1. Alternative Quality Contract: Improving Health Care Quality While Reducing Spending Growth Alliance for Health Reform Deborah Devaux Monday, August 10, 2009

2. 2 Blue Cross Blue Shield of Massachusetts Transformation Vision: 2016 A health care system that provides safe, timely, effective, affordable, patient-centered care for everyone in Massachusetts.

3. 3 Blue Cross Blue Shield of Massachusetts Cornerstones of the Alternative QUALITY Contract The Alternative QUALITY Contract model is composed of key components that are standard across provider entities  Integration across the continuum of care  Accountability for performance measures (ambulatory and inpatient)  Global payment for all medical services (health status adjusted)  Sustained partnerships (5 year contract) This will lead to …  New products differentiating Alternative QUALITY Contract providers  Member incentives to encourage healthy behaviors

4. 4 Blue Cross Blue Shield of Massachusetts Key components of the alternative contract model Expanded Margin Opportunity INITIAL GLOBAL PAYMENT LEVEL Efficiency Opportunity Inflation Performance Unique contract model: Physicians & hospital contracted together as a “system” – accountable for cost & quality across full care continuum Long-term (5-years) Controls cost growth: Global payment for care across the continuum Annual inflation tied to CPI Incentive to eliminate clinically wasteful care (“overuse”) Improved quality, safety and outcomes: Robust performance measure set creates accountability for quality, safety and outcomes across continuum Substantial financial incentives for high performance (up to 10% upside)

5. 5 Blue Cross Blue Shield of Massachusetts Includes a significant upside potential based on a sophisticated set of measures that address patient safety, appropriateness of care and patient satisfaction Initial payment level is derived from the historical experience of the provider group. Payment is adjusted annually in line with inflation Global payment is not reset annually Providers can retain margins derived from reduction of inefficiencies Payment is health status adjusted to adequately consider changes in patient morbidity How Is this Different from Capitation?

6. 6 Blue Cross Blue Shield of Massachusetts Performance Measures For The AQC Clinical process measures o Acute MI o Heart Failure care o Pneumonia care o Surgical care Clinical outcomes measures o Hospital-acquired infections o Complications after major surgery (AMI, PE/DVT, Pneumonia) o Obstetric trauma Patient Care Experiences o Communication quality: physicians o Communication quality: nurses o Responsiveness o Discharge support/planning Developmental Measures o Measure # 1 o Measure # 2 Hospital Quality and Safety Ambulatory Care Quality Clinical process measures o Depression o Diabetes o Cardiovascular Disease o Cancer Screening o Pediatric: Appropriate Testing / Treatment o Pediatric: Well Child Visits Clinical outcomes measures (triple-weighted) o Diabetes (HbA1c, LDL-c and BP control) o Hypertension (blood pressure control) o Cardiovascular Disease (BP control, LDL-c control) Patient Care Experiences o Quality of clinical interactions o Integration of care o Access to care Developmental Measures o Measure # 1

7. 7 Blue Cross Blue Shield of Massachusetts Performance Achievement Model

8. 8 Blue Cross Blue Shield of Massachusetts Provider Feedback Transition and management support Risk accountability Member communications alignment PCP responsibility

9. 9 Blue Cross Blue Shield of Massachusetts Massachusetts Payment Reform Commission Global payment as predominant form of payment Transition not to exceed five years Careful transition with infrastructure Create new independent Board to implement Complementary strategies −health plan design −evidence based coverage −consumer engagement (lifestyle; self-management) −administrative simplification −medical malpractice reform −end of life care −primary care workforce development