cracking the code on healthcare · quality score, (2) decreasing their episode price – provided...
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Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
Cracking the Code on Healthcare: The Imperative for Controlling Costs
MA Health Data Consortium
April 12, 2012
Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
What is HCI3?
• Not-for-profit emanating from the combination of Bridges To Excellence, Inc. and PROMETHEUS Payment, Inc.
• Engaged in many Foundation-funded and private sector pilots and initiatives
• Focus of organization spans the spectrum of payment reform, excluding the two poles – basic FFS and capitation
• The goal is to improve quality and affordability of health care in the US
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Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
The three “Ps” that affect cost of
care
• Price – favorable market position may yield a higher than average market price
– Absent other signals, price is considered a proxy for quality by consumers (Hibbard, 2012)
• Practice patterns – conservative or aggressive; regional patterns; conflicts of interest (e.g. surgeons with patents on devices, need to fill beds)
• Performance – care defects leads to costs for potentially avoidable complications
3
Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
The effect of the first P – Price
Regional employer, 2006-2010 Total Health Plan Costs
4
83
49
$0
$20
$40
$60
$80
$100
$120
$140
$133MM Four-Year Increase in Price and Use
Use
Price
16
37
4
9
9
5
5
Lab Price
Imag Price
ED Price
Phys Price
OP Surg Price
IP Price
RX Price
16
4
7
7
10
6 Lab Use
Imag Use
ED Use
Phys Use
OP Surg Use
IP Use
RX Use
63%
37%
18
17
Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
Inpatient stay costs drive
difference in total episode costs
2011 Analysis
National Database
of Commercially
Insured, and
nationally
representative
sample of
Medicare
beneficiaries
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Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
2nd P: Practice Patterns - differences
driven by utilization factors
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
A B C D E F G
Average Colonoscopy Episode Cost
HCI3, 2011 NY Analysis
Choices
regarding
anesthesia and
double
procedures
(colonoscopy
with endoscopy)
drive episode
cost differences
here
provider practices
Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
3rd P: Performance - Typical Costs are Similar
PACs Drive Provider Cost Differences
Percent of episode dollars spent on PACs ranges from a low of 57% to a high of 72%
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$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Medical Group Practice A Practice B Practice C Practice D Practice E
Diabetes - Average Episode Costs (adjusted) Typical vs. PAC
Average Adjusted Typical Average PAC
2011 Analysis of Regional health System, Medicaid, No Rx
Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
Addressing the 3 P’s - Payment drives
function, which drives form – policy view
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Pay for Performance
Upside-only Bundles
Full Risk Bundles
Total Cost Shared Savings
Capitation
Fee For
Service
Provider Financial Risk Low High
Payer/
Purc
ha
ser
Savin
gs
Low
High
Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
Three views of consumer
“shopping”
Fee for Service “Bundle” Capitation
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Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
Our Mission: True value-based
purchasing
A B
C
Each “team” can
improve by (1)
increasing their
quality score, (2)
decreasing their
episode price –
provided they
meet the min Q
score of 80
Episode of
Total Knee
Replacement
Episode Cost $18,500 $20,500 $25,000
Quality Score 75 90 95
Value Index 247 228 263
Co-pay $1,710 $0 $3,150
Value Index =
Episode Price / Quality Score
Co-pay A = (247-228) * 90
Co-pay C = (263-228) * 90
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Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
So…if this model makes sense,
why hasn’t it been adopted?
• Change is tough for the incumbents
– Disrupt relationships
– Disrupt operations
– Disrupt business model
• Very little (if any) fear of business failure
• Healthcare delivery system growth often
seen as positive job creating engine
• Lack of CMS push (until now)
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Proprietary & Confidential. Health Care Incentives Improvement Institute, Inc.
For contact information:
www.HCI3.org
www.bridgestoexcellence.org
www.prometheuspayment.org