. & self- mgt support (e.g., RN care mgr) Method for targeting high-risk patients (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 Physician Practice

85 85 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Capabilities Exist Today, But Don’t Coordinate w/ Physicians Physician w/ time for diagnosis, treatment planning, and followup Resources for patient educ. & self- mgt support (e.g., RN care mgr) Coordinated relationships with other specialists and hospitals Data and analytics to measure and monitor utilization and quality Physician Practice Health Plan or Disease Mgt Vendor Method for targeting high-risk patients (e.g., predictive modeling) Capability for tracking patient care and ensuring followup (e.g., registry) Patient Unneeded Testing Inpatient Episodes

86 86 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Medical Home Initiatives Expand Practice Capacity, But Not Enough Physician w/ time for diagnosis, treatment planning, and followup Resources for patient educ. & self- mgt support (e.g., RN care mgr) Coordinated relationships with other specialists and hospitals Data and analytics to measure and monitor utilization and quality Patient- Centered Medical Home Health Plan Method for targeting high-risk patients (e.g., predictive modeling) Capability for tracking patient care and ensuring followup (e.g., registry) Patient Unneeded Testing Inpatient Episodes

87 87 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Global Payment Requires ROI 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”

88 88 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Goal: Give Docs the Capacity to Deliver “Accountable Care” Physician w/ time for diagnosis, treatment planning, and followup Resources for patient educ. & self- mgt support (e.g., RN care mgr) Method for targeting high-risk patients (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 Physician Practice + Partners = ACO Patient Unneeded Testing Inpatient Episodes

89 89 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Can Small Physician Practices Manage Accountable Payments? Infrastructure/Services –Small physician practices may not have enough patients to justify staff or other services to coordinate care, particularly for patients with complex illnesses (e.g., nurse care managers, patient registries, etc.) Quality/Cost Measurement –Small numbers of patients make measurement unreliable; physicians may be inappropriately labeled low quality, high cost, or vice versa DOMDDOMD DOMDDOMD DOMDDOMD DOMDDOMD DOMDDO Better Patient Outcomes & Lower Cost ?

90 90 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Solution 1: Hospitals Acquire Physician Practices DOMDDOMD DOMDDOMD DOMDDOMD DOMDDOMD DOMDDOMD Hospital Management Better Patient Outcomes & Lower Cost DOMDDOMD DOMDDOMD DOMDDOMD DOMDDOMD DOMDDO

91 91 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Shared Savings Forces Hospitals To Consider Hiring Physicians Hospitals are not directly eligible for shared savings; all savings are attributed to primary care physicians Even if the hospital reduces readmissions, infections, complications, etc., it may receive no reward for doing so Reducing hospitalizations, ER visits, etc. will reduce the hospital’s revenues, but the hospital may receive no share of the savings to help it cover its stranded fixed costs Consequently, hospitals may feel compelled to own physician practices, either to capture a portion of the shared savings revenue, or to prevent there from being any savings!

92 92 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Solution 2: Hospital-Physician Partnerships Hospital Staff & IT (e.g., via Physician- Hospital Org.) Better Patient Outcomes & Lower Cost DOMDDOMD DOMDDOMD DOMDDOMD DOMDDOMD DOMDDO MDDOMD DOMDDOMD DOMDDOMD DOMDDOMD DOMDDOMD

93 93 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Solution 3: Use IPAs for Critical Mass Independent Practice Association Better Patient Outcomes & Lower Cost DOMDDOMD DOMDDOMD DOMDDOMD DOMDDOMD DOMDDO MDDOMD DOMDDOMD DOMDDOMD DOMDDOMD DOMDDOMD

94 94 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Examples of Small, Independent MD Practices With Global Pmt Small Primary Care Practices Managing Global Payments –Physician Health Partners (PHP) in Denver, CO is a management services organization that supports four separate IPAs (median size: 3 MDs/practice). PHP accepts capitated risk-based contracts on behalf of the IPAs with both Medicare and commercial HMOs. Independent PCPs & Specialists Managing Global Payments –Northwest Physicians Network (NPN) in Tacoma, WA is an IPA with 109 PCPs and 345 specialists in 165 practices (average size: 2.4 MDs/practice). NPN accepts full or partial risk capitation contracts, operates its own Medicare Advantage plan, and does third party administration for self-insured businesses. Joint Contracting by MDs & Hospitals for Global Payments –The Mount Auburn Cambridge IPA (MACIPA) and Mount Auburn Hospital jointly contract with three major Boston-area health plans for full-risk capitation. The IPA is independent of the hospital; they coordinate care with each other without any formal legal structure.

95 95 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Benefit Design Changes Are Also 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 and Incentives to: Improve health Take prescribed medications Allow a provider to coordinate care Choose the highest-value providers and services

96 96 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Example: Important to Coordinate Pharmacy & Medical Benefits Hospital Costs Physician Costs Other Services Medical Benefits (Parts A/B) Drug Costs Pharmacy Benefits (Part D) Single-minded focus on reducing costs here......could result in higher spending on hospitalizations High copays for brand-names when no generic exists Doughnut holes & deductibles Principal treatment for most chronic diseases involves regular use of maintenance medication

97 97 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Ensuring That Lower Cost ≠ Lower Quality Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care

98 98 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Effective Quality Measurement and Reporting Needed 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

99 99 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Federal Measurement of Quality? 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 Undesirable: National data aggregation and reporting –E.g., PQRI/PQRS

100 100 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Community-Driven Quality Measurement 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 participation of physicians and hospitals, as a growing number of regions do Massachusetts Health Quality Partners Wisconsin Collaborative for Healthcare Quality Oregon Health Care Quality Corporation

101 101 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement “Measurement” vs. “Analysis” Measurement presumes we know what we’re looking for, that we know what’s desirable/achievable in all communities, and that we can legitimately rate/rank providers based on the measures –That’s a high standard, and it’s not surprising that we don’t have adequate measures in many important areas, particularly outcome measures Analysis, particularly exploratory analysis, presumes only that we believe there are opportunities to improve value, and that more work will be needed to determine what is achievable and cost-effective

102 102 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Example: Prometheus Analyses of Avoidable Complications Analysis of a Commercially-Insured Population

103 103 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Majority of Opportunities for Savings Related to Cardiology Opportunities for Cardiology Analysis of a Commercially-Insured Population

104 104 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement (Many) Other Issues Malpractice/Defensive Medicine –Reforms in malpractice law –Collaborative changes in physician practice, so more conservative care is the standard of care across the entire community e.g., HealthTeamWorks/Colorado Clinical Guidelines Collaborative Hospital Restructuring –Significant reductions in admissions, readmissions, infections, procedures will require multi-year phase-out of existing capital investments & new/different investments Workforce Training/Retraining –More PCPs, more nurses willing to make home visits, fewer support staff for fewer procedures, etc. And Others

105 105 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Payment Reform Is Necessary, But Not Sufficient Reducing Costs Without Rationing Value-Driven Delivery Systems Patient Education & Engagement Value-Driven Payment Systems & Benefit Designs Quality/Cost Analysis & Reporting

106 106 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Many Specific Activities in Each Area... Value-Driven Payment & Benefits Quality/ Cost Analysis & Reporting Public Reporting Business Case Analysis Value-Driven Delivery Systems Technical Assistance to Providers Design & Delivery of Care Patient Education/ Engagement Value-Based Choice Education Materials Engagement of Purchasers Alignment of Multiple Payers Payment System Design Benefit Design Provider Organization/ Coordination Claims, Clinical & Patient Data Wellness & Adherence Reducing Costs Without Rationing

107 107 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement...All of Which Need to Be Coordinated to Be Successful Public Reporting Business Case Analysis Design & Delivery of Care Value-Based Choice Engagement of Purchasers Alignment of Multiple Payers Payment System Design Benefit Design Provider Organization/ Coordination Claims, Clinical & Patient Data Wellness & Adherence Do patients know which providers offer the highest value care? Will investments in new care models create savings > costs? Will benefit designs give patients the ability to adhere to care plans? Will payment support better care? Can providers accept new payment models? Technical Assistance to Providers Education Materials

108 108 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How Can All These Functions Be Delivered in a Coordinated Way? Public Reporting Business Case Analysis Design & Delivery of Care Value-Based Choice Engagement of Purchasers Alignment of Multiple Payers Payment System Design Benefit Design Provider Organization/ Coordination Claims, Clinical & Patient Data Wellness & Adherence Technical Assistance to Providers Education Materials ?

109 109 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement The Role of Regional Health Improvement Collaboratives Public Reporting Business Case Analysis Design & Delivery of Care Value-Based Choice Engagement of Purchasers Alignment of Multiple Payers Payment System Design Benefit Design Provider Organization/ Coordination Claims, Clinical & Patient Data Wellness & Adherence Regional Health Improvement Collaborative Technical Assistance to Providers Education Materials

110 110 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement...With Active Involvement of All Healthcare Stakeholders Regional Health Improve- ment Collab. Healthcare Providers Healthcare Payers Healthcare Consumers Healthcare Purchasers

111 111 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Leading Regional Health Improvement Collaboratives –Albuquerque Coalition for Healthcare Quality –Aligning Forces for Quality – South Central PA –Alliance for Health –Better Health Greater Cleveland –California Cooperative Healthcare Reporting Initiative –California Quality Collaborative –Finger Lakes Health Systems Agency –Greater Detroit Area Health Council –Health Improvement Collaborative of Greater Cincinnati –Healthy Memphis Common Table –Institute for Clinical Systems Improvement –Integrated Healthcare Association –Iowa Healthcare Collaborative –Kansas City Quality Improvement Consortium –Louisiana Health Care Quality Forum –Maine Health Management Coalition –Massachusetts Health Quality Partners –Midwest Health Initiative –Minnesota Community Measurement –Minnesota Healthcare Value Exchange –Nevada Partnership for Value-Driven Healthcare (HealthInsight) –New York Quality Alliance –Oregon Health Care Quality Corporation –P2 Collaborative of Western New York –Pittsburgh Regional Health Initiative –Puget Sound Health Alliance –Quality Counts (Maine) –Quality Quest for Health of Illinois –Utah Partnership for Value-Driven Healthcare (HealthInsight) –Wisconsin Collaborative for Healthcare Quality –Wisconsin Healthcare Value Exchange Network for Regional Healthcare Improvement

112 112 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Moving to Accountable Care There is no one-size-fits-all solution to healthcare transformation; each region will need to actually make it happen in its own unique environment. The best federal policy will support regional innovation. Payment reform is necessary, but not sufficient. Delivery system reform, changes in benefit design, and effective quality measurement are also essential. Everything needs to focus on improving outcomes. Physicians need to take the lead by agreeing to take accountability for reducing costs without rationing, creating organizational structures that enable them to do so, and demanding the payment changes needed to support them.

113 113 © Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement For More Information on Payment and Delivery Reforms

114 For More Information: Harold D. Miller Executive Director, Center for Healthcare Quality and Payment Reform and President & CEO, Network for Regional Healthcare Improvement (412)


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