WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE · Consumers Chose Expensive Cars Consumer Share of Car...

WIN-WIN-WIN APPROACHESTO ACCOUNTABLE CARE

How Providers, Hospitals, Employers, and Patients

Can All Benefit fromHealthcare Payment and Delivery Reform

Harold D. MillerPresident and CEO

Center for Healthcare Quality and Payment Reform

www.CHQPR.org

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

In Another Country,

Passage of Landmark Legislation

ACA

Affordable Car Act

Goal:

Every citizen should have affordable transportation

Method for Achieving the Goal:

Give all citizens insurance that would cover the cost

of new automobiles and repairs when needed


How to Control Spending on Cars

If Insurance Is Paying?


To Control Spending, Payers Set

Separate Fees for Each Car Part

HCPCS Codes(Hierarchical

Car PartsCompensation

System)


Auto Workers Were Paid Based

On How Many Parts They Installed

HCPCS Codes(Hierarchical

Car PartsCompensation

System)AMA

Automobile ManufacturingAssociation

CPT System(Car Parts Tokens)


The Result for Drivers?

Cars had many unnecessary parts

Cars were readmitted to the factory20% of the time to correct malfunctions

This occurred despite requirements for accreditation of factories by

the Joint Commission on Auto Creationand certification of auto workers by

the National Committee on Quality Autos


Spending on Cars Grew Rapidly


What to Do?


More Parts Were Used

Factories Mergedto Resist Fee Cuts

$

$ $

What to Do?

Cut Fees for Parts & Assembly

Cut Fees forParts & Assembly


What to Do?

Pay for Bundles Instead of Parts

Driving Related Groups (DRGs)


Cost Per Bundle Declined, But

More Expensive Bundles Used

Consumers were given

bundles they didn’t need

Small Engines Bigger Engines Really Big Engines


What to Do?

Consumer-Directed Car Payment

Consumer Share

of Car Price

$1,000 Copayment

10% Coinsurance

w/$2,000 OOP Max

$5,000 Deductible


Since Total Price Didn’t Matter,

Consumers Chose Expensive Cars

Consumer Share

of Car Price

Price

$18,000

Price

$320,000

$1,000 Copayment $1,000 $1,000

10% Coinsurance

w/$2,000 OOP Max

$2,000 $2,000

$5,000 Deductible $5,000 $5,000


High Cost-Sharing Also Applied to

Preventive Maintenance…

Consumer Share

of Car Maintenance

Preventive

Maintenance

Cost Sharing Co-payment

High Deductible Full Cost


…Resulting in Deferred

Maintenance & Expensive Repairs

Consumer Share

of Car Maintenance

Preventive

Maintenance

Deferred

Maintenance

Cost Sharing Co-payment Co-insurance

High Deductible Full Cost No More Than

Out-of-Pocket

Limit


What to Do?

“Shared Savings” ProgramsSTEP 1

Continue Paying Factories & Workers Based on Parts

0-50% of Difference in Cost of PartsCompared toOther CarsIf Minimum

SavingsThreshold

and QualityTargets

Were Met

+

STEP 2Compare Cost of Parts

and Award Shared Savings

# of Partsx

Cost of Parts

# of Partsx

Cost of Parts

<

RESULT

• Some factories reduced parts but not enough to get shared savings

• Some factories spent more to meet quality targets than they received in shared savings

• Some factories left out parts where there were no quality measures

• Most factories and workers lost money and went back to business as usual

Was There a Better Way?


Pay for Complete Cars With

Warranties, Not Parts & Repairs


Have People Pay the Last Dollar,

Not the First Dollar for Cost-Share

Consumer Share

of Car Price

Price

$18,000

Price

$320,000

$1,000 Copayment: $1,000 $1,000

10% Coinsurance

w/$2,000 OOP Max:

$2,000 $2,000

$5,000 Deductible: $5,000 $5,000

Highest-Value: $1,000 $303,000


Design Cost Sharing to Encourage

Preventive Maintenance

Consumer Share

of Maintenance

Preventive

Maintenance

Deferred

Maintenance

Value-Based

Cost SharingNo or Low Copay Co-insurance

High Deductible


Pay for What Consumers Need:

Transportation, Not (Just) Cars

Allow the flexibility to deliver services

that best meet the individual’s needs

with accountability for controlling costs

$


In the U.S.,

A Historic Legislative Success

ACA

Affordable Care Act

Goal:

Every citizen should have affordable healthcare

Method for Achieving the Goal:

Give all citizens insurance that would cover the cost

of healthcare services when needed


How to Control Spending on Care

When Insurance Is Paying?




Pay for Parts?




Pay for Parts? Pay for Outcomes?


Diabetes:

A Quarter-Trillion Dollar Problem

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Bad Outcomes &High Spending

$176 Billion in

Healthcare Spending

$69 Billion in

Reduced Productivity

$245 Billion

Total Cost

Source:

“Economic Costs of Diabetes

in the U.S. in 2012,”

Diabetes Care (Volume 36)

April 2013


What’s America’s Strategy for

Reducing Cost, Improving Quality?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


$176 Billion in

Healthcare Spending

$69 Billion in


$245 Billion

Total Cost

?


Occasional 15 Minute Visits With

Overworked PCPs to Order Meds

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


$176 Billion in

Healthcare Spending

$69 Billion in


$245 Billion

Total Cost

PCP15 MinuteOffice Visit

$73/visit

Medications


With Limited Time & Resources,

Is It Surprising Quality is Low?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity



$73/visit

MedicationsBlood Sugar

Cholesterol

Blood Pressure

Tobacco Use

Aspirin Use

Eye Exams

Kidney Exams

Quality Metrics

D5

<40%

Source: Average

D5 Composite Measures in

Cincinnati and Minnesota


Why Don’t PCPs

Do a Better Job?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity



$73/visit

MedicationsBlood Sugar

Cholesterol

Blood Pressure

Tobacco Use

Aspirin Use

Eye Exams

Kidney Exams

Quality Metrics

D5

<40%

Source: Average

D5 Composite Measures in

Cincinnati and Minnesota


More Time With Patients =

Lower Revenues to PCP Practice

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity

15 MinuteOffice Visit

PCP

LongerOffice Visit

Medications

20 minutes per patient

@ $73 Level 3 E&M=

25% Less Revenue

25 minutes per patient

@ $108 Level 4 E&M=

11% Less Revenue



Proactive Outreach to Patients

to Improve Quality?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice VisitPhone Call

or Email

Medications

$0 Payment



Group Visits to Deliver Care

at Lower Cost?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice VisitPhone Call

or Email

Group Visit

Medications

$0 Payment



Hire a Nurse/Diabetes Educator

to Help Patients Manage Health?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit

Nurse orDiabetesEducator

Phone Callor Email

Group Visit

Medications

$0 Payment



Call an Endocrinologist to Help

With Complex Patients?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

Medications

$0 Payment



No Payment for Coordination of

PCPs and Specialists

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

Endocrinologist

Call w/ PCP

Medications

$0 Payment

$0 Payment



Payers Do Pay for Office Visits

with Endocrinologists….

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

Endocrinologist

Call w/ PCP

30-45 Min.Office Visit $108-166


Medications


Long Waits Due to Many Visits for

Issues That Needed Only a Call…

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist


Endocrinologist

Call w/ PCP


Medications

3-9 Month

Wait for Visit


…And the Extra Copay May Deter

the Patient From Making the Visit

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

3-9 Month

Wait for Visit

ExtraPatientCopay


Endocrinologist

Call w/ PCP


Medications


If Patients Can’t Afford Meds,

All the Rest May Be in Vain

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

MedicationsLow Copay

High CopayHigh Cost-Share


Endocrinologist

Call w/ PCP

30-45 Min.Office Visit


We Don’t Pay for All the Right Parts,

And We Pay A Lot for the Repairs

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist


High CopayHigh Cost-Share


Endocrinologist

Call w/ PCP


$0 Payment

$0 Payment

$0 Payment

$0 Payment

$0 Payment

Lower Payment

HIGH

PAYMENT


So Is It Any Surprise that Quality

is Poor and Spending is High?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

Blood Sugar

Cholesterol

Blood Pressure

Tobacco Use

Aspirin Use

Eye Exams

Kidney Exams

Quality Metrics

D5

<40%



High Copay

Endocrinologist

Call w/ PCP



What Are Medicare and Private

Health Plans Doing to Fix This?

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist



High Copay

Endocrinologist

Call w/ PCP



Strategy 1:

Force PCPs to Buy an EHR

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

RequiringEHRs

• Increases expensesfor PCP practice

• Takes time away fromoffice visits with patients

• PCP EHR and endocrinologist EHR may not be able to exchange data even ifHIPAA barriers can beovercome



High Copay

Endocrinologist

Call w/ PCP



Strategy 2:

Bonuses/Penalties for Quality

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

P4P/VBP

Blood Sugar

Cholesterol

Blood Pressure

Tobacco Use

Aspirin Use

Eye Exams

Kidney Exams

Quality Metrics

• No additional resourcesto address the barrierspreventing higher quality

• Unintended consequencesof over-focus on metrics

Hospitalizations& Death Due to Overtreatment



High Copay

Endocrinologist

Call w/ PCP


$


More Admits/Deaths Today Due

to Low Blood Sugar Than High

Hypoglycemia

1 Yr Mortality: 19.9%

30 Day Readmits: 16.3%

Hyperglycemia

1 Yr Mortality: 17.1%

30 Day Readmits: 15.3%

Source: National Trends in US Hospital Admissions for Hyperglycemia and HypoglycemiaAmong Medicare Beneficiaries, 1999 to 2011 JAMA Internal Medicine May 17, 2014


Strategy 3:

“Shared Savings”

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

Non-DiabetesSpendingShared

Savings

• No additional upfrontresources to address the barriers preventing higher quality care

• Puts physicians at riskfor services and costs they cannot control


High Copay

Endocrinologist

Call w/ PCP


$ $


Strategy 4:

Patient-Centered Medical Home

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

PCMH/PMPM

• Monthly payment may beto small or inflexible toovercome service barriers

• No support for specialists

• Quality improvement orshared savings requirements may beunreasonable given sizeof monthly payment


(Small)MonthlyPayment

PerPatient


High Copay

Endocrinologist

Call w/ PCP



A Better Way:

Condition-Based Payment

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist

Diabetes-RelatedCosts


Endocrinologist

Call w/ PCP


Quality of Life

Low Cost of Care

Productivity

CONDITION-BASED

PAYMENT


Flexibility to Deliver Care

Without Restrictions of FFS

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist



Endocrinologist

Call w/ PCP


Quality of Life

Low Cost of Care

Productivity

FLEXIBILITY

ABOUT

WHICH

SERVICES

TO

DELIVER

TO

HELP

PATIENTS

STAY

WELL

CONDITION-BASED

PAYMENT


Accountability to Ensure

Outcomes and Costs Improve

Patient with

Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity


PCP

LongerOffice Visit


Phone Callor Email

Group Visit

Call toSpecialist



Endocrinologist

Call w/ PCP


Quality of Life

Low Cost of Care

Productivity

FLEXIBILITY

ABOUT

WHICH

SERVICES

TO

DELIVER

TO

HELP

PATIENTS

STAY

WELL

ACCOUNTABILITY

FOR

MANAGING

AVOIDABLE

COSTS

RELATED TO

DIABETES

AND IMPROVING

OUTCOMES

CONDITION-BASED

PAYMENT

Can We Afford to Pay More

for High-Quality, Coordinated Care

When We’re Trying

to Reduce Healthcare Spending?


Most of the Money Today is

Going to Hospitals, Not Doctors

Source:

“Economic

Costs of

Diabetes

in the U.S.

in 2012,”

Diabetes

Care

(Volume 36)

April 2013

HospitalAdmissions

(43%)

Physicians (9%)


Could We Afford to Spend 20%

More on Better Care Management?

HospitalAdmits

Physicians +20%


A Small Reduction in Expensive

Complications Saves A Lot of $$$

HospitalAdmits

Physicians +20%

-6%


20% More $ on Care Mgt +

6% Fewer Admits = Lower Total $

HospitalAdmits

Physicians +20%

-6%

-1%


Upfront Investment Is Needed,

Targeted by Docs to Achieve Impact

HospitalAdmits

Physicians +20%

-6%

-1%


Today: Reactive Care for Chronic

Disease, Many HospitalizationsCURRENT

$/Patient # Pts Total $

Physician Svcs

PCP $600 500 $300,000

Hospitalizations

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

Specialist $400 250 $100,000

Total Spending 500 $2,900,000

500 ModeratelySevere Chronic

Disease Patients• PCP paid only for

periodic office visits

• Patients do not takemaintenance medicationsreliably

• 50% of patients are hospitalized each yearfor exacerbations

• Specialist only sees patient duringhospital admissions


Is There a Better Way?

CURRENT FUTURE

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

Physician Svcs ? ?

PCP $600 500 $300,000 ? ?

Hospitalizations ? ?

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

Specialist $400 250 $100,000 ? ?

Total Spending 500 $2,900,000 ? ?


Pay the PCP for

Proactive Care ManagementCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Hospitalizations

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

Specialist $400 250 $100,000



Pay the Specialist to Co-Manage

The Patient’s CareCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

Hospitalizations

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

Specialist (Inpt) $400 250 $100,000 $0



Provide Nursing Support

For Patient Education & Care MgtCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Hospitalizations

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

Specialist (Inpt) $400 250 $100,000 $0



Can We Afford to Double Spending

on Ambulatory Care?CURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Specialist (Inpt) $400 250 $100,000 $0



Yes, If It Succeeds In

Reducing HospitalizationsCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

Admissions $10,000 250 $2,500,000 $10,000 215 $2,150,000 -14%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending 500 $2,900,000 500 $2,830,000 -2.5%


Improved Chronic Disease Mgt Can

Potentially Generate Large SavingsCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000 -40%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending 500 $2,900,000 500 $2,180,000 -25%


But What About the Hospital?

CURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000 -40%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending 500 $2,900,000 500 $2,180,000 -25%


What Should Matter to Hospitals is

Margin, Not Revenues (Volume)


Hospital Costs Are Not

Proportional to Utilization

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

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99

100

$0

00

#Patients

Cost & Revenue Changes With Fewer Patients

.

Costs

20% reduction in volume

7% reduction

in cost


Reductions in Utilization Reduce

Revenues More Than Costs

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

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$0

00

#Patients


Revenues

Costs

20% reduction in volume

7% reduction

in cost

20% reduction

in revenue


Causing Negative Margins

for Hospitals

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

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100

$0

00

#Patients


Revenues

Costs

Payers Will Be

Underpaying For

Care If

Admissions,

Readmissions, Etc.

Are Reduced


But Spending Can Be Reduced

Without Bankrupting Hospitals

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

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$0

00

#Patients


Revenues

Costs

Payers Can

Still Save $

Without Causing

Negative Margins

for Hospital


How Can 40% Fewer Admissions

Be a Win for the Hospital?CURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000 -40%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending 500 $2,900,000 500 $2,180,000 -25%


Analyze the Hospital’s

Cost StructureCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

Hospital Fixed $6,000 60% $1,500,000

Hosp. Variable $3,700 37% $925,000

Hosp. Margin $300 3% $75,000

Total $10,000 250 $2,500,000

Specialist (Inpt) $400 250 $100,000



What Happens to Hospital Finances

When Admissions Go Down?CURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

Hospital Fixed $6,000 60% $1,500,000

Hosp. Variable $3,700 37% $925,000

Hosp. Margin $300 3% $75,000

Total $10,000 250 $2,500,000 150

Specialist (Inpt) $400 250 $100,000 $0



Continue to Cover the Fixed Costs

CURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000

Hosp. Margin $300 3% $75,000

Total $10,000 250 $2,500,000 150

Specialist (Inpt) $400 250 $100,000 $0



Save on Variable Costs

With Fewer PatientsCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $3,700 $555,000 -40%

Hosp. Margin $300 3% $75,000

Total $10,000 250 $2,500,000 150

Specialist (Inpt) $400 250 $100,000 $0



Increase the Hospital’s

Contribution MarginCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $10,000 250 $2,500,000 150

Specialist (Inpt) $400 250 $100,000 $0



Hospital Gets Less Total Revenue,

But is Better Off FinanciallyCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $10,000 250 $2,500,000 150 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0



And the Payer Still Spends Less

CURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $10,000 250 $2,500,000 150 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending 500 $2,900,000 500 $2,817,500 -3%


Win-Win-Win: Better Care, Higher

Physician Pay, Lower SpendingCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $10,000 250 $2,500,000 150 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending 500 $2,900,000 500 $2,817,500 -3%

Payer Wins

Hospital Wins

Providers Win


What Payment Model Supports This

Win-Win-Win Approach?CURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $10,000 250 $2,500,000 150 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending 500 $2,900,000 500 $2,817,500 -3%


You Don’t Want to Try and

Renegotiate Individual FeesCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $10,000 250 $2,500,000 $14,250 150 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending 500 $2,900,000 500 $2,817,500 -3%


Look at What is Being Spent Today

in Total on the Patient’s ConditionCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total 250 $2,500,000 150 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending $5,800 500 $2,900,000 500 $2,817,500 -3%


Tell the Payer You’ll Do It For Less

Than They’re Spending TodayCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total 250 $2,500,000 150 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%


Use That Budget to Pay Doctors &

Hospitals What They Really NeedCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 500 $450,000 +50%

Specialist 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $2,500,000 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%


Condition-Based Payment Puts the

Providers in Charge of Care & PmtCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 500 $450,000 +50%

Specialist 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $2,500,000 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%


“Shared Savings” Doesn’t Solve

the Problems with FFS

• No actual change in payment to the physicians– No funding for the nurse

– No payment for phone calls instead of office visits

– No flexibility to proactive outreach instead of reactive care

• Arbitrary “share” of savings may not be sufficient to cover higher costs of care or losses from FFS revenue

– <50% of savings is not adequate if >50% of costs are fixed


Condition-Based Payment Allows

A Win-Win-Win SolutionCURRENT FUTURE


Physician Svcs

PCP $600 500 $300,000 $900 500 $450,000 +50%

Specialist $300 500 $150,000 +50%

RN Care Mgr $80,000

Total $300,000 500 $680,000 127%

Hospitalizations

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

Hosp. Variable $3,700 37% $925,000 $555,000 -40%

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

Total $10,000 250 $2,500,000 150 $2,137,500 -15%

Specialist (Inpt) $400 250 $100,000 $0

Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%

Providers Win

Payer Wins

Hospital Wins

What About Proceduralists?


Example: Reducing

Avoidable ProceduresTODAY

$/Patient # Pts Total $

Physician Svcs

Evaluations $100 300 $30,000

Procedures $600 200 $120,000

Subtotal $150,000

Hospital Pmt $7,000 200 $1,400,000

Total Pmt/Cost $1,550,000

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


Under FFS, Fewer Procedures=>

Losses for Physicians and HospitalsTODAY w/ UTILIZATION CTRL

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

Physician Svcs

Evaluations $100 300 $30,000 $100 300 $30,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $138,000 -8%

Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,398,000 -10%


Is There a Better Way?

TODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 ? ? ?

Procedures $600 200 $120,000 ? ? ?

Subtotal $150,000 ?

? ? ?

Hospital Pmt $7,000 200 $1,400,000 ? ? ?

Total Pmt/Cost $1,550,000 ? ? ?


Pay Physicians to Manage

Patient Care, Not to Do ProceduresTODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,413,000 -9%

Better Payment for Condition Management• Physician paid adequately to engage in

shared decision making process with patients and given the decision support tools to ensure quality


Physicians Could Be Paid More

While Still Reducing Total $TODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,413,000 -9%


What About the Hospital?

TODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,413,000 -9%


To Create a Win for the Hospital,

Determine the Cost StructureTODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000

Variable Costs $3,150 45% $630,000

Margin $350 5% $70,000

Subtotal $7,000 200 $1,400,000 180



Preserve Revenues Needed

for Fixed Costs…TODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000 $700,000 -0%

Variable Costs $3,150 45% $630,000

Margin $350 5% $70,000

Subtotal $7,000 200 $1,400,000 180



…Save on Variable Costs With

Fewer Procedures…TODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000 $700,000 -0%

Variable Costs $3,150 45% $630,000 $567,000 -10%

Margin $350 5% $70,000

Subtotal $7,000 200 $1,400,000 180



…Improve Contribution Margin…

TODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000 $700,000 -0%

Variable Costs $3,150 45% $630,000 $567,000 -10%

Margin $350 5% $70,000 $71,400 +2%

Subtotal $7,000 200 $1,400,000 180



…And The Payer

Still Saves MoneyTODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000 $700,000 -0%

Variable Costs $3,150 45% $630,000 $567,000 -10%

Margin $350 5% $70,000 $71,400 +2%

Subtotal $7,000 200 $1,400,000 180 $1,338,400 -4%

Total Pmt/Cost $1,550,000 $1,491,400 -4%


I.e., Win-Win-Win for

Physician, Hospital, and PayerTODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000

Procedures $600 200 $120,000 $600 180 $108,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000 $700,000 -0%

Variable Costs $3,150 45% $630,000 $567,000 -10%

Margin $350 5% $70,000 $71,400 +2%

Subtotal $7,000 200 $1,400,000 180 $1,338,400 -4%

Total Pmt/Cost $1,550,000 $1,491,400 -4%

Physician Wins

Payer Wins

Hospital Wins


Pay Based on the Patient’s

Condition, Not on the ProcedureTODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000

Procedures $600 200 $120,000

Subtotal $150,000

Hospital Pmt

Fixed Costs $3,500 50% $700,000

Variable Costs $3,150 45% $630,000

Margin $350 5% $70,000

Subtotal $7,000 200 $1,400,000

Total Pmt/Cost $5,167 300 $1,550,000


Plan to Offer Care of the Condition

at a Lower Cost Per PatientTODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000

Procedures $600 200 $120,000

Subtotal $150,000

Hospital Pmt

Fixed Costs $3,500 50% $700,000

Variable Costs $3,150 45% $630,000

Margin $350 5% $70,000

Subtotal $7,000 200 $1,400,000

Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%


Use the Payment as a Budget to

Redesign Care…TODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000

Procedures $600 200 $120,000

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000

Variable Costs $3,150 45% $630,000

Margin $350 5% $70,000

Subtotal $7,000 200 $1,400,000 $1,338,400 -4%

Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%


…And Let the Health System

Decide How It Should Be PaidTODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000 +50%

Procedures $600 200 $120,000 $600 180 $108,000 -10%

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000 $700,000 -0%

Variable Costs $3,150 45% $630,000 $567,000 -10%

Margin $350 5% $70,000 $71,400 +2%

Subtotal $7,000 200 $1,400,000 $1,338,400 -4%

Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%


Would “Shared Savings”

Achieve the Same Thing?


Same Example As Before…

Year 0

Physician Svcs

Evaluations $30,000

Procedures $120,000

Subtotal $150,000

Hospital Pmt

Procedures $1,400,000

Subtotal $1,400,000


Savings

# Patients $/Patient

300 $100

200 $600

200 $7,000

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


Year 1: Physicians & Hospitals Both

Lose With Fewer Procedures)Year 0 Year 1 Chg

Physician Svcs

Evaluations $30,000 $30,000

Procedures $120,000 $108,000

$0

Subtotal $150,000 $138,000 -8%

Hospital Pmt

Procedures $1,400,000 $1,260,000

Subtotal $1,400,000 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,398,000 -10%

Savings $152,000

ReduceProcs

by 10%

Year 1:Lower

Revenuefor

Docs &Hospital


Year 2: Losses Are Lower If Shared

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

Physician Svcs

Evaluations $30,000 $30,000 $30,000

Procedures $120,000 $108,000 $108,000

Shared Savings $0 $12,000

Subtotal $150,000 $138,000 -8% $150,000 0%

Hospital Pmt

Procedures $1,400,000 $1,260,000 $1,260,000

Shared Savings $64,000

Subtotal $1,400,000 $1,260,000 -10% $1,324,000 -5%

Total Pmt/Cost $1,550,000 $1,398,000 -10% $1,474,000 -5%

Savings $152,000 $76,000

ReduceProcs

by 10%

Year 1:Lower

Revenuefor

Docs &Hospital

Year 2:SharedSavingsOffsetsSome

Losses


…But Physicians and Hospitals Still

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

Physician Svcs

Evaluations $30,000 $30,000 $30,000

Procedures $120,000 $108,000 $108,000

Shared Savings $0 $12,000

Subtotal $150,000 $138,000 -8% $150,000 0% -$12,000

-4%

Hospital Pmt

Procedures $1,400,000 $1,260,000 $1,260,000

Shared Savings $64,000

Subtotal $1,400,000 $1,260,000 -10% $1,324,000 -5% -$216,000

-8%

Total Pmt/Cost $1,550,000 $1,398,000 -10% $1,474,000 -5% $228,000

Savings $152,000 $76,000 -7%


It’s Even Worse Than That…

• There is no shared savings payment at all if a minimum total savings level is not reached

• 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


Condition-Based Payment Defines

The Right Way to “Share Savings”TODAY TOMORROW


Physician Svcs

Evaluations $100 300 $30,000 $150 300 $45,000 +50%

Procedures $600 200 $120,000 $600 180 $108,000 -10%

Subtotal $150,000 $153,000 +2%

Hospital Pmt

Fixed Costs $3,500 50% $700,000 $700,000 -0%

Variable Costs $3,150 45% $630,000 $567,000 -10%

Margin $350 5% $70,000 $71,400 +2%

Subtotal $7,000 200 $1,400,000 $1,338,400 -4%

Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%


Savings from Shifting to Lower

Cost Procedures and Settings• Maternity Care

– Vaginal delivery instead of C-Section

– Term delivery instead of early elective delivery

– Delivery in birth center instead of hospital

• Back Pain– Less radical surgery

– Physical therapy instead of surgery

• Chest Pain– History and exam before imaging

– Lower cost imaging

– Non-invasive imaging instead of invasive imaging

– Medical management instead of invasive treatment


Higher Condition-Based Payment

For Higher-Acuity PatientsTODAY TOMORROW


Higher-Acuity

Evaluations $100 150 $15,000$741

150+16%

Procedures $600 135 $81,000 122

Fixed Costs $472,500 $472,500 0%

Variable Costs $3,150 135 $425,250 $382,725 -10%

Hosp. Margin $47,250 $48,668 +3%

Total Payment $6,940 150 $1,041,000 $6,767 150 $1,014,975 -3%

Lower-Acuity

Evaluations $100 150 $15,000$455

150$68,213 +14%

Procedures $600 75 $45,000 68

Fixed Costs $262,500 $262,500 -0%

Variable Costs $3,150 75 $236,250 $212,625 -10%

Hosp. Margin $26,250 $27,038 +3%

Total Payment $3,900 150 $585,000 $3,803 150 $570,375 -3%


Opportunities for Reducing

Spending Exist in Every Specialty

Psychiatry

OB/GYN

OrthopedicSurgery

Opportunitiesto Improve Care

and Reduce Cost

• Reduce infectionsand complications

• Use less expensivepost-acute carefollowing surgery

• Reduce ER visitsand admissions forpatients withdepression andchronic disease

• Reduce use ofelective C-sections

• Reduce earlydeliveries and use of NICU

Cardiology

• Use less invasiveand expensiveprocedures when appropriate


Fee-for-Service Creates

Barriers to Redesigning Care

Psychiatry

OB/GYN

OrthopedicSurgery


and Reduce Cost

Barriers inCurrent

Payment System






• Similar/lower payment forvaginal deliveries

• No flexibility toincrease inpatientservices to reducecomplications &post-acute care

• No payment forphone consults with PCPs

• No payment forRN care managers

Cardiology


• Payment is basedon which procedure is used,not the outcomefor the patient


There Are Win-Win-Win Solutions

Through Better Payment Systems

Psychiatry

OB/GYN

OrthopedicSurgery


and Reduce Cost

Barriers inCurrent

Payment System

Solutions viaAccountable

Payment Models






• Similar/lower payment forvaginal deliveries

• Condition-basedpaymentfor total cost ofdelivery in low-riskpregnancy

• Episode paymentfor hospital andpost-acute carecosts withwarranty

• No flexibility toincrease inpatientservices to reducecomplications &post-acute care

• Joint condition-based payment to PCP andpsychiatrist

• No payment forphone consults with PCPs

• No payment forRN care managers

Cardiology


• Condition-basedpayment coveringCABG, PCI, or medicationmanagement

• Payment is basedon which procedure is used,not the outcomefor the patient


Examples from Other Specialties

Oncology

Radiology

Gastroenterology


and Reduce Cost

Barriers inCurrent

Payment System

Solutions viaAccountable

Payment Models

• Reduce unnecessarycolonoscopies andcolon cancer

• Reduce ER/admits forinflammatory bowel d.

• Reduce ER visitsand admissions fordehydration

• Reduce anti-emeticdrug costs

• Reduce use of high-cost imaging

• Improve diagnosticspeed & accuracy

• Low payment forreading images &penalty for 2x

• Inability to changeinapprop. orders

• Global paymentfor imaging costs

• Partnership in condition-basedpayments

• Population-basedpayment for coloncancer screening

• Condition-based pmtfor IBD

• No flexibility to focusextra resources onhighest-risk patients

• No flexibility to spendmore on care mgt

• Condition-basedpayment includingnon-oncolytic Rxand ED/hospitalutilization

• No flexibility tospend more onpreventive care

• Payment based onoffice visits, notoutcomes

Neurology

• Avoid unnecessaryhospitalizations forepilepsy patients

• Reduce strokes andheart attacks after TIA

• Condition-basedpayment for epilepsy

• Episode or condition-based payment forTIA

• No flexibility tospend more onpreventive care

• No payment tocoordinate w/ cardio


You Can’t Fix Fee-for-Service

With Small Add-On Payments

FFS•No payment for services that will benefit patients

•Lower revenues from reducing avoidable costs

FFS

Shared SavingsShared Savings

FFS

P4P

FFS

PMPM


What Takes the Time/Expertise

of an Oncology Practice?

6 Months of TreatmentNewPatient

Post-Tx Follow-Up


What Generates Revenues for

an Oncology Practice?


Post-Tx Follow-Up


Mismatch Between Revenues

and Patient Care in Oncology


Post-Tx Follow-Up



Developed by Oncologists


Post-Tx Follow-Up

New

Patient

Payment TxMonth

Pmt

TxMonth

Pmt

TxMonth

Pmt

TxMonth

Pmt

TxMonth

Pmt

TxMonthPmt

Non-TxMo. $

Non-TxMo. $

Non-TxMo. $

Higher Payments

For More Complex Pts


How Does All of This

Fit Into ACOs?


Starting With The Patients..

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy


Each Patient Should Choose &

Use a Primary Care Practice…

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice


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



…With a Medical Neighborhood

to Consult With on Complex Cases

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

AccountableMedical

Home

Endocrinology,

Neurology,

Psychiatry

AccountableMedicalNeighborhood

Accountability for:


•Unnecessary Referrals

•Co-Managed Outcomes



..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,

Neurology,

Psychiatry


Accountability for:


•Unnecessary Procedures

•Infections, Complications



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




AccountableMedical

Home

Endocrinology,

Neurology,

Psychiatry


ACO

Accountable PaymentModels



Shared SavingsPayment

Primary

Care

ACO

Orthopedics OB/GYNCardiology

Shared Savings ACOs Can’t Truly

Change Care Delivery or Payment

Fee-for-ServicePayment

Expensive IT Systems

EndocrineNeurologyPsychiatry

Nurse Care Managers

Back Pain

PATIENTS

Pregnancy

Shared SavingsBonus

Diabetes

Heart

Disease


MEDICARE, MEDICAID, or EMPLOYER

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




AccountableMedical

Home

Endocrinology,

Neurology,

Psychiatry

Risk-AdjustedGlobal Payment



You Don’t Need a Big Health

System to Manage Global Payment

• 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

– North Texas Specialty Physicians, a 600 physician multi-specialty IPA in Fort

Worth, set up its own Medicare Advantage PPO plan and uses revenues from

the health plan and capitation contracts to pay its PCPs 250% of Medicare

rates and provides high quality, coordinated care to patients. www.ntsp.com

• 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

http://www.npnwa.net/

http://www.phpmcs.com/

http://www.macipa.com/


Four Things Needed

For Win-Win-Win Solutions


Four Things Needed

For Win-Win-Win Solutions1. Defining the Change in Care Delivery

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


How to Find Savings

Opportunities? Ask Physicians

“I have zero control over

utilization or studies ordered.

I don’t get paid for calling

a referring doctor and

telling him/her the imaging test

is worthless.”

Radiologist in Maine

“I do many unnecessary

colonoscopies on young men.

Give every PCP an anuscope

to allow diagnosis of bleeding

hemorrhoids in the office.”

Gastroenterologist in Maine

“I strongly suspect overutilization

of abdominal CT scans in the ER

and in the hospital; CT scans lead

to further CT scans to follow up

lung and adrenal nodules. The

hospital focuses on length of stay,

but never looks at appropriateness

of radiologic studies.”

Internist at AMA HOD Meeting

“Patients often need to be in

extended care to receive antibiotics

because Medicare doesn’t pay for

home IV therapy. Patient stays

in the hospital for 3 days to justify

a nursing home/rehab stay.”

Orthopedist at AMA HOD Meeting


Opportunities Vary

(Significantly) By RegionBad Hearts in Detroit?Bad Backs in Grand Rapids?

Michigan


Four Things Needed



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?


A Critical Element is

Shared, Trusted Data

• Healthcare Providers need to know the current utilization and

costs for their patients and the likely impact of care changes to

know whether the payment amount will cover the costs of

delivering redesigned care to the patients

• Purchasers/Payers needs to know the current utilization and

costs to know whether the proposed payment amount is a

better deal than they have today

• Both sets of data have to match in order for providers and

payers to agree on the new approach!


Four Things Needed




3. Designing a Payment System 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


Accountability Must Be Focused on

What Each Provider Can Influence

Spendingthe

PhysicianCannotControl

Spendingthe

PhysicianCan

Controlor

Influence

Healthcare

Spendin

g

e.g., PCPs can’t reduce surgical site infections

e.g., surgeons can’t prevent diabetic foot ulcers

e.g., oncologists can’t prevent cancer

e.g., PCPs can help diabetics avoid amputations

e.g., surgeons can reduce surgical site infections

e.g., oncologists can reduce complications from

drug toxicity


Four Things Needed




3. Designing a Payment System 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. Implementing the Payment and Care Delivery Changes– All payers need to change the payment system– All providers need to accept the payments and change care delivery


Designing Win-Win Approaches

Requires Collaboration & Trust

WIN-LOSE

Hospitals Physicians Post-Acute Purchasers

WIN-LOSE

WIN-WIN


One Payer Changing

Is Not Enough

Payer

Provider

Payer Payer

Patient Patient Patient

Provider is only compensated for changed practices

for the subset of patients covered by participating payers

Better

Payment &

Benefits

Current

Payment &

Benefits Current

Payment &

Benefits


All Payers Need to Change to

Enable Providers to Transform

Payer

Provider

Payer Payer


Better

Payment &

Benefits

Better

Payment

& Benefits Better

Payment

& Benefits


Payers Need to Truly Align to

Allow Focus on Better Care

Payer

Provider

Payer Payer


Better

Payment

System A

Better

Payment

System B Better

Payment

System C

Even if every payer’s system is better than it was, if they’re all different, providers will spend too much time

and money on administration rather than care improvement


State/Medicare Multi-Payer

Primary Care Demonstration

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

MedicarePrivatePayer

PrivatePayer Medicaid

PMPM PMPM

PrimaryCare

Practice

PrimaryCare

Practice

PMPM PMPM


Michigan “Multi-Payer”

Primary Care Demonstration

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

Medicare BCBSMPriorityHealthMedicaid

HigherE&M+ G-Codes

PMPMPMPM+G-Codes

PMPM

OtherPayers

$0


Differences in Payment and in

the Definitions of Payments

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

MiPCT Care Management Billing Collaborative

PrimaryCare

Practice

PrimaryCare

Practice

Problem: MiPCT participating practices are underutilizing the available billing codes for care management services. Further, the

descriptions and requirements for care management codes differ among payers.


HigherE&M+ G-Codes

PMPMPMPM+G-Codes

PMPM

OtherPayers

$0


Help for PCPs Comes With

Increased Administrative Burden

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice


HigherE&M+ G-Codes

PMPMPMPM+G-Codes

PMPM

This is Collaboration?

MiPCT Care Management Billing Collaborative

PrimaryCare

Practice

PrimaryCare

Practice

Problem: MiPCT participating practices are underutilizing the available billing codes for care management services. Further, the

descriptions and requirements for care management codes differ among payers.

OtherPayers

$0


A Neutral Facilitator is Needed

to Achieve a Common Approach

PAYER A

Payment

Definition 1

PAYER B

Payment

Definition 1

PAYER C

Payment

Definition 1

PROVIDER A

Payment

Definition 1

PROVIDER B

Payment

Definition 1

PROVIDER C

Payment

Definition 1

Neutral

Facilitator(ideally

with

trusted

data

analytics)


Example of Multi-Stakeholder

Approach to Payment Reform

EmployersWest

MichiganPaymentDesign

Workgroup

PrimaryCare

Physicians

SpecialistsUnions

HealthPlans

Alliance for Health

Michigan Institute forClinical Systems Improvement


Current Payment

for Primary Care

Payer

Payer

Payer

Office Visits forPreventive Services

Office Visits for Chronic Disease Issues

Tests & Procedures forPreventive Services

Tests & Procedures forChronic Disease Mgt

Tests & Procedures forAcute Issues

Office Visits forAcute Issues

CURRENTPAYMENT

PRIMARY CARE


Current Non-Payment

for Primary Care

Payer

Payer

Payer


Outreach Calls for Preventive Services


Proactive Care Mgt for Chronic Disease





CURRENTPAYMENT

NO PAYMENT

NO PAYMENT

PRIMARY CARE


What Is Not Paid For Is Exactly

What’s Needed to Improve Quality

Payer

Payer

Payer









CURRENTPAYMENT

NO PAYMENT

NO PAYMENT

PRIMARY CARE

Preventive Care Quality

Chronic Disease Mgt Quality


A Better Approach: Flexible

Payment Instead of E&M Payment








PROPOSEDPAYMENT

Payer

Payer

Payer

MonthlyCore

Primary Care

Services Payment

PRIMARY CARE



Size of Monthly Payment Should

Differ Based on Patient Health

No Chronic Diseaseand

No Major Risk Factors

PATIENT HEALTH ISSUES

SIZ

E O

F M

ON

TH

LY

PE

R-P

AT

IEN

T P

AY

ME

NT

One Chronic Diseaseor

Major Risk Factors

Two Chronic Diseasesor One Chronic Dis.

and Major Risk Factors

Complex andHigh-RiskPatients

Small Payment forLarge # of Patients H

igh P

aym

ent

for

Sm

all

# o

f P

atients

LargerPayment

forSubset ofPatientsNeeding

MoreProactive

Care

StillLarger

Payment for

Subset of

PatientsNeeding

EvenMore

ProactiveCare


A Better Benefit Design

For Patients

BENEFIT DESIGN

• Patient enrolls as a “member” of the primary care practice, but has no restrictions on other care

• Patient has no copays for visits related to either preventive care or chronic disease care from this practice

• Patient only pays cost-sharing for acute issues








PROPOSEDPAYMENT

Payer

Payer

Payer

MonthlyCore

Primary Care

Services Payment

PRIMARY CARE



Better Payment for the “Medical

Neighborhood” (Specialists)

SPECIALIST PMT

• Payments for telephone calls & emails for PCP consults with specialists they work with

• Sharing of the monthly core payment if the specialist is co-managing the patient with thePCP

• Transfer of monthly payment to specialist for some patients








PROPOSEDPAYMENT

Payer

Payer

Payer

MonthlyCore

Primary Care

Services Payment

PRIMARY CARE



Accountability for Spending and

Quality That PCPs Can Control

ACCOUNTABILITY

• Monthly payment would be adjusted up or down based on quality and avoidable utilization

Quality of preventive care

Quality of chronic disease care

Avoidable ER utilization

High-tech imaging

Specialty referrals








PROPOSEDPAYMENT

Payer

Payer

Payer

MonthlyCore

Primary Care

Services Payment

PRIMARY CARE



This is Different Than

Current PCMH Programs







PMPM for“Care Management”

Current PCMH Model

P4P/Shared Savings





Core Primary CareServices Payment

Performance Adjustment

NEW MODEL


It’s Also Different from Traditional

PCP Capitation Programs








Primary CareCapitation

Current PCMH Model

P4P/Shared Savings P4P

PCP CapitationNEW MODEL








P4P

It’s Better Than

Current PCMH or Capitation













Primary CareCapitation

Current PCMH Model

P4P/Shared Savings


PCP Capitation

• Most practice revenue still comes from office visits

• Fewer office visits = lower revenue, even with PMPM

• Patient still discouraged from office visits by copays

• Patients must beattributed based on claims

• No incentive for PCP practice to see patient for acute needs

• Payment is the same for patients with high needs as low needs

• Employer is paying even if patient needs few services

• Patients must enroll for all services

• PCP practice receives predictable, flexible payment for patient mgt

• Higher payment for patients withgreater needs

• Employer only pays more if patient needs or receives more services

• Patient enrollsonly for prev. & chronic care

NEW MODEL

(PARTIAL CAPITATION)


All Stakeholders Worked Together

To Develop a Win-Win Solution

NEW MODEL







EmployersWest


Workgroup

PrimaryCare

Physicians

SpecialistsUnions

HealthPlans

Alliance for Health



Will Payers Implement It?

NEW MODEL







EmployersWest


Workgroup

PrimaryCare

Physicians

SpecialistsUnions

HealthPlans

Alliance for Health


??


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


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


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


Example: No Coordination of

Pharmacy & Medical Benefits

Hospital

Costs

Physician

Costs

Other

Services

Medical Benefits

Drug

Costs

Pharmacy Benefits

Single-minded focus on

reducing costs here...

...often results 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


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


Airfare Choices

from Boston to ClevelandBoston Cleveland

?

USAirways

1-Stop

Coach

$622

United

Non-Stop

Coach

$1,107

United

Non-Stop

First Class

$1,355

Airfares for July 6-7, 2011 as of 6/26/11


What If We Paid for Travel

the Way We Pay for Healthcare?Boston Cleveland

?

Consumer Share

of Travel Cost

USAirways

1-Stop

Coach

$622

United

Non-Stop

Coach

$1,107

United

Non-Stop

First Class

$1,355



Flat Copayments:

First Class Fare WinsBoston Cleveland

?

Consumer Share

of Travel Cost

USAirways

1-Stop

Coach

$622

United

Non-Stop

Coach

$1,107

United

Non-Stop

First Class

$1,355

$100 Copayment: $100 $100 $100



Coinsurance:

First Class Fare Probably WinsBoston Cleveland

?

Consumer Share

of Travel Cost

USAirways

1-Stop

Coach

$622

United

Non-Stop

Coach

$1,107

United

Non-Stop

First Class

$1,355

$100 Copayment: $100 $100 $100

10% Coinsurance: $62 $111 $136



High Deductible:

First Class Fare WinsBoston Cleveland

?

Consumer Share

of Travel Cost

USAirways

1-Stop

Coach

$622

United

Non-Stop

Coach

$1,107

United

Non-Stop

First Class

$1,355

$100 Copayment: $100 $100 $100

10% Coinsurance: $62 $111 $136

$500 Deductible: $500 $500 $500



Price Difference:

Lowest Coach Fare WinsBoston Cleveland

?

Consumer Share

of Travel Cost

USAirways

1-Stop

Coach

$622

United

Non-Stop

Coach

$1,107

United

Non-Stop

First Class

$1,355

$100 Copayment: $100 $100 $100

10% Coinsurance: $62 $111 $136

$500 Deductible: $500 $500 $500

Lowest Coach Fare: $0 $485 $733



Where Will You Get

Your Knee Replaced?

Consumer Share

of Surgery CostPrice #1

$20,000

Price #2

$25,000

Price #3

$30,000

Knee Joint

Replacement


Where Will You Get

Your Knee Replaced?

Consumer Share


$20,000

Price #2

$25,000

Price #3

$30,000

$1,000 Copayment: $1,000 $1,000 $1,000

10% Coinsurance

w/$2,000 OOP Max:

$2,000 $2,000 $2,000

$5,000 Deductible: $5,000 $5,000 $5,000

Knee Joint

Replacement


Where Will You Get

Your Knee Replaced?

Consumer Share


$20,000

Price #2

$25,000

Price #3

$30,000

$1,000 Copayment: $1,000 $1,000 $1,000

10% Coinsurance

w/$2,000 OOP Max:

$2,000 $2,000 $2,000

$5,000 Deductible: $5,000 $5,000 $5,000

Highest-Value: $0 $5,000 $10,000

Knee Joint

Replacement


Current Transparency Efforts

Are Focused on Procedure PricePayment

for

Procedure

dded

Provider 1:

$25,000

Provider 2:

$23,000

-8%


What Hidden Costs

Accompany the Lower Price?Payment

for

Procedure

Payment and Rate

of Complications

Provider 1:

$25,000 $30,000 2%

Provider 2:

$23,000 $30,000 10%

-8%


Total Spending May Be Higher

With the “Lower Price” ProviderPayment

for

Procedure

Payment and Rate of

Complications

Average

Total

Payment

Provider 1:

$25,000 $30,000 2% $25,600

Provider 2:

$23,000 $30,000 10% $26,000

-8% +2%

Provider 2 hasa lower starting price,but is more expensive

when lower qualityis factored in


Bundled/Warrantied Pmts Allow

Comparing Apples to ApplesPayment

for

Procedure

Payment and Rate of

Complications

Bundled/

Episode

Payment

Provider 1:

2% $25,600

Provider 2:

10% $26,000

+2%

Bundled pricesshow that

Provider 1 is thehigher-value

provider


Why Is It So Much Cheaper to Fly

to Pittsburgh Than Cleveland?Boston Cleveland

?

Boston Pittsburgh

?

Non-Stop Coach Fare: $1,107

Non-Stop Coach Fare: $188



Is It The Shorter Distance?

Boston Cleveland

?

Boston Pittsburgh

?

Non-Stop Coach Fare: $1,107

Non-Stop Coach Fare: $188

551 Air Miles


483 Air Miles


Or Greater Competition?

Boston Cleveland

?

Boston Pittsburgh

?

Choice: United Non-Stop: $1,107

(No other non-stop choice)

Choice #3: USAirways Non-Stop: $238

Choice #2: JetBlue Non-Stop: $188

Choice #1: Delta Non-Stop: $188

NON-

COMPETITIVE

MARKET

COMPETITIVE

MARKET



Which Is More Likely to Generate

True Price Competition?

DO MD DOMD

DO MD DO MD

DO MD DO MD

DO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DO MD

DO MD DO MD

ONE BIG

ACO

DO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DO MD

DO MD DO MD

Hospital ACO

VS

Physician Group ACO

IPA ACOHOSPITAL

HOSPITAL

HOSPITAL

HOSPITAL

HOSPITAL


What Do Michigan Communities

Need for Higher Value Care?


Better Payment Systems and

Benefit Designs from All Payers

Engagementof

Purchasers

Alignment ofMultiplePayers

PaymentSystemDesign

BenefitDesign

Value-DrivenPayment /Benefits


Dramatically Better Care Delivery

Supported by Better Payment

TechnicalAssistanceto Providers

Design &Delivery of

Care

Engagementof

Purchasers


PaymentSystemDesign

BenefitDesign

ProviderOrganization/Coordination


Value-DrivenDeliverySystems


Educated and Engaged

Consumers


Design &Delivery of

Care

ConsumerEducation/

Engagement

EducationMaterials

Engagementof

Purchasers


PaymentSystemDesign

BenefitDesign




ConsumerEducation/Engagement


Data and Analysis Available to

Everyone

DataCollection &

Analysis


Design &Delivery of

Care

ConsumerEducation/

Engagement

EducationMaterials

Engagementof

Purchasers


PaymentSystemDesign

BenefitDesign



Data andAnalytics



PublicReporting


And a Mechanism for Bringing

All the Pieces Together

DataCollection &

Analysis


Design &Delivery of

Care

ConsumerEducation/

Engagement

EducationMaterials

Engagementof

Purchasers


PaymentSystemDesign

BenefitDesign



Data andAnalytics



RegionalHealth

ImprovementCollaborative

PublicReporting


All Stakeholders Must Be Involved

for Win-Win-Win Solutions

RegionalHealth

ImprovementCollaborative

Physicians andOther Providers

Hospitals and Post-Acute Care

Patients andFamilies

Purchasersand Payers


Learn More About Win-Win-Win

Payment and Delivery Reform

Center for Healthcare Quality and Payment Reformwww.PaymentReform.org

http://www.paymentreform.org/

For More Information:

Harold D. MillerPresident and CEO

Center for Healthcare Quality and Payment Reform

[email protected]

(412) 803-3650

www.CHQPR.org

www.PaymentReform.org

APPENDIX


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


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


For Self-Funded Employers, The

Health Plan is Just a Pass Through

Self-Funded

PurchasersProviders

ASOHealth Plan(No Risk)

Provider Claims

Purchaser Payment


Little Incentive for Health Plans to

Support True 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


What We Need Are

Purchaser-Provider Partnerships

Self-Funded

PurchasersProviders

Better Payment and Benefit Structure

Lower Cost, Higher Quality Care

Provider “wins” if:• Patients stay healthy

and need less care• Purchaser pays

adequately for high-quality care to those who need it

Purchasers and Patients “win” if:• Provider keeps

employees healthy • Provider delivers

high-quality care at low prices


Purchasers and Physicians Have

Common Interests, But Don’t Know It

“We’ve started talking directly to physicians,

and we’ve discovered that

what they want to sell is what we want to buy…”

Cheryl DeMars

CEO, The Alliance(Employer Coalition in Wisconsin)


Health Plan Implements Changes

Purchasers/Providers Agree On

Self-Funded

PurchasersProviders

HealthPlans Implementation




National Companies Are

Moving in This Direction

Self-Funded

PurchasersProviders



Provider “wins” if:• Patients stay healthy

and need less care• Purchaser pays

adequately for high-quality care to those who need it

Purchasers and Patients “win” if:• Provider keeps

employees healthy • Provider delivers

high-quality care at low prices

APPENDIX


Condition-Based Payment Can

Improve Care for Diabetics…

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity

Patient with

Diabetes

PCP+Specialist



…But We Need to Also Focus on

Preventing Diabetes

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity

HealthyChildren

andAdults

Obesity

HealthyWeight

Patient with

Diabetes

PCP+Specialist

Patient without

Diabetes


That Means Upstream Investment

to Combat Obesity

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity

HealthyChildren

andAdults

Obesity

HealthyWeight

Patient with

Diabetes

PCP+Specialist

Pediatrics

AdultPrimary Care

Endocrinology

Patient without

Diabetes

Healthy Foodsand WalkableCommunities


True Population-Based Payment

Has to Have a Long-Term Focus

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity

HealthyChildren

andAdults

Obesity

HealthyWeight

Patient with

Diabetes

PCP+Specialist

Population-Based Payment

Patient without

Diabetes

Pediatrics

AdultPrimary Care

Endocrinology



MANY YEARS FOR

RETURN ON INVESTMENT

Current “Shared Savings” Models

Penalize Long-Term Prevention

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity

HealthyChildren

andAdults

Obesity

HealthyWeight

Patient with

Diabetes

PCP+Specialist


$$$ INVESTMENT

SAVINGS

Patient without

Diabetes

Pediatrics

AdultPrimary Care

Endocrinology



MANY YEARS FOR

RETURN ON INVESTMENT

A Public-Private Partnership

Will Be Needed For Investment

Premature Death

Amputations

Blindness

Kidney Failure

Hospitalizations

ER Visits

Inability to Work

Low Productivity

Quality of Life

Low Cost of Care

Productivity

HealthyChildren

andAdults

Obesity

HealthyWeight

Patient with

Diabetes

PCP+Specialist


$$$ INVESTMENT

SAVINGSEmployers

Medicare

Patient without

Diabetes

Pediatrics

AdultPrimary Care

Endocrinology


APPENDIX


To Set A Fair Price,

Start With Existing Costs…

COST

TIME

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS


…Set a Payment Level That Is

≤ Expected Costs…

COST

TIME

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Bundled

or

Episode

Payment

Level


…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


...And Both the Payer and

Physician Will “Win”

COST

TIME

Costs

in

New

Pmt

$$$$$$

Bonus for

Physician

Savings

For Payer

Costs

in

FFS

Costs

in

FFS

Costs

in

FFS

Bundled

or

Episode

Payment

Level


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


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


Physicians 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








Provider

Performance

Risk

Insurance

Risk

Bundled

or

Episode

Payment

Level


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






SeverityAdjustment



Outlier Pmt/Stop-Loss

Risk Exclusions

RiskCorridors

PerformanceRisk

(Physician’sResponsibility)

WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE · Consumers Chose Expensive Cars Consumer Share of Car...

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