2. © 2005 Med-Vantage, Inc. All rights reserved. Proprietary and confidential. May not be reproduced without permission Beau Carter Senior Health Policy and Strategy Consultant Med-Vantage Sustainable Funding Models for RHIOs Get Connected Knowledge Forum June 28, 2005 Med Vantage, Inc ®

3. Company Overview  Founded 2001, San Francisco corporate office  Domain expertise: P4P, Consumer Scorecards, EBM Metrics & Deployment, ROI evaluation, Risk Adjustment  First-to-market application, patent pending QualScore - Physician Quality & Cost Decision Support Tool Medical Cost Estimator – Treatment Cost and Provider Search Tool EBMScore – EBM Measure Construction, ROI & Reporting Tool  Largest consumer quality scorecard deployment underway for CDH/PPO/HMO (Arkansas BCBS)  11 health plan clients (pay-for-performance clients)  200 EBM Measures, 18 specialties (road tested, defensible)  National ETG and KPI benchmark data set (50M members) © 2005 Med-Vantage, Inc. All rights reserved. Proprietary and confidential. May not be reproduced without permission

4. 3 EBM Research & Evaluation Physician Scorecard Clinical Informatics Pay for Performance (P4P) Evidence-Based Physician Scorecard Solutions

5. 4 IOM Call to Action “If we want safer, higher- quality care, we will need to have redesigned systems of care, including the use of information technology to support clinical and administrative processes.”

6. 5 “I think the projects that seem to be making the biggest progress are really focusing on the real nuts and bolts of how they get interoperability to occur. …They are also looking at business models and financial alignment.” Quoted in Jim Molpus “David Brailer's Year of Living Attentively” for HealthLeaders News, May 10, 2005 A First-Year Assessment of RHIOs From David Brailer, MD

7. 6 2003 2004 n = 28 n = 50 IT - Fastest Growing P4P Domain Category % Total n n Clinical (HEDIS)89% 25 94% 47 Clinical (non-HEDIS)46% 13 32% 16 Patient satisfaction79% 22 56% 28 Efficiency/utilization57% 16 46% 23 Administrative/market share54% 15 40% 20 Information technology39% 11 54% 27 Patient safety29% 8 12% 6 Other32% 9 22% 11 2004 National P4P Survey P4P Measure Domains © 2005 Med-Vantage, Inc. All rights reserved. Proprietary and confidential. May not be reproduced without permission

8. 7 IT Incentive Models for Physicians Clinical Information SystemsModel Level 1 – Connectivity, electronic claims submission, eligibility verification HIP, MVP/Taconic IPA, IBC Level 2 - Health Plan Based Patient Registry, Care Alerts Priority Health Plan (MI), Horizon BCBS (NJ), BCBS Excellus (Rochester) Level 3– Electronic Prescribing Incentive BCBS-MA, Anthem, MVP/Taconic, Bridges to Excellence (BTE), BCBST Level 3 – Basic Patient Registry Use in MD Office, Adoption of EMR Harvard Pilgrim, BTE, Anthem, BCBS- MA, IHA, Fallon, BCBS-MI, Dean Health Plan, BCBS-MISS, MVP/Taconic IPA, CareFirst, BCBST Level 4 - Electronic Patient Registries, Systems for Rx/Tests, EMR, Health Plan Connectivity (lab, chart results, Rx) Non-P4P: BCBS-AL, Group Health Cooperative, Kaiser Source: Bridges to Excellence. © 2005 Med-Vantage Inc. All Rights Reserved. www.medvantageinc.com

9. 8 “If interoperability is not solidified and built into EMRs, a generation of investment will be lost, as will an opportunity for fundamental improvement in care delivery?” David Brailer, MD February 17, 2005 speech to HIMSS But remember, the magic is in not bi-lateral connectivity – it’s in community exchange

10. 9 Purchasers Payers RHIO Hospitals & Physicians Gain Sharing Enrollment Fee Community Pool Participation Fee RHIO - Aligning Health Resources with Community Goals Savings ©2004 Jeff Rose, HealthAlliant. All Rights Reserved

11. 10 Financial Barriers to Physician Participation $30,000 - $50,000 -- Client / Server $1,000 per physician per month - ASP model Practice productivity loss Financial ROI favors the payers over providers SOLUTION: Sustainable model built on core funding for the exchange plus financial incentives for physician practice participation

12. 11 Pharmacies Hospitals Reference Laboratories TRANSLATOR CLINICAL DATA REPOSITORY E- Results E Rx MedAllies Portal EMR 1 EMR 2 MASTER PATIENT INDEX PAYORS PAY-4-PERFORMANCE PMS PHYSICIANS PATIENTS Physician Practice Source: A. John Blair III, MD, Taconic IPA

13. 12 THINC Health Information Exchange

14. 13 Incentives for Physician IT Adoption “Financial incentives of the approximate range of $3 to $6 per patient visit or $0.50 to $1.00 per member per month appear to be a sufficient starting point to encourage wide-spread adoption of basic EMR technologies by small, ambulatory primary care practices.” Work Group on Financial, Legal, and Organizational Stability Connecting for Health…A Public-Private Collaborative June 23, 2004 © 2005 Med-Vantage Inc. All Rights Reserved. www.medvantageinc.com

15. 14 Hudson Valley THINC – Flow of IT Adoption Incentive $ MD BTE Employer A Self-Funded Employer B Health Plan C Health Plan D Certification Of Performance $ $ $ $ Health Plan ASO $ Federal/State Government ? $

16. 15 The Case for Payer Participation in a Collaborative RHIO Incentive Model In most markets, no one payer has enough market share to drive change alone A small investment can produce a large return The broader the participation, the fewer “free riders” Most “e” benefits accrue to the payer Some payers could fund physician incentives with Rx savings © 2005 Med-Vantage, Inc. All rights reserved. Proprietary and confidential. May not be reproduced without permission

17. 16 There is a Strong Payer ROI in e-Rx Copyright © 2004 Healthvision, Inc. 65% 29% 3%

18. 17... and an ROI in EMR Adoption EMR Benefits Source: Partners Health Care experience based on 2500 patients and providers. “Cost and Benefit Analysis for electronic medical records in primary care.” The American Journal of Medicine 2003;114:397-403 15% 14% 13% 5% 15% 29% 4%

19. 18 Physician P4P Model: From 100% IT to 100% Outcomes Phase I Years 1-2 Phase II Years 3-4 Phase III Year 5 on Key Type of P4PP4I (Pay for Infrastructure) P4U (Pay for Use) P4O (Pay for Outcomes) Desired BehaviorEstablish & use patient registries Adopt & use eRx system Adopt & use full EMRPerform at EBM best practice levels Key Performance Indicators Use of registries Use of eRx with decision support Use of full EMR Clinical metrics – screening/levels Clinical metrics - HbA1c, LDL levels; smoking cessation; obesity, hypertension management WeightingIT ( pat. reg. & eRx) – 70% Generic Rx – 30% IT (EMR) – 50% Clinical – 50% (screening/levels) Clinical – 100% Levels + performance based on chart data Data SourcesSelf-report - registry eRx system reports Clinical – admin data EMR system reports Clinical – admin & lab data Admin. & lab data, plus patient data from EMR Incentive FormulaYes-No: registry Two tiers for eRx % use Two tiers for EMR use Two tiers for clinical Yes-No: smoking, obesity management Incentive Pay-outUp to 10% bonus pmpm or visit add-on Up to 10% bonus pmpm or visit add-on Up to 10% bonus pmpm or visit add-on © 2005 Med-Vantage, Inc. All Rights Reserved. May not be reproduced without permission.

20. 19 And When the Choices Look Like This …

21. 20 Do this … © 2004 Med-Vantage, Inc. All Rights Reserved. May not be reproduced without permission. “Do the right thing. It will gratify some people and astonish the rest.” Mark Twain © 2005 Med-Vantage, Inc. All rights reserved. Proprietary and confidential. May not be reproduced without permission

22. 21 For More Information… Beau Carter Senior Health Policy & Strategy Consultant Med-Vantage, Inc. 1 California Street, Suite 2800 San Francisco, CA 94111 (415) 765-7103 www.medvantageinc.com 2003 - 2004 National P4P Study – now available 50 + page White Paper – call 415-765-7106 Executive Summary – on the web site