FROM VOLUME TO VALUE: Better Ways to Pay for Health Care, and How to Get There

1
FROM VOLUME TO VALUE Better Ways to Pay for
Health Care, and How to Get There

• Harold D. MillerExecutive Director Center for
  Healthcare Quality and Payment Reformand
  President and CEO Network for Regional
  Healthcare Improvement

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What is anAccountable Care Organization?
3
The Official Definition
What is anAccountable Care Organization?
A group of providers who areaccountable for the
quality, cost, and overall care of patients
Section 3022, Patient Protection and Affordable
Care Act
4
The Real Definition
What is anAccountable Care Organization?
A group of providers who can figureout how to
save moneyin health care
5
How Will ACOs Generate All These Savings?
Financial Risk
ACO(the Black Box)
Patients
LowerCosts
Organizational Structure
6
Whats In That Black Box Cant Be Good For
Consumers, Can It?
Financial Risk
ACO(the Black Box)
RATIONING
Patients
LowerCosts
Organizational Structure
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Focus Should Be On Improving Care to Reduce Costs
REDUCINGCOSTS WITHOUTRATIONING
Patients
LowerCosts
8
Reducing Costs Without RationingCan It Be Done??
9
Reducing Costs Without RationingPrevention and
Wellness
HealthyConsumer
ContinuedHealth
PreventableCondition
10
Reducing Costs Without RationingAvoiding
Hospitalizations
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Acute Care Episode
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Reducing Costs Without RationingEfficient,
Successful Treatment
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode
High-CostSuccessfulOutcome
Complications, Infections,Readmissions
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Reducing Costs Without RationingIs Also Quality
Improvement!
Better Outcomes/Higher Quality
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode
High-CostSuccessfulOutcome
Complications, Infections,Readmissions
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Current Payment Systems Reward Bad Outcomes, Not
Better Health
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode

High-CostSuccessfulOutcome
Complications, Infections,Readmissions
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Are There Better Ways to Pay for Health Care?
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode
?

High-CostSuccessfulOutcome
Complications, Infections,Readmissions
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Episode Payments to Reward Value Within Episodes
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode

High-CostSuccessfulOutcome
EpisodePayment
Complications, Infections,Readmissions
A Single Payment For All Care Needed From All
Providers inthe Episode, With a Warranty
ForComplications
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Yes, a Health Care ProviderCan Offer a Warranty

• Geisinger Health System ProvenCareSM
• 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

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Payment Process Improvement Better Outcomes,
Lower Costs
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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.

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The Weakness of Episode Payment
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode
How do you preventunnecessary episodes of
care? (e.g., preventable hospitalizationsfor
chronic disease, overuse of cardiac
surgery, back surgery, etc.)
High-CostSuccessfulOutcome
EpisodePayment
Complications, Infections,Readmissions
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Comprehensive Care PaymentsTo Avoid Episodes
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode

High-CostSuccessfulOutcome
ComprehensiveCarePayment or GlobalPayment
Complications, Infections,Readmissions
A Single Payment For All Care Needed For A
Condition
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Isnt This Capitation?No Its Different
COMPREHENSIVE CARE PAYMENT
Payment Levels Adjusted Based on Patient
Conditions
Limits on Total RiskProviders Accept
forUnpredictable Events
Providers Lose Money On Unusually Expensive Cases
Providers Are Paid Regardless of the Quality of
Care
Bonuses/PenaltiesBased on QualityMeasurement
Provider Makes More Money If Patients Stay Well
Provider Makes More Money If Patients Stay Well
Flexibility to DeliverHighest-Value Services
Flexibility to DeliverHighest-ValueServices
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Example BCBS MassachusettsAlternative 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
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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)

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A Deeper Dive into Episode Payments and
Implications
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode

High-CostSuccessfulOutcome
EpisodePayment
Complications, Infections,Readmissions
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Episode Payment Bundling Warranty

• Bundling Making a single payment to two or more
  providers who are currently paid separately
• e.g., services of both a hospital and a physician
• e.g., both hospital and post-acute care services
• Warranty Not charging/being paid more for costs
  of treating hospital-acquired infections,
  problems caused by errors, etc.

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Current Episode-of-Care Initiatives

• Medicare Acute Care Episode (ACE) Demonstration
• single amount for hospital physician services
  for cardiac, orthopedic DRGs
• combined payment lower than current Medicare
  payments
• patients receive share of Medicares savings
  through lower copays
• Bundled payment goes to a Physician-Hospital
  Organization which then divides the payment
  between the hospital and the physicians
• Congressional authorization allows CMS to waive
  restrictions on gain-sharing, so hospitals can
  share internal savings with physicians
• Physicians eligible to receive up to 25 more
  than current payment levels
• Prometheus PaymentTM
• covers full episode of care and all providers
• estimates the appropriate payment amount based on
  historical costs and any guidelines for
  evidence-based care
• virtual bundling no provider receives the
  money for another providers services each
  provider receives a share of the total episode
  payment in proportion to the services theyve
  billed
• Pilot sites in Rockford, IL Michigan
  Minneapolis Philadelphia Utah

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How Can Physicians, Hospitals, and Payers
Benefit from Bundling?
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Example Reducing Cost of Implantable
Defibrillators
COST TYPE TODAY
Physician Fee 1,200

Device Cost 20,000
Other Hospital Cost 9,100
Hosp. Margin (3) 900
Total Hospital Pmt 30,000

Total Cost to Payer 31,200
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Physicians Could Help Hospitals Reduce Cost of
Medical Devices
COST TYPE TODAY CHANGE
Physician Fee 1,200

Device Cost 20,000 -10 (2,000)
Other Hospital Cost 9,100
Hosp. Margin 900
Total Hospital Pmt 30,000

Total Cost to Payer 31,200
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Today All Savings Goes to the Hospital, No
Reward for Physician
COST TYPE TODAY CHANGE SPLIT
Physician Fee 1,200 0

Device Cost 20,000 -10 (2,000)
Other Hospital Cost 9,100
Hosp. Margin 900 222 (2000)
Total Hospital Pmt 30,000

Total Cost to Payer 31,200 -0
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Bundling Allows Savings Split Among Docs,
Hospital, Payers
COST TYPE TODAY CHANGE SPLIT
Physician Fee 1,200 50 (600)

Device Cost 20,000 -10 (2,000)
Other Hospital Cost 9,100
Hosp. Margin 900 50 (450)
Total Hospital Pmt 30,000

Total Cost to Payer 31,200 - 2.3 (950)
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So Defibrillator Implantation is Cheaper But More
Profitable
COST TYPE TODAY CHANGE SPLIT NEW
Physician Fee 1,200 50 (600) 1,800

Device Cost 20,000 -10 (2,000) 18,000
Other Hospital Cost 9,100 9,100
Hosp. Margin 900 50 (450) 1,350
Total Hospital Pmt 30,000 28,450

Total Cost to Payer 31,200 - 2.3 (950) 30,250
Win-Win-Win
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Wont Bundling Encourage More Procedures?
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Bundling Can Provide a Path to Reducing
Overutilization
COST TYPE TODAY 200 Cases
Physician Fee 1,200 240,000

Device Cost 20,000
Other Hospital Cost 9,100
Hosp. Margin 900 180,000
Total Hospital Pmt 30,000

Total Cost to Payer 31,200 6,240,000
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What If There is Evidence of Overutilization?
COST TYPE TODAY 200 Cases
Physician Fee 1,200 240,000

Device Cost 20,000
Other Hospital Cost 9,100
Hosp. Margin 900 180,000
Total Hospital Pmt 30,000

Total Cost to Payer 31,200 6,240,000
Assume a study findsthat 20 of proceduresare
unnecessary orcan be avoided throughmedical
management
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Appropriateness Guidelines Alone Can Hurt
Hospitals Physicians
COST TYPE TODAY 200 Cases TODAY 160 Cases Chg
Physician Fee 1,200 240,000 1,200 192,000 -20

Device Cost 20,000 20,000
Other Hospital Cost 9,100 9,100
Hosp. Margin 900 180,000 900 144,000 -20
Total Hospital Pmt 30,000 30,000

Total Cost to Payer 31,200 6,240,000 31,200 4,992,000 -20
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Bundling Guidelines Can Avoid Harming Providers
While Saving
COST TYPE TODAY 200 Cases NEW 160 Cases Chg
Physician Fee 1,200 240,000 1,800 288,000 20

Device Cost 20,000 18,000
Other Hospital Cost 9,100 9,100
Hosp. Margin 900 180,000 1,350 216,000 20
Total Hospital Pmt 30,000 28,450

Total Cost to Payer 31,200 6,240,000 30,250 4,840,000 -22
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Bundling Can Also Allow Benefits From Changes in
Settings
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Under Todays Separate Facility and Physician
Fees
INPATIENT
Hospital DRG
Payer
Physician Fee
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Savings From Shifts to Lower Cost Settings All
Accrue to Payer
INPATIENT
OUTPATIENT
Hospital DRG
Payer Savings
Outpatient APC
Payer
Physician Fee
Physician Fee
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Savings From Shifts to Lower Cost Settings All
Accrue to Payer
INPATIENT
OUTPATIENT
OFFICE
Hospital DRG
Payer Savings
Payer Savings
Outpatient APC
Practice Exp.
Payer
Physician Fee
Physician Fee
Physician Fee
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But if the Physician Is Accepting a Bundled
Payment
INPATIENT
OUTPATIENT
OFFICE
Hospital DRG
Payer Savings
Payer Savings
Outpatient APC
Practice Exp.
Payer
Physician Fee
Physician Fee
Physician Fee
BundledPayment
Hospital Cost
Payer
Physician Fee
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The Physician Can Be Paid More But Still Charge
Less to the Payer
INPATIENT
OUTPATIENT
OFFICE
Hospital DRG
Payer Savings
Payer Savings
Outpatient APC
Practice Exp.
Payer
Physician Fee
Physician Fee
Physician Fee
BundledPayment
Hospital Cost
Payer Savings
Payer Savings
Outpatient Cost
Office Costs
Payer
Physician Fee
Physician Fee
Physician Fee
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How Can Physicians, Hospitals, Payers Benefit
from Warranties?
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Prices for Warrantied Care Will Likely Be Higher
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Prices for Warrantied Care Will Likely Be Higher

• Q Why should we pay more to get good-quality
  care??
• A In most industries, warrantied products cost
  more, but theyre desirable because TOTAL
  spending on the product (repairs replacement)
  is lower than without the warranty

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Prices for Warrantied Care May Be Higher, But
Spending Lower

• Q Why should we pay more to get good-quality
  care??
• A In most industries, warrantied products cost
  more, but theyre desirable because TOTAL
  spending on the product (repairs replacement)
  is lower than without the warranty
• In healthcare, a DRG with a warranty would need
  to have a higher payment rate than the equivalent
  non-warrantied DRG, but the higher price would be
  offset by fewer DRGs w/ complications, outlier
  payments, and readmissions

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Example 10,000 Procedure
Cost of Procedure
10,000
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Actual Average Payment for Procedure is Higher
than 10,000
Cost of Procedure AddedCost of Infection Rate of Infections AverageTotal Cost
10,000 20,000 5 11,000
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Starting Point for Warranty PriceActual Current
Average Payment
Cost of Procedure AddedCost of Infection Rate of Infections AverageTotal Cost Price Charged Change in Net Revenue
10,000 20,000 5 11,000 11,000 0
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Limited Warranty Gives Financial Incentive to
Improve Quality
Cost of Procedure AddedCost of Infection Rate of Infections AverageTotal Cost Price Charged Change in Net Revenue
10,000 20,000 5 11,000 11,000 0
10,000 20,000 4 10,800 11,000 200
ReducingAdverseEvents
ImprovesThe Bottom Line
...ReducesCosts...
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Higher-Quality Provider Can Charge Less, Attract
More Patients
Cost of Procedure AddedCost of Infection Rate of Infections AverageTotal Cost Price Charged Change in Net Revenue
10,000 20,000 5 11,000 11,000 0
10,000 20,000 4 10,800 11,000 200

10,000 20,000 4 10,800 10,800 0
EnablesLowerPrices
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A Virtuous Cycle of QualityImprovement Cost
Reduction
Cost of Procedure AddedCost of Infection Rate of Infections AverageTotal Cost Price Charged Change in Net Revenue
10,000 20,000 5 11,000 11,000 0
10,000 20,000 4 10,800 11,000 200

10,000 20,000 4 10,800 10,800 0
10,000 20,000 3 10,600 10,800 200
ReducingAdverseEvents
ImprovesThe Bottom Line
...ReducesCosts...
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Win-Win-Win for Patients, Payers, and Providers
Cost of Procedure AddedCost of Infection Rate of Infections AverageTotal Cost Price Charged Change in Net Revenue
10,000 20,000 5 11,000 11,000 0
10,000 20,000 4 10,800 11,000 200

10,000 20,000 4 10,800 10,800 0
10,000 20,000 3 10,600 10,800 200

10,000 20,000 3 10,600 10,600 0
10,000 20,000 0 10,000 10,600 600
Quality is Better...
...Cost is Lower...
...Providers More Profitable
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In Contrast, Non-Payment Alone Creates Financial
Losses
Cost of Procedure AddedCost of Infection Rate of Infections AverageTotal Cost AmountPaid Change in Net Revenue
10,000 20,000 5 11,000 11,000 0
10,000 20,000 5 11,000 10,000 -1,000

10,000 20,000 3 10,600 10,000 -600

10,000 20,000 0 10,000 10,000 0
Non-Payment forInfections
Causes Losses WhileImproving
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Is P4P Easier Than a Warranty?
Payer-Driven P4P Provider-Driven Warranty
Payer defines what level of performance is acceptable to determine bonus or penalty Physiciansdefine feasible level of performance and have incentive to do better
Payer defines which cases will be include/excluded Physicians have incentive to improve on all potential cases
P4P bonus/penalty may not offset loss in revenues/margin from fewer admissions, visits, procedures Physicians set price of successful care to adequately cover costs with fewer admissions/visits
P4P bonus/penalty may not cover costs of extra services needed to improve performance Physicians set price of successful treatment to cover costs of additional services needed
Payer must spend more to incent greater performance improvements beyond the minimum level Physicians have incentive to improve as much as possible to reduce costs and to reduce prices in order to attract more patients
Payer decides which providers (hospital, physicians, post-acute care) to reward/penalize Hospital, physicians, and other providers decide themselves how to divide accountability
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Not Just Better Acute Care,But Reducing the Need
for It
HealthyConsumer
ContinuedHealth
PreventableCondition
NoHospitalization
Efficient Successful Outcome
Acute Care Episode
High-CostSuccessfulOutcome
Complications, Infections,Readmissions
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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

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We Dont Pay for the Things That Will Prevent
Overutilization
CURRENT PAYMENT SYSTEMS
Health Insurance Plan



ERVisits
HospitalStay
Office Visits
PhysicianPractice
Avoidable
Avoidable
Phone Calls
Lab Work/Imaging
...No penalty or reward forhigh
utilizationelsewhere
NurseCare Mgr
Avoidable
No payment for services that can prevent
utilization...
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Global Payment Can Solve That,But Its a Big
Jump from FFS
FULL COMP. CARE/GLOBAL PAYMENT
Health Insurance Plan
Condition-AdjustedPer PersonPayment

ERVisits
HospitalStay
Office Visits
PhysicianPractice/ACO
Avoidable
Avoidable
Phone Calls

Lab Work/Imaging
NurseCare Mgr
Avoidable
Flexibility and accountabilityfor a
condition-adjusted budgetcovering all services
61
What Might a Transitional Payment System Look
Like?
CURRENT PAYMENT SYSTEMS
Health Insurance Plan



ERVisits
HospitalStay
Office Visits
PhysicianPractice
Avoidable
Avoidable
Phone Calls
Lab Work/Imaging
NurseCare Mgr
Avoidable
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Typical Medical Home SolutionPay More for
Physician Services
(TYPICAL) MEDICAL HOME PROGRAM
Health Insurance Plan



ER Visits
HospitalStay
Office Visits
PhysicianPractice
Avoidable
Avoidable
MonthlyCare MgtPayment
Lab Work/Imaging
Phone Calls
Avoidable
RN Care Mgr

Higher payment for primary care...
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Weakness More for Physicians, But Any
Savings Elsewhere?
(TYPICAL) MEDICAL HOME PROGRAM
Health Insurance Plan



ER Visits
HospitalStay
Office Visits
PhysicianPractice
Avoidable
Avoidable
MonthlyCare MgtPayment
Lab Work/Imaging
...But no commitment to reduceutilizationelsewhe
re
Phone Calls
Avoidable
RN Care Mgr

Higher payment for primary care...
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Is Shared Savings the Answer?
SHARED SAVINGS MODEL
Health Insurance Plan



ERVisits
HospitalStay
Office Visits
PhysicianPractice
Avoidable
Avoidable
Phone Calls
Lab Work/Imaging
Portion of savings from reducedspending in other
areas...
NurseCare Mgr

Avoidable
...Returnedto physicianpractice aftersavings
determined...
...but no upfront for better care
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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
• Requires TOTAL costs to go down in order for the
  physician practice to receive ANY increase in
  payment, even if the practice cant control all
  costs
• Gives more rewards to the poor performers who
  improve than the providers whove done well all
  along
• The underlying fee for service incentives
  continue losing less (via shared savings) is
  still losing compared to FFS
• I.e., its not really true payment reform

66
Better Approach Simulate Flexibility/Incentives
of Global Pmt
CARE MGT PAYMENT UTILIZATION P4P
Health Insurance Plan




ER Visits
HospitalStay
Office Visits
PhysicianPractice
Avoidable
Avoidable
Lab Work/Imaging
Avoidable
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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, thepractice pays a
  penalty via a reduction in its FFS conversion
  factor equivalent to up to 50 of Care Management
  Payment

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Not Just PCPs, But The Medical Neighborhood, Too
FFS Payment Based on Volume, Procedures,
Office Visits
Resources Incentives for More CoordinatedCare
Primary CareMedical Home
(Non-Primary Care) Specialists
PATIENT
69
Pay Both PCPs Specialists for Outcomes
Coordination
Resources Incentives for More CoordinatedCare
Payment for Consultation w/ PCP Outcomes-BasedPa
yment
Primary CareMedical Home
(Non-Primary Care) Specialists
PATIENT
70
Today Underpaid PCPs, Underused Specialists,
High Costs
500 Moderate/Severe Chronic Disease Patients
71
Today Underpaid PCPs, Underused Specialists,
High Costs
500 Moderate/Severe Chronic Disease Patients
6.7 of the moneygoes to the physicians
72
Pay PCPs Specialists to Provide More
Coordinated, Proactive Care
500 Moderate/Severe Chronic Disease Patients
Pay for Patient Care, Not Visits
73
Higher Medication Expenses,But Lower Hospital
Costs
500 Moderate/Severe Chronic Disease Patients
Pay for Patient Care, Not Visits
Better Outcomes
Better Medication Compliance
74
Win-Win-Win Through PCP/Specialist Coordinated Mgt
500 Moderate/Severe Chronic Disease Patients
Fewer Hospitalizations
More Revenue for Docs
Lower Total Costs
75
Minnesotas 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 patients 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/
76
Phase 2 More ACO-nessPartial Global Payment
PARTIAL GLOBAL PMT (Professional Svcs)
Health Insurance Plan

Condition-AdjustedPer PersonPayment

ERVisits
HospitalStay
Office Visits
PhysicianPractice
Avoidable
Avoidable
Phone Calls

Lab Work/Imaging
NurseCare Mgr
Avoidable
Flexibility and accountabilityfor a
condition-adjusted budgetcovering all
professional services
77
And Then Transition to a FullGlobal Payment
System
FULL COMP. CARE/GLOBAL PAYMENT
Health Insurance Plan
Condition-AdjustedPer PersonPayment

ERVisits
HospitalStay
Office Visits
PhysicianPractice/ACO
Avoidable
Avoidable
Phone Calls

Lab Work/Imaging
NurseCare Mgr


Avoidable
P4P Bonus/PenaltyBased on Quality
78
Transitioning to Accountable Care Payment
79
How Does All This Fit Into Accountable Care
Organizations??
80
If Physician Practices Want to Manage a Patient
Population...
PATIENTS
Heart Disease
PrimaryCare Practice
Back Pain
Pregnancy
81
...Should They Hope Payers Will Make the Right
Payment Changes?
MEDICARE/HEALTH PLAN
CareMgt PmtP4P
PATIENTS
HeartEpisode Pmt
Heart Disease
PrimaryCare Practice
BackEpisode Pmt
Back Pain
Pregnancy
PregnancyEpisode Pmt
82
Or Take a Single Payment Work Out Internal Pmts
Themselves?
MEDICARE/HEALTH PLAN
Condition-Adjusted Comprehensive Care(Global)
Payment
ACO
CareMgt PmtP4P
PATIENTS
HeartEpisode Pmt
Heart Disease
PrimaryCare Practice
BackEpisode Pmt
Back Pain
Pregnancy
PregnancyEpisode Pmt
83
Challenge Giving Physicians the Skills to Take
Accountable Pmts
InpatientEpisodes
?
PhysicianPractice
Patient
UnneededTesting
84
Resources/Capabilities Neededfor Docs to Take
Accountable Pmts
Data and analytics to measure and monitor
utilization and quality
Coordinated relationships with other specialists
and hospitals
InpatientEpisodes
Method for targeting high-riskpatients (e.g.,
predictive modeling)
PhysicianPractice
Patient
Capability for tracking patient care and ensuring
followup (e.g., registry)
UnneededTesting
Resources for patient educ. self-mgt support
(e.g., RN care mgr)
Physician w/ time for diagnosis,treatment
planning, and followup
85
Capabilities Exist Today, But Dont Coordinate w/
Physicians
Data and analytics to measure and monitor
utilization and quality
HealthPlanorDiseaseMgtVendor
Coordinated relationships withother specialists
and hospitals
InpatientEpisodes
Method for targeting high-riskpatients (e.g.,
predictive modeling)
Patient
Capability for tracking patient care and ensuring
followup (e.g., registry)
UnneededTesting
Resources for patient educ. self-mgt support
(e.g., RN care mgr)
PhysicianPractice
Physician w/ time for diagnosis,treatment
planning, and followup
86
Medical Home Initiatives Expand Practice
Capacity, But Not Enough
Data and analytics to measure and monitor
utilization and quality
HealthPlan
Coordinated relationships withother specialists
and hospitals
InpatientEpisodes
Method for targeting high-riskpatients (e.g.,
predictive modeling)
Patient
Capability for tracking patient care and ensuring
followup (e.g., registry)
Patient-CenteredMedicalHome
UnneededTesting
Resources for patient educ. self-mgt support
(e.g., RN care mgr)
Physician w/ time for diagnosis,treatment
planning, and followup
87
Global Payment RequiresROI Analysis Targeting

• Return on Investment (ROI Cost-Effectiveness)
• Cost of interventionvs.
• 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
  patientsvs.
• Providing services to all patients as a general
  benefit

88
Goal Give Docs the Capacityto Deliver
Accountable Care
Data and analytics to measure and monitor
utilization and quality
Coordinated relationships withother specialists
and hospitals
PhysicianPracticePartners ACO
InpatientEpisodes
Capability for tracking patient care and ensuring
followup (e.g., registry)
Patient
Method for targeting high-riskpatients (e.g.,
predictive modeling)
UnneededTesting
Resources for patient educ. self-mgt support
(e.g., RN care mgr)
Physician w/ time for diagnosis,treatment
planning, and followup
89
Can Small Physician Practices Manage Accountable
Payments?

• Infrastructure/Services
• Small physician practices may not have enough
  patients to justify staff or other services to
  coordinate care, particularly for patients with
  complex illnesses (e.g., nurse care managers,
  patient registries, etc.)
• Quality/Cost Measurement
• Small numbers of patients make measurement
  unreliable physicians may be inappropriately
  labeled low quality, high cost, or vice versa

DO
MD
DO
MD
Better Patient Outcomes Lower Cost
?
DO
MD
DO
MD
MD
DO
MD
DO
DO
MD
DO
MD
DO
MD
DO
MD
90
Solution 1 Hospitals Acquire Physician Practices
Hospital Management
DO
MD
DO
MD
DO
MD
DO
MD
Better Patient Outcomes Lower Cost
DO
MD
DO
MD
DO
MD
DO
MD
DO
MD
DO
MD
MD
DO
MD
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DO
MD
DO
MD
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MD
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MD
DO
MD
91
Shared Savings Forces Hospitals To Consider
Hiring Physicians

• Hospitals are not directly eligible for shared
  savingsall savings are attributed to primary
  care physicians
• Even if the hospital reduces readmissions,
  infections, complications, etc., it may receive
  no reward for doing so
• Reducing hospitalizations, ER visits, etc. will
  reduce the hospitals revenues, but the hospital
  may receive no share of the savings to help it
  cover its stranded fixed costs
• Consequently, hospitals may feel compelled to own
  physician practices, either to capture a portion
  of the shared savings revenue, or to prevent
  there from being any savings!

92
Solution 2 Hospital-Physician Partnerships
HospitalStaff IT (e.g.,via Physician-Hospita
lOrg.)
DO
MD
DO
MD
DO
MD
DO
MD
Better Patient Outcomes Lower Cost
DO
MD
DO
MD
DO
MD
DO
MD
MD
DO
MD
DO
DO
MD
DO
MD
DO
MD
DO
MD
DO
MD
DO
MD
DO
MD
DO
MD
DO
MD
DO
MD
93
Solution 3 Use IPAs for Critical Mass
IndependentPractice Association
DO
MD
DO
MD
DO
MD
DO
MD
Better Patient Outcomes Lower Cost
DO
MD
DO
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DO
MD
DO
MD
MD
DO
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DO
DO
MD
DO
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DO
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DO
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DO
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94
Examples of Small, Independent MD Practices With
Global Pmt

• Small Primary Care Practices Managing Global
  Payments
• Physician Health Partners (PHP) in Denver, CO is
  a management services organization that supports
  four separate IPAs (median size 3 MDs/practice).
  PHP accepts capitated risk-based contracts on
  behalf of the IPAs with both Medicare and
  commercial HMOs. www.phpmcs.com
• Independent PCPs Specialists Managing Global
  Payments
• Northwest Physicians Network (NPN) in Tacoma, WA
  is an IPA with 109 PCPs and 345 specialists in
  165 practices (average size 2.4 MDs/practice).
  NPN accepts full or partial risk capitation
  contracts, operates its own Medicare Advantage
  plan, and does third party administration for
  self-insured businesses. www.npnwa.net
• Joint Contracting by MDs Hospitals for Global
  Payments
• The Mount Auburn Cambridge IPA (MACIPA) and Mount
  Auburn Hospital jointly contract with three major
  Boston-area health plans for full-risk
  capitation. The IPA is independent of the
  hospital they coordinate care with each other
  without any formal legal structure.
  www.macipa.com

95
Benefit Design Changes AreAlso Critical to
Success

• Ability andIncentives to
• Improve health
• Take prescribed medications
• Allow a provider to coordinate care
• Choose the highest-value providers and services

• Ability and Incentives to
• Keep patients well
• Avoid unneeded services
• Deliver services efficiently
• Coordinate services with other providers

Payment System
Benefit Design
Provider
Patient
96
Example Important to Coordinate Pharmacy
Medical Benefits
Single-minded focus on reducing costs here...
...could result in higherspending on
hospitalizations
Medical Benefits (Parts A/B)
Pharmacy Benefits (Part D)
Hospital Costs
PhysicianCosts
Drug Costs

• High copays for brand-nameswhen no generic
  exists
• Doughnut holes deductibles

OtherServices
Principal treatment for mostchronic diseases
involves regular use of maintenance medication
97
Ensuring ThatLower Cost ? Lower Quality

• Concern Giving healthcare providers more
  accountability for costs reduces the incentives
  for overuse, but raises concerns about whether
  patients will get too little care

98
Effective Quality Measurement and Reporting Needed

• 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

99
Federal Measurement of Quality?

• 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
• Undesirable National data aggregation and
  reporting
• E.g., PQRI/PQRS

100
Community-DrivenQuality Measurement

• 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
  participationof physicians andhospitals, as
  agrowing number of regions do

101
Measurement vs. Analysis

• Measurement presumes we know what were looking
  for, that we know whats desirable/achievable in
  all communities, and that we can legitimately
  rate/rank providers based on the measures
• Thats a high standard, and its not surprising
  that we dont have adequate measures in many
  important areas, particularly outcome measures
• Analysis, particularly exploratory analysis,
  presumes only that we believe there are
  opportunities to improve value, and that more
  work will be needed to determine what is
  achievable and cost-effective

102
Example Prometheus Analyses of Avoidable
Complications
Analysis of a Commercially-Insured Population
www.HCI3.org
103
Majority of Opportunities for Savings Related to
Cardiology
Opportunities for Cardiology
Analysis of a Commercially-Insured Population
www.HCI3.org
104
(Many) Other Issues

• Malpractice/Defensive Medicine
• Reforms in malpractice law
• Collaborative changes in physician practice, so
  more conservative care is the standard of care
  across the entire community
• e.g., HealthTeamWorks/Colorado Clinical
  Guidelines Collaborative
• Hospital Restructuring
• Significant reductions in admissions,
  readmissions, infections, procedures will require
  multi-year phase-out of existing capital
  investments new/different investments
• Workforce Training/Retraining
• More PCPs, more nurses willing to make home
  visits, fewer support staff for fewer procedures,
  etc.
• And Others

105
Payment Reform Is Necessary,But Not Sufficient
PatientEducation Engagement
Quality/CostAnalysis Reporting
Value-DrivenPayment Systems Benefit Designs
Reducing CostsWithoutRationing
Value-DrivenDelivery Systems
106
Many Specific Activities in Each Area...
PatientEducation/Engagement
EducationMaterials
Value-BasedChoice
Wellness Adherence
Value-DrivenPayment Benefits
Quality/Cost Analysis Reporting
EngagementofPurchasers
Reducing CostsWithoutRationing
PublicReporting
BenefitDesign
Claims, Clinical Patient Data
Business Case Analysis
PaymentSystem Design
Alignment ofMultiple Payers
TechnicalAssistanceto Providers
Value-DrivenDeliverySystems
Design Delivery ofCare
ProviderOrganization/Coordination
107
...All of Which Need to Be Coordinated to Be
Successful
EducationMaterials
Do patients know which providers offer the
highest value care?
Will benefit designsgive patients the ability to
adhere to care plans?
Value-BasedChoice
Wellness Adherence
EngagementofPurchasers
PublicReporting
BenefitDesign
Claims, Clinical Patient Data
Business Case Analysis
PaymentSystem Design
Alignment ofMultiple Payers
Will paymentsupport better care?Can
providersaccept newpayment models?
TechnicalAssistanceto Providers
Will investmentsin new caremodels
createsavings gt costs?
Design Delivery ofCare
ProviderOrganization/Coordination
108
How Can All These Functions Be Delivered in a
Coordinated Way?
EducationMaterials
Value-BasedChoice
Wellness Adherence
EngagementofPurchasers
PublicReporting
BenefitDesign
?
Claims, Clinical Patient Data
Business Case Analysis
PaymentSystem Design
Alignment ofMultiple Payers
TechnicalAssistanceto Providers
Design Delivery ofCare
ProviderOrganization/Coordination
109
The Role of Regional Health Improvement
Collaboratives
EducationMaterials
Value-BasedChoice
Wellness Adherence
EngagementofPurchasers
PublicReporting
BenefitDesign
RegionalHealthImprovementCollaborative
Claims, Clinical Patient Data
Business Case Analysis
PaymentSystem Design
Alignment ofMultiple Payers
TechnicalAssistanceto Providers
Design Delivery ofCare
ProviderOrganization/Coordination
110
...With Active Involvement of All Healthcare
Stakeholders
HealthcareProviders
HealthcarePayers
RegionalHealthImprove-mentCollab.
HealthcareConsumers
HealthcarePurchasers
111
Leading Regional Health Improvement Collaboratives

• Albuquerque Coalition for Healthcare Quality
• Aligning Forces for Quality South Central PA
• Alliance for Health
• Better Health Greater Cleveland
• California Cooperative Healthcare Reporting
  Initiative
• California Quality Collaborative
• Finger Lakes Health Systems Agency
• Greater Detroit Area Health Council
• Health Improvement Collaborative of Greater
  Cincinnati
• Healthy Memphis Common Table
• Institute for Clinical Systems Improvement
• Integrated Healthcare Association
• Iowa Healthcare Collaborative
• Kansas City Quality Improvement Consortium
• Louisiana Health Care Quality Forum
• Maine Health Management Coalition
• Massachusetts Health Quality Partners
• Midwest Health Initiative
• Minnesota Community Measurement

Network for RegionalHealthcare
Improvement www.NRHI.org
112
Moving to Accountable Care

• There is no one-size-fits-all solution to
  healthcare transformation each region will need
  to actually make it happen in its own unique
  environment. The best federal policy will
  support regional innovation.
• Payment reform is necessary, but not sufficient.
  Delivery system reform, changes in benefit
  design, and effective quality measurement are
  also essential. Everything needs to focus on
  improving outcomes.
• Physicians need to take the lead by agreeing to
  take accountability for reducing costs without
  rationing, creating organizational structures
  that enable them to do so, and demanding the
  payment changes needed to support them.

113
For More Information on Payment and Delivery
Reforms
www.PaymentReform.org
114
For More Information

• Harold D. MillerExecutive Director, Center for
  Healthcare Quality and Payment ReformandPresiden
  t CEO, Network for Regional Healthcare
  ImprovementMiller.Harold_at_GMail.com
• [phone]
• www.CHQPR.org
• www.NRHI.org
• www.PaymentReform.org