Improving Health Care Quality and Reducing Costs through Payment and Delivery System Reform Harold D. Miller Executive Director Center for Healthcare Quality.

Improving Health Care Quality and Reducing Costs through Payment and Delivery System Reform Harold D. Miller Executive Director Center for Healthcare Quality and Payment Reform and 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 Core of the National Budget Problem “Our health-care problem is our deficit problem. Nothing else even comes close.” President Obama September 2010

4 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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.

6 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Insurance Cost Growth Quadruple the 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

7 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Health Care Costs Have Wiped Out Real Income Gains $ 95 for spending $ 945 for health care $ 870 for inflation $1910 more income

10 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Prevention and Wellness Health Condition Continued Health Healthy Consumer

11 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Avoiding Hospitalizations Health Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode

12 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Efficient, Successful Treatment Health Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome

13 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Reducing Costs Without Rationing: Is Also Quality Improvement! Health Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome Better Outcomes/Higher Quality

14 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How is Cleveland Doing? Health Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome

23 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Are There Similar Issues With Commercial/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

24 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement What You Can Learn from Claims: Prometheus Analysis of PACs www.HCI3.org Significant Spending on Potentially Avoidable Complications for Chronic Disease Patients

25 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Current Payment Systems Reward Bad Outcomes, Not Better Health Health Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome $

26 © 2009-2011 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 $ ?

27 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement “Episode Payments” to Reward Value Within Episodes Health 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

28 © 2009-2011 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

31 © 2009-2011 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.

32 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement The Weakness of Episode Payment Health 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.)

33 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Comprehensive Care Payments To Avoid Episodes Health 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

34 © 2009-2011 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

35 © 2009-2011 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 http://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html

36 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Comprehensive Care & Episode Payment Can Be Complementary Health Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome $ Comp. Care/ Global Payment Episode Payment E.g., annual pmt to manage an individual’s chronic disease, including hospitalizations E.g., the payment made when the individual has an exacerbation requiring hospitalization

37 © 2009-2011 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)

39 © 2009-2011 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

40 © 2009-2011 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

41 © 2009-2011 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...

42 © 2009-2011 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

43 © 2009-2011 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...

44 © 2009-2011 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

45 © 2009-2011 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

46 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Not Just Better Acute Care, But Reducing the Need for It Health Condition Continued Health Healthy Consumer No Hospitalization Acute Care Episode Efficient Successful Outcome Complications, Infections, Readmissions High-Cost Successful Outcome

47 © 2009-2011 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), 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

48 © 2009-2011 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

49 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $$ Option 1: Add New Fee Codes for Unreimbursed PCP Services MEDICAL HOME PROGRAM Avoidable Office Visits Nurse Care Mgr Phone Calls $ Higher payment for primary care $

50 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $$ Option 2: Pay for Monthly “Care Mgt” to Cover Missing Services MEDICAL HOME PROGRAM Avoidable $ Higher payment for primary care Office Visits RN Care Mgr Phone Calls Monthly Care Mgt Payment $

51 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement ER Visits Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $$ More $ for PCPs, But Any Savings Elsewhere? MEDICAL HOME PROGRAM Avoidable $ Higher payment for primary care...But no commitment to reduce utilization elsewhere Office Visits RN Care Mgr Phone Calls Monthly Care Mgt Payment $

52 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Specialty Consults Lab Work/ Imaging Hospital Stay Health Insurance Plan Physician Practice $$ Option 3: “Shared Savings” (More $ Only If Total Costs Decrease) 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 $

53 © 2009-2011 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 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

54 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Health Insurance Plan Physician Practice $ $$ Option 4: Resources + Accountability CARE MGT PAYMENT + UTILIZATION P4P ER Visits Lab Work/ Imaging Hospital Stay Avoidable P4P Bonus/Penalty Based on Utilization $ Office Visits $ $$ $ RN Care Mgr Phone Calls Monthly Care Mgt Payment More $ for PCP Targets for Reduction In Utilization $

55 © 2009-2011 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 equivalent to up to 50% of Care Management Payment

57 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement PRIMARY CARE PRACTICEHEALTH PLAN ER EXPENSES Many Patients Are Going to ER Due to Difficulty Seeing PCPs

58 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement PRIMARY CARE PRACTICEHEALTH PLAN ER EXPENSES PCPs Could Reduce ER Expenses With Right Resources

59 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Upfront Money Could Enable PCPs to Change, If Willing PRIMARY CARE PRACTICEHEALTH PLAN ER EXPENSES

60 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Payer Can Reward PCP for Results and Still Save Money PRIMARY CARE PRACTICEHEALTH PLAN ER EXPENSES

62 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement But Upfront Payment Reform is Needed So Care Can Be Changed PRIMARY CARE PRACTICEHEALTH PLAN ER EXPENSES

63 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement And Outcome Targets Need to Be Things Physicians Can Influence PRIMARY CARE PRACTICEHEALTH PLAN ER EXPENSES

64 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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

65 © 2009-2011 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

66 © 2009-2011 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

67 © 2009-2011 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 http://www.icsi.org/health_care_redesign_/diamond_35953/

68 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Health Insurance Plan Physician Practice $ $ Option 5: Partial Comprehensive Care 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

69 © 2009-2011 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 Option 6: Risk-Adjusted Full Comprehensive Care Payment COMPREHENSIVE CARE/YEAR-LONG EPISODE Avoidable $ $ Condition- Adjusted Per Person Payment Office Visits Nurse Care Mgr Phone Calls $$ P4P Bonus/Penalty Based on Quality

71 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement A Critical Element is Shared, 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!

72 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Short-Term Payments Focus on Short-Term Costs/Outcomes Health Condition Hospitalization Episode Readmission No Hospitalization Healthy Consumer Continued Health Prevention Services Episode Payment Medical Home/ Year-Long Episode

73 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Where is the Incentive for Prevention? Health Condition Hospitalization Episode Readmission No Hospitalization Healthy Consumer Continued Health Prevention Services Episode Payment Medical Home/ Year-Long Episode

74 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Global Payment Can Help, But Only If It’s a Multi-Year Contract Health Condition Hospitalization Episode Readmission No Hospitalization Healthy Consumer 5+ Years Continued Health Prevention Services

75 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement What Skills Do Physicians Need to Take Accountability? Physician Practice ? Patient Unneeded Testing Inpatient Episodes

76 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Resources/Capabilities Needed for MDs to Take Accountability Patient Unneeded Testing Inpatient Episodes 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-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

77 © 2009-2011 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

78 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Medical Home Initiatives Expand MD Capacity, But Not Enough MD 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

79 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Global/Episode 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”

80 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Goal: Give MDs the Capacity to Deliver “Accountable Care” 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-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

84 © 2009-2011 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

85 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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

86 © 2009-2011 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 Drug Costs Pharmacy Benefits 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

87 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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

88 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Where Will You Get Your Knee Replaced? Consumer Share of Surgery Cost Price #1 $23,000 Price #2 $28,000 Price #3 $33,000 Knee Joint Replacement

89 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Copayment? Use High Price Provider Consumer Share of Surgery Cost Price #1 $23,000 Price #2 $28,000 Price #3 $33,000 $1,000 Copayment:$1,000 Knee Joint Replacement

90 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Coinsurance? Use High Price Provider Consumer Share of Surgery Cost Price #1 $23,000 Price #2 $28,000 Price #3 $33,000 $1,000 Copayment:$1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 Knee Joint Replacement

91 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement High Deductible? Use High Price Provider Consumer Share of Surgery Cost Price #1 $23,000 Price #2 $28,000 Price #3 $33,000 $1,000 Copayment:$1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 $5,000 Deductible:$5,000 Knee Joint Replacement

92 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Pay the Difference in Price? Use the High-Value Provider Consumer Share of Surgery Cost Price #1 $23,000 Price #2 $28,000 Price #3 $33,000 $1,000 Copayment:$1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 $5,000 Deductible:$5,000 Highest-Value:$0$5,000$10,000 Knee Joint Replacement

93 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Blue Cross/Blue Shield of MA Hospital Choice Cost-Share Benefit Low-Cost Hospitals High-Cost Hospitals PCP$20 SPC$35 Inpatient Hospital$500$1500* Outpatient Hospital Day Surgery$250$1250 High Tech Radiology$50$500 Laboratory$0$35 X-Rays/Other Imaging Tests$0$100 PT/OT/ST$35$70 *LOWER INPATIENT COPAY APPLIES IF EMERGENCY ADMISSION

94 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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

95 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How to Encourage Patients to Use a Medical Home? CONSUMERS/ PATIENTS CAN CHANGE OR USE MULTIPLE PROVIDERS AT WILL CONSUMERS/ PATIENTS ARE “LOCKED IN” TO A SINGLE GATEKEEPER PROVIDER ROCKHARD PLACE

96 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How to Encourage Patients to Use a Medical Home? CONSUMERS/ PATIENTS CAN CHANGE OR USE MULTIPLE PROVIDERS AT WILL CONSUMERS/ PATIENTS ARE “LOCKED IN” TO A SINGLE GATEKEEPER PROVIDER CONSUMERS/ PATIENTS ARE ENCOURAGED TO CHOOSE & USE AN ACO OR MEDICAL HOME MIDDLE GROUND ROCKHARD PLACE

97 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How to Encourage Patients to Use a Medical Home? CONSUMERS/ PATIENTS CAN CHANGE OR USE MULTIPLE PROVIDERS AT WILL CONSUMERS/ PATIENTS ARE “LOCKED IN” TO A SINGLE GATEKEEPER PROVIDER CONSUMERS/ PATIENTS ARE ENCOURAGED TO CHOOSE & USE AN ACO OR MEDICAL HOME MIDDLE GROUND ROCKHARD PLACE OPTION 1:Charge patients more for using providers outside the ACO or medical home (requires changing benefits)

98 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How to Encourage Patients to Use a Medical Home? CONSUMERS/ PATIENTS CAN CHANGE OR USE MULTIPLE PROVIDERS AT WILL CONSUMERS/ PATIENTS ARE “LOCKED IN” TO A SINGLE GATEKEEPER PROVIDER CONSUMERS/ PATIENTS ARE ENCOURAGED TO CHOOSE & USE AN ACO OR MEDICAL HOME MIDDLE GROUND ROCKHARD PLACE 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)

99 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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 participation of physicians and hospitals, as a growing number of regions do Massachusetts Health Quality Partners Wisconsin Collaborative for Healthcare Quality Better Health Greater Cleveland

100 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Both Payment & Benefits Are Controlled by the Payer ProviderPatient Payment System Benefit Design PAYER 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

101 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement But Purchaser Support is Needed Particularly for Benefit Changes ProviderPatient Payment System Benefit Design PAYER Purchaser 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

102 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Challenge: Gaining Support from a Critical Mass of Payers Payer Provider Payer Patient Provider is only compensated for changed practices for the subset of patients covered by participating payers Better Payment System Current Payment System

103 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Payers Need to Truly Align to Allow Focus on Better Care Payer Provider Payer Patient Better Payment System A Better Payment System B Better Payment System 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

104 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Purchasers Must Support Multi-Payer Payment Reforms Payer Provider Payer Patient Better Payment System Purchaser

105 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Payer Coordination Is Beginning to 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

106 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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

107 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Many Different Activities Needed for Success Value-Driven Payment & Benefits Quality/Cost/ Experience 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

108 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement How Can 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 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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 Better Health Greater Cleveland Technical Assistance to Providers Education Materials

110 © 2009-2011 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

For More Information: Harold D. Miller Executive Director, Center for Healthcare Quality and Payment Reform and President & CEO, Network for Regional Healthcare Improvement Miller.Harold@GMail.com (412) 803-3650 www.CHQPR.org www.NRHI.org www.PaymentReform.org

113 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement Healthcare Redesign in Cleveland: Today’s Work Session Topics 1.Improving Outcomes and Reducing Costs for Patients With Chronic Disease A.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 Patients A.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?

114 © 2009-2011 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 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 D. Miller Executive Director Center for Healthcare Quality.

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Improving Health Care Quality and Reducing Costs through Payment and Delivery System Reform Harold D. Miller Executive Director Center for Healthcare Quality.

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Presentation on theme: "Improving Health Care Quality and Reducing Costs through Payment and Delivery System Reform Harold D. Miller Executive Director Center for Healthcare Quality."— Presentation transcript:

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