Download Win-Win-Win Approaches to Oncology Payment

WIN-WIN-WIN APPROACHES
TO ACCOUNTABLE CARE
How Hospitals, Physicians,
Payers, and Patients
Can All Benefit from
Better Payment Models for Oncology
Harold D. Miller
President and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
How Do You Control Growing
Healthcare Spending?
$
TOTAL
HEALTH
CARE
SPENDING
TOTAL
HEALTH
CARE
SPENDING
TOTAL
HEALTH
CARE
SPENDING
TOTAL
HEALTH
CARE
SPENDING
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
2
Freezing/Cutting Physician
Payments Didn’t Do It
$
TOTAL
HEALTH
CARE
SPENDING
SGR
TOTAL
HEALTH
CARE
SPENDING
TOTAL
HEALTH
CARE
SPENDING
SGR
SGR
TOTAL
HEALTH
CARE
SPENDING
SGR
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
3
Now Focus is on Prices for Drugs
& Use of Acute & Post-Acute Care
$
TOTAL
HEALTH
CARE
SPENDING
Post-Acute
Care Use
Drug
Prices
TOTAL
HEALTH
CARE
SPENDING
Post-Acute
Care Use
TOTAL
HEALTH
CARE
SPENDING
Post-Acute
Care Use
Drug
Prices
Drug
Prices
TOTAL
HEALTH
CARE
SPENDING
Cut?
Post-Acute
Care Use
Cut?
Drug
Prices
Hospital
Payment
Rates
Hospital
Payment
Rates
Hospital
Payment
Rates
Cut?
Hospital
Payment
Rates
Physician
Payment
Physician
Payment
Physician
Payment
Physician
Payment
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
4
Or…Forcing ACOs to Figure It Out
(Somehow)
$
TOTAL
HEALTH
CARE
SPENDING
Post-Acute
Care Use
Drug
Prices
TOTAL
HEALTH
CARE
SPENDING
Post-Acute
Care Use
TOTAL
HEALTH
CARE
SPENDING
Post-Acute
Care Use
SAVINGS
Drug
Prices
Accountable
Care
Organization
(ACO)
Drug
Prices
Hospital
Payment
Rates
Hospital
Payment
Rates
Hospital
Payment
Rates
Physician
Payment
Physician
Payment
Physician
Payment
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
5
The Right Focus: Spending
That is Unnecessary or Avoidable
$
AVOIDABLE
SPENDING
NECESSARY
SPENDING
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
NECESSARY
SPENDING
NECESSARY
SPENDING
AVOIDABLE
SPENDING
NECESSARY
SPENDING
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
6
Avoidable Spending Occurs
In All Aspects of Healthcare
SURGERY
• Unnecessary surgery
• Use of unnecessarily-expensive implants
• Infections and complications of surgery
• Overuse of inpatient rehabilitation
$
AVOIDABLE
SPENDING
NECESSARY
SPENDING
CANCER TREATMENT
• Use of unnecessarily-expensive drugs
• ER visits/hospital stays for dehydration
and avoidable complications
• Fruitless treatment at end of life
• Late-stage cancers due to poor screening
CHEST PAIN DIAGNOSIS/TREATMENT
• Overuse of high-tech stress tests/imaging
• Overuse of cardiac catheterization
• Overuse of PCIs, high-priced stents
CHRONIC DISEASE
• ER visits for exacerbations
• Hospital admissions and readmissions
• Amputations, blindness
© Center for Healthcare Quality and Payment Reform CHQPR.org
7
The Goal: Less Avoidable $,
$
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
NECESSARY
SPENDING
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
8
The Goal: Less Avoidable $,
More Necessary $
$
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
NECESSARY
SPENDING
NECESSARY
SPENDING
NECESSARY
SPENDING
NECESSARY
SPENDING
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
9
Win-Win for Patients & Payers
$
SAVINGS
SAVINGS
SAVINGS
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
NECESSARY
SPENDING
NECESSARY
SPENDING
NECESSARY
SPENDING
NECESSARY
SPENDING
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
10
Barriers in the Payment System
Create a Win-Lose for Providers
$
SAVINGS
AVOIDABLE
SPENDING
NECESSARY
SPENDING
AVOIDABLE
SPENDING
BARRIERS
IN THE
CURRENT
PAYMENT
SYSTEM
NECESSARY
SPENDING
© Center for Healthcare Quality and Payment Reform CHQPR.org
11
Barrier #1: No $ or Inadequate $
for High-Value Services
$
AVOIDABLE
SPENDING
NECESSARY
SPENDING
No Payment or
Inadequate Payment for:
• Services delivered
outside of face-to-face
visits with clinicians, e.g.,
phone calls, e-mails, etc.
• Services delivered by
non-clinicians, e.g.,
nurses, community health
workers, etc.
• Non-medical services,
e.g., transportation
• Additional time or cost
for patients with
higher intensity needs
• Services not covered by
benefit restrictions
UNPAID
SERVICES
© Center for Healthcare Quality and Payment Reform CHQPR.org
12
Barrier #2: Avoidable Spending
May Be Revenue for Providers…
$
PROFIT
AVOIDABLE
SPENDING
PROVIDER
REVENUE
NECESSARY
SPENDING
COST
OF
SERVICE
DELIVERY
© Center for Healthcare Quality and Payment Reform CHQPR.org
13
…And When Avoidable Services
Aren’t Delivered…
$
PROFIT
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
PROVIDER
REVENUE
NECESSARY
SPENDING
COST
OF
SERVICE
DELIVERY
NECESSARY
SPENDING
© Center for Healthcare Quality and Payment Reform CHQPR.org
14
…Providers’ Revenue
May Decrease…
$
PROFIT
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
PROVIDER
REVENUE
NECESSARY
SPENDING
COST
OF
SERVICE
DELIVERY
PROVIDER
NECESSARY REVENUE
SPENDING
© Center for Healthcare Quality and Payment Reform CHQPR.org
15
…But Providers’ Fixed Costs
Don’t Disappear…
$
Many Fixed Costs of Services
Remain When Volume Decreases
PROFIT
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
PROVIDER
REVENUE
NECESSARY
SPENDING
COST
OF
SERVICE
DELIVERY
COST
OF
PROVIDER SERVICE
NECESSARY REVENUE
DELIVERY
SPENDING
© Center for Healthcare Quality and Payment Reform CHQPR.org
16
…Leaving Providers With Losses
(or Bigger Losses Than Today)
$
Many Fixed Costs of Services
Remain When Volume Decreases
Potentially Causing Financial Losses
PROFIT
AVOIDABLE
SPENDING
AVOIDABLE
SPENDING
PROVIDER
REVENUE
NECESSARY
SPENDING
COST
OF
SERVICE
DELIVERY
LOSS
COST
OF
PROVIDER SERVICE
NECESSARY REVENUE
DELIVERY
SPENDING
© Center for Healthcare Quality and Payment Reform CHQPR.org
17
The Things We Want to Prevent
Are What Hospitals Are Paid to Do
SURGERY
• Unnecessary surgery
• Use of unnecessarily-expensive implants
• Infections and complications of surgery
• Overuse of inpatient rehabilitation
$
AVOIDABLE
SPENDING
NECESSARY
SPENDING
CANCER TREATMENT
• Use of unnecessarily-expensive drugs
• ER visits/hospital stays for dehydration
and avoidable complications
• Fruitless treatment at end of life
• Late-stage cancers due to poor screening
CHEST PAIN DIAGNOSIS/TREATMENT
• Overuse of high-tech stress tests/imaging
• Overuse of cardiac catheterization
• Overuse of PCIs, high-priced stents
CHRONIC DISEASE
• ER visits for exacerbations
• Hospital admissions and readmissions
• Amputations, blindness
© Center for Healthcare Quality and Payment Reform CHQPR.org
18
A Payment Change isn’t Reform
Unless It Removes the Barriers
BARRIER #1
BARRIER #2
© Center for Healthcare Quality and Payment Reform CHQPR.org
19
Where Does Spending on
Cancer Care Go?
Current
Spending
Per Patient
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Analysis of total spending in 2012 for commercially insured patients
during an “episode” of chemotherapy treatment
(treatment months through the second month after treatment ends)
© Center for Healthcare Quality and Payment Reform CHQPR.org
20
Most Cancer Spending
Doesn’t Go to Oncology Practices
Current
Spending
Per Patient
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
E&M
Infusions
Fees for oncology practice services
represent less than 10% of spending
for cancer patients during
episodes of chemotherapy treatment
Analysis of total spending in 2012 for commercially insured patients
during an “episode” of chemotherapy treatment
(treatment months through the second month after treatment ends)
© Center for Healthcare Quality and Payment Reform CHQPR.org
21
Most Spending is For Drugs, Tests,
and Hospitalizations
Current
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
$20,000
$15,000
Drugs
$10,000
$5,000
$0
90%+ of spending pays for drugs,
laboratory tests, imaging studies,
surgical procedures, emergency
room visits, and hospitalizations
E&M
Infusions
Fees for oncology practice services
represent less than 10% of spending
for cancer patients during
episodes of chemotherapy treatment
Analysis of total spending in 2012 for commercially insured patients
during an “episode” of chemotherapy treatment
(treatment months through the second month after treatment ends)
© Center for Healthcare Quality and Payment Reform CHQPR.org
22
Most Spending is For Drugs, Tests,
and Hospitalizations
Current
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
Other
Services
Where Are the Opportunities
$30,000
90%+ of spending pays for drugs,
Testing
laboratory tests, imaging studies,
to
Reduce
Spending
$25,000
surgical procedures,
emergency
room visits, and hospitalizations
$20,000
Without
Harming
Patients?
Drugs
$15,000
$35,000
$10,000
$5,000
$0
E&M
Infusions
Fees for oncology practice services
represent less than 10% of spending
for cancer patients during
episodes of chemotherapy treatment
Analysis of total spending in 2012 for commercially insured patients
during an “episode” of chemotherapy treatment
(treatment months through the second month after treatment ends)
© Center for Healthcare Quality and Payment Reform CHQPR.org
23
Opportunities to Reduce Spending
Without Harming Patients
Current
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
• ED visits and hospital admissions
for chemotherapy-related complications
$25,000
$20,000
$15,000
Drugs
$10,000
$5,000
$0
E&M
Infusions
© Center for Healthcare Quality and Payment Reform CHQPR.org
24
Opportunities to Reduce Spending
Without Harming Patients
Current
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
• ED visits and hospital admissions
for chemotherapy-related complications
• Unnecessarily expensive tests
• Unnecessary testing
• Unnecessarily expensive drugs
• Unnecessary drugs
• Unnecessary end-of-life treatment
$20,000
$15,000
Drugs
$10,000
$5,000
$0
E&M
Infusions
© Center for Healthcare Quality and Payment Reform CHQPR.org
25
Large Savings Possible From
Reducing Avoidable Spending
Avoiding Emergency Room Visits and Hospitalizations
• An oncology medical home project used clinical nurse triage management and enhanced
access to care in the oncology practice to reduce (total) emergency room use and total hospital
admissions by over 50%.
(Sprandio JD, Flounders BP, Tofani S. Data-Driven Transformation to an Oncology Patient-Centered Medical Home. Journal of Oncology Practice 9(3):130. May 2013.)
Improving Appropriate Use of Drugs
• Chemotherapy spending for Medicare patients ranged from $11,059 per patient for oncology
practices in the lowest spending quartile to $18,044 per patient for practices in the highestspending quartile, a range of $6,985. Over 1/3 of the variation ($3,600) stemmed from variation
in the use of just two drugs – Neulasta (pegfilgrastim) and Avastin (bevacizumab).
(Clough JD et al. Wide Variation in Payments for Medicare Beneficiary Oncology Services Suggests Room for Practice-Level Improvement. Health Affairs 34(4): 601. April 2015.)
• A study of the use of Neulasta (pegfilgrastim) at an outpatient oncology clinic found that
approximately half of all cases using pegfilgrastim for primary prophylaxis were not consistent
with published guidelines, representing an avoidable cost of $8,093 per patient.
(Waters GE et al. Comparison of Pegfilgrastim Prescribing Practice to National Guidelines at a University Hospital Outpatient Oncology Clinic. Journal of Onc. Practice 9(4):203. July 2013.)
• A study of the use of myeloid colony-stimulating factors (CSF) such as pegfilgrastim in lung and
cancer patients found that 96% of CSFs were administered in scenarios where CSF therapy is
not recommended by evidence-based guidelines.
(Potosky AL et al. Use of Colony-Stimulating Factors With Chemotherapy: Opportunities for Cost Savings and Improved Outcomes. J. National Cancer Inst. 103:979-982. June 22, 2011.)
Improving End of Life Care
• A study of commercially-insured cancer patients found that patients incurred an average of
$74,212 in cancer-related expenses in the six months before death and $25,260 was spent in
the final month of life.
Chastek B, et al. Health Care Costs for Patients With Cancer at the End of Life. Journal of Oncology Practice 8(6s):75s. November 2012.
© Center for Healthcare Quality and Payment Reform CHQPR.org
26
Large Savings Possible From
Reducing Avoidable Spending
Avoiding Emergency Room Visits and Hospitalizations
• An oncology medical home project used clinical nurse triage management and enhanced
access to care in the oncology practice to reduce (total) emergency room use and total hospital
admissions by over 50%.
(Sprandio JD, Flounders BP, Tofani S. Data-Driven Transformation to an Oncology Patient-Centered Medical Home. Journal of Oncology Practice 9(3):130. May 2013.)
Improving Appropriate Use of Drugs
• Chemotherapy spending for Medicare patients ranged from $11,059 per patient for oncology
practices in the lowest spending quartile to $18,044 per patient for practices in the highestspending quartile, a range of $6,985. Over 1/3 of the variation ($3,600) stemmed from variation
in the use of just two drugs – Neulasta (pegfilgrastim) and Avastin (bevacizumab).
What are the Barriers to
Reducing Avoidable
Spending
in Oncology?
(Clough JD et al. Wide Variation in Payments for Medicare Beneficiary Oncology Services Suggests Room for Practice-Level Improvement. Health Affairs 34(4): 601. April 2015.)
• A study of the use of Neulasta (pegfilgrastim) at an outpatient oncology clinic found that
approximately half of all cases using pegfilgrastim for primary prophylaxis were not consistent
with published guidelines, representing an avoidable cost of $8,093 per patient.
(Waters GE et al. Comparison of Pegfilgrastim Prescribing Practice to National Guidelines at a University Hospital Outpatient Oncology Clinic. Journal of Onc. Practice 9(4):203. July 2013.)
• A study of the use of myeloid colony-stimulating factors (CSF) such as pegfilgrastim in lung and
cancer patients found that 96% of CSFs were administered in scenarios where CSF therapy is
not recommended by evidence-based guidelines.
(Potosky AL et al. Use of Colony-Stimulating Factors With Chemotherapy: Opportunities for Cost Savings and Improved Outcomes. J. National Cancer Inst. 103:979-982. June 22, 2011.)
Improving End of Life Care
• A study of commercially-insured cancer patients found that patients incurred an average of
$74,212 in cancer-related expenses in the six months before death and $25,260 was spent in
the final month of life.
Chastek B, et al. Health Care Costs for Patients With Cancer at the End of Life. Journal of Oncology Practice 8(6s):75s. November 2012.
© Center for Healthcare Quality and Payment Reform CHQPR.org
27
No Payment For Many Services
Essential to Quality Cancer Care
Current
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
• No payment for physician time outside
of face-to-face visits with patients
• No payment for time spent with patients
by non-physician staff (nurses, social
workers, financial counselors, etc.)
E&M
Infusions
Non-E&M
© Center for Healthcare Quality and Payment Reform CHQPR.org
28
No Payment For Many Services
Essential to Quality Cancer Care
Current
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
E&M
Infusions
Non-E&M
Care Mgt
• No payment for physician time outside
of face-to-face visits with patients
• No payment for time spent with patients
by non-physician staff (nurses, social
workers, financial counselors, etc.)
• No payment for 24/7 hotline and
triage services needed by patients
experiencing complications
• No payment for extended hours or
open schedule slots for urgent care
© Center for Healthcare Quality and Payment Reform CHQPR.org
29
Payments for Oncology Services
Only Cover 2/3 of Practice Costs
Current
Spending
Per Patient
$45,000
$40,000
$35,000
$30,000
$25,000
ER/Hospital
Admissions
Other
Services
Testing
Avoidable $
$20,000
$15,000
Drugs
SOURCE:
Towle EL,
Barr TR,
Senese JL,
“The National
Practice Benchmark
for Oncology,
2014 Report on
2013 Data”
Journal of
Oncology Practice
November 2014
$10,000
$5,000
$0
E&M
Infusions
Non-E&M
Care Mgt
© Center for Healthcare Quality and Payment Reform CHQPR.org
30
Practices Depend on Drug Margins
to Support Unbillable Services
Current
Spending
Per Patient
$45,000
$40,000
$35,000
$30,000
$25,000
ER/Hospital
Admissions
Other
Services
Testing
Avoidable $
$20,000
$15,000
Drugs
SOURCE:
Towle EL,
Barr TR,
Senese JL,
“The National
Practice Benchmark
for Oncology,
2014 Report on
2013 Data”
Journal of
Oncology Practice
November 2014
$10,000
$5,000
$0
Drug Margin
E&M
Infusions
Non-E&M
Care Mgt
© Center for Healthcare Quality and Payment Reform CHQPR.org
31
Failure to Pay for Good Care…
Current
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
Drug Margin
E&M
Infusions
Non-E&M
Care Mgt
• No payment for physician time outside
of face-to-face visits with patients
• No payment for time spent with patients
by non-physician staff (nurses, social
workers, financial counselors, etc.)
• No payment for 24/7 hotline and
triage services needed by patients
experiencing complications
• No payment for extended hours or
open schedule slots for urgent care
© Center for Healthcare Quality and Payment Reform CHQPR.org
32
Failure to Pay for Good Care…
Leads to Costly, Low-Value Services
Current
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
Drug Margin
E&M
Infusions
Non-E&M
Care Mgt
• ED visits and hospital admissions
for chemotherapy-related complications
• Unnecessarily expensive tests
• Unnecessary testing
• Unnecessarily expensive drugs
• Unnecessary drugs
• Unnecessary end-of-life treatment
• No payment for physician time outside
of face-to-face visits with patients
• No payment for time spent with patients
by non-physician staff (nurses, social
workers, financial counselors, etc.)
• No payment for 24/7 hotline and
triage services needed by patients
experiencing complications
• No payment for extended hours or
open schedule slots for urgent care
© Center for Healthcare Quality and Payment Reform CHQPR.org
33
A Better Way to Pay
for Cancer Care - PCOP
www.asco.org/paymentreform
© Center for Healthcare Quality and Payment Reform CHQPR.org
34
Goal #1: Pay for Care Mgt…
Cancer Care
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
Drug Margin
E&M
Infusions
Non-E&M
Care Mgt
Care Mgt
E&M
Infusions
Non-E&M
Payment for
Care Management,
Triage, and
Rapid Response
to Complications
© Center for Healthcare Quality and Payment Reform CHQPR.org
35
Goal #1: Pay for Care Mgt…
to Prevent ER Visits & Admits
Cancer Care
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
Drug Margin
E&M
Infusions
Non-E&M
Care Mgt
SAVINGS
ER/Admissions
Other
Services
Testing
Avoidable $
Low Use of
Emergency Rooms
and Hospital
Admissions
Drugs
Drug Margin
Care Mgt
E&M
Infusions
Non-E&M
Payment for
Care Management,
Triage, and
Rapid Response
to Complications
© Center for Healthcare Quality and Payment Reform CHQPR.org
36
Goal #2: Pay for Services Needed
to Support Value-Based Treatment
Cancer Care
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
Drug Margin
E&M
Infusions
Non-E&M
Care Mgt
SAVINGS
ER/Admissions
Other
Services
Testing
Avoidable $
Drugs
Drug Margin
Care Mgt
Non-FFS Svcs
E&M
Infusions
Non-E&M
E&M
Infusions
Payment for
Services Delivered
by Non-Physician
Staff and
Non-Face-to-Face
Services
© Center for Healthcare Quality and Payment Reform CHQPR.org
37
Goal #2: Pay for Services Needed
to Support Value-Based Treatment
Cancer Care
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
Drug Margin
E&M
Infusions
Non-E&M
Care Mgt
SAVINGS
ER/Admissions
Other
Services
Testing
Avoidable $
SAVINGS
ER/Admissions
Other
Services
Testing
Drugs
Drugs
Drug Margin
Drug Margin
Non-FFS Svcs
Care Mgt
E&M
Infusions
Non-E&M
E&M
Infusions
Appropriate Use of
Drugs, Testing,
End of Life Care,
etc.
Payment for
Services Delivered
by Non-Physician
Staff and
Non-Face-to-Face
Services
© Center for Healthcare Quality and Payment Reform CHQPR.org
38
Filling Gaps in Payment is Good,
But What About Hospital Revenue?
Cancer Care
Spending
Per Patient
$45,000
$40,000
ER/Hospital
Admissions
$35,000
Other
Services
$30,000
Testing
$25,000
Avoidable $
$20,000
$15,000
Drugs
$10,000
$5,000
$0
Drug Margin
E&M
Infusions
Non-E&M
Care Mgt
SAVINGS
ER/Admissions
Other
Services
Testing
Avoidable $
SAVINGS
ER/Admissions
Other
Services
Testing
Drugs
Drugs
Drug Margin
Drug Margin
Non-FFS Svcs
Care Mgt
E&M
Infusions
Non-E&M
??
E&M
Infusions
© Center for Healthcare Quality and Payment Reform CHQPR.org
39
Example: Reducing Preventable
Admits During Cancer Treatment
$/Pt
Oncology Pract.
E&M/Infusions
CURRENT
# Pts
Total $
$4,500
1000 $4,500,000
Hospitalizations
Admissions
$15,000
Total Spending
350 $5,250,000
1000 $9,750,000
Patients Receiving
Chemotherapy
Treatment for Cancer
• 1,000 patients treated by
oncology practice in a year
• Oncology practice receives
$4,500 per patient in
total fees for E&M services
and infusion services
(excluding cost of drugs)
• 35% of patients are
hospitalized during the year
for complications related
to chemotherapy treatment
($15,000 payment to hospital
per admission)
© Center for Healthcare Quality and Payment Reform CHQPR.org
40
How Would You Improve Payment
and Lower Total Spending?
$/Pt
Oncology Pract.
E&M/Infusions
CURRENT
# Pts
Total $
$/Pt
$4,500
1000 $4,500,000
?
Hospitalizations
Admissions
$15,000
Total Spending
350 $5,250,000
1000 $9,750,000
?
?
FUTURE
# Pts
Total $
Chg
© Center for Healthcare Quality and Payment Reform CHQPR.org
41
Improve Care for Patients By
Paying for Triage/Response
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
Hospitalizations
Admissions
Total Spending
$4,500
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
1000 $4,500,000
$15,000
$4500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
350 $5,250,000
1000 $9,750,000
Better Payment for Cancer Treatment Management
• Oncology practice paid additional $200,000 ($200/patient)
to set up a triage system and provide rapid treatment in the office
for complications of treatment (nausea, fever, etc.)
© Center for Healthcare Quality and Payment Reform CHQPR.org
42
A Reduction in Hospital Admissions
Would More Than Pay for Costs
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
Hospitalizations
Admissions
Total Spending
$4,500
$15,000
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
$4500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
350 $5,250,000 $15,000
1000 $9,750,000
245 $3,675,000
1000 $9,375,000
-30%
-14%
Better Payment for Cancer Treatment Management
• Oncology practice paid additional $200,000 ($200/patient)
to set up a triage system and provide rapid treatment in the office
for complications of treatment (nausea, fever, etc.)
• Result is a 30% reduction in preventable hospital admissions
© Center for Healthcare Quality and Payment Reform CHQPR.org
43
Wins for Patients, Docs, & Payers;
But What About Hospitals?
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
Hospitalizations
Admissions
Total Spending
$4,500
$15,000
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
Chg
1000 $4,500,000
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
350 $5,250,000 $15,000
1000 $9,750,000
245 $3,675,000
1000 $9,375,000
-30%
-14%
Oncology Practice Wins
$4500
$200
FUTURE
# Pts
Total $
Hospital Loses
Payer Wins
Better Payment for Cancer Treatment Management
• Oncology practice paid additional $200,000 ($200/patient)
to set up a triage system and provide rapid treatment in the office
for complications of treatment (nausea, fever, etc.)
• Result is a 30% reduction in preventable hospital admissions
© Center for Healthcare Quality and Payment Reform CHQPR.org
44
What Should Matter to Hospitals is
Margin, Not Revenues (Volume)
© Center for Healthcare Quality and Payment Reform CHQPR.org
45
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 CHQPR.org
46
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 CHQPR.org
47
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
Admissions,
Readmissions, Etc.
Are Reduced
$000
Cost & Revenue Changes With Fewer Patients
#Patients
© Center for Healthcare Quality and Payment Reform CHQPR.org
48
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 CHQPR.org
49
We Need to Understand the
Hospital’s Cost Structure
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
Hospitalizations
Admissions
Total Spending
$4,500
$15,000
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
$4500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
350 $5,250,000 $15,000
1000 $9,750,000
245 $3,675,000
1000 $9,375,000
-30%
-14%
© Center for Healthcare Quality and Payment Reform CHQPR.org
50
We Need to Understand the
Hospital’s Cost Structure
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
1000 $4,500,000
$4,500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
51
Now, If the Number of Admissions
is Reduced…
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
$4,500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
245
© Center for Healthcare Quality and Payment Reform CHQPR.org
52
…Fixed Costs Will Remain the
Same (in the Short Run)…
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
$4,500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
0%
245
© Center for Healthcare Quality and Payment Reform CHQPR.org
53
…Variable Costs Will Decrease in
Proportion to Admissions…
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
$4,500
$200
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
$1,102,500
0%
-30%
$4,500
245
© Center for Healthcare Quality and Payment Reform CHQPR.org
54
…And Even With a Higher Margin…
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
$4,500
$200
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
$1,102,500
$273,000
0%
-30%
+4%
$4,500
245
© Center for Healthcare Quality and Payment Reform CHQPR.org
55
…The Hospital Comes Out Ahead
With Significantly Lower Revenue
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
$4,500
$200
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
$4,500
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
$1,102,500
$273,000
245 $4,788,000
0%
-30%
+4%
-9%
© Center for Healthcare Quality and Payment Reform CHQPR.org
56
And the Payer Still Saves Money
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
$4,500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
$4,500
© Center for Healthcare Quality and Payment Reform CHQPR.org
57
I.e., a Win-Win-Win-Win for
Patient, Practice, Hospital, & Payer
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
Chg
1000 $4,500,000
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
Oncology Practice Wins
$4,500
$200
FUTURE
# Pts
Total $
$4,500
Hospital Wins
Payer Wins
© Center for Healthcare Quality and Payment Reform CHQPR.org
58
What Payment Model Supports
This Win-Win-Win Approach?
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
$4,500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
$4,500
© Center for Healthcare Quality and Payment Reform CHQPR.org
59
Trying to Renegotiate Individual
Fees Is Impractical
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
$4,500
$200
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000 $4,500,000
1000
$200,000
1000 $4,700,000
+4%
$3,412,500
$1,575,000 $4,500
$262,500
350 $5,250,000 $19,543
1000 $9,750,000
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
60
Look at What is Being Spent on
the Patients’ Condition
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
$9,750
CURRENT
# Pts
Total $
$/Pt
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
61
…Offer to Manage Care for a
Lower, But More Flexible Payment
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
$9,750
CURRENT
# Pts
Total $
$/Pt
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
$9,488
1000
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
62
…Use the Payment as a Budget
to Redesign Care…
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
$9,750
CURRENT
# Pts
Total $
$/Pt
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
$4,700
$4,788
$9,488
1000 $4,700,000
+4%
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
63
…And Let Physicians and Hospitals
Decide How They Should Be Paid
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
$9,750
CURRENT
# Pts
Total $
$/Pt
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
FUTURE
# Pts
Total $
Chg
$4,700
$4,500,000
$200,000
1000 $4,700,000
+4%
$4,788
$9,488
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
64
Condition-Based Payment Provides
Flexibility to Redesign Care & Pmt
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
$9,750
CURRENT
# Pts
Total $
CONDITION-BASED PMT
$/Pt
# Pts
Total $
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
Chg
$4,700
$4,500,000
$200,000
1000 $4,700,000
+4%
$4,788
$9,488
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
65
Condition-Based Payment Provides
Flexibility to Change Compensation
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
$9,750
CURRENT
# Pts
Total $
CONDITION-BASED PMT
$/Pt
# Pts
Total $
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
Chg
$4,700
$4,200,000
$500,000
1000 $4,700,000
+4%
$4,788
$9,488
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
66
Condition-Based Payment Also
Changes Hospital Incentives
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
$9,750
CURRENT
# Pts
Total $
CONDITION-BASED PMT
$/Pt
# Pts
Total $
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
Chg
$4,700
$4,500,000
$200,000
1000 $4,700,000
+4%
$4,788
$9,488
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
67
What Happens if Admissions Can
Be Reduced Even More?
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
FEWER ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$273,000
1000 $4,788,000
Chg
196
© Center for Healthcare Quality and Payment Reform CHQPR.org
68
Fixed Costs Remain…
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
FEWER ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$273,000
1000 $4,788,000
Chg
$3,412,500
© Center for Healthcare Quality and Payment Reform CHQPR.org
0%
69
…Variable Costs Decrease…
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
FEWER ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$273,000
1000 $4,788,000
$4,500
Chg
$3,412,500
196
$882,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
0%
-20%
70
…Revenue Remains the Same
(Assuming Same Total Patients)…
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
FEWER ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$273,000
1000 $4,788,000
Chg
$4,500
$3,412,500
196
$882,000
0%
-20%
$4,778
1000 $4,788,000
+0%
© Center for Healthcare Quality and Payment Reform CHQPR.org
71
…So Margins Increase (Instead of
Decreasing As They Would Today)
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
FEWER ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$273,000
1000 $4,788,000
$4,500
$4,778
$3,412,500
196
$882,000
$493,500
1000 $4,788,000
Chg
0%
-20%
+81%
+0%
© Center for Healthcare Quality and Payment Reform CHQPR.org
72
What Happens if
Admissions Increase?
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
FEWER ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$273,000
1000 $4,788,000
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
$4,500
$4,778
$3,412,500
196
$882,000
$493,500
1000 $4,788,000
MORE ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$273,000
1000 $4,788,000
Chg
0%
-20%
+81%
+0%
Chg
294
$4,778
1000
© Center for Healthcare Quality and Payment Reform CHQPR.org
73
Margins Decrease But Change Is
Limited to Variable Costs
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
FEWER ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$262,500
1000 $4,777,500
CONDITION-BASED PMT
$/Pt
# Pts
Total $
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
$4,500
$4,778
$4,500
$4,778
$3,412,500
196
$882,000
$483,000
$493,500
1000 $4,788,000
$4,777,500
MORE ADMISSIONS
$/Pt
# Pts
Total $
$3,412,500
245 $1,102,500
$273,000
1000 $4,788,000
$4,500
$4,778
$3,412,500
294 $1,323,000
$52,500
1000 $4,788,000
Chg
0%
-20%
+84%
+81%
+0%
Chg
0%
+20%
-89%
+0%
© Center for Healthcare Quality and Payment Reform CHQPR.org
74
Maryland Has Been Moving to
Global Budgets for Hospitals
• All-Payer Payment Rates
–
–
–
–
All payers pay the same, including Medicare
Costs of uncompensated care included in the all-payer rates
Adding incentives for quality, complications, readmissions
Problem: No control over volume; hospitals could always make more
money by admitting more patients and doing more procedures
• Total Patient Revenue (TPR)
– Global budget for hospital services, adjusted for population, not actual
level of services
– No incentive to admit more patients or do more procedures;
incentive to reduce readmissions and avoidable admissions
– Focused on isolated, rural hospitals, where one hospital serves the
entire population
• Global Budget Revenue (GBR)
– New CMS Waiver approved in January 2014
– Being implemented now for urban hospitals
– Designed to control increases in total hospital revenue per capita
instead of revenue per case
© Center for Healthcare Quality and Payment Reform CHQPR.org
75
Condition-Based Payment Provides
Flexibility to Redesign Care & Pmt
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
Hospitalizations
Fixed
(65%)
Variable (30%)
Margin ( 5%)
Total Hospital
Total Spending
CURRENT
# Pts
Total $
CONDITION-BASED PMT
$/Pt
# Pts
Total $
HOW IS
$4,500
1000 $4,500,000
$4,500,000
CONDITION-BASED $200,000
1000 $4,500,000 $4,700
1000 $4,700,000
PAYMENT
DIFFERENT
$9,750
$3,412,500
$3,412,500
$4,500
$1,575,000
$1,102,500
FROM
$750
$262,500
$273,000
$15,000
350 $5,250,000
$4,788
245 $4,788,000
“SHARED
SAVINGS??”
$9,750
1000 $9,750,000
$9,488
1000 $9,488,000
Chg
+4%
0%
-30%
+4%
-9%
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
76
Same Example as Before
Year 0
Oncology Pract.
E&M/Infusions
Net Revenue
Hospitalizations
Revenues
Costs – Fixed
Costs – Variable
Hospital Margin
Net Margin
Total Spending
$4,500,000
$/Patient Patients
$4500
$4,500,000
$5,250,000
$3,412,500
$1,575,000
$262,500
$262,500
$9,750,000
$15,000
65%
30%
5%
1000
Patients Receiving
Chemotherapy
Treatment for Cancer
• 1,000 patients treated by
oncology practice in a
year
• Oncology practice
receives $4,500 per
350
patient in total fees for
E&M services and
infusion services
(excluding cost of drugs)
• 35% of patients are
hospitalized during the
year for complications
related to chemotherapy
treatment
($15,000 payment to
hospital per admission)
© Center for Healthcare Quality and Payment Reform CHQPR.org
77
What Happens Under a
Shared Savings Arrangement?
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Year 1
Chg
$5,250,000
$3,412,500
$1,575,000
$262,500
$262,500
$9,750,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
78
Year 1: No New $ for
Oncology Practice Services
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Year 1
Chg
$4,500,000
($200,000)
0%
$4,300,000
-4%
$5,250,000
$3,412,500
$1,575,000
$262,500
$262,500
$9,750,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
79
Significant Loss for Hospital
if Admissions Are Reduced
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
$5,250,000
$3,412,500
$1,575,000
$262,500
$262,500
Year 1
Chg
$4,500,000
($200,000)
0%
$4,300,000
-4%
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
($840,000)
$9,750,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
80
Big Savings for Payer
if Oncology Practice Succeeds
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
Chg
$4,500,000
($200,000)
0%
$4,300,000
-4%
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
($840,000)
$9,750,000
$8,175,000
$1,575,000
-16%
© Center for Healthcare Quality and Payment Reform CHQPR.org
81
Year 2: Continued Losses for
Providers if Success Continues
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
($840,000)
$9,750,000
$8,175,000
$1,575,000
Chg
0% $4,500,000
($200,000)
-4%
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
Year 2
$3,675,000
$3,412,500
$1,102,500
($840,000)
-16%
© Center for Healthcare Quality and Payment Reform CHQPR.org
82
50% of Year 1 Savings
Returned to Providers…
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
0% $4,500,000
($200,000)
?
-4% $4,500,000
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
($840,000)
$9,750,000
$8,175,000
$1,575,000
Year 2
Chg
0%
$3,675,000
$3,412,500
$1,102,500
($840,000)
?
-16%
© Center for Healthcare Quality and Payment Reform CHQPR.org
83
Even If You Merely Cover the
Oncology Practice’s New Costs….
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
0% $4,500,000
($200,000)
$200,000
-4% $4,500,000
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
($840,000)
$9,750,000
$8,175,000
$1,575,000
Year 2
Chg
0%
$3,675,000
$3,412,500
$1,102,500
($840,000)
?
-16%
© Center for Healthcare Quality and Payment Reform CHQPR.org
84
…There Isn’t Enough Left to
Offset the Hospital’s Losses
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
0% $4,500,000
($200,000)
$200,000
-4% $4,500,000
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
($840,000)
$9,750,000
$8,175,000
$1,575,000
Year 2
Chg
0%
$3,675,000
$3,412,500
$1,102,500
($840,000)
$587,500
($252,500) -196%
-16%
© Center for Healthcare Quality and Payment Reform CHQPR.org
85
…But the Payer Is Still Way Ahead
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
0% $4,500,000
($200,000)
$200,000
-4% $4,500,000
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
($840,000)
$9,750,000
$8,175,000
$1,575,000
Year 2
Chg
0%
$3,675,000
$3,412,500
$1,102,500
($840,000)
$587,500
($252,500) -196%
-16% $8,962,500
$787,500
-8%
© Center for Healthcare Quality and Payment Reform CHQPR.org
86
Nothing Pays for First Year Losses,
so Cumulative Impact is Negative
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
0% $4,500,000
($200,000)
$200,000
-4% $4,500,000
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
($840,000)
$9,750,000
$8,175,000
$1,575,000
Year 2
Chg
Cumulative
0% ($200,000)
$3,675,000
$3,412,500
$1,102,500
($840,000)
$587,500
($252,500) -196% ($1,617,500)
-16% $8,962,500
$787,500
-8%
$2,362,500
© Center for Healthcare Quality and Payment Reform CHQPR.org
87
The Payer Has “Won” by
Making the Providers Lose
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
($840,000)
$9,750,000
$8,175,000
$1,575,000
Year 2
0% $4,500,000
($200,000)
$200,000
-4% $4,500,000
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
Oncology Practice Loses
Chg
Cumulative
0% ($200,000)
$3,675,000
$3,412,500
$1,102,500
($840,000)
$587,500
($252,500) -196% ($1,617,500)
-16% $8,962,500
$787,500
Hospital Loses
Chg
-8%
$2,362,500
Payer Wins
© Center for Healthcare Quality and Payment Reform CHQPR.org
88
It’s Even Worse Than That…
• There is no shared savings payment at all if a minimum
total savings level is not reached
• If there is a shared savings payment, it’s reduced if
quality thresholds aren’t met, even if the quality measures
have nothing to do with where savings occurred
• The shared savings payment ends at the end of the
3-year contract period, even if utilization remains lower,
and the payer keeps 100% of the savings in future years
© Center for Healthcare Quality and Payment Reform CHQPR.org
89
Is CMMI Shared Savings Better?
(100% Return of Savings > 4%)
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
Year 2
Chg
Cumulative
0% $4,500,000
($200,000)
?
-4% $4,500,000
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
($840,000)
$3,675,000
$3,412,500
$1,102,500
($840,000)
?
$145,000
$9,750,000
$8,175,000
$1,575,000
-16% $9,360,000
$390,000
-4%
© Center for Healthcare Quality and Payment Reform CHQPR.org
90
More Savings Returned But Not
Enough to Cover Hospital Loss
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
Year 2
0% $4,500,000
($200,000)
$200,000
-4% $4,500,000
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
$262,500
($840,000)
$3,675,000
$3,412,500
$1,102,500
($840,000)
$985,000
$145,000
$9,750,000
$8,175,000
$1,575,000
-16% $9,360,000
$390,000
Chg
Cumulative
0%
-45%
-4%
© Center for Healthcare Quality and Payment Reform CHQPR.org
91
CMMI Shared Savings Model:
Win for CMS, Losses for Providers
Year 0
Oncology Pract.
E&M/Infusions
$4,500,000
Triage/Response
Shared Savings
Net Revenue
$4,500,000
Hospitalizations
Revenues
Costs – Fixed
Costs - Variable
Hospital Margin
Shared Savings
Net Margin
Total Spending
Payer Savings
$5,250,000
$3,412,500
$1,575,000
$262,500
Year 1
$4,500,000
($200,000)
$4,300,000
Chg
Year 2
0% $4,500,000
($200,000)
$200,000
-4% $4,500,000
$262,500
($840,000)
$3,675,000
$3,412,500
$1,102,500
($840,000)
$985,000
$145,000
$9,750,000
$8,175,000
$1,575,000
-16% $9,360,000
$390,000
Oncology Practice Loses
$3,675,000 -30%
$3,412,500
$1,102,500
($840,000) -420%
Hospital Loses
Chg
Cumulative
0% ($200,000)
-45% ($1,220,000)
-4%
$1,965,000
CMS Wins
© Center for Healthcare Quality and Payment Reform CHQPR.org
92
So Why Do Payers Like The
Shared Savings Model So Much??
It’s easy for them to implement:
• No changes in underlying fee for service payment and no
costs to change claims payment system
• Additional payments only made if savings are achieved
• The payer sets the rules as to how “savings” are calculated
• Shared savings payments are made well after savings are
achieved, helping the payers’ cash flow
• All of the savings goes back to the payer after the end of the
shared savings contract
© Center for Healthcare Quality and Payment Reform CHQPR.org
93
Condition-Based Payment Sets
Budget Based on Achievable Costs
$/Pt
Oncology Pract.
E&M/Infusions
Triage/Respond
Total Practice
$4,500
Hospitalizations
Fixed
(65%) $9,750
Variable (30%) $4,500
Margin ( 5%)
$750
Total Hospital
$15,000
Total Spending
$9,750
CURRENT
# Pts
Total $
CONDITION-BASED PMT
$/Pt
# Pts
Total $
1000 $4,500,000
1000 $4,500,000
$3,412,500
$1,575,000
$262,500
350 $5,250,000
1000 $9,750,000
Chg
$4,700
$4,500,000
$200,000
1000 $4,700,000
+4%
$4,788
$9,488
$3,412,500
$1,102,500
$273,000
245 $4,788,000
1000 $9,488,000
0%
-30%
+4%
-9%
-2.7%
© Center for Healthcare Quality and Payment Reform CHQPR.org
94
Protections For Providers Against
Taking Inappropriate Risk
•
Risk Adjustment/Stratification: The payment rates to the provider would be
adjusted 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 to the
Physician from the payer would be increased if spending on an individual patient
exceeds a pre-defined threshold. An alternative would be for the physician 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 to the
physician would be increased if spending on all patients exceeds a pre-defined
percentage above the payments. An alternative would be for the physician to
purchase aggregate stop loss insurance and include the cost of the insurance in
the payment bundle.
•
Adjustment for External Price Changes: The payment to the physician would be
adjusted for changes in the prices of drugs or services from other physicians that
are beyond the control of the physician accepting the payment.
•
Excluded Services: Services the physician 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 CHQPR.org
95
Example of Risk-Stratified
Condition-Based Payment
LOWER RISK PATIENTS
# Pts
HIGHER RISK PATIENTS
# Pts
Total Practice
Hospitalizations
500
500
1000
Total Hospital
62
500
183
500
245
1000
Oncology Pract.
Lower-Risk (12%)
of Hospital Admission
Higher-Risk (37%)
of Hospital Admission
© Center for Healthcare Quality and Payment Reform CHQPR.org
96
Example of Risk-Stratified
Condition-Based Payment
LOWER RISK PATIENTS
$/Pt
# Pts
Total $
Oncology Pract.
E&M/Infusion
Triage/Intervene
Total Practice
Hospitalizations
Fixed
Variable
Margin
Total Hospital
Total Spending
Lower Payment
For Lower-Risk
Patients
$4,500
$100
$4,600
$4,500
$2,401
$7,001
500 $2,250,000
500
$50,000
500 $2,300,000
HIGHER RISK PATIENTS
$/Pt
# Pts
Total $
$4,500
$300
$4,800
$853,125
$279,000 $4,500
$68,250
62 $1,200,375 $7,175
500 $3,500,375 $11,975
Higher Payment
For Higher-Risk
Patients
TOTAL
500 $2,250,000 $4,500,000
500
$150,000
$200,000
500 $2,400,000 $4,700,000
$2,559,375
$823,500
$204,750
183 $3,587,625
500 $5,987,625
$3,412,500
$1,102,500
$273,000
$4,788,000
$9,488,000
Still
Lower
Total
Spending
© Center for Healthcare Quality and Payment Reform CHQPR.org
97
Many Medical Specialties Are
Working on Condition-Based Pmt
Opportunities
to Improve Care
and Reduce Cost
Barriers in
Current
Payment System
Solutions via
Accountable
Payment Models
• Use less invasive
and expensive
procedures
when appropriate
• Payment is based
on which
procedure is used,
not the outcome
for the patient
Orthopedic
Surgery
• Avoid use of surgery
when non-surgical
approaches will
address pain and
mobility
• Payment is based
on which
procedure is used,
not the outcome
for the patient
• Condition-based
payment covering
CABG, PCI, or
medication
management
• Condition-based
payment for
joint osteoarthritis
covering physical
therapy & surgery
Psychiatry
• Reduce ER visits
and admissions for
patients with
depression and
chronic disease
• No payment for
phone consults
with PCPs
• No payment for
RN care managers
• Joint conditionbased payment
to PCP and
psychiatrist for
patient support
OB/GYN
• 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
Cardiology
© Center for Healthcare Quality and Payment Reform CHQPR.org
98
How Does An ACO Reduce
Spending Without Rationing Care?
TODAY
FUTURE
ACCOUNTABLE CARE ORGANIZATION
Spending Per Patient
Payer
Savings
NOTE:
Graph
Is not
drawn
to
scale
Total
Spending
for a
Group
of Patients
Payer
Spending
???
Lower
Spending
for a
Group
of Patients
Payer
Spending
© Center for Healthcare Quality and Payment Reform CHQPR.org
99
Condition-Based Payment Allows
All Specialties to Support ACOs
TODAY
FUTURE
ACCOUNTABLE CARE ORGANIZATION
Avoidable $
Payer
Savings
Spending Per Patient
Other
Avoidable $
Maternity
Other
Avoidable $
Total
Cancer
Spending
for a
Avoidable $
Group
Back/Joint
Pain
of Patients
Avoidable $
Maternity
Avoidable $
Cancer
Avoidable $
Back/Joint
Pain
Avoidable $
Chronic
Diseases
NOTE:
Graph
Is not
drawn
to
scale
Avoidable $
Payer
Spending
Condition-Based
Payment for
Chronic Disease
Management
Avoidable $
Chronic
Diseases
Payer
Spending
© Center for Healthcare Quality and Payment Reform CHQPR.org
100
Three Different Payment Models
in PCOP
© Center for Healthcare Quality and Payment Reform CHQPR.org
101
Three Different Payment Models
in PCOP
1. Patient Centered Oncology Payment (Basic Model)
• 4 new CPT codes
•
•
•
•
New Patient Treatment Planning (One-Time)
Monthly Care Management During Treatment
Monthly Care Management During Active Monitoring
Monthly Payment for Patients on Clinical Trials
• Adjustments to payment amounts for new codes based on:
•
•
Adherence to Choosing Wisely and appropriate use criteria for
ordering drugs, lab tests, imaging, and end-of-life care
Maintaining low rate of ED visits and hospitalizations for patients
during chemotherapy treatment
© Center for Healthcare Quality and Payment Reform CHQPR.org
102
Three Different Payment Models
in PCOP
1. Patient Centered Oncology Payment (Basic Model)
• 4 new CPT codes
•
•
•
•
New Patient Treatment Planning (One-Time)
Monthly Care Management During Treatment
Monthly Care Management During Active Monitoring
Monthly Payment for Patients on Clinical Trials
• Adjustments to payment amounts for new codes based on:
•
•
Adherence to Choosing Wisely and appropriate use criteria for
ordering drugs, lab tests, imaging, and end-of-life care
Maintaining low rate of ED visits and hospitalizations for patients
during chemotherapy treatment
2. Consolidated Payments for Oncology Care (Option A)
• Consolidate current CPT codes into new monthly codes
•
•
•
New Patient
Treatment Month (multiple levels based on patient needs)
Active Monitoring Month (multiple levels)
• Adjustments to payment amounts, same as basic model
© Center for Healthcare Quality and Payment Reform CHQPR.org
103
Three Different Payment Models
in PCOP
1. Patient Centered Oncology Payment (Basic Model)
• 4 new CPT codes
•
•
•
•
New Patient Treatment Planning (One-Time)
Monthly Care Management During Treatment
Monthly Care Management During Active Monitoring
Monthly Payment for Patients on Clinical Trials
• Adjustments to payment amounts for new codes based on:
•
•
Adherence to Choosing Wisely and appropriate use criteria for
ordering drugs, lab tests, imaging, and end-of-life care
Maintaining low rate of ED visits and hospitalizations for patients
during chemotherapy treatment
2. Consolidated Payments for Oncology Care (Option A)
• Consolidate current CPT codes into new monthly codes
•
•
•
New Patient
Treatment Month (multiple levels based on patient needs)
Active Monitoring Month (multiple levels)
• Adjustments to payment amounts, same as basic model
ConditionBased
Payment
Model:
3. Virtual Budgets for Oncology Care (Option B)
• Bundle hospital costs, costs of testing, and/or cost of drugs with
patient services into monthly payments
• Use appropriate use criteria to protect against underuse
© Center for Healthcare Quality and Payment Reform CHQPR.org
104
Oncology Provider + Payer
Partnerships Needed
• Oncology practices and hospitals can’t change the way they
deliver care unless payers agree to pay them differently
• There is uncertainty on both sides:
– Will the additional payments enable the oncology practice to meet
performance targets?
– Will the savings offset the higher payments made by the payer?
• A true partnership is needed to create a win-win-win approach
© Center for Healthcare Quality and Payment Reform CHQPR.org
105
FOR MORE INFORMATION
www.CancerPayment.org
www.asco.org/paymentreform
Harold D. Miller
President and CEO
Center for Healthcare Quality and Payment Reform
[email protected]
Learn More About Win-Win-Win
Payment and Delivery Reform
www.PaymentReform.org
© Center for Healthcare Quality and Payment Reform CHQPR.org
107
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
APPENDIX:
Covering Loss in Drug Margins
Example: Rewarding Oncologists
for Reducing Overused Drugs
$/Pt
Oncology Practice
E&M/Infusions
$4,500
Total Practice
CURRENT
# Pts
Total $
1000 $4,500,000
1000 $4,500,000
Overused Rx
Acquisition Cost
Margin (x+15%)
Drug Payment
$21,750
$3,250
$25,000
200 $4,350,000
200
$650,000
200 $5,000,000
Total Payer $
$20,000
1000 $9,500,000
Patients Receiving
Chemotherapy
Treatment for Cancer
• 1,000 patients treated by
oncology practice in a year
• Oncology practice receives
$4,500 per patient in total
fees for E&M services and
infusion services
(excluding cost of drugs)
• 20% of patients receive an
expensive drug
($25,000 cost per patient)
• 25% of patients do not need
the expensive drug
• Practice is paid 15% above
drug acquisition cost for the
drugs it administers
© Center for Healthcare Quality and Payment Reform CHQPR.org
110
Oncology Practice Revenue Comes
From Service Fees + Drug Margins
$/Pt
Oncology Practice
E&M/Infusions
$4,500
Total Practice
CURRENT
# Pts
Total $
1000 $4,500,000
1000 $4,500,000
Overused Rx
Acquisition Cost
Margin (x+15%)
Drug Payment
$21,750
$3,250
$25,000
200 $4,350,000
200
$650,000
200 $5,000,000
Total Payer $
$20,000
1000 $9,500,000
Net Provider $
1000 $5,150,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
111
What if We Pay the Practice More
to Follow Appropriate Use Criteria?
$/Pt
Oncology Practice
E&M/Infusions
Added Services
Total Practice
$4,500
1000 $4,500,000
$/Pt
$4,500
$150
1000 $4,500,000
Overused Rx
Acquisition Cost
Margin (x+15%)
Drug Payment
$21,750
$3,250
$25,000
Total Payer $
$20,000
Net Provider $
Change
CURRENT
# Pts
Total $
200 $4,350,000
200
$650,000
200 $5,000,000 $25,000
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$150,000
1000 $4,650,000
+3%
150 $3,750,000
-25%
1000 $9,500,000
1000 $5,150,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
112
Reducing Overused Medications
Also Reduces Drug Margin Revenue
$/Pt
Oncology Practice
E&M/Infusions
Added Services
Total Practice
$4,500
1000 $4,500,000
$/Pt
$4,500
$150
1000 $4,500,000
Overused Rx
Acquisition Cost
Margin (x+15%)
Drug Payment
$21,750
$3,250
$25,000
Total Payer $
$20,000
Net Provider $
Change
CURRENT
# Pts
Total $
200 $4,350,000 $21,750
200
$650,000
$3,250
200 $5,000,000 $25,000
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$150,000
1000 $4,650,000
+3%
150 $3,262,500
150
$487,500
150 $3,750,000
-25%
-25%
-25%
1000 $9,500,000
1000 $5,150,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
113
Payer Saves Significant Money But
Practice Actually Loses Revenue
$/Pt
Oncology Practice
E&M/Infusions
Added Services
Total Practice
$4,500
1000 $4,500,000
$/Pt
$4,500
$150
$21,750
$3,250
$25,000
Total Payer $
$20,000
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$150,000
1000 $4,650,000
+3%
150 $3,262,500
150
$487,500
150 $3,750,000
-25%
-25%
-25%
1000 $9,500,000
1000 $8,400,000
-12%
1000 $5,150,000
$5,137,500
($12,500)
-0.2%
1000 $4,500,000
Overused Rx
Acquisition Cost
Margin (x+15%)
Drug Payment
Net Provider $
Change
CURRENT
# Pts
Total $
200 $4,350,000 $21,750
200
$650,000
$3,250
200 $5,000,000 $25,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
114
Oncology Practice Payment Can Be
Adjusted to Create a Win-Win
$/Pt
Oncology Practice
E&M/Infusions
Added Services
Pmt Adjustment
Total Practice
$4,500
1000 $4,500,000
$/Pt
$4,500
$150
$163
$21,750
$3,250
$25,000
Total Payer $
$20,000
FUTURE
# Pts
Total $
Chg
1000 $4,500,000
1000
$150,000
1000
$162,500
1000 $4,812,500
+7%
150 $3,262,500
150
$487,500
150 $3,750,000
-25%
-25%
-25%
1000 $9,500,000
1000 $8,562,500
-10%
1000 $5,150,000
$5,300,000
$150,000
+3%
1000 $4,500,000
Overused Rx
Acquisition Cost
Margin (x+15%)
Drug Payment
Net Provider $
Change
CURRENT
# Pts
Total $
200 $4,350,000 $21,750
200
$650,000
$3,250
200 $5,000,000 $25,000
© Center for Healthcare Quality and Payment Reform CHQPR.org
115
APPENDIX:
Controlling Risk in
Condition-Based Payment
The Goal: Slower Growth in
Spending Than Under FFS
COST
FFS
Pmts
Actual
FFS
Pmts
FFS
Pmts
Actual Projected
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
117
To Attract Payers, New Payment
Must Be < Projected FFS Spend
COST
Bundled
or
ConditionBased
Payment
Level
Lower
Pmt
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Actual Proposed
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
118
…If All Goes Well, Provider’s Costs
Are Lower Than the Payment…
COST
Bundled
or
ConditionBased
Payment
Level
Lower
Pmt
Lower
Costs
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Costs
of
Svcs
Actual Proposed Actual
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
119
...And Both the Payer and
Provider Will “Win”
Savings
For Payer
COST
Bundled
or
ConditionBased
Payment
Level
WINWIN
Profit for
Provider
Lower
Pmt
Lower
Costs
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Costs
of
Svcs
Actual Proposed Actual
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
120
The Risk Providers Fear:
All Won’t Go Well (Costs Go Up)..
COST
Bundled
or
ConditionBased
Payment
Level
Lower
Pmt
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
Costs
of
Svcs
Actual Proposed Actual
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
121
…Creating a Win-Lose Situation
Savings
For Payer
COST
Bundled
or
ConditionBased
Payment
Level
Lower
Pmt
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
WINLOSE
Loss for
Provider
Excess
Cost
Costs
of
Svcs
Actual Proposed Actual
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
122
Many Different Reasons Costs
May Increase Beyond Payment
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
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 CHQPR.org
123
Providers CAN Control Many of
the Factors Causing Higher Costs
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
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 CHQPR.org
124
But Other Causes of Higher Costs
CAN’T Be Controlled by Providers
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
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 CHQPR.org
125
Providers Should NOT Be
Expected To Take Insurance Risk
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
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
Providers
CAN Control
(Performance
Risk)
What
Providers
CANNOT
Control
(Insurance
Risk)
TIME
© Center for Healthcare Quality and Payment Reform CHQPR.org
126
Four Mechanisms for Separating
Insurance and Performance Risk
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
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 CHQPR.org
127