1. 1 NCQA’s New Efficiency Measures: Relative Resource Use March 2011

2. 2 Presentation Outline Context High-Level Review of Relative Resource Use (RRU) Measures Using the RRU measures to drive lower costs Policy implications and concerns

3. 3 Takeaways Demand for cost/efficiency metrics are high; RRUs are an attempt to meet that demand, but no measures are perfect – this is true of RRUs RRUs tell one piece of the efficiency story, which plans can use to better understand costs in their own plans Furthering our broader look in the understanding Triple Aim outcomes, ACHP is engaged in helping plans better understand RRUs, what is driving RRU results within organizations, and how best to communicate how well RRUs capture or do not capture the care your organization delivers.

4. 4 Context

5. 5 Introduction Cost and quality are two of the most important issues in health care reform today - ACHP plans, like many others, are striving to improve the quality of health care while making it more affordable. While total cost of care is the ultimate aim, it is useful to understand the major drivers of that total cost ─Unit price ─Patient/member health mix ─Intensity of services provided ─Administrative costs RRUs provide a means of looking at the intensity of services provided controlled for unit price and health mix.

6. 6 As a Learning Tool ACHP Previously Looked at HEDIS ® Utilization Data HEDIS ® Utilization Strengths -- Large number (400+) of comparable plans -- Collected annually for multiple years -- Broad and comprehensive set of measures HEDIS ® Utilization Weaknesses -- Not adjusted for populations -- Not adjusted for costs within categories -- Sometimes not as rigorously audited as clinical measures RRU measures provide the next step beyond “raw” utilization to measure resource use in a more nuanced way.

7. 7 RRU Equation For a Given Group of Chronically Ill Members…. Claims x Standardized Price (Plan Observed) ------------------------------------------------- National Average Claims x Standardized Price (Expected) * This is very oversimplified for illustrative purposes

8. 8 The Cost of Health Care – Standardized Prices A world with 4 Health Care Services A larger service is more expensive A smaller service is less expensive

9. 9 The Cost of Health Care – Standardized Prices Health Services Can Cost Different Amounts Person 1 Person 2 Person 3 Person 4 Person 5

10. 10 The Cost of Health Care – Standardized Prices The Same Types/Shapes of Services are the Same Cost/Size Person 1 Person 2 Person 3 Person 4 Person 5

11. 11 High-Level Review of RRU Measures

12. 12 Making the RRUs – How Plan Care Delivery Translate into the Cost and Quality Ratios Identify populations (chronically ill) Count services (claims) Apply standard pricing Create an index Combine with Quality Index  Cost/Quality Plot

13. 13 Six RRU Populations (Five Reported Populations) Asthma Cardiac Conditions COPD Diabetes Uncomplicated Hypertension Low Back Pain (not publicly reported)

14. 14 Percent of Membership in each RRU Category 2010 Commercial % of Member Months ACHP Member Total Members DiabetesAsthmaCardioHypertensionCOPD CDPHP174k3.4%1.5%0.7%4.8%1.4% GHP291k4.7%1.2%0.6%2.6%0.8% SHP99k3.1%1.3%0.7%3.1%0.5% SWHP157k4.4%1.1%0.6%2.9%0.7% CHP104k6.2%1.2%0.7%5.6%1.0% KPOH92k5.4%1.4%0.6%4.4%1.1% KPHI161k5.1%1.3%0.4%3.9%0.4% GHCSCW51k2.7%2.3%0.4%1.9%0.4% This is a list of some of the smaller membership ACHP member plans from whom we have received detailed data The “total members” includes the largest commercial NCQA reporting LOB (typically the HMO product)

15. 15 Collection and Reporting Resource use is risk-adjusted for a plan’s population composition in terms of clinical condition, age, gender and presence of comorbidities. ─NCQA will further refine their risk-adjustment methodology for 2012 A ratio of observed-to-expected resource use is then calculated within each clinical condition, where expected resource use is the risk-adjusted average number needed to treat all eligible members with the given condition. ─For example: A ratio of 1.15 indicates 15 percent greater than average resource use, while 0.95 indicates 5 percent less than average resource use. Health Plans 1. Health Plans send total cost and utilization data standardized for price to NCQA NCQA 2. NCQA provides expected total standard cost for each condition by plan type/ product line 12

16. 16 Why an Observed to Expected Ratio (O:E)? Observed – what the standardized costs of your health plan were Expected – if your members used services at the average national rate, what would your plan’s standardized cost be Plans may have a different mix of age and sex across their chronically ill population.

17. 17 The Quality Index – Diabetes Example The quality index is simply an average of the quality measures related to the RRU compared to the all-plan average of those same quality measures. Some measures are weighted relative to one another. Diabetes (RDI) Quality Index

18. 18 Cost/Quality Matrix for Example Health Plan Commercial Diabetes 2010

19. 19 Are Cost and Quality Associated? The first year of public RRU data does not support an association (plots look like scatter shot) Remember, most HEDIS ® measures are underuse measures – in the short run improving quality may result in higher costs. …over the long run preventing someone from getting diabetes does not drive RRUs either higher or lower.

20. 20 Using RRU Measures to Drive Lower Costs

21. 21 Using Individual Plan Data to Investigate Cost Drivers Public information is only a small subset of the information provided to NCQA by plans and given back to plans through standardized reports. Some ACHP members have provided us their individual data in order to conduct enhanced analyses.

22. 22 Looking at Index Ratios by Chronic Condition and Service Category – Example Health Plan Index MeasureDiabetesAsthmaCardio Conditions Uncomp. Hypertension COPD RRU Index – Medical w/Case mix Adjustment 1.130.801.291.081.13 RRU Index – Pharmacy w/Case mix Adjustment 1.00 0.820.970.86 RRU Index – Adverse Events (IP) w/Case mix Adjustment 1.070.931.171.031.07 RRU Index – Adverse Events (ED) w/Case mix Adjustment 1.230.981.271.401.25 This type of analysis can show what areas have the highest relative costs compared to other plans across conditions This can also be used to identify outlier data Remember: Index ratio = Observed/Expected

23. 23 HEDIS ® Utilization Versus RRUs 2010 Commercial – Example Plan National Percentile Comparison HEIDS Utilization National Percentile / % of median Diabetes RRU (indexed) Hypertension RRU (indexed) Discharges/k 74 th /1.091.071.03 ER visits/k 84 th /1.191.231.40 Outpatient visits/k versus E&M $PMPM 46 th /0.991.040.98 Total Rx $PMPM & Number of Scripts PYMY versus Total Rx $PMPM 3 rd /0.591.000.97 Inpatient days versus Inpatient $PMPM 43 rd /1.041.111.04 Surgery days & Ambulatory Surgical Procedures versus surgical outpatient $PMPM 100 th /1.991.311.29 Comparing RRUs to HEDIS ® utilization can indicate where costs may be driven by overall high utilization versus mix of services.

24. 24 RRUs Over Time 2008-10 - Example Plan Commercial Diabetes RRU Observed verses Expected

25. 25 2010 Commercial Uncomplicated Hypertension Variation ACHP Members Average Costs $PMPM (Observed) C

26. 26 What Categories Drive Cost for Each Condition? CDPHP 2010 Commercial RRUs

27. 27 What Conditions Drive Total Costs $PMPM? CDPHP 2010 Commercial RRU

28. 28 ACHP Results

29. 29 ACHP Results The following data results were obtained from the Quality Compass ® data files. We highlighted the lowest RRU results for each category. We have noticed some data issues between these results and the individualized plan reports. ─May be a result of index calculation inclusion

30. 30 ACHP Plan Comparison 2010 Commercial Diabetes RRU Results Plan Name National Total Medical Index National Pharmacy Index National Inpatient Discharge Index National Emergency Department Discharge Index Capital District Physicians' Health Plan0.871.040.740.87 Capital Health Plan1.040.940.930.91 Fallon Community Health Plan0.970.840.941.01 Geisinger Health Plan1.041.011.031.06 Group Health Cooperative10.810.970.74 Group Health Cooperative of Madison1.021.191.270.91 Independent Health1.03NR1.010.91 Kaiser - ColoradoNR0.8510.79 Kaiser - Georgia1.030.751.030.78 Kaiser - HawaiiNR0.790.70.84 Kaiser - Mid-Atlantic States0.730.810.740.7 Kaiser - Northern CaliforniaNR0.910.871.05 Kaiser - NorthwestEXC1.030.960.69 Kaiser - Ohio0.630.831.091.21 Kaiser - Southern CaliforniaNR0.860.991.08 Martin's Point1.141.331.221.66 Presbyterian Health Plan0.881.050.920.97 Priority Health11.10.851.45 Rocky Mountain Health Plans (9461)0.770.810.70.74 Rocky Mountain Health Plans (9462)0.90.850.920.85 Scott and White Health Plan1.1311.071.23 Security Health Plan of Wisconsin1.061.091.030.81 SelectHealth0.961.110.91.1 Tufts Associated Health Maintenance Organization1.0711.081.11 UPMC Health Plan1.20.991.551.14

31. 31 ACHP Plan Comparison 2010 Commercial Uncomplicated Hypertension RRU Results Plan Name National Total Medical Index National Pharmacy Index National Inpatient Discharge Index National Emergency Department Discharge Index Capital District Physicians' Health Plan0.911.110.670.85 Capital Health Plan0.981.010.81.01 Fallon Community Health Plan0.720.790.660.92 Geisinger Health Plan0.90.890.99 Group Health Cooperative1.210.81.230.87 Group Health Cooperative of Madison1.20.931.480.88 Independent Health0.84NR0.730.83 Kaiser - ColoradoNR0.791.270.86 Kaiser - HawaiiNR0.730.770.9 Kaiser - Mid-Atlantic StatesEXC0.810.530.61 Kaiser - Northern CaliforniaNR0.921.241.05 Kaiser - NorthwestEXC0.911.020.8 Kaiser - Ohio0.71 0.91.12 Kaiser - Southern CaliforniaNR0.860.880.99 Martin's Point1.111.291.191.59 Presbyterian Health Plan1.01 0.990.91 Priority Health1.091.041.011.25 Rocky Mountain Health Plans (9461)1.210.891.340.92 Scott and White Health Plan1.080.971.031.4 Security Health Plan of Wisconsin1.240.951.260.9 SelectHealth1.241.11.241.22 Tufts Associated Health Maintenance Organization1.020.930.941.09 UPMC Health Plan1.170.911.211.15

32. 32 MRIs/1000 Member Years for Low Back Pain RRU Variation in Commercial 2010 (Observed)

33. 33 Policy Implications and Concerns

34. 34 Policy Implications and Concerns What if RRUs are the standard for efficiency ─Who is hurt? ─Does it capture population health? Comparisons ─What is the benchmark and how is it determined? Can RRUs demonstrate the lower price/affordability of care of ACHP member plans?

35. 35 Factors that May Drive Higher RRUs Less managed networks Richer benefit packages Better provider discounts (compared to what you would expect) Under-coding A disproportionate share of the sickest of the sick …and using more services

36. 36 RRUs and Population Health RRUs, like almost all cost or pseudo-cost measures, have adjustments for the health plan population. The “best” RRU plans are those that have the best short-term management of patients (generally, the greater the risk-adjustment the shorter the term). ─More risk-adjustment is not good or bad, it is just different Because the underlying health of the population is “adjusted away” improvements health plans make in this area are not captured fully by RRUs.

37. 37 The Display of RRU Comparisons Remember that RRUs are displayed publicly as “indexes” where 1.0 represents an average, “expected” value. NCQA currently creates indexes based by product line. ─There is an HMO index where the average HMO is 1.0 ─There is a PPO index where the average PPO is 1.0 Because PPO plans, at least on quality, perform lower than HMOs, NCQA’s tool can generate a chart where superior HMO performance looks similar of inferior to objectively lower quality performance.

38. 38 Diabetes Quality Performance Capital Health Plan versus Aetna of Florida (PPO)

39. 39 The Data Display now Available in Quality Compass does not Differentiate between these plans

40. 40 Can RRUs Demonstrate the Lower Price/Affordability of ACHP Member Plans? RRUs may be evidence of affordability, but ─Not all ACHP member plans are below average on efficiency –Could be influenced by methodology rather than actual costs ─RRUs do not capture efficiencies through more attractive pricing (or lower admin costs, or dividends to shareholders) ─It is still difficult to connect “efficiency” to premium –If your plan is so efficient then why did my premium go up 15% this year? RRUs are probably better as an indicator of provider network efficiency.

41. 41 Takeaways Demand for cost/efficiency metrics are high; RRUs are an attempt to meet that demand, but no measures are perfect – this is true of RRUs RRUs tell one piece of the efficiency story, which plans can use to better understand costs in their own plans Furthering our broader look in the understanding Triple Aim outcomes, ACHP is engaged in helping plans better understand RRUs, what is driving RRU results within organizations, and how best to communicate how well RRUs capture or do not capture the care your organization delivers.

42. 42 Contact Information Adam Zavadil Alliance of Community Health Plans azavadil@achp.org 202.785.2247