Employer Payment Reform Workshop I January 11, 2013 Supported by Robert Wood Johnson Foundation’s Aligning Forces for Quality The Call to Action; If Not Now, When?

2  Payment Reform project goals  Employers’ landscape today  Why employers should care 2

3 Project Goals Change payment to reward value instead of volume  Assess employers’ current level of understanding  Engage employers in changing payment models in Minnesota & nationally including TCOC, HCH, others  Identify and answer your questions of health plans & providers  Identify your goals for payment reform  Communicate to market with Consensus Statement 3

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5 Employers’ Landscape Today  Most attention focused on numerous, short-term demands  Managing trend  Complying with multiple new regulations  Understanding impact of insurance exchanges  Promoting wellness programs  Staying in the game – in or out decision, when  Some attention on high level concepts  Quality improvement  Care delivery change  Less attention on details of care transformation and payment reform  Complex  Hidden and negotiated by suppliers  Varies by provider and market 5

6 Heard on the Street  “Payment for quality and shared savings is not enough to invest in new care models” – primary care clinic  “I’m going to do as many surgeries as possible and hope to retire before this affects me” - orthopedic surgeon  “The amount of revenue at risk today, low single digits, is not enough to really change behavior; we still win by providing more services” – large care system CEO  “Public and private purchasers are the only stakeholder that cares if costs go from $38 billion to $40 billion; everyone else grows” - local policy wonk 6

7 Employers’ Call to Action is Needed Now  Dartmouth Atlas: utilization varies by provider supply  30-50% of spending is waste  NY Times 1/6/2013 – “Health Insurers Raise Some Rates by Double Digits”  20-26% increases by Anthem, Aetna, BS CA  Easier to pass costs along than figure out, and implement, changes in payment  Collective employer effort can influence health plans to address payment reform  Potential cost shifting from public to private purchasers with Federal and state reform 7

8 Today’s Meeting Goals  You know enough to know what you don’t know  Your key questions are raised  You begin to define the employers’ role  You believe employers can have an impact  You are energized to take action 8

Understanding the Road to Payment Reform in Health Care Michael Bailit 9

10 What Employers are Saying so far… Six employer interviews  National & local, large & small, public & private  Varying levels of general understanding –Payers have mentioned changes in contracts, “on board” –Don’t know results of payment reform so far –Unsure of details, e.g., year end settlements, provider cash flow, pace of change MN moving faster than rest of the country Concerns about provider consolidation  Two employers have –Included questions about payment reform in RFPs –Had conversations with health plans and providers together Learned about progress to date Expressed desire to accelerate reform Provided input on contracts that changed terms  All agreed collective action is more powerful than individual 10

11 Employer Survey Preliminary Findings Average on a scale of 1 (low) to 6 (high)  How well informed? (3)  How important to: –Know your health plan’s negotiated pmpm targets? (4.6) –Compare providers’ pmpm payment targets? (4.8) –Compare performance against targets? (5.1) –Set pmpm targets to decrease rate of increase or reduce costs over time (33%) –Include downside risk in provider contracts (5.3)  Roles: –Meet with key care systems and health plans (73%) –Have input on amount of revenue at risk for quality (73%) –Provide input on targets and trend (64%) –Input on amount at risk for savings (64%) 11

12 What Others Say Employers Can Do  United Health Care, December 2012 – Farewell to Fee for Service? –Be catalysts for testing new payment models –Explore value-based benefit designs –Deploy employee incentives for wise choices about health and health care  Institute of Medicine (IOM) September 2012 Report – Best Care at Lower Costs; promote transparency in quality, value, and outcomes to aid consumers in care decisions  Elliott Fisher MD, MPH, Dartmouth – Slowing the Growth of Health Care Spending: If Not Us, Then Who? –Slow medical arms race –Accelerate payment reform transition –Move market share to higher value providers  Other possible roles –Measure and reward health plan performance for Reducing waste Changing payment models to reward value, faster –Require health plans to reform payment –Contract directly with providers 12

13 Discussion Questions  Do you want to know:  Cost and quality targets of different care systems?  How providers perform compared to targets?  What are plans doing to address market share leverage of provider consolidation?  Wiling to offer narrower networks based on quality and cost targets?  Willing to challenge health plans to meet your company’s trend goals without more cost shifting to consumers?  Will payment reform really change how care is delivered and can providers perform to manage disease as a team?  How could employers accelerate the right kind of payment reform?  Would you be willing to set goals for pace of payment reform?  How to balance high deductible health plans and ACO/TCOC strategy?  Do you feel like you can influence the supply side? 13

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