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DELIVERING HIGHER-VALUE MATERNITY CARE Designing Alternative Payment Models for Better Care, Lower Spending, and Financially Viable Maternity Care Providers Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform www.CHQPR.org How Do You Control Growing Healthcare Spending? $ TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 2 Typical Strategy #1: Cut Provider Fees for Services $ TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING SAVINGS Cut Provider Fees TOTAL HEALTH CARE SPENDING BY PAYERS © Center for Healthcare Quality and Payment Reform www.CHQPR.org 3 Typical Strategy #2: Shift Costs to Patients $ TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING SAVINGS TOTAL HEALTH CARE SPENDING BY PAYERS Higher Cost-Share & Deductibles © Center for Healthcare Quality and Payment Reform www.CHQPR.org 4 Typical Strategy #3: Delay or Deny Care to Patients $ TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING TOTAL HEALTH CARE SPENDING SAVINGS TOTAL HEALTH CARE SPENDING BY PAYERS Lack of Needed Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 5 Results of the Typical Strategies • • • • • • • Small providers forced out of business Consolidation of providers to resist cuts in fees Shifts in care to higher-cost settings Increases in utilization to offset losses in revenue Patients avoiding necessary care due to high cost-sharing Large increases in health insurance premiums Inability to afford health insurance © Center for Healthcare Quality and Payment Reform www.CHQPR.org 6 Results of the Typical Strategies • • • • • • • Small providers forced out of business Consolidation of providers to resist cuts in fees Shifts in care to higher-cost settings Increases in utilization to offset losses in revenue Patients avoiding necessary care due to high cost-sharing Large increases in health insurance premiums Inability to afford health insurance IS THERE A BETTER WAY? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 7 The Right Focus: Spending That is Unnecessary or Avoidable $ AVOIDABLE SPENDING NECESSARY SPENDING AVOIDABLE SPENDING AVOIDABLE SPENDING NECESSARY SPENDING NECESSARY SPENDING AVOIDABLE SPENDING NECESSARY SPENDING TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 8 Avoidable Spending Occurs In All Aspects of Healthcare $ AVOIDABLE SPENDING NECESSARY SPENDING © Center for Healthcare Quality and Payment Reform www.CHQPR.org 9 Avoidable Spending Occurs In All Aspects of Healthcare SURGERY • Unnecessary surgery • Use of unnecessarily-expensive implants • Infections and complications of surgery • Overuse of inpatient rehabilitation $ AVOIDABLE SPENDING NECESSARY SPENDING © Center for Healthcare Quality and Payment Reform www.CHQPR.org 10 Avoidable Spending Occurs In All Aspects of Healthcare SURGERY • Unnecessary surgery • Use of unnecessarily-expensive implants • Infections and complications of surgery • Overuse of inpatient rehabilitation $ AVOIDABLE SPENDING CANCER TREATMENT • Use of unnecessarily-expensive drugs • ER visits/hospital stays for dehydration and avoidable complications • Fruitless treatment at end of life NECESSARY SPENDING © Center for Healthcare Quality and Payment Reform www.CHQPR.org 11 Avoidable Spending Occurs In All Aspects of Healthcare SURGERY • Unnecessary surgery • Use of unnecessarily-expensive implants • Infections and complications of surgery • Overuse of inpatient rehabilitation $ AVOIDABLE SPENDING NECESSARY SPENDING CANCER TREATMENT • Use of unnecessarily-expensive drugs • ER visits/hospital stays for dehydration and avoidable complications • Fruitless treatment at end of life CHEST PAIN DIAGNOSIS/TREATMENT • Overuse of high-tech stress tests/imaging • Overuse of cardiac catheterization • Overuse of PCIs, high-priced stents © Center for Healthcare Quality and Payment Reform www.CHQPR.org 12 Avoidable Spending Occurs In All Aspects of Healthcare SURGERY • Unnecessary surgery • Use of unnecessarily-expensive implants • Infections and complications of surgery • Overuse of inpatient rehabilitation $ AVOIDABLE SPENDING NECESSARY SPENDING CANCER TREATMENT • Use of unnecessarily-expensive drugs • ER visits/hospital stays for dehydration and avoidable complications • Fruitless treatment at end of life CHEST PAIN DIAGNOSIS/TREATMENT • Overuse of high-tech stress tests/imaging • Overuse of cardiac catheterization • Overuse of PCIs, high-priced stents MATERNITY CARE • Unnecessary C-Sections • Early elective deliveries • Underuse of birth centers • Complications of delivery © Center for Healthcare Quality and Payment Reform www.CHQPR.org 13 The Right Goal: Less Avoidable $, $ AVOIDABLE SPENDING AVOIDABLE SPENDING AVOIDABLE SPENDING AVOIDABLE SPENDING NECESSARY SPENDING TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 14 The Right Goal: Less Avoidable $, More Necessary $ $ AVOIDABLE SPENDING AVOIDABLE SPENDING AVOIDABLE SPENDING AVOIDABLE SPENDING NECESSARY SPENDING NECESSARY SPENDING NECESSARY SPENDING NECESSARY SPENDING TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 15 Win-Win for Patients & Payers Lower Spending for Payers $ AVOIDABLE SPENDING NECESSARY SPENDING SAVINGS SAVINGS SAVINGS AVOIDABLE SPENDING AVOIDABLE SPENDING AVOIDABLE SPENDING NECESSARY SPENDING Better Care for NECESSARY Patients SPENDING NECESSARY SPENDING TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 16 Barriers in the Payment System Create a Win-Lose for Providers $ SAVINGS AVOIDABLE SPENDING NECESSARY SPENDING AVOIDABLE SPENDING BARRIERS IN THE CURRENT PAYMENT SYSTEM NECESSARY SPENDING © Center for Healthcare Quality and Payment Reform www.CHQPR.org 17 Barrier #1: No $ or Inadequate $ for High-Value Services $ AVOIDABLE SPENDING NECESSARY SPENDING No Payment or Inadequate Payment for: • Services delivered outside of face-to-face visits with providers, e.g., phone calls, e-mails, etc. • Communication among providers to manage patient needs • Services delivered by non-physicians (nurses, midwives, homecare aides) • Services in non-traditional settings (e.g., birth centers) • Non-medical services, e.g., transportation • Additional time for patients with higher intensity needs UNPAID SERVICES © Center for Healthcare Quality and Payment Reform www.CHQPR.org 18 Barrier #2: Avoidable Spending May Be Revenue for Providers… $ MARGIN AVOIDABLE SPENDING PROVIDER REVENUE NECESSARY SPENDING COST OF SERVICE DELIVERY © Center for Healthcare Quality and Payment Reform www.CHQPR.org 19 …And When Avoidable Services Aren’t Delivered… $ MARGIN AVOIDABLE SPENDING AVOIDABLE SPENDING PROVIDER REVENUE NECESSARY SPENDING COST OF SERVICE DELIVERY NECESSARY SPENDING © Center for Healthcare Quality and Payment Reform www.CHQPR.org 20 …Providers’ Revenue May Decrease… $ MARGIN AVOIDABLE SPENDING AVOIDABLE SPENDING PROVIDER REVENUE NECESSARY SPENDING COST OF SERVICE DELIVERY NECESSARY PROVIDER SPENDING REVENUE © Center for Healthcare Quality and Payment Reform www.CHQPR.org 21 …But Fixed Costs Don’t Vanish Many Fixed Costs of Services Remain When Volume Decreases $ • Leases & staff in provider practice • Costs of hospital emergency room and labor & delivery suite MARGIN AVOIDABLE SPENDING AVOIDABLE SPENDING PROVIDER REVENUE NECESSARY SPENDING COST OF SERVICE DELIVERY COST OF NECESSARY PROVIDER SERVICE SPENDING REVENUE DELIVERY © Center for Healthcare Quality and Payment Reform www.CHQPR.org 22 …But Fixed Costs Don’t Vanish and New Costs May Be Added… Many Fixed Costs of Services Remain When Volume Decreases And New Costs May Be Incurred, $ • Costs of unpaid provider services • Costs of collecting quality data MARGIN AVOIDABLE SPENDING AVOIDABLE SPENDING PROVIDER REVENUE NECESSARY SPENDING COST OF SERVICE DELIVERY COST OF NEW SVCS COST OF NECESSARY PROVIDER SERVICE SPENDING REVENUE DELIVERY © Center for Healthcare Quality and Payment Reform www.CHQPR.org 23 …Leaving Providers With Losses (or Bigger Losses Than Today) Many Fixed Costs of Services Remain When Volume Decreases And New Costs May Be Incurred, Potentially Causing Financial Losses $ MARGIN AVOIDABLE SPENDING AVOIDABLE SPENDING PROVIDER REVENUE NECESSARY SPENDING COST OF SERVICE DELIVERY LOSS COST OF NEW SVCS COST OF NECESSARY PROVIDER SERVICE SPENDING REVENUE DELIVERY © Center for Healthcare Quality and Payment Reform www.CHQPR.org 24 Small Payment Bonuses Usually Won’t Offset the Losses Many Fixed Costs of Services Remain When Volume Decreases And New Costs May Be Incurred, Potentially Causing Financial Losses That Aren’t Offset by Small Bonuses $ MARGIN AVOIDABLE SPENDING AVOIDABLE SPENDING PROVIDER REVENUE NECESSARY SPENDING COST OF SERVICE DELIVERY LOSS P4P COST OF NEW SVCS COST OF NECESSARY PROVIDER SERVICE SPENDING REVENUE DELIVERY © Center for Healthcare Quality and Payment Reform www.CHQPR.org 25 A Payment Change isn’t Reform Unless It Removes the Barriers BARRIER #1 BARRIER #2 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 26 CMS “Alternative Payment Models” Currently in Place TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, Multi-Specialty Groups, PHOs, and IPAs Accountable Care Organizations (MSSP & Pioneer) FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Bonuses/Penalties on Attributed Total Spending Primary Care Comprehensive Primary Care Initiative Specialty Care Oncology Care Model Hospitals and Post-Acute Care Comprehensive Care for Joint Replacement © Center for Healthcare Quality and Payment Reform www.CHQPR.org 27 CMS “Alternative Payment Models” Don’t Change Current Payments TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, Multi-Specialty Groups, PHOs, and IPAs Accountable Care Organizations (MSSP & Pioneer) FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending Primary Care Comprehensive Primary Care Initiative Specialty Care Oncology Care Model Hospitals and Post-Acute Care Comprehensive Care for Joint Replacement © Center for Healthcare Quality and Payment Reform www.CHQPR.org 28 …Most Only Provide More $ After Other Spending is Reduced TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, Multi-Specialty Groups, PHOs, and IPAs Accountable Care Organizations (MSSP & Pioneer) FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending Primary Care Comprehensive Primary Care Initiative Specialty Care Oncology Care Model Hospitals and Post-Acute Care Comprehensive Care for Joint Replacement © Center for Healthcare Quality and Payment Reform www.CHQPR.org 29 Problems With “Shared Savings” • Providers receive no upfront resources to improve care management for patients • Already efficient providers receive little or no additional revenue and may be forced out of business • Providers who have been practicing inefficiently or inappropriately are paid more than others • Providers could be rewarded for denying needed care as well as by reducing overuse • Providers are placed at risk for costs they cannot control and random variation in spending • Shared savings bonuses are temporary and “re-benchmarking” leaves providers with inadequate payment to deliver necessary services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 30 Medicare ACOs Aren’t Succeeding Due to Flaws in Shared Savings 2013 Results for Medicare Shared Savings ACOs • • • • 46% of ACOs (102/220) increased Medicare spending Only 24% (52/220) received shared savings payments After making shared savings payments, Medicare spent more than it saved Net loss to Medicare: $78 million 2014 Results for Medicare Shared Savings ACOs • • • • 45% of ACOs (152/333) increased Medicare spending Only 26% (86/333) received shared savings payments After making shared savings payments, Medicare spent more than it saved Net loss to Medicare: $50 million 2015 Results for Medicare Shared Savings ACOs • 48% of ACOs (189/392) increased Medicare spending • Only 30% (119/392) received shared savings payments • After making shared savings payments, Medicare spent more than it saved • Net loss to Medicare: $216 million © Center for Healthcare Quality and Payment Reform www.CHQPR.org 31 Current APMs are Problematic Because Payers Designed Them HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Providers Have To Change Care to Align With Payment Systems Patients and Providers May Not Come Out Ahead © Center for Healthcare Quality and Payment Reform www.CHQPR.org 32 Providers Need to Design Payments to Support Good Care HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Providers Have To Change Care to Align With Payment Systems Patients and Providers May Not Come Out Ahead THE RIGHT WAY TO DESIGN PAYMENT REFORMS Providers Redesign Care and Identify Payment Barriers Payers Change Payment to Support Redesigned Care Patients Get Better Care and Providers Stay Financially Viable © Center for Healthcare Quality and Payment Reform www.CHQPR.org 33 How Do You a Good Alternative Payment Model? 1. Identify opportunities to improve care and reduce avoidable spending 2. Identify the barriers in the payment system that prevent implementing the improvements 3. Payers give healthcare providers flexible, adequate resources to overcome the barriers in the current payment system 4. Healthcare providers take accountability for achieving the improvements in care and reductions in spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 34 How Do You a Good Alternative Payment Model? 1. Identify opportunities to improve care and reduce avoidable spending 2. Identify the barriers in the payment system that prevent implementing the improvements 3. Payers give healthcare providers flexible, adequate resources to overcome the barriers in the current payment system 4. Healthcare providers take accountability for achieving the improvements in care and reductions in spending WIN: Better Care for Patients WIN: Lower Spending for Payers WIN: Financially Successful Healthcare Providers © Center for Healthcare Quality and Payment Reform www.CHQPR.org 35 Start By Identifying Opportunities to Reduce Avoidable Spending 1. Identify opportunities to improve care and reduce avoidable spending 2. Identify the barriers in the payment system that prevent implementing the improvements 3. Payers give healthcare providers flexible, adequate resources to overcome the barriers in the current payment system 4. Healthcare providers take accountability for achieving the improvements in care and reductions in spending WIN: Better Care for Patients WIN: Lower Spending for Payers WIN: Financially Successful Healthcare Providers © Center for Healthcare Quality and Payment Reform www.CHQPR.org 36 • Hospital-acquired infections • Medical errors • Hospital readmissions PROCEDURE $ COMPLICATIONS Opportunity Area #1: Identify Avoidable Complications © Center for Healthcare Quality and Payment Reform www.CHQPR.org 37 Savings PROCEDURE COMPLICATIONS COMPLICATIONS $ PROCEDURE Opportunity Area #1: Reduce Avoidable Complications © Center for Healthcare Quality and Payment Reform www.CHQPR.org 38 COMPLICATIONS Warranty • • PROCEDURE • PROCEDURE $ COMPLICATIONS Payment Solution #1: (Limited) Warranty • WARRANTY PAYMENT Higher payment to support higher-quality care No additional payment to correct preventable complications Savings from reducing avoidable complications Not an outcome guarantee © Center for Healthcare Quality and Payment Reform www.CHQPR.org 39 • Unnecessary post-acute care • Unnecessary consultations • Unnecessarily expensive drugs, medical devices, etc. PROCEDURE INEFFICIENCY COMPLICATIONS Warranty PROCEDURE PROCEDURE $ COMPLICATIONS Opportunity Area #2: Identify Inefficiencies in Delivery © Center for Healthcare Quality and Payment Reform www.CHQPR.org 40 PROCEDURE INEFFICI ENCY INEFFICIENCY Savings PROCEDURE COMPLICATIONS Warranty PROCEDURE PROCEDURE $ COMPLICATIONS Opportunity Area #2: Reduce Inefficiencies in Delivery © Center for Healthcare Quality and Payment Reform www.CHQPR.org 41 INEFFICI ENCY Bundle PROCEDURE PROCEDURE INEFFICIENCY COMPLICATIONS Warranty PROCEDURE PROCEDURE $ COMPLICATIONS Payment Solution #2: Bundle for Entire Procedure BUNDLED PAYMENT • Single payment to support all of the services needed to deliver a treatment • Higher payments for patients with higher needs rather than higher payments just because more services were delivered • Savings from reducing unnecessary services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 42 INEFFICI COMPLIENCY CATIONS Procedural Episode Bundle + Warranty PROCEDURE PROCEDURE $ INEFFIC- COMPLIIENCY CATIONS Payment Solution #3: Episode = Bundle + Warranty EPISODE PAYMENT • Bundle: Single payment for all services related to a treatment • Warranty: No additional payment to address complications that occur after treatment is completed © Center for Healthcare Quality and Payment Reform www.CHQPR.org 43 INEFFICI ENCY Bundle HOSPITAL PROCEDURE INEFFICIENCY Procedural Episode Bundle + Warranty HOSPITAL PROCEDURE COMPLICATIONS Warranty HOSPTIAL PROCEDURE HOSPTAL PROCEDURE $ COMPLICATIONS Most Bundles/Warranties/Episodes Are for Hospital-Based Procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 44 INEFFICI ENCY HOSPITAL PROCEDURE HOSPITAL PROCEDURE INEFFICIENCY HOSPITAL PROCEDURE LOWER-COST SITE OF SERVICE • Outpatient surgery • Drugs administered in physician offices • Births in birth centers COMPLICATIONS HOSPTIAL PROCEDURE HOSPTAL PROCEDURE $ COMPLICATIONS Opportunity Area #3: Using Lower-Cost Sites of Service © Center for Healthcare Quality and Payment Reform www.CHQPR.org 45 LOWER-COST TREATMENT INEFFICI ENCY HOSPITAL PROCEDURE HOSPITAL PROCEDURE INEFFICIENCY HOSPITAL PROCEDURE LOWER-COST SITE OF SERVICE • Physical therapy instead of joint or back surgery • Medication therapy instead of invasive procedure • Vaginal delivery instead of C-Section COMPLICATIONS HOSPTIAL PROCEDURE HOSPTAL PROCEDURE $ COMPLICATIONS Opportunity Area #4: Using Lower-Cost Treatments © Center for Healthcare Quality and Payment Reform www.CHQPR.org 46 LOWER-COST TREATMENT LOWER-COST SITE OF SERVICE HOSPITAL PROCEDURE HOSPITAL PROCEDURE HOSPITAL PROCEDURE INEFFICI ENCY INEFFICIENCY HOSPTIAL PROCEDURE COMPLICATIONS COMPLICATIONS $ HOSPTAL PROCEDURE To Capture Those Savings Opportunities… Savings Savings © Center for Healthcare Quality and Payment Reform www.CHQPR.org 47 CONDITION-BASED PAYMENT • Single (bundled) payment for all services needed to treat a condition • Higher payments for patients with more severe conditions • Savings from reducing unnecessary treatments or using lower-cost treatments LOWER-COST TREATMENT Condition-Based Payment LOWER-COST SITE OF SERVICE HOSPITAL PROCEDURE INEFFICI ENCY HOSPITAL PROCEDURE HOSPITAL PROCEDURE INEFFICIENCY COMPLICATIONS HOSPTIAL PROCEDURE HOSPTAL PROCEDURE $ COMPLICATIONS Payment Option 4:Condition-Based Payment, Not a Procedural Episode © Center for Healthcare Quality and Payment Reform www.CHQPR.org 48 Condition-Based Payments Needed Across Healthcare • Knee Osteoarthritis – Home-based rehab instead of facility-based rehab – Physical therapy instead of surgery • Chest Pain – Non-invasive imaging instead of invasive imaging – Medical management instead of invasive treatment • Chronic Disease Management – Improved education and self-management support – Avoiding hospitalizations for exacerbations • Maternity Care – Vaginal delivery instead of C-Section – Term delivery instead of early elective delivery – Delivery in birth center instead of hospital © Center for Healthcare Quality and Payment Reform www.CHQPR.org 49 All of These Payment Options Can Be Used in Maternity Care Normal Pregnancy Delivery © Center for Healthcare Quality and Payment Reform www.CHQPR.org 50 Bundles to Encourage Providers to Reduce Hospital Costs Bundled Payment OB $$$ C-Section Normal Pregnancy Delivery Hospital $$$ Bundled Payment Vaginal OB/CNM $$ Delivery Hospital $$ © Center for Healthcare Quality and Payment Reform www.CHQPR.org 51 Warranties to Support Reductions in Delivery-Related Complications Bundled Payment with Warranty (Episode) OB $$$ C-Section Hospital $$$ Complications No Complications Bundled Payment with Warranty (Episode) Normal Pregnancy Delivery Vaginal Delivery OB/CNM $$ Complications Hospital $$ No Complications © Center for Healthcare Quality and Payment Reform www.CHQPR.org 52 Condition-Based Payment to Encourage More Vaginal Deliveries Condition-Based Payment OB $$$ C-Section in Hospital Hospital $$$ Normal Pregnancy Delivery Vaginal OB/CNM $$ Delivery in Hospital Hospital $$ Complications No Complications Complications No Complications © Center for Healthcare Quality and Payment Reform www.CHQPR.org 53 Condition-Based Payment To Encourage Use of Birth Centers Condition-Based Payment OB $$$ C-Section in Hospital Hospital $$$ Normal Pregnancy Delivery Vaginal OB/CNM $$ Delivery in Hospital Hospital $$ CNM $ Delivery in Birth Center Birth Ctr $ Complications No Complications Complications No Complications Complications No Complications © Center for Healthcare Quality and Payment Reform www.CHQPR.org 54 Payment Can Also Move Upstream to Improve Outcomes Population-Based Payment/Maternity ACO-CCO Higher-Risk Pregnancy Total Patient Population PreConception Care Lower-Risk Pregnancy Avoided Pregnancy © Center for Healthcare Quality and Payment Reform www.CHQPR.org 55 Basic Condition-Based Payment Has Best Opportunities for Savings Condition-Based Payment OB $$$ C-Section in Hospital Hospital $$$ Normal Pregnancy Delivery Vaginal OB/CNM $$ Delivery in Hospital Hospital $$ CNM $ Delivery in Birth Center Birth Ctr $ Complications No Complications Complications No Complications Complications No Complications © Center for Healthcare Quality and Payment Reform www.CHQPR.org 56 Making the Numbers Work: A Hypothetical Example © Center for Healthcare Quality and Payment Reform www.CHQPR.org 57 Making the Numbers Work: A Hypothetical Example WARNING TO THOSE WITH MATH PHOBIA: Lots of Numbers Coming Quickly; Slides Available for Detailed Review Afterwards © Center for Healthcare Quality and Payment Reform www.CHQPR.org 58 Making the Numbers Work: A Hypothetical Example WARNING TO THOSE WITH MATH PHOBIA: Lots of Numbers Coming Quickly; Slides Available for Detailed Review Afterwards Examples are all simplified for purposes of presentation but the principles and conclusions are realistic © Center for Healthcare Quality and Payment Reform www.CHQPR.org 59 Payment to Birth Center $/Patient Birth Center Midwife Birth Center Total $2,200 $4,000 $6,200 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 60 Payment for Hospital Delivery $/Patient Birth Center Midwife Birth Center Total Hosp. Vaginal OB-GYN Vag. Hospital Vag. Total $2,200 $4,000 $6,200 $3,300 $7,500 $10,800 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 61 Payment for C-Section $/Patient Birth Center Midwife Birth Center Total $2,200 $4,000 $6,200 Hosp. Vaginal OB-GYN Vag. Hospital Vag. Total $3,300 $7,500 $10,800 Hosp C-Section OB-GYN C-S Hospital C-S Total $3,600 $12,000 $15,600 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 62 Birth Center Deliveries Are Dramatically Less Expensive $/Patient Birth Center Midwife Birth Center Total Hosp. Vaginal OB-GYN Vag. Hospital Vag. Total Hosp C-Section OB-GYN C-S Hospital C-S Total $2,200 $4,000 $6,200 $3,300 $7,500 $10,800 -43% -60% $3,600 $12,000 $15,600 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 63 Birth Center Deliveries Are Dramatically Less Expensive $/Patient Birth Center Midwife Birth Center Total Hosp. Vaginal OB-GYN Vag. Hospital Vag. Total Hosp C-Section OB-GYN C-S Hospital C-S Total $2,200 $4,000 $6,200 $3,300 $7,500 $10,800 -43% -60% But not every delivery can be done in a birth center, and not every woman will want to try… …so what is the real savings opportunity?? $3,600 $12,000 $15,600 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 64 Assume a Typical Current Distribution of Births CURRENT $/Patient # Pts Birth Center Midwife Birth Center Total $2,200 $4,000 $6,200 Hosp. Vaginal OB-GYN Vag. Hospital Vag. Total $3,300 $7,500 $10,800 Hosp C-Section OB-GYN C-S Hospital C-S Total $3,600 $12,000 $15,600 Total Pmt/Cost 20 Type of Delivery Birth Center 2% CSection 680 68% Hospital Vaginal 300 30% 1000 100% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 65 Average Overall Spending is More Than $12,000 Per Birth CURRENT $/Patient # Pts Total $ Birth Center Midwife Birth Center Total $2,200 $4,000 $6,200 20 $44,000 $80,000 $124,000 680 $2,244,000 $5,100,000 $7,344,000 300 $1,080,000 $3,600,000 $4,680,000 Hosp. Vaginal OB-GYN Vag. Hospital Vag. Total $3,300 $7,500 $10,800 Hosp C-Section OB-GYN C-S Hospital C-S Total $3,600 $12,000 $15,600 Total Pmt/Cost $12,148 1000 $12,148,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 66 What if We Could Deliver 30% of Babies in the Birth Center? CURRENT $/Patient # Pts Total $ Birth Center Midwife Birth Center Total $2,200 $4,000 $6,200 FUTURE $/Patient # Pts Total $ Chg 20 $44,000 $80,000 $124,000 300 1400% 680 $2,244,000 $5,100,000 $7,344,000 500 -26% 300 -33% Hosp. Vaginal OB-GYN Vag. Hospital Vag. Total $3,300 $7,500 $10,800 Hosp C-Section OB-GYN C-S Hospital C-S Total $3,600 $12,000 $15,600 $1,080,000 $3,600,000 $4,680,000 200 Total Pmt/Cost $12,148 1000 $12,148,000 1000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 67 15% Savings on Maternity Care? CURRENT $/Patient # Pts Total $ Birth Center Midwife Birth Center Total $2,200 $4,000 $6,200 FUTURE $/Patient # Pts Total $ 20 $44,000 $80,000 $124,000 680 $2,244,000 $5,100,000 $7,344,000 300 $1,080,000 $3,600,000 $4,680,000 Hosp. Vaginal OB-GYN Vag. Hospital Vag. Total $3,300 $7,500 $10,800 Hosp C-Section OB-GYN C-S Hospital C-S Total $3,600 $12,000 $15,600 Total Pmt/Cost $12,148 1000 $12,148,000 Chg 300 $660,000 $1,200,000 $1,860,000 1400% 500 $1,650,000 $3,750,000 $5,400,000 -26% 200 $720,000 $2,400,000 $3,120,000 -33% 1000 $10,380,000 -15% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 68 Viewed from the Perspective of the Maternity Providers… © Center for Healthcare Quality and Payment Reform www.CHQPR.org 69 Good for the Midwives Midwife CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 70 Bad for the OB-Gyns Midwife OB-GYN Vaginal Birth C-Section Subtotal CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 500 200 700 $1,650,000 $720,000 $2,370,000 -29% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 71 Good for the Birth Center Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% -29% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 72 Bad for the Hospital Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Vaginal Birth C-Section Subtotal CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 500 200 700 $1,650,000 $720,000 $2,370,000 $4,000 20 $80,000 $4,000 300 $1,200,000 1400% $7,500 $12,000 680 300 980 $5,100,000 $3,600,000 $8,700,000 $7,500 $12,000 500 200 700 $3,750,000 $2,400,000 $6,150,000 -29% -29% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 73 Good for the Payer Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Vaginal Birth C-Section Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 $4,000 20 $80,000 $7,500 $12,000 680 300 980 $5,100,000 $3,600,000 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 $4,000 300 $1,200,000 1400% $7,500 $12,000 500 200 700 $3,750,000 $2,400,000 $6,150,000 -29% 1000 $10,380,000 -15% -29% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 74 Win-Lose Outcome Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Vaginal Birth C-Section Subtotal Payer CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 $4,000 20 $80,000 $7,500 $12,000 680 300 980 $5,100,000 $3,600,000 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 $4,000 300 $1,200,000 1400% $7,500 $12,000 500 200 700 $3,750,000 $2,400,000 $6,150,000 -29% 1000 $10,380,000 -15% -29% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 75 Should Birth Centers Care That Hospitals & OB-GYNs Lose $? • Birth centers can’t offer a complete replacement for hospital/OB-GYN maternity care • Mothers wouldn’t use the birth center without a hospital/OB-GYN backup • The birth center can’t give an accurate price/cost estimate to payers or mothers without a committed price from the hospitals & OB-GYNs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 76 Will Physicians and Hospitals Raise their Prices to Offset Losses?… Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Vaginal Birth C-Section Subtotal Payer CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ $2,200 20 $44,000 $2,200 300 $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $4,600 $5,100 $4,000 20 $80,000 $4,000 300 $7,500 $12,000 680 300 980 $5,100,000 $3,600,000 $8,700,000 $10,500 $17,000 500 200 700 $12,148 1000 $12,148,000 500 200 700 Chg $2,300,000 $1,020,000 $3,320,000 0% $5,250,000 $3,600,000 $8,850,000 3% 0% 2% 1000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 77 …If So, Total Spending Will Increase Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Vaginal Birth C-Section Subtotal Payer CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $4,600 $5,100 $4,000 20 $80,000 $7,500 $12,000 680 300 980 $5,100,000 $3,600,000 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $2,300,000 $1,020,000 $3,320,000 $4,000 300 $1,200,000 1400% $10,500 $17,000 500 200 700 $5,250,000 $3,600,000 $8,850,000 3% 0% 2% 1000 $14,030,000 +15% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 78 If the Payer Can’t Be Assured of Savings, Status Quo is Better Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Vaginal Birth C-Section Subtotal Payer CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $4,600 $5,100 $4,000 20 $80,000 $7,500 $12,000 680 300 980 $5,100,000 $3,600,000 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $2,300,000 $1,020,000 $3,320,000 $4,000 300 $1,200,000 1400% $10,500 $17,000 500 200 700 $5,250,000 $3,600,000 $8,850,000 3% 0% 2% 1000 $14,030,000 +15% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 79 Episodes Limited to Birth Center Services Won’t Be of Much Interest OB $$$ C-Section in Hospital Hospital $$$ Normal Pregnancy Delivery Vaginal OB/CNM $$ Delivery in Hospital Hospital $$ Birth Center Episode CNM $ Delivery in Birth Center Birth Ctr $ Hospital Delivery $$$ Total cost is not predictable for either insurance plan or consumer © Center for Healthcare Quality and Payment Reform www.CHQPR.org 80 Birth Center Would Be at Risk for Hospital Costs in a Full Episode OB $$$ C-Section in Hospital Hospital $$$ Normal Pregnancy Delivery Vaginal OB/CNM $$ Delivery in Hospital Hospital $$ Birth Center Episode CNM $ Delivery in Birth Center Birth Ctr $ Hospital Delivery $$$ © Center for Healthcare Quality and Payment Reform www.CHQPR.org 81 Payers (and Patients) Want a Comprehensive Solution Condition-Based Payment OB $$$ C-Section in Hospital Hospital $$$ Normal Pregnancy Delivery Vaginal OB/CNM $$ Delivery in Hospital Hospital $$ CNM $ Delivery in Birth Center Birth Ctr $ © Center for Healthcare Quality and Payment Reform www.CHQPR.org 82 Do Hospitals Have to Lose for Birth Centers & Payers to Win? Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Vaginal Birth C-Section Subtotal Payer CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 $4,000 20 $80,000 $7,500 $12,000 680 300 980 $5,100,000 $3,600,000 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 $4,000 300 $1,200,000 1400% $7,500 $12,000 500 200 700 $3,750,000 $2,400,000 $6,150,000 -29% 1000 $10,380,000 -15% -29% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 83 What Should Matter to Hospitals is Margin, Not Revenues (Volume) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 84 Hospital Costs Are Not Proportional to Utilization 7% reduction in cost . Costs 100 99 98 97 96 95 94 93 92 91 90 89 88 87 86 85 84 83 82 81 20% reduction in volume $1,000 $980 $960 $940 $920 $900 $880 $860 $840 $820 $800 $000 Cost & Revenue Changes With Fewer Patients #Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 85 Reductions in Utilization Reduce Revenues More Than Costs 7% reduction in cost 20% reduction in volume Revenues Costs 100 99 98 97 96 95 94 93 92 91 90 89 88 87 86 85 84 83 82 81 20% reduction in revenue $1,000 $980 $960 $940 $920 $900 $880 $860 $840 $820 $800 $000 Cost & Revenue Changes With Fewer Patients #Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 86 Causing Negative Margins for Hospitals $1,000 $980 $960 $940 $920 $900 $880 $860 $840 $820 $800 Revenues Costs 100 99 98 97 96 95 94 93 92 91 90 89 88 87 86 85 84 83 82 81 Payers Will Be Underpaying For Care If Deliveries, Surgeries, Etc. Are Reduced $000 Cost & Revenue Changes With Fewer Patients #Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 87 But Spending Can Be Reduced Without Bankrupting Hospitals Cost & Revenue Changes With Fewer Patients 100 99 98 97 96 95 94 93 92 91 90 89 88 87 86 85 84 83 82 81 $000 Payers Can $1,000 Still Save $ $980 Without Causing $960 Negative Margins $940 for Hospital $920 $900 $880 Revenues $860 Costs $840 $820 $800 #Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 88 Need to Understand Hospital Costs, Not Just Hospital Payment Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Vaginal Birth C-Section Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 $4,000 20 $80,000 $7,500 $12,000 680 300 980 $5,100,000 $3,600,000 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 $4,000 300 $1,200,000 1400% $7,500 $12,000 500 200 700 $3,750,000 $2,400,000 $6,150,000 -29% 1000 $10,380,000 -15% -29% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 89 Fixed Costs Are Significant for Standby Services Like Maternity Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% -29% 50% 45% 5% $8,700,000 $12,148 1000 $12,148,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 90 Costs Are What Matter In Determining Adequacy of Payment Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% -29% 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 980 $8,700,000 $12,148 1000 $12,148,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 91 What Happens When # of Hospital Deliveries is Reduced? Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% -29% 700 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 92 Hospital Still Needs to Support Fixed Costs of Maternity Services Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% -29% $4,350,000 0% 700 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 93 Variable Costs Will Decrease With Fewer Admissions Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% $4,350,000 $2,796,429 $3,995 -29% 0% -29% 700 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 94 Assume the Hospital’s Margin Doesn’t Change Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% $4,350,000 $2,796,429 $435,000 $3,995 -29% 0% -29% 0% 700 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 95 Hospital Can Accept Lower Revenue & Maintain Services… Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% 700 $4,350,000 $2,796,429 $435,000 $7,581,429 $3,995 -29% 0% -29% 0% -13% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 96 Cost Per Hospital Delivery Will Increase… Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% 700 $4,350,000 $2,796,429 $435,000 $7,581,429 $3,995 $10,831 -29% 0% -29% 0% -13% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 97 Cost Per Hospital Delivery Will Increase…But Total Spend Declines Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% 700 $4,350,000 $2,796,429 $435,000 $7,581,429 $3,995 $10,831 -29% 0% -29% 0% -13% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 98 Some Savings Achieved, But Not As Dramatic As Predicted Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $4,000 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,200,000 1400% $4,350,000 $3,995 $2,796,429 $435,000 $10,831 700 $7,581,429 $11,811 1000 $11,811,429 -29% 0% -29% 0% -13% -3% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 99 Lower Birth Center Costs With Higher Volume Increases Savings Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $3,500 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,050,000 1213% $4,350,000 $3,995 $2,796,429 $435,000 $10,831 700 $7,581,429 $11,661 1000 $11,661,429 -29% 0% -29% 0% -13% -4% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 100 Bigger Savings Possible If Hospital Can Reduce L&D Capacity Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $3,500 20% $1,740,000 $6,658 75% $6,525,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,050,000 1213% $1,740,000 $6,658 $4,660,714 $435,000 $9,827 700 $6,879,214 $10,959 1000 $10,959,214 -29% 0% -29% +10% -21% -10% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 101 Win-Win-Win for Patients, Payers Birth Center, and Hospital… Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $3,500 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,050,000 1213% $4,350,000 $3,995 $2,796,429 $435,000 $10,831 700 $7,581,429 $11,661 1000 $11,661,429 -29% 0% -29% 0% -13% -4% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 102 Problem: OB-Gyn Practice Loses, And It Has Fixed Costs to Cover Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $3,500 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,050,000 1213% $4,350,000 $3,995 $2,796,429 $435,000 $10,831 700 $7,581,429 $11,661 1000 $11,661,429 -29% 0% -29% 0% -13% -4% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 103 Problem: OB-Gyn Practice Loses, And It Has Fixed Costs to Cover Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 300 $660,000 1400% $3,300 $3,600 $4,000 680 300 980 $2,244,000 $1,080,000 $3,324,000 $3,300 $3,600 20 $80,000 $3,500 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 500 200 700 $1,650,000 $720,000 $2,370,000 300 $1,050,000 1213% $4,350,000 $3,995 $2,796,429 $435,000 $10,831 700 $7,581,429 $11,661 1000 $11,661,429 -29% 0% -29% 0% -13% -4% Birth Center needs cooperation from physicians to succeed because the Birth Center can’t complete all deliveries itself © Center for Healthcare Quality and Payment Reform www.CHQPR.org 104 If Midwives Are Already Doing Many Deliveries, Negative Impact is Lower Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ $2,200 200 $440,000 $2,200 300 $660,000 $3,300 $3,600 $4,000 500 300 800 $1,650,000 $1,080,000 $2,730,000 $3,300 $3,600 20 $80,000 $3,500 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 Chg 50% 400 300 700 $1,320,000 $1,080,000 $2,400,000 300 $1,050,000 1400% $4,350,000 $3,995 $2,796,429 $435,000 $10,831 700 $7,581,429 $11,691 1000 $11,691,429 -12% 0% -29% 0% -13% -2% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 105 If Birth Rate Is Increasing, Savings With No Negative Impact Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ $2,200 200 $440,000 $2,200 300 $660,000 $3,300 $3,600 $4,000 500 300 800 $1,650,000 $1,080,000 $2,730,000 $3,300 $3,600 20 $80,000 $3,500 50% $4,350,000 $3,995 45% $3,915,000 5% $435,000 $8,878 980 $8,700,000 $12,148 1000 $12,148,000 Chg 50% 500 300 800 $1,650,000 $1,080,000 $2,730,000 300 $1,050,000 1213% $4,350,000 $3,995 $3,195,918 $435,000 $9,976 800 $7,980,918 $11,292 1100 $12,420,918 0% 0% -18% 0% -8% 4% 10% Increase in Births = Only 4% Increase in Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 106 What If There Are Competing Maternity Care Providers? Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Providers Other Providers Total Spending CURRENT $/Patient # Pts Total $ $2,200 20 $44,000 $3,300 $3,600 $4,000 $3,995 $8,878 $12,148 $12,148 680 300 980 20 $2,244,000 $1,080,000 $3,324,000 $80,000 50% $4,350,000 45% $3,915,000 5% $435,000 980 $8,700,000 1000 $12,148,000 1000 $12,148,000 $24,296,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 107 What if Maternity Provider Group #1 Offers Birth Center Svc + Savings? Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Providers Other Providers Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ $2,200 20 $44,000 $3,300 $3,600 $4,000 $3,995 $8,878 $12,148 $12,148 680 300 980 20 $2,244,000 $1,080,000 $3,324,000 $80,000 $3,500 50% $4,350,000 45% $3,915,000 5% $435,000 980 $8,700,000 1000 $12,148,000 1000 $12,148,000 $11,661 $12,148 Chg $24,296,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 108 If Patients Shift Away From Other Maternity Providers Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Providers Other Providers Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ $2,200 20 $44,000 $3,300 $3,600 $4,000 $3,995 $8,878 $12,148 $12,148 680 300 980 20 $2,244,000 $1,080,000 $3,324,000 $80,000 50% $4,350,000 45% $3,915,000 5% $435,000 980 $8,700,000 1000 $12,148,000 1000 $12,148,000 Chg $3,500 $11,661 1500 $12,148 500 $24,296,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 109 …And Many New Patients Use Birth Center… Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Providers Other Providers Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 450 $990,000 2150% $3,300 $3,600 $4,000 $3,995 $8,878 $12,148 $12,148 680 300 980 20 $2,244,000 $1,080,000 $3,324,000 $80,000 50% $4,350,000 45% $3,915,000 5% $435,000 980 $8,700,000 1000 $12,148,000 1000 $12,148,000 $3,500 450 $1,575,000 2150% $11,811 1500 $12,148 500 $24,296,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 110 …OB-GYNs Will Still See More Patients… Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Providers Other Providers Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 450 $990,000 2150% $3,300 $3,600 $4,000 $3,995 $8,878 $12,148 $12,148 680 300 980 20 $2,244,000 $1,080,000 $3,324,000 $80,000 50% $4,350,000 45% $3,915,000 5% $435,000 980 $8,700,000 1000 $12,148,000 1000 $12,148,000 $3,300 $3,600 750 300 1050 $3,500 450 $2,475,000 $1,080,000 $3,555,000 7% 2150% $11,811 1500 $12,148 500 $24,296,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 111 …The Hospital Will Have More Deliveries… Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Providers Other Providers Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 450 $990,000 2150% $3,300 $3,600 $4,000 $3,995 $8,878 $12,148 $12,148 680 300 980 20 $2,244,000 $1,080,000 $3,324,000 $80,000 50% $4,350,000 45% $3,915,000 5% $435,000 980 $8,700,000 1000 $12,148,000 1000 $12,148,000 $3,300 $3,600 750 300 1050 $3,500 450 $3,995 $10,831 1050 $11,811 1500 $12,148 500 $2,475,000 $1,080,000 $3,555,000 7% 2150% $4,350,000 $4,194,643 $478,500 $9,023,143 10% 4% $24,296,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 112 …With Significant Savings to Payer Compared to the Status Quo Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Providers Other Providers Total Spending CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 450 $990,000 2150% $3,300 $3,600 $4,000 $3,995 $8,878 $12,148 $12,148 680 300 980 20 $2,244,000 $1,080,000 $3,324,000 $80,000 $3,300 $3,600 750 300 1050 $3,500 450 $2,475,000 $1,080,000 $3,555,000 7% 2150% 50% $4,350,000 45% $3,915,000 5% $435,000 980 $8,700,000 1000 $12,148,000 1000 $12,148,000 $4,350,000 $3,995 $4,194,643 $478,500 $10,831 1050 $9,023,143 $11,811 1500 $15,368,143 $12,148 500 $6,074,000 10% 4% $24,296,000 $21,442,143 -12% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 113 Win-Win-Win for Providers, Patients, Payers With Better Delivery System Midwife OB-GYN Vaginal Birth C-Section Subtotal Birth Center Hospital Fixed Cost Variable Cost Margin Subtotal Providers Other Providers Payer CURRENT FUTURE $/Patient # Pts Total $ $/Patient # Pts Total $ Chg $2,200 20 $44,000 $2,200 450 $990,000 2150% $3,300 $3,600 $4,000 $3,995 $8,878 $12,148 $12,148 680 300 980 20 $2,244,000 $1,080,000 $3,324,000 $80,000 $3,300 $3,600 750 300 1050 $4,000 450 $2,475,000 $1,080,000 $3,555,000 7% 2150% 50% $4,350,000 45% $3,915,000 5% $435,000 980 $8,700,000 1000 $12,148,000 1000 $12,148,000 $4,350,000 $3,995 $4,194,643 $478,500 $10,831 1050 $9,023,143 $11,811 1500 $15,368,143 $12,148 500 $6,074,000 10% 4% $24,296,000 $21,442,143 -12% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 114 Teamwork By All Providers Needed to Offer Condition-Based Pmt Condition-Based Payment OB $$$ C-Section in Hospital Hospital $$$ Normal Pregnancy Delivery Vaginal OB/CNM $$ Delivery in Hospital Hospital $$ Birth Center Episode CNM $ Delivery in Birth Center Birth Ctr $ MATERNITY CARE TEAM: Birth Center + Midwives + OB-GYNs + Hospital © Center for Healthcare Quality and Payment Reform www.CHQPR.org 115 Promote Outcomes/Experience, Don’t Overpromise Savings • Promoting the Value of Birth Centers – Focus on good experience for mother and good outcomes for mother & baby – Don’t promise dramatic savings for payers or mothers © Center for Healthcare Quality and Payment Reform www.CHQPR.org 116 Look for Win-Win Opportunities to Expand Birth Centers • Promoting the Value of Birth Centers – Focus on good experience for mother and good outcomes for mother & baby – Don’t promise dramatic savings for payers or mothers • Focus Expansion Efforts Where Win-Win-Win Opportunities Exist – – – – – – Communities with overcapacity in hospital labor & delivery Communities with OB-GYN practices where physicians are retiring Communities where midwives are already doing many deliveries in hospital Communities with competing maternity care providers Communities with growing populations Communities with large, local employers who can push for change © Center for Healthcare Quality and Payment Reform www.CHQPR.org 117 Proceed Cautiously/Collaboratively in Small & Low-Income Communities • Promoting the Value of Birth Centers – Focus on good experience for mother and good outcomes for mother & baby – Don’t promise dramatic savings for payers or mothers • Focus Expansion Efforts Where Win-Win-Win Opportunities Exist – – – – – – Communities with overcapacity in hospital labor & delivery Communities with OB-GYN practices where physicians are retiring Communities where midwives are already doing many deliveries in hospital Communities with competing maternity care providers Communities with growing populations Communities with large, local employers who can push for change • Proceed Cautiously Where Expansion Could Be Problematic – Hospitals with large numbers of Medicaid patients and low Medicaid payments where the hospital covers losses with commercial maternity care patients – Communities with Critical Access Hospitals where labor & delivery is a major inpatient service and a primary surgical service – Communities with one OB-GYN – Communities with declining populations © Center for Healthcare Quality and Payment Reform www.CHQPR.org 118 Increase Awareness of Birth Centers In Advance of Expansion http://www.post-gazette.com/business/biz-opinion/2011/03/06/regional-insights-better-maternity-care-can-reduce-health-care-costs/201103060506 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 119 If We Do It Right: A Better Maternity Care System • Better Care for Patients – Mothers can receive high quality care with the best outcomes for themselves and their babies • Lower Spending for Payers & Patients – Mothers can receive the lowest cost service that addresses their needs, not the service that generates the highest revenues or margins for providers • Financially Viable Healthcare Providers – Birth centers, midwives, physicians, and hospitals are all paid adequately to deliver the high-quality care that patients need © Center for Healthcare Quality and Payment Reform www.CHQPR.org 120 Learn More About Win-Win-Win Payment and Delivery Reform www.PaymentReform.org © Center for Healthcare Quality and Payment Reform www.CHQPR.org 121 CHQPR Resources on Maternity Care www.PaymentReform.org © Center for Healthcare Quality and Payment Reform www.CHQPR.org 122 For More Information: Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform [email protected] (412) 803-3650 www.CHQPR.org www.PaymentReform.org