WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE How ... · WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE...

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WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE How Cardiologists Can Lead the Way to Higher-Quality, More Affordable Health Care Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform 2014 CARDIOVASCULAR SUMMIT

Transcript of WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE How ... · WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE...

Page 1: WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE How ... · WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE How Cardiologists Can Lead the Way to Higher-Quality, More Affordable Health Care

WIN-WIN-WIN APPROACHESTO ACCOUNTABLE CARE

How Cardiologists Can Lead the Wayto Higher-Quality, More Affordable

Health Care

Harold D. MillerPresident and CEO

Center for Healthcare Quality and Payment Reform

2014 CARDIOVASCULAR SUMMIT

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2© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #1:In which U.S. industries

are the key employees told that at the end of the year, they can expect to receive

a 25% pay cutregardless of how well

they’ve performed?

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3© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #1:In which U.S. industries

are the key employees told that at the end of the year, they can expect to receive

a 25% pay cutregardless of how well

they’ve performed?

ANSWER:Health Care

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4© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Medicare SGR Is a Big Problem,

But So Is Lack of Annual Updates

PhysicianPractice Costs

PhysicianPaymentIncreases

If SGR CutIs Made

23% EffectiveReduction

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5© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #2:In which U.S. industries

are businessesonly able to sell

their products and servicesthrough an intermediary who demands large discounts andincreases prices by 18-25%?

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6© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #2:In which U.S. industries

are businessesonly able to sell

their products and servicesthrough an intermediary who demands large discounts andincreases prices by 18-25%?

ANSWER:Health Care

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7© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

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8© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #3:In which U.S. industries

can one set of employeesonly get a raise if other

employees take a pay cut,even when the business is

performing well?

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9© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #3:In which U.S. industries

can one set of employeesonly get a raise if other

employees take a pay cut,even when the business is

performing well?

ANSWER:Health Care

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10© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

The SGR Also Pits Physicians

Against Each Other

PCP Fees

Specialty

Fees

PCP Fees

Specialty

Fees

Physician Payments Capped by the Sustainable Growth Rate

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11© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #4:In which U.S. industries does government policyfavor large businessesover small businesses?

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12© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #4:In which U.S. industries does government policyfavor large businessesover small businesses?

ANSWER:Health Care

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13© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Unlike Physicians, Hospitals

Have Received Pay Increases

Physicians

Hospitals

Inflation

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14© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #5:Who is to blame forthe way physicians

are paid andmicromanaged?

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15© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

A Short Quiz

QUESTION #5:Who is to blame forthe way physicians

are paid andmicromanaged?

ANSWER:Physicians

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16© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

The Blame Rests With Physicians

• Physicians haven’t defined solutions to control healthcare costs without rationing

• Physicians are seen as the drivers of higher costs

• Physicians haven’t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices

• Physicians aren’t organized to manage and deliver high-value population health care to purchasers and patients

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17© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Three Paths to the Future:

Which Door Will You Choose?

TODAY

FUTURE #1

FUTURE #2

FUTURE #3

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18© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

What Purchasers & Patients Want:

High-Quality Care at Lower Cost

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Savings

TODAY TOMORROW

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19© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

What Purchasers & Patients Want:

High-Quality Care at Lower Cost

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Savings

TODAY TOMORROW

Where Will The Savings Come From?

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20© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

What Purchasers & Patients Want:

High-Quality Care at Lower Cost

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Savings

TODAY TOMORROW

Where Will The Savings Come From?

It Depends on Who’s the Last in Line

In Getting Paid

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21© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Door #1:

Continuation of the Status Quo

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

TraditionalInsuranceCompany/

TPA

Savings

TODAY TOMORROW

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22© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Who’s First in Line?

Health Plans

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

TraditionalInsuranceCompany/

TPA

Savings

TODAY TOMORROW

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23© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Who’s Last in Line?

Physicians

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

Savings

TODAY TOMORROW

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24© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Where Will Savings Come From?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

Savings

TODAY TOMORROW

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25© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Will Health Plans Voluntarily

Reduce Their Fees/Profits?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

Health PlanAdm/Profit

HospitalPayments

PhysicianPayments

Savings

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26© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Will Health Plans Voluntarily

Reduce Their Fees/Profits?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

Health PlanAdm/Profit

HospitalPayments

PhysicianPayments

Savings

Not

Likely

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27© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Can Health Plans Cut Payments

to the Big Hospital in Town?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

Health PlanAdm/Profit

HospitalPayments

PhysicianPayments

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

Savings

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28© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Can Health Plans Cut Payments

to the Big Hospital in Town?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

Health PlanAdm/Profit

HospitalPayments

PhysicianPayments

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

Savings

Not

Likely

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29© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Or Will Payers Continue Cutting

(or Not Increasing) Doctor Pay?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

Health PlanAdm/Profit

HospitalPayments

PhysicianPayments

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

Savings

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30© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Not Just Lower Fees, But

Interference in Physician Decisions

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

Savings

• Lower Fees

(“Discounts”)

• Prior Authorization

• Step Therapy

• Utilization Review

• Disease Mgt Vendors

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31© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

#1 in Spending = Heart Conditions,

So Where Will the Focus Likely Be?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Savings

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32© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Will Employment by Hospitals

Protect Physicians?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HealthSystem

Payments

PhysicianSalaries

TraditionalInsuranceCompany/

TPA

SavingsHealth PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

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33© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

When Health Systems Get Less,

Where Will They Make the Cuts?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HealthSystem

Payments

PhysicianSalaries

TraditionalInsuranceCompany/

TPA

Savings

Health PlanAdmin Cost

& Profit

HealthSystem

Payments

PhysicianSalaries

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

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34© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Health Systems Want to Ensure

They Don’t Get Cut by Payers…

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Health PlanAdmin Cost

& Profit

HealthSystem

Payments

PhysicianSalaries

TraditionalInsuranceCompany/

TPA

Savings

Health PlanAdmin Cost

& Profit

HealthSystem

Payments

PhysicianSalaries

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

TraditionalInsuranceCompany/

TPA

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35© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

HealthSystem w/InsuranceCompany

Door #2:

Hospital-Owned Health Plans

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

HospitalPayments

PhysicianPayments

Savings

Health PlanAdmin/Prof.

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36© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

HealthSystem w/InsuranceCompany

If Hospitals Are Now First In Line,

Where Will Savings Come From?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

HospitalPayments

PhysicianPayments

Savings

Health PlanAdmin/Prof.

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37© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

HealthSystem w/InsuranceCompany

Maybe Health Plan Expenses

Can Be Reduced…

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

HospitalPayments

PhysicianPayments

Savings

Health PlanAdmin/Prof.

HospitalPayments

PhysicianPayments

Health PlanAdm/Profit

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38© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

HealthSystem w/InsuranceCompany

…But Hospital Will Still Need the

Health Plan to Watch the Docs

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

HospitalPayments

PhysicianPayments

Savings

Health PlanAdmin/Prof.

HospitalPayments

PhysicianPayments

Health PlanAdm/Profit

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39© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

HealthSystem w/InsuranceCompany

So Physicians Will Likely Still Be

Subject to Cuts and Interference

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

HospitalPayments

PhysicianPayments

Savings

Health PlanAdmin/Prof.

HospitalPayments

PhysicianPayments

Health PlanAdm/Profit

HospitalPayments

PhysicianPayments

Health PlanAdmin/Prof.

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40© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

What’s Behind Door #3?

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

Savings

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41© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Physician-Led Health

Plans &Contracting

Physician Leadership to

Control Both Cost & Quality

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

CostHospital

Payments

PhysicianPayments

Health PlanAdmin Cost

& Profit

Savings

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42© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Physician-Led Health

Plans &Contracting

Physicians Can Watch Themselves,

They Don’t Need Health Plans…

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

CostHospital

Payments

PhysicianPayments

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

Health PlanAdm/Profit

Savings

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43© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Physician-Led Health

Plans &Contracting

Better Care of Patients Will Reduce

Avoidable Hospitalizations…

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

CostHospital

Payments

PhysicianPayments

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

Health PlanAdm/Profit

Savings

Hospital

Payments

PhysicianPayments

Health PlanAdm/Profit

Savings

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44© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Physician-Led Health

Plans &Contracting

…Allowing Better Pay for Doctors

AND More Savings for Purchasers

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

CostHospital

Payments

PhysicianPayments

Health PlanAdmin Cost

& Profit

HospitalPayments

PhysicianPayments

Health PlanAdm/Profit

Savings

Hospital

Payments

PhysicianPayments

Health PlanAdm/Profit

Savings

Hospital

Payments

PhysicianPayments

Health PlanAdm/Profit

Savings

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45© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Physician-Led Health

Plans &Contracting

Door #3 = A Physician-Led

Healthcare Future

High

Costs

and

Weak

Quality

High

Quality

Care

at

Lower

Cost

HospitalPayments

PhysicianPayments

Health PlanAdmin Cost

& Profit

Savings

Hospital

Payments

PhysicianPayments

Health PlanAdm/Profit

• Significant savingsfor purchasers and patients

• Better pay for physicians

• Less spending on health planoverhead

• Less interference in physician-patient relationship

• Less spending on avoidableexpensive, risky procedures

• Better health and quality of life for patients

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46© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

High Quality Health Plans

Run By Physician Groups

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47© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Three Paths to the Future:

Which Door Will You Choose?

TODAY

HEALTH PLAN-LED

HEALTHCARE

HOSPITAL-LED

HEALTHCARE

PHYSICIAN-LED

HEALTHCARE

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48© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

If Physicians Choose Door #3,

What Will They Need to Succeed?

TODAY

PHYSICIAN-LED

HEALTHCARE

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49© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Since Heart Care is #1 in Spending,

Cardiology Leadership is Essential

Current

Purchaser

& Patient

Spending

High

Quality

Care

at

Lower

Cost

Savings

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50© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

How Can a Cardiology Practice

Lower Costs & Improve Quality?

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51© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

Your Real Cardiology Business

is More Than Your Salary…

Cardiologist Salary

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…And More Than Your Total

Practice Costs..

Cardiologist SalaryPractice Expenses

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…It’s the Tests You Order, Even If

Someone Else Does Them

Cardiologist SalaryPractice Expenses

Tests and Imaging

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…It’s the Procedures You Do,

And Where You Do Them

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

Tests and Imaging

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…And the Unplanned Admissions

of Your Patients…

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Tests and Imaging

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…The Post-Acute Care Costs

After Hospital Stays…

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Tests and Imaging

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…The Unplanned Readmissions

and Repeat Procedures…

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Tests and Imaging

Readmissions

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…And the Number and Types of

Medications You Prescribe

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

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That Adds Up to a LOT of Money:

>$10,000/patient/yr in Medicare

Cardiologist Services $324

Other Physician Svcs $880

Inpatient Hospital Stays

& ER$4,255

Lab Tests & Imaging$1,416

Outpatient Procedures$1,431

Post-Acute Care$1,205

All Other Services$1,157

TOTAL AVERAGE COSTPER PATIENT (w/o Rx):

$10,667

Medicare Patients Whose CareWas Directed by a Cardiologist

in 4 Midwest States, 2010

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

Source:

Medicare

QRUR

Reports

2011

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Only 3% of the Money Is

Going to the Cardiologist

Cardiologist Services $324

Other Physician Svcs $880

Inpatient Hospital Stays

& ER$4,255

Lab Tests & Imaging$1,416

Outpatient Procedures$1,431

Post-Acute Care$1,205

All Other Services$1,157

TOTAL AVERAGE COSTPER PATIENT (w/o Rx):

$10,667

Medicare Patients Whose CareWas Directed by a Cardiologist

in 4 Midwest States, 2010

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

$100,000 Revenuefor Cardiologist

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But What the Cardiologist Does

Determines Most of the Other 97%

Cardiologist Services $324

Other Physician Svcs $880

Inpatient Hospital Stays

& ER$4,255

Lab Tests & Imaging$1,416

Outpatient Procedures$1,431

Post-Acute Care$1,205

All Other Services$1,157

TOTAL AVERAGE COSTPER PATIENT (w/o Rx):

$10,667

Medicare Patients Whose CareWas Directed by a Cardiologist

in 4 Midwest States, 2010

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

$100,000 Revenuefor Cardiologist

$3,200,000

in Total

Non-Pharmacy

Medicare

Expenditures

Prescribed,

Ordered,

or

Influenced by

Cardiologist

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Can Cardiologists Earn More AND

Give Medicare Savings?

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

$100,000 Revenuefor Cardiologist

$3,200,000

in Total

Non-Pharmacy

Medicare

Expenditures

Prescribed,

Ordered,

or

Influenced by

Cardiologist

3% Savings for Medicare

10% Increase in Cardiologist Revenue

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Yes: All You Need is a Small

Reduction in All the Other Costs

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

$100,000 Revenuefor Cardiologist

$3,200,000

in Total

Non-Pharmacy

Medicare

Expenditures

Prescribed,

Ordered,

or

Influenced by

Cardiologist

3% Savings for Medicare

10% Increase in Cardiologist Revenue

3.4% Reductionin Total

Non-PharmacyMedicare

Expenditures

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Only Cardiologists Can

Reduce Costs Without Rationing

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

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Only Cardiologists Can

Reduce Costs Without Rationing

• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

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Only Cardiologists Can

Reduce Costs Without Rationing

• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities

• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

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Only Cardiologists Can

Reduce Costs Without Rationing

• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities

• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

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Only Cardiologists Can

Reduce Costs Without Rationing

• Less use of expensive inpatient rehab• More in-home services

• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities

• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

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Only Cardiologists Can

Reduce Costs Without Rationing

• Better post-discharge care management• Fewer complications from procedures

• Less use of expensive inpatient rehab• More in-home services

• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities

• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

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Only Cardiologists Can

Reduce Costs Without Rationing

• Use of lower-cost medications• Avoiding unnecessary medications

• Better post-discharge care management• Fewer complications from procedures

• Less use of expensive inpatient rehab• More in-home services

• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities

• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities

Cardiologist SalaryPractice Expenses

Outpatient Procedures

Inpatient Procedures

and Admissions of

Chronic Disease

Patients

Post-Acute Care

Medications

Tests and Imaging

Readmissions

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Cardiologists Agree That Many

Tests/Procedures Are Overused

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Utilization Rates Vary

Dramatically Across Regions

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FFS Barriers for Physicians in

Reducing Healthcare Spending• What if Cardiologists Reduced Unnecessary Imaging and Used

Lower-Cost Imaging Tests for Patients with Stable Angina?– Medicare and commercial payers would get a lot of savings– Cardiologists would get less revenue– Congress/CMS would still freeze or cut physicians’ payments

• What if Cardiologists Increased the Use of Medication Therapy and Reduced the Number of PCIs for Patients with Stable Angina?– Medicare and commercial payers would get a lot of savings– Cardiologists would get a lot less revenue– Hospitals would get a lot less revenue– Congress/CMS would still freeze or cut physicians’ payments

• What if Cardiologists Improved Care Management of CHF Patients and Reduced Hospital Admissions and Readmissions?– Medicare and commercial payers would get a lot of savings– Cardiologists wouldn’t be paid for the expanded care management services– Hospitals would get a lot less revenue– Congress/CMS would still freeze or cut physicians’ payments

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Physicians Don’t Need Incentives,

They Need Fewer Barriers

FFS•No payment for services that will benefit patients

•Lower revenues from reducing avoidable costs

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Most “Payment Reforms”

Don’t Fix The Problems with FFS

FFS•No payment for services that will benefit patients

•Lower revenues from reducing avoidable costs

FFS

Shared Savings

Shared Savings

FFS

P4P

FFS

PMPM

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Fortunately, There Are Good

Alternatives to Fee for Service

BUILDING

BLOCKS HOW IT WORKS

Bundled

Payment

Single payment to 2+

providers who are now

paid separately (e.g.,

hospital+physician)

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Fortunately, There Are Good

Alternatives to Fee for Service

BUILDING

BLOCKS HOW IT WORKS

Bundled

Payment

Single payment to 2+

providers who are now

paid separately (e.g.,

hospital+physician)

Warrantied

Payment

Higher payment for

quality care, no extra

payment for correcting

preventable errors and

complications

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Fortunately, There Are Good

Alternatives to Fee for Service

BUILDING

BLOCKS HOW IT WORKS

Bundled

Payment

Single payment to 2+

providers who are now

paid separately (e.g.,

hospital+physician)

Warrantied

Payment

Higher payment for

quality care, no extra

payment for correcting

preventable errors and

complications

Condition-

Based

Payment

Payment based on the

patient’s condition,

rather than on the

procedure used

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Accountable Payment Models

Allow Win-Win-Win Approaches

BUILDING

BLOCKS HOW IT WORKS

HOW PHYSICIANS

AND HOSPITALS

CAN BENEFIT

HOW PAYERS

CAN BENEFIT

Bundled

Payment

Single payment to 2+

providers who are now

paid separately (e.g.,

hospital+physician)

Higher payment for

physicians if they

reduce costs paid by

hospitals

Physician and hospital

offer a lower total price

to Medicare or health

plan than today

Warrantied

Payment

Higher payment for

quality care, no extra

payment for correcting

preventable errors and

complications

Higher payment for

physicians and

hospitals with low

rates of infections

and complications

Medicare or health

plan no longer pays

more for high rates of

infections or

complications

Condition-

Based

Payment

Payment based on the

patient’s condition,

rather than on the

procedure used

No loss of payment

for physicians and

hospitals using fewer

tests and procedures

Medicare or health

plan no longer pays

more for unnecessary

procedures

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Example: Diagnosis/Treatment of

Chest Pain/Stable Angina

Patientwith

StableAngina

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FFS Rewards

More and Higher-Cost Testing…

MoreExpensive

Testing MEDICARE/

HEALTH

PLAN

LessExpensive

Testing

Patientwith

StableAngina

Lower

Payment

Higher

Payment

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…and FFS Rewards More and

Higher-Cost Procedures

MoreExpensive

Testing

PCI

MEDICARE/

HEALTH

PLAN

LessExpensive

Testing

Patientwith

StableAngina

MedicalManagement Lower

Payment

Higher

Payment

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Instead, Pay to Manage the

Patient’s Condition…

MoreExpensive

Testing

PCI

MEDICARE/

HEALTH

PLAN

LessExpensive

Testing

Patientwith

StableAngina

MedicalManagement

Condition-Based Payment

Single

Payment

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…And Enable More Cost-Effective

Care Without Loss of Revenue

MoreExpensive

Testing

PCI

MEDICARE/

HEALTH

PLAN

LessExpensive

Testing

Patientwith

StableAngina

MedicalManagement

Condition-Based Payment

Single

Payment

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Payment Would Be Risk-Adjusted

Based on Patient Conditions

MoreExpensive

TestingPCI

MedicalManagement

MEDICARE/

HEALTH

PLAN

LessExpensive

Testing

Patientwith

StableAngina

PCI

MedicalManagement

High Risk of AMI

Low Risk of AMI

LessExpensive

Testing

MoreExpensive

Testing

Lower

Payment

Higher

Payment

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ACC Appropriate Use Criteria

Enable Effective Risk Adjustment

MoreExpensive

TestingPCI

MedicalManagement

MEDICARE/

HEALTH

PLAN

LessExpensive

Testing

Patientwith

StableAngina

PCI

MedicalManagement

High Risk of AMI

Low Risk of AMI

LessExpensive

Testing

MoreExpensive

Testing

ACCAUCVia

FOCUS

Lower

Payment

Higher

Payment

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ACC SMARTCare Project Is An

Opportunity to Implement This

MoreExpensive

TestingPCI

MedicalManagement

MEDICARE/

HEALTH

PLAN

Lower

PaymentLess

ExpensiveTesting

Higher

Payment

Patientwith

StableAngina

PCI

MedicalManagement

High Risk of AMI

Low Risk of AMI

LessExpensive

Testing

MoreExpensive

Testing

ACCAUCVia

FOCUS

SMARTCare

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Reality Is More Complex,

But the Same Principles Still Apply

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Appropriate Use w/o Pmt Reform

= Financial Losses for Physicians

MoreExpensive

Testing

PCI

MEDICARE/

HEALTH

PLAN

LessExpensive

Testing

Patientwith

StableAngina

MedicalManagement Lower

Payment

Higher

Payment

ACCAUCVia

FOCUS

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Doesn’t Lower Utilization

and Lower Spending

Have to Result in Losses for

Physicians and Hospitals?

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Example: Reducing

Avoidable ProceduresTODAY

$/Patient # Pts Total $

Physician Svcs

Evaluations $150 300 $45,000

Procedures $850 200 $170,000

Subtotal $215,000

Hospital Pmt $11,000 200 $2,200,000

Total Pmt/Cost $2,415,000

Optional Procedurefor a Condition

• Physician evaluates 300 patients/year

• Physician performsprocedure on 2/3 ofevaluated patients

• Up to 10% of proceduresmay be avoidablethrough patient choiceor alternative treatment

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Most of the Money Today

Is NOT Going to the PhysicianTODAY

$/Patient # Pts Total $

Physician Svcs

Evaluations $150 300 $45,000

Procedures $850 200 $170,000

Subtotal $215,000

Hospital Pmt $11,000 200 $2,200,000

Total Pmt/Cost $2,415,000

Physician Payment is

9% of Total Spending

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Typical Health Plan Approach:

Prior Auth/Utilization ControlsTODAY w/ UTILIZATION CTRL

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 $150 300 $45,000

Procedures $850 200 $170,000 $850 180 $153,000

Subtotal $215,000 $198,000

Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000

Total Pmt/Cost $2,415,000 $2,178,000 -10%

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Under FFS, Payer Wins,

Physicians and Hospitals LoseTODAY w/ UTILIZATION CTRL

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 $150 300 $45,000

Procedures $850 200 $170,000 $850 180 $153,000

Subtotal $215,000 $198,000 -8%

Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10%

Total Pmt/Cost $2,415,000 $2,178,000 -10%

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Is There a Better Way?

TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 ? ? ?

Procedures $850 200 $170,000 ? ? ?

Subtotal $215,000 ?

? ? ?

Hospital Pmt $11,000 200 $2,200,000 ? ? ?

Total Pmt/Cost $2,415,000 ? ? ?

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A Better Way: Pay for Care of the

Condition, Not for the ProcedureTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000

Procedures $850 200 $170,000

Subtotal $215,000

Hospital Pmt $11,000 200 $2,200,000

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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Physicians Can Maintain Practice

Revenue With Fewer ProceduresTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt $11,000 200 $2,200,000

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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Flexible Payment for Condition

Allows Patient-Centered CareTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt $11,000 200 $2,200,000

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

Payment for Condition Management• Physician can engage in shared decision making process with patients• Physician can determine if procedure is needed with no impact on revenue

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Win for Physician, Win for Payer,

But Where Do Savings Come From?TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt $11,000 200 $2,200,000 ?

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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Do Hospitals Have to Lose In Order

for Physicians To Win?TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

Physician Wins

Payer Wins

Hospital Loses

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What Should Matter to Hospitals is

Margin, Not Revenues (Volume)

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Hospital Costs Are Not

Proportional to Utilization

$800$820$840$860$880$900$920$940$960$980$1,000

81

82

83

84

85

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87

88

89

90

91

92

93

94

95

96

97

98

99

100

$0

00

#Patients

Cost & Revenue Changes With Fewer Patients

.

Costs

20% reduction in volume

7% reduction

in cost

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Reductions in Utilization Reduce

Revenues More Than Costs

$800$820$840$860$880$900$920$940$960$980$1,000

81

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86

87

88

89

90

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92

93

94

95

96

97

98

99

100

$0

00

#Patients

Cost & Revenue Changes With Fewer Patients

Revenues

Costs

20% reduction in volume

7% reduction

in cost

20% reduction

in revenue

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Causing Negative Margins

for Hospitals

$800$820$840$860$880$900$920$940$960$980$1,000

81

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88

89

90

91

92

93

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95

96

97

98

99

100

$0

00

#Patients

Cost & Revenue Changes With Fewer Patients

Revenues

Costs

Payers Will Be

Underpaying For

Care If

Admissions

and Procedures

are Reduced

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But Spending Can Be Reduced

Without Bankrupting Hospitals

$800$820$840$860$880$900$920$940$960$980$1,000

81

82

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85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

$0

00

#Patients

Cost & Revenue Changes With Fewer Patients

Revenues

Costs

Payers Can

Still Save $

Without Causing

Negative Margins

for Hospital

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Adequacy of Payment Depends On

Fixed/Variable Costs & MarginsTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000

Variable Costs $3,300 30% $660,000

Margin $550 5% $110,000

Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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Now, if the Number of Procedures

is Reduced…TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000

Variable Costs $3,300 30% $660,000

Margin $550 5% $110,000

Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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…Fixed Costs Will Remain the

Same (in the Short Run)…TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%

Variable Costs $3,300 30% $660,000

Margin $550 5% $110,000

Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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…Variable Costs Will Go Down in

Proportion to Procedures…TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%

Variable Costs $3,300 30% $660,000 $3,300 $594,000 -10%

Margin $550 5% $110,000

Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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What’s Left for Margin From the

Hospital’s Share of Revenue?TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%

Variable Costs $3,300 30% $660,000 $594,000 -10%

Margin $550 5% $110,000

Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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The Hospital Is Making More Money

With Less Revenue!TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%

Variable Costs $3,300 30% $660,000 $594,000 -10%

Margin $550 5% $110,000 $113,000 +3%

Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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I.e., Win-Win-Win for

Physician, Hospital, and PayerTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 -0%

Variable Costs $3,300 30% $660,000 -10%

Margin $550 5% $110,000 $113,000 +3%

Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

Physician Wins

Payer Wins

Hospital Wins

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What Happens If You Can Reduce

Avoidable Procedures Even More?TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180 160

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000

Variable Costs $3,300 30% $660,000

Margin $550 5% $110,000

Subtotal $11,000 200 $2,200,000 180 160 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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The Budget Is the Same, Because

It’s Not Based on # of ProceduresTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 160

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000

Variable Costs $3,300 30% $660,000

Margin $550 5% $110,000

Subtotal $11,000 200 $2,200,000 160 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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The Hospital’s Margin Improves

With Reduced Variable CostsTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 160

Subtotal $215,000 $222,000 +3%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%

Variable Costs $3,300 30% $660,000 $528,000 -20%

Margin $550 5% $110,000 $179,000 +63%

Subtotal $11,000 200 $2,200,000 160 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%

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Who Ever Heard of Giving a

Hospital a Budget?

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If The Physician Can Reduce the

Hospital’s Costs Per Procedure….TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000

Procedures $850 200 $170,000

Subtotal $215,000

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 $1,430,000

Variable Costs $3,300 30% $660,000 $2,000 $360,000 -46%

Margin $550 5% $110,000

Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%

Total Pmt/Cost $8,050 300 $2,415,000

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Everyone Can Win Even More

TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $276,000 +28%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 $1,430,000

Variable Costs $3,300 30% $660,000 $2,000 $360,000

Margin $550 5% $110,000 $121,000 +10%

Subtotal $11,000 200 $2,200,000 180 $1,911,000 -13%

Total Pmt/Cost $8,050 300 $2,415,000 $7,290 300 $2,187,000 -9%

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$2,200 Variation in Average Cost of

Drug-Eluting Stents in CA Hospitals

Source: Coronary Angioplasty with Drug Eluting Stents: Device Costs, Hospital

Costs, and Insurance Payments, Emma L. Dolan and James C. Robinson

Berkeley Center for Health Technology, September 2010

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$16,000 Variation in Avg Costs of

Defibrillators Across CA Hospitals

Source: Pacemaker and Implantable Cardioverter-Defibrillator Implant Procedures in California Hospitals,

James C. Robinson and Emma L. Dolan, Berkeley Center for Health Technology, 2010

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Not Just Devices: Other Savings

Opportunities From Bundling• Better scheduling of scarce resources (e.g., surgery suites) to

reduce both underutilization & overtime

• Coordination among multiple physicians and departments to

avoid duplication and conflicts in scheduling

• Standardization of equipment and supplies to facilitate bulk

purchasing

• Less wastage of expensive supplies

• Reduced length of stay

• Etc.

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Total Hospital Margins Depend on

High-Margin Services

Profit

Loss

Profit

Profit

Loss

Loss

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Commercial Rates Make Up for

Losses on Other Patients

Profit

Profit

Loss

Loss

Loss

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Starting With the Earlier Example

TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $276,000 +28%

Hospital Pmt

Fixed Costs $7,150 65% $1,430,000 $1,430,000

Variable Costs $3,300 30% $660,000 $360,000

Margin $550 5% $110,000 $121,000 +10%

Subtotal $11,000 200 $2,200,000 180 $1,911,000 -13%

Total Pmt/Cost $8,050 300 $2,415,000 $7,290 300 $2,187,000 -9%

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What if This is a VERY High

Margin Procedure for the Hospital?TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $276,000 +28%

Hospital Pmt

Fixed Costs $7,150 48% $1,430,000

Variable Costs $3,300 22% $660,000

Margin $4,550 30% $910,000

Subtotal $15,000 200 $3,000,000

Total Pmt/Cost $10,716 300 $3,215,000

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Cover Fixed Costs, Reduce Variable

Costs, and Preserve/Improve MarginTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 $350 300 $105,000

Procedures $850 200 $170,000 $950 180 $171,000

Subtotal $215,000 $276,000 +28%

Hospital Pmt

Fixed Costs $7,150 48% $1,430,000 $1,430,000 0%

Variable Costs $3,300 22% $660,000 $2,000 $360,000 -45%

Margin $4,550 30% $910,000 $955,500 +5%

Subtotal $15,000 200 $3,000,000 180 $2,745,500 -8%

Total Pmt/Cost $10,716 300 $3,215,000

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Smaller % Savings on Higher Price

= Bigger $ SavingsTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Evaluations $150 300 $45,000 300

Procedures $850 200 $170,000 180

Subtotal $215,000 $276,000 +28%

Hospital Pmt

Fixed Costs $7,150 48% $1,430,000 $1,430,000

Variable Costs $3,300 22% $660,000 $2,000 $360,000

Margin $4,550 30% $910,000 $955,500 +5%

Subtotal $15,000 200 $3,000,000 180 $2,745,500 -8%

Total Pmt/Cost $10,716 300 $3,215,000 $10,072 300 $3,021,500 -6%

Physician Wins

Payer Wins

Hospital Wins

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How Does Condition-Based

Payment Work in Chronic Disease?

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FFS Doesn’t Pay for Care Mgt,

But Pays for ER Visits & Admits

CareManagement

ER Visits/Hospital

Admissions

AvoidExacerbations

MEDICARE/

HEALTH

PLAN

PatientwithCHF

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Condition-Based Payment

Rewards Better Care Mgt

CareManagement

ER Visits/Hospital

Admissions

AvoidExacerbations

MEDICARE/

HEALTH

PLANSingle

Payment

PatientwithCHF

Condition-Based Payment

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Condition-Based Payment

Should Be Risk-Adjusted

MoreExtensive

CareManagement

ER Visits/Hospital

Admissions

AvoidExacerbations

MEDICARE/

HEALTH

PLAN

Lower

Payment

LessExtensiveCare Mgt

Higher

Payment

PatientwithCHF

ER Visits/Hospital Adm.

AvoidExacerbations

Higher Risk Patients

Lower Risk Patients

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Win-Win-Win in

Chronic Disease Management, TooTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%

Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%

Margin $300 3% $75,000 $82,500 +10%

Subtotal $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Pmt/Cost $5,280 500 $2,640,000 500 $2,510,000 -5%

Physician Wins

Payer Wins

Hospital Wins

See Example

in the

Online Appendix

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How Do You Develop

Win-Win-Win Solutions?

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How Do You Develop

Win-Win-Win Solutions?1. Defining the Change in Care Delivery

– How can care be redesigned to improve quality and reduce costs?

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How Do You Develop

Win-Win-Win Solutions?1. Defining the Change in Care Delivery

– How can care be redesigned to improve quality and reduce costs?

2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?

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How Do You Develop

Win-Win-Win Solutions?1. Defining the Change in Care Delivery

– How can care be redesigned to improve quality and reduce costs?

2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?

3. Designing a Payment Model That Supports Change– Flexibility to change the way care is delivered– Accountability for costs and quality/outcomes related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk

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How Do You Develop

Win-Win-Win Solutions?1. Defining the Change in Care Delivery

– How can care be redesigned to improve quality and reduce costs?

2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?

3. Designing a Payment Model That Supports Change– Flexibility to change the way care is delivered– Accountability for costs and quality/outcomes related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk

4. Designing an Appropriate Internal Compensation System– Changing payment to the provider organization does not

automatically change compensation to physicians and hospitals

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How Do You Develop

Win-Win-Win Solutions?1. Defining the Change in Care Delivery

– How can care be redesigned to improve quality and reduce costs?

2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?

3. Designing a Payment Model That Supports Change– Flexibility to change the way care is delivered– Accountability for costs and quality/outcomes related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk

4. Designing an Appropriate Internal Compensation System– Changing payment to the provider organization does not

automatically change compensation to physicians and hospitals

5. Getting Payers to Use the Payment Model

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Major Barrier: Gaining Support

from a Critical Mass of Payers

Health Plan

Provider

Health Plan Health Plan

Patient Patient Patient

Provider is only compensated for changed practices

for the subset of patients covered by participating payers

Better

Payment

System

Current

Payment

System Current

Payment

System

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For Most Employees, the Employer

is the Insurer, Not a Health Plan

Source:

Employer

Health

Benefits

2012 Annual

Survey.

The Kaiser

Family

Foundation

and Health

Research

and

Educational

Trust

60% inSelf-

FundedPlans

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For Self-Funded Employers, The

Health Plan is Just a Pass Through

Self-Funded

PurchasersProviders

ASOHealth Plan(No Risk)

Provider Claims

Purchaser Payment

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Little Incentive for Health Plans to

Support Payment Reforms

True Payment Reform Means:• Health plan incurs the costs of

implementing new payment models• Purchaser gains all the savings from

reduced utilization and spending(because all claims are passed through)

Self-Funded

PurchasersProviders

ASOHealth Plan(No Risk)

Provider Claims

Purchaser Payment

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A Better Approach:

Purchaser/Provider Partnerships

Self-Funded

Purchasers

ProvidersWilling to ManageCosts

Better Payment and Benefit Structure

Lower Cost, Higher Quality Care

Provider “wins” if:

• Patients stay healthy and need less care

• Purchaser pays provider adequately tomanage care efficiently

Purchasers and Patients “win” if:

• Providers reduce purchasers’ costs

• Patients stay healthy and have lower cost-sharing

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Health Plan Implements Changes

Purchasers/Providers Agree On

Self-Funded

Purchasers

ProvidersWilling toManageCosts

ASOHealth Plan(No Risk) Implementation

Better Payment and Benefit Structure

Lower Cost, Higher Quality Care

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What About Employers/ Individuals

With Traditional Health Insurance?

FullyInsured

Purchasers(No Risk)

Providers

HealthInsurance

Plan(Risk)

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Health Insurance Increasingly

Makes the Patient the Purchaser

FullyInsured

Purchasers(No Risk)

Providers

HealthInsurance

Plan(Risk)

Memberswith High

Deductibles

Premium

Out-of-Pocket

Paymentsfor

Many Testsand

Procedures

Payments for Highest-Cost

Procedures and Sickest Patients

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So It’s the Patient Who Has to

Pay for Value, Not the Health Plan

Providers

Memberswith High

Deductibles

BetterPayment

Model

HigherQuality

Care

FullyInsured

Purchasers(No Risk)

HealthInsurance

Plan(Risk)

Premium

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Reference Pricing Does Same for

Higher-Priced Procedures

FullyInsured

Purchasers(No Risk)

Highest-Value

Providers

HealthInsurance

Plan(Risk)

Memberswith Cost

Sharing

Premium Reference Pricing

Lowest-Value

Providers

LowCost-

Sharing

HighCost-

Sharing

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How Do You Create a Direct Contracting Relationship

With a Purchaser?

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The Purchaser Wants Lower

Spending Without Rationing

Sp

en

din

g P

er

Pati

en

t

NOTE:Graph Is notdrawnto scale

TODAY

PurchaserSpending

TOMORROW

PurchaserSpending

TotalHealthcareSpending

forthe

Purchaser’sPatients

LowerHealthcareSpendingWithout

Rationing

PurchaserSavings

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A Proposal to Improve Heart Care

Spending Will Be of Great Interest...

Sp

en

din

g P

er

Pati

en

t

NOTE:Graph Is notdrawnto scale

TODAY

PurchaserSpending

TOMORROW

HeartConditions

Avoidable $Avoidable $

HeartConditions

PurchaserSpending

TotalHealthcareSpending

forthe

Purchaser’sPatients

LowerHealthcareSpendingWithout

Rationing

PurchaserSavings

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But Purchasers Prefer to Control

All/Most Spending, Not Just Some

Sp

en

din

g P

er

Pati

en

t

NOTE:Graph Is notdrawnto scale

TODAY

PurchaserSpending

TOMORROW

HeartConditions

Avoidable $Pregnancy

Avoidable $

Diabetes

Avoidable $

Avoidable $

HeartConditions

DiabetesAvoidable $

Avoidable $

Pregnancy

Bones/Joints

Avoidable $

Bones/Joints

Avoidable $

OtherAvoidable $

Other

Avoidable $

PurchaserSpending

TotalHealthcareSpending

forthe

Purchaser’sPatients

LowerHealthcareSpendingWithout

Rationing

PurchaserSavings

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That’s Why There’s Interest in

Accountable Care Organizations

Sp

en

din

g P

er

Pati

en

t

NOTE:Graph Is notdrawnto scale

TODAY

PurchaserSpending

TOMORROW

HeartConditions

Avoidable $Pregnancy

Avoidable $

Diabetes

Avoidable $

Avoidable $

HeartConditions

DiabetesAvoidable $

Avoidable $

Pregnancy

Bones/Joints

Avoidable $

Bones/Joints

Avoidable $

OtherAvoidable $

Other

Avoidable $

PurchaserSpending

TotalHealthcareSpending

forthe

Purchaser’sPatients

LowerHealthcareSpendingWithout

Rationing

PurchaserSavings

ACO

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How Does Cardiology

Fit Into

Accountable Care Organizations?

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Goal of the ACO: Improve Value in

All Aspects of Patient Care

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

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Each Patient Should Choose &

Use a Primary Care Practice…

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

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MEDICARE/HEALTH PLAN

…Which Takes Accountability for

What PCPs Can Control/Influence

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

AccountableMedical

Home Accountability for:• Avoidable ER Visits

•Avoidable Hospitalizations

•Unnecessary Tests

•Unnecessary Referrals

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MEDICARE/HEALTH PLAN

…With a Medical Neighborhood

to Consult With on Complex Cases

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

AccountableMedical

Home

Endocrinology,

Cardiology,

Psychiatry

AccountableMedicalNeighborhood

Accountability for:

•Unnecessary Tests

•Unnecessary Referrals

•Co-Managed Outcomes

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MEDICARE/HEALTH PLAN

..And Specialists Accountable for

the Conditions They Manage

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

Orthopedic

Group

OB/GYN

Group

Cardiology

GroupHeart Episode/Condition Pmt

Back Episode/Condition Pmt

PregnancyManagement Pmt

AccountableMedical

Home

Endocrinology,

Cardiology,

Psychiatry

AccountableMedicalNeighborhood

Accountability for:

•Unnecessary Tests

•Unnecessary Procedures

•Infections, Complications

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MEDICARE/HEALTH PLAN

That’s Building the ACO

from the Bottom Up

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

Orthopedic

Group

OB/GYN

Group

Cardiology

GroupHeart Episode/Condition Pmt

Back Episode/Condition Pmt

PregnancyManagement Pmt

AccountableMedical

Home

Endocrinology,

Cardiology,

Psychiatry

AccountableMedicalNeighborhood

ACO

Accountable PaymentModels

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MEDICARE/HEALTH PLAN

Shared SavingsPayment

Primary

Care

ACO

Orthopedics OB/GYNCardiology

Most ACOs Today

Aren’t Truly Reinventing Care

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Fee-for-ServicePayment

Expensive IT Systems

Psych.,

Endoc.

Nurse Care Managers

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MEDICARE/HEALTH PLAN

A True ACO Can Take a Global

Payment And Make It Work

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

ACO

Orthopedic

Group

OB/GYN

Group

Cardiology

GroupHeart Episode/Condition Pmt

Back Episode/Condition Pmt

PregnancyManagement Pmt

AccountableMedical

Home

Endocrinology,

Cardiology,

Psychiatry

Risk-AdjustedGlobal Payment

AccountableMedicalNeighborhood

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Example: BCBS MA

Alternative 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 two year results– Higher ambulatory care quality than non-AQC practices, better patient

outcomes, lower readmission rates and ER utilization, lower costshttp://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html

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You Don’t Need To Be Part of a

Hospital to Manage Global Payment

• 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

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Physicians Need Protections From

Insurance Risk • Two Major Types of Risk

– Insurance Risk: Whether patients will have a health condition• The payer/purchaser pays for this today, and should continue to do so

– Performance Risk: How much it costs to treat that health condition• The payer/purchaser pays for this today, but the provider can control it

• How Do You Separate Insurance & Performance Risk?

– Risk/severity adjustment of payment

– Risk corridors in case costs were mis-estimated

– Outlier payments for unusually expensive patients

– Risk exclusions for some patient populations or situations where costs

can’t reasonably be controlled by the physician or hospital

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How Many Patients

Do You Need to

(Successfully)

Manage Total Risk?

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Companies With <1,000 Workers

Take Total Healthcare Cost Risk

Sources:

Employer

Health

Benefits

2012 Annual

Survey.

The Kaiser

Family

Foundation

and Health

Research

and

Educational

Trust;

State-Level

Trends in

Employer-

Sponsored

Health

Insurance,

April 2013.

State Health

Access Data

Assistance

Center and

Robert

Wood

Johnson

Foundation

Fewer

employees

than typical

physician

practice panel

size

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The Keys to Managing Risk

• How Do Small Employers Manage Self-Insurance Risk?

– They know who their employees are and can estimate spending

– They start with what they spent last year and try to control growth

– They have reserves to cover year-to-year variation

– They purchase stop-loss insurance to cover unusually expensive cases

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The Keys to Managing Risk

• How Do Small Employers Manage Self-Insurance Risk?

– They know who their employees are and can estimate spending

– They start with what they spent last year and try to control growth

– They have reserves to cover year-to-year variation

– They purchase stop-loss insurance to cover unusually expensive cases

• How Would Physician Practices & Hospitals Manage Risk?

– They need to know who their patients are in order to project spending

– They need to start with last year’s payments and control growth

– They need some reserves to cover year-to-year variation

– They need to purchase stop-loss insurance to cover unusually

expensive cases

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Building the Capabilities to Manage

Accountable Payment Models

CAPABILITY BARRIER SOLUTIONS

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Building the Capabilities to Manage

Accountable Payment Models

CAPABILITY BARRIER SOLUTIONS1. Know who your

patients arePPO health plans don’t require patients to designate PCPs or use a consistent set of physicians or hospitals for care

Redesign care to be sufficiently patient-friendly that patients will want to have physicians/hospitals coordinate their care

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Building the Capabilities to Manage

Accountable Payment Models

CAPABILITY BARRIER SOLUTIONS1. Know who your

patients arePPO health plans don’t require patients to designate PCPs or use a consistent set of physicians or hospitals for care

Redesign care to be sufficiently patient-friendly that patients will want to have physicians/hospitals coordinate their care

2. Start with last year’s spending and control growth

Physicians and hospitals don’t have data on past spending in order to identify savings opportunities

Ask payers for their data and engage all specialties in finding ways to redesign care

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Building the Capabilities to Manage

Accountable Payment Models

CAPABILITY BARRIER SOLUTIONS1. Know who your

patients arePPO health plans don’t require patients to designate PCPs or use a consistent set of physicians or hospitals for care

Redesign care to be sufficiently patient-friendly that patients will want to have physicians/hospitals coordinate their care

2. Start with last year’s spending and control growth

Physicians and hospitals don’t have data on past spending in order to identify savings opportunities

Ask payers for their data and engage all specialties in finding ways to redesign care

3. Have reserves to cover year-to-year variation

Physician practices don’t have retained earnings

Hospitals may have reserves committed to debt

Begin setting aside revenues to build reserves

Transition to higher levels of risk over time

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Building the Capabilities to Manage

Accountable Payment Models

CAPABILITY BARRIER SOLUTIONS1. Know who your

patients arePPO health plans don’t require patients to designate PCPs or use a consistent set of physicians or hospitals for care

Redesign care to be sufficiently patient-friendly that patients will want to have physicians/hospitals coordinate their care

2. Start with last year’s spending and control growth

Physicians and hospitals don’t have data on past spending in order to identify savings opportunities

Ask payers for their data and engage all specialties in finding ways to redesign care

3. Have reserves to cover year-to-year variation

Physician practices don’t have retained earnings

Hospitals may have reserves committed to debt

Begin setting aside revenues to build reserves

Transition to higher levels of risk over time

4. Purchase stop-loss insurance to cover unusually expensivecases

None – insurancecompanies offer this and many capitated providers buy it

Factor the cost of stop-loss insurance into costs of managing care for patients

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This All Sounds Really Hard

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Can’t We Just Keep Doing

What We’re Doing Today

Until We Retire?

This All Sounds Really Hard

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The Opportunities to Reduce Costs

Without Rationing Are Widely Known

Helping Patients with Chronic

Disease Stay Out of Hospital

Reducing Hospital

Readmissions

Reducing Overutilization of

Outpatient Services

Shifting Preference-Sensitive

Care to Lower-Cost Options

Reducing the Cost of

Expensive Inpatient Care

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The Question is: How Will

Purchasers Get The Savings?

Helping Patients with Chronic

Disease Stay Out of Hospital

Reducing Hospital

Readmissions

Reducing Overutilization of

Outpatient Services

Shifting Preference-Sensitive

Care to Lower-Cost Options

Reducing the Cost of

Expensive Inpatient Care

PURCHASER

?

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The Payer-Driven Approach

to Achieving Savings (Door #1)

Helping Patients with Chronic

Disease Stay Out of Hospital

Reducing Hospital

Readmissions

Reducing Overutilization of

Outpatient Services

Shifting Preference-Sensitive

Care to Lower-Cost Options

Reducing the Cost of

Expensive Inpatient Care

PURCHASER

Physician P4P

High

Deductibles

Narrow

Networks

Prior

Authorization

Tiering on

Cost

Readmission

Penalty

Managed Fee-for-Service

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The Physician-Driven Approach

to Achieving Savings (Door #3)

Helping Patients with Chronic

Disease Stay Out of Hospital

Reducing Hospital

Readmissions

Reducing Overutilization of

Outpatient Services

Shifting Preference-Sensitive

Care to Lower-Cost Options

Reducing the Cost of

Expensive Inpatient Care

PURCHASER

Coordinated

Care/

Accountable

Care

Organization

Global Pmt/Budget

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Very Different Models…

Helping Patients with Chronic

Disease Stay Out of Hospital

Reducing Hospital

Readmissions

Reducing Overutilization of

Outpatient Services

Shifting Preference-Sensitive

Care to Lower-Cost Options

Reducing the Cost of

Expensive Inpatient Care

PURCHASER

Coordinated

Care/

Accountable

Care

Organization

Physician P4P

High

Deductibles

Narrow

Networks

Prior

Authorization

Tiering on

Cost

Readmission

Penalty

Managed Fee-for-Service Global Pmt/Budget

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…And Very Different Impacts

on Physicians and Hospitals

PURCHASERManaged Fee-for-Service

1. Payer defines how care

should be redesigned

2. Payer obtains all savings

from lower utilization

3. Payer decides how much

savings to share with

physicians, if any

1. Physicians determine how

care should be redesigned

2. Physicians/Hospital

and Purchaser/Payer

agree on adequate price

for quality care and amount

of savings for payer

3. Physicians get to keep any

additional savings and to

determine how to divide it

Global Pmt/Budget

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Six Steps You Can Take Now

Toward a Physician-Led Future1. Tell the ACC Leadership that developing and implementing

accountable payment models should be a priority for the College.

2. Call your Congressmen/Senators and tell them that you and other physicians will take responsibility for controlling healthcare costs, but you need appropriate Medicare payment models that support them, not more P4P programs.

3. Meet with the major employers in your community and tell them you will help them control cardiac care costs for their employees if they will create better payment systems for physicians and better benefit designs for their employees.

4. Analyze your own data and data from employers to identify opportunities for reducing utilization and costs and develop the business case for changes in delivery and payment.

5. Meet with the finance staff from your hospital and the testing facilities in the community to determine the true costs of delivering tests and procedures at lower volumes.

6. Meet with physicians from other specialties to develop the business plan for a true, physician-led ACO that can deliver high-quality, coordinated, efficient care to patients.

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Learn More About Win-Win-Win

Payment and Delivery Reform

Center for Healthcare Quality and Payment Reformwww.PaymentReform.org

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Today’s Slides:

Harold D. MillerPresident and CEO

Center for Healthcare Quality and Payment Reform

[email protected]

(412) 803-3650

www.CHQPR.org

www.PaymentReform.org

www.chqpr.org/downloads/Miller-CVSummit2014.pdf

or look in “What’s New” at www.paymentreform.org

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186© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

APPENDICES

• Patient Role and Accountability

• How Condition-Based Payment Would Work for

Chronic Disease Management

• Protecting Against Inappropriate Risk in a Multi-Year Contract

• Why Shared Savings Isn’t Effective Payment Reform

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APPENDIX

Patient Role and Accountability

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What’s the Patient’s

Role and Accountability?

ProviderPatient

Payment

System

Ability and

Incentives to:

• Keep patients well

• Avoid unneeded services

• Deliver services efficiently

• Coordinate services with other

providers

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Benefit Design Changes Are

Also Critical to Success

ProviderPatient

Payment

System

Benefit

Design

Ability and

Incentives to:

• Keep patients well

• Avoid unneeded services

• Deliver services efficiently

• Coordinate services with other

providers

Ability and

Incentives to:

• Improve health

• Take prescribed medications

• Allow a provider to coordinate care

• Choose the highest-value providers and

services

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Barriers In Current

Benefit Designs

• Co-pays, co-insurance, and high deductibles discourage or

prevent patients from using primary care, preventive

treatments, and chronic disease maintenance medications

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Example: Coordinating

Pharmacy & Medical Benefits

Hospital

Costs

Physician

Costs

Other

Services

Medical Benefits

Drug

Costs

Pharmacy Benefits

Single-minded focus on

reducing costs here...

...could result in higher

spending on hospitalizations

• High copays for brand-names

when no generic exists

• Doughnut holes & deductibles

Principal treatment for mostchronic diseases involves regular use

of maintenance medication

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Barriers In Current

Benefit Designs

• Co-pays, co-insurance, and high deductibles discourage or

prevent patients from using primary care, preventive

treatments, and chronic disease maintenance medications

• Co-pays, co-insurance, and high deductibles provide little or

no incentive for patients to choose the highest-value providers

for expensive services

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APPENDIX

How Condition-Based Payment

Would Work for

Chronic Disease Management

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Reducing Avoidable

Hospital Admissions for CHFTODAY

$/Patient # Pts Total $

Physician Svcs

Office Visits $70 2000 $140,000

Hospital Pmt

Admissions $10,000 250 $2,500,000

Total Pmt/Cost $5,280 500 $2,640,000

PreventableAdmissions forChronic Disease

Patients• 500 moderately severe

congestive heart failure patients

• Physician practicesees the patients in theoffice 4 times per year

• ½ of the patients are admitted to the hospitalduring the year for anexacerbation

• Payer is spending over$5000 per patient on physician visitsand hospital admissions

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Most of the Money Today

Is NOT Going to the PhysicianTODAY

$/Patient # Pts Total $

Physician Svcs

Office Visits $70 2000 $140,000

Hospital Pmt

Admissions $10,000 250 $2,500,000

Total Pmt/Cost $5,280 500 $2,640,000

Physician Payment is

5% of Total Spending

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Pay Physician Practices Differently

TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Admissions $10,000 250 $2,500,000

Total Pmt/Cost $5,280 500 $2,640,000

Better Payment for Chronic Disease Management• Physician paid adequately to support in-depth visits with patients• Physician paid to respond to patient calls when problems arise• Practice has a nurse care manager available to do patient

education and make home visits to high-risk patients

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Can We Afford to Double Payment

to Physicians for These Patients?TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Admissions $10,000 250 $2,500,000

Total Pmt/Cost $5,280 500 $2,640,000

Better Payment for Chronic Disease Management• Physician paid adequately to support in-depth visits with patients• Physician paid to respond to patient calls when problems arise• Practice has a nurse care manager available to do patient

education and make home visits to high-risk patients

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Yes, IF It Successfully

Prevents Hospital AdmissionsTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Admissions $10,000 250 $2,500,000 $10,000 175 $1,175,000 -30%

Total Pmt/Cost $5,280 500 $2,640,000 $2,910 500 $1,455,000 -45%

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Cover the Hospital’s Costs and

Increase Margin at Lower RevenueTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%

Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%

Margin $300 3% $75,000 $82,500 +10%

Subtotal $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Pmt/Cost $5,280 500 $2,640,000 500

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And the Payer Still Saves Money

(Just Not As Much)TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%

Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%

Margin $300 3% $75,000 $82,500 +10%

Subtotal $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Pmt/Cost $5,280 500 $2,640,000 $2,510,000 -5%

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I.e., Win-Win-Win for

Physician, Hospital, and PayerTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%

Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%

Margin $300 3% $75,000 $82,500 +10%

Subtotal $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Pmt/Cost $5,280 500 $2,640,000 500 $2,510,000 -5%

Physician Wins

Payer Wins

Hospital Wins

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Instead of Trying to Negotiate

Many Changes in FFS Payments…TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%

Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%

Margin $300 3% $75,000 $82,500 +10%

Subtotal $10,000 250 $2,500,000 $12,743 175 $2,230,000 -11%

Total Pmt/Cost $5,280 500 $2,640,000 $5,020 500 $2,510,000 -5%

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…Take a Condition-Based Payment

Lower Than Current SpendingTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%

Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%

Margin $300 3% $75,000 $82,500 +10%

Subtotal $10,000 250 $2,500,000 $12,743 175 $2,230,000 -11%

Total Pmt/Cost $5,280 500 $2,640,000 $5,020 500 $2,510,000 -5%

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Then Physicians and Hospitals

Divide the Payment To Cover CostTODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs

Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%

Phone Calls $50 2000 $100,000

RN Care Mgr $80,000

Subtotal $140,000 $280,000 +100%

Hospital Pmt

Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%

Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%

Margin $300 3% $75,000 $82,500 +10%

Subtotal $10,000 250 $2,500,000 $12,743 175 $2,230,000 -11%

Total Pmt/Cost $5,280 500 $2,640,000 $5,020 500 $2,510,000 -5%

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APPENDIX

Protecting AgainstInappropriate Risk

in a Multi-Year Contract

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206© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

To Set A Fair Price,

Start With Existing Costs…

COST

TIME

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

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…Set a Payment Level That Is

≤ Expected Costs…

COST

TIME

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Bundled

or

Episode

Payment

Level Exp.

Costs

in

FFS

$

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208© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

…If All Goes Well, Costs Will Be

Lower Than the Payment Level…

COST

TIME

Costs

in

New

Pmt

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Bundled

or

Episode

Payment

Level

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209© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

...And Both the Purchaser and

Provider Will “Win”

COST

TIME

Costs

in

New

Pmt

$$$$$$

Bonus for

Provider

Savings

For Purchaser

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Bundled

or

Episode

Payment

Level

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What Everybody Fears:

All Won’t Go Well (Costs Go Up)

COST

TIME

Costs

in

New

Pmt

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Bundled

or

Episode

Payment

Level

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Many Different Reasons Costs

May Increase Beyond Payment

COST

TIME

Costs

in

New

Pmt

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Excess

Cost

UnusuallyCostly Patient

Overutilizationof Services

New, High-CostTreatment

Many Avoidable Complications

Higher-SeverityPatients

Large RandomVariation

Failure to FollowGuidelines

Bundled

or

Episode

Payment

Level

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Providers Should NOT Be

Expected To Take Insurance Risk

COST

TIME

Costs

in

New

Pmt

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Excess

Cost

UnusuallyCostly Patient

Overutilizationof Services

New, High-CostTreatment

Many Avoidable Complications

Higher-SeverityPatients

Large RandomVariation

Failure to FollowGuidelines

Provider

Performance

Risk

Insurance

Risk

Bundled

or

Episode

Payment

Level

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Four Mechanisms for Separating

Insurance and Performance Risk

COST

TIME

Costs

in

New

Pmt

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Bundled

or

Episode

Payment

Level

Excess

Cost

UnusuallyCostly Patient

Overutilizationof Services

New, High-CostTreatment

Many Avoidable Complications

Higher-SeverityPatients

SeverityAdjustment

Large RandomVariation

Failure to FollowGuidelines

Outlier Pmt/Stop-Loss

Risk Exclusions

RiskCorridors

PerformanceRisk

(Provider’sResponsibility)

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APPENDIX

Why Shared Savings

Isn’t Effective Payment Reform

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Would “Shared Savings”

Achieve Win-Win-Win Results

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Same Example As Before…

Year 0

Physician Svcs

Evaluations $45,000

Procedures $170,000

Subtotal $215,000

Hospital Pmt

Procedures $2,200,000

Subtotal $2,200,000

Total Pmt/Cost $2,415,000

Savings

# Patients $/Patient

300 $150

200 $850

200 $11,000

Optional Procedurefor a Condition

• Physician evaluates allpatients

• Physician performsprocedure on 2/3 ofevaluated patients

• Up to 10% of proceduresmay be avoidablethrough patient choiceor alternative treatment

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Year 1: Physicians & Hospitals Both

Lose With Fewer Procedures)Year 0 Year 1 Chg

Physician Svcs

Evaluations $45,000 $45,000

Procedures $170,000 $153,000

$0

Subtotal $215,000 $198,000 -8%

Hospital Pmt

Procedures $2,200,000 $1,980,000

Subtotal $2,200,000 $1,980,000 -10%

Total Pmt/Cost $2,415,000 $2,178,000 -10%

Savings $237,000

ReduceProcs

by 10%

Year 1:Lower

Revenuefor

Docs &Hospital

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Year 2: Losses Are Lower If Shared

Savings Are Paid…(No)Year 0 Year 1 Chg Year 2 Chg

Physician Svcs

Evaluations $45,000 $45,000 $45,000

Procedures $170,000 $153,000 $153,000

Shared Savings $0 $17,000

Subtotal $215,000 $198,000 -8% $215,000 -0%

Hospital Pmt

Procedures $2,200,000 $1,980,000 $1,980,000

Shared Savings $0 $101,500

Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -6%

Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5%

Savings $237,000 $118,500

ReduceProcs

by 10%

Year 1:Lower

Revenuefor

Docs &Hospital

Year 2:SharedSavingsOffsetsSome

Losses

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…But Physicians and Hospitals Still

Have Net 2-Year LossesYear 0 Year 1 Chg Year 2 Chg Cumulative

Physician Svcs

Evaluations $45,000 $45,000 $45,000

Procedures $170,000 $153,000 $153,000

Shared Savings $0 $17,000

Subtotal $215,000 $198,000 -8% $215,000 -0% -$17,000

-4%

Hospital Pmt

Procedures $2,200,000 $1,980,000 $1,980,000

Shared Savings $0 $101,500

Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -5% -$338,500

-8%

Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% $355,500

Savings $237,000 $118,500 -7%

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Physician Unlikely to Get Shared

Savings If Hospital is First in LineYear 0 Year 1 Chg Year 2 Chg Cumulative

Physician Svcs

Evaluations $45,000 $45,000 $45,000

Procedures $170,000 $153,000 $153,000

Shared Savings $0 $0

Subtotal $215,000 $198,000 -8% $198,000 -8% -$34,000

-8%

Hospital Pmt

Procedures $2,200,000 $1,980,000 $1,980,000

Shared Savings $0 $118,500

Subtotal $2,200,000 $1,980,000 -10% $2,098,500 -5% -$321,500

-7%

Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% $355,500

Savings $237,000 $118,500 -7%

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It’s Even Worse Than That…

• There is no shared savings payment at all if a minimum total savings level is not reached– If other physicians increase spending, it may offset savings you

achieve, leaving nothing to be shared with physicians or hospital

• If there is a shared savings payment, it’s reduced if quality thresholds aren’t met, even if the quality measures have nothing to do with where savings occurred

• The shared savings payment ends at the end of the 3-year contract period, even if utilization remains lower, and the payer keeps 100% of the savings in future years

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So Why Do Payers Like The

Shared Savings Model So Much??

It’s easy for them to implement:

• No changes in underlying fee for service payment and no

costs to change claims payment system

• Additional payments only made if savings are achieved

• The payer sets the rules as to how “savings” are calculated

• Shared savings payments are made well after savings are

achieved, helping the payers’ cash flow

• All of the savings goes back to the payer after the end of the

shared savings contract