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Strategies for Getting Greater Value in Healthcare Source: National Association of Health Underwriters Education Foundation State of U.S. Healthcare Source: National Association of Health Underwriters Education Foundation 2 Healthcare Costs & the Economy Projected 2024 U.S. healthcare spending = $5.46 trillion, 19.6% GDP Source: National Association of Health Underwriters Education Foundation 3 Up, Up and Away: U.S. Healthcare Spending Projections Centers for Medicare and Medicaid Services Source: National Association of Health Underwriters Education Foundation 4 U.S. Healthcare System: High Costs, Mediocre Results We spend far more on healthcare than other countries. Source: National Association of Health Underwriters Education Foundation 5 U.S. Healthcare System: High Costs, Mediocre Results We don’t live as long as people in many other countries. Source: National Association of Health Underwriters Education Foundation 6 What Do We Get For All This Spending? ‣ U.S. ranks last in efficiency ‣ U.S. ranks low on safe and coordinated care and patient access to primary care ‣ However, the U.S. ranks best on: ‣ Provision and receipt of preventive and patient-centered care. ‣ Rapid access to specialists. Source: National Association of Health Underwriters Education Foundation 7 Employers Foot the Bill Employers paid 58% of employees’ healthcare costs in 2014. ‣ A typical family of four has $23,215 in medical costs each year ‣ Employer pays $13,520 ‣ Employee pays $9,695 ‣ ($5,908 in payroll deductions and $3,787 in out-of-pocket costs.) Source: National Association of Health Underwriters Education Foundation 8 What Is Driving Healthcare Costs? ‣ There is no single driver responsible for the nation’s high and rising healthcare costs. ‣ There is no single strategy to meet this challenge. Source: National Association of Health Underwriters Education Foundation 9 What Is Driving Healthcare Costs? ‣ Fee-for-service reimbursement ‣ Insurance benefit design ‣ Fragmentation in care delivery ‣ ‣ Administrative burden Cultural biases influencing care utilization ‣ Healthcare market consolidation ‣ High unit prices of medical services ‣ The health care legal and regulatory environment ‣ Structure and supply of the health professional workforce ‣ Population aging, rising rates of chronic disease and co-morbidities ‣ Advances in medical technology ‣ Lack of transparency about cost, quality ‣ Tax treatment of health insurance Source: National Association of Health Underwriters Education Foundation 10 Chronic Disease Drives Healthcare Spending U.S. Healthcare Spending by Number of Chronic Conditions in 2010 Persons with no chronic conditions 14.2% Persons with more than 5 chronic conditions 35.0% Persons with 1 chronic condition 14.8% Persons with 2 chronic conditions 13.0% Persons with 4 chronic conditions 11.2% Persons with 3 chronic conditions 11.8% Source: National Association of Health Underwriters Education Foundation 11 Quality Varies Widely There is a radical difference in potentially avoidable hospitalization rates across the country Source: National Association of Health Underwriters Education Foundation 12 Price Varies Widely Source: National Association of Health Underwriters Education Foundation 13 Price Varies Widely Price for service in the U.S. can vary as much as Source: National Association of Health Underwriters Education Foundation 14 Price Varies Widely: Massachusetts Hospitals Source: National Association of Health Underwriters Education Foundation 15 Payment Reform Source: National Association of Health Underwriters Education Foundation 16 Fee for Service: Paying for Volume, Not Value ‣ Most healthcare services are paid for with a fee-for-service model. ‣ Pay regardless of quality, outcomes ‣ Pay for every test and procedure regardless of necessity ‣ Doesn’t pay for some important aspects of care – like coordination Source: National Association of Health Underwriters Education Foundation 17 The Objectives of Payment Reform ‣ To pay for the care we want, including better prevention, care coordination and disease management ‣ To not pay for care we don’t want (wasteful/harmful care) ‣ To incentivize and reward providers for delivering high-quality, efficient care ‣ To remove financial barriers to improving the deliver of healthcare Source: National Association of Health Underwriters Education Foundation 18 The Elements of Value-based Payment Reforms ‣ Payment that reflects provider performance, especially the quality and safety of care that providers deliver; ‣ Payment methods that are designed to spur efficiency and reduce unnecessary spending; ‣ If a payment method only addresses efficiency, it is not considered valueoriented; it must include a quality component. Source: National Association of Health Underwriters Education Foundation 19 Payment Framework BASE PAYMENT MODELS Fee For Service Charges Fee Schedule Bundled Payment Per Diem DRG Episode Case Rate Global Payment Partial Capitation Full Capitation Increasing Accountability, Risk, Provider Collaboration, Resistance, and Complexity PERFORMANCE-BASED PAYMENT OR PAYMENT DESIGNED TO CUT WASTE (financial upside & downside depends on quality, efficiency, cost, etc.) Chart: Catalyst for Payment Reform Source: National Association of Health Underwriters Education Foundation 20 The Payment Reform Continuum Type Upside only for providers Examples Physicians •Primary Care Medical Home/payment for care coordination •Payment for shared decision making •Payment for nontraditional visits (e.g. e-visits) •Hospital-physician gainsharing •Pay for Performance •Shared savings Hospitals •Pay for Performance •Shared savings Downside only for providers •Hospital penalties (e.g. readmissions, Hospital Acquired Conditions, never events, warranties, Length of Stay) Two-sided risk (both upside and downside) •Bundled payment •Global payment/capitation •Shared-risk in Accountable Care Organizations Chart: Catalyst for Payment Reform Source: National Association of Health Underwriters Education Foundation 21 Payment Reform Strategies Pay-for-Performance/Bonus Payments ‣ A pay-for-performance model provides performance incentives to providers for increasing quality of care and/or reducing costs ‣ Incentives paid on top of fee-for-service payments Source: National Association of Health Underwriters Education Foundation 22 Payment Reform Strategies Pay-for-Performance/Bonus Payments for Quality/Efficiency Example: ‣ Bridges to Excellence (BTE) recognizes physician practices that meet performance benchmarks ‣ Participating physicians earn both peer recognition and bonuses from participating health plans. Source: National Association of Health Underwriters Education Foundation 23 Payment Reform Strategies Payments Not Tied to Individual Services or Visits ‣ Providers get incentives not tied to fee-for-service payments, such as a payment for care coordination given to patient-centered medical homes Source: National Association of Health Underwriters Education Foundation 24 Payment Reform Strategies Payments Not Tied to Individual Services or Visits Example: ‣ Payment and shared savings for care coordination and case management in a patientcentered medical home. ‣ CareFirst Blue Cross Blue Shield annual medical cost increase dropped to 2 percent for 1 million members in its medical home program Source: National Association of Health Underwriters Education Foundation 25 Payment Reform Strategies Bundled Payment ‣ A single payment to providers or healthcare facilities (or jointly to both) for all services to treat a given condition or to provide a given treatment ‣ Also known as “episode-based payment” ‣ Providers assume financial risk for the cost of services for a particular treatment or condition Source: National Association of Health Underwriters Education Foundation 26 Payment Reform Strategies Bundled Payment Example: Surgery Center of Oklahoma ‣ Flat-fee, all-inclusive pricing for dozens of procedures ‣ Quotes prices on its web site Source: National Association of Health Underwriters Education Foundation 27 Payment Reform Strategies Shared Savings/Shared Risk Models ‣ ‣ Shared savings ‣ Providers paid to provide care for a defined population ‣ Providers are incentivized to reduce unnecessary spending because they share savings with payers Shared risk ‣ Contracts go one step farther: Providers not only share savings, but accept financial liability if they do not meet targets Source: National Association of Health Underwriters Education Foundation 28 Payment Reform Strategies Shared Risk Example: ‣ Blue Shield of California, Hill Physicians and Dignity Health formed ACO to serve CalPERS ‣ ACO reduced Blue Shield premiums for CalPERS beneficiaries by $59 million, or $480 per member per year, over 3 years Source: The Commonwealth Fund’s Case Studies of Accountable Care Systems Source: National Association of Health Underwriters Education Foundation 29 Payment Reform Strategies Non-Payment Policies ‣ Providers do not get paid for performing services that are deemed harmful or do not contribute positively to the care process Source: National Association of Health Underwriters Education Foundation 30 Payment Reform Strategies ‣ Non-Payment Policies Example: ‣ South Carolina Medicaid and Blue Cross Blue Shield of South Carolina teamed up to stop paying for early elective deliveries ‣ Policy realized substantial savings Source: National Association of Health Underwriters Education Foundation 31 Payment Reform Strategies Full Capitation/Global Payment ‣ Health plan pays a fixed dollar payment to providers for the care that members receive in a given time period, such as a month ‣ Payment adjusted for performance and severity of illness of the patient population Source: National Association of Health Underwriters Education Foundation 32 Pairing Benefit Design & Payment Reform Source: National Association of Health Underwriters Education Foundation 33 Why Discuss Pairings of Benefit Designs and Payment Reform? ‣ Benefit design and payment reform are equally important ‣ Benefit design is taking on broader meaning ‣ Some promising payment reforms are slow to be adopted – benefit design could make a difference ‣ If doctors and patients work together, in the same direction, outcomes and the value are more likely to improve Source: National Association of Health Underwriters Education Foundation 34 Benefit Designs in Play Today ‣ Benefit design features fall into the following five domains: 1. Cost sharing ‣ 2. 3. 4. Co-insurance, co-pays, deductibles Financial incentives around lifestyle choices and use of services ‣ Consumer-directed healthcare ‣ Value-based insurance design 5. Policies ‣ Prior authorization ‣ Required referrals to specialists Transparency ‣ Price and quality Financial incentives around choice of provider ‣ Reference pricing ‣ Centers of excellence ‣ Narrow networks Source: National Association of Health Underwriters Education Foundation 35 What is Reference Pricing? Reference Pricing establishes a standard price for a drug, procedure, service or bundle of services, and generally requires that health plan members pay any allowed charges beyond this amount. Consumers seeking care from providers above the reference price may be subject to additional out-ofpocket financial liability $20K Price Variation Identical Service ‣ $15K $10K REFERENCE PRICE Consumers seeking care from providers at or below the reference price are typically responsible for normal or no cost-sharing $5K $0 Frequency and Cost of Services Performed Catalyst for Payment Reform Source: National Association of Health Underwriters Education Foundation 36 Effective Pairing: Reference Pricing & Bundled Payment ‣ CalPERs sets a reference price of $30,000 for hip/knee replacement surgery. ‣ Members who seek care at a higher price provider pay the difference above the reference price. ‣ ‣ In the first nine months: ‣ Number of enrollees who chose a designated highvalue hospital increased from 50% to 64% ‣ Average price fell from $42,000 to $27,000 40 hospitals cut prices Source: National Association of Health Underwriters Education Foundation 37 What is a Narrow Network? ‣ Plans with narrow networks of providers limit the doctors and hospitals their enrollees can use. ‣ Go to doctor A or hospital A, and the plan will pay all or most of the bill ‣ Go to doctor B or hospital B, and the enrollee may have to pay all or most of the bill herself A B Source: National Association of Health Underwriters Education Foundation 38 Effective Pairing: Narrow Network & Shared Savings (and Risk) ‣ Intel has a direct contract with Presbyterian Health System (PHS) ‣ Employees who select the PHS option must use a narrow network of PHS providers ‣ Intel pays PHS directly to manage quality and cost ‣ PHS shares in both savings and risk Source: National Association of Health Underwriters Education Foundation 39 What is Case Management for High-Cost Employees? ‣ Specially trained, multidisciplinary teams coordinate closely with primary care teams to meet the needs of patients with multiple chronic conditions or advanced illness. Source: National Association of Health Underwriters Education Foundation 40 Effective Pairing: Case Management & Shared Risk ‣ Blue Cross Blue Shield of North Carolina created program to identify patients who frequently use emergency rooms ‣ ‣ Identifying and educating identify high ER users eliminated 1,300 inappropriate ER visits in a year Case management pairs well with shared risk. ‣ Incents providers to work in cross-disciplinary teams to ensure the needs of complex patients are being met outside the hospital. Source: National Association of Health Underwriters Education Foundation 41 Price Transparency Source: National Association of Health Underwriters Education Foundation 42 Price and Quality Transparency ‣ Transparency is important to: ‣ Create educated healthcare consumers ‣ Create accountability for price and quality variation among providers ‣ Enable purchasers to judge value Source: National Association of Health Underwriters Education Foundation 43 Defining Price Transparency The National Association of Health Underwriters defines price transparency as “empowering the healthcare consumer with the cost and quality information necessary to make an educated and informed choice on a particular service, treatment, procedure or appliance before they make a buying decision.” Source: National Association of Health Underwriters Education Foundation 44 Employers’ Need for Price Transparency ‣ Employers are asking employees to get engaged, educated and empowered ‣ Empowered employees can help drive better quality and efficiency ‣ Unwarranted price variation needs to be exposed to help identify high-value providers. Source: National Association of Health Underwriters Education Foundation 45 States Are Not Filling the Void… 2015 Report Card on State Price Transparency Laws 1-A 2-Bs 2-Cs 45-Fs Source: National Association of Health Underwriters Education Foundation 46 Private Price Tools on the Rise ‣ The private sector is stepping up with information about price and in some cases quality. ‣ Health plans ‣ Independent vendors: Castlight Health, Change Healthcare, Fair Health, Guroo, Healthcare Bluebook, Zest Health Source: National Association of Health Underwriters Education Foundation 47 The Data Sharing “Spat” Many health plans restrict data use by self-funded purchasers ‣ Some plans do not allow purchasers to give price data to other third party vendors ‣ ‣ They argue that price information is proprietary and confidential Plans making significant investments in more sophisticated and proprietary transparency tools worry that providing data to other vendors supports competing products Source: National Association of Health Underwriters Education Foundation 48 Employers Using Price, Quality Information for Reference Pricing Consumers seeking care from providers above the reference price may be subject to additional out-ofpocket financial liability Price Variation Identical Service $20K $15K $10K $5K REFERENCE PRICE Consumers seeking care from providers at or below the reference price are typically responsible for normal or no cost-sharing $0 Frequency and Cost of Services Performed Catalyst for Payment Reform Source: National Association of Health Underwriters Education Foundation 49 What Employers Can Do About It Tips to Encourage Employee Use of Plan Cost Tools ‣ Incentivize employees ‣ Engage influencers and stakeholders ‣ Email campaign ‣ Use testimonials ‣ Follow up promotion strategy ‣ ‣ Highlight health plan tools in existing benefits communications Engage spouses and dependents ‣ Incorporate tools in new hire onboarding Source: National Association of Health Underwriters Education Foundation 50 Value-based Insurance Design Source: National Association of Health Underwriters Education Foundation 51 A New Approach to Benefits: Recognize Clinical Nuance University of Michigan Center for Value-Based Insurance Design Source: National Association of Health Underwriters Education Foundation 52 Value-based Insurance Design ‣ Sets consumer cost-sharing level on clinical ‣ ‣ Reduce or eliminate financial barriers to high-value clinical services and providers Successfully implemented by hundreds of public and private payers University of Michigan Center for Value-Based Insurance Design Source: National Association of Health Underwriters Education Foundation 53 Example: Waiving Co-Pays for Medications after a Heart Attack ‣ Study assessed impact of free access to preventive medications for Aetna members who had a heart attack ‣ Random trial reported in New England Journal of Medicine ‣ “Enhanced prescription coverage improved medication adherence and rates of (heart attacks) and decreased patient spending without increasing overall health costs.” Source: National Association of Health Underwriters Education Foundation 54 Implementing V-BID: Connecticut State Employees Health Plan ‣ ‣ Participating employees receive a reprieve from higher premiums if they commit to: ‣ Yearly physicals, age-appropriate screenings/preventive care, two free dental cleanings ‣ Employees with certain chronic conditions must participate in disease management programs (which include free office visits and lower drug co-pays) Early results: ‣ 99% of employees enrolled ‣ Decrease in ER and specialty care ‣ Increase in primary care visits ‣ Increase in chronic disease medication adherence ‣ Medical spending trend declined Source: National Association of Health Underwriters Education Foundation 55 Steering Employees to Centers of Excellence ‣ Lowe's eliminates co-pays and pays travel costs if employees use the Cleveland Clinic for elective heart procedures ‣ Cleveland Clinic’s negotiated bundled price beats price of local hospitals Source: National Association of Health Underwriters Education Foundation 56 HSA-qualified HDHPs: Making Them Work for the Chronically Ill ‣ More than 25% of employers now offer High Deductible Health Plans, many with qualified Health Savings Accounts ‣ The clinical downside: Higher out-of-pocket costs may discourage employees from getting evidence-based medical services ‣ The upshot: There is a movement to changes the rules to encourage enrollees with chronic diseases to get the care they need to manage their conditions Graphic: Western Health Advantage Source: National Association of Health Underwriters Education Foundation 57