Value Based Purchasing: Opportunities and Challenges John J' Kaelin Presentation to Texas Associatio

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Value Based Purchasing Opportunities and
Challenges John J. Kaelin Presentation to
Texas Association of Health Plans

• November 16, 2004

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Topics in Todays Presentation

• Background on AmeriChoice
• A Call to Action
• Identify Key Measures
• State Case Studies
• Relationship and Impact on Actuarial Soundness
  and Rate Setting
• Challenges and Opportunities for Plans

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AmeriChoiceWho We Are

• Business unit of UnitedHealth Group
• Largest health and well-being company in country
• Public sector health care specialist
• Founded 198914 years experience
• 1.3 million members
• Medicaid
• SCHIP
• Uninsured
• Medicare (dual eligible focus)
• 11 health plans
• 2 management service contracts

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Our Operations
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Our Mission

• To improve the health and quality of life of the
  people we serve by providing quality health care
  and management services.

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Value Based Purchasing

• Growing consensus that purchasers should provide
  stronger payment incentives for quality
• Incentive strategies can lead to improved
  quality of care
• Clearly defined expectations and measures can
  improve purchaser and plan relationships

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Defining Value Based Purchasing

• A call for action
• We the undersigned are united in our belief that
  a unique opportunity now exists to address the
  crisis of quality facing the nations health
  system. The human and financial costs of medical
  error and substandard care have been exhaustively
  documented. A robust inventory of measures and
  standards for quality improvement has been
  developed and continues to grow. The strategic
  concept of paying for performancea bedrock
  principle in most industrieshas begun to emerge
  in health care in a variety of experiments in
  both the private and public sectors.
• Berwick, et al, Health Affairs, November 2003

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Important Considerations

• While we all agree with the goals stated above,
  how purchasers go about achieving them is
  critical.
• Plans need to actively participate in the design
  of these programs.
• Measure-selection and data considerations are the
  key to success.
• Adequate payment rates are an essential
  foundation for these programs to succeed.
• Purchasers need to recognize significant
  improvements managed care plans have already
  produced for Medicaid when compared to fee for
  service programs

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Overall Context for Medicaid

• Many states implemented mandatory managed care
  programs in the middle 1990s
• Managed care programs have significantly improved
  the quality and accessibility of health care
  services
• The following slides illustrate the improvements
  in the state of Maryland as a result of the
  managed care program
• The charts are excerpted from the states
  evaluation of the program issued in January 2002

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Well-Child Population Receiving Service (by age)
All (Weighted) category reflects an adjusted
value that accounts for the shift in the age
distribution since 1997. Results should be
interpreted carefully due to small number of
individual in certain age groups (19-20).
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ER Visits per Thousand (BY AGE)
All (Weighted) category reflects an adjusted
value that accounts for the shift in the age
distribution since 1997. Results should be
interpreted carefully due to small number of
individual in certain age groups (19-20).
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Childrens Dental Services (by age)
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Value Based Purchasing How It Works on the Ground

• Well take a look at the features of value based
  purchasing programs in 2 statesNew York and
  Marylandwhere AmeriChoice operates plans.
• This will help us identify the mechanics,
  challenges and implications of these programs.

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New York Quick Facts

• Mandatory managed care for MedicaidTANF
• SSI is voluntary at this point
• Total enrollment of approximately 2 million
• Large statewide program28 health plans

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New Yorks Program

• A quality incentive implemented in 2002
• Plans could receive a bonus payment in addition
  to their regular capitation payment
• Payment tied to quality and satisfaction
• Plans could receive up to 1 of premium
• In 2003, the State paid out 7 million in quality
  bonuses to 17 plans

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New Yorks Program--2

• Quality component relies on HEDIS and New
  York-specific measures, including child health,
  adult health and chronic disease
• Enrollee satisfaction information collected
  through CAHPS survey to provide information on
  access and satisfaction

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New York Quality Measures

• Childhood immunizations
• Lead testing
• Well child care
• Adolescent well care
• Comprehensive diabetes care
• Chlamydia screening
• Appropriate asthma meds
• Advising smokers to quit
• Follow-up after hospitalization for mental health

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New York Satisfaction Measures

• Getting care when needed
• Receiving services quickly
• Rating of personal doctor or nurse
• Rating of health plan
• Problem getting service

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Scoring in New York

• Benchmarks are established
• For quality measures set at 75th percentile from
  prior period
• For satisfaction plan performance compared to
  statewide average
• Scores for both quality and satisfaction are
  combined

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New York Pay Out Amounts

• Five levels
• 1
• .75
• .50
• .25
• 0
• Note No Penalty

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Maryland Quick Facts

• Mandatory managed care for TANF and SSI
• Over 450,000 enrolled
• 7 plans participate

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Marylands Approach

• Initiated in 2000
• Developed comprehensive set of measures focusing
  on
• Access to care
• Quality of care
• MCO administration

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Maryland Measure Criteria

• Evidence based
• Measurable (data must exist)
• Comparability (to other states or national
  benchmarks)

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Maryland Quality Measures

• Claims adjudicated within 30 days of receipt
• Well child visits
• Dental services for children
• Ambulatory care services for SSI adults
• Ambulatory care services for SSI children
• Timeliness of prenatal care
• Cervical cancer screening
• Lead screening
• Eye exams for diabetics

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Maryland Data Sources

• HEDIS and health plan encounter data are used
• Different targets based on the data source used
  to populate the measure

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Setting the Maryland HEDIS Targets

• For those measures that relied on HEDIS reports,
  incentive targets were set at 90 of the
  national HEDIS score.
• The state wanted to reward performance only when
  its plans were among the best in the nation.
• For its disincentives, the target was set at 95
  of the average Maryland HEDIS score.

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Maryland Targets for Encounter Measures

• Incentives were set at 105 of the best
  performing plan in the Maryland Medicaid program.
• Disincentives were triggered when a plan fell
  below 95 of the average Maryland score.

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Maryland Implementation

• Funding for the incentive component of the
  program was eliminated by the Legislature
• Result is that the program functions more in a
  sanctioning mode, although incentive points can
  be used to reduce sanction payments
• Funding decisions did not allow for quality to be
  rewarded in a financial manner

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Role of Risk Adjustment

• Neither state currently adjusts performance based
  on MCO case mix (although Maryland risk adjusts
  payments to MCOs)
• States and plans need to consider impact of mix
  on measures and relative plan performance
• Some measures, such as well child care, do not
  require mix adjustment
• Others, such as SSI utilization measures, may be
  affected by case mix

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LessonsMeasure Selection

• Most measures reflect areas where consensus on
  underlying need to establish a performance
  target.
• Common areas include well child visits,
  appropriate use of asthma meds, lead screening
• Consistent with recent Commonwealth Fund study on
  Quality of Health Care for Children and
  Adolescents ( April 2004)

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Lessons Benchmarks

• Many benchmarks are set on plan performance in
  the particular state.
• Benchmarks that are state-specific may be better
  suited to recognizing what is achievable given
  unique market issues.
• Use of national benchmarks can present challenges
• Member mix issues
• Marketplace and delivery system differences

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Lessons Funding and the Budget

• Overall context of Medicaid budget pressures in
  states need to be recognized
• Both states implemented their systems as add ons
  to the basic capitation rates
• Add on funding places the item in the overall
  state budget trade off debate

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Rate Setting Methodology Requirements

• The goal of promoting quality by additional
  payments operates within the larger payment
  system.
• Plans and states need to make sure the Medicaid
  managed care rates meet the CMS actuarial
  soundness requirements.
• A transparent rate setting process that allows
  plans to understand the cost and utilization
  assumptions used by the state is an essential
  element in aligning quality goals to capitation
  rates.

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Collecting Submitting Encounter Data

• A successful incentive system must rely on high
  quality, complete encounter data from plans.
• Both states reviewed today made significant
  investments in working with their plans over time
  to make sure adequate reporting resulted.
• Incentive based systems were feasible because
  encounter data and other data sources were
  adequate.
• The experience in many states demonstrates the
  strong relationship between encounter data
  submissions and payment triggers.

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Challenges and Opportunities for Plans

• Purchasers need to be reminded that the important
  goals of quality improvement in Medicaid are
  provided through a variety of mechanisms.
• While ready-to-use measures on care coordination
  and chronic care management may not be available,
  plans need to articulate the value of these
  programs as well.
• For plans in states that are considering
  incentive programs, the process of selecting
  measures, validating data sources and simulating
  results should be open and interactive.
• The impact of enrollment turnover in Medicaid
  needs to be considered in selecting measures and
  benchmarks

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Challenges and Opportunities for Plans
Enrollment Turnover

• A July 2004 study issued by Fairbrother, et al
  documented the impact of enrollee turnover in 5
  states on quality measures
• Many enrollees can not be included in HEDIS
  scores due to short time enrolled in the plan and
  the report recommends that users understand who
  is not included in the performance measure
• Report points out that it takes a reasonable
  period of time for a health plan to manage the
  care of new enrollees.
• Suggests development of modified measures that do
  not rely on continuous enrollment but rather
  rates per 1000 member months

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Questions

• Contact John J. Kaelinjkaelin_at_americhoice.com