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CREATING A PHYSICIAN-LED HEALTHCARE FUTURE Better Care for Patients, Lower Healthcare Spending, & Financially Viable Physician Practices Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform www.CHQPR.org Goals of Today’s Presentation • How to Eliminate the Federal Deficit • How to Increase Physicians’ Pay (While Reducing Healthcare Spending) • How to Improve Care for Patients and Lower Their Insurance Premiums • How to Get Rid of Health Insurance Companies (or Make Them Work for Doctors, Rather Than the Other Way Around) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 2 A Short Quiz About the U.S. Economy © Center for Healthcare Quality and Payment Reform www.CHQPR.org 3 A Short Quiz About the U.S. Economy QUESTION #1: Which U.S. industry told its employees every year for the past decade that their pay would be cut by 15-30% regardless of how well they performed? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 4 A Short Quiz About the U.S. Economy QUESTION #1: Which U.S. industry told its employees every year for the past decade that their pay would be cut by 15-30% regardless of how well they performed? ANSWER: Health Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 5 Medicare SGR Is Now Gone, But Physician Pay Is Behind Inflation 28% Lower Than Inflation If SGR Cut Had Been Made © Center for Healthcare Quality and Payment Reform www.CHQPR.org 6 A Short Quiz About the U.S. Economy QUESTION #2: In which U.S. industry can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 7 A Short Quiz About the U.S. Economy QUESTION #2: In which U.S. industry can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well? ANSWER: Health Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 8 Even Without the SGR, Physician Pay Must Be “Budget-Neutral” Physician Payment Budget Neutrality Payments for Specialists Payments for Specialists Payments for PCPs Payments for PCPs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 9 A Short Quiz About the U.S. Economy QUESTION #3: In which U.S. industries are businesses only able to sell their products and services to consumers through an intermediary who demands large discounts and increases prices by 18-25%? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 10 A Short Quiz About the U.S. Economy QUESTION #3: In which U.S. industries are businesses only able to sell their products and services to consumers through an intermediary who demands large discounts and increases prices by 18-25%? ANSWER: Health Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 11 Health Plans Spend As Much on Administration/Profit as on Drugs Admin: $110 billion Drugs: $117 billion Physicians Hospitals © Center for Healthcare Quality and Payment Reform www.CHQPR.org 12 A Lot of a Physician’s Pay Goes To Costs of Dealing with Health Plans Admin: $110 billion Drugs: $117 billion Admin: $30 billion Physicians Hospitals © Center for Healthcare Quality and Payment Reform www.CHQPR.org 13 A Short Quiz About the U.S. Economy QUESTION #4: Who is to blame for the way physicians are paid and micromanaged? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 14 A Short Quiz About the U.S. Economy QUESTION #4: Who is to blame for the way physicians are paid and micromanaged? ANSWER: Physicians © Center for Healthcare Quality and Payment Reform www.CHQPR.org 15 The Blame Rests With Physicians • Physicians haven’t defined solutions to control healthcare costs without rationing • Physicians have allowed themselves to be seen as the causes of higher spending • Physicians don’t collaborate to manage and deliver high-value population health care to purchasers and patients • Physicians haven’t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices © Center for Healthcare Quality and Payment Reform www.CHQPR.org 16 Healthcare Spending Is the Biggest Driver of Federal Deficits 46% of Spending Growth is Healthcare Source: CBO Budget Outlook August 2012 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 17 Three Paths to the Future: Which Door Will Doctors Choose? FUTURE #1 SGR Repeal FUTURE #2 FUTURE #3 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 18 Door #1: Pay for Performance (P4P) PAY FOR PERFORMANCE SGR Repeal © Center for Healthcare Quality and Payment Reform www.CHQPR.org 19 P4P Assumes Providers Need “Incentives” for Higher Value Care $ Bonus Penalty Pay for Performance (“P4P”) Based on Quality and Cost Measures Fee for Service © Center for Healthcare Quality and Payment Reform www.CHQPR.org 20 Hospital Value-Based Payment • Hospital Readmission Penalties • Hospital-Acquired Condition Penalties • Hospital Value-Based Purchasing © Center for Healthcare Quality and Payment Reform www.CHQPR.org 21 Hospital Readmission Penalties $ Current Payment & High Readmit Rate Revenue from High Readmit Rate Reduce Readmissions OR Revenue from Admissions Payments for All Admissions Will Be Cut © Center for Healthcare Quality and Payment Reform www.CHQPR.org 22 The Hope: Hospitals Will Reduce Readmissions to Avoid Penalties $ Current Payment & High Readmit Rate Revenue from High Readmit Rate Revenue from Admissions Lower Readmits & No Payment Cut Revenue from Average Readmit Rate Revenue from Admissions w/ no Change in Payment Rate © Center for Healthcare Quality and Payment Reform www.CHQPR.org 23 The Myth: Hospitals Control All of the Reasons for Readmissions $ Lower Readmits & No Payment Cut Current Payment • Poor Access to & High Readmit Rate Primary Care Revenue from High Readmit Rate Revenue from Admissions • Low Quality of Post-Acute Care • Patients w/o Capacity for Self-Care or Inadequate Home Support Revenue from Average Readmit Rate Revenue from Admissions w/ no Change in Payment Rate © Center for Healthcare Quality and Payment Reform www.CHQPR.org 24 Hospitals May Be Penalized for Having Patients With Higher Needs JAMA Intern Med. Published online September 14, 2015. doi:10.1001/jamainternmed.2015.4660 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 25 Under Current Pmt System, Fewer Readmissions = Lower Margins $ Current Payment & High Readmit Rate Lower Readmits & No Payment Cut Margin Revenue from High Readmit Rate Revenue from Admissions Losses Revenue from Average Readmit Rate Hospital Costs Revenue from Admissions w/ no Change in Payment Rate Hospital Costs (Don’t Decrease in Proportion to Revenues) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 26 So Hospitals Are Hurt Financially One Way or the Other $ Current Payment & High Readmit Rate Lower Readmits & No Payment Cut Losses Losses Revenue from Average Readmit Rate Revenue from High Readmit Rate Reduced Revenue from Admissions Due to Readmission Penalties Hospital Costs Revenue from Admissions w/ no Change in Payment Rate Hospital Costs (Don’t Decrease in Proportion to Revenues) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 27 Pay for Performance Started as Small Quality Bonuses for Docs $ P4P+ QUALITY MEASURES • Mammograms • Colon Cancer Screening • HbA1c Control • LDL FFS © Center for Healthcare Quality and Payment Reform www.CHQPR.org 28 P4P Hasn’t Worked Well Because It Doesn’t Fix FFS Problems $ P4P+ FFS QUALITY MEASURES • Mammograms • Colon Cancer Screening • HbA1c Control • LDL • A small bonus may not be enough to pay for the added costs of improving quality • A small bonus may not be enough to offset loss of fee-for-service revenue from healthier patients or lower utilization • A small bonus may not be enough to offset the costs of collecting and reporting the quality data LOSSES/ UNPAID SVCS © Center for Healthcare Quality and Payment Reform www.CHQPR.org 29 Over-Emphasis on Narrow Quality Measures Can Harm Patients 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 Hypoglycemia Among Medicare Beneficiaries, 1999 to 2011 JAMA Internal Medicine May 17, 2014 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 30 Solution? Add More Measures $ P4P+ QUALITY MEASURES • Mammograms • Colon Cancer Screening • HbA1c Control • LDL P4P+ FFS FFS LOSSES/ UNPAID SVCS LOSSES/ UNPAID SVCS QUALITY MEASURES • Mammograms • Colon Cancer Screening • Flu Vaccine • Tobacco Counseling • Hypertension Control • HbA1c Control • LDL • Eye Exams • Aspirin Use © Center for Healthcare Quality and Payment Reform www.CHQPR.org 31 When That Didn’t Work, Bonuses Were Converted Into Penalties $ P4P+ QUALITY MEASURES • Mammograms • Colon Cancer Screening • HbA1c Control • LDL P4P+ QUALITY MEASURES • Mammograms • Colon Cancer Screening • Flu Vaccine • BMI Screens • Tobacco Counseling • Fall Risk Assessment • Hypertension Control • HbA1c Control • LDL • Eye Exams • Aspirin Use QUALITY MEASURES • Mammograms • Colon Cancer Screening • Flu Vaccine • Tobacco Counseling • Hypertension Control • HbA1c Control • LDL • Eye Exams • Aspirin Use P4PFFS FFS FFS LOSSES/ UNPAID SVCS LOSSES/ UNPAID SVCS LOSSES/ UNPAID SVCS © Center for Healthcare Quality and Payment Reform www.CHQPR.org 32 Medicare P4P Will First Hit Small Practices (<10) Next Year 2017 $ +x% +x% +x% -4.5% +x% -6% -9% -10% 2018 FFS FFS FFS FFS 2015 2016 2017 2018 NPs, PAs 1-9 Docs 10-99 Docs 100+ Docs 1-9 Docs 10-99 Docs 100+ Docs 100+ Docs 10-99 Docs 100+ Docs 2015 2016 2017 2018 Chart Not Drawn to Scale Value-Based Modifier: 4% Penalties or Bonuses Meaningful Use: 3% Penalties Physician Quality Reporting (PQRS): 2% Penalties TOTAL Potential Penalties: 9% Penalty Value-Based Modifier: 4+% Penalties or Bonuses Meaningful Use: 4% Penalties Physician Quality Reporting (PQRS): 2% Penalties TOTAL Potential Penalties: 10+% Penalty Small Practices Start 2017 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 33 The End of Collaboration? • In the CMS Value-Based Payment Modifier, bonuses are only paid to physicians who have above average quality if penalties are assessed on other physicians with below average quality • To maintain budget neutrality, the size of bonuses depends on the size of penalties • Under this system, why would high-performing physicians want to help under-performing physicians to improve? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 34 Merit-Based Incentive Payment System (MIPS) is P4P on Steroids $ +x% +x% -4.5% +x% -6% -9% +10% +10% +10% +10% +10% +10% +9x% +9x% +9x% +9x% +9x% +7x% +5x% +x% +4x% -4% -9% -5% -7% -9% -9% -9% -9% -10% FFS FFS FFS FFS FFS FFS FFS FFS FFS FFS FFS FFS 2015 2016 2017 2018 2019 2020 2021 2022 2023 TODAY • Meaningful Use (MU) • Quality Reporting (PQRS) • Value Modifier (VM) 2024 2025 2026 MIPS • • • • “Advancing Care Information” (EHR Use) Quality Performance Program Resource Use Clinical Practice Improvement © Center for Healthcare Quality and Payment Reform www.CHQPR.org 35 Physicians Will Be Increasingly Penalized for High Resource Use 2020 Quality Resource Use “Clinical Practice Improvement Activities” “Advancing Care Information” (EHR Use) 2021+ Quality 30% Resource Use 30% 15% “Clinical Practice Improvement Activities” 15% 25% “Advancing Care Information” (EHR Use) 25% 50% 10% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 36 Resource Use Performance Measures • Average of all applicable resource use measures – Total Per Capita Costs (total spending per patient per year) • Dropped condition-specific groups currently used in Value Modifier – Medicare Spending Per Beneficiary (spending in hospital + 30 days) – Episode measures, e.g., • Spending during and after admission for exacerbation of heart failure • Spending during surgery and rehabilitation for knee replacement • Spending during treatment and rehabilitation for stroke • Measures are calculated from claims data, attributed to physicians based on measure-specific attribution formulas, and used for MIPS if there are a minimum number of cases – Total Per Capita Costs attributed to PCP with most office visits – Medicare Spending Per Beneficiary (MSPB) attributed to hospital physician with most physician billings during hospital stay – Episodes attributed based on physician who billed for trigger event © Center for Healthcare Quality and Payment Reform www.CHQPR.org 37 Door #1: Accountability Without Resources or Flexibility PAY FOR PERFORMANCE (MIPS) SGR Repeal • Accountability for: • • • • Quality Measures Spending on Patients “Meaningful Use” “Practice Improvement” • No Change in the Services Physicians are Paid For or the Adequacy of Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 38 Door #2: Alternative Payment Models PAY FOR PERFORMANCE (MIPS) SGR Repeal ALTERNATIVE PAYMENT MODELS (APMs) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 39 MACRA Encourages Use of APMs Instead of MIPS • Physicians who participate in approved Alternative Payment Models (APMs) at more than a minimum level: – – – – are exempt from MIPS receive a 5% lump sum bonus receive a higher annual update (increase) in their FFS revenues receive the benefits of participating in the APM © Center for Healthcare Quality and Payment Reform www.CHQPR.org 40 The Need for “Alternative Payment Models” PROBLEM Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost © Center for Healthcare Quality and Payment Reform www.CHQPR.org 41 The Need for “Alternative Payment Models” PROBLEM BARRIER #1 No payment or inadequate payment for many high-value services, e.g., Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost • Responding to patient phone calls that can avoid office or ER visits • Calls among physicians to determine a diagnosis or coordinate care delivery • Hiring nurses to help chronic disease patient avoid exacerbations • Providing palliative care, not just hospice © Center for Healthcare Quality and Payment Reform www.CHQPR.org 42 The Need for “Alternative Payment Models” PROBLEM BARRIER #1 No payment or inadequate payment for many high-value services, e.g., Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost • Responding to patient phone calls that can avoid office or ER visits • Calls among physicians to determine a diagnosis or coordinate care delivery • Hiring nurses to help chronic disease patient avoid exacerbations • Providing palliative care, not just hospice BARRIER #2 Loss of revenue when patients stay healthy and don’t need procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 43 Alternative Payment Models Being Implemented by Medicare 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 44 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 45 …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 46 Problems With “Shared Savings” • Physicians receive no upfront resources to improve care management for patients • Conservative physicians receive little or no additional revenue and may be forced out of business • Physicians who have been practicing inefficiently or inappropriately can receive bonuses to practice more appropriately • Physicians could be paid more for denying needed care • Physicians are placed at risk for costs they cannot control • Shared savings bonuses are temporary and “re-benchmarking” leaves physicians with inadequate payment to deliver necessary services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 47 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 48 Private Shared Savings ACOs Are Also Floundering © Center for Healthcare Quality and Payment Reform www.CHQPR.org 49 Why?? No Change in the Way Physicians or Hospitals Are Paid MEDICARE Fee-for-Service Payment PATIENTS ACO Heart Disease Diabetes Back Pain Pregnancy Primary Radiology, Cardiology Neurosurgery OB/GYN Care Endocrinology © Center for Healthcare Quality and Payment Reform www.CHQPR.org 50 Most ACOs Spend a Lot on IT and Nurse Care Managers MEDICARE Fee-for-Service Payment PATIENTS Heart Disease ACO Expensive IT Systems Nurse Care Managers Diabetes Back Pain Pregnancy Primary Radiology, Cardiology Neurosurgery OB/GYN Care Endocrinology © Center for Healthcare Quality and Payment Reform www.CHQPR.org 51 Possible Future “Shared Savings” Doesn’t Support Better Care Today MEDICARE Fee-for-Service Payment PATIENTS Heart Disease Diabetes Back Pain Shared Savings Payment??? ACO Expensive IT Systems Nurse Care Managers Share of Shared Savings Payment?? Pregnancy Primary Radiology, Cardiology Neurosurgery OB/GYN Care Endocrinology © Center for Healthcare Quality and Payment Reform www.CHQPR.org 52 Most ACOs Today Aren’t Truly Redesigning Care MEDICARE Fee-for-Service Payment PATIENTS Heart Disease Diabetes Back Pain Shared Savings Payment??? ACO Expensive IT Systems Nurse Care Managers Share of Shared Savings Payment?? Pregnancy Primary Radiology, Cardiology Neurosurgery OB/GYN Care Endocrinology © Center for Healthcare Quality and Payment Reform www.CHQPR.org 53 ACOs Try to “Manage Care” Like Health Plans Do & It Works As Badly MEDICARE Fee-for-Service Payment PATIENTS Heart Disease Shared Savings Payment??? ACO~HEALTH PLAN Expensive IT Systems Nurse Care Managers Diabetes Back Pain Pregnancy Primary Radiology, Cardiology Neurosurgery OB/GYN Care Endocrinology © Center for Healthcare Quality and Payment Reform www.CHQPR.org 54 Are Bundled Payments Better Than ACOs? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 55 CMS “Comprehensive Care for Joint Replacement” EPISODE PAYMENT FOR SURGERIES PATIENT Hospital Costs for Surgery Readmits Post-Acute Care (IRF, SNF, HH) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 56 Principal Goal of CMS Proposal Is Reducing Post-Acute Care Cost EPISODE PAYMENT FOR SURGERIES PATIENT Hospital Costs for Surgery Readmits Hospital Costs for Surgery Readmits Post-Acute Care (IRF, SNF, HH) Post-Acute SAVINGS Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 57 Proposed Structure Encourages Lower Spending, Not Better Care EPISODE PAYMENT FOR SURGERIES PATIENT Hospital Costs for Surgery Readmits Hospital Costs for Surgery Readmits Post-Acute Care (IRF, SNF, HH) Post-Acute SAVINGS Care • No risk adjustment – target spending amount is the same for high-risk, poor functional status patients as low-risk patients • No flexibility to deliver different types of post-acute care or to be paid differently – no change in current payment systems © Center for Healthcare Quality and Payment Reform www.CHQPR.org 58 Hospitals at Risk for Total Cost With Everyone Still Paid the Same EPISODE PAYMENT FOR SURGERIES PATIENT Hospital Costs for Surgery Readmits Hospital Costs for Surgery Readmits Post-Acute Care (IRF, SNF, HH) Post-Acute SAVINGS Care • No risk adjustment – target spending amount is the same for high-risk, poor functional status patients as low-risk patients • No flexibility to deliver different types of post-acute care or to be paid differently – no change in current payment systems • Hospital is at risk for higher post-acute care spending CMS Hospital Providers and Post-Acute Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 59 Over Time, CMS Keeps More of the Savings, If There Are Any EPISODE PAYMENT FOR SURGERIES PATIENT Hospital Costs for Surgery Readmits Hospital Costs for Surgery Readmits Post-Acute Care (IRF, SNF, HH) Post-Acute SAVINGS Care • No risk adjustment – target spending amount is the same for high-risk, poor functional status patients as low-risk patients • No flexibility to deliver different types of post-acute care or to be paid differently – no change in current payment systems • Hospital is at risk for higher post-acute care spending • Target spending is reduced every year to match lower FFS spending, even if “savings” were being used to pay for services not supported by FFS CMS Hospital Providers and Post-Acute Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 60 If There Are Fewer Surgeries, CMS Keeps ALL of the Savings EPISODE PAYMENT FOR SURGERIES PATIENT Hospital Costs for Surgery Readmits Hospital Costs for Surgery Readmits Post-Acute Care (IRF, SNF, HH) Post-Acute SAVINGS Care CMS Hospital Non-Surg. Treatment SAVINGS Providers and Post-Acute Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 61 CMS Proposing Same Approach for AMI, CABG, and Hip Fracture © Center for Healthcare Quality and Payment Reform www.CHQPR.org 62 How Will the Future Unfold? Current FFS System CMS APMs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 63 Starting with Hip & Knee Surgery, CABG, and AMI… Hospital At-Risk for Total Cost of Joint Care Current FFS System © Center for Healthcare Quality and Payment Reform www.CHQPR.org 64 …CMS Could Put Hospitals “In Charge” of All Inpatient Procedures Hospital At-Risk for Total Cost of Joint Care Hospital Super-DRG For All Hospital Admissions Current FFS System © Center for Healthcare Quality and Payment Reform www.CHQPR.org 65 CMS Puts Physicians at Risk for Total Cost of Outpatient Services Hospital At-Risk for Total Cost of Joint Care Current FFS System Physician P4P Based on Total Episode Spending Hospital Super-DRG For All Hospital Admissions Physician At-Risk for Total Cost of Outpatient Services (SGR Redux) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 66 The Likely Result: Everyone Will Need to Work for a Health System Hospital At-Risk for Total Cost of Joint Care Current FFS System Physician P4P Based on Total Episode Spending Hospital Super-DRG For All Hospital Admissions Physician At-Risk for Total Cost of Outpatient Services (SGR Redux) Physicians, Small Hospitals, and Other Providers Have No Choice But to Be Part of Large Health Systems © Center for Healthcare Quality and Payment Reform www.CHQPR.org 67 Big Health Systems Are Much Easier for CMS to Control Hospital At-Risk for Total Cost of Joint Care Current FFS System Physician P4P Based on Total Episode Spending Hospital Super-DRG For All Hospital Admissions Physician At-Risk for Total Cost of Outpatient Services (SGR Redux) Physicians, Small Hospitals, and Other Providers Have No Choice But to Be Part of Large Health Systems Simple System For Medicare to Regulate © Center for Healthcare Quality and Payment Reform www.CHQPR.org 68 Result: Lack of Choice and High Prices For Everyone Else Hospital At-Risk for Total Cost of Joint Care Current FFS System Physician P4P Based on Total Episode Spending Hospital Super-DRG For All Hospital Admissions Physician At-Risk for Total Cost of Outpatient Services (SGR Redux) Physicians, Small Hospitals, and Other Providers Have No Choice But to Be Part of Large Health Systems Simple System For Medicare to Regulate Few/No Choices for Patients or Physicians, Higher Private Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 69 What’s Behind Door #3? PAY FOR PERFORMANCE (MIPS) SGR Repeal ALTERNATIVE PAYMENT MODELS (APMs) DOOR #3 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 70 Door #1 and Door #2 are Payer-Designed Payment Systems HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Physicians Have To Change Care to Align With Payment Systems Patients and Physicians May Not Come Out Ahead © Center for Healthcare Quality and Payment Reform www.CHQPR.org 71 Physicians Need to Design Payments to Support Good Care HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Physicians Have To Change Care to Align With Payment Systems Patients and Physicians May Not Come Out Ahead THE RIGHT WAY TO DESIGN PAYMENT REFORMS Physicians Redesign Care and Identify Payment Barriers Payers Change Payment to Support Redesigned Care Patients Get Better Care and Physicians Stay Financially Viable © Center for Healthcare Quality and Payment Reform www.CHQPR.org 72 The Third Door Under MACRA PAY FOR PERFORMANCE (MIPS) SGR Repeal ALTERNATIVE PAYMENT MODELS (APMs) PHYSICIAN-FOCUSED PAYMENT MODELS © Center for Healthcare Quality and Payment Reform www.CHQPR.org 73 MACRA Requires Development of Physician-Focused APMs • Physician-Focused Payment Model Technical Advisory Committee (PTAC) created by Congress to solicit and review proposals from physician groups, medical specialty societies, and others for “physician-focused payment models” and to make recommendations to CMS as to which models to implement • Under MACRA, CMS must respond to PTAC recommendations, but is not required to implement them. (However, there will considerable pressure on CMS, from Congress and others, to implement the recommendations.) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 74 What Happens When Physicians Redesign Patient Care and Receive Adequate Payments to Support It? Better Care at Lower Cost for Total Joint Replacement PHYSICIAN LEADER: Stephen J. Zabinski, MD Director, Division of Orthopaedic Surgery, Shore Medical Ctr © Center for Healthcare Quality and Payment Reform www.CHQPR.org 76 Better Care at Lower Cost for Total Joint Replacement PHYSICIAN LEADER: Stephen J. Zabinski, MD Director, Division of Orthopaedic Surgery, Shore Medical Ctr OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • Reduce surgical complications by reducing patient risk factors prior to surgery • Obtain lower prices for implants from vendors • Match implants to patient needs • Return patients home as quickly as possible • Use lower cost settings for surgery and rehabilitation © Center for Healthcare Quality and Payment Reform www.CHQPR.org 77 Better Care at Lower Cost for Total Joint Replacement PHYSICIAN LEADER: Stephen J. Zabinski, MD Director, Division of Orthopaedic Surgery, Shore Medical Ctr OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS BARRIERS IN THE CURRENT PAYMENT SYSTEM • Reduce surgical complications by reducing patient risk factors prior to surgery • Obtain lower prices for implants from vendors • Match implants to patient needs • Return patients home as quickly as possible • Use lower cost settings for surgery and rehabilitation • No payment for pre-operative patient risk reduction programs • No payment for care coordination throughout surgical episode • Separate payments to hospital and physician • No data on costs of facilities © Center for Healthcare Quality and Payment Reform www.CHQPR.org 78 Better Care at Lower Cost for Total Joint Replacement PHYSICIAN LEADER: Stephen J. Zabinski, MD Director, Division of Orthopaedic Surgery, Shore Medical Ctr OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS BARRIERS IN THE CURRENT PAYMENT SYSTEM • Reduce surgical complications by reducing patient risk factors prior to surgery • Obtain lower prices for implants from vendors • Match implants to patient needs • Return patients home as quickly as possible • Use lower cost settings for surgery and rehabilitation • No payment for pre-operative patient risk reduction programs • Average length of stay TKR: 3.3 1.8 days THR: 2.9 1.6 days • No payment for care coordination throughout surgical episode • Average device cost $6,301 $4,242 • Separate payments to hospital and physician • No data on costs of facilities RESULTS WITH ADEQUATE PAYMENT FOR BETTER CARE • Discharges to home 34% 78% • Readmission rate 3.2% 2.7% • Total Episode Spending TKR: $25,365 $19,597 THR: $26,580 $20,636 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 79 Better Care at Lower Cost for Crohn’s Disease PHYSICIAN LEADER: Lawrence R. Kosinski, MD Managing Partner, Illinois Gastroenterology Group © Center for Healthcare Quality and Payment Reform www.CHQPR.org 80 Better Care at Lower Cost for Crohn’s Disease PHYSICIAN LEADER: Lawrence R. Kosinski, MD Managing Partner, Illinois Gastroenterology Group OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • Health plan spends $11,000/year/patient on patients with Crohn’s • >50% of expenses are for hospital care, most due to complications • <33% of patients seen by physician in 30 days prior to hospitalization • 10% of expenses for biologics, many administered in hospitals • 3.5% of spending goes to gastroenterologists © Center for Healthcare Quality and Payment Reform www.CHQPR.org 81 Better Care at Lower Cost for Crohn’s Disease PHYSICIAN LEADER: Lawrence R. Kosinski, MD Managing Partner, Illinois Gastroenterology Group OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • Health plan spends $11,000/year/patient on patients with Crohn’s • >50% of expenses are for hospital care, most due to complications • <33% of patients seen by physician in 30 days prior to hospitalization • 10% of expenses for biologics, many administered in hospitals • 3.5% of spending goes to gastroenterologists BARRIERS IN THE CURRENT PAYMENT SYSTEM • No payment to support “medical home” services in gastroenterology practice: No payment for nurse care manager No payment for clinical decision support tools to ensure evidencebased care No payment for proactive telephone contact with patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 82 Better Care at Lower Cost for Crohn’s Disease PHYSICIAN LEADER: Lawrence R. Kosinski, MD Managing Partner, Illinois Gastroenterology Group OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • Health plan spends $11,000/year/patient on patients with Crohn’s • >50% of expenses are for hospital care, most due to complications • <33% of patients seen by physician in 30 days prior to hospitalization • 10% of expenses for biologics, many administered in hospitals • 3.5% of spending goes to gastroenterologists BARRIERS IN THE CURRENT PAYMENT SYSTEM • No payment to support “medical home” services in gastroenterology practice: No payment for nurse care manager No payment for clinical decision support tools to ensure evidencebased care No payment for proactive telephone contact with patients RESULTS WITH ADEQUATE PAYMENT FOR BETTER CARE • Hospitalization rate cut by more than 50% • Total spending reduced by 10% even with higher payments to the physician practice • Improved patient satisfaction due to fewer complications and lower out-of-pocket costs www.SonarMD.com © Center for Healthcare Quality and Payment Reform www.CHQPR.org 83 Better Care at Lower Cost for Cancer PHYSICIAN LEADER: Barbara McAneny, MD CEO, New Mexico Cancer Center © Center for Healthcare Quality and Payment Reform www.CHQPR.org 84 Better Care at Lower Cost for Cancer PHYSICIAN LEADER: Barbara McAneny, MD CEO, New Mexico Cancer Center OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • 40-50% of patients receiving chemotherapy are hospitalized for complications of treatment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 85 Better Care at Lower Cost for Cancer PHYSICIAN LEADER: Barbara McAneny, MD CEO, New Mexico Cancer Center OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS BARRIERS IN THE CURRENT PAYMENT SYSTEM • 40-50% of patients receiving chemotherapy are hospitalized for complications of treatment • No payment for triage services to enable rapid response to patient complications • No payment for patient and family education about complications and how to respond • Inadequate payment to reserve capacity for IV hydration of patients experiencing problems © Center for Healthcare Quality and Payment Reform www.CHQPR.org 86 Better Care at Lower Cost for Cancer PHYSICIAN LEADER: Barbara McAneny, MD CEO, New Mexico Cancer Center OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS BARRIERS IN THE CURRENT PAYMENT SYSTEM • 40-50% of patients receiving chemotherapy are hospitalized for complications of treatment • No payment for triage services to enable rapid response to patient complications • No payment for patient and family education about complications and how to respond RESULTS WITH ADEQUATE PAYMENT FOR BETTER CARE • 36% fewer ED visits • 43% fewer admissions • 22% reduction in total cost of care ($4,784 over six months) • Inadequate payment to reserve capacity for IV hydration of patients experiencing problems © Center for Healthcare Quality and Payment Reform www.CHQPR.org 87 Better Care at Lower Cost for Pregnancy PHYSICIAN LEADER: Steve Calvin, MD Medical Director, Minnesota Birth Center © Center for Healthcare Quality and Payment Reform www.CHQPR.org 88 Better Care at Lower Cost for Pregnancy PHYSICIAN LEADER: Steve Calvin, MD Medical Director, Minnesota Birth Center OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • 33% C-section rate, 2x recommended rate • 25% of mothers want to deliver in a birth center, <2% actually do • Significantly lower costs for delivery in birth centers than hospitals © Center for Healthcare Quality and Payment Reform www.CHQPR.org 89 Better Care at Lower Cost for Pregnancy PHYSICIAN LEADER: Steve Calvin, MD Medical Director, Minnesota Birth Center OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • 33% C-section rate, 2x recommended rate • 25% of mothers want to deliver in a birth center, <2% actually do • Significantly lower costs for delivery in birth centers than hospitals BARRIERS IN THE CURRENT PAYMENT SYSTEM • Inadequate payment or no payment at all for deliveries in birth centers • Higher payments to hospitals for C-sections, higher $/hour to physicians for C-sections • Impossible to determine or compare total cost of delivery with separate payments for facility, OB/Gyn, pediatrician, and others and separate payments for mother and baby © Center for Healthcare Quality and Payment Reform www.CHQPR.org 90 Better Care at Lower Cost for Pregnancy PHYSICIAN LEADER: Steve Calvin, MD Medical Director, Minnesota Birth Center OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • 33% C-section rate, 2x recommended rate • 25% of mothers want to deliver in a birth center, <2% actually do • Significantly lower costs for delivery in birth centers than hospitals BARRIERS IN THE CURRENT PAYMENT SYSTEM RESULTS WITH ADEQUATE PAYMENT FOR BETTER CARE • Inadequate payment or no payment at all for deliveries in birth centers • 68% of deliveries in birth center • Higher payments to hospitals for C-sections, higher $/hour to physicians for C-sections • 28% reduction in cost of maternity care • 9% C-section rate • Impossible to determine or compare total cost of delivery with separate payments for facility, OB/Gyn, pediatrician, and others and separate payments for mother and baby © Center for Healthcare Quality and Payment Reform www.CHQPR.org 91 Better Care at Lower Cost for Emergency Room Patients PHYSICIAN LEADER: Jennifer L. Wiler, MD Assoc. Prof. of Emergency Medicine, University of Colorado © Center for Healthcare Quality and Payment Reform www.CHQPR.org 92 Better Care at Lower Cost for Emergency Room Patients PHYSICIAN LEADER: Jennifer L. Wiler, MD Assoc. Prof. of Emergency Medicine, University of Colorado OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • Many individuals have 3+ Emergency Department visits per year • Many frequent ED users have no insurance or inability to afford copays, behavioral health problems, and no PCP © Center for Healthcare Quality and Payment Reform www.CHQPR.org 93 Better Care at Lower Cost for Emergency Room Patients PHYSICIAN LEADER: Jennifer L. Wiler, MD Assoc. Prof. of Emergency Medicine, University of Colorado OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • Many individuals have 3+ Emergency Department visits per year • Many frequent ED users have no insurance or inability to afford copays, behavioral health problems, and no PCP BARRIERS IN THE CURRENT PAYMENT SYSTEM • No payment for patient education and care coordination in the ED • No payment for home visits to help patients after discharge • No funding to address non-medical needs such as lack of transportation © Center for Healthcare Quality and Payment Reform www.CHQPR.org 94 Better Care at Lower Cost for Emergency Room Patients PHYSICIAN LEADER: Jennifer L. Wiler, MD Assoc. Prof. of Emergency Medicine, University of Colorado OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS • Many individuals have 3+ Emergency Department visits per year • Many frequent ED users have no insurance or inability to afford copays, behavioral health problems, and no PCP BARRIERS IN THE CURRENT PAYMENT SYSTEM RESULTS WITH ADEQUATE PAYMENT FOR BETTER CARE • No payment for patient education and care coordination in the ED • 41% fewer ED visits • No payment for home visits to help patients after discharge • 80% now have a primary care provider • No funding to address non-medical needs such as lack of transportation • 49% fewer admissions • 50% lower total spending including cost of program © Center for Healthcare Quality and Payment Reform www.CHQPR.org 95 How Do You Define a Good Alternative Payment Model That Supports High Quality Physician-Directed Patient Care? Step 1: Identify Opportunities to Reduce Avoidable Spending Fee-for-Service Payment (FFS) OPPORTUNITIES TO REDUCE SPENDING WITHOUT HARMING PATIENTS $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services • Reduce Avoidable Hospital Admissions • Reduce Unnecessary Tests and Treatments • Use Lower-Cost Tests and Treatments • Deliver Services More Efficiently • Use Lower-Cost Sites of Service • Reduce Preventable Complications • Prevent Serious Conditions From Occurring FFS Payments to Physician Practice © Center for Healthcare Quality and Payment Reform www.CHQPR.org 97 Step 2: Identify Barriers in Current Payments That Need to Be Fixed Fee-for-Service Payment (FFS) OPPORTUNITIES TO REDUCE SPENDING WITHOUT HARMING PATIENTS $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services • Reduce Avoidable Hospital Admissions • Reduce Unnecessary Tests and Treatments • Use Lower-Cost Tests and Treatments • Deliver Services More Efficiently • Use Lower-Cost Sites of Service • Reduce Preventable Complications • Prevent Serious Conditions From Occurring BARRIERS IN CURRENT FFS SYSTEM • No Payment for Many High-Value Services • Insufficient Revenue to Cover Costs When Using Fewer or Lower-Cost Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 98 Step 3: Design an APM That Removes the Payment Barriers Fee-for-Service Payment (FFS) Physician-Focused Alternative Payment Model $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Flexible, Adequate Payment for Physician’s Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 99 Step 3: Design an APM That Removes the Payment Barriers Fee-for-Service Payment (FFS) $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Physician-Focused Alternative Payment Model • Paying more for time needed for adequate diagnosis and treatment planning, particularly for complex patients • Paying for time spent on phone calls & emails with patients & other physicians • Paying for nurses to help patients with self-management • Eliminating time spent on unnecessary documentation and battles with health plans Flexible, Adequate Payment for Physician’s Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 100 Step 4: Include Provisions to Assure Control of Cost & Quality Fee-for-Service Payment (FFS) $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Physician-Focused Alternative Payment Model Savings Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Avoidable Spending Payments to Other Providers for Related Services Accountability for Controlling Avoidable Spending Flexible, Adequate Payment for Physician’s Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 101 How Can Well-Designed Alternative Payment Models Help Physicians Financially? Most of the Money in Healthcare Doesn’t Go to Physicians Physicians: 16% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 103 Most of the $ for Diabetes Care is For Complications, Not Doctors Hospital Admissions (43%) Source: “Economic Costs of Diabetes in the U.S. in 2012,” Diabetes Care (Volume 36) April 2013 Physicians (9%) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 104 Could We Afford to Spend More on Better Diabetes Management? Hospital Admits Physicians Better Pay for Physicians © Center for Healthcare Quality and Payment Reform www.CHQPR.org 105 Yes, If We Can Prevent Expensive Complications Hospital Admits Physicians Avoided Hospital Admits Better Pay for Physicians © Center for Healthcare Quality and Payment Reform www.CHQPR.org 106 Example: 20% More Care Mgt $ + 6% Fewer Admits = Lower Total $ -1% -6% Hospital Admits Physicians +20% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 107 “Alternative Payment Models” Can Be Win-Win-Wins Fee-for-Service Payment (FFS) $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Physician-Focused Alternative Payment Model Savings Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Avoidable Spending Payments to Other Providers for Related Services Flexible, Adequate Payment for Physician’s Services Win for Payer: Lower Total Spending Win for Patient: Better Care Without Unnecessary Services Win for Physician: Adequate Payment for High-Value Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 108 Example: Reducing Avoidable Surgeries for Knee Osteoarthritis © Center for Healthcare Quality and Payment Reform www.CHQPR.org 109 Example: Reducing Avoidable Surgeries for Knee Osteoarthritis CURRENT $/Patient # Pts Total $ Primary Care Evaluations $100 100 $10,000 Treatment of Knee Osteoarthritis • 100 patients with knee pain visit PCP for evaluation © Center for Healthcare Quality and Payment Reform www.CHQPR.org 110 Example: Reducing Avoidable Surgeries for Knee Osteoarthritis CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal $100 100 $10,000 $200 $500 20 20 $4,000 $10,000 $14,000 Treatment of Knee Osteoarthritis • 100 patients with knee pain visit PCP for evaluation • Physical therapy used by 20% of patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 111 Example: Reducing Avoidable Surgeries for Knee Osteoarthritis CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 Treatment of Knee Osteoarthritis • 100 patients with knee pain visit PCP for evaluation • Physical therapy used by 20% of patients • Surgery performed procedure on 80% of evaluated patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 112 Example: Reducing Avoidable Surgeries for Knee Osteoarthritis CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 Treatment of Knee Osteoarthritis • 100 patients with knee pain visit PCP for evaluation • Physical therapy used by 20% of patients • Surgery performed procedure on 80% of evaluated patients 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 113 Example: Reducing Avoidable Surgeries for Knee Osteoarthritis CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 100 $1,096,000 Treatment of Knee Osteoarthritis • 100 patients with knee pain visit PCP for evaluation • Physical therapy used by 20% of patients • Surgery performed procedure on 80% of evaluated patients • 25% of surgeries avoidable with better outpatient management © Center for Healthcare Quality and Payment Reform www.CHQPR.org 114 Under FFS, Low Payment for Diagnosis & Treatment Planning CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 115 Under FFS, Low Payment for Non-Surgical Options CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 116 Under FFS, Fewer Surgeries = Losses for Providers & Hospitals CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $1,400 60 $84,000 -25% $12,000 80 $960,000 $12,000 60 $720,000 -25% 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 117 A P4P/MIPS Bonus to the Surgeon Doesn’t Offset Loss of Revenue CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 FUTURE $/Patient # Pts Total $ $1,456 60 $87,360 Chg -22% +4% $12,000 80 $960,000 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 118 Is There a Better Way? CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ $100 100 $10,000 ? $200 $500 20 20 ? ? $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 ? Chg ? 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 119 A Better Way: Pay PCPs for Good Diagnosis & Treatment Planning CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 FUTURE $/Patient # Pts Total $ Chg $200 100 $1,096,000 Better Payment for Condition Management • PCP paid adequately to help patient decide on treatment options © Center for Healthcare Quality and Payment Reform www.CHQPR.org 120 A Better Way: Pay Adequately for Non-Surgical Management CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ $100 100 $10,000 $200 $200 $500 20 20 $500 $750 $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 Chg 100 $1,096,000 Better Payment for Condition Management • PCP paid adequately to help patient decide on treatment options • Physiatrists & physical therapists paid to deliver effective non-surgical care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 121 A Better Way: Pay Adequately For the Necessary Surgeries CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ $100 100 $10,000 $200 $200 $500 20 20 $500 $750 $1,400 80 $4,000 $10,000 $14,000 $112,000 $12,000 80 $960,000 Chg $2,100 100 $1,096,000 Better Payment for Condition Management • PCP paid adequately to help patient decide on treatment options • Physiatrists & physical therapists paid to deliver effective non-surgical care • Surgeon paid more per surgery for patients who need surgery © Center for Healthcare Quality and Payment Reform www.CHQPR.org 122 If That Results in 25% Fewer Surgeries… CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ $100 100 $10,000 $200 100 $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $12,000 80 $960,000 $12,000 60 Chg 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 123 Physicians Could Be Paid More… CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $12,000 80 $960,000 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 124 Physicians Could Be Paid More… ….While Still Reducing Total $ CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $12,000 80 $960,000 $12,000 60 $720,000 -25% 100 $916,000 -16% 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 125 Win-Win-Win for Providers, Payers, & Patients CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $12,000 80 $960,000 $12,000 60 $720,000 -25% 100 $916,000 -16% Total Pmt/Cost Physicians Win 100 $1,096,000 Patients Win Payer Wins © Center for Healthcare Quality and Payment Reform www.CHQPR.org 126 What About the Hospital? CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $12,000 80 $960,000 $12,000 60 $720,000 -25% 100 $916,000 -16% 100 $1,096,000 Hospital Loses © Center for Healthcare Quality and Payment Reform www.CHQPR.org 127 Do Hospitals Have to Lose In Order for Providers & Payers To Win? CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $12,000 80 $960,000 $12,000 60 $720,000 -25% 100 $916,000 -16% Total Pmt/Cost Physicians Win 100 $1,096,000 Hospital Loses Payer Wins © Center for Healthcare Quality and Payment Reform www.CHQPR.org 128 What Should Matter to Hospitals is Margin, Not Revenues (Volume) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 129 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 130 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 131 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 Surgeries, Readmissions, Etc. Are Reduced $000 Cost & Revenue Changes With Fewer Patients #Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 132 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 133 We Need to Understand the Hospital’s Cost Structure CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Surgeries Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $12,000 80 $960,000 $12,000 60 $720,000 -25% 100 $916,000 -16% 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 134 Adequacy of Payment Depends On Fixed/Variable Costs & Margins CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 135 Now, if the Number of Procedures is Reduced… CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 60 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 136 …Fixed Costs Will Remain the Same (in the Short Run)… CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 $480,000 0% 60 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 137 …Variable Costs Will Go Down in Proportion to Procedures… CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 $480,000 $324,000 0% -25% $5,400 60 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 138 …And Even With a Higher Margin for the Hospital… CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 $480,000 $324,000 $52,800 0% -25% +10% $5,400 60 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 139 …The Hospital Gets Less Total Revenue But Higher Margin CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 60 $480,000 $324,000 $52,800 $856,800 0% -25% +10% -11% $5,400 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 140 …And The Payer Still Saves Money CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 60 $480,000 $324,000 $52,800 $856,800 0% -25% +10% -11% 100 $1,052,800 -4% 100 $1,096,000 $5,400 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 141 Win-Win-Win-Win for Patients Providers, Hospital, and Payer CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost $100 100 $200 $500 20 20 $1,400 80 $6,000 50% $5,400 45% $600 5% $12,000 80 $10,000 FUTURE $/Patient # Pts Total $ $200 Chg 100 $20,000 100% $4,000 $500 40 $10,000 $750 40 $14,000 $112,000 Providers $2,100 Win 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $480,000 $324,000 $52,800 $856,800 0% -25% +10% -11% 100 $1,052,800 -4% Hospital Wins $480,000 Payer Wins $432,000 $48,000 $960,000 100 $1,096,000 $5,400 60 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 142 What Payment Model Supports This Win-Win-Win Approach? CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 60 $480,000 $324,000 $52,800 $856,800 0% -25% +10% -11% 100 $1,052,800 -4% 100 $1,096,000 $5,400 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 143 Renegotiating Individual Fees is Impractical… CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 60 $480,000 $324,000 $52,800 $856,800 0% -25% +10% -11% 100 $1,052,800 -4% 100 $1,096,000 $5,400 $14,280 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 144 …What Assures The Payer That There Will Be Fewer Procedures? CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost FUTURE $/Patient # Pts Total $ Chg $100 100 $10,000 $200 100 $20,000 100% $200 $500 20 20 $500 $750 40 40 $1,400 80 $4,000 $10,000 $14,000 $112,000 $2,100 60 $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 60 $480,000 $324,000 $52,800 $856,800 0% -25% +10% -11% 100 $1,052,800 -4% 100 $1,096,000 ? $5,400 $14,280 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 145 Solution:Pay Based on the Patient’s Condition, Not on the Procedures CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost $10,960 $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 FUTURE $/Patient # Pts Total $ Chg 100 $1,096,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 146 Plan to Offer Care of the Condition at a Lower Cost Per Patient CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost $10,960 $100 100 $10,000 $200 $500 20 20 $1,400 80 $4,000 $10,000 $14,000 $112,000 $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 100 $1,096,000 FUTURE $/Patient # Pts Total $ $10,528 Chg 100 © Center for Healthcare Quality and Payment Reform www.CHQPR.org -4% 147 Use the Payment as a Budget to Redesign Care… CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost $10,960 $100 100 $10,000 $200 $500 20 20 80 $4,000 $10,000 $14,000 $112,000 $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 $1,400 100 $1,096,000 FUTURE $/Patient # Pts Total $ $10,528 Chg 100 $20,000 100% 60 $50,000 $126,000 257% +13% 60 $480,000 $324,000 $52,800 $856,800 100 $1,052,800 © Center for Healthcare Quality and Payment Reform www.CHQPR.org -4% 148 …And Let Providers & Hospitals Decide How They Should Be Paid CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost $10,960 FUTURE $/Patient # Pts Total $ $100 100 $10,000 $200 $200 $500 20 20 $500 $750 80 $4,000 $10,000 $14,000 $112,000 $6,000 50% $5,400 45% $600 5% $12,000 80 $480,000 $432,000 $48,000 $960,000 $1,400 100 $1,096,000 $2,100 $10,528 Chg 100 $20,000 100% 60 $50,000 $126,000 257% +13% 60 $480,000 $324,000 $52,800 $856,800 100 $1,052,800 © Center for Healthcare Quality and Payment Reform www.CHQPR.org -4% 149 Condition-Based Payment Allows True Win-Win-Win Solutions CURRENT $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal $6,000 50% $5,400 45% $600 5% $12,000 80 Condition Pmt. $10,960 $100 100 $200 $500 20 20 $1,400 80 $10,000 FUTURE $/Patient # Pts Total $ $200 100 $20,000 100% $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $480,000 $324,000 $52,800 $856,800 0% -25% +10% -11% 100 $1,052,800 -4% $4,000 $500 40 $10,000 $750 40 $14,000 $112,000 Physicians $2,100 Win 60 $200Wins Hospital $480,000 Payer Wins $432,000 $48,000 $960,000 60 100 $1,096,000 $10,528 Chg © Center for Healthcare Quality and Payment Reform www.CHQPR.org 150 Condition-Based Payment Requires a Team Approach to Care Delivery Condition Mgt Team CURRENT $/Patient # Pts Total $ FUTURE $/Patient # Pts Total $ Chg Primary Care Phys. Therapy $100 100 $200 $500 20 20 $1,400 80 Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal $6,000 50% $5,400 45% $600 5% $12,000 80 Condition Pmt. $10,960 $10,000 $200 100 $20,000 100% $20,000 $30,000 $50,000 $126,000 400% 200% 257% +13% $480,000 $324,000 $52,800 $856,800 0% -25% +10% -11% 100 $1,052,800 -4% $4,000 $500 40 $10,000 $750 40 $14,000 $112,000 Physicians $2,100 Win 60 Hospital Wins $480,000 Payer Wins $432,000 $48,000 $960,000 100 $1,096,000 60 $10,528 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 151 Tie Payment to Outcomes to Prevent Undertreatment • Patient return to functionality • Lack of pain • Avoiding infections for surgery © Center for Healthcare Quality and Payment Reform www.CHQPR.org 152 Patients Differ in Their Need for Surgery vs. Physical Therapy LOWER-RISK PATIENTS # Pts Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Surgery 40% Need Surgery HIGHER-RISK PATIENTS # Pts 50 50 30 30 10 10 20 40 80% Need Surgery © Center for Healthcare Quality and Payment Reform www.CHQPR.org 153 Condition-Based Payment Amount Must Be Stratified on Patient Needs LOWER-RISK PATIENTS $/Patient # Pts Total $ Primary Care Evaluations Non-Surg.Tx Management Phys. Therapy Subtotal Surgeon Hospital Pmt Fixed Costs Variable Costs Margin Subtotal Total Pmt/Cost HIGHER-RISK PATIENTS $/Patient # Pts Total $ $200 50 $10,000 $200 50 $10,000 $500 $750 30 30 $500 $750 10 10 $2,100 20 $15,000 $22,500 $37,500 $42,000 $2,100 40 $5,000 $7,500 $12,500 $84,000 20 $192,000 $108,000 $21,120 $321,120 40 $288,000 $216,000 $31,680 $535,680 50 $410,620 50 $642,180 $5,400 $8,212 $5,400 $12,844 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 154 Opportunities for Lower-Cost Care for Many Conditions • Knee Osteoarthritis – Home-based rehab instead of facility-based rehab – Physical therapy instead of surgery • Maternity Care – Vaginal delivery instead of C-Section – Term delivery instead of early elective delivery – Delivery in birth center instead of hospital • 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 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 155 Opportunities for Lower-Cost Care for Many Conditions • Knee Osteoarthritis TODAY – Home-based rehab instead of facility-based rehab – Physical therapy instead of surgery • Maternity Care – Vaginal delivery instead of C-Section – Term delivery instead of early elective delivery – Delivery in birth center instead of hospital Savings for Payers = Lower Margins for Hospitals • 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 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 156 Opportunities for Lower-Cost Care for Many Conditions • Knee Osteoarthritis TODAY – Home-based rehab instead of facility-based rehab – Physical therapy instead of surgery • Maternity Care – Vaginal delivery instead of C-Section – Term delivery instead of early elective delivery – Delivery in birth center instead of hospital • 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 Savings for Payers = Lower Margins for Hospitals CONDITION-BASED PAYMENT Savings for Payers = Higher Margins for Hospitals © Center for Healthcare Quality and Payment Reform www.CHQPR.org 157 What if We Paid for Cars the Way We Paid for Care? What if We Paid for Cars the Way We Paid for Care? How Would You Control Spending on Cars If Insurance Was Paying? Should the Government Set Fees for Each Car Part? HCPCS Codes (Hierarchical Car Parts Compensation System) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 160 And Pay Auto Workers Based On How Many Parts They Installed? HCPCS Codes (Hierarchical Car Parts Compensation System) AMA Automobile Manufacturing Association CPT System (Car Parts Tokens) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 161 The Result for Drivers If We Paid That Way… © Center for Healthcare Quality and Payment Reform www.CHQPR.org 162 The Result for Drivers If We Paid That Way… Cars would get many unnecessary parts © Center for Healthcare Quality and Payment Reform www.CHQPR.org 163 The Result for Drivers If We Paid That Way… Cars would get many unnecessary parts Cars would be readmitted to the factory frequently to correct malfunctions © Center for Healthcare Quality and Payment Reform www.CHQPR.org 164 The Way We Actually Pay for Cars Is Much Better Pay for Complete Cars With Warranties, Not Parts & Repairs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 166 People Aren’t Forced to Buy Cars But Have Choices of Transportation $ © Center for Healthcare Quality and Payment Reform www.CHQPR.org 167 What Happens to ACOs with Physician-Focused APMs? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 168 Patients Have Many Healthcare Needs PATIENTS Heart Disease Diabetes Back Pain Pregnancy © Center for Healthcare Quality and Payment Reform www.CHQPR.org 169 Each Patient Should Choose & Use a Primary Care Practice… PATIENTS Heart Disease Diabetes Primary Care Practice Back Pain Pregnancy © Center for Healthcare Quality and Payment Reform www.CHQPR.org 170 …Which Takes Accountability for What PCPs Can Control/Influence MEDICARE, MEDICAID HEALTH PLAN PATIENTS Heart Disease Diabetes Back Pain Accountable Medical Home Primary Care Practice Accountability for: • Avoidable ER Visits • Avoidable Hospitalizations • Unnecessary Tests • Unnecessary Referrals Pregnancy © Center for Healthcare Quality and Payment Reform www.CHQPR.org 171 …With a Medical Neighborhood to Consult With on Complex Cases MEDICARE, MEDICAID HEALTH PLAN PATIENTS Heart Disease Diabetes Accountable Medical Home Primary Care Practice Back Pain Pregnancy Endocrinology, Cardiology, Radiology Accountability for: •Unnecessary Tests •Unnecessary Referrals •Co-Managed Outcomes Accountable Medical Neighborhood © Center for Healthcare Quality and Payment Reform www.CHQPR.org 172 ..And Specialists Accountable for the Conditions They Manage MEDICARE, MEDICAID Accountability for: HEALTH PLAN •Unnecessary Tests •Unnecessary Procedures •Infections, Complications PATIENTS Heart Disease Diabetes Accountable Medical Home Primary Care Practice Cardiology Group Heart Episode/ Condition Pmt Neurosurg. PMR Group Back Surgery Episode Pmt OB/GYN Group Pregnancy Condition Pmt Back Pain Pregnancy Endocrinology, Cardiology, Radiology Accountable Medical Neighborhood © Center for Healthcare Quality and Payment Reform www.CHQPR.org 173 That’s Building the ACO from the Bottom Up MEDICARE, MEDICAID HEALTH PLAN Accountable Payment Models PATIENTS Heart Disease Diabetes Accountable Medical Home Primary Care Practice ACO Cardiology Group Heart Episode/ Condition Pmt Neurosurg. PMR Group Back Surgery Episode Pmt OB/GYN Group Pregnancy Condition Pmt Back Pain Pregnancy Endocrinology, Cardiology, Radiology Accountable Medical Neighborhood © Center for Healthcare Quality and Payment Reform www.CHQPR.org 174 A True ACO/CIN Can Take a Global Payment And Make It Work MEDICARE, MEDICAID HEALTH PLAN, EMPLOYER Risk-Adjusted Global Payment PATIENTS Heart Disease Diabetes Accountable Medical Home Primary Care Practice ACO/CIN Cardiology Group Heart Episode/ Condition Pmt Neurosurg. PMR Group Back Surgery Episode Pmt OB/GYN Group Pregnancy Condition Pmt Back Pain Pregnancy Endocrinology, Cardiology, Physiatry Accountable Medical Neighborhood © Center for Healthcare Quality and Payment Reform www.CHQPR.org 175 Isn’t This Capitation? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 176 Isn’t This Capitation? CAPITATION (WORST VERSIONS) No Additional Revenue for Taking Sicker Patients Providers Lose Money On Unusually Expensive Cases Providers Are Paid Regardless of the Quality of Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 177 Isn’t This Capitation? No – It’s Different CAPITATION (WORST VERSIONS) RISK-ADJUSTED GLOBAL PMT No Additional Revenue for Taking Sicker Patients Payment Levels Adjusted Based on Patient Conditions Providers Lose Money On Unusually Expensive Cases Limits on Total Risk Providers Accept for Unpredictable Events Providers Are Paid Regardless of the Quality of Care Bonuses/Penalties Based on Quality Measurement © Center for Healthcare Quality and Payment Reform www.CHQPR.org 178 Isn’t This Capitation? No – It’s Different CAPITATION (WORST VERSIONS) RISK-ADJUSTED GLOBAL PMT No Additional Revenue for Taking Sicker Patients Payment Levels Adjusted Based on Patient Conditions Providers Lose Money On Unusually Expensive Cases Limits on Total Risk Providers Accept for Unpredictable Events Providers Are Paid Regardless of the Quality of Care Bonuses/Penalties Based on Quality Measurement Provider Makes More Money If Patients Stay Well Provider Makes More Money If Patients Stay Well Flexibility to Deliver Highest-Value Services Flexibility to Deliver Highest-Value Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 179 You Don’t Need a Big Health System to Manage Global Payment • Independent PCPs & Specialists Managing Global Payments – 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 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 180 What’s the Patient’s Role and Accountability? Payment System Patient Provider Ability and Incentives to: • Keep patients well • Avoid unneeded services • Deliver services efficiently • Coordinate services with other providers © Center for Healthcare Quality and Payment Reform www.CHQPR.org 181 Benefit Design Changes Are Also Critical to Success Ability and Incentives to: • Improve health • Take prescribed medications • Allow a provider to coordinate care • Choose the highest-value providers and services Benefit Design Payment System Patient Provider Ability and Incentives to: • Keep patients well • Avoid unneeded services • Deliver services efficiently • Coordinate services with other providers © Center for Healthcare Quality and Payment Reform www.CHQPR.org 182 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 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 183 Example: No Coordination of Pharmacy & Medical Benefits Single-minded focus on reducing costs here... Pharmacy Benefits Drug Costs • High copays for brand-names when no generic exists • Doughnut holes & deductibles ...often results in higher spending on hospitalizations Medical Benefits Hospital Costs Physician Costs Other Services Principal treatment for most chronic diseases involves regular use of maintenance medication © Center for Healthcare Quality and Payment Reform www.CHQPR.org 184 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 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 185 Airfare Choices from Boston to Cleveland Boston 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 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 186 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 Airfares for July 6-7, 2011 as of 6/26/11 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 187 Flat Copayments: First Class Fare Wins Boston Cleveland ? Consumer Share of Travel Cost $100 Copayment: USAirways 1-Stop Coach $622 $100 United Non-Stop Coach $1,107 $100 United Non-Stop First Class $1,355 $100 Airfares for July 6-7, 2011 as of 6/26/11 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 188 Coinsurance: First Class Fare Probably Wins Boston Cleveland ? Consumer Share of Travel Cost $100 Copayment: 10% Coinsurance: USAirways 1-Stop Coach $622 $100 $62 United Non-Stop Coach $1,107 $100 $111 United Non-Stop First Class $1,355 $100 $136 Airfares for July 6-7, 2011 as of 6/26/11 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 189 High Deductible: First Class Fare Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 $100 Copayment: 10% Coinsurance: $100 $62 $100 $111 $500 Deductible: $500 $500 United Non-Stop First Class $1,355 $500 $100 $136 Airfares for July 6-7, 2011 as of 6/26/11 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 190 Price Difference: Lowest Coach Fare Wins 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 $500 $100 Copayment: 10% Coinsurance: $100 $62 $100 $111 $100 $136 $500 Deductible: Lowest Coach Fare: $500 $0 $500 $485 $733 Airfares for July 6-7, 2011 as of 6/26/11 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 191 Where Will You Get Your Knee Replaced? Knee Joint Replacement Consumer Share of Surgery Cost Price #1 $20,000 Price #2 $25,000 Price #3 $30,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 192 Where Will You Get Your Knee Replaced? Knee Joint Replacement Consumer Share of Surgery Cost $1,000 Copayment: 10% Coinsurance w/$2,000 OOP Max: $5,000 Deductible: Price #1 $20,000 Price #2 $25,000 $1,000 $2,000 $1,000 $2,000 $5,000 $5,000 Price #3 $30,000 $5,000 $1,000 $2,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 193 Where Will You Get Your Knee Replaced? Knee Joint Replacement Consumer Share of Surgery Cost $1,000 Copayment: 10% Coinsurance w/$2,000 OOP Max: $5,000 Deductible: Highest-Value: Price #1 $20,000 Price #2 $25,000 Price #3 $30,000 $5,000 $1,000 $2,000 $1,000 $2,000 $1,000 $2,000 $5,000 $0 $5,000 $5,000 $10,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 194 Flying to Pittsburgh vs. Cleveland Boston Boston Cleveland Pittsburgh Cleveland Airfares for July 6-7, 2011 as of 6/26/11 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 195 Why Is It So Much Cheaper to Fly to Pittsburgh Than Cleveland? Boston Cleveland One-Stop Coach Fare: $662 Non-Stop Coach Fare: $1,107 Boston Pittsburgh Non-Stop Coach Fare: $188 Airfares for July 6-7, 2011 as of 6/26/11 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 196 Is It The Shorter Distance? Boston Cleveland ? 551 Air Miles One-Stop Coach Fare: $662 Non-Stop Coach Fare: $1,107 Boston Pittsburgh ? 483 Air Miles Non-Stop Coach Fare: $188 Airfares for July 6-7, 2011 as of 6/26/11 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 197 Or Greater Competition? Boston NONCOMPETITIVE MARKET Cleveland ? Choice: United Non-Stop: $1,107 (No other non-stop choice) Boston Pittsburgh ? COMPETITIVE MARKET Airfares for July 6-7, 2011 as of 6/26/11 Choice #1: Delta Non-Stop: $188 Choice #2: JetBlue Non-Stop: $188 Choice #3: USAirways Non-Stop: $238 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 198 Choice & Competition Encourages Efficiency Knee Joint Replacement Consumer Share of Surgery Cost Highest-Value: Price #1 $20,000 $0 Price #2 $25,000 $5,000 Price #3 $30,000 $10,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 199 Loss of Choice & Competition Will Lead to Higher Costs Knee Joint Replacement Consumer Share of Surgery Cost Highest-Value: Price #1 $20,000 $0 Price #2 $25,000 $5,000 Price #3 $30,000 $10,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 200 Which Is More Likely to Generate True Price Competition? Hospital ACO/CIN ONE BIG ACO HOSPITAL MD DO MD DO DO MD DO MD DO MD DO MD MD DO MD DO DO MD DO MD MD DO MD DO DO MD DO MD DO MD DO MD MD DO MD DO DO MD DO MD DO MD DO MD IPA ACO/CIN HOSPITAL VS HOSPITAL MD DO MD DO DO MD DO MD MD DO MD DO Physician Group ACO/CIN HOSPITAL MD DO MD DO HOSPITAL DO MD DO MD © Center for Healthcare Quality and Payment Reform www.CHQPR.org 201 This All Sounds Really Hard This All Sounds Really Hard Can’t We Just Keep Doing What We’re Doing Today Until We Retire? The Opportunities to Reduce Costs Without Rationing Are Widely Known Reducing Hospital Readmissions Helping Patients with Chronic Disease Stay Out of Hospital Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 204 The Question is: How Will Payers Get The Savings? PAYER ? Reducing Hospital Readmissions Helping Patients with Chronic Disease Stay Out of Hospital Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 205 The Payer-Driven Approach to Achieving Savings Managed Fee-for-Service Readmission Penalty Physician P4P/VBM High Deductibles Prior Authorization Narrow Networks Tiering on Cost PAYER Reducing Hospital Readmissions Helping Patients with Chronic Disease Stay Out of Hospital Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 206 The Physician-Driven Approach to Achieving Savings PAYER/PURCHASER Global Pmt/Budget Reducing Hospital Readmissions Helping Patients with Chronic Disease Stay Out of Hospital Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Clinically Integrated Network (CIN) or Accountable Care Organization (ACO) Reducing the Cost of Expensive Inpatient Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 207 Very Different Models… Managed Fee-for-Service Readmission Penalty Physician P4P/VBM High Deductibles Prior Authorization Narrow Networks Tiering on Cost PAYER/PURCHASER Global Pmt/Budget Reducing Hospital Readmissions Helping Patients with Chronic Disease Stay Out of Hospital Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Clinically Integrated Network (CIN) or Accountable Care Organization (ACO) Reducing the Cost of Expensive Inpatient Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 208 …And Very Different Impacts on Physicians Managed Fee-for-Service PAYER/PURCHASER Global Pmt/Budget 1. Payer defines how care should be redesigned 1. Physicians determine how care should be redesigned 2. Payer obtains all savings from lower utilization 2. Physicians and Purchaser/Payer agree on adequate price for quality care and amount of savings for payer 3. Payer decides how much savings to share with physicians, if any 3. Physicians get to keep any additional savings and to determine how to divide it © Center for Healthcare Quality and Payment Reform www.CHQPR.org 209 A Different “Triple Aim” • Better Care for Patients – Physicians having the flexibility to design care that matches patient needs • Lower Spending for Payers – Physicians able to use the best combination of services for patients without worrying about which service generates more profits • Financially Viable Physician Practices (and Hospitals) – – – – Physicians paid adequately to deliver high-quality care Physicians able to remain independent if they want to Hospitals paid adequately to cover their standby costs Hospitals able to thrive without acquiring physician practices © Center for Healthcare Quality and Payment Reform www.CHQPR.org 210 Still to Come • How to design an Alternative Payment Model that works for your patients in your practice • How to make health plans work for you, rather than being forced to work for them • What you need to do now to create a physician-led healthcare payment & delivery system © Center for Healthcare Quality and Payment Reform www.CHQPR.org 211 PART 2: Designing an Alternative Payment Model Step 1: Identify Opportunities to Reduce Avoidable Spending Fee-for-Service Payment (FFS) OPPORTUNITIES TO REDUCE SPENDING WITHOUT HARMING PATIENTS $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services • Reduce Avoidable Hospital Admissions • Reduce Unnecessary Tests and Treatments • Use Lower-Cost Tests and Treatments • Deliver Services More Efficiently • Use Lower-Cost Sites of Service • Reduce Preventable Complications • Prevent Serious Conditions From Occurring FFS Payments to Physician Practice © Center for Healthcare Quality and Payment Reform www.CHQPR.org 213 Step 2: Identify Barriers in Current Payments That Need to Be Fixed Fee-for-Service Payment (FFS) OPPORTUNITIES TO REDUCE SPENDING WITHOUT HARMING PATIENTS $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services • Reduce Avoidable Hospital Admissions • Reduce Unnecessary Tests and Treatments • Use Lower-Cost Tests and Treatments • Deliver Services More Efficiently • Use Lower-Cost Sites of Service • Reduce Preventable Complications • Prevent Serious Conditions From Occurring BARRIERS IN CURRENT FFS SYSTEM • No Payment for Many High-Value Services • Insufficient Revenue to Cover Costs When Using Fewer or Lower-Cost Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 214 Step 3: Design an APM That Removes the Payment Barriers Fee-for-Service Payment (FFS) Physician-Focused Alternative Payment Model $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Flexible, Adequate Payment for Physician’s Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 215 Step 4: Include Provisions to Assure Control of Cost & Quality Fee-for-Service Payment (FFS) $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Physician-Focused Alternative Payment Model Savings Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Avoidable Spending Payments to Other Providers for Related Services Accountability for Controlling Avoidable Spending Flexible, Adequate Payment for Physician’s Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 216 The Starting Point is Care Design, Not a Payment Model HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Physicians Have To Change Care to Align With Payment Systems Patients and Physicians May Not Come Out Ahead THE RIGHT WAY TO DESIGN PAYMENT REFORMS Physicians Redesign Care and Identify Payment Barriers Payers Change Payment to Support Redesigned Care Patients Get Better Care and Physicians Stay Financially Viable © Center for Healthcare Quality and Payment Reform www.CHQPR.org 217 Step 1: Identify Opportunities to Reduce Avoidable Spending Fee-for-Service Payment (FFS) OPPORTUNITIES TO REDUCE SPENDING WITHOUT HARMING PATIENTS $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services • Reduce Avoidable Hospital Admissions • Reduce Unnecessary Tests and Treatments • Use Lower-Cost Tests and Treatments • Deliver Services More Efficiently • Use Lower-Cost Sites of Service • Reduce Preventable Complications • Prevent Serious Conditions From Occurring FFS Payments to Physician Practice © Center for Healthcare Quality and Payment Reform www.CHQPR.org 218 5-17% of Hospital Admissions Are Potentially Preventable Source: AHRQ HCUP © Center for Healthcare Quality and Payment Reform www.CHQPR.org 219 Millions of Preventable Events Harm Patients and Increase Costs # Errors (2008) Medical Error Cost Per Error Total U.S. Cost Pressure Ulcers 374,964 $10,288 $3,857,629,632 Postoperative Infection 252,695 $14,548 Complications of Implanted Device 60,380 $18,771 $3,676,000,000 $1,133,392,980 Infection Following Injection 8,855 $78,083 $691,424,965 Pneumothorax 25,559 $24,132 $616,789,788 Central Venous Catheter Infection 7,062 $83,365 $588,723,630 Others 773,808 $11,640 $9,007,039,005 TOTAL 1,503,323 $13,019 $19,571,000,000 3 Adverse Events Every Minute Source: The Economic Measurement of Medical Errors, Milliman and the Society of Actuaries, 2010 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 220 Many Ways to Reduce Tests & Services Without Harming Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 221 Diagnostic Error is a Fundamental Quality Issue Underlying All Others © Center for Healthcare Quality and Payment Reform www.CHQPR.org 222 Institute of Medicine Estimate: 30% of Spending is Avoidable © Center for Healthcare Quality and Payment Reform www.CHQPR.org 223 Avoidable Spending Opportunities Differ from Specialty to Specialty Fee-for-Service Payment (FFS) $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice SURGERY • Unnecessary surgery • Use of unnecessarily-expensive implants • Infections and complications of surgery • Overuse of inpatient rehabilitation 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 224 Step 2: Identify Barriers in Current Payments to Delivering Better Care Fee-for-Service Payment (FFS) OPPORTUNITIES TO REDUCE SPENDING WITHOUT HARMING PATIENTS $ Total Spending Relevant to the Physician’s Services Physician Practice Revenue Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services • Reduce Avoidable Hospital Admissions • Reduce Unnecessary Tests and Treatments • Use Lower-Cost Tests and Treatments • Deliver Services More Efficiently • Use Lower-Cost Sites of Service • Reduce Preventable Complications • Prevent Serious Conditions From Occurring BARRIERS IN CURRENT FFS SYSTEM • No Payment for Many High-Value Services • Insufficient Revenue to Cover Costs When Using Fewer or Lower-Cost Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 225 Your Turn What is an opportunity to reduce healthcare spending on the patients in your practice that is related to the services you deliver or order? Be specific about: 1. what kinds of patients would be involved 2. where or how savings would be generated (what would there be less of, or what lower-cost alternative would be used?) What is the most important change in the way care is delivered that you or others would need to make in order to achieve savings for this opportunity? What are the biggest problems with the current payment system that would make it difficult or impossible for you or others to implement the changes in care and achieve these savings? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 226 There Are Many Physician-Focused Alternatives to CMS APMs www.PaymentReform.org APM #1: Payment for a High-Value Service APM #2: Condition-Based Payment for a Physician’s Services APM #3: Multi-Physician Bundled Payment APM #4: Physician-Facility Procedure Bundle APM #5: Warrantied Payment for Physician Services APM #6: Episode Payment for a Procedure APM #7: Condition-Based Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 227 There Are Many Physician-Focused Alternatives to CMS APMs www.PaymentReform.org Multiple Types APM #1: Payment for a High-Value Service of APM #2: Condition-BasedAPMs Payment for a Physician’s Services Needed APM #3: Multi-Physician Bundled Payment Because APM #4: Physician-Facility Procedure Bundle Physicians APM #5: Warrantied Payment for Physician Deliver Services Different APM #6: Episode Payment for a Procedure Types APM #7: Condition-Based ofPayment Care to Different Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 228 Proceduralists Can Reduce Complications & Improve Efficiency Proceduralist High Spending on Complications & Post-Acute Care Hospital $ Low Complication & PAC Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 229 Procedural Episode Payments Support Higher Quality/Lower Cost Procedural Episode Payment Proceduralist High Spending on Complications & Post-Acute Care Hospital $ Low Complication & PAC Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 230 What if You Can Avoid the Procedure Altogether? Procedural Episode Payment Proceduralist High Spending on Complications & Post-Acute Care Hospital $ $ Low Complication & PAC Spending Medical Management © Center for Healthcare Quality and Payment Reform www.CHQPR.org 231 Specialists Managing a Condition Can Avoid Unnecessary Procedures Procedural Episode Payment Condition Specialist Proceduralist High Spending on Complications & Post-Acute Care Hospital $ $ Low Complication & PAC Spending Medical Management © Center for Healthcare Quality and Payment Reform www.CHQPR.org 232 Condition-Based Payment Supports Use of Highest-Value Treatment ConditionBased Payment Condition Specialist Procedural Episode Payment Proceduralist High Spending on Complications & Post-Acute Care Hospital $ $ Low Complication & PAC Spending Medical Management © Center for Healthcare Quality and Payment Reform www.CHQPR.org 233 Are We Making the Payment for the Correct Condition?? ConditionBased Payment Wrong Condition Procedural Episode Payment Proceduralist High Spending on Complications & Post-Acute Care Hospital $ Low Complication & PAC Spending $ Medical Management ??????? $ Correct Condition Correct Treatment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 234 The Diagnostician Ensures the Right Condition is Being Treated ConditionBased Payment Condition Specialist Procedural Episode Payment Proceduralist High Spending on Complications & Post-Acute Care Hospital $ Low Complication & PAC Spending $ Medical Management Diagnostician $ Correct Condition Correct Treatment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 235 “Condition-Based” Payment Also Needed to Support Good Diagnosis ConditionBased Payment (Symptoms) ConditionBased Payment (Diagnosis) Condition Specialist Procedural Episode Payment Proceduralist High Spending on Complications & Post-Acute Care Hospital $ Low Complication & PAC Spending $ Medical Management Diagnostician $ Correct Condition Correct Treatment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 236 Different Physicians Play These Roles & Need Appropriate APMs Procedural Episode Payment Surgeon High Spending on Complications & Post-Acute Care Hospital $ Low Complication & PAC Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 237 Different Physicians Play These Roles & Need Appropriate APMs ConditionBased Payment (Diagnosis) Internist Procedural Episode Payment Surgeon High Spending on Complications & Post-Acute Care Hospital $ $ Low Complication & PAC Spending Medical Management © Center for Healthcare Quality and Payment Reform www.CHQPR.org 238 Different Physicians Play These Roles & Need Appropriate APMs ConditionBased Payment (Symptoms) ConditionBased Payment (Diagnosis) Internist Procedural Episode Payment Surgeon High Spending on Complications & Post-Acute Care Hospital $ Low Complication & PAC Spending $ Medical Management Radiologist $ Correct Condition Correct Treatment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 239 How Do You Design Alternative Payment Models for Endocrinology? Look at Each Condition Separately Conditions Treated Diabetes Osteoporosis Thyroid Problems Other Conditions © Center for Healthcare Quality and Payment Reform www.CHQPR.org 241 Step 1: Identify the Opportunities to Improve Care & Reduce Cost Conditions Treated Opportunities to Improve Care and Reduce Cost Diabetes • Reduce avoidable ED visits, admits, readmissions • Reduce avoidable spending on drugs • Prevent pre-diabetes from progressing Osteoporosis Thyroid Problems Other Conditions © Center for Healthcare Quality and Payment Reform www.CHQPR.org 242 Step 2: Identify the Barriers in the Current Payment System Conditions Treated Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System Diabetes • Reduce avoidable ED visits, admits, readmissions • Reduce avoidable spending on drugs • Prevent pre-diabetes from progressing • No payment for care management svcs • No payment for phone/email consults • No payment for evidence-based prevention programs Osteoporosis Thyroid Problems Other Conditions © Center for Healthcare Quality and Payment Reform www.CHQPR.org 243 Step 3: Design Solutions to Overcome the Barriers Conditions Treated Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System Solutions via Alternative Payment Models Diabetes • Reduce avoidable ED visits, admits, readmissions • Reduce avoidable spending on drugs • Prevent pre-diabetes from progressing • No payment for care management svcs • No payment for phone/email consults • No payment for evidence-based prevention programs • Payment for care management & specialty consults • Condition-based payment for diabetes management • Multi-year payment to support prevention Osteoporosis Thyroid Problems Other Conditions © Center for Healthcare Quality and Payment Reform www.CHQPR.org 244 Opportunities, Barriers, and Solutions Will Differ by Condition Conditions Treated Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System Solutions via Alternative Payment Models Diabetes • Reduce avoidable ED visits, admits, readmissions • Reduce avoidable spending on drugs • Prevent pre-diabetes from progressing • No payment for care management svcs • No payment for phone/email consults • No payment for evidence-based prevention programs Osteoporosis • Reduce rate of fractures • Reduce unnecessary testing • Reduce unnecessary use of expensive Rx • No payment for care management services • Payment based on number of tests • Payment for care management & specialty consults • Condition-based payment for diabetes management • Multi-year payment to support prevention • Condition-based payment for mgt of osteoporosis • Condition-based payment for mgt of osteopenia Thyroid Problems Other Conditions © Center for Healthcare Quality and Payment Reform www.CHQPR.org 245 Different Payment Models for Different Endocrine Conditions Conditions Treated Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System Solutions via Alternative Payment Models Diabetes • Reduce avoidable ED visits, admits, readmissions • Reduce avoidable spending on drugs • Prevent pre-diabetes from progressing • No payment for care management svcs • No payment for phone/email consults • No payment for evidence-based prevention programs Osteoporosis • Reduce rate of fractures • Reduce unnecessary testing • Reduce unnecessary use of expensive Rx • No payment for care management services • Payment based on number of tests • Payment for care management & specialty consults • Condition-based payment for diabetes management • Multi-year payment to support prevention • Condition-based payment for mgt of osteoporosis • Condition-based payment for mgt of osteopenia Thyroid Problems • Reduce unnecessary imaging and testing • Reduce over- and under-treatment • Low payment for time to diagnose & do patient education • Payment based on tests & treatments • Bundled payment for diagnosis • Condition-based payment for management Other Conditions © Center for Healthcare Quality and Payment Reform www.CHQPR.org 246 Not Every Condition Needs an Alternative Payment Model Conditions Treated Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System Solutions via Alternative Payment Models Diabetes • Reduce avoidable ED visits, admits, readmissions • Reduce avoidable spending on drugs • Prevent pre-diabetes from progressing • No payment for care management svcs • No payment for phone/email consults • No payment for evidence-based prevention programs Osteoporosis • Reduce rate of fractures • Reduce unnecessary testing • Reduce unnecessary use of expensive Rx • No payment for care management services • Payment based on number of tests • Payment for care management & specialty consults • Condition-based payment for diabetes management • Multi-year payment to support prevention • Condition-based payment for mgt of osteoporosis • Condition-based payment for mgt of osteopenia Thyroid Problems • Reduce unnecessary imaging and testing • Reduce over- and under-treatment • Low payment for time to diagnose & do patient education • Payment based on tests & treatments • Bundled payment for diagnosis • Condition-based payment for management Other Conditions • FFS • APM © Center for Healthcare Quality and Payment Reform www.CHQPR.org 247 Hypothetical, Simplified Example of Diabetes Management © Center for Healthcare Quality and Payment Reform www.CHQPR.org 248 Hypothetical, Simplified Example of Diabetes Management 1000 Patients with Diabetes © Center for Healthcare Quality and Payment Reform www.CHQPR.org 249 Hypothetical, Simplified Example of Diabetes Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 1000 1000 Patients with Diabetes $600,000 • PCP paid only for periodic office visits (6 visits @ $100/visit) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 250 Hypothetical, Simplified Example of Diabetes Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits Endocrinologist Office Visits 1000 Patients with Diabetes $600 1000 $600,000 $100 1000 $100,000 • PCP paid only for periodic office visits (6 visits @ $100/visit) • Endocrinologist sees patients once per year © Center for Healthcare Quality and Payment Reform www.CHQPR.org 251 Hypothetical, Simplified Example of Diabetes Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits Endocrinologist Office Visits Pharmaceuticals $600 $100 $1,000 1000 1000 Patients with Diabetes $600,000 1000 $100,000 1000 $1,000,000 • PCP paid only for periodic office visits (6 visits @ $100/visit) • Endocrinologist sees patients once per year • Patients take medications averaging $1,000/year © Center for Healthcare Quality and Payment Reform www.CHQPR.org 252 Opportunity: Avoidable Hospitalizations CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Pharmaceuticals $1,000 Hospitalizations $10,000 1000 1000 Patients with Diabetes $600,000 1000 $100,000 1000 $1,000,000 250 $2,500,000 • PCP paid only for periodic office visits (6 visits @ $100/visit) • Endocrinologist sees patients once per year • Patients take medications averaging $1,000/year • 25% of patients are hospitalized each year; average cost of hospitalization = $10,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 253 Hypothetical, Simplified Example of Diabetes Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 1000 Patients with Diabetes $600,000 1000 $100,000 1000 $1,000,000 250 $2,500,000 1000 $4,200,000 • PCP paid only for periodic office visits (6 visits @ $100/visit) • Endocrinologist sees patients once per year • Patients take medications averaging $1,000/year • 25% of patients are hospitalized each year; average cost of hospitalization = $10,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 254 Barrier: No Payment for Services That Could Reduce Hospitalizations CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 1000 Patients with Diabetes $600,000 1000 $100,000 1000 $1,000,000 250 $2,500,000 1000 $4,200,000 • PCP paid only for periodic office visits (6 visits @ $100/visit) • Endocrinologist sees patients once per year • Patients take medications averaging $1,000/year • 25% of patients are hospitalized each year; average cost of hospitalization = $10,000 • No payment for phone consults by endocrinologist with PCP; no payment for case mgt by endocrinologist © Center for Healthcare Quality and Payment Reform www.CHQPR.org 255 Most of the Money Isn’t Going to the Physicians CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 1000 $100,000 1000 $1,000,000 250 $2,500,000 1000 $4,200,000 Physician Payments = 17% of Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 256 What if More Endocrinologist Support Could Reduce Admissions? APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 1000 1000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 $96,000 $196,000 1000 $1,000,000 200 $2,000,000 1000 $3,796,000 +0% +96% +0% -20% -10% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 257 How Much Increased Payment Does the Endocrinologist Need? APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 1000 1000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 $96,000 $196,000 1000 $1,000,000 200 $2,000,000 1000 $3,796,000 +0% +96% +0% -20% -10% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 258 The Endocrinologist Needs a Business Plan for Improving Care CURRENT FFS $/Pt # Pts Total $ Endocrinologist Revenues Office Visits Diabetes Mgt Total Revenue Endocrinologist Costs Current Costs Physician Time Nurse Care Mgr Total Costs Profit Margin $100 1000 $/Pt $100,000 $100,000 $95,000 $95,000 $5,000 $100 $96 APM # Pts 1000 1000 Total $ $100,000 $96,000 $196,000 Chg 0% +96% $95,000 $10,000 $80,000 $185,000 +95% $11,000 +120% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 259 Viability May Depend on Volume of Patients & Type of Payment CURRENT FFS $/Pt # Pts Total $ Endocrinologist Revenues Office Visits Diabetes Mgt Total Revenue Endocrinologist Costs Current Costs Physician Time Nurse Care Mgr Total Costs Profit Margin $100 500 $/Pt $50,000 $50,000 $47,500 $47,500 $2,500 $100 $96 APM # Pts 500 500 Total $ $50,000 $48,000 $98,000 Chg 0% +96% $47,500 $5,000 $80,000 $132,500 +179% ($34,500) -1480% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 260 Viability May Depend on Volume of Patients & Type of Payment CURRENT FFS $/Pt # Pts Total $ Endocrinologist Revenues Office Visits Diabetes Mgt Total Revenue Endocrinologist Costs Current Costs Physician Time Nurse Care Mgr Total Costs Profit Margin $100 500 $/Pt $50,000 APM # Pts $100 $96 Total $ 500 500 $50,000 $48,000 $98,000 $50,000 $47,500 $47,500 $2,500 Chg 0% +96% $47,500 $5,000 $80,000 $132,500 +179% ($34,500) -1480% Potential Solutions: • Share resources with other practices • Get more payers/patients participating © Center for Healthcare Quality and Payment Reform www.CHQPR.org 261 Higher Payment to Endocrinologist Must Create Higher Value to Payer APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 1000 1000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 $96,000 $196,000 1000 $1,000,000 200 $2,000,000 1000 $3,796,000 +0% +96% +0% -20% -10% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 262 How Does the Payer Know That Hospitalizations Will Decrease? APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 1000 1000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 $96,000 $196,000 1000 $1,000,000 250 $2,500,000 1000 $4,296,000 +0% +96% +0% 0% +2% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 263 Solution: Add an Accountability Component to the Payment APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P(180-220 Admits) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 $10,000 1000 1000 0 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 $96,000 $0 $196,000 1000 $1,000,000 200 $2,000,000 1000 $3,796,000 +0% +96% +0% -20% -10% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 264 Failure to Control Hospitalizations Sufficiently Reduces Payment APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P(180-220 Admits) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 $10,000 1000 1000 -5 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 $96,000 ($50,000) $146,000 1000 $1,000,000 225 $2,250,000 1000 $3,996,000 +0% +46% +0% -10% -5% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 265 Greater Success in Preventing Admissions Increases Payment APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P(180-220 Admits) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 $10,000 1000 1000 5 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 +0% $96,000 $50,000 $246,000 +146% 1000 $1,000,000 +0% 175 $1,750,000 -30% 1000 $3,596,000 -14% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 266 How to Set the Standard of Performance? • “Tournament” Model – – – – – Success is based on how other physicians performed in the same year Used in CMS Value Based Modifier Physicians do not know the standard in advance Physicians only “win” if other physicians lose Discourages collaboration in developing ways to improve © Center for Healthcare Quality and Payment Reform www.CHQPR.org 267 How to Set the Standard of Performance? • “Tournament” Model – – – – – Success is based on how other physicians performed in the same year Used in CMS Value Based Modifier Physicians do not know the standard in advance Physicians only “win” if other physicians lose Discourages collaboration in developing ways to improve • “Improvement” Model – Success based on whether physician improves over prior year – Used in CMS Shared Savings Model – Rewards physicians who have been performing poorly, provides no change in payment to high-performing physicians – As limit on improvement is reached, rationale for payment disappears © Center for Healthcare Quality and Payment Reform www.CHQPR.org 268 How to Set the Standard of Performance? • “Tournament” Model – – – – – Success is based on how other physicians performed in the same year Used in CMS Value Based Modifier Physicians do not know the standard in advance Physicians only “win” if other physicians lose Discourages collaboration in developing ways to improve • “Improvement” Model – Success based on whether physician improves over prior year – Used in CMS Shared Savings Model – Rewards physicians who have been performing poorly, provides no change in payment to high-performing physicians – As limit on improvement is reached, rationale for payment disappears • A Better Way: Standards Based on Known Feasible Targets – Success based on achieving performance levels other physicians have achieved in previous years – All physicians receive adequate payment if they achieve the standard – No need to improve if standard is already met – Standard is defined with a confidence interval based on reliability of measure – Reward for higher performance encourages creation of higher standard © Center for Healthcare Quality and Payment Reform www.CHQPR.org 269 Adequate Payment for All, Low Performers Generate Savings APM – Expected Results $/Pt # Pts Total $ FFS Low Performer $/Pt # Pts Total $ PCP $600 Endocrinologist $100 Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 $100,000 $196 1000 $1,000,000 $1,000 300 $3,000,000 $10,000 1000 $4,700,000 1000 $600,000 1000 $196,000 1000 $1,000,000 200 $2,000,000 1000 $3,796,000 APM – Expected Results $/Pt # Pts Total $ FFS High Performer $/Pt # Pts Total $ Chg +0% +96% +0% -33% -19% Chg PCP $600 Endocrinologist $100 Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 $100,000 $196 1000 $1,000,000 $1,000 200 $2,000,000 $10,000 1000 $3,700,000 1000 $600,000 1000 $196,000 1000 $1,000,000 200 $2,000,000 1000 $3,796,000 +0% +96% +0% 0% +3% Grand Total 2000 $8,400,000 2000 $7,592,000 -10% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 270 Not All Patients Are The Same Low Risk Patients $/Pt # Pts Total $ PCP Office Visits Endocrinologist Office Visits Diabetes Mgt P4P Total Endocrin. Pharmaceuticals Hospitalizations Total Spending High Risk Patients $/Pt # Pts Total $ 50 500 150 500 10% Admission Rate 30% Admission Rate © Center for Healthcare Quality and Payment Reform www.CHQPR.org 271 Not All Patients Are The Same: Stratifying APMs Based on Risk APM – Low Risk Patients $/Pt # Pts Total $ PCP Office Visits $400 Endocrinologist Office Visits $50 Diabetes Mgt $48 P4P Total Endocrin. Pharmaceuticals $500 Hospitalizations $10,000 Total Spending APM – High Risk Patients $/Pt # Pts Total $ 500 $200,000 $800 500 $400,000 500 500 $25,000 $24,000 $150 $144 500 500 $75,000 $72,000 500 50 500 $49,000 $250,000 $1,500 $500,000 $10,000 $999,000 10% Admission Rate $147,000 500 $750,000 150 $1,500,000 500 $2,797,000 30% Admission Rate © Center for Healthcare Quality and Payment Reform www.CHQPR.org 272 Fee for Service Has Built-In Risk Adjustment Traditional FFS • Higher payments made for patients who receive more services • Provider receives higher payment based on bills submitted for services delivered • No higher payment if individual services require more time or resources © Center for Healthcare Quality and Payment Reform www.CHQPR.org 273 Payer Risk Adjustment Models Are a Poor Substitute Traditional FFS • Higher payments made for patients who receive more services • Provider receives higher payment based on bills submitted for services delivered • No higher payment if individual services require more time or resources Payer Risk Adjustment • Higher payments made for patients who are assigned more diagnosis codes • Provider receives higher payment based on number and type of diagnosis codes assigned on claims • No higher payment for some diagnosis codes or for higher severity conditions without separate codes © Center for Healthcare Quality and Payment Reform www.CHQPR.org 274 Effective Risk Adjustment via Provider-Defined Classifications Traditional FFS • Higher payments made for patients who receive more services • Provider receives higher payment based on bills submitted for services delivered • No higher payment if individual services require more time or resources Patient Classification • Higher payments are made for patients who are classified as higher need for their condition • Provider bills for a “condition-based payment” code from a family of codes stratified based on patient needs • No higher payment based solely on number of services delivered Payer Risk Adjustment • Higher payments made for patients who are assigned more diagnosis codes • Provider receives higher payment based on number and type of diagnosis codes assigned on claims • No higher payment for some diagnosis codes or for higher severity conditions without separate codes © Center for Healthcare Quality and Payment Reform www.CHQPR.org 275 Development of Patient Condition Groups Under MACRA SEC. 101. REPEALING THE SUSTAINABLE GROWTH RATE (SGR) AND IMPROVING MEDICARE PAYMENT FOR PHYSICIANS’ SERVICES. (f) COLLABORATING WITH THE PHYSICIAN, PRACTITIONER, AND OTHER STAKEHOLDER COMMUNITIES TO IMPROVE RESOURCE USE MEASUREMENT. (2) DEVELOPMENT OF CARE EPISODE AND PATIENT CONDITION GROUPS AND CLASSIFICATION CODES.— (D) DEVELOPMENT OF PROPOSED CLASSIFICATION CODES.— (i) IN GENERAL.—Taking into account the information described in subparagraph (B) and the information received under subparagraph (C), the Secretary shall— (I) establish care episode groups and patient condition groups, which account for a target of an estimated 1⁄2 of expenditures under parts A and B (with such target increasing over time as appropriate); and (II) assign codes to such groups. (ii) CARE EPISODE GROUPS.—In establishing the care episode groups under clause (i), the Secretary shall take into account—(I) the patient’s clinical problems at the time items and services are furnished during an episode of care, such as the clinical conditions or diagnoses, whether or not inpatient hospitalization occurs, and the principal procedures or services furnished; and (II) other factors determined appropriate by the Secretary. (iii) PATIENT CONDITION GROUPS.—In establishing the patient condition groups under clause (i), the Secretary shall take into account— (I) the patient’s clinical history at the time of a medical visit, such as the patient’s combination of chronic conditions, current health status, and recent significant history (such as hospitalization and major surgery during a previous period, such as 3 months); and (II) other factors determined appropriate by the Secretary, 276 © Center for Healthcare Quality and Payment Reform www.CHQPR.org Solution: Add an Accountability Component to the Payment APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P(180-220 Admits) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 $10,000 1000 1000 0 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 $96,000 $0 $196,000 1000 $1,000,000 200 $2,000,000 1000 $3,796,000 +0% +96% +0% -20% -10% Higher Endocrinologist payment + Lower hospitalizations = Lower net payer spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 277 What if Increased Drug Spending Reduced the Hospital Admissions? APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P(180-220 Admits) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Total Spending 1000 $600,000 $600 1000 1000 $100,000 $100 $96 $10,000 1000 1000 5 $100,000 1000 $1,000,000 $1,500 250 $2,500,000 $10,000 1000 $4,200,000 Chg $600,000 +0% $100,000 +0% $96,000 $50,000 $246,000 +146% 1000 $1,500,000 +50% 175 $1,750,000 -30% 1000 $4,096,000 -3% Higher Endocrinologist payment + Higher drug spending + Lower hospitalizations = Higher net payer spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 278 Solution: Tie Accountability to All Substitutable Services APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Drug + Hospital Total Spending Chg 1000 $600,000 $600 1000 $600,000 +0% 1000 $100,000 $100 $96 $0 1000 1000 1000 $100,000 $96,000 $0 $196,000 $1,000,000 $1,750,000 $3,000,000 $3,796,000 +0% $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 175 1000 1000 +96% +0% -30% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -10% 279 No Bonus Payment if Admission Reduction Offset by Drug Costs APM – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending Chg 1000 $600,000 $600 1000 $600,000 +0% 1000 $100,000 $100 $96 ($50) 1000 1000 1000 $100,000 $96,000 ($50,000) $146,000 $1,500,000 $1,750,000 $3,250,000 $3,996,000 +0% $100,000 1000 $1,000,000 $1,500 250 $2,500,000 $10,000 $3,250 1000 $4,200,000 1000 175 1000 1000 +46% +50% -30% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -5% 280 CMS Wants to Make Each Provider Accountable for Total Spending Healthcare Spending ACOs Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement Spending on All Chronic Disease Care and Care Related to Joint Surgery After Discharge Payments to Hospitals Spending on All Services the ACO’s Patients Receive Spending on All Services the PCP’s Patients Receive Spending on All Services the Oncologists’ Patients Receive During Chemo Treatment Payments to ACOs Payments to PCPs Payments to Oncologists © Center for Healthcare Quality and Payment Reform www.CHQPR.org 281 Accountability Must Be Focused on What Each Provider Can Influence Healthcare Spending Total Spending Per Patient Spending the Provider Cannot Control 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 Other Spending the Provider Can Control or Influence 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 Payments to the Provider © Center for Healthcare Quality and Payment Reform www.CHQPR.org 282 A Critical Element is Shared, Trusted Data • Physicians 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! © Center for Healthcare Quality and Payment Reform www.CHQPR.org 283 How Do Patients Know Physicians Won’t Stint to Reduce Spending? CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts 1000 $600,000 $600 1000 1000 $100,000 $100 $96 $50 1000 1000 1000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 175 1000 1000 Total $ Chg $600,000 +0% $100,000 +0% $96,000 $50,000 $246,000 +146% $1,000,000 0% $1,750,000 -30% $3,000,000 $3,796,000 -10% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 284 How Do Patients Know Physicians Won’t Stint to Reduce Spending? CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts 1000 $600,000 $600 1000 1000 $100,000 $100 $96 $50 1000 1000 1000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 175 1000 1000 Total $ Chg $600,000 +0% $100,000 +0% $96,000 $50,000 $246,000 +146% $1,000,000 0% $1,750,000 -30% $3,000,000 $3,796,000 -10% Add a Mechanism for Protecting Against Underuse © Center for Healthcare Quality and Payment Reform www.CHQPR.org 285 How Do You Protect Against Underuse? • Use Quality Measures to Adjust Payment? – – – – – – No single measure of quality exists, so multiple measures are used More measures get added every year, but major gaps exist Every payer uses a different set of measures Claims-based measures fail to capture relevant clinical information Process measures may constrain flexibility Significant problems in reliability and risk adjustment for many measures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 286 How Do You Protect Against Underuse? • Use Quality Measures to Adjust Payment? – – – – – – No single measure of quality exists, so multiple measures are used More measures get added every year, but major gaps exist Every payer uses a different set of measures Claims-based measures fail to capture relevant clinical information Process measures may constrain flexibility Significant problems in reliability and risk adjustment for many measures • Develop and Follow Appropriate Use Criteria – Focus cost accountability on services where appropriate use criteria exist • Savings result from avoiding unnecessary and inappropriate utilization • No reward for avoiding use of necessary/appropriate services – Physicians have flexibility to adjust services where no evidence exists – Tying payment to appropriate use creates a business case for maintenance of registries used to develop and refine appropriate use criteria – Examples: ASCO Patient-Centered Oncology Payment, ACC SMARTCare © Center for Healthcare Quality and Payment Reform www.CHQPR.org 287 APM #1: Payment for a High-Value Service • Continuation of existing FFS payments • Payment for additional services • Measurement of avoidable utilization and/or quality/outcomes • Adjustment of payment amounts based on performance • Updating payments over time © Center for Healthcare Quality and Payment Reform www.CHQPR.org 288 APM #1: Payment for a High-Value Service • Continuation of existing FFS payments • Payment for additional services • Measurement of avoidable utilization and/or quality/outcomes • Adjustment of payment amounts based on performance • Updating payments over time Is MIPS Better Than an APM? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 289 MIPS Includes Accountability for Resource Use by Physicians MIPS “Merit-Based Incentive Payment System” Quality 50% 30% Resource Use 10% 30% “Clinical Practice Improvement Activities” 15% 15% EHR “Meaningful Use” 25% 25% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 290 MIPS Requires Accountability With No Change in FFS Structure MIPS – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P (+/- 9% FFS) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending Chg 1000 $600,000 $600 1000 $600,000 +0% 1000 $100,000 $100 $0 $0 1000 $100,000 $0 $0 $100,000 $1,000,000 $2,000,000 $3,000,000 $3,700,000 +0% $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 1000 200 1000 1000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org +0% +0% -20% -12% 291 Failure to Control Other Spending Could Result in FFS Reductions MIPS – Higher Spending $/Pt # Pts Total $ CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P (+/- 9% FFS) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending Chg 1000 $600,000 $600 1000 $600,000 +0% 1000 $100,000 $100 $0 ($9) 1000 $100,000 $0 ($9,000) $91,000 $1,500,000 $2,100,000 $3,600,000 $4,291,000 +0% $100,000 1000 $1,000,000 $1,500 250 $2,500,000 $10,000 $3,600 1000 $4,200,000 1000 1000 210 1000 1000 -9% +50% -16% © Center for Healthcare Quality and Payment Reform www.CHQPR.org +2% 292 Is Shared Savings Easier? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 293 In Shared Savings, No Upfront Funds for New Physician Costs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 294 If Savings Are Achieved in Year 1, Shares Are Distributed in Year 2 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 295 But the Year 2 Payment Has to Cover the Year 2 Costs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 296 And The Physician Still Hasn’t Recouped the Year 1 Costs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 297 So Shared Savings Is Often a Win-Lose © Center for Healthcare Quality and Payment Reform www.CHQPR.org 298 A Good APM Marries Resources & Accountability Together CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts Total $ Chg 1000 $600,000 $600 1000 $600,000 +0% 1000 $100,000 $100 $96 $0 1000 1000 1000 $100,000 $96,000 $0 $196,000 $1,000,000 $2,000,000 $3,000,000 $3,796,000 +0% $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 200 1000 1000 +96% 0% -20% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -10% 299 APM #1: Payment for a High-Value Service • Continuation of existing FFS payments • Payment for additional services • Measurement of avoidable utilization and/or quality/outcomes • Adjustment of payment amounts based on performance • Updating payments over time © Center for Healthcare Quality and Payment Reform www.CHQPR.org 300 The Endocrinologist Needs a Business Plan for Improving Care CURRENT FFS $/Pt # Pts Total $ Endocrinologist Revenues Office Visits Diabetes Mgt Total Revenue Endocrinologist Costs Current Costs Physician Time Nurse Care Mgr Total Costs Profit Margin $100 1000 $/Pt $100,000 $100,000 $95,000 $95,000 $5,000 $100 $96 APM # Pts 1000 1000 Total $ $100,000 $96,000 $196,000 Chg 0% +96% $95,000 $10,000 $80,000 $185,000 +95% $11,000 +120% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 301 What if Better Care for Patients Means Fewer MD Office Visits? CURRENT FFS $/Pt # Pts Total $ Endocrinologist Revenues Office Visits Diabetes Mgt Total Revenue Endocrinologist Costs Current Costs Physician Time Nurse Care Mgr Total Costs Profit Margin $100 1000 $/Pt $100,000 $100,000 $95,000 $95,000 $5,000 $50 $96 APM # Pts 1000 1000 Total $ Chg $50,000 $96,000 $146,000 +46% $95,000 $10,000 $80,000 $185,000 ($39,000) +95% -880% -50% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 302 Replace FFS Payments With Per Patient Bundled Payments CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt $0 P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts Total $ 1000 $600,000 $600 1000 $600,000 1000 1000 $100,000 $0 X $196 $0 1000 1000 1000 $0 $196,000 $0 $196,000 $1,000,000 $2,000,000 $3,000,000 $3,796,000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 200 1000 1000 Chg +0% +96% 0% -20% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -10% 303 Same Accountability Measure, But More Flexibility/Protection CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt $0 P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts Total $ 1000 $600,000 $600 1000 $600,000 1000 1000 $100,000 $0 X $196 $0 1000 1000 1000 $0 $196,000 $0 $196,000 $1,000,000 $2,000,000 $3,000,000 $3,796,000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 200 1000 1000 Chg +0% +96% 0% -20% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -10% 304 APM #2: Condition-Based Payment for a Physician’s Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 305 APM #2: Condition-Based Payment for a Physician’s Services • Payment based on the patient’s health condition rather than specific services delivered • Payment replaces some or all current FFS payments • Payment amounts stratified based on patient needs • Measurement of appropriateness and/or outcomes • Adjustment of payments based on performance • Updating payment amounts over time © Center for Healthcare Quality and Payment Reform www.CHQPR.org 306 What About the PCP? CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts Total $ 1000 $600,000 $600 1000 $600,000 1000 $100,000 X $196 $0 1000 1000 1000 $0 $196,000 $0 $196,000 $1,000,000 $2,000,000 $3,000,000 $3,796,000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 200 1000 1000 Chg +0% +96% 0% -20% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -10% 307 Higher Pay for PCP is Feasible If Savings Are High Enough CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts Total $ Chg +10% 1000 $600,000 $660 1000 $660,000 1000 $100,000 X $196 $0 1000 1000 1000 $0 $196,000 $0 $196,000 $1,000,000 $2,000,000 $3,000,000 $3,856,000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,000 1000 $4,200,000 1000 200 1000 1000 +96% 0% -20% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -8% 308 PCP May Be Unhappy If Specialist Gets All Performance-Based Pay CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts 1000 $600,000 $660 1000 1000 $100,000 X $196 $50 1000 1000 1000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $2,750 1000 $4,200,000 1000 175 1000 1000 Total $ Chg $660,000 +10% $0 $196,000 $50,000 $246,000 +146% $1,000,000 0% $1,750,000 -30% $2,750,000 $3,656,000 -13% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 309 PCP May Be Unhappy If Specialist Gets All Performance-Based Pay CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts 1000 $600,000 $660 1000 1000 $100,000 X $196 $50 1000 1000 1000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $2,750 1000 $4,200,000 1000 175 1000 1000 Total $ Chg $660,000 +10% $0 $196,000 $50,000 $246,000 +146% $1,000,000 0% $1,750,000 -30% $2,750,000 $3,656,000 -13% In other CMS programs, the question is: Who “gets” the shared savings payment or who gets credit for the performance? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 310 Specialist May Be Unhappy If PCP Has No Accountability for Results CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending $/Pt APM # Pts Total $ Chg +10% 1000 $600,000 $660 1000 $660,000 1000 $100,000 X $196 ($100) 1000 1000 1000 $0 $196,000 ($100,000) $96,000 $1,000,000 $2,300,000 $3,300,000 $4,056,000 $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,300 1000 $4,200,000 1000 230 1000 1000 -4% 0% -8% -3.4% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 311 Option 1: Create Separate Performance-Based Payments CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 P4P ($2800-$3200) Total PCP Endocrinologist Office Visits $100 Diabetes Mgt P4P ($2800-$3200) Total Endocrin. Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending 1000 $/Pt $600,000 $660 ($50) APM # Pts 1000 1000 $600,000 1000 $100,000 X $196 ($50) $100,000 1000 $1,000,000 $1,000 250 $2,500,000 $10,000 $3,300 1000 $4,200,000 1000 1000 1000 1000 230 1000 1000 Total $ Chg $660,000 ($50,000) $610,000 +10% $0 $196,000 ($50,000) $146,000 $1,000,000 $2,300,000 $3,300,000 $4,056,000 +2% +46% 0% -8% -3.4% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 312 Option 2: Create a Bundled Payment for PCP+Endocrinologist CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P ($2800-$3200) Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending 1000 1000 1000 1000 250 1000 $/Pt $600,000 $100,000 $660 $196 $50 $700,000 $906 $1,000,000 $1,000 $2,500,000 $10,000 $2,750 $4,200,000 APM # Pts 1000 1000 1000 1000 1000 175 1000 1000 Total $ $660,000 $196,000 $50,000 $906,000 $1,000,000 $1,750,000 $2,750,000 $3,656,000 Chg +10% +96% +29% 0% -30% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -13% 313 APM #3: Multi-Physician Bundled Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 314 Physicians Have to Decide How to Divide Performance Payments CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P ($2800-$3200) Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending 1000 1000 1000 1000 250 1000 $/Pt $600,000 $100,000 $660 $196 $50 $700,000 $906 $1,000,000 $1,000 $2,500,000 $10,000 $2,750 $4,200,000 APM # Pts 1000 1000 1000 1000 1000 175 1000 1000 ? Total $ $660,000 $196,000 $50,000 $906,000 $1,000,000 $1,750,000 $2,750,000 $3,656,000 Chg +10% +96% +29% 0% -30% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -13% 315 Physicians Also Have Ability to Change FFS Payment CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P ($2800-$3200) Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending 1000 1000 1000 1000 250 1000 $/Pt $600,000 $100,000 $720 $136 $0 $700,000 $856 $1,000,000 $1,000 $2,500,000 $10,000 $3,000 $4,200,000 APM # Pts 1000 1000 1000 1000 1000 200 1000 1000 Total $ $660,000 $196,000 $0 $856,000 $1,000,000 $2,000,000 $3,000,000 $3,856,000 Chg +20% +36% +22% 0% -20% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -8% 316 Flexibility Allows Creation of “Specialty Medical Home” PCP-Managed Patients $/Pt # Pts Total $ Physicians PCP $500 Endocrinologist $212 Total Physicians $712 Pharmaceuticals $500 Hospitalizations $10,000 Total Spending Endocrinologist-Managed $/Pt # Pts Total $ 500 $250,000 $200 500 $106,000 $800 500 $356,000 $906 500 $500,000 $1,500 50 $500,000 $10,000 500 $1,106,000 10% Hospitalization Rate 500 $100,000 500 $400,000 500 $500,000 500 $750,000 150 $1,500,000 500 $2,750,000 30% Hospitalization Rate © Center for Healthcare Quality and Payment Reform www.CHQPR.org 317 APM #3: Multi-Physician Bundled Payment • • • • • • • • • Single payment for services delivered by 2+ physicians Payment may supplement or replace FFS payments Patient agrees to use the multi-physician team Bundled payment is paid to an “alternative payment entity” (e.g., a PCP-Endocrinologist LLC) Payment amounts stratified based on patient needs Measurement of avoidable utilization Measurement of appropriateness, quality, and/or outcomes Adjustment of payments based on performance Updating payment amounts over time © Center for Healthcare Quality and Payment Reform www.CHQPR.org 318 How Flexible, Adequate Payment is Better for Patients & Physicians © Center for Healthcare Quality and Payment Reform www.CHQPR.org 319 How Flexible, Adequate Payment is Better for Patients & Physicians Current Fee-for-Service • Physicians only get paid when they have office visits with patients • The PCP doesn’t get paid to answer a call from the patient • The specialist doesn’t get paid to answer a call from a PCP that might avoid the need for a visit • If the specialist doesn’t see the patient, they don’t get paid • If the patient sees the specialist, the PCP doesn’t get paid • The physicians get paid the same for a visit regardless of how complex the patient’s needs are • There is no payment if patients receive help from nurses • The physicians get paid the same amount regardless of whether the patient has avoidable complications • Physicians have to document every visit and justify the level of the visit based on payer requirements © Center for Healthcare Quality and Payment Reform www.CHQPR.org 320 How Flexible, Adequate Payment is Better for Patients & Physicians Current Fee-for-Service Multi-Physician Bundles • Physicians only get paid when they have office visits with patients • The PCP doesn’t get paid to answer a call from the patient • The specialist doesn’t get paid to answer a call from a PCP that might avoid the need for a visit • If the specialist doesn’t see the patient, they don’t get paid • If the patient sees the specialist, the PCP doesn’t get paid • The physicians get paid the same for a visit regardless of how complex the patient’s needs are • There is no payment if patients receive help from nurses • The physicians get paid the same amount regardless of whether the patient has avoidable complications • Physicians have to document every visit and justify the level of the visit based on payer requirements • Physicians get paid for managing care of patients with the condition, regardless of whether they have an office visit • Physicians have the flexibility to determine which patients need to be seen when and by whom • Physicians have the flexibility to use the payment to hire nurses or other staff to help patients • Payments are higher for managing more complex patients • Physicians that do a better job of reducing avoidable complications make more money • Physicians have to document the presence of the condition and the patient’s designation of the physicians as the managers of their care, and they only document individual services to the extent needed clinically © Center for Healthcare Quality and Payment Reform www.CHQPR.org 321 Does the Hospital Have to Lose for Everyone Else to Win? CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P ($2800-$3200) Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations $10,000 Other Spending Total Spending 1000 1000 1000 1000 250 1000 $/Pt $600,000 $100,000 $660 $196 $50 $700,000 $906 $1,000,000 $1,000 $2,500,000 $10,000 $2,750 $4,200,000 APM # Pts 1000 1000 1000 1000 1000 175 1000 1000 Total $ $660,000 $196,000 $50,000 $906,000 $1,000,000 $1,750,000 $2,750,000 $3,656,000 Chg +10% +96% +29% 0% -30% © Center for Healthcare Quality and Payment Reform www.CHQPR.org -13% 322 We Have to Understand the Hospital’s Cost Structure CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $660 $196 $50 $906 $1,000 APM # Pts Total $ 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 Chg +10% +96% +29% 0% $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 323 Now, If the Number of Admissions is Reduced… CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $50 $906 $1,000 APM # Pts Total $ 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 Chg +10% +96% +29% 0% 175 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 324 …Fixed Costs Will Remain the Same (in the Short Run)… CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $50 $906 $1,000 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 0% +29% 0% $3,700 175 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 325 …Variable Costs Will Go Down In Proportion to Admissions… CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 APM # Pts Total $ Chg $660 $196 $50 $906 $1,000 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $3,700 $1,500,000 $647,500 0% -30% +29% 0% 175 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 326 …And Even With a Higher Margin For the Hospital… CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 APM # Pts Total $ Chg $660 $196 $50 $906 $1,000 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $3,700 $1,500,000 $647,500 $82,500 0% -30% +10% +29% 0% 175 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 327 …Revenue is Reduced … CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $50 $906 $1,000 $3,700 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 $647,500 $82,500 175 $2,230,000 0% -30% +10% -11% +29% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 328 …And the Payer Still Saves Money CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $50 $906 $1,000 $3,700 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 $647,500 $82,500 175 $2,230,000 1000 $4,136,000 0% -30% +10% -11% -1.5% +29% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 329 Win-Win-Win-Win for Patients, Physicians, Hospital, and Payer CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 Physicians Win $660 $196 $50 $906 $1,000 $3,700 $4,136 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 $647,500 $82,500 175 $2,230,000 1000 $4,136,000 0% -30% +10% -11% -1.5% +29% 0% Hospital Wins Payer Wins © Center for Healthcare Quality and Payment Reform www.CHQPR.org 330 What Payment Model Supports This Approach? CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $50 $906 $1,000 $3,700 $4,136 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 $647,500 $82,500 175 $2,230,000 1000 $4,136,000 0% -30% +10% -11% -1.5% +29% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 331 Solution: Pay Based on the Patient’s Condition, Not the Services CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 1000 1000 $/Pt APM # Pts Total $ Chg $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 332 Plan to Offer Care of the Condition at a Lower Cost Per Patient CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 1000 1000 $/Pt APM # Pts Total $ Chg $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $4,136 -1.5% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 333 Use the Payment as a Budget to Redesign Care CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 1000 1000 $/Pt APM # Pts Total $ Chg $600,000 $100,000 1000 $700,000 1000 $1,000,000 $906,000 $1,000,000 +29% 0% $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $2,230,000 1000 $4,136,000 -11% -1.5% $4,136 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 334 And Let Physicians and Hospital Decide How They Should Be Paid CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $50 $906 $1,000 $3,700 $4,136 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 $647,500 $82,500 175 $2,230,000 1000 $4,136,000 0% -30% +10% -11% -1.5% +29% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 335 Condition-Based Payment Puts Providers in Charge of Compensation CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $50 $906 $1,000 $3,700 $4,136 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 $647,500 $82,500 175 $2,230,000 1000 $4,136,000 0% -30% +10% -11% -1.5% +29% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 336 APM #7: (Full) Condition-Based Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 337 Under Condition-Based Payment, All Services Are Now Costs CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 Condition-Based Pmt Margin on Payment 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 COSTS $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 REVENUES $660 $196 $50 $906 $1,000 $3,700 $4,136 $4,136 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 $647,500 $82,500 175 $2,230,000 1000 $4,136,000 1000 $4,136,000 $0 0% -40% +10% -11% -1.5% -1.5% +29% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 338 Under Condition-Based Payment, Better Results Higher Margins CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 Condition-Based Pmt Margin on Payment 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $50 $906 $1,000 $3,700 $4,136 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $50,000 1000 $906,000 1000 $1,000,000 +10% +96% $1,500,000 $555,000 $82,500 150 $2,137,000 $4,043,500 1000 $4,136,000 $92,500 0% -40% +10% -15% -3.7% -1.5% +29% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 339 Higher Margins Are Returned to Providers, Not Payers CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals $1,000 Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 Condition-Based Pmt Margin on Payment 1000 1000 $/Pt $600,000 $100,000 1000 $700,000 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $660 $196 $100 $906 $1,000 $3,700 $4,136 APM # Pts Total $ Chg 1000 $660,000 1000 $196,000 1000 $100,000 1000 $956,000 1000 $1,000,000 +10% +96% $1,500,000 $555,000 $125,000 150 $2,180,000 $4,136,000 1000 $4,136,000 $0 0% -40% +67% -13% -1.5% -1.5% +37% 0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 340 What if a New Drug Helps Reduce Hospital Admissions? CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals Current Drugs $1,000 New Medication Total Rx Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 Condition-Based Payment Margin on Payment $/Pt 1000 1000 $600,000 $100,000 1000 $700,000 1000 $1,000,000 $660 $196 $50 $906 $1,000 $1,250 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $3,700 $4,136 APM # Pts 1000 1000 1000 1000 Total $ Chg $660,000 $196,000 $50,000 $906,000 +10% +96% 0 $0 1000 $1,250,000 1000 $1,250,000 $1,500,000 $462,500 $82,500 125 $2,045,000 $4,201,000 1000 $4,136,000 ($65,000) +29% +25% 0% -50% +10% -15% 0.0% -1.5% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 341 Under APM, The Drug Must Be Cost-Effective for Providers CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals Current Drugs $1,000 New Medication Total Rx Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 Condition-Based Payment Margin on Payment $/Pt 1000 1000 $600,000 $100,000 1000 $700,000 1000 $1,000,000 $660 $196 $50 $906 $1,000 $1,250 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $3,700 $4,136 APM # Pts 1000 1000 1000 1000 Total $ Chg $660,000 $196,000 $50,000 $906,000 +10% +96% 0 $0 1000 $1,250,000 1000 $1,250,000 $1,500,000 $462,500 $82,500 125 $2,045,000 $4,201,000 1000 $4,136,000 ($65,000) +29% +25% 0% -50% +10% -15% 0.0% -1.5% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 342 Physicians Can Target the Drug to Patients Who Will Most Benefit CURRENT FFS $/Pt # Pts Total $ Physicians PCP $600 Endocrinologist $100 P4P Total Physicians $700 Pharmaceuticals Current Drugs $1,000 New Medication Total Rx Hospitalizations Fixed (60%) $6,000 Variable (37%) $3,700 Margin ( 3%) $300 Total Hospital $10,000 Total Spending $4,200 Condition-Based Payment Margin on Payment $/Pt 1000 1000 $600,000 $100,000 1000 $700,000 1000 $1,000,000 $660 $196 $50 $906 $1,000 $1,250 1000 $1,000,000 $1,500,000 $925,000 $75,000 250 $2,500,000 1000 $4,200,000 $3,700 $4,136 APM # Pts 1000 1000 1000 1000 Total $ Chg $660,000 $196,000 $50,000 $906,000 +10% +96% +29% 800 $800,000 200 $250,000 1000 $1,050,000 $1,500,000 $555,000 $82,500 150 $2,137,500 $4,093,500 1000 $4,136,000 $42,500 +5% 0% -40% +10% -15% -2.5% -1.5% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 343 Condition-Based Payments Must Stratify Patients by Risk/Need APM – Low Risk Patients $/Pt # Pts Total $ Physicians PCP Endocrinologist P4P Total Physicians Pharmaceuticals Hospitalizations Fixed Variable Margin Total Hospital Total Spending APM – High Risk Patients $/Pt # Pts Total $ 55 500 120 500 11% Admission Rate 24% Admission Rate © Center for Healthcare Quality and Payment Reform www.CHQPR.org 344 Higher Condition-Based Payment for Higher-Need Patients APM – Low Risk Patients $/Pt # Pts Total $ Physicians PCP Endocrinologist P4P Total Physicians Pharmaceuticals Hospitalizations Fixed Variable Margin Total Hospital Total Spending APM Payment $440 $96 $25 $561 $500 $3,700 $2,523 500 500 500 500 500 APM – High Risk Patients $/Pt # Pts Total $ $220,000 $48,000 $12,500 $280,500 $250,000 $500,000 $203,500 $27,500 55 $731,000 500 $1,261,500 500 $1,261,500 11% Admission Rate $880 $296 $75 $1,251 $1,500 $3,700 $5,749 500 500 500 500 500 $440,000 $148,000 $37,500 $625,500 $750,000 $1,000,000 $444,000 $55,000 120 $1,499,000 500 $2,874,500 500 $2,874,500 24% Admission Rate © Center for Healthcare Quality and Payment Reform www.CHQPR.org 345 Protections For Providers Against Taking Inappropriate Risk • Risk Stratification: The payment rates would vary based on objective characteristics of the patient and treatment that would be expected to result in the need for more services or increase the risk of complications. • Outlier Payment or Individual Stop Loss Insurance: The payment would be increased if spending on an individual patient exceeds a pre-defined threshold. An alternative would be for the provider to purchase individual stop loss insurance (sometimes referred to as reinsurance) and include the cost of the insurance in the payment bundle. • Risk Corridors or Aggregate Stop Loss Insurance: The payment would be increased if spending on all patients exceeds a pre-defined percentage above the payments. An alternative would be for the provider to purchase aggregate stop loss insurance and include the cost of the insurance in the payment bundle. • Adjustment for External Price Changes: The payment would be adjusted for changes in the prices of drugs or services from other providers that are beyond the control of the provider accepting the payment. • Excluded Services: Services the provider does not deliver, or order, or otherwise have the ability to influence would not be included as part of accountability measures in the payment system. © Center for Healthcare Quality and Payment Reform www.CHQPR.org 346 Defining the Patient Population PCPs/Specialists are Managing FFS/PPO • Patient may or may not have a PCP • Patient can receive services from any physician in the network, including multiple physicians delivering services for the same condition • No physician knows what any other physician is doing • No one is in charge of coordinating services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 347 Defining the Patient Population PCPs/Specialists are Managing FFS/PPO • Patient may or may not have a PCP • Patient can receive services from any physician in the network, including multiple physicians delivering services for the same condition • No physician knows what any other physician is doing • No one is in charge of coordinating services PAYER APMs • Patients are “attributed” to PCPs and specialists retrospectively based on the number of office visits they make • Healthy patients may not be attributed to the physicians who kept them healthy • Physicians may be attributed patients they only saw once • Physician may be held accountable for spending that occurred before the patient began seeing the specialist © Center for Healthcare Quality and Payment Reform www.CHQPR.org 348 Defining the Patient Population PCPs/Specialists are Managing FFS/PPO • Patient may or may not have a PCP • Patient can receive services from any physician in the network, including multiple physicians delivering services for the same condition • No physician knows what any other physician is doing • No one is in charge of coordinating services Condition Management • Patient chooses a PCP but can change at any time • Patient chooses specialists or teams to manage a specific condition or combination of conditions for a period of time • Patients can choose specialty teams from different health systems for different conditions if they wish • PCP is paid to provide care coordination and specialists are paid to communicate/coordinate PAYER APMs • Patients are “attributed” to PCPs and specialists retrospectively based on the number of office visits they make • Healthy patients may not be attributed to the physicians who kept them healthy • Physicians may be attributed patients they only saw once • Physician may be held accountable for spending that occurred before the patient began seeing the specialist © Center for Healthcare Quality and Payment Reform www.CHQPR.org 349 Patient Relationship Categories Being Created Under MACRA SEC. 101. REPEALING THE SUSTAINABLE GROWTH RATE (SGR) AND IMPROVING MEDICARE PAYMENT FOR PHYSICIANS’ SERVICES. (f) COLLABORATING WITH THE PHYSICIAN, PRACTITIONER, AND OTHER STAKEHOLDER COMMUNITIES TO IMPROVE RESOURCE USE MEASUREMENT. (3) ATTRIBUTION OF PATIENTS TO PHYSICIANS OR PRACTITIONERS.— (B) DEVELOPMENT OF PATIENT RELATIONSHIP CATEGORIES AND CODES.— The Secretary shall develop patient relationship categories and codes that define and distinguish the relationship and responsibility of a physician or applicable practitioner with a patient at the time of furnishing an item or service. Such patient relationship categories shall include different relationships of the physician or applicable practitioner to the patient (and the codes may reflect combinations of such categories), such as a physician or applicable practitioner who— (i) considers themself to have the primary responsibility for the general and ongoing care for the patient over extended periods of time; (ii) considers themself to be the lead physician or practitioner and who furnishes items and services and coordinates care furnished by other physicians or practitioners for the patient during an acute episode; (iii) furnishes items and services to the patient on a continuing basis during an acute episode of care, but in a supportive rather than a lead role; (iv) furnishes items and services to the patient on an occasional basis, usually at the request of another physician or practitioner; or (v) furnishes items and services only as ordered by another physician or practitioner. © Center for Healthcare Quality and Payment Reform www.CHQPR.org 350 APM #7: Condition-Based Payment • Payment based on the patient’s health condition • Payment covers multiple treatment options delivered by the physician(s) and other providers • Patient agrees to use the provider team for services related to the health condition • Bundled payment is paid to an “alternative payment entity” (prospective, retrospective, or hybrid) • Payment amounts stratified based on patient needs • Outlier payments and risk corridors to address random variation and unusually expensive patients • Measurement of appropriateness, quality, and/or outcomes • Adjustment of payments based on performance • Updating payment amounts over time © Center for Healthcare Quality and Payment Reform www.CHQPR.org 351 How Would You Design APMs for Gastroenterology? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 352 Identify the Types of Patient Needs That Physicians Address Types of Patient Needs Addressed Colon Cancer Screening Upper GI Bleeding (NVUGIB) Inflammatory Bowel Disease Other Conditions & Procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 353 Step 1: Identify the Opportunities to Improve Care & Reduce Cost Types of Patient Needs Addressed Opportunities to Improve Care and Reduce Cost Colon Cancer Screening • Deliver colonoscopy in lowest-cost way • Improve adenoma detection rate • Avoid complications in colonoscopy • Focus on highest-risk patients Upper GI Bleeding (NVUGIB) Inflammatory Bowel Disease Other Conditions & Procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 354 Step 2: Identify the Barriers in the Current Payment System Types of Patient Needs Addressed Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System Colon Cancer Screening • Deliver colonoscopy in lowest-cost way • Improve adenoma detection rate • Avoid complications in colonoscopy • Focus on highest-risk patients • All providers paid separately • No payment for outreach to high-risk patients • Higher payment for repeat & unnecessary procedures Upper GI Bleeding (NVUGIB) Inflammatory Bowel Disease Other Conditions & Procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 355 Step 3: Design Solutions to Overcome the Barriers Types of Patient Needs Addressed Opportunities to Improve Care and Reduce Cost Colon Cancer Screening • Deliver colonoscopy in lowest-cost way • Improve adenoma detection rate • Avoid complications in colonoscopy • Focus on highest-risk patients Barriers in Current Payment System Solutions via Alternative Payment Models • All providers paid • Bundled payment for separately colonoscopy • No payment for • Warrantied payment outreach to high-risk for colonoscopy patients • Population-based • Higher payment for payment for repeat & unnecessary cancer screening procedures Upper GI Bleeding (NVUGIB) Inflammatory Bowel Disease Other Conditions & Procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 356 Opportunities, Barriers, and Solutions Will Differ by Condition Barriers in Current Payment System Solutions via Alternative Payment Models Types of Patient Needs Addressed Opportunities to Improve Care and Reduce Cost Colon Cancer Screening • Deliver colonoscopy in lowest-cost way • Improve adenoma detection rate • Avoid complications in colonoscopy • Focus on highest-risk patients • All providers paid • Bundled payment for separately colonoscopy • No payment for • Warrantied payment outreach to high-risk for colonoscopy patients • Population-based • Higher payment for payment for repeat & unnecessary cancer screening procedures Upper GI Bleeding (NVUGIB) • Reduce ED visits and hospitalizations due to bleeds • Use lowest-cost, effective intervention • Avoid complications • No payment for care management • Financial penalty for using lower-cost procedures • Bundled/warrantied payment for acute conditions • Condition-based payment for chronic conditions Inflammatory Bowel Disease Other Conditions & Procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 357 Different Payment Models for Different GI Conditions Opportunities to Improve Care and Reduce Cost Colon Cancer Screening • Deliver colonoscopy in lowest-cost way • Improve adenoma detection rate • Avoid complications in colonoscopy • Focus on highest-risk patients • All providers paid • Bundled payment for separately colonoscopy • No payment for • Warrantied payment outreach to high-risk for colonoscopy patients • Population-based • Higher payment for payment for repeat & unnecessary cancer screening procedures • Reduce ED visits and hospitalizations due to bleeds • Use lowest-cost, effective intervention • Avoid complications • Reduce ED visits & hospitalizations • Reduce drug costs • Reduce absences from work • No payment for care management • Financial penalty for using lower-cost procedures • Bundled/warrantied payment for acute conditions • Condition-based payment for chronic conditions • No payment for care management or proactive outreach • No flexibility for nonface-to-face visits • Add-on payment for care management support • Condition-based payment for IBD Upper GI Bleeding (NVUGIB) Inflammatory Bowel Disease Barriers in Current Payment System Solutions via Alternative Payment Models Types of Patient Needs Addressed Other Conditions & Procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 358 Not Every Condition Needs an Alternative Payment Model Opportunities to Improve Care and Reduce Cost Colon Cancer Screening • Deliver colonoscopy in lowest-cost way • Improve adenoma detection rate • Avoid complications in colonoscopy • Focus on highest-risk patients • All providers paid • Bundled payment for separately colonoscopy • No payment for • Warrantied payment outreach to high-risk for colonoscopy patients • Population-based • Higher payment for payment for repeat & unnecessary cancer screening procedures • Reduce ED visits and hospitalizations due to bleeds • Use lowest-cost, effective intervention • Avoid complications • Reduce ED visits & hospitalizations • Reduce drug costs • Reduce absences from work • No payment for care management • Financial penalty for using lower-cost procedures • Bundled/warrantied payment for acute conditions • Condition-based payment for chronic conditions • No payment for care management or proactive outreach • No flexibility for nonface-to-face visits • Add-on payment for care management support • Condition-based payment for IBD Upper GI Bleeding (NVUGIB) Inflammatory Bowel Disease Other Conditions & Procedures Barriers in Current Payment System Solutions via Alternative Payment Models Types of Patient Needs Addressed • FFS © Center for Healthcare Quality and Payment Reform www.CHQPR.org 359 Many Specialties Developing Better Payment Models Opportunities to Improve Care and Reduce Cost Cardiology Orthopedic Surgery Neurology OB/GYN Barriers in Current Payment System Solutions via Accountable Payment Models • Use less invasive procedures when appropriate • Reduce exacerbations of heart failure • Reduce infections and complications of surgery • Use non-surgical care instead of surgery • Avoid unnecessary hospitalizations for epilepsy patients • Reduce strokes and heart attacks after TIA • Payment is based on procedure is used, not the outcome • No payment for patient education & care mgt • No support for shared decision-making • Lack of resources for good home-based care, patient education • No flexibility to spend more on preventive care • No payment for patient education & care mgt • Condition-based payment for stable angina • Condition-based payment for HF • Bundled and warrantied payment for surgery • Condition-based payment for arthritis • Reduce use of elective C-sections • Reduce early deliveries and use of NICU • Similar/lower payment for vaginal deliveries • Condition-based payment for total cost of delivery in low-risk pregnancy • Condition-based payment for epilepsy • Episode or conditionbased payment for TIA © Center for Healthcare Quality and Payment Reform www.CHQPR.org 360 Other Examples of SpecialtySpecific Payment Models Opportunities to Improve Care and Reduce Cost Psychiatry Gastroenterology Oncology Primary Care • Reduce ER visits and admissions for patients with depression and chronic disease • Reduce unnecessary colonoscopies and colon cancer • Reduce ER/admits for inflammatory bowel d. • Reduce ER visits and admissions for dehydration • Reduce overuse of tests and drugs • Reduce avoidable hospitalizations for chronic disease pts • Reduce unnecessary tests and referrals Barriers in Current Payment System • No payment for phone consults with PCPs • No payment for RN care managers Solutions via Accountable Payment Models • Joint conditionbased payment to PCP and psychiatrist • No flexibility to focus extra resources on highest-risk patients • No flexibility to spend more on care mgt • No payment for care management services • Inadequate payment for diagnosis and treatment planning • Population-based payment for colon cancer screening • Condition-based pmt for IBD • Payment for care management svcs • Accountability for hospital admissions & use of guidelines • No payment for nurses • Monthly payments for chronic care to work with chronic management disease patients • No payment for phone • Payments to support consults w/ specialists PCP-specialist partnerships © Center for Healthcare Quality and Payment Reform www.CHQPR.org 361 Should Physicians Fear the Risks of Accountable Payment Models? Risks Under APMs • Will the amount of payment be adequate to cover the services patients need? • Will risk adjustment be adequate to control for differences in need? •How will you control the costs of other providers involved in the care in the alternative payment model? • What portion of payments will be withheld based on quality measures? • Will you have enough patients to cover the costs of managing the new payment? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 362 Risk Is Not New to Physicians, It’s Just Different Risk in APMs Risks Under FFS Risks Under APMs •Will fee levels from payers be adequate to cover the costs of delivering services? •What utilization controls will payers impose on your services? •What “value-based” reductions will be made in your payments based on “efficiency” measures? •What “value-based” reductions will be made in your fees based on quality measures? •Will you have enough patients to cover your practice expenses? • Will the amount of payment be adequate to cover the services patients need? • Will risk adjustment be adequate to control for differences in need? •How will you control the costs of other providers involved in the care in the alternative payment model? • What portion of payments will be withheld based on quality measures? • Will you have enough patients to cover the costs of managing the new payment? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 363 Can Small Physician Practices Manage Accountable Payments? • Infrastructure/Services – Small physician practices may not have enough patients to justify staff or other services to coordinate care, particularly for patients with complex illnesses (e.g., nurse care managers, patient registries, etc.) • Quality/Cost Measurement – Small numbers of patients make measurement unreliable; physicians may be inappropriately labeled low quality, high cost, or vice versa MD DO MD DO DO MD DO MD MD DO MD DO MD DO MD DO DO MD DO MD ? Better Patient Outcomes & Lower Cost © Center for Healthcare Quality and Payment Reform www.CHQPR.org 364 Even Solo Physicians Can Take Accountability for Cost/Outcomes • In 1987, an orthopedic surgeon in Lansing, Michigan and the local hospital, Ingham Medical Center, offered: – a fixed total price for surgical services for shoulder and knee problems – a warranty for any subsequent services needed for a two-year period, including repeat visits, imaging, rehospitalization and additional surgery • Results: – Health insurer paid 40% less than otherwise – Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer rehospitalizations • Method: – Reducing unnecessary auxiliary services such as radiography and physical therapy – Reducing the length of stay in the hospital – Reducing complications and readmissions. Johnson LL, Becker RL. An alternative health-care reimbursement system—application of arthroscopy and financial warranty: results of a two-year pilot study. Arthroscopy. 1994 Aug;10(4):462–70 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 365 Sharing Resources Reduces Cost/Size of Impact Needed © Center for Healthcare Quality and Payment Reform www.CHQPR.org 366 Sharing Services Across Multiple Practices Shared Services Data and analytics to measure and monitor utilization and quality Coordinated relationships with specialists and hospitals Capability for tracking patient care and ensuring followup (e.g., registry) Method for targeting high-risk patients (e.g., predictive modeling Resources for patient educ. & selfmgt support (e.g., RN care mgr) MD DO MD DO MD DO MD DO DO MD DO MD DO MD DO MD MD DO MD DO DO MD DO MD MD DO MD DO MD DO MD DO DO MD DO MD DO MD DO MD Better Patient Outcomes & Lower Cost © Center for Healthcare Quality and Payment Reform www.CHQPR.org 367 IPAs and CINs Can Be Vehicles for Sharing Services/Accountability IPA/CIN Shared Services Data and analytics to measure and monitor utilization and quality Coordinated relationships with specialists and hospitals Capability for tracking patient care and ensuring followup (e.g., registry) Method for targeting high-risk patients (e.g., predictive modeling Resources for patient educ. & selfmgt support (e.g., RN care mgr) MD DO MD DO MD DO MD DO DO MD DO MD DO MD DO MD MD DO MD DO DO MD DO MD MD DO MD DO MD DO MD DO DO MD DO MD DO MD DO MD Better Patient Outcomes & Lower Cost © Center for Healthcare Quality and Payment Reform www.CHQPR.org 368 Still to Come • Getting payers to implement good payment models • Redesigning care delivery to improve outcomes and lower spending • Organizing to succeed under alternative payment models © Center for Healthcare Quality and Payment Reform www.CHQPR.org 369 PART 3: Implementing Alternative Payment Models Ideally, Health Plans Would Use Physician-Focused Payments Physician-Focused Payment Models Health Plans Physician Practice Higher Value Care: • Better Quality • Lower Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 371 Most Health Plans Resist True Payment Reforms “Value-Based Purchasing” • FFS + P4P • Shared Savings • Narrow Network Discounts Health Plans Physician Practice Low Value Care: • Poor Quality • High Avoidable Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 372 For Most Workers, Employers are the Insurer, Not a Health Plan Source: Employer Health Benefits 2012 Annual Survey. The Kaiser Family Foundation and Health Research and Educational Trust 60% of Workers Are Now in Self-Insured Plans © Center for Healthcare Quality and Payment Reform www.CHQPR.org 373 For Self-Funded Employers, The Health Plan is Just a Pass Through Purchaser Payment SelfFunded Purchasers ASO Health Plan (No Risk) Physician Practice Provider Claims © Center for Healthcare Quality and Payment Reform www.CHQPR.org 374 No Incentive for Health Plans to Change Without Customer Demand SelfFunded Purchasers ASO Health Plan (No Risk) Physician Practice For Health Plan: • Higher costs of implementing new payment models • Savings will (should) go to the purchasers, not the plans © Center for Healthcare Quality and Payment Reform www.CHQPR.org 375 What We Need Are Purchaser-Provider Partnerships Better Payment and Benefit Structure SelfFunded Purchasers Lower Cost, Higher Quality Care Purchasers and Patients “win” if: • Physicians keep employees healthy • Physicians deliver high-quality care at low prices Physician Practice Physicians “win” if: • Patients stay healthy and need less care • Purchaser pays adequately for high-quality care to those who need it © Center for Healthcare Quality and Payment Reform www.CHQPR.org 376 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) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 377 Health Plan Implements Changes Purchasers/Providers Agree On Health Plans Implementation Better Payment and Benefit Structure SelfFunded Purchasers Lower Cost, Higher Quality Care Physician Practice © Center for Healthcare Quality and Payment Reform www.CHQPR.org 378 Some Purchasers Are Making Specialty-Specific Payments Purchasers Cardiac Surgery Practice E.g., Walmart Lowes Orthopedic Practice © Center for Healthcare Quality and Payment Reform www.CHQPR.org 379 Purchasers Don’t Want to Deal With Every Specialty Separately Primary Care Practice SelfFunded Purchasers Cardiology Practice Gastroenterology Practice OB/GYN Practice Neurosurgery Practice © Center for Healthcare Quality and Payment Reform www.CHQPR.org 380 Purchasers Want “One Throat to Choke” (a CIN) Clinically Integrated Network PCPs SelfGlobal Funded Purchasers Payment Cardiologists Gastroenterologists OB/GYNs Neurosurgeons © Center for Healthcare Quality and Payment Reform www.CHQPR.org 381 Physician-Led CINs Can Change Compensation & Care Delivery Clinically Integrated Network Chronic Disease Mgt Payment SelfGlobal Funded Purchasers Payment Heart Disease Mgt Payment IBD Mgt Payment Maternity Care Payment Back Pain Mgt Pmt PCPs Cardiologists Gastroenterologists OB/GYNs Neurosurgeons © Center for Healthcare Quality and Payment Reform www.CHQPR.org 382 Provider-Owned Plans Allow Direct Contracting ProviderOwned Health Plan Better Payment and Benefit Structure Self-Funded Purchasers Providers Lower Cost, Higher Quality Care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 383 Purchasers Have Total Risk Today TOTAL COST OF HEALTH CARE Self-Funded Purchasers, Medicare, Medicaid Providers © Center for Healthcare Quality and Payment Reform www.CHQPR.org 384 The Goal Should Not Be to Shift Total Risk to Physicians TOTAL COST OF HEALTH CARE TOTAL COST OF HEALTH CARE Self-Funded Purchasers, Medicare, Medicaid Physicians © Center for Healthcare Quality and Payment Reform www.CHQPR.org 385 Goal: Share Risk With Physicians on Costs They Can Control INSURANCE RISK (Risk of Illness) PERFORMANCE RISK (Cost/Illness) Self-Funded Purchasers, Medicare, Medicaid Physicians © Center for Healthcare Quality and Payment Reform www.CHQPR.org 386 How Many Patients Do You Need to (Successfully) Manage Total Costs? 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 EmployerSponsored Health Insurance, April 2013. State Health Access Data Assistance Center and Robert Wood Johnson Foundation Fewer employees than typical physician practice panel size © Center for Healthcare Quality and Payment Reform www.CHQPR.org 388 The Keys to Managing Risk • How Do Small Employers Manage Self-Insurance Risk? – – – – They know who their employees are and can estimate spending They start with what they spent last year and try to control growth They have reserves to cover year-to-year variation They purchase stop-loss insurance to cover unusually expensive cases © Center for Healthcare Quality and Payment Reform www.CHQPR.org 389 The Keys to Managing Risk • How Do Small Employers Manage Self-Insurance Risk? – – – – They know who their employees are and can estimate spending They start with what they spent last year and try to control growth They have reserves to cover year-to-year variation They purchase stop-loss insurance to cover unusually expensive cases • How Would Physician Practices Manage Risk? – – – – They need to know who their patients are in order to project spending They need to start with last year’s payments and control growth They need some reserves to cover year-to-year variation They need to purchase stop-loss insurance to cover unusually expensive cases © Center for Healthcare Quality and Payment Reform www.CHQPR.org 390 It Would Be Eas(ier) if Purchasers & Providers Matched Geographically Employer in Community 1 Employer in Community 1 Employer in Community 2 Employer in Community 2 Employer in Community 2 Employer in Community 3 Employer in Community 3 Global Payment Physicians in Community 1 Community 1 CIN Global Payment Physicians in Community 2 Community 2 CIN Global Payment Physicians in Community 3 Community 3 CIN © Center for Healthcare Quality and Payment Reform www.CHQPR.org 391 Employers’ Employees Don’t All Live in the Same Community Small, Local Employer Small, Local Employer Small, Local Employer Physicians in Community 1 Physicians in Community 2 Physicians in Community 3 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 392 Larger Employers Will Span Even More Communities Small, Local Employer Larger and National Employers Small, Local Employer Small, Local Employer Physicians in Community 1 Physicians in Community 2 Physicians in Community 3 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 393 To Solve This, You Could Create a Big CIN/ACO Large CIN/ACO Small, Local Employer Larger and National Employers Small, Local Employer Small, Local Employer Physicians in Community 1 Physicians in Community 2 Physicians in Community 3 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 394 …Or Multiple Local CINs Could Contract as a Larger Network Contracting Network Small, Local Employer Larger and National Employers Small, Local Employer Small, Local Employer Physicians in Community 1 CIN 1 Physicians in Community 2 CIN 2 Physicians in Community 3 CIN 3 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 395 …Or Multiple CINs Could Contract as a Network Contracting Network Small, Local Employer Larger and National Employers Small, Local Employer Small, Local Employer Physicians in Community 1 CIN 1 Physicians in Community 2 CIN 2 Physicians in Community 3 CIN 3 It’s easier to collaborate if profits don’t depend on volume of procedures or cherry-picking patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 396 Facilitator Needed to Develop Common Contracting Approach Contracting Network Small, Local Employer Larger and National Employers Small, Local Employer Small, Local Employer Physicians in Community 1 CIN 1 Physicians in Community 2 CIN 2 Physicians in Community 3 CIN 3 Facilitator, e.g., PA Medical Society © Center for Healthcare Quality and Payment Reform www.CHQPR.org 397 Instead of Having To Accept What Medicare and Health Plans Pay… Medicare Beneficiaries CMS Medicare FFS MA Plans Fully Insured Large Groups Commercial Health Plans Commercial FFS Self-Insured Employers Individuals & Small Groups State Medicaid Medicaid MCOs Physician Group, IPA, or Health System Medicaid FFS © Center for Healthcare Quality and Payment Reform www.CHQPR.org 398 What Could Happen If Physicians Had Their Own Health Plans? Medicare Beneficiaries CMS MA Plans Fully Insured Large Groups Commercial Health Plans Self-Insured Employers ? ? Individuals & Small Groups Physician -Owned Health Plan Physician Group, IPA, or Health System ? State Medicaid Medicaid MCOs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 399 Get Risk-Adjusted Payment from Medicare, Pay Physicians Better Medicare Beneficiaries Fully Insured Large Groups CMS Commercial Health Plans Self-Insured Employers Individuals & Small Groups State Medicaid Risk-Adjusted Medicare Advantage Payment Physician -Owned Health Plan Better Physician Payment Physician Group, IPA, or Health System Medicaid MCOs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 400 Contract Directly with Self-Insured Employers, Pay Physicians Better Medicare Beneficiaries Fully Insured Large Groups Self-Insured Employers CMS Commercial Health Plans Risk-Adjusted Direct Contract Individuals & Small Groups State Medicaid Risk-Adjusted Medicare Advantage Payment Physician -Owned Health Plan Better Physician Payment Physician Group, IPA, or Health System Medicaid MCOs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 401 Use Exchanges for Small Group Business, Pay Physicians Better Medicare Beneficiaries Fully Insured Large Groups Self-Insured Employers CMS Risk-Adjusted Medicare Advantage Payment Commercial Health Plans Risk-Adjusted Direct Contract Individuals & Small Groups Insurance Exchanges State Medicaid Medicaid MCOs Physician -Owned Health Plan Better Physician Payment Physician Group, IPA, or Health System Risk-Adjusted Premium Revenue © Center for Healthcare Quality and Payment Reform www.CHQPR.org 402 Contract Directly With State for Medicaid, Pay Physicians Better Medicare Beneficiaries Fully Insured Large Groups Self-Insured Employers Individuals & Small Groups State Medicaid CMS Risk-Adjusted Medicare Advantage Payment Commercial Health Plans Risk-Adjusted Direct Contract Insurance Exchanges Physician -Owned Health Plan Better Physician Payment Physician Group, IPA, or Health System Risk-Adjusted Premium Revenue Risk-Adjusted Global Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 403 Get Global Payment for Large Groups, Pay Physicians Better Medicare Beneficiaries CMS Risk-Adjusted Medicare Advantage Payment Fully Insured Large Groups Self-Insured Employers Individuals & Small Groups State Medicaid Risk-Adjusted Direct Contract Insurance Exchanges Physician -Owned Health Plan Better Physician Payment Physician Group, IPA, or Health System Risk-Adjusted Premium Revenue Risk-Adjusted Global Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 404 Result: A “Single Payer System” Controlled by Physicians Medicare Beneficiaries CMS Risk-Adjusted Medicare Advantage Payment Fully Insured Large Groups Self-Insured Employers Individuals & Small Groups State Medicaid Risk-Adjusted Direct Contract Insurance Exchanges Physician -Owned Health Plan Better Physician Payment Physician Group, IPA, or Health System Risk-Adjusted Premium Revenue Risk-Adjusted Global Payment ONE PAYER, MANY CUSTOMERS © Center for Healthcare Quality and Payment Reform www.CHQPR.org 405 Eliminating the Middle Man, Reconnecting Physicians & Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 406 High Quality Health Plans Run By Physician Groups © Center for Healthcare Quality and Payment Reform www.CHQPR.org 407 What is Needed for Success in an Alternative Payment Model? • Clinically Integrated Networks (CINs), and Accountable Care Organizations (ACOs) can’t succeed under an Alternative Payment Model if they don’t change the way care is delivered to patients • Just as Health Insurance Companies don’t deliver care to patients, neither do Clinically Integrated Networks (CINs) or Accountable Care Organizations (ACOs) – physicians deliver care • Individual physician practices will have to redesign their care delivery processes © Center for Healthcare Quality and Payment Reform www.CHQPR.org 408 Reducing Hospitalizations for COPD No Exacerbation Home Serious Exacerbation Hospital Patient with COPD © Center for Healthcare Quality and Payment Reform www.CHQPR.org 409 Intervening Before ER Visits/Admissions Occur Home No Exacerbation Patient with COPD Cold, Failure to Take Meds, Etc. Serious Exacerbation Serious Exacerbation Hospital OPPORTUNITY FOR IMPACT © Center for Healthcare Quality and Payment Reform www.CHQPR.org 410 Creating a COPD Action Plan BEFORE Patient with COPD AFTER Patient with COPD Home No Exacerbation Cold, Failure to Take Meds, Etc. Serious Exacerbation Serious Exacerbation Hospital No Exacerbation Home Cold, Failure to Take Meds, Etc. Serious Exacerbation ACTION PLAN: Call MD/RN, Add Meds, Etc. Hospital © Center for Healthcare Quality and Payment Reform www.CHQPR.org 411 Making an Action Plan Work Patient Must Be Willing to Call Right Away For Help Resolving an Exacerbation Primary Care Practice Must Be Able to Respond Right Away When a Patient Calls (And Not By Sending Them to the ER) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 412 How We Hope A Primary Care Practice Answers Patient Calls During Office Hours: Calls PCP Office Speaks to Scheduler Patient with Action Plan Has Problem After Office Hours: Seen by PCP Patient treated and remains out of hospital Calls Answ. Svc. Speaks to PCP © Center for Healthcare Quality and Payment Reform www.CHQPR.org 413 What Actually Happens, All Too Often Goes to ER During Office Hours: Calls PCP Office Can’t Get Through No Appts Available Speaks to Scheduler Seen by PCP Patient admitted to Hospital Patient with Action Plan Has Problem After Office Hours: Patient treated and remains out of hospital Calls Answ. Svc. Speaks to PCP Patient admitted to Hospital Speaks to On-Call MD Goes to ER © Center for Healthcare Quality and Payment Reform www.CHQPR.org 414 Redesigning How a Primary Care Practice Answers Patient Calls Process for Office Phone Screening, Assessment, and Scheduling During Office Hours: Call from Patient with COPD Action Plan No COPD? Nurse Phone Assessment Schedule Visit Today If Possible Patient Can’t Come Today Receptionist Patient Stable, Can Wait Answering Service After Office Hours: Send to ER If Necessary MD Calls & Assesses Protocol for On-Call Physicians to Use Communication Between Office & Care Manager Physician Sees Patient Nurse Notifies Care Mgr Assessed as OK to Come Tomorrow Needs Home Visit or Call Now Call Care Mgr or Home Care Needs Home Visit or Call Now ER Visit Needed Treatment Changed If Needed Home Visit to Patient Contact RN/MD w/ Findings Home Visits for At-Risk Patients Short-Term Treatment in ER Requires Home Visit to Not Admit Patient Can Return Home Requires Admission Care Mgr Notified Protocol for ER/Admits © Center for Healthcare Quality and Payment Reform www.CHQPR.org 415 Costs of Transformation • Expensive IT systems don’t change care delivery and often make it harder to invest resources in the things that really matter • The key costs: – Implementing different ways of delivering care is inherently inefficient in the short run, even if it’s better in the long run, so productivity-based revenue will decline – New personnel (e.g., nurse care managers) have to be recruited, trained, and paid before the full benefits of savings have been achieved – Physicians need to plan and manage the transformation, and that takes time away from patients • Working capital/reserves are needed to cover these costs • A business plan is needed to make sure that working capital will be recovered © Center for Healthcare Quality and Payment Reform www.CHQPR.org 416 Physicians Have to Measure Their Performance (Using Meaningful Measures) and Make Improvements When Needed Allergists: Tendency to Use Testing © Center for Healthcare Quality and Payment Reform www.CHQPR.org 418 Cardiology: Tendency to Use Echo © Center for Healthcare Quality and Payment Reform www.CHQPR.org 419 GI: Tendency to Use Upper GI Endoscopy © Center for Healthcare Quality and Payment Reform www.CHQPR.org 420 Physicians Have to Measure Their Performance (Using Meaningful Measures) and Make Improvements When Needed Colleagues in the Practice, CIN, or ACO Need to Enforce a Commitment to Improvement and Accountability and Change Partners If Necessary Physicians Have to Put Aside Differences and Work Together Fighting Over Shares of a Shrinking Pie Controlled by Payers VS Working Together to Put Physicians Back in Control of Healthcare © Center for Healthcare Quality and Payment Reform www.CHQPR.org 422 What Would a Physician-Driven, Patient-Centered CIN Look Like? • The patient (and their employer) gets a 90 day money-back guarantee if they choose the CIN • The CIN helps the patient find a primary care physician with the type of access, team, cultural competence, and personality the patient will be most comfortable with • The PCP and CIN immediately work to welcome the patient and design a plan of care to match the patient’s needs and preferences, and it regularly solicits feedback on performance • If the patient has a specific health problem, the PCP & CIN commit to get the patient the best care for that problem at the lowest cost, even if that is not from a provider in the CIN – The CIN provides the patient with comparative information on the quality and cost of the CIN physicians and providers compared to all other providers (rather than forcing the patient to search the internet) – If the patient chooses a non-group provider, the patient will pay the difference in cost unless the other provider’s quality is better • The CIN pays physicians to manage the patient’s conditions effectively, not based on office visits or procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 423 Your Turn • Assuming the problems with the payment system were fixed, what other barriers (if any) would you face in making the changes in care delivery needed to achieve savings? • What concerns or fears would you have about being held accountable for achieving the savings? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 424 Learn More About Win-Win-Win Payment and Delivery Reform www.PaymentReform.org © Center for Healthcare Quality and Payment Reform www.CHQPR.org 425 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 Procedural Bundles and Warranties A Hypothetical Case of Surgery COST TYPE TODAY Physician Fee $2,000 Hospital Cost $20,900 Hosp. Margin (5%) $ 1,100 Total Hospital Pmt $22,000 Total Cost to Payer $24,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 428 Most of the Money Is Not Going to the Physician COST TYPE TODAY Physician Fee $2,000 Hospital Cost $20,900 Hosp. Margin (5%) $ 1,100 Total Hospital Pmt $22,000 Total Cost to Payer $24,000 Physician receives 8% of total spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 429 What if the Surgeon Could Reduce The Hospital’s Costs? COST TYPE TODAY Physician Fee $2,000 Hospital Cost $20,900 Hosp. Margin (5%) $ 1,100 Total Hospital Pmt $22,000 Total Cost to Payer $24,000 CHANGE -3% ($630) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 430 Today: All Savings Goes to the Hospital, No Reward for Physician COST TYPE TODAY Physician Fee $2,000 Hospital Cost $20,900 Hosp. Margin (5%) $ 1,100 Total Hospital Pmt $22,000 Total Cost to Payer $24,000 CHANGE SPLIT + 0% -3% ($630) +57% ($630) -0% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 431 Bundling Eliminates Boundary Between Hospital & Physician Pmt COST TYPE TODAY Physician Fee $ 2,000 Hospital Cost $20,900 Hospital Margin $ 1,100 Total Cost to Payer $24,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 432 Bundling Allows Savings Split Among Docs, Hospitals, Payers COST TYPE TODAY CHANGE SPLIT Physician Fee $ 2,000 + 10% ($200) Hospital Cost $20,900 Hospital Margin $ 1,100 +18% ($200) Total Cost to Payer $24,000 - -3% ($630) 1% ($230) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 433 So Price of Surgery is Lower But More Profitable COST TYPE TODAY CHANGE SPLIT NEW + 10% ($200) $ 2,200 Physician Fee $ 2,000 Hospital Cost $20,900 Hospital Margin $ 1,100 +18% ($200) $ 1,300 Total Cost to Payer $24,000 - $23,770 -3% ($630) $20,270 1% ($230) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 434 Opportunities to Reduce Hospital Costs • Use of lower-cost medical devices and equipment, or negotiating for better prices on devices • Better scheduling of scarce resources (e.g., surgery suites) to reduce both underutilization & overtime • Coordination among multiple physicians and departments to avoid duplication and conflicts in scheduling • Standardization of equipment and supplies to facilitate bulk purchasing • Less wastage of expensive supplies • Reduced length of stay • Etc. © Center for Healthcare Quality and Payment Reform www.CHQPR.org 435 APM #4: Physician-Facility Bundle © Center for Healthcare Quality and Payment Reform www.CHQPR.org 436 Medicare Acute Care Episode (ACE) Demonstration • Bundled Medicare Part A (hospital) and Part B (physician) payments together for cardiac and orthopedic (hips & knees) procedures • Total Medicare payment was 1%-8% lower than what the standard Medicare DRG + physician fee would have been • Payment was made to a Physician-Hospital Organization, which then divided the payment between hospital and surgeon • Surgeon could receive up to 25% above Medicare fee • Patient cost-sharing reduced by up to 50% of Medicare’s savings • CMS waived Stark rules for gainsharing • Implemented in 2009/2010 in five hospital systems based on competitive bids: – – – – – Hillcrest Medical Center, Oklahoma (cardiac + orthopedic procedures) Baptist Health System, Texas (cardiac + orthopedic procedures) Oklahoma Heart Hospital, Oklahoma (cardiac procedures) Lovelace Health System, New Mexico (cardiac + orthopedic procedures) Exempla Saint Joseph Hospital, Colorado (cardiac procedures) • Most hospitals achieved significant savings, and physicians received increases in payment for procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 437 Yes, a Health Care Provider Can Offer a Warranty SM Geisinger Health System ProvenCare – A single payment for an ENTIRE 90 day period including: • • • • ALL related pre-admission care ALL inpatient physician and hospital services ALL related post-acute care ALL care for any related complications or readmissions – Types of conditions/treatments currently offered: • • • • • • • • Cardiac Bypass Surgery Cardiac Stents Cataract Surgery Total Hip Replacement Bariatric Surgery Perinatal Care Low Back Pain Treatment of Chronic Kidney Disease © Center for Healthcare Quality and Payment Reform www.CHQPR.org 438 Payment + Process Improvement = Better Outcomes, Lower Costs © Center for Healthcare Quality and Payment Reform www.CHQPR.org 439 Readmission Reduction: 44% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 440 It Can Be Done By Physicians, Not Just Large Health Systems • In 1987, an orthopedic surgeon in Lansing, Michigan and the local hospital, Ingham Medical Center, offered: – a fixed total price for surgical services for shoulder and knee problems – a warranty for any subsequent services needed for a two-year period, including repeat visits, imaging, rehospitalization and additional surgery • Results: – Health insurer paid 40% less than otherwise – Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer rehospitalizations • Method: – Reducing unnecessary auxiliary services such as radiography and physical therapy – Reducing the length of stay in the hospital – Reducing complications and readmissions. Johnson LL, Becker RL. An alternative health-care reimbursement system—application of arthroscopy and financial warranty: results of a two-year pilot study. Arthroscopy. 1994 Aug;10(4):462–70 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 441 A Warranty is Not an Outcome Guarantee • Offering a warranty on care does not imply that you are guaranteeing a cure or a good outcome • It merely means that you are agreeing to correct avoidable problems at no (additional) charge • Most warranties are “limited warranties,” in the sense that they agree to pay to correct some problems, but not all © Center for Healthcare Quality and Payment Reform www.CHQPR.org 442 Prices for Warrantied Care Will Likely Be Higher © Center for Healthcare Quality and Payment Reform www.CHQPR.org 443 Prices for Warrantied Care Will Likely Be Higher • Q: “Why should we pay more to get good-quality care??” • A: In most industries, warrantied products cost more, but they’re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty © Center for Healthcare Quality and Payment Reform www.CHQPR.org 444 Example: $5,000 Procedure, 20% Readmission Rate Cost of Success Added Cost of Readmit Rate of Readmits $5,000 $5,000 20% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 445 Average Payment for Procedure is Higher than the Official “Price” Cost of Success Added Cost of Readmit Rate of Readmits Average Total Cost $5,000 $5,000 20% $6,000 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 446 Average Payment for Procedure is Higher than the Official “Price” Cost of Success Added Cost of Readmit Rate of Readmits Average Total Cost $5,000 $5,000 20% $6,000 So how much should you charge to offer this same procedure with a warranty? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 447 Starting Point for Warranty Price: Actual Current Average Payment Cost of Success Added Cost of Readmit Rate of Readmits Average Total Cost Price Charged $5,000 $5,000 20% $6,000 $6,000 Net Margin $ 0 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 448 Limited Warranty Gives Financial Incentive to Improve Quality Cost of Success Added Cost of Readmit Rate of Readmits Average Total Cost Price Charged $5,000 $5,000 20% $6,000 $6,000 $ $5,000 $5,000 15% $5,750 $6,000 $250 Reducing Adverse Events… ...Reduces Costs... Net Margin 0 …Improves The Bottom Line © Center for Healthcare Quality and Payment Reform www.CHQPR.org 449 Higher-Quality Provider Can Charge Less, Attract Patients Cost of Success Added Cost of Readmit Rate of Readmits Average Total Cost Price Charged $5,000 $5,000 20% $6,000 $6,000 $ $5,000 $5,000 15% $5,750 $6,000 $250 $5,000 $5,000 15% $5,750 $5,900 $ 150 Enables Lower Prices Still With Better Margin Net Margin 0 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 450 A Virtuous Cycle of Quality Improvement & Cost Reduction Cost of Success Added Cost of Readmit Rate of Readmits Average Total Cost Price Charged $5,000 $5,000 20% $6,000 $6,000 $ $5,000 $5,000 15% $5,750 $6,000 $250 $5,000 $5,000 15% $5,750 $5,900 $150 $5,000 $5,000 10% $5,500 $5,900 $400 Reducing Adverse Events… ...Reduces Costs... Net Margin 0 …Improves The Bottom Line © Center for Healthcare Quality and Payment Reform www.CHQPR.org 451 Win-Win-Win Through Appropriate Payment & Pricing Cost of Success Added Cost of Readmit Rate of Readmits Average Total Cost Price Charged $5,000 $5,000 20% $6,000 $6,000 $ $5,000 $5,000 15% $5,750 $6,000 $250 $5,000 $5,000 15% $5,750 $5,900 $150 $5,000 $5,000 10% $5,500 $5,900 $400 $5,000 $5,000 10% $5,500 $5,700 $200 $5,000 $5,000 5% $5,250 $5,700 $450 Quality is Better... Net Margin 0 ...Cost is Lower... ...Providers More Profitable © Center for Healthcare Quality and Payment Reform www.CHQPR.org 452 Different Warranty Prices for Cases With Different Risks Cost of Success Added Cost of Readmit Rate of Readmits Average Total Cost Price Charged $5,000 $5,000 20% $6,000 $6,000 $ $5,000 $5,000 10% $5,500 $5,700 $200 Net Margin 0 HIGH RISK CASES $5,000 $5,000 30% $6,500 $6,500 $ 0 $5,000 $5,000 15% $5,750 $6,100 $350 LOW RISK CASES $5,000 $5,000 10% $5,500 $5,500 $ 0 $5,000 $5,000 5% $5,250 $5,350 $100 © Center for Healthcare Quality and Payment Reform www.CHQPR.org 453 APM #5: Warrantied Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 454 A Critical Element is Shared, Trusted Data • Physicians and Hospitals need to know the current utilization and costs for their patients to determine whether a bundled/warrantied payment amount will cover the costs of delivering effective care to the patients • Purchasers and Payers need to know the current utilization and costs for their employees/members to determine whether the bundled/warrantied 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! © Center for Healthcare Quality and Payment Reform www.CHQPR.org 455 Current Transparency Efforts Are Focused on Procedure Price Payment for Procedure dded Provider 1: $25,000 Provider 2: $23,000 -8% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 456 What Hidden Costs Accompany the Lower Price? Payment for Procedure Payment and Rate of Complications Provider 1: $25,000 $30,000 2% $30,000 10% Provider 2: $23,000 -8% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 457 Total Spending May Be Higher With the “Lower Price” Provider Payment for Procedure Payment and Rate of Complications Average Total Payment $30,000 2% $25,600 $30,000 10% $26,000 Provider 1: $25,000 Provider 2: $23,000 -8% +2% Provider 2 has a lower starting price, but is more expensive when lower quality is factored in © Center for Healthcare Quality and Payment Reform www.CHQPR.org 458 Bundled/Warrantied Pmts Allow Comparing Apples to Apples Payment for Procedure Payment and Rate of Complications Bundled/ Episode Payment Provider 1: 2% $25,600 10% $26,000 Provider 2: Bundled prices show that Provider 1 is the higher-value provider +2% © Center for Healthcare Quality and Payment Reform www.CHQPR.org 459 Many Variations Possible in Combining Bundles and Warranties © Center for Healthcare Quality and Payment Reform www.CHQPR.org 460 PATIENT Starting with a Hospital Procedure… Procedure Hospital DRG Physician Fee © Center for Healthcare Quality and Payment Reform www.CHQPR.org 461 Simplest Bundle, Already Working in CMS Demonstrations PATIENT SINGLE PMT Procedure Hospital DRG Physician Fee © Center for Healthcare Quality and Payment Reform www.CHQPR.org 462 Bundling All Physicians Promotes More Care Coordination PATIENT SINGLE PMT Procedure Hospital DRG Lead Doc. Fee Consultant Fee Consultant Fee © Center for Healthcare Quality and Payment Reform www.CHQPR.org 463 Not All Care Providers Are Inside the Hospital Walls PATIENT SINGLE PMT Procedure Post-Acute Hospital DRG Lead Doc. Fee Rehab Home Health Consultant Fee Consultant Fee PCP Specialist PROBLEM: No incentive to reduce unnecessary use of expensive post-acute care © Center for Healthcare Quality and Payment Reform www.CHQPR.org 464 Bundling Inpatient and Post-Acute Care Promotes Coordination PATIENT SINGLE PAYMENT Procedure Post-Acute Hospital DRG Lead Doc. Fee Rehab Home Health Consultant Fee Consultant Fee PCP Specialist © Center for Healthcare Quality and Payment Reform www.CHQPR.org 465 Does the Bundle Stop When Things Go Bad in the Hospital? PATIENT SINGLE PAYMENT Procedure Complication Post-Acute Hospital DRG Lead Doc. Fee DRG/Outlier Lead Doc. Fee Rehab Home Health Consultant Fee Consultant Fee Consultant Fee Consultant Fee PCP Specialist PROBLEM: Hospital and physicians are paid more to treat expensive infections and complications © Center for Healthcare Quality and Payment Reform www.CHQPR.org 466 Including a Warranty for Complications in the Bundle PATIENT SINGLE PAYMENT Procedure Complication Post-Acute Hospital DRG Lead Doc. Fee DRG/Outlier Lead Doc. Fee Rehab Home Health Consultant Fee Consultant Fee Consultant Fee Consultant Fee PCP Specialist © Center for Healthcare Quality and Payment Reform www.CHQPR.org 467 Including a Warranty for Post-Discharge Problems PATIENT SINGLE PAYMENT Procedure Complication Post-Acute Readmission Hospital DRG Lead Doc. Fee DRG/Outlier Lead Doc. Fee Rehab Home Health Hospital DRG Lead Doc. Fee Consultant Fee Consultant Fee Consultant Fee Consultant Fee PCP Specialist Consultant Fee Consultant Fee Days Post-Discharge 15 30 90+ © Center for Healthcare Quality and Payment Reform www.CHQPR.org 468 “Episode” Payments Are Bundles Over a Full Course of Treatment PATIENT SINGLE PAYMENT Procedure Complication Post-Acute Readmission Hospital DRG Lead Doc. Fee DRG/Outlier Lead Doc. Fee Rehab Home Health Hospital DRG Lead Doc. Fee Consultant Fee Consultant Fee Consultant Fee Consultant Fee PCP Specialist Consultant Fee Consultant Fee Days Post-Discharge 15 30 90+ © Center for Healthcare Quality and Payment Reform www.CHQPR.org 469 APM #6: Episode Payment for a Procedure © Center for Healthcare Quality and Payment Reform www.CHQPR.org 470 What If The Procedure Could Be Done Outside the Hospital? PATIENT SINGLE PAYMENT Procedure Complication Post-Acute Readmission Hospital DRG Lead Doc. Fee DRG/Outlier Lead Doc. Fee Rehab Home Health Hospital DRG Lead Doc. Fee Consultant Fee Consultant Fee Consultant Fee Consultant Fee PCP Specialist Consultant Fee Consultant Fee Alternate Setting Facility Fee Physician Fee PROBLEM: No incentive to use lowercost setting, since payer gains all savings from lower facility fees © Center for Healthcare Quality and Payment Reform www.CHQPR.org 471 A Facility-Independent Episode PATIENT SINGLE PAYMENT Procedure Complication Post-Acute Readmission Hospital DRG Lead Doc. Fee DRG/Outlier Lead Doc. Fee Rehab Home Health Hospital DRG Lead Doc. Fee Consultant Fee Consultant Fee Consultant Fee Consultant Fee PCP Specialist Consultant Fee Consultant Fee Alternate Setting Facility Fee Physician Fee SOLUTION: Providers keep some of the savings from moving procedures to lower-cost settings © Center for Healthcare Quality and Payment Reform www.CHQPR.org 472 What if An Alternative Procedure Would Be Better or Cheaper? PATIENT SINGLE PAYMENT Procedure Complication Post-Acute Readmission Hospital DRG Lead Doc. Fee DRG/Outlier Lead Doc. Fee Rehab Home Health Hospital DRG Lead Doc. Fee Consultant Fee Consultant Fee Consultant Fee Consultant Fee PCP Specialist Consultant Fee Consultant Fee Alternate Setting Facility Fee Physician Fee Alternate Procedure Facility Fee Prof. Fee PROBLEM: No incentive to use lower-cost procedures (or to use no procedure at all) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 473 A Condition-Based (Not Procedure-Based) Payment PATIENT SINGLE PAYMENT Procedure Complication Post-Acute Readmission Hospital DRG Lead Doc. Fee DRG/Outlier Lead Doc. Fee Rehab Home Health Hospital DRG Lead Doc. Fee Consultant Fee Consultant Fee Consultant Fee Consultant Fee PCP Specialist Consultant Fee Consultant Fee Alternate Setting Facility Fee Physician Fee Alternate Procedure Facility Fee Prof. Fee SOLUTION: Provider keeps some of the savings from using lower-cost procedures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 474 Accountable Medical Home for Primary Care Current Payment for Primary Care CURRENT PAYMENT PRIMARY CARE Tests & Procedures for Preventive Services Office Visits for Preventive Services Payer Payer Payer Office Visits for Chronic Disease Issues Tests & Procedures for Chronic Disease Mgt Office Visits for Acute Issues Tests & Procedures for Acute Issues © Center for Healthcare Quality and Payment Reform www.CHQPR.org 476 Current Non-Payment for Primary Care CURRENT PAYMENT PRIMARY CARE Tests & Procedures for Preventive Services Office Visits for Preventive Services Outreach Calls for Preventive Services Payer NO PAYMENT Payer NO Proactive Care Mgt for Chronic Disease PAYMENT Payer Office Visits for Chronic Disease Issues Tests & Procedures for Chronic Disease Mgt Office Visits for Acute Issues Tests & Procedures for Acute Issues © Center for Healthcare Quality and Payment Reform www.CHQPR.org 477 What Is Not Paid For Is Exactly What’s Needed to Improve Quality CURRENT PAYMENT PRIMARY CARE Tests & Procedures for Preventive Services Office Visits for Preventive Services Outreach Calls for Preventive Services Payer NO PAYMENT Payer NO Proactive Care Mgt for Chronic Disease PAYMENT Payer Office Visits for Chronic Disease Issues Preventive Care Quality Chronic Disease Mgt Quality Tests & Procedures for Chronic Disease Mgt Office Visits for Acute Issues Tests & Procedures for Acute Issues © Center for Healthcare Quality and Payment Reform www.CHQPR.org 478 One Option: New CPT Fees for Currently Unpaid Services PRIMARY CARE PROPOSED PAYMENT Tests & Procedures for Preventive Services Office Visits for Preventive Services Outreach Calls for Preventive Services Proactive Care Mgt for Chronic Disease Office Visits for Chronic Disease Issues Payer CPT Fee Payer Payer Tests & Procedures for Chronic Disease Mgt Office Visits for Acute Issues Tests & Procedures for Acute Issues © Center for Healthcare Quality and Payment Reform www.CHQPR.org 479 A Better Approach: Flexible Bundled Payment PRIMARY CARE Tests & Procedures for Preventive Services PROPOSED PAYMENT Office Visits for Preventive Services Outreach Calls for Preventive Services Proactive Care Mgt for Chronic Disease Office Visits for Chronic Disease Issues Monthly Core Primary Care Services Payment Payer Payer Payer Tests & Procedures for Chronic Disease Mgt Office Visits for Acute Issues Tests & Procedures for Acute Issues © Center for Healthcare Quality and Payment Reform www.CHQPR.org 480 Small Payment for Large # of Patients Larger Payment for Subset of Patients Needing More Proactive Care Still Larger Payment for Subset of Patients Needing Even More Proactive Care No Chronic Disease One Chronic Disease Two Chronic Diseases or or One Chronic Dis. and No Major Risk Factors Major Risk Factors and Major Risk Factors High Payment for Small # of Patients SIZE OF MONTHLY PER-PATIENT PAYMENT Size of Monthly Payment Should Differ Based on Patient Health Complex and High-Risk Patients PATIENT HEALTH ISSUES © Center for Healthcare Quality and Payment Reform www.CHQPR.org 481 ConditionBased Billing Code xxx01 Small Payment for Large # of Patients ConditionBased Billing Code xxx02 Larger Payment for Subset of Patients Needing More Proactive Care ConditionBased Billing Code xxx03 Still Larger Payment for Subset of Patients Needing Even More Proactive Care No Chronic Disease One Chronic Disease Two Chronic Diseases or or One Chronic Dis. and No Major Risk Factors Major Risk Factors and Major Risk Factors ConditionBased Billing Code xxx04 High Payment for Small # of Patients SIZE OF MONTHLY PER-PATIENT PAYMENT Physicians Could Bill for Codes for Patients by Risk/Acuity Level Complex and High-Risk Patients PATIENT HEALTH ISSUES © Center for Healthcare Quality and Payment Reform www.CHQPR.org 482 SIZE OF MONTHLY PER-PATIENT PAYMENT Adjust Payment Amounts Based on Results PCPs Can Control • 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 Bonus Specialty referrals Penalty No Chronic Disease One Chronic Disease Two Chronic Diseases or or One Chronic Dis. and No Major Risk Factors Major Risk Factors and Major Risk Factors Complex and High-Risk Patients PATIENT HEALTH ISSUES © Center for Healthcare Quality and Payment Reform www.CHQPR.org 483 The Per Patient Payment is the Core Payment, Not an Add-On NEW MODEL Tests & Procedures for Acute Issues Office Visits for Acute Issues Tests & Procedures for Chronic Disease Mgt Tests & Procedures for Preventive Services Performance Adjustment Core Primary Care Services Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 484 This is Different Than Current PCMH Programs Current PCMH Model NEW MODEL P4P/Shared Savings Tests & Procedures for Acute Issues Office Visits for Acute Issues Tests & Procedures for Chronic Disease Mgt Tests & Procedures for Preventive Services Performance Adjustment PMPM for “Care Management” Tests & Procedures for Preventive Services Office Visits for Preventive Services Office Visits for Chronic Disease Issues Tests & Procedures for Chronic Disease Mgt Office Visits for Acute Issues Tests & Procedures for Acute Issues Core Primary Care Services Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 485 It’s Also Different from Traditional PCP Capitation Programs Current PCMH Model NEW MODEL P4P/Shared Savings Tests & Procedures for Acute Issues Office Visits for Acute Issues Tests & Procedures for Chronic Disease Mgt Tests & Procedures for Preventive Services Performance Adjustment PMPM for “Care Management” Tests & Procedures for Preventive Services Office Visits for Preventive Services Office Visits for Chronic Disease Issues Tests & Procedures for Chronic Disease Mgt Office Visits for Acute Issues Tests & Procedures for Acute Issues PCP Capitation P4P Primary Care Capitation Core Primary Care Services Payment © Center for Healthcare Quality and Payment Reform www.CHQPR.org 486 APM #2: Condition-Based Payment for a Physician’s Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 487 Comparison to New CMS CPC+ Program • Provides significant, risk-adjusted care management payments without requiring PCPs to earn them through shared savings • Focuses accountability on things that primary care practices can control, such as ED visits and ambulatory care sensitive hospitalizations, not spending on cancer treatment, surgical site infections, etc. • Limits potential losses to a specific amount of payment paid in advance © Center for Healthcare Quality and Payment Reform www.CHQPR.org 488 Specialty Medical Homes Phases of Care for Specialist Diagnosis and Ongoing Mgt Symptoms of an Acute or Chronic Condition © Center for Healthcare Quality and Payment Reform www.CHQPR.org 490 Phases of Care for Specialist Diagnosis and Ongoing Mgt PCP Input Symptoms of an Acute or Chronic Condition Diagnosis and Treatment Planning by Specialist © Center for Healthcare Quality and Payment Reform www.CHQPR.org 491 Phases of Care for Specialist Diagnosis and Ongoing Mgt PCP Input Symptoms of an Acute or Chronic Condition Diagnosis and Treatment Planning by Specialist No Condition or Different Condition © Center for Healthcare Quality and Payment Reform www.CHQPR.org 492 Phases of Care for Specialist Diagnosis and Ongoing Mgt PCP Input Symptoms of an Acute or Chronic Condition Diagnosis and Treatment Planning by Specialist Continued Care By Specialist for Patients with Difficult-to-Control Condition No Condition or Different Condition © Center for Healthcare Quality and Payment Reform www.CHQPR.org 493 Phases of Care for Specialist Diagnosis and Ongoing Mgt PCP Input Symptoms of an Acute or Chronic Condition Diagnosis and Treatment Planning by Specialist No Condition or Different Condition Continued Care By Specialist for Patients with Difficult-to-Control Condition Continued Care By PCP for Patients with Well-Controlled Condition Specialty Consults © Center for Healthcare Quality and Payment Reform www.CHQPR.org 494 Payment Model for Specialist Diagnosis and Ongoing Mgt PCP Input Symptoms of an Acute or Chronic Condition Diagnosis and Treatment Planning by Specialist One-Time Payment No Condition or Different Condition Continued Care By Specialist for Patients with Difficult-to-Control Condition Continued Care By PCP for Patients with Well-Controlled Condition Specialty Consults © Center for Healthcare Quality and Payment Reform www.CHQPR.org 495 Payment Model for Specialist Diagnosis and Ongoing Mgt PCP Input Symptoms of an Acute or Chronic Condition Diagnosis and Treatment Planning by Specialist One-Time Payment No Condition or Different Condition Continued Care By Specialist for Patients with Difficult-to-Control Condition Monthly Payments Continued Care By PCP for Patients with Well-Controlled Condition Specialty Consults © Center for Healthcare Quality and Payment Reform www.CHQPR.org 496 Payment Model for Specialist Diagnosis and Ongoing Mgt PCP Input Symptoms of an Acute or Chronic Condition Diagnosis and Treatment Planning by Specialist One-Time Payment No Condition or Different Condition Continued Care By Specialist for Patients with Difficult-to-Control Condition Monthly Payments Continued Care By PCP for Patients with Well-Controlled Condition Specialty Consults Payments for Phone/Email Contacts © Center for Healthcare Quality and Payment Reform www.CHQPR.org 497 Payment Model for Specialist Diagnosis and Ongoing Mgt PCP Input Symptoms of an Acute or Chronic Condition Diagnosis and Treatment Planning by Specialist One-Time Payment No Condition or Different Condition Continued Care By Specialist for Patients with Difficult-to-Control Condition Monthly Payments Continued Care By PCP for Patients with Well-Controlled Condition Monthly Payments Specialty Consults Payments for Phone/Email Contacts © Center for Healthcare Quality and Payment Reform www.CHQPR.org 498 Part 4 Transitioning to Total Cost Management Purchasers Want to Reduce Their Total Spending on Healthcare TODAY FUTURE Spending Per Patient Payer Savings NOTE: Graph Is not drawn to scale Total Spending for a Group of Patients Payer Spending Lower Spending Without Rationing Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 500 Traditional Actuarial Breakdowns Aren’t Very Actionable TODAY FUTURE Spending Per Patient Other Payer Savings Labs Total Physicians Spending for a Outpatient Group of Patients Which categories can be reduced? And how would that be done? Lower Spending Without Rationing Inpatient NOTE: Graph Is not drawn to scale Payer Spending Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 501 More Detailed Breakdowns By Type of Service Don’t Help Much TODAY FUTURE Other Payer Savings Spending Per Patient DME Drugs Total Spending for a Group of Patients Home Health SNF Procedures Tests Surgeries Medical Admissions Which categories can be reduced? And how would that be done? Lower Spending Without Rationing ER Visits Tests E&M NOTE: Graph Is not drawn to scale Payer Spending Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 502 A Better Way: Look at Patients By Their Health Conditions.. TODAY Spending Per Patient Other Maternity Total Cancer Spending for a Group Chest Pain of Patients Chronic Diseases NOTE: Graph Is not drawn to scale Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 503 …and Identify Avoidable Services for Each Condition TODAY Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 504 Example: Avoidable Costs for Chronic Disease Patients TODAY Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale • ER visits for exacerbations • Hospital admissions and readmissions • Amputations, blindness Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 505 Example: Avoidable Costs in Diagnosis/Intervention for Chest Pain TODAY Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale • Overuse of high-tech stress tests/imaging • Overuse of cardiac catheterization • Overuse of PCIs, high-priced stents • ER visits for exacerbations • Hospital admissions and readmissions • Amputations, blindness Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 506 Example: Avoidable Costs in Cancer Care TODAY Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale • Use of unnecessarily-expensive drugs • ER visits/hospital stays for dehydration and avoidable complications • Fruitless treatment at end of life • Late-stage cancers due to poor screening • Overuse of high-tech stress tests/imaging • Overuse of cardiac catheterization • Overuse of PCIs, high-priced stents • ER visits for exacerbations • Hospital admissions and readmissions • Amputations, blindness Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 507 Example: Avoidable Costs for Maternity Care TODAY Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale • Overuse of C-Sections • Early elective deliveries • Low birthweight due to poor prenatal care • Use of hospitals instead of birth centers • Use of unnecessarily-expensive drugs • ER visits/hospital stays for dehydration and avoidable complications • Fruitless treatment at end of life • Late-stage cancers due to poor screening • Overuse of high-tech stress tests/imaging • Overuse of cardiac catheterization • Overuse of PCIs, high-priced stents • ER visits for exacerbations • Hospital admissions and readmissions • Amputations, blindness Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 508 And Many Other Opportunities TODAY Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale • Unnecessary/avoidable services • Overuse of C-Sections • Early elective deliveries • Low birthweight due to poor prenatal care • Use of hospitals instead of birth centers • Use of unnecessarily-expensive drugs • ER visits/hospital stays for dehydration and avoidable complications • Fruitless treatment at end of life • Late-stage cancers due to poor screening • Overuse of high-tech stress tests/imaging • Overuse of cardiac catheterization • Overuse of PCIs, high-priced stents • ER visits for exacerbations • Hospital admissions and readmissions • Amputations, blindness Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 509 Only Physicians Know How to Change Care to Reduce Costs TODAY FUTURE Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Avoidable $ Other Avoidable $ Maternity Avoidable $ Cancer Avoidable $ Chest Pain Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale Payer Savings Payer Spending Chronic Diseases Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 510 Primary Care Can’t Do It Alone TODAY FUTURE Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Avoidable $ Other Avoidable $ Maternity Avoidable $ Cancer Avoidable $ Chest Pain Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale Payer Savings Payer Spending Chronic Diseases Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 511 You Also Need the Specialists Who Deliver the Services TODAY FUTURE Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Avoidable $ Other Avoidable $ Maternity Avoidable $ Cancer Avoidable $ Chest Pain Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale Payer Savings Payer Spending Chronic Diseases Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 512 Allergists: Tendency to Use Testing © Center for Healthcare Quality and Payment Reform www.CHQPR.org 513 Cardiology: Tendency to Use Echo © Center for Healthcare Quality and Payment Reform www.CHQPR.org 514 GI: Tendency to Use Upper GI Endoscopy © Center for Healthcare Quality and Payment Reform www.CHQPR.org 515 Mix of Patient Conditions Varies (A Lot) From Payer to Payer © Center for Healthcare Quality and Payment Reform www.CHQPR.org 516 Purchaser and Specialty-Specific Strategy for Reducing Spending TODAY FUTURE Avoidable $ Spending Per Patient Other Avoidable $ Maternity Avoidable $ Total Cancer Spending for a Avoidable $ Group Chest Pain of Patients Avoidable $ Avoidable $ Other Avoidable $ Maternity Avoidable $ Cancer Avoidable $ Chest Pain Avoidable $ Chronic Diseases NOTE: Graph Is not drawn to scale Payer Savings Payer Spending Chronic Diseases Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 517 What Kind of Data Do You Need? © Center for Healthcare Quality and Payment Reform www.CHQPR.org 518 What Kind of Data Do You Need? • Healthcare Billings/Claims Data (Payers) – Data on (billable) services delivered – Data on payment amounts for services, if released • It’s hard to save someone money if they won’t tell you what they’re paying now – Does not include information on unbillable services or costs – Does not include adequate information on patient characteristics © Center for Healthcare Quality and Payment Reform www.CHQPR.org 519 What Kind of Data Do You Need? • Healthcare Billings/Claims Data (Payers) – Data on (billable) services delivered – Data on payment amounts for services, if released • It’s hard to save someone money if they won’t tell you what they’re paying now – Does not include information on unbillable services or costs – Does not include adequate information on patient characteristics • Clinical Data (Provider EHRs) – – – – Data on patient characteristics Data on services Only includes information on services patient received from the provider Does not include information on costs or payments © Center for Healthcare Quality and Payment Reform www.CHQPR.org 520 What Kind of Data Do You Need? • Healthcare Billings/Claims Data (Payers) – Data on (billable) services delivered – Data on payment amounts for services, if released • It’s hard to save someone money if they won’t tell you what they’re paying now – Does not include information on unbillable services or costs – Does not include adequate information on patient characteristics • Clinical Data (Provider EHRs) – – – – Data on patient characteristics Data on services Only includes information on services patient received from the provider Does not include information on costs or payments • Data on the Costs of Services (Cost Accounting and Modeling) – – – – Information on what provider pays for staff, equipment, supplies used Need to know not just what costs are today, but how costs will change Cost accounting helps with baseline, but analytic models also needed Variable costs is most important information in short run © Center for Healthcare Quality and Payment Reform www.CHQPR.org 521 What Kind of Data Do You Need? • Healthcare Billings/Claims Data (Payers) – Data on (billable) services delivered – Data on payment amounts for services, if released • It’s hard to save someone money if they won’t tell you what they’re paying now – Does not include information on unbillable services or costs – Does not include adequate information on patient characteristics • Clinical Data (Provider EHRs) – – – – Data on patient characteristics Data on services Only includes information on services patient received from the provider Does not include information on costs or payments • Data on the Costs of Services (Cost Accounting and Modeling) – – – – Information on what provider pays for staff, equipment, supplies used Need to know not just what costs are today, but how costs will change Cost accounting helps with baseline, but analytic models also needed Variable costs is most important information in short run • Data on Patient-Reported Outcomes (Surveys) – Information on benefits to patients beyond the services they received, such as quality of life, ability to work and perform activities of daily living © Center for Healthcare Quality and Payment Reform www.CHQPR.org 522 Spending Per Patient Achieving Significant Savings Is Much Easier Than It Looks… TODAY YEAR 1 Total Healthcare Spending for a Group of Patients Total Healthcare Spending for a Group of Patients NOTE: Graph Is not drawn to scale Payer Spending Payer Spending YEAR 2 Total Healthcare Spending for a Group of Patients Payer Spending YEAR 3 Total Healthcare Spending for a Group of Patients Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 523 What Payers Want and Need is to Reduce Growth in Spending Spending Per Patient TODAY Total Healthcare Spending for a Group of Patients NOTE: Graph Is not drawn to scale Payer Spending YEAR 1 Total Healthcare Spending for a Group of Patients Payer Spending YEAR 2 Total Healthcare Spending for a Group of Patients Payer Spending YEAR 3 Total Healthcare Spending for a Group of Patients Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 524 “Savings” Means Slower Growth Each Year Spending Per Patient TODAY Total Healthcare Spending for a Group of Patients NOTE: Graph Is not drawn to scale Payer Spending YEAR 1 Total SlowerHealthcare Growing Spending Spending for a for Group of Patients Payer Spending YEAR 2 Total Healthcare Spending for a Group of Patients Payer Spending YEAR 3 Total Healthcare Spending for a Group of Patients Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 525 Additional Care Redesign Initiatives Each Year Control the Trend Spending Per Patient TODAY Total Healthcare Spending for a Group of Patients NOTE: Graph Is not drawn to scale Payer Spending YEAR 1 Total SlowerHealthcare Growing Spending Spending for a for Group of Patients Payer Spending YEAR 2 Total Healthcare SlowerSpending Growing for a Spending Group for of Patients of Patients Payer Spending YEAR 3 Total Healthcare Spending for a Group of Patients Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 526 So Significant Savings Achieved Even Though Spending is Higher Spending Per Patient TODAY Total Healthcare Spending for a Group of Patients NOTE: Graph Is not drawn to scale Payer Spending YEAR 1 Total SlowerHealthcare Growing Spending Spending for a for Group of Patients Payer Spending YEAR 2 YEAR 3 Total Healthcare SlowerSpending Growing for a Spending Group for of Patients of Patients Total Healthcare Spending SlowerGrowing for a Spending Group of Patients for of Patients Payer Spending Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 527 How Do You Control The Trend? Spending Per Patient TODAY Total Healthcare Spending for a Group of Patients NOTE: Graph Is not drawn to scale Payer Spending YEAR 1 Total SlowerHealthcare Growing Spending Spending for a for Group of Patients Payer Spending YEAR 2 YEAR 3 Total Healthcare SlowerSpending Growing for a Spending Group for of Patients of Patients Total Healthcare Spending SlowerGrowing for a Spending Group of Patients for of Patients Payer Spending Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 528 Identify the Avoidable Spending.. Spending Per Patient TODAY YEAR 2 Avoidable Spending Avoidable Spending Necessary Spending NOTE: Graph Is not drawn to scale YEAR 1 Payer Spending YEAR 3 Avoidable Spending Avoidable Spending Necessary Spending Payer Spending Necessary Spending Payer Spending Necessary Spending Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 529 …And Reduce It Over Time… Spending Per Patient TODAY YEAR 2 Avoidable Spending Avoidable Spending Necessary Spending NOTE: Graph Is not drawn to scale YEAR 1 Payer Spending YEAR 3 Avoidable Spending Avoidable Spending Necessary Spending Payer Spending Necessary Spending Payer Spending Necessary Spending Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 530 …While the Appropriate Spending Can Still Increase…. Spending Per Patient TODAY YEAR 2 YEAR 3 Avoidable Spending Avoidable Spending Necessary Spending NOTE: Graph Is not drawn to scale YEAR 1 Payer Spending Avoidable Spending Necessary Spending Payer Spending Avoidable Spending Necessary Spending Payer Spending Necessary Spending Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 531 So Patients Are Getting Better Care at Lower Cost Spending Per Patient TODAY Avoidable Spending Necessary Spending NOTE: Graph Is not drawn to scale Payer Spending YEAR 1 Avoidable Spending Necessary Spending Payer Spending YEAR 2 Avoidable Spending Necessary Spending Payer Spending YEAR 3 Avoidable $ Necessary Spending Payer Spending © Center for Healthcare Quality and Payment Reform www.CHQPR.org 532 Controlling Risk To Attract Payers, New Payment Must Be < Projected FFS Spend COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Actual Proposed TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 534 …If All Goes Well, Provider’s Costs Are Lower Than the Payment… COST Bundled or ConditionBased Payment Level Lower Spend Lower Costs FFS $ Actual FFS $ APM $ Costs of Svcs Actual Proposed Actual TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 535 ...And Both the Payer and Provider Will “Win” Savings For Payer COST Bundled or ConditionBased Payment Level WINWIN Profit for Provider Lower Spend Lower Costs FFS $ Actual FFS $ APM $ Costs of Svcs Actual Proposed Actual TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 536 The Risk Physicians Fear: All Won’t Go Well (Costs Go Up).. COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 537 …Creating a Win-Lose Situation Savings For Payer COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ WINLOSE Loss for Provider Excess Cost Costs of Svcs Actual Proposed Actual TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 538 Many Different Reasons Costs May Increase Beyond Payment COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 539 Physicians CAN Control Many of the Factors Causing Higher Costs COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients What Physicians CAN Control (Performance Risk) TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 540 But Other Causes of Higher Costs CANNOT Be Controlled by Doctors COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients What Physicians CAN Control (Performance Risk) What Physicians CANNOT Control (Insurance Risk) TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 541 Physicians Should NOT Be Expected To Take Insurance Risk COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients What Physicians CAN Control (Performance Risk) What Physicians CANNOT Control (Insurance Risk) TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 542 Four Mechanisms for Separating Insurance and Performance Risk COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients Performance Risk (Provider’s Responsibility) Risk Corridors Risk Exclusions Outlier Pmt/ Stop-Loss Risk Adjustment TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 543 Risk Exclusions COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients Performance Risk (Provider’s Responsibility) Risk Corridors Risk Exclusions Outlier Pmt/ Stop-Loss Risk Adjustment TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 544 Division of Financial Responsibility (DOFR) Category of Utilization/Spending • Physician Services • • • Medications • ED Visits and Hospital Admits Physician Accountability Paid by Payer Without Under APM Impact on APM All services delivered by • All other services delivered patient’s PCP by other physicians All services delivered by patient’s endocrinologist All diabetes-specific services delivered by other physicians Diabetes-related medications • Price increases in @ base year prices diabetes-related medications • Cost differential of new diabetes medications with significantly improved outcomes • Non-diabetes-related medications ED visits and hospitalizations • Price increases in hospital other than trauma or services oncology @ base year prices • Other ED visits and hospitalizations © Center for Healthcare Quality and Payment Reform www.CHQPR.org 545 Division of Financial Responsibility (DOFR) Category of Utilization/Spending • Physician Services • • • Medications • ED Visits and Hospital Admits Physician Accountability Paid by Payer Without Under APM Impact on APM All services delivered by • All other services delivered patient’s PCP by other physicians All services delivered by patient’s endocrinologist All diabetes-specific services delivered by other physicians Diabetes-related medications • Price increases in @ base year prices diabetes-related medications • Cost differential of new diabetes medications with significantly improved outcomes • Non-diabetes-related medications ED visits and hospitalizations • Price increases in hospital other than trauma or services oncology @ base year prices • Other ED visits and hospitalizations © Center for Healthcare Quality and Payment Reform www.CHQPR.org 546 Division of Financial Responsibility (DOFR) Category of Utilization/Spending • Physician Services • • • Medications ED Visits and Hospital Admits Physician Accountability Under APM All services delivered by patient’s PCP All services delivered by patient’s endocrinologist All diabetes-specific services delivered by other physicians Utilization of diabetes-related medications @ base year prices Paid by Payer Without Impact on APM • All other services delivered by other physicians • Price increases in diabetes-related medications • Cost differential of new diabetes medications with significantly improved outcomes • Non-diabetes-related medications • ED visits and hospitalizations • Price increases in hospital other than trauma or services oncology @ base year prices • Other ED visits and hospitalizations © Center for Healthcare Quality and Payment Reform www.CHQPR.org 547 Division of Financial Responsibility (DOFR) Category of Utilization/Spending • Physician Services • • • Physician Accountability Under APM All services delivered by patient’s PCP All services delivered by patient’s endocrinologist All diabetes-specific services delivered by other physicians Utilization of diabetes-related medications @ base year prices Medications ED Visits and Hospital Admits • # of ED visits and hospitalizations other than trauma or oncology @ base year prices Paid by Payer Without Impact on APM • All other services delivered by other physicians • Price increases in diabetes-related medications • Cost differential of new diabetes medications with significantly improved outcomes • Non-diabetes-related medications • Price increases in hospital services • Other ED visits and hospitalizations © Center for Healthcare Quality and Payment Reform www.CHQPR.org 548 Risk (Acuity/Severity) Adjustment COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients Performance Risk (Provider’s Responsibility) Risk Corridors Risk Exclusions Outlier Pmt/ Stop-Loss Risk Adjustment TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 549 Spending Per Patient Risk Adjustment Applies to the Total Patient Population Provider 1 Provider 2 All Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 550 Spending Per Patient Risk Adjustment Masks Differences in Subgroups Provider 1 Provider 2 Patients With No Chronic Disease Provider 1 Provider 2 Patients With One Chronic Disease Provider 1 Provider 2 Patients With 2+ Chronic Diseases Provider 1 Provider 2 All Patients © Center for Healthcare Quality and Payment Reform www.CHQPR.org 551 Payment Per Patient Alternative Approach: Stratifying Payments & Measures Patients With No Chronic Disease Patients With One Chronic Disease Patients With 2+ Chronic Diseases © Center for Healthcare Quality and Payment Reform www.CHQPR.org 552 Outlier Payments/Stop-Loss COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients Performance Risk (Provider’s Responsibility) Risk Corridors Risk Exclusions Outlier Pmt/ Stop-Loss Risk Adjustment TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 553 Outlier Payment (Individual Stop-Loss) • Some patients are unusually expensive – Risk adjustment models/stratifications are designed to predict average costs of groups of patients, not the exact cost of an individual patient – Risk for even a small percentage of the costs of treating a very expensive patient can result in a large financial penalty for a physician • Outlier payment: an additional payment from a payer to a provider to cover all or part of the higher cost of the patient’s care – A threshold is created to define when a patient is an “outlier.” – The payer pays the physician or hospital a percentage (e.g., 80% or 100%) of the difference between the actual cost and the threshold amount • Individual stop-loss insurance – Similar to an outlier payment, except that the provider has to pay a premium to an insurer to be eligible to receive the stop-loss payment • Excluding or “Winsorizing” patients in spending measures – When the physician is not directly responsible for paying for services, but is held accountable for a measure of spending, “Winsorizing” means capping the amount included for an individual patient at a maximum amount. (The alternative is to exclude the patient from the measure denominator altogether.) © Center for Healthcare Quality and Payment Reform www.CHQPR.org 554 Using Risk Corridors to Share Risks Not Captured by Risk Adjustment COST Bundled or ConditionBased Payment Level Lower Spend FFS $ Actual FFS $ APM $ Excess Cost Costs of Svcs Actual Proposed Actual Many Avoidable Complications Failure to Follow Guidelines Overutilization of Services Large Random Variation New, High-Cost Treatment Unusually Costly Patient Higher-Severity Patients Performance Risk (Provider’s Responsibility) Risk Corridors Risk Exclusions Outlier Pmt/ Stop-Loss Risk Adjustment TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 555 No One Expects That the Payment Amount Will Be Exactly Right Actual Cost of Services Cost = Payment Payment Amount Actual Cost of Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 556 Some Random Variation Will Occur From Year to Year Actual Cost of Services Cost = Payment Payment Amount Actual Cost of Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 557 Physician Practice Can Handle Some Variation, As It Does Today Actual Cost of Services Cost=Pmt+x% Cost = Payment Provider Pays 100% of Extra Cost in this Range Provider Retains 100% of Savings Risk Corridor #1 Risk Corridor #1 Payment Amount Cost=Pmt-x% Actual Cost of Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 558 Payers Should Remain Responsible for All or Part of Large Variation Actual Cost of Services Cost=Pmt+x% Cost = Payment Payer Pays All or Part of Excess Cost Provider Pays 100% of Extra Cost in this Range Provider Retains 100% of Savings Cost=Pmt-x% Risk Corridor #2 Risk Corridor #1 Risk Corridor #1 Payment Amount Risk Corridor #2 Payer Receives All or Part of Savings Actual Cost of Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 559 New APMs Can Start with Narrow Risk Corridors Actual Cost of Services Payer Pays All of Excess Cost Risk Corridor #2 Cost=Pmt+x% Cost = Payment Provider Pays 100% of Extra Cost Provider Retains 100% of Savings Cost=Pmt-x% Risk Corridor #1 Risk Corridor #1 Payment Amount Risk Corridor #2 Payer Receives All of Savings Actual Cost of Services © Center for Healthcare Quality and Payment Reform www.CHQPR.org 560 Expand Risk Corridors Over Time, As Medicare Did in Part D TIME © Center for Healthcare Quality and Payment Reform www.CHQPR.org 561 Use Narrow Risk Corridors for Small Providers over Short Times Annual Measures Multi-Year Measures © Center for Healthcare Quality and Payment Reform www.CHQPR.org 562 Complex Risk Corridor Arrangements Possible EXAMPLE OF ASYMMETRIC TIERED RISK CORRIDORS Actual Cost of Services Cost=Base+10% Cost=Base+5% Cost = Payment Payer Pays 80% of Extra Cost Provider Pays 20% Provider Pays 50% of Extra Cost Payer Pays 50% of Extra Cost Provider Pays 80% of Extra Cost in this Range Payer Pays 20% Provider Retains 100% of Savings in this Range Cost=Base-8% Cost=Base-15% Actual Cost of Services Provider Retains 60% of Savings Provider Retains 34% of Savings Base Payment Amount Payer Receives 40% of Savings Payer Receives 66% of Savings © Center for Healthcare Quality and Payment Reform www.CHQPR.org 563
