sustainable u.s. health spending: the quest for value...

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Sustainable U.S. Health Spending: The Quest for

Value – Panels 1 and 2

July 15, 2014

Altarum Center for Sustainable Health Spending

with Funding from

The Robert Wood Johnson Foundation

2

Sustainable U.S. Health Spending: The Quest for Value

Welcome

Linc Smith, CEO, Altarum Institute Ceci Connolly, Managing Director, PwC Health Research

Institute – Moderator, Sessions I – III

3


Panel 1 Health Spending in 2014: What’s Happening? Peter Orszag, Vice Chairman, Corporate and Investment

Banking, Citibank Larry Levitt, Senior Vice President for Special Initiatives,

Kaiser Family Foundation Stuart Altman, Professor of National Health Policy, Heller

School, Brandeis University

Health Spending in 2014: Keep Your Eye on Medicare Ball Peter R. Orszag Vice Chairman, Corporate and Investment Banking Chairman, Financial Strategy and Solutions Group Columnist, Bloomberg View

July 2014

Altarum Symposium on Sustainable U.S. Health Spending: The Quest for Value

Recent deceleration in health spending

Monthly Budget Review, June 2014

Medicare does not have a business cycle component

What’s different this time

Vignette: readmissions

UNH Study: Cost of Cancer Patients under Bundled Payments ($ Millions)

98.1

7.5

64.76

21

0

20

40

60

80

100

120

1 2

Predicted Actual

Total Chemotherapy Drugs

What would happen if it continued?

Dazed and Confused by Recent Health Spending Trends Altarum Symposium on Sustainable U.S. Health Spending

July 15, 2014

Larry Levitt

Senior Vice President, Kaiser Family Foundation

@larry_levitt

0%

1%

2%

3%

4%

5%

6%

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

Source: KFF analysis of BEA data (health care services and pharmaceutical /medical products).

One series shows year over year change in health spending by quarter, the other random numbers

0%

1%

2%

3%

4%

5%

6%

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014


Year over year change in health spending by quarter, 2009-2014

Average = 4.3%

$2.10

$2.15

$2.20

$2.25

$2.30

$2.35

$2.40

Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014


Health spending in Q1 2014 was largely in line with recent trends…Q4 2013 was a bit of an anomaly

Source: Analysis by the Kaiser Family Foundation and the Altarum Center for Sustainable Health Spending.

Health spending growth, actual vs. predicted

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Actual Predicted

• Short answer: No.

• Remember the March surge in ACA signups? That was real, but those folks didn’t actually become insured until the second quarter.

• There was likely an average of 3-4 million more people insured during the first quarter of 2014 through Medicaid and health insurance exchanges. That would increase spending by maybe a quarter of a percent or so.

• With 8 to 10 million more people insured in the second quarter, we can expect a bump in spending of perhaps between half and three-quarters of a percent.

Should we have expected a 10% jump in health spending in the first quarter of 2014?

1. Growth in total health spending remains very low, with no clear signs yet of deceleration or acceleration. We should all resist the temptation to read too much into month to month, and even quarter to quarter, changes.

2. The improved economy will likely put upward pressure on spending, but when and by how much is uncertain.

3. There is probably more going on in the slowdown than the economy, including direct and indirect effects of the ACA.

4. More people insured under the ACA will likely bump spending up a bit, but it will not lead to a surge.

5. Aggregates and averages mask a lot of variation.

6. Small changes in the growth rate make a big difference. A one percentage point change ≈ $2 trillion over 10 years.

Key points about recent health spending trends

Spending For Healthcare Will Continue To Grow Less Rapidly

Stuart H. Altman Ph.D. Chaikin Professor of Health Policy

Heller School for Social Policy and Management

Brandeis University

Healthcare Spending Is Growing Less Rapidly!

But Will It Continue?

Average Annual Percent Change in National Health Expenditures, 1960-2012

13.1%

11.0%

8.4%

5.5% 5.8%

6.4%

7.0% 8.5%

9.5%

8.4%

7.1% 6.8%

6.6% 6.2%

4.7%

3.8% 3.9% 3.9% 3.9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1970 1980 1990 93 97 98 99 2000 1 2 3 4 5 6 7 8 9 10 2011 2012

Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2010; file nhe2010.zip).

http://www.cms.hhs.gov/NationalHealthExpendData/

I Think It Will!

The Reinhardt/Altman Thesis

In The Past Spending Driven By Cost of Care (Reimbursement Model)

In The Future Cost of Care Likely To Be Driven By Spending Limits

(Payment Model)

WHY---

Government Sponsored Patients and Payments Will Become A

Greater Force in Healthcare System

Demographics and The Growing Number of Medicaid Recipients

Are Key Reasons

Medicare and Medicaid Enrollments Will Grow Disproportionately---

6%

57%

71%

0

10

20

30

40

50

60

70

80

Private Medicare Medicaid

Perc

en

t C

han

ge

in E

nro

llm

en

t

CMS, National Health Expenditure Projections, 2012 to 2022, January 2013.

Growth in Enrollment by Payer Source,

2006 - 2022

But Payments By Government Programs Will Not Grow as

Quickly

So---Spending Growth From Government Programs Will Not Grow In Proportion To Growth In Enrollment or

Service Use

Nevertheless Government Payments Will Dominate The

Healthcare System!

0%

10%

20%

30%

40%

50%

60%

Private Govt. Total Govt. (Medicare) Govt. (Medicaid)

48.7% 46.7%

26.5%

20.2%

43.2%

51.7%

29.6%

22.1%

2006

2022

CMS, National Health Expenditure Projections, 2012 to 2022, January 2013.

Total Health Insurance Payments by Payer

Source

2006 versus 2022

(Percent of Total)

In The Past Healthcare Providers Counted on Higher Private

Insurance Payments To Make Up Shortfalls In Government Payments

BUT This Will Get Harder In The Future

Private Insurance Payments Used To Pay For Lower Government Payments

Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals. (1) Includes Medicaid Disproportionate Share payments.

92.0%

85.0%

130.0% 138.0%

157.4%

60%

80%

100%

120%

140%

160%

180%

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

Medicare Medicaid(1) Private Payer

Hospital Payment-to-Cost Ratios

A Snap-Shot of 2010-2011 Changes

Employer-Sponsored Health Insurance Spending Increases

More than FFS Medicare 2010-2011

4.6% 4.9%

6.9%

3.8%

1.0% 1.0%

-1.0%

6.3%

3.1% 3.4%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

All categories Inpatient hospital

Outpatient visits and services

Professional services

Prescription drugs

Pe

rce

nt

chan

ge, 2

01

0 t

o 2

01

1

Service category

Spending Per Covered Individual Enrolled in Employer-Sponsored health insurance and FFS Medicare (Percent change from 2010 to 2011)

Employer-sponsored health insurance

FFS Medicare

MedPac, “Report to Congress: Medicare Payment Policy,” March 2014.

Mainly Driven By Higher Private Price Increases

Employer-Sponsored Health Insurance Prices Increase More Than Medicare 2010-2011

5.5%

4.9%

2.6%

1.2%

0.7%

1.8%

2.3%

1.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Inpatient hospital Outpatient visits and services

Professional services Prescription drugs

Pe

rce

nt

chan

ge, 2

01

0 t

o 2

01

1

Service category

Price per service, Employer-sponsored health insurance versus FFS Medicare

(Percent change from 2010 to 2011)

Employer-sponsored insurance

FFS Medicare

MedPac, “Report to Congress: Medicare Payment Policy,” March 2014.

But Large Growth of Private Payments Could Be Nearing It’s

End

Employers Are Requiring Workers To Absorb More of The Increases In Premiums---AND Pay Higher Co-

Payments

Growth In Health Insurance Premiums and Workers Contribution Far Exceed Earnings and Inflation

1999-2013

Many Employers and Private Health Plans Developing

Techniques To Lower Spending Growth

Techniques Used By Private Insurance To Lower Spending Growth

• Require Insured To Buy High Deductible Health Plans

• Increase Use of “Limited” or “Tiered” Networks Based on “Value-Based Criteria

• Linking Payments To Lower Priced Providers---”Reference Pricing”

• Use Different Forms of Bundled or Global Payments

<1%

1%

1%

1%

2%

3%

3%

3%

5%

5%

4%

7%

8%

10%

27%

46%

73%

16%

17%

19%

20%

20%

21%

20%

21%

25%

24%

27%

24%

29%

28%

31%

21%

16%

56%

55%

58%

60%

58%

57%

60%

61%

55%

54%

52%

46%

42%

39%

28%

26%

11%

9%

10%

8%

10%

12%

13%

13%

15%

15%

17%

18%

23%

21%

24%

14%

7%

19%

17%

13%

8%

8%

5%

4%

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1996

1993

1988

Conventional HMO PPO POS HDHP/SO

NOTE: Information was not obtained for POS plans in 1988. A portion of the change in plan type enrollment for 2005 is likely attributable to incorporating more recent Census Bureau estimates of the number of state and local government workers and removing federal workers from the weights. See the Survey Design and Methods section from the 2005 Kaiser/HRET Survey of Employer-Sponsored Health Benefits for additional information.

SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012; KPMG Survey of Employer-Sponsored Health Benefits, 1993, 1996; The Health Insurance Association of America (HIAA), 1988.

Distribution of Health Plan Enrollment for Covered Workers, by Plan Type, 1988-2012

With Limited Payment Growth Healthcare Providers Will Be

Required To Develop More Cost Effective Delivery Systems

Next Panel Will Explain How!

45


Panel 2 Health Care Delivery: How to Best Increase Value & Quality? Harold D. Miller, Director, Center for Healthcare Quality &

Payment Reform Kate Goodrich, Director, Quality Measurement and Health

Assessment Group, CMS Kavita Patel, Managing Director for Clinical Transformation

and Delivery, Brookings Institution

WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE How Payment Reform Can

Enable Providers to Willingly Control Health Care Spending

(Without Harming Patients)

Harold D. Miller President and CEO

Center for Healthcare Quality and Payment Reform

www.CHQPR.org

47 © 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org

In A Different Country, A Historic Legislative Success

ACA Affordable Car Act

Goal: Every citizen should have affordable transportation

Method for Achieving the Goal: Give all citizens insurance to be used for purchasing cars


To Control Spending, Payers Used Fee Schedules for Car Parts

HCPCS Codes (Hierarchical

Car Parts Compensation

System) AMA

Automobile Manufacturing Association

CPT System (Car Parts Tokens)


The Result for Drivers?

Cars had many unnecessary parts

Cars were readmitted to the factory 20% of the time to correct malfunctions

Even though factories were accredited by the Joint Commission on Auto Creation

and auto workers were certified by by the National Committee on Quality Autos


Spending on Cars Grew Rapidly


What to Do?


What to Do? Cut Fees for Parts & Assembly

Cut Fees for Parts & Assembly

Use of More Parts

Mergers of Factories to Resist Fee Cuts

$

$ $


What to Do? Pay for Bundles Instead of Parts

Driving Related Groups (DRGs)


Cost Per Bundle Declined, But More Expensive Bundles Used

Consumers were given options they didn’t need

Small Engines Bigger Engines Really Big Engines


What to Do? Consumer-Directed Car Payment

Consumer Share of Car Price

$1,000 Copayment 10% Coinsurance

w/$2,000 OOP Max $5,000 Deductible


Both Citizens and Auto Workers Preferred More Expensive Cars


Price $17,000

Price $320,000

$1,000 Copayment $1,000 $1,000 10% Coinsurance

w/$2,000 OOP Max $2,000 $2,000

$5,000 Deductible $5,000 $5,000


High Cost-Sharing Led to Poor Preventive Maintenance

Consumer Share of Car Maintenance

Preventive Maintenance

Deferred Maintenance

Cost Sharing Co-payment Co-insurance High Deductible Full Cost No More Than

Out-of-Pocket Limit


What to Do? “Shared Savings” Programs

STEP 1 Continue Paying Factories & Workers Based on Parts

0-50% of Difference in Cost of Parts Compared to Other Cars If Minimum

Savings Threshold

and Quality Targets

Were Met

+

STEP 2 Compare Cost of Parts

and Award Shared Savings

# of Parts x

Cost of Parts

# of Parts x

Cost of Parts

<

RESULT • Some factories reduced parts but not enough to get shared savings

• Some factories spent more to meet quality targets than they received in shared savings

• Some factories left out parts where there were no quality measures

• Most factories and workers lost money and went back to business as usual

Was There a Better Way?


Solution: Pay for Transportation, Not (Just) Cars

Allow the flexibility to deliver services that best meet the individual’s needs

with accountability for controlling costs

$


Have People Pay the Last Dollar, Not the First Dollar for Cost-Share


Price $17,000

Price $320,000

$1,000 Copayment: $1,000 $1,000

10% Coinsurance w/$2,000 OOP Max:

$2,000 $2,000

$5,000 Deductible: $5,000 $5,000

Highest-Value: $1,000 $304,000


Design Cost Sharing to Encourage Preventive Maintenance

Consumer Share of Maintenance

Preventive Maintenance

Deferred Maintenance

Value-Based Cost Sharing No or Low Copay Co-insurance

High Deductible


Lessons on Controlling Spending from One ACA to Another

• Expect consumers to pay the extra cost of options they choose that cost more than needed

• Don’t require high cost sharing for the inexpensive items that can keep existing vehicles operational

• Expect patients to pay the extra cost of treatments they choose that cost more than needed

• Don’t require high cost sharing for the inexpensive services that can help people stay healthy

• Don’t pay for car parts, pay for what the consumer really needs: transportation to reach their destination

AFFORDABLE CAR ACT • Don’t pay for procedures,

pay for what the patient really needs: effective management of their health problems

AFFORDABLE CARE ACT


In Health Care, Our Goals and Payment Don’t Match

WHAT WE MOST WANT THEM TO DO

WHAT WE ACTUALLY PAY THEM FOR

DOCTORS

Keep us healthy

Performing surgeries, imaging, and procedures

(Doctors aren’t paid at all if their patients stay healthy)

HOSPITALS

Have well-equipped

emergency rooms, surgery suites, imaging centers, and

cardiac catheterization labs ready to go 24/7

in case we need them

Performing surgeries, imaging,

and procedures

(Hospitals aren’t paid at all to be ready for emergencies)

How Do You Pay Physicians and Hospitals

Without Encouraging Volume?


Example: Reducing Avoidable Procedures

TODAY $/Patient # Pts Total $

Physician Svcs Evaluations $100 300 $30,000 Procedures $600 200 $120,000 Subtotal $150,000

Hospital Pmt $7,000 200 $1,400,000

Total Pmt/Cost $1,550,000

Optional Procedure for a Condition

• Physician evaluates all patients

• Physician performs procedure on 2/3 of evaluated patients

• Up to 10% of procedures may be avoidable through patient choice or alternative treatment


Typical Health Plan Approach: Prior Auth/Utilization Controls

TODAY w/ UTILIZATION CTRL $/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs Evaluations $100 300 $30,000 $100 300 $30,000 Procedures $600 200 $120,000 $600 180 $108,000 Subtotal $150,000 $138,000

Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000

Total Pmt/Cost $1,550,000 $1,398,000 -10%


Under FFS, Payer Wins, Physicians and Hospitals Lose

TODAY w/ UTILIZATION CTRL $/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs Evaluations $100 300 $30,000 $100 300 $30,000 Procedures $600 200 $120,000 $600 180 $108,000 Subtotal $150,000 $138,000 -8%

Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,398,000 -10%


Is There a Better Way? TODAY TOMORROW

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs

Evaluations $100 300 $30,000 ? ? ? Procedures $600 200 $120,000 ? ? ? Subtotal $150,000 ?

? ? ? Hospital Pmt $7,000 200 $1,400,000 ? ? ?

Total Pmt/Cost $1,550,000 ? ? ?


Pay Physicians to Manage Patient Care, Not to Do Procedures

TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Physician Svcs Evaluations $100 300 $30,000 $150 300 $45,000 Procedures $600 200 $120,000 $600 180 $108,000 Subtotal $150,000 $153,000 +2%

Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,413,000 -9%

Better Payment for Condition Management • Physician paid adequately to engage in

shared decision making process with patients and given the decision support tools to ensure quality


Physicians Could Be Paid More While Still Reducing Total $



Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,413,000 -9%


Do Hospitals Have to Lose In Order for Physicians and Payers To Win?



Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,413,000 -9%

Physician Wins

Payer Wins Hospital Loses


Do Hospitals Have to Lose In Order for Physicians and Payers To Win?



Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%

Total Pmt/Cost $1,550,000 $1,413,000 -9%

What should matter to hospitals is their margin, not their revenue (volume)


Adequacy of Payment Depends On Fixed/Variable Costs & Margins



Hospital Pmt Fixed Costs $3,500 50% $700,000 Variable Costs $3,150 45% $630,000 Margin $350 5% $70,000 Subtotal $7,000 200 $1,400,000 180



Now, if the Number of Procedures is Reduced…



Hospital Pmt Fixed Costs $3,500 50% $700,000 Variable Costs $3,150 45% $630,000 Margin $350 5% $70,000 Subtotal $7,000 200 $1,400,000 180



…Fixed Costs Will Remain the Same (in the Short Run)…



Hospital Pmt Fixed Costs $3,500 50% $700,000 $700,000 -0% Variable Costs $3,150 45% $630,000 Margin $350 5% $70,000 Subtotal $7,000 200 $1,400,000 180



…Variable Costs Will Go Down in Proportion to Procedures…



Hospital Pmt Fixed Costs $3,500 50% $700,000 $700,000 -0% Variable Costs $3,150 45% $630,000 $567,000 -10% Margin $350 5% $70,000 Subtotal $7,000 200 $1,400,000 180



…And Even With a Higher Margin for the Hospital… TODAY TOMORROW


Evaluations $100 300 $30,000 $150 300 $45,000 Procedures $600 200 $120,000 $600 180 $108,000 Subtotal $150,000 $153,000 +2%

Hospital Pmt Fixed Costs $3,500 50% $700,000 $700,000 -0% Variable Costs $3,150 45% $630,000 $567,000 -10% Margin $350 5% $70,000 $71,400 +2% Subtotal $7,000 200 $1,400,000 180



…The Hospital Gets Less Revenue, But a Higher Margin…



Hospital Pmt Fixed Costs $3,500 50% $700,000 $700,000 -0% Variable Costs $3,150 45% $630,000 $567,000 -10% Margin $350 5% $70,000 $71,400 +2% Subtotal $7,000 200 $1,400,000 180 $1,338,400 -4%



…And The Payer Still Saves Money TODAY TOMORROW


Evaluations $100 300 $30,000 $150 300 $45,000 Procedures $600 200 $120,000 $600 180 $108,000 Subtotal $150,000 $153,000 +2%


Total Pmt/Cost $1,550,000 $1,491,400 -4%


I.e., Win-Win-Win for Physician, Hospital, and Payer




Total Pmt/Cost $1,550,000 $1,491,400 -4%

Physician Wins

Payer Wins Hospital Wins


What Payment Model Supports This Win-Win-Win Approach?




Total Pmt/Cost $1,550,000 $1,491,400 -4%


Pay Based on the Patient’s Condition, Not on the Procedure



Hospital Pmt Fixed Costs $3,500 50% $700,000 Variable Costs $3,150 45% $630,000 Margin $350 5% $70,000 Subtotal $7,000 200 $1,400,000

Total Pmt/Cost $5,167 300 $1,550,000


Plan to Offer Care of the Condition at a Lower Cost Per Patient



Hospital Pmt Fixed Costs $3,500 50% $700,000 Variable Costs $3,150 45% $630,000 Margin $350 5% $70,000 Subtotal $7,000 200 $1,400,000

Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%


Use the Payment as a Budget to Redesign Care… TODAY TOMORROW


Evaluations $100 300 $30,000 Procedures $600 200 $120,000 Subtotal $150,000 $153,000 +2%

Hospital Pmt Fixed Costs $3,500 50% $700,000 Variable Costs $3,150 45% $630,000 Margin $350 5% $70,000 Subtotal $7,000 200 $1,400,000 $1,338,400 -4%

Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%


…And Let the Providers Decide How They Should Be Paid


Physician Svcs Evaluations $100 300 $30,000 $150 300 $45,000 +50% Procedures $600 200 $120,000 $600 180 $108,000 -10% Subtotal $150,000 $153,000 +2%

Hospital Pmt Fixed Costs $3,500 50% $700,000 $700,000 -0% Variable Costs $3,150 45% $630,000 $567,000 -10% Margin $350 5% $70,000 $71,400 +2% Subtotal $7,000 200 $1,400,000 $1,338,400 -4%

Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%


Condition-Based Payment Gives Flexibility AND Accountability


Physician Svcs Evaluations $100 300 $30,000 $150 300 $45,000 +50% Procedures $600 200 $120,000 $600 180 $108,000 -10% Subtotal $150,000 $153,000 +2%

Hospital Pmt Fixed Costs $3,500 50% $700,000 $700,000 -0% Variable Costs $3,150 45% $630,000 $567,000 -10% Margin $350 5% $70,000 $71,400 +2% Subtotal $7,000 200 $1,400,000 $1,338,400 -4%

Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%


Better Payment Models Allow Win-Win-Win Approaches

BUILDING BLOCKS

HOW IT WORKS

HOW PHYSICIANS AND HOSPITALS

CAN BENEFIT

HOW PAYERS CAN BENEFIT

Bundled Payment

Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)

Higher payment for physicians if they

reduce costs paid by hospitals

Physician and hospital offer a lower total price to Medicare or health

plan than today

Warrantied Payment

Higher payment for quality care, no extra

payment for correcting preventable errors and

complications

Higher payment for physicians and

hospitals with low rates of infections and complications

Medicare or health plan no longer pays

more for high rates of infections or

complications

Condition-Based

Payment

Payment based on the patient’s condition, rather than on the procedure used

No loss of payment for physicians and

hospitals using fewer tests and procedures

Medicare or health plan no longer pays

more for unnecessary procedures


Opportunities for Reducing Spending Exist in Every Specialty

Psychiatry

OB/GYN

Orthopedic Surgery

Opportunities to Improve Care

and Reduce Cost

• Reduce infections and complications

• Use less expensive post-acute care following surgery

• Reduce ER visits and admissions for patients with depression and chronic disease

• Reduce use of elective C-sections

• Reduce early deliveries and use of NICU

Cardiology • Use less invasive

and expensive procedures when appropriate


Fee-for-Service Creates Barriers to Redesigning Care

Psychiatry

OB/GYN

Orthopedic Surgery


and Reduce Cost Barriers in

Current Payment System






• Similar/lower payment for vaginal deliveries

• No flexibility to increase inpatient services to reduce complications & post-acute care

• No payment for phone consults with PCPs

• No payment for RN care managers



• Payment is based on which procedure is used, not the outcome for the patient


There Are Win-Win-Win Solutions Through Better Payment Systems

Psychiatry

OB/GYN

Orthopedic Surgery




Solutions via Accountable

Payment Models






• Similar/lower payment for vaginal deliveries

• Condition-based payment for total cost of delivery in low-risk pregnancy

• Episode payment for hospital and post-acute care costs with warranty

• No flexibility to increase inpatient services to reduce complications & post-acute care

• Joint condition- based payment to PCP and psychiatrist

• No payment for phone consults with PCPs

• No payment for RN care managers



• Condition-based payment covering CABG, PCI, or medication management

• Payment is based on which procedure is used, not the outcome for the patient


Examples from Other Specialties

Oncology

Radiology

Gastroenterology




Solutions via Accountable

Payment Models

• Reduce unnecessary colonoscopies and colon cancer

• Reduce ER/admits for inflammatory bowel d.

• Reduce ER visits and admissions for dehydration

• Reduce anti-emetic drug costs

• Reduce use of high-cost imaging

• Improve diagnostic speed & accuracy

• Low payment for reading images & penalty for 2x

• Inability to change inapprop. orders

• Global payment for imaging costs

• Partnership in condition-based payments

• Population-based payment for colon cancer screening

• Condition-based pmt for IBD

• No flexibility to focus extra resources on highest-risk patients

• No flexibility to spend more on care mgt

• Condition-based payment including non-oncolytic Rx and ED/hospital utilization

• No flexibility to spend more on preventive care

• Payment based on office visits, not outcomes

Neurology • Avoid unnecessary

hospitalizations for epilepsy patients

• Reduce strokes and heart attacks after TIA

• Condition-based payment for epilepsy

• Episode or condition- based payment for TIA

• No flexibility to spend more on preventive care

• No payment to coordinate w/ cardio


Most “Payment Reforms” Today Don’t Change Fee for Service

• Medical Home Programs – Quality pay for performance (P4P) on top of FFS – Small monthly payments on top of FFS – Shared savings payments on top of FFS

• Accountable Care Organizations (ACOs) – Shared savings on top of FFS

• Hospital Procedure-Based Episodes – Hips and knees – Other conditions, all requiring hospitalization

• No Condition-Based Payments


If We Want to Reduce Healthcare Spending Without Rationing

• Implement true payment reforms, not more P4P & shared savings programs

• Create payment reforms in every specialty that allow physicians to redesign care at lower costs without harming patients while enabling physician practices and hospitals to remain financially viable

• Don’t try to “test” models in artificial demonstrations; let willing providers implement them and then evolve them over time, as has been done with every existing payment system

• Create benefit designs for patients that encourage them to maintain/improve their health and to make value-based choices about providers and services


Learn More About Win-Win-Win Payment and Delivery Reform

Center for Healthcare Quality and Payment Reform www.PaymentReform.org

http://www.paymentreform.org/

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

CMS and Health System Transformation Kate Goodrich, MD MHS Director, Quality Measurement and Health Assessment Group, CMS Symposium on Sustainable U.S. Health Spending: The Quest for Value July 15, 2014

98

Framework for Progression of Payment to Clinicians and Organizations in Payment Reform Category 1: Fee for Service – No Link to Quality

Category 2: Fee for Service – Link to Quality

Category 3: Alternative Payment Models on Fee-for Service Architecture

Category 4: Population-Based Payment

Description Payments are based on volume of services and not linked to quality or efficiency

At least a portion of payments vary based on the quality or efficiency of health care delivery

• Some payment is linked to the effective management of a population or an episode of care

• Payments still triggered by delivery of services, but, opportunities for shared savings or 2-sided risk

• Payment is not directly triggered by service delivery so volume is not linked to payment

• Clinicians and organizations are paid and responsible for the care of a beneficiary for a long period (eg, >1 yr)

Examples

Medicare • Limited in Medicare fee-for-service

• Majority of Medicare payments now are linked to quality

• Hospital value-based purchasing

• Physician Value-Based Modifier

• Readmissions/Hospital Acquired Condition Reduction Program

• Accountable Care Organizations

• Medical Homes • Bundled Payments

• Eligible Pioneer accountable care organizations in years 3 – 5

• Some Medicare Advantage plan payments to clinicians and organizations

• Some Medicare-Medicaid (duals) plan payments to clinicians and organizations

Medicaid Varies by state • Primary Care Case Management

• Some managed care models

• Integrated care models under fee for service

• Managed fee-for-service models for Medicare-Medicaid beneficiaries

• Medicaid Health Homes • Medicaid shared savings

models • Medicaid waivers for

delivery reform incentive payments

• Episodic-based payments

• Some Medicaid managed care plan payments to clinicians and organizations

• Some Medicare-Medicaid (duals) plan payments to clinicians and organizations

Rajkumar R, Conway PH, Tavenner M. The CMS—Engaging Multiple Payers in Risk-Sharing Models. JAMA.

Doi:10.1001/jama.2014.3703

Value-Based Purchasing

• Hospital:

• Value-based purchasing, readmissions, healthcare acquired conditions

• Aligns with: EHR Incentive Program and Inpatient Quality Reporting

• Physician/clinician

• Physician value-based modifier, MSSP

• Aligns with: Physician Quality Reporting System, EHR incentive program

• End stage renal disease bundle and quality incentive program

• Coming Attraction: Skilled Nursing Facility (SNF) VBP

100

Recent Proposed or Finalized Changes to Measurement Policies • HVBP:

– Addition of Efficiency Domain – Proposed increase number of outcome measures, reduce number and

weight of process measures

• PVM and PQRS (all proposed): – Remove low bar measures, add more PRO-PMs, outcomes, patient safety,

appropriate use, require more outcome measures in QCDRs – Require reporting of 2 “cross-cutting” measures (population health-

focused) – Require CG-CAHPS for large group practices – Proposed 4% at risk for VM – Increase number of measures on Physician Compare over 2 years

• ESRD QIP: – Transition to more outcome, safety, patient experience measures

101

What’s next to achieve the longer term vision for VBP?

• We’ve successfully aligned measures across like programs • Still need to align data sources, data collection vehicles,

measurement standards (eCQMs), measurement time periods

• More frequent and meaningful provider feedback (registry and EHRs more nimble)

• Alignment of policy principles across programs – e.g. Reward for improvement, measure weighting, amount of

payment at risk, etc.

• Accountability for health of a population • Helping front line providers with improvement work

– CMMI models – QIOs/11th SOW

102

© 2013, The Brookings Institution

Health Care Delivery: How to Best Increase Value and Quality

Kavita Patel, MD, MS

Fellow and Managing Director Engelberg Center for Health Care Reform

The Brookings Institution

July 15, 2014


Prevalence of Alternative Payment Models in the Commercial Sector

104 Source: Prevalence of Payment Reform Models, 2013 National Compendium on Payment Reform, Catalyst for Payment Reform


Pathway to Payment Reform

Source: The Brookings Institution, 2014


PCMH and ACO Models Explained

106


Emerging Opportunities in Specialty Care

Specialty Area Model Opportunities

Oncology

• Payment for clinical pathways adherence • Patient-centered oncology medical home • Bundled payments • Oncology-specific ACO

Cardiology

• Payment for chronic disease care management • Bundled payments for cardiac surgery

procedures • Cardiology-specific ACO • Patient-centered cardiology medical home

Gastroenterology • Bundled payment for CRC screening • Patient-centered medical home for IBD

sustainable u.s. health spending: the quest for value...

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