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FROM VOLUME TO VALUE: Better Ways to Pay for Healthcare Harold D. Miller Executive Director Center for Healthcare Quality and Payment Reform and President and CEO Network for Regional Healthcare Improvement What’s the Biggest Issue Federal Health Reform Didn’t Solve? What’s the Biggest Issue Federal Health Reform Didn’t Solve? How to Reduce Healthcare Costs Without Rationing Reducing Costs Without Rationing: Prevention Healthy Consumer Continued Health Preventable Condition © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 4 Reducing Costs Without Rationing: Avoiding Hospitalizations Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 5 Reducing Costs Without Rationing: Efficient, Successful Treatment Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 6 Go Where the Money Is: Maternity Care & Chronic Disease U.S. Expenditures on Hospital Inpatient Stays, Age 0-65, 2006 (Millions) Normal birth/live born Heart conditions Cancer Trauma-related disorders Other circulatory conditions arteries, veins, … Diabetes mellitus Gallbladder, pancreatic, and liver disease Hypertension Other endocrine, nutritional & immune … Kidney Disease COPD, asthma Other CNS disorders Pneumonia Mental disorders Infectious diseases Back problems Osteoarthritis and other non-traumatic joint … Medical Expenditure Panel Survey, 2006 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 7 Maternity Care Costs Can Be Reduced By Using Birth Centers... Average Facility Labor & Birth Charge, 2003 - Vaginal Delivery (No Complications) Hospital Vaginal Delivery - Birth Center 75% Lower Cost Source: Carol Sakala and Maureen Corry, Evidence-Based Maternity Care: What It Is and What It Can Achieve, Milbank Memorial Fund 2008 $0 $3,000 $6,000 $9,000 $12,000 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 8 ...And By Avoiding Unnecessary Cesareans Average Facility Labor & Birth Charge, 2003 Cesarean Delivery (No Complications) Vaginal Delivery (No Complications) Hospital 50% Lower Cost 75% Lower Cost Vaginal Delivery - Birth Center Source: Carol Sakala and Maureen Corry, Evidence-Based Maternity Care: What It Is and What It Can Achieve, Milbank Memorial Fund 2008 $0 $3,000 $6,000 $9,000 $12,000 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 9 New Jersey Florida Mississippi Louisiana West Virginia Arkansas Connecticut Kentucky Alabama New York Texas Oklahoma Massachusetts Virginia South Carolina Tennessee Maryland Nevada District of Columbia Rhode Island California Delaware Georgia United States Nebraska New Hampshire North Carolina Michigan llinois Missouri Pennsylvania Maine Kansas Ohio Indiana Iowa Montana Washington North Dakota Oregon Wyoming Vermont South Dakota Hawaii Arizona Minnesota Colorado Wisconsin Idaho New Mexico Alaska Utah Nevada is Above Average in the Rate of Cesarean Births... % of Births by Cesarean Section, 2007 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 10 Rhode Island Connecticut Washington Florida Nevada Colorado Massachusetts Oregon Arizona Kentucky Vermont Wisconsin New Jersey Virginia Iowa llinois Ohio Nebraska California Kansas Pennsylvania Minnesota West Virginia Montana United States Tennessee Maryland Georgia District of Columbia Delaware New Hampshire Hawaii Michigan North Dakota Idaho Oklahoma Missouri South Carolina New York Wyoming Texas North Carolina Alabama Indiana Maine Utah Arkansas Mississippi Louisiana New Mexico Alaska South Dakota ...and Has Had the 5th Highest Growth in Cesareans in the U.S. % Change in Cesarean Birth Rate, 1996-2007 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 11 It Takes Some Leadership and a Little Training • With training in Perfecting Patient CareSM from the Pittsburgh Regional Health Initiative, a team from Magee Womens Hospital in Pittsburgh: – Reduced by 64% the rate of elective inductions of birth prior to full gestation (which reduces neonatal intensive care (NICU) usage and complications for both mother and child) – Reduced by 60% the use of Cesarean sections for elective inductions of birth in first-time mothers © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 12 Current Payment Systems Reward Bad Outcomes, Not Better Health Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode $ Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 13 “Episode Payments” to Reward Value Within Episodes Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode $ Episode Payment Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions A Single Payment For All Care Needed From All Providers in the Episode, With a Warranty For Complications © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 14 The Weakness of Episode Payment Healthy Consumer Continued Health Preventable Condition How do you prevent unnecessary episodes of care? (e.g., preventable hospitalizations for chronic disease, overuse of cardiac surgery, back surgery, etc.) No Hospitalization Acute Care Episode Episode Payment Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 15 Comprehensive Care Payments To Avoid Episodes Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode $ A Single Payment For All Care Needed For A Condition Comprehensive Care Payment or “Global” Payment Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 16 Isn’t This Capitation? No – It’s Different CAPITATION (WORST VERSIONS) COMPREHENSIVE CARE PAYMENT 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 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 17 Who Should Be Accountable For Achieving Higher Value Care? • Hospitals? • Integrated Delivery Systems? • Multi-Specialty Group Practices? © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 18 Keeping People Well? Primary Care Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions PRIMARY CARE © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 19 Avoiding Hospitalizations? Primary + Specialty Care Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode PRIMARY CARE Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions PRIMARY + SPECIALTY © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 20 Better Acute Care? Hospitals and Specialists Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode PRIMARY CARE PRIMARY + SPECIALTY Efficient Successful Outcome High-Cost Successful Outcome Complications, Infections, Readmissions HOSPITALS & SPECIALISTS © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 21 Implications • Hospitals and physicians will need to work together to improve quality and lower costs for inpatient care to ensure they are the acute care provider of choice in the community • Physicians, particularly primary care physicians, will need to improve skills in preventing hospitalizations and managing patient utilization to control total patient care costs • Payment systems will need to provide the support that physicians and hospitals need to deliver higher-quality, lower-cost care © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 22 Hospitals & MDs Paid Separately For Hospital Care... Costs and Payment Today Physician Payment MD Fees Hospital Payment DRG or Per Diem © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 23 ...MDs and Hospitals Expected to Cover Their “Own” Costs Costs and Payment Today Physician Payment Physician “Cost” Drug/ Device Costs Hospital Payment Hospital Staff/ Facility Costs © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 24 So Any Savings in Hospital Costs Go to Hospitals, Not Physicians Initiative to Reduce Device Costs & Improve Efficiency Costs and Payment Today Physician Payment Physician “Cost” Drug/ Device Costs Hospital Payment Hospital Staff/ Facility Costs Physician “Cost” No Reward for Physician Hospital Margin Improves Drug/ Device Costs Hospital Staff/ Facility Costs © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 25 Bundled Payment Covers All Costs in a Single Payment... Bundled Episode Payment Physician “Cost” Bundled Hospital + Physician Payment Drug/ Device Costs Hospital Staff/ Facility Costs © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 26 ...So if MDs & Hospitals Cooperate to Generate Savings... Bundled Episode Payment Initiative to Reduce Device Costs & Improve Efficiency Physician “Cost” Bundled Hospital + Physician Payment Drug/ Device Costs Hospital Staff/ Facility Costs Physician “Cost” Drug/ Device Costs Hospital Staff/ Facility Costs © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 27 ...MDs, Hospitals, and Payers Can All Benefit Bundled Episode Payment Initiative to Reduce Device Costs & Improve Efficiency Physician “Cost” Bundled Hospital + Physician Payment Drug/ Device Costs Hospital Staff/ Facility Costs Physician “Cost” Reallocation of Savings Payer Savings Physician “Cost” MD Bonus Hosp. Margin Drug/ Device Costs Drug/ Device Costs Hospital Staff/ Facility Costs Hospital Staff/ Facility Costs Lower Price Higher Physician Payment Capital to Reinvest Episode payment would give hospitals & MDs incentives to collaborate to reduce costs © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 28 A Mechanism to Allocate the Payments is Needed Bundled Episode Payment Initiative to Reduce Device Costs & Improve Efficiency Physician “Cost” Bundled Hospital + Physician Payment Drug/ Device Costs Hospital Staff/ Facility Costs Physician “Cost” Reallocation of Savings Payer Savings Physician “Cost” MD Bonus Hosp. Margin Drug/ Device Costs Drug/ Device Costs Hospital Staff/ Facility Costs Hospital Staff/ Facility Costs PHO or Other Hospital/MD Collaborative • Plan initiatives • Set targets • Monitor progress • Allocate payments © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 29 Today: Separate Payments for Hospitals & Physicians Treatment for Conditions Present on Admission Hospital Services Drugs & Devices Non-MD Staff DRG Facilities/Equipment Physician Services Physician Services Fee Fee © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 30 “Bundled Payment”: Aligning Hospital and MD Incentives Treatment for Conditions Present on Admission Hospital Services Drugs & Devices Non-MD Staff Facilities/Equipment Physician Services Physician Services INPATIENT BUNDLE © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 31 Today: Higher Payment for Hospital-Acquired Conditions Treatment for Conditions Present on Admission Treatment for Hospital-Acquired Conditions Hospital Services Drugs & Devices Non-MD Staff Facilities/Equipment Physician Services Physician Services INPATIENT BUNDLE © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 32 “Inpatient Warranty:” No Additional Payment for Adverse Events Treatment for Conditions Present on Admission Treatment for Hospital-Acquired Conditions Hospital Services Drugs & Devices Non-MD Staff Facilities/Equipment Physician Services Physician Services INPATIENT BUNDLE INPATIENT WARRANTY © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 33 Today: Separate Payments for Inpatient and Post-Acute Care Treatment for Conditions Present on Admission Treatment for Hospital-Acquired Conditions PostHospital Care Rehab Home Health Long-Term Care MD Services INPATIENT BUNDLE INPATIENT WARRANTY © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 34 “Inpatient + Post-Acute Bundle” Pays for Both Jointly Treatment for Conditions Present on Admission Treatment for Hospital-Acquired Conditions PostHospital Care Rehab Home Health Long-Term Care MD Services INPATIENT BUNDLE INPATIENT WARRANTY INPATIENT+POST-ACUTE BUNDLE © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 35 Today: Extra Payment for Preventable Readmissions Treatment for Conditions Present on Admission Treatment for Hospital-Acquired Conditions PostHospital Care Hospital Readmission No Readmit; Planned or Unpreventable Readmission Readmission Preventable By Post-Acute Care Readmission Preventable During Initial Admission INPATIENT BUNDLE INPATIENT WARRANTY INPATIENT+POST-ACUTE BUNDLE © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 36 Full Episode Payment With A Limited Warranty Treatment for Conditions Present on Admission Treatment for Hospital-Acquired Conditions PostHospital Care Hospital Readmission Unpreventable Readmission Readmission Preventable By Post-Acute Care Readmission Preventable During Initial Admission INPATIENT BUNDLE INPATIENT WARRANTY INPATIENT+POST-ACUTE BUNDLE FULL EPISODE WITH WARRANTY © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 37 Different Episode/Bundling Concepts for Different Problems PROBLEM/GOAL PAYMENT METHOD Encourage physicians to work with hospitals to eliminate inpatient inefficiencies INPATIENT BUNDLED PAYMENT Encourage reduction in adverse events during inpatient care INPATIENT WARRANTY Encourage more efficient combinations of inpatient & post-acute care BUNDLED INPATIENT & POSTACUTE CARE PAYMENT Encourage efficiency and quality across the full episode of care FULL EPISODE PAYMENT WITH LIMITED WARRANTY © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 38 It’s Not A New Concept; Results Documented Over 20 Years Ago • In 1987, an orthopedic surgeon in Lansing, MI 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. © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 39 Yes, a Health Care Provider Can Offer a Warranty Geisinger Health System ProvenCare SM – 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 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 40 Payment + Process Improvement = Better Outcomes, Lower Costs © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 41 Geisinger Perinatal ProvenCare: 26% Reduction in Cesareans GWV Primary C-Sections Jan 2008-Dec 2009 47 UCL=45.5 42 Percent 37 32 27 Avg=29.0 22 UCL=31.4 Avg=21.4 17 12 7 LCL=12.5 LCL=11.4 Implementation of electronic process 2 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 42 A Single Case Rate for All or Different Rates by Severity? • Severity adjustment is essential to episode payment – FFS implicitly adjusts for patient severity/risk/complexity by paying more for patients who have more complex problems – FFS doesn’t distinguish which patients have higher needs from those the provider overtreats – Episode payment needs to make the distinction • Are there severity adjustment systems? – DRGs, MS-DRGs, APR-DRGs for hospital episodes, HHRGs for home care, CMS-HCC for Medicare Advantage, etc. – Clinical category systems: ® • e.g., 3M Potentially Preventable Readmissions, Clinical Risk Groups – Regression-based category systems: • e.g, CMS Readmission measures being used for Hospital Compare TM • e.g., PROMETHEUS system for Potentially Avoidable Complications © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 43 Better Payment for Episodes Doesn’t Prevent Episodes Episode Payment Readmission Patient w/ Chronic Disease(s) Hospitalization Episode No Hospitalization © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 44 Significant Reduction in Rate of Hospitalizations Possible Examples: • 40% reduction in hospital admissions, 41% reduction in ER visits for exacerbations of COPD using in-home & phone patient education by nurses or respiratory therapists (2003) J. Bourbeau, M. Julien, et al, “Reduction of Hospital Utilization in Patients with Chronic Obstructive Pulmonary Disease: A Disease-Specific Self-Management Intervention,” Archives of Internal Medicine 163(5), 2003 • 66% reduction in hospitalizations for CHF patients using homebased telemonitoring (1999) M.E. Cordisco, A. Benjaminovitz, et al, “Use of Telemonitoring to Decrease the Rate of Hospitalization in Patients With Severe Congestive Heart Failure,” American Journal of Cardiology 84(7), 1999 • 27% reduction in hospital admissions, 21% reduction in ER visits through self-management education (2005) M.A. Gadoury, K. Schwartzman, et al, “Self-Management Reduces Both Short- and LongTerm Hospitalisation in COPD,” European Respiratory Journal 26(5), 2005 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 45 20-40% Reduction in Surgery Through Shared Decision-Making Reduction in Use of Surgery Among Patients Using Decision Aids 0% -10% -20% -30% -40% -50% Coronary Mastectomy for Revascularization Breast Cancer for Angina Back Surgery Prostatectomy for BPH © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 46 PCPs Can’t Get Paid for Many Tools To Avoid Hospitalization Episode Payment Readmission Patient w/ Chronic Disease(s) Hospitalization Episode Primary Care MD No Hospitalization MD Office Visits MD Phone Calls Nurse Care Mgt Remote Monitoring Specialist Consults © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 47 How It Works Today CURRENT PAYMENT SYSTEMS Health Insurance Plan Physician Practice $ $ $ Office Visits Specialty Consults Hospital Stay Avoidable Avoidable Lab Work/ Imaging Payment for preventable and unnecessary utilization of expensive care Phone Calls Nurse Care Mgr No payment for services that can prevent utilization Avoidable © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 48 Option 1: Add New Fee Codes for Unreimbursed PCP Services MEDICAL HOME PROGRAM Health Insurance Plan Physician Practice $ $ $ Office Visits Specialty Consults Hospital Stay Avoidable Avoidable Phone Calls Nurse Care Mgr Higher payment for primary care Lab Work/ Imaging Avoidable $ © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 49 Option 2: Pay for Monthly “Care Mgt” to Cover Missing Services MEDICAL HOME PROGRAM Health Insurance Plan Physician Practice $ $ $ Office Visits Specialty Consults Hospital Stay Monthly Care Mgt Payment Avoidable Avoidable Phone Calls RN Care Mgr Higher payment for primary care Lab Work/ Imaging Avoidable $ © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 50 Weakness: More $ for PCPs, But Any Savings Elsewhere? MEDICAL HOME PROGRAM Health Insurance Plan Physician Practice $ $ $ Office Visits Specialty Consults Hospital Stay Monthly Care Mgt Payment Avoidable Avoidable Lab Work/ Imaging ...But no commitment to reduce utilization elsewhere Phone Calls RN Care Mgr Higher payment for primary care Avoidable $ © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 51 Option 3: No New Money for PCPs, but More Flexibility PRACTICE CAPITATION Health Insurance Plan ConditionAdjusted Per Person Payment $ Physician Practice $ $ $ $ Office Visits Specialty Consults Hospital Stay Avoidable Avoidable Phone Calls Nurse Care Mgr Lab Work/ Imaging Avoidable Ability to Allocate $ to Most Effective Services © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 52 Option 4: “Shared Savings” (More $ Only If Total Costs Decrease) SHARED SAVINGS MODEL Health Insurance Plan Physician Practice ...Returned $ to physician practice after savings determined... $ $ $ Office Visits Specialty Consults Hospital Stay Avoidable Avoidable Phone Calls Nurse Care Mgr ...but no upfront $ for better care Lab Work/ Imaging Avoidable Portion of savings from reduced spending in other areas... © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 53 Weaknesses of “Shared Savings” • No upfront money to enable primary care practices to hire nurse care managers, install information technology, etc. • It rewards those who are currently poor performers more than those who are good performers • It’s not sustainable – once costs are reduced, there is less to be saved and so shared savings payments go down © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 54 Option 5: The Beginnings of “Accountable Care” Payment CARE MGT PAYMENT + UTILIZATION P4P Health Insurance Plan $ Physician Practice $ $ $$ $ $ Office Visits Specialty Consults Hospital Stay Monthly Care Mgt Payment Avoidable Avoidable Lab Work/ Imaging Targets for Reduction In Utilization Phone Calls RN Care Mgr $ More $ for PCP $ Avoidable P4P Bonus/Penalty Based on Utilization © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 55 Option 6: More ACO-ness: Partial Global Payment PARTIAL GLOBAL PMT (Professional Svcs) Health Insurance Plan ConditionAdjusted Per Person Payment $$ $ Office Visits Physician Practice $ $ $ Phone Calls Nurse Care Mgr $ Specialty Consults Hospital Stay Avoidable Avoidable Lab Work/ Imaging P4P Bonus/Penalty Based on Utilization Avoidable Flexibility and accountability for a condition-adjusted budget covering all professional services © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 56 Option 7: True ACO: Flexibility & Accountability w/o Insurance Risk FULL COMP. CARE/GLOBAL PAYMENT Health Insurance Plan ConditionAdjusted Per Person Payment $ Physician Practice/ ACO Office Visits $ Phone Calls Nurse Care Mgr Specialty Consults Hospital Stay Avoidable Avoidable Lab Work/ Imaging Avoidable Flexibility and accountability for a condition-adjusted budget covering all services © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 57 Option 7a: Ensuring Incentives Exist for Quality as Well as Cost FULL COMP. CARE/GLOBAL PMT + QUALITY P4P Health Insurance Plan ConditionAdjusted Per Person Payment $ Office Visits Physician Practice/ ACO $ $ $ Phone Calls Nurse Care Mgr Specialty Consults Hospital Stay Avoidable Avoidable Lab Work/ Imaging Avoidable P4P Bonus/Penalty Based on Quality © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 58 Example: BCBS Massachusetts Alternative Quality Contract • A single payment amount is established to cover all costs of care for a population of patients • The initial payment is set based on past expenditures; the amount increases each year at an inflation rate based on CPI, not on medical inflation, so savings come from controlling increases over time • The payment amount functions as a budget; the budget is adjusted up or down based on the types and severity of conditions the patients have, so providers aren’t taking insurance risk, only performance risk • The provider doesn’t need to pay claims; BCBS still pays individual providers fee-for-service, but fees are adjusted up or down to keep total costs within the payment budget • Payments are increased by annual bonuses based on the quality of care delivered © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 59 Episode Payments for Acute Care Help the ACO Manage Costs FULL COMP. CARE/GLOBAL PMT + QUALITY P4P Health Insurance Plan ConditionAdjusted Per Person Payment Episode Payment to Hospital $ Office Visits Physician Practice/ ACO $ $ $ Phone Calls Nurse Care Mgr Specialty Consults Hospital Stay Avoidable Avoidable Lab Work/ Imaging Avoidable P4P Bonus/Penalty Based on Quality © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 60 Primary Care Must Be the Core of an ACO Accountable Care Requires Coordinated Relationships, Not Necessarily Corporate Integration Hospital Hospital Primary Care Practice Primary Care Practice Primary Care Practice Primary Care Practice Primary Care Practice Primary Care Practice Specialist Specialist Specialist Specialist Specialist © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 61 Transitioning to Accountable Care Payment CARE MGT PAYMENT + UTILIZATION P4P Health Insurance Plan $ Physician Practice $ $ $$ $ $ Office Visits Specialty Consults Hospital Stay Avoidable Avoidable Lab Work/ Imaging Targets for Reduction In Utilization Monthly Care Mgt Payment Phone Calls RN Care Mgr $ More $ for PCP $ Avoidable P4P Bonus/Penalty Based on Utilization PARTIAL GLOBAL PMT (Professional Svcs) Health Insurance Plan ConditionAdjusted Per Person Payment $$ $ Office Visits Physician Practice $ $ $ Phone Calls Nurse Care Mgr $ Specialty Consults Hospital Stay Avoidable Avoidable Lab Work/ Imaging P4P Bonus/Penalty Based on Utilization Avoidable Flexibility and accountability for a condition-adjusted budget covering all professional services FULL COMP. CARE/GLOBAL PMT + QUALITY P4P Health Insurance Plan ConditionAdjusted Per Person Payment $ Office Visits Physician Practice/ ACO $ $ $ Phone Calls Nurse Care Mgr Specialty Consults Hospital Stay Avoidable Avoidable Lab Work/ Imaging Avoidable P4P Bonus/Penalty Based on Quality © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 62 One Payer Changing Isn’t Enough Payer Better Payment System Payer Current Payment System Payer Current Payment System Provider Patient Patient Patient Provider is only compensated for changed practices for the subset of patients covered by participating payers © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 63 Payers Need to Align to Enable Providers to Transform Payer Better Payment System Payer Better Payment System Payer Better Payment System Provider Patient Patient Patient © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 64 Payer Coordination Is Beginning to Occur Around the Country • Examples of Multi-Payer Payment Reforms: – Minnesota: Multi-payer change in payments for primary care practices and psychiatrists to help manage patients with depression – Pennsylvania: Multi-payer initiative to support medical home/chronic care services in primary care practices – Rhode Island: Multi-payer chronic care/medical home project in primary care practices – Vermont: Multi-payer medical home project • A Facilitator of Coordination is Needed – PA, RI, VT: State Government – Minnesota: Institute for Clinical Systems Improvement • Medicare Needs to Participate in Local Projects © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 65 How Do You Set the Price? • If price is too high, inefficiencies will exist, regardless of what incentives may exist in the payment method • If price is too low, providers will be unable to deliver high-quality care • So how does the “right” price get determined? © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 66 Our Standard Methods of Controlling Prices Don’t Work • Price Negotiations as Part of Contracting – Even large insurers can’t demand price concessions from large/monopoly providers © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 67 Our Standard Methods of Controlling Prices Don’t Work • Price Negotiations as Part of Contracting – Even large insurers can’t demand price concessions from large/monopoly providers • Narrow Networks – In theory, could steer patients to lower-cost providers and give providers greater volume to reduce prices – In practice, prohibits patients from using the providers they prefer and creates consumer backlash – Networks are based on providers, not services, so providers with some good services are either in or out for all services © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 68 Our Standard Methods of Controlling Prices Don’t Work • Price Negotiations as Part of Contracting – Even large insurers can’t demand price concessions from large/monopoly providers • Narrow Networks – In theory, could steer patients to lower-cost providers and give providers greater volume to reduce prices – In practice, prohibits patients from using the providers they prefer and creates consumer backlash – Networks are based on providers, not services, so providers with some good services are either in or out for all services • Copays, Co-insurance and High-Deductible Health Plans – Create little incentive for consumers to choose lower-cost providers on the expensive items that make a difference – Create significant disincentive to pursue preventive care that may prevent the expensive items in the first place © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 69 Your Choices With Auto Purchase Insurance HYUNDAI SONATA 5 yr/60,000m warranty 5 star crash rating MSRP: $22,450 LEXUS LS 460 4 yr/50,000m warranty No crash rating MSRP: $63,825 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 70 Copayment: Lexus Wins HYUNDAI SONATA 5 yr/60,000m warranty 5 star crash rating $1,000 Copay: LEXUS LS 460 4 yr/50,000m warranty No crash rating MSRP: $22,450 MSRP: $63,825 $1,000 $1,000 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 71 Coinsurance: Lexus Wins for Most People HYUNDAI SONATA 5 yr/60,000m warranty 5 star crash rating LEXUS LS 460 4 yr/50,000m warranty No crash rating MSRP: $22,450 MSRP: $63,825 $1,000 Copay: $1,000 $1,000 10% Coinsurance: $2,245 $6,383 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 72 High Deductible: Lexus Wins HYUNDAI SONATA 5 yr/60,000m warranty 5 star crash rating LEXUS LS 460 4 yr/50,000m warranty No crash rating MSRP: $22,450 MSRP: $63,825 $1,000 Copay: $1,000 $1,000 10% Coinsurance: $2,245 High Deductible: $10,000 $6,383 $10,000 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 73 Price Difference: Hyundai Wins for Most People HYUNDAI SONATA LEXUS LS 460 5 yr/60,000m warranty 5 star crash rating 4 yr/50,000m warranty No crash rating MSRP: $22,450 MSRP: $63,825 $1,000 Copay: $1,000 $1,000 10% Coinsurance: $2,245 High Deductible: $10,000 Price Difference: $0 $6,383 $10,000 $41,375 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 74 Better Ways of Controlling Prices • Value-Based Competition by Providers for Consumers – Define episode prices and global fees so it’s easier to compare costs of different providers and procedures – Publish information on prices and quality of all providers – Require consumers to pay the “last dollar” of providers’ prices (i.e., the difference between the prices of more expensive and less expensive providers/services with equivalent quality) – Create shared decision-making processes to help consumers decide among services based on benefits and costs © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 75 Better Ways of Controlling Prices • Value-Based Competition by Providers for Consumers – Define episode prices and global fees so it’s easier to compare costs of different providers and procedures – Publish information on prices and quality of all providers – Require consumers to pay the “last dollar” of providers’ prices (i.e., the difference between the prices of more expensive and less expensive providers/services with equivalent quality) – Create shared decision-making processes to help consumers decide among services based on benefits and costs • Ensuring There Are Competitors – Prevent anti-competitive consolidations and encourage limited duplication of services (assuming consumers are made price-sensitive) – Regulate prices where monopolies exist (e.g., the Maryland Hospital rate-setting commission) – Prohibit all-or-nothing contracting for services by large providers © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 76 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 © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 77 Extreme Views of Patient Role in Use of Medical Home/ACO ROCK CONSUMERS/ PATIENTS CAN CHANGE OR USE MULTIPLE PROVIDERS AT WILL MIDDLE GROUND HARD PLACE CONSUMERS/ PATIENTS ARE “LOCKED IN” TO A SINGLE GATEKEEPER PROVIDER © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 78 Creating a Middle Ground to Support the Medical Home/ACO ROCK MIDDLE GROUND HARD PLACE CONSUMERS/ PATIENTS CAN CHANGE OR USE MULTIPLE PROVIDERS AT WILL CONSUMERS/ PATIENTS HAVE INCENTIVES TO CHOOSE & USE AN ACO OR MEDICAL HOME CONSUMERS/ PATIENTS ARE “LOCKED IN” TO A SINGLE GATEKEEPER PROVIDER © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 79 Importance of Coordinating Pharmacy & Medical Benefits Single-minded focus on reducing costs here... Pharmacy Benefits Drug Costs ...could result in higher spending on hospitalizations Medical Benefits Hospital Costs • High copays for brand-names when no generic exists • Doughnut holes & deductibles Physician Costs Other Services Principal treatment for most chronic diseases involves regular use of maintenance medication © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 80 Better Payment Systems Require Good Quality Measurement • Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 81 Better Payment Systems Require Good Quality Measurement • Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care • Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 82 Better Payment Systems Require Good Quality Measurement • Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care • Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs Massachusetts Health Quality Partners Wisconsin Collaborative for Healthcare Quality • Ideal: Develop quality measures with participation Minnesota Community Measurement of physicians, as Regional Health Improvement Collaboratives do © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 83 Functions Needed for Healthcare Payment & Delivery Reform... Consumer Education & Engagement Quality/Cost Measurement & Reporting Value-Driven Payment Systems & Benefit Designs Value-Driven Delivery Systems © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 84 ...Functions Can’t Proceed in Silos... Consumer Education & Engagement Quality/Cost Measurement & Reporting ? Value-Driven Payment Systems & Benefit Designs Value-Driven Delivery Systems © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 85 Coordinated Support for All Functions at the Regional Level... Consumer Education & Engagement Quality/Cost Measurement & Reporting Regional Health Improvement Collaborative Value-Driven Payment Systems & Benefit Designs Value-Driven Delivery Systems © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 86 Coordinated Support for All Functions at the Regional Level... Consumer Education & Engagement Quality/Cost Measurement & Reporting Nevada Partnership for Value-Driven Healthcare (HealthInsight) Value-Driven Payment Systems & Benefit Designs Value-Driven Delivery Systems © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 87 ...With Active Involvement of All Healthcare Stakeholders Healthcare Providers Healthcare Payers Regional Health Improvement Collaborative Healthcare Purchasers Healthcare Consumers © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 88 For More Information on Payment and Delivery Reforms www.PaymentReform.org © 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement 89 For More Information: Harold D. Miller Executive Director, Center for Healthcare Quality and Payment Reform and President & CEO, Network for Regional Healthcare Improvement [email protected] (412) 803-3650 www.CHQPR.org www.NRHI.org www.PaymentReform.org
