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Accountable Care Through Physician Leadership

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CooperKatz & Company
CooperKatz & Company

In this presentation, Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, discusses how to lower healthcare costs and deliver higher quality of care without threatening to cut physician payments. The key is a physician-led healthcare future.

Health & Medicine
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CREATING WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE THROUGH PHYSICIAN LEADERSHIP Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform www.CHQPR.org
2© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz
3© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #1: In which U.S. industries are the key employees told that at the end of the year, they can expect to receive a 25% pay cut regardless of how well they’ve performed?
4© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #1: In which U.S. industries are the key employees told that at the end of the year, they can expect to receive a 25% pay cut regardless of how well they’ve performed? ANSWER: Health Care
5© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Medicare SGR Is a Big Problem, But So Is Lack of Annual Updates Physician Practice Costs Physician Payment Increases If SGR Cut Is Made 23% Effective Reduction
6© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #2: In which U.S. industries are businesses only able to sell their products and services through an intermediary who demands large discounts and increases prices by 18-25%?
7© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #2: In which U.S. industries are businesses only able to sell their products and services through an intermediary who demands large discounts and increases prices by 18-25%? ANSWER: Health Care
8© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
9© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #3: In which U.S. industries can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well?
10© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #3: In which U.S. industries can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well? ANSWER: Health Care
11© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The SGR Also Pits Physicians Against Each Other PCP Fees Specialty Fees PCP Fees Specialty Fees Physician Payments Capped by the Sustainable Growth Rate
12© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #4: In which U.S. industries does government policy favor large businesses over small businesses?
13© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #4: In which U.S. industries does government policy favor large businesses over small businesses? ANSWER: Health Care
14© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Unlike Physicians, Hospitals Have Received Pay Increases Physicians Hospitals Inflation
15© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #5: Who is to blame for the way physicians are paid and micromanaged?
16© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #5: Who is to blame for the way physicians are paid and micromanaged? ANSWER: Physicians
17© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Blame Rests With Physicians • Physicians haven’t defined solutions to control healthcare costs without rationing • Physicians are seen as the drivers of higher costs • Physicians haven’t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices • Physicians aren’t organized to manage and deliver high-value population health care to purchasers and patients
18© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Three Paths to the Future: Which Door Will Physicians Choose? TODAY FUTURE #1 FUTURE #2 FUTURE #3
19© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Purchasers & Patients Want: High-Quality Care at Lower Cost High Costs and Weak Quality High Quality Care at Lower Cost Savings TODAY TOMORROW
20© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Purchasers & Patients Want: High-Quality Care at Lower Cost High Costs and Weak Quality High Quality Care at Lower Cost Savings TODAY TOMORROW Where Will The Savings Come From?
21© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Purchasers & Patients Want: High-Quality Care at Lower Cost High Costs and Weak Quality High Quality Care at Lower Cost Savings TODAY TOMORROW Where Will The Savings Come From? It Depends on Who’s the Last in Line In Getting Paid
22© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Door #1: Continuation of the Status Quo High Costs and Weak Quality High Quality Care at Lower Cost Traditional Insurance Company/ TPA Savings TODAY TOMORROW
23© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Who’s First in Line? Health Plans High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Traditional Insurance Company/ TPA Savings TODAY TOMORROW
24© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Who’s Last in Line? Physicians High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Savings TODAY TOMORROW
25© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Where Will Savings Come From? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Savings TODAY TOMORROW
26© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Will Health Plans Voluntarily Reduce Their Fees/Profits? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Savings
27© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Will Health Plans Voluntarily Reduce Their Fees/Profits? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Savings Not Likely
28© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Can Health Plans Cut Payments to the Big Hospital in Town? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Savings
29© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Can Health Plans Cut Payments to the Big Hospital in Town? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Savings Not Likely
30© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Or Will Payers Continue Cutting (or Not Increasing) Doctor Pay? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Savings
31© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Not Just Lower Fees, But Interference in Physician Decisions High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Admin Cost & Profit Hospital Payments Physician Payments Savings • Lower Fees (“Discounts”) • Prior Authorization • Step Therapy • Utilization Review • Disease Mgt Vendors
32© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Will Employment by Hospitals Protect Physicians? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Health System Payments Physician Salaries Traditional Insurance Company/ TPA SavingsHealth Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA
33© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org When Health Systems Get Less, Where Will They Make the Cuts? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Health System Payments Physician Salaries Traditional Insurance Company/ TPA Savings Health Plan Admin Cost & Profit Health System Payments Physician Salaries Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA
34© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health Systems Want to Ensure They Don’t Get Cut by Payers… High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Health System Payments Physician Salaries Traditional Insurance Company/ TPA Savings Health Plan Admin Cost & Profit Health System Payments Physician Salaries Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA
35© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company Door #2: Hospital-Owned Health Plans High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof.
36© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company If Hospitals Are Now First In Line, Where Will Savings Come From? High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof.
37© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company Maybe Health Plan Expenses Can Be Reduced… High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof. Hospital Payments Physician Payments Health Plan Adm/Profit
38© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company …But Hospital Will Still Need the Health Plan to Watch the Docs High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof. Hospital Payments Physician Payments Health Plan Adm/Profit
39© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company So Physicians Will Likely Still Be Subject to Cuts and Interference High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof. Hospital Payments Physician Payments Health Plan Adm/Profit Hospital Payments Physician Payments Health Plan Admin/Prof.
40© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What’s Behind Door #3? High Costs and Weak Quality High Quality Care at Lower Cost Savings
41© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting Physician Leadership to Control Both Cost & Quality High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Savings
42© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting Physicians Can Watch Themselves, They Don’t Need Health Plans… High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Health Plan Adm/Profit Savings
43© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting Better Care of Patients Will Reduce Avoidable Hospitalizations… High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Health Plan Adm/Profit Savings Hospital Payments Physician Payments Health Plan Adm/Profit Savings
44© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting …Allowing Better Pay for Doctors AND More Savings for Purchasers High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Health Plan Adm/Profit Savings Hospital Payments Physician Payments Health Plan Adm/Profit Savings Hospital Payments Physician Payments Health Plan Adm/Profit Savings
45© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting Door #3 = A Physician-Led Healthcare Future High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Savings Hospital Payments Physician Payments Health Plan Adm/Profit • Significant savings for purchasers and patients • Better pay for physicians • Less spending on health plan overhead • Less interference in physician-patient relationship • Less spending on avoidable expensive, risky procedures • Better health and quality of life for patients
46© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org High Quality Health Plans Run By Physician Groups
47© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org If Physicians Choose Door #3, What Must They Do to Succeed? TODAY PHYSICIAN-LED HEALTHCARE
48© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Physician’s Real Business is More Than Their Salary… Physician Salary
49© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And More Than Their Total Practice Costs.. Physician Salary Practice Expenses
50© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …It’s the Tests They Order, Even If Someone Else Does Them Physician Salary Practice Expenses Tests and Imaging
51© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …It’s the Procedures They Do, And Where They Do Them Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures Tests and Imaging
52© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And the Unplanned Admissions of Their Patients… Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Tests and Imaging
53© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …The Post-Acute Care Costs After Hospital Stays… Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Tests and Imaging
54© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …The Unplanned Readmissions and Repeat Procedures… Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Tests and Imaging Readmissions
55© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And the Number and Types of Medications They Prescribe Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
56© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Most of the Money in Healthcare Doesn’t Go to Physicians Physicians: 16%
57© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org .. But Most Money Goes to Things That Physicians Can Influence Things Physicians Prescribe, Control, or Influence 84% Physicians: 16%
58© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Medicare Payment Silos Pit Physicians Against Each Other PCP Fees Specialty Fees PCP Fees Specialty Fees Physician Fees (Part B)
59© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physicians Should Benefit From Lowering Other Healthcare Costs PCP Fees Specialty Fees PCP Fees Drug Costs Hospital & Post-Acute Care Costs Specialty FeesPhysician Fees (Part B) Total Healthcare Costs (Parts A, B, and D) Drug Costs (Part D) Hospital & Post-Acute Care Costs (Part A)
How Do You Repeal the SGR and Give Physicians Reasonable Payment Increases?
61© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 10 Year Federal Budget Projections for Medicare Physician Fees Only Represent 12% of Projected Medicare Spending
62© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org SGR Repeal & MEI Update Increases Total Spending by 2.6% SGR Repeal & MEI Update: $160 Billion
63© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 3% Savings in Non-Physician Spending Would Pay for Repeal $160 Billion= 3% of Non-Physician Spending
64© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org But Nobody in DC Believes That Physicians Can/Will Do It CBO expects that physicians would generally choose to participate in the payment options that offer the largest payments for the services they provide… CBO expects that most of the alternative payment models that would be adopted under this legislation would increase Medicare spending. CBO’s review of numerous Medicare demonstration projects found that very few succeeded in reducing Medicare spending. CBO expects that the greater influence of providers within the design process specified in H.R. 2810 would lead to smaller savings than would arise from the development and adoption of new approaches through the [current] CMMI process. Congressional Budget Office Cost Estimate for H.R. 2810 (September 13, 2013)
65© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
66© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
67© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
68© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Fewer unnecessary procedures •Reducing the cost of procedures •More procedures in outpatient settings •Fewer ER visits for chronic disease •Fewer admissions for chronic disease •Z•Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
69© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Less use of expensive inpatient rehab •More in-home services •Fewer unnecessary procedures •Reducing the cost of procedures •More procedures in outpatient settings •Fewer ER visits for chronic disease •Fewer admissions for chronic disease •Z•Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
70© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Better post-discharge care management •Fewer complications from procedures •Less use of expensive inpatient rehab •More in-home services •Fewer unnecessary procedures •Reducing the cost of procedures •More procedures in outpatient settings •Fewer ER visits for chronic disease •Fewer admissions for chronic disease •Z•Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
71© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Use of lower-cost medications •Avoiding unnecessary medications •Better post-discharge care management •Fewer complications from procedures •Less use of expensive inpatient rehab •More in-home services •Fewer unnecessary procedures •Reducing the cost of procedures •More procedures in outpatient settings •Fewer ER visits for chronic disease •Fewer admissions for chronic disease •Z•Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
72© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org How Big Are the Opportunities?
73© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 5-17% of Hospital Admissions Are Potentially Preventable Source: AHRQ HCUP
74© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Millions of Preventable Events Harm Patients and Increase Costs Medical Error # Errors (2008) Cost Per Error Total U.S. Cost Pressure Ulcers 374,964 $10,288 $3,857,629,632 Postoperative Infection 252,695 $14,548 $3,676,000,000 Complications of Implanted Device 60,380 $18,771 $1,133,392,980 Infection Following Injection 8,855 $78,083 $691,424,965 Pneumothorax 25,559 $24,132 $616,789,788 Central Venous Catheter Infection 7,062 $83,365 $588,723,630 Others 773,808 $11,640 $9,007,039,005 TOTAL 1,503,323 $13,019 $19,571,000,000 Source: The Economic Measurement of Medical Errors, Milliman and the Society of Actuaries, 2010 3 Adverse Events Every Minute
75© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Many Ways to Reduce Tests & Procedures w/o Harming Patients
76© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fee-for-Service Payment is a Barrier to Success Lack of Flexibility in FFS • No payment for phone calls or emails with patients • No payment to coordinate care among providers • No payment for non- physician support services to help patients with self-management • No flexibility to shift resources across silos (hospital <-> physician, post-acute <->hospital, SNF <-> home health, etc.)
77© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fee-for-Service Payment is a Barrier to Success Lack of Flexibility in FFS • No payment for phone calls or emails with patients • No payment to coordinate care among providers • No payment for non- physician support services to help patients with self-management • No flexibility to shift resources across silos (hospital <-> physician, post-acute <->hospital, SNF <-> home health, etc.) Penalty for Quality/Efficiency • Lower revenues if patients don’t make frequent office visits • Lower revenues for performing fewer tests and procedures • Lower revenues if infections and complications are prevented instead of treated • No revenue at all if patients stay healthy
78© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Most “Payment Reforms” Don’t Fix The Problems with FFS FFS •No payment for services that will benefit patients •Lower revenues from reducing avoidable costs FFS Shared Savings Shared Savings FFS P4P FFS PMPM
79© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fortunately, There Are Good Alternatives to Fee for Service BUILDING BLOCKS HOW IT WORKS Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
80© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fortunately, There Are Good Alternatives to Fee for Service BUILDING BLOCKS HOW IT WORKS Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician) Warrantied Payment Higher payment for quality care, no extra payment for correcting preventable errors and complications
81© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fortunately, There Are Good Alternatives to Fee for Service BUILDING BLOCKS HOW IT WORKS Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician) Warrantied Payment Higher payment for quality care, no extra payment for correcting preventable errors and complications Condition- Based Payment Payment based on the patient’s condition, rather than on the procedure used
82© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Accountable 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
83© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Example: Reducing Avoidable Procedures TODAY $/Patient # Pts Total $ Physician Svcs Evaluations $150 300 $45,000 Procedures $850 200 $170,000 Subtotal $215,000 Hospital Pmt $11,000 200 $2,200,000 Total Pmt/Cost $2,415,000 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
84© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Most of the Money Today Is NOT Going to the Physician TODAY $/Patient # Pts Total $ Physician Svcs Evaluations $150 300 $45,000 Procedures $850 200 $170,000 Subtotal $215,000 Hospital Pmt $11,000 200 $2,200,000 Total Pmt/Cost $2,415,000 Physician Payment is 9% of Total Spending
85© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Typical Health Plan Approach: Prior Auth/Utilization Controls TODAY w/ UTILIZATION CTRL $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $150 300 $45,000 Procedures $850 200 $170,000 $850 180 $153,000 Subtotal $215,000 $198,000 Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 Total Pmt/Cost $2,415,000 $2,178,000 -10%
86© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Under FFS, Payer Wins, Physicians and Hospitals Lose TODAY w/ UTILIZATION CTRL $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $150 300 $45,000 Procedures $850 200 $170,000 $850 180 $153,000 Subtotal $215,000 $198,000 -8% Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10% Total Pmt/Cost $2,415,000 $2,178,000 -10%
87© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Is There a Better Way? TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 ? ? ? Procedures $850 200 $170,000 ? ? ? Subtotal $215,000 ? ? ? ? Hospital Pmt $11,000 200 $2,200,000 ? ? ? Total Pmt/Cost $2,415,000 ? ? ?
88© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Better Way: Pay Physicians Differently TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 Total Pmt/Cost $2,415,000 $2,202,000 Better Payment for Condition Management • Physician paid adequately to engage in shared decision making process with patients • Physician paid adequately for procedures without needing to increase volume of procedures
89© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physicians Could Be Paid More While Still Reducing Total $ TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10% Total Pmt/Cost $2,415,000 $2,202,000 -9%
90© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Do Hospitals Have to Lose In Order for Physicians To Win? TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10% Total Pmt/Cost $2,415,000 $2,202,000 -9% Physician Wins Payer Wins Hospital Loses
91© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Should Matter to Hospitals is Margin, Not Revenues (Volume)
92© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Hospital Costs Are Not Proportional to Utilization $800 $820 $840 $860 $880 $900 $920 $940 $960 $980 $1,000 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 #Patients Cost & Revenue Changes With Fewer Patients . Costs 20% reduction in volume 7% reduction in cost
93© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Reductions in Utilization Reduce Revenues More Than Costs $800 $820 $840 $860 $880 $900 $920 $940 $960 $980 $1,000 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 #Patients Cost & Revenue Changes With Fewer Patients Revenues Costs 20% reduction in volume 7% reduction in cost 20% reduction in revenue
94© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Causing Negative Margins for Hospitals $800 $820 $840 $860 $880 $900 $920 $940 $960 $980 $1,000 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 #Patients Cost & Revenue Changes With Fewer Patients Revenues Costs Payers Will Be Underpaying For Care If Adverse Events, Readmissions, Etc. Are Reduced
95© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org But Spending Can Be Reduced Without Bankrupting Hospitals $800 $820 $840 $860 $880 $900 $920 $940 $960 $980 $1,000 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 #Patients Cost & Revenue Changes With Fewer Patients Revenues Costs Payers Can Still Save $ Without Causing Negative Margins for Hospital
96© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Adequacy of Payment Depends On Fixed/Variable Costs & Margins TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 Variable Costs $3,300 30% $660,000 Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 Total Pmt/Cost $2,415,000
97© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Now, if the Number of Procedures is Reduced… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 Variable Costs $3,300 30% $660,000 Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $2,415,000
98© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …Fixed Costs Will Remain the Same (in the Short Run)… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $2,415,000
99© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …Variable Costs Will Go Down in Proportion to Procedures… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $3,300 $594,000 -10% Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $2,415,000
100© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And Even With a Higher Margin for the Hospital… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $2,415,000
101© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …The Hospital Gets Less Total Revenue (But More Per Case)… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000
102© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And The Payer Still Saves Money TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000 $2,359,000 -2%
103© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org I.e., Win-Win-Win for Physician, Hospital, and Payer TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000 $2,359,000 -2% Physician Wins Payer Wins Hospital Wins
104© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Payment Model Supports This Win-Win-Win Approach? TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000 $2,359,000 -2%
105© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org It’s Impractical to Renegotiate Fees for Individual Services TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000 $2,359,000 -2%
106© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Pay Based on the Patient’s Condition, Not on the Procedure TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $2,359,000 -2%
107© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Plan to Offer Care of the Condition at a Lower Cost Per Patient TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
108© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Use the Payment as a Budget to Redesign Care… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
109© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And Let the Providers Decide How They Should Be Paid TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
110© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Would “Shared Savings” Achieve the Same Thing?
111© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Same Example As Before… Year 0 Physician Svcs Evaluations $45,000 Procedures $170,000 Subtotal $215,000 Hospital Pmt Procedures $2,200,000 Subtotal $2,200,000 Total Pmt/Cost $2,415,000 Savings # Patients $/Patient 300 $150 200 $850 200 $11,000 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
112© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Year 1: Physicians & Hospitals Both Lose With Fewer Procedures) Year 0 Year 1 Chg Physician Svcs Evaluations $45,000 $45,000 Procedures $170,000 $153,000 $0 Subtotal $215,000 $198,000 -8% Hospital Pmt Procedures $2,200,000 $1,980,000 Subtotal $2,200,000 $1,980,000 -10% Total Pmt/Cost $2,415,000 $2,178,000 -10% Savings $237,000 Reduce Procs by 10% Year 1: Lower Revenue for Docs & Hospital
113© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Year 2: Losses Are Lower If Shared Savings Are Paid…(No) Year 0 Year 1 Chg Year 2 Chg Physician Svcs Evaluations $45,000 $45,000 $45,000 Procedures $170,000 $153,000 $153,000 Shared Savings $0 $17,000 Subtotal $215,000 $198,000 -8% $215,000 -0% Hospital Pmt Procedures $2,200,000 $1,980,000 $1,980,000 Shared Savings $0 $101,500 Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -6% Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% Savings $237,000 $118,500 Reduce Procs by 10% Year 1: Lower Revenue for Docs & Hospital Year 2: Shared Savings Offsets Some Losses
114© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …But Physicians and Hospitals Still Have Net 2-Year Losses Year 0 Year 1 Chg Year 2 Chg Cumulative Physician Svcs Evaluations $45,000 $45,000 $45,000 Procedures $170,000 $153,000 $153,000 Shared Savings $0 $17,000 Subtotal $215,000 $198,000 -8% $215,000 -0% -$17,000 -4% Hospital Pmt Procedures $2,200,000 $1,980,000 $1,980,000 Shared Savings $0 $101,500 Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -5% -$338,500 -8% Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% $355,500 Savings $237,000 $118,500 -7%
115© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 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
116© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 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
117© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org “Shared Savings” Forces Hospitals To Consider Hiring Physicians • Hospitals are not directly eligible for shared savings; all savings are attributed to primary care physicians • Even if the hospital reduces readmissions, infections, complications, etc., it may receive no reward for doing so • Reducing hospitalizations, ER visits, etc. will reduce the hospital’s revenues, but the hospital may receive no share of the savings to help it cover its stranded fixed costs • Consequently, hospitals may feel compelled to own physician practices, either to capture a portion of the shared savings revenue, or to prevent there from being any savings!
118© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org It Hasn’t Been Working Too Well in Medicare So Far • Of the 109 Track 1 (Upside Only) ACOs that started in 2012: – 57 (52%) Track 1 ACOs did not achieve savings in 2013 – 25 (23%) Track 1 ACOs achieved savings, but not enough to receive shared savings payments – 27 (25%) Track 1 ACOs received shared savings payments • Of the 5 Track 2 (Downside Risk) ACOs that started in 2012: – 2 (33%) Track 2 ACOs received shared savings payments – 3 (67%) Track 2 ACOs had to repay a share of losses to CMS
119© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Condition-Based Payment Puts the Physicians in Control TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
120© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org If The Physician Can Reduce the Hospital’s Costs Per Procedure…. TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 Procedures $850 200 $170,000 Subtotal $215,000 Hospital Pmt Fixed Costs $7,150 65% $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 -45% Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
121© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Both the Hospital & Physician Can “Win” Even More Inside the Budget TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 Procedures $850 200 $170,000 Subtotal $215,000 Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 Margin $550 5% $110,000 $139,000 +26% Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
122© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Both the Hospital & Physician Can “Win” Even More Inside the Budget TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $300 300 $90,000 Procedures $850 200 $170,000 $1700 180 $340,000 Subtotal $215,000 $430,000 100% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 Margin $550 5% $110,000 $139,000 +26% Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
123© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Or Reduce The Price to Reduce Healthcare Spending TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $189 300 $56,700 Procedures $850 200 $170,000 $1,190 180 $214,200 Subtotal $215,000 $270,900 +26% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 Margin $550 5% $110,000 $139,000 +26% Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13% Total Pmt/Cost $8,050 300 $2,415,000 $7,455 300 $2,199,900 -9%
124© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org $2,200 Variation in Average Cost of Drug-Eluting Stents in CA Hospitals Source: Coronary Angioplasty with Drug Eluting Stents: Device Costs, Hospital Costs, and Insurance Payments, Emma L. Dolan and James C. Robinson Berkeley Center for Health Technology, September 2010
125© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org $8,000 Variation in Avg Costs of Joint Implants Across CA Hospitals Source: Implantable Medical Devices for Hip Replacement Surgery: Economic Implications for California Hospitals, Emma L. Dolan and James C. Robinson , Berkeley Center for Health Technology, May 2010
126© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org $16,000 Variation in Avg Costs of Defibrillators Across CA Hospitals Source: Pacemaker and Implantable Cardioverter-Defibrillator Implant Procedures in California Hospitals, James C. Robinson and Emma L. Dolan, Berkeley Center for Health Technology, 2010
127© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Not Just Devices: Other Savings Opportunities From Bundling • Better scheduling of scarce resources (e.g., surgery suites) to reduce both underutilization & overtime • Coordination among multiple physicians and departments to avoid duplication and conflicts in scheduling • Standardization of equipment and supplies to facilitate bulk purchasing • Less wastage of expensive supplies • Reduced length of stay • Etc.
128© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Condition-Based Payment Puts the Physicians in Control TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $189 300 $56,700 Procedures $850 200 $170,000 $1,190 180 $214,200 Subtotal $215,000 $270,900 +26% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 Margin $550 5% $110,000 $139,000 +26% Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13% Total Pmt/Cost $8,050 300 $2,415,000 $7,455 300 $2,199,900 -9%
129© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Steps to Successful Payment Reform 1. Defining the Change in Care Delivery – How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients?
130© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Best Way to Find Savings Opportunities? Ask Physicians “I have zero control over utilization or studies ordered. I don’t get paid for calling a referring doctor and telling him/her the imaging test is worthless.” Radiologist in Maine “I do many unnecessary colonoscopies on young men. Give every PCP an anuscope to allow diagnosis of bleeding hemorrhoids in the office.” Gastroenterologist in Maine “I strongly suspect overutilization of abdominal CT scans in the ER and in the hospital; CT scans lead to further CT scans to follow up lung and adrenal nodules. The hospital focuses on length of stay, but never looks at appropriateness of radiologic studies.” Internist at AMA HOD Meeting “Patients often need to be in extended care to receive antibiotics because Medicare doesn’t pay for home IV therapy. Patient stays in the hospital for 3 days to justify a nursing home/rehab stay.” Orthopedist at AMA HOD Meeting
131© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Steps to Successful Payment Reform 1. Defining the Change in Care Delivery – How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2. Analyzing Expected Costs and Savings – What will there be less of, and how much does that save? – What will there be more of, and how much does that cost? – Will the savings offset the costs on average? – How much variation in costs and savings is likely?
132© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Critical Element is Shared, Trusted Data • Physician/Hospital need to know the current utilization and costs for their patients to know whether the new payment model will cover the costs of delivering effective care to the patients • Purchaser/Payer needs to know the current utilization and costs to know whether the new payment model is a better deal than they have today • Both sets of data have to match in order for providers and payers to agree on the new approach!
133© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Steps to Successful Payment Reform 1. Defining the Change in Care Delivery – How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2. Analyzing Expected Costs and Savings – What will there be less of, and how much does that save? – What will there be more of, and how much does that cost? – Will the savings offset the costs on average? – How much variation in costs and savings is likely? 3. Designing a Payment Model That Supports Change – Flexibility to change the way care is delivered – Accountability for costs and quality/outcomes related to care – Adequate payment to cover lowest-achievable costs – Protection for the provider from insurance risk
134© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Opportunities and Solutions Vary By Specialty Psychiatry OB/GYN Orthopedic Surgery Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System Solutions via Accountable Payment Models • 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 • 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 Cardiology • Use less invasive and expensive procedures when appropriate • Condition-based payment covering CABG, PCI, or medication management • Payment is based on which procedure is used, not the outcome for the patient
135© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Examples from Other Specialties Oncology Radiology Gastroenterology Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System 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
136© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Steps to Successful Payment Reform 1. Defining the Change in Care Delivery – How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2. Analyzing Expected Costs and Savings – What will there be less of, and how much does that save? – What will there be more of, and how much does that cost? – Will the savings offset the costs on average? – How much variation in costs and savings is likely? 3. Designing a Payment Model That Supports Change – Flexibility to change the way care is delivered – Accountability for costs and quality/outcomes related to care – Adequate payment to cover lowest-achievable costs – Protection for the provider from insurance risk 4. Compensating Physicians Appropriately – Changing payment to the provider organization (physician practice/group/IPA/health system) does not automatically change compensation to physicians
137© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org How Does This All Fit Into ACOs? Heart Disease Diabetes Back Pain PATIENTS Pregnancy
138© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Each Patient Should Choose & Use a Primary Care Practice… Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice
139© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN …Which Takes Accountability for What PCPs Can Control/Influence Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice Accountable Medical Home Accountability for: • Avoidable ER Visits •Avoidable Hospitalizations •Unnecessary Tests •Unnecessary Referrals
140© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN …With a Medical Neighborhood to Consult With on Complex Cases Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice Accountable Medical Home Endocrinology, Neurology, Psychiatry Accountable Medical Neighborhood Accountability for: •Unnecessary Tests •Unnecessary Referrals •Co-Managed Outcomes
141© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN ..And Specialists Accountable for the Conditions They Manage Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice Neurosurg. Group OB/GYN Group Cardiology Group Heart Episode/ Condition Pmt Back Episode/ Condition Pmt Pregnancy Management Pmt Accountable Medical Home Endocrinology, Neurology, Psychiatry Accountable Medical Neighborhood Accountability for: •Unnecessary Tests •Unnecessary Procedures •Infections, Complications
142© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN That’s Building the ACO from the Bottom Up Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice Neurosurg. Group OB/GYN Group Cardiology Group Heart Episode/ Condition Pmt Back Episode/ Condition Pmt Pregnancy Management Pmt Accountable Medical Home Endocrinology, Neurology, Psychiatry Accountable Medical Neighborhood ACO Accountable Payment Models
143© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN Shared Savings Payment Primary Care ACO Orthopedics OB/GYNCardiology Most ACOs Today Aren’t Truly Reinventing Care or Payment Fee-for-Service Payment Expensive IT Systems Psych., Neuro Nurse Care Managers Heart Disease Diabetes Back Pain PATIENTS Pregnancy Shared Savings Bonus
144© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN A True ACO Can Take a Global Payment And Make It Work Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice ACO Neurosurg. Group OB/GYN Group Cardiology Group Heart Episode/ Condition Pmt Back Episode/ Condition Pmt Pregnancy Management Pmt Accountable Medical Home Endocrinology, Neurology, Psychiatry Risk-Adjusted Global Payment Accountable Medical Neighborhood
145© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 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 No Additional Revenue for Taking Sicker Patients CAPITATION (WORST VERSIONS) RISK-ADJUSTED GLOBAL PMT Isn’t This Capitation? No – It’s Different
146© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Example: BCBS MA Alternative Quality Contract • Single payment for all costs of care for a population of patients – Adjusted up/down annually based on severity of patient conditions – Initial payment set based on past expenditures, not arbitrary estimates – Provides flexibility to pay for new/different services – Bonus paid for high quality care • Five-year contract – Savings for payer achieved by controlling increases in costs – Allows provider to reap returns on investment in preventive care, infrastructure • Broad participation – 14 physician groups/health systems participating with over 400,000 patients, including one primary care IPA with 72 physicians • Positive two year results – Higher ambulatory care quality than non-AQC practices, better patient outcomes, lower readmission rates and ER utilization, lower costs http://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html
147© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Barrier: Gaining Support from a Critical Mass of Payers Health Plan Provider Health Plan Health Plan Patient Patient Patient Provider is only compensated for changed practices for the subset of patients covered by participating payers Better Payment System Current Payment System Current Payment System
148© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org For Most Employees, the Employer is the Insurer, Not a Health Plan Source: Employer Health Benefits 2012 Annual Survey. The Kaiser Family Foundation and Health Research and Educational Trust
149© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org For Self-Funded Employers, The Health Plan is Just a Pass Through Self- Funded Purchasers Providers ASO Health Plan (No Risk) Provider Claims Purchaser Payment
150© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Little Incentive for Health Plans to Support Payment Reforms True Payment Reform Means: • Health plan incurs the costs of implementing new payment models • Purchaser gains all the savings from reduced utilization and spending (because all claims are passed through) Self- Funded Purchasers Providers ASO Health Plan (No Risk) Provider Claims Purchaser Payment
151© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Better Approach: Purchaser/Provider Partnerships Self- Funded Purchasers Providers Willing to Manage Costs Better Payment and Benefit Structure Lower Cost, Higher Quality Care Provider “wins” if: • Patients stay healthy and need less care • Purchaser pays provider adequately to manage care efficiently Purchasers and Patients “win” if: • Providers reduce purchasers’ costs • Patients stay healthy and have lower cost- sharing
152© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health Plan Implements Changes Purchasers/Providers Agree On Self- Funded Purchasers Providers Willing to Manage Costs ASO Health Plan (No Risk) Implementation Better Payment and Benefit Structure Lower Cost, Higher Quality Care
How Many Patients Do You Need to (Successfully) Manage Total Risk?
154© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Companies With <1,000 Workers Take Total Healthcare Cost Risk Sources: Employer Health Benefits 2012 Annual Survey. The Kaiser Family Foundation and Health Research and Educational Trust; State-Level Trends in Employer- Sponsored Health Insurance, April 2013. State Health Access Data Assistance Center and Robert Wood Johnson Foundation Fewer employees than typical physician practice panel size
155© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Keys to Managing Risk • How Do Small Employers Manage Self-Insurance Risk? – They know who their employees are and can estimate spending – They start with what they spent last year and try to control growth – They have reserves to cover year-to-year variation – They purchase stop-loss insurance to cover unusually expensive cases
156© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Keys to Managing Risk • How Do Small Employers Manage Self-Insurance Risk? – They know who their employees are and can estimate spending – They start with what they spent last year and try to control growth – They have reserves to cover year-to-year variation – They purchase stop-loss insurance to cover unusually expensive cases • How Would Physician Practices & Hospitals Manage Risk? – They need to know who their patients are in order to project spending – They need to start with last year’s payments and control growth – They need some reserves to cover year-to-year variation – They need to purchase stop-loss insurance to cover unusually expensive cases
157© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What’s the Patient’s Role and Accountability? ProviderPatient Payment System Ability and Incentives to: •Keep patients well •Avoid unneeded services •Deliver services efficiently •Coordinate services with other providers
158© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Benefit Design Changes Are Also Critical to Success ProviderPatient Payment System Benefit Design Ability and Incentives to: •Keep patients well •Avoid unneeded services •Deliver services efficiently •Coordinate services with other providers Ability and Incentives to: •Improve health •Take prescribed medications •Allow a provider to coordinate care •Choose the highest-value providers and services
159© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Barriers In Current Benefit Designs • Co-pays, co-insurance, and high deductibles discourage or prevent patients from using primary care, preventive treatments, and chronic disease maintenance medications
160© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Example: No Coordination of Pharmacy & Medical Benefits Hospital Costs Physician Costs Other Services Medical Benefits Drug Costs Pharmacy Benefits Single-minded focus on reducing costs here... ...often results in higher spending on hospitalizations •High copays for brand-names when no generic exists •Doughnut holes & deductibles Principal treatment for most chronic diseases involves regular use of maintenance medication
161© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Barriers In Current Benefit Designs • Co-pays, co-insurance, and high deductibles discourage or prevent patients from using primary care, preventive treatments, and chronic disease maintenance medications • Co-pays, co-insurance, and high deductibles provide little or no incentive for patients to choose the highest-value providers for expensive services
162© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Airfare Choices from Boston to Cleveland Boston Cleveland ? USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 Airfares for July 6-7, 2011 as of 6/26/11
163© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What If We Paid for Travel the Way We Pay for Healthcare? Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 Airfares for July 6-7, 2011 as of 6/26/11
164© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Flat Copayments: First Class Fare Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 $100 Copayment: $100 $100 $100 Airfares for July 6-7, 2011 as of 6/26/11 
165© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Coinsurance: First Class Fare Probably Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 $100 Copayment: $100 $100 $100 10% Coinsurance: $62 $111 $136 Airfares for July 6-7, 2011 as of 6/26/11  
166© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org High Deductible: First Class Fare Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 $100 Copayment: $100 $100 $100 10% Coinsurance: $62 $111 $136 $500 Deductible: $500 $500 $500 Airfares for July 6-7, 2011 as of 6/26/11   
167© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Price Difference: Lowest Coach Fare Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 $100 Copayment: $100 $100 $100 10% Coinsurance: $62 $111 $136 $500 Deductible: $500 $500 $500 Lowest Coach Fare: $0 $485 $733 Airfares for July 6-7, 2011 as of 6/26/11    
168© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Where Will You Get Your Knee Replaced? Consumer Share of Surgery Cost Price #1 $20,000 Price #2 $25,000 Price #3 $30,000 Knee Joint Replacement
169© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Where Will You Get Your Knee Replaced? Consumer Share of Surgery Cost Price #1 $20,000 Price #2 $25,000 Price #3 $30,000 $1,000 Copayment: $1,000 $1,000 $1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 $2,000 $2,000 $5,000 Deductible: $5,000 $5,000 $5,000   Knee Joint Replacement
170© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Where Will You Get Your Knee Replaced? Consumer Share of Surgery Cost Price #1 $20,000 Price #2 $25,000 Price #3 $30,000 $1,000 Copayment: $1,000 $1,000 $1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 $2,000 $2,000 $5,000 Deductible: $5,000 $5,000 $5,000 Highest-Value: $0 $5,000 $10,000     Knee Joint Replacement
171© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Which Health System or ACO Will You Choose? Total Annual Cost Per Patient/Member Health System/ ACO #1 $6,000 Health System/ ACO #2 $8,000 Health System/ ACO #3 $10,000 Consumer Share $0 $2,000 $4,000
172© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Would Happen If Consumers Had Choice & Considered Value? • Minnesota Patient Choice – started by the Buyers Health Care Action Group (BHCAG) in the 1990s – “care systems” bid on risk-adjusted (total) cost of patient care (i.e., risk- adjusted global payment) – care systems are divided into cost/quality tiers based on their relative bids – consumers pay the difference in the bid price to select a care system in a higher cost tier • Results – Many consumers switched to lower cost providers – High cost providers reduced their costs to retain/attract patients
This All Sounds Really Hard
Can’t We Just Keep Doing What We’re Doing Today Until We Retire? This All Sounds Really Hard
175© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Opportunities to Reduce Costs Without Rationing Are Widely Known Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care
176© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Question is: How Will Purchasers Get The Savings? Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care PURCHASER ?
177© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Payer-Driven Approach to Achieving Savings Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care PURCHASER Physician P4P High Deductibles Narrow Networks Prior Authorization Tiering on Cost Readmission Penalty Managed Fee-for-Service
178© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Provider-Driven Approach to Achieving Savings Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care PURCHASER Coordinated Care/ Accountable Care Organization Global Pmt/Budget
179© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Very Different Models… Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care PURCHASER Coordinated Care/ Accountable Care Organization Physician P4P High Deductibles Narrow Networks Prior Authorization Tiering on Cost Readmission Penalty Managed Fee-for-Service Global Pmt/Budget
180© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And Very Different Impacts on Physicians and Hospitals PURCHASER Managed Fee-for-Service 1. Payer defines how care should be redesigned 2. Payer obtains all savings from lower utilization 3. Payer decides how much savings to share with provider 1. Provider determines how care should be redesigned 2. Provider and Purchaser or Payer agree on adequate price for provider care and amount of savings for payer 3. Providers get to keep any additional savings and to determine how to divide it Global Pmt/Budget
181© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Opportunities From Completely Redesigning Payment & Delivery • Better Payment for Physicians and Hospitals – No threats of major fee cuts – No health plan/benefit manager utilization review – Physicians and hospitals paid based on quality, not volume • Truly High Quality, Patient-Centric Care – Coordinated care by multiple physicians – Care mgt from providers, not health plans or disease mgt co’s – Flexibility for telephone, internet, & home visits if patients need them • Greater Patient Engagement – Zero or low copayments for essential medications and services – Higher cost-sharing for unnecessary tests and services – Incentives for patient wellness and adherence • Less Spending on Administrative Costs – Less spending for health plan administrative costs and profits – Less spending by providers on payer-imposed administrative costs • Lower Government Spending and Smaller Deficits • Better Health for Citizens and More Affordable Insurance
182© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Learn More About Win-Win-Win Payment and Delivery Reform Center for Healthcare Quality and Payment Reform www.PaymentReform.org
For More Information: Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform Miller.Harold@GMail.com (412) 803-3650 www.CHQPR.org www.PaymentReform.org
APPENDIX
What About Primary Care and Non-Proceduralists?
186© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Today: Reactive Care for Chronic Disease, Many Hospitalizations TODAY $/Patient # Pts Total $ Physician Svcs PCP $600 500 $300,000 Specialist 0 $0 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 Total Pmt (Cost) $2,900,000 500 Moderately Severe Chronic Disease Patients • PCP paid only for periodic office visits • Patients do not take maintenance medications reliably • 50% of patients are hospitalized each year for exacerbations • Specialist only sees patient during hospital admissions
187© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Pay the PCP for Proactive Care Management TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 Total Pmt (Cost) $2,900,000
188© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Pay the Specialist to Be a Responsive Medical Neighbor TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
189© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Provide Adequate Resources to Support Patients TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 Total Pmt (Cost) $2,900,000
190© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Can We Afford a 127% Increase in Spending on Ambulatory Care? TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 Total Pmt (Cost) $2,900,000
191© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Yes, If It Succeeds In Reducing Hospitalizations TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 150 $1,500,000 -40% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000 $2,180,000 -25%
192© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org But What About the Hospital? TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 150 $1,500,000 -40% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000 $2,180,000 -25%
193© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Analyze the Hospital’s Cost Structure TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
194© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Continue to Cover the Fixed Costs TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
195© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Save on Variable Costs With Fewer Patients TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
196© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Increase the Hospital’s Contribution Margin TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 $82,500 +10% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
197© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Payer Still Spends Less TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 $82,500 +10% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000 $2,817,500 -3%
198© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Win-Win-Win: Better Care, Higher Physician Pay, Lower Spending TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 $82,500 +10% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000 $2,817,500 -3% Physicians Win Payer Wins Hospital Wins
199© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Use a Condition-Based Payment for the Patients to Support Care TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 $82,500 +10% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%
APPENDIX
201© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Instead of Having To Accept What Medicare and Health Plans Pay… CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Medicare FFS Medicaid FFS MA Plans Commercial FFS
202© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Could Happen If Physicians Had Their Own Health Plans? CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries MA Plans Physician -Owned Health Plan ? ? ?
203© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Get Risk-Adjusted Payment from Medicare, Pay Physicians Better CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Physician -Owned Health Plan Risk-Adjusted Medicare Advantage Payment Better Physician Payment
204© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Contract Directly with Self-Insured Employers, Pay Physicians Better CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Physician -Owned Health Plan Risk-Adjusted Medicare Advantage Payment Better Physician Payment Risk-Adjusted Direct Contract
205© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Use Exchanges for Small Group Business, Pay Physicians Better CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Physician -Owned Health Plan Risk-Adjusted Medicare Advantage Payment Better Physician Payment Insurance Exchanges Risk-Adjusted Premium Revenue Risk-Adjusted Direct Contract
206© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Contract Directly With State for Medicaid, Pay Physicians Better CMS Physician Group, IPA, or Health System Commercial Health Plans Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Physician -Owned Health Plan Risk-Adjusted Medicare Advantage Payment Better Physician Payment Risk-Adjusted Premium Revenue Risk-Adjusted Direct Contract Insurance Exchanges Risk-Adjusted Global Payment
207© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Get Global Payment for Large Groups, Pay Physicians Better CMS Physician Group, IPA, or Health System Physician -Owned Health Plan Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups Insurance Exchanges State Medicaid Medicare Beneficiaries Risk-Adjusted Direct Contract Risk-Adjusted Medicare Advantage Payment Better Physician Payment Risk-Adjusted Premium Revenue Risk-Adjusted Global Payment
208© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Result: A “Single Payer System” Controlled by Physicians CMS Physician Group, IPA, or Health System Physician -Owned Health Plan Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups Insurance Exchanges State Medicaid Medicare Beneficiaries Risk-Adjusted Direct Contract Risk-Adjusted Medicare Advantage Payment Better Physician Payment Risk-Adjusted Premium Revenue Risk-Adjusted Global Payment ONE PAYER, MANY CUSTOMERS
APPENDIX
210© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org To Set A Fair Price, Start With Existing Costs… COST TIME Costs in FFS Costs in FFS Costs in FFS
211© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …Set a Payment Level That Is ≤ Expected Costs… COST TIME Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level Exp. Costs in FFS $
212© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …If All Goes Well, Costs Will Be Lower Than the Payment Level… COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level
213© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org ...And Both the Purchaser and Provider Will “Win” COST TIME Costs in New Pmt $$$ $$$ Bonus for Provider Savings For Purchaser Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level
214© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Everybody Fears: All Won’t Go Well (Costs Go Up) COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level
215© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Many Different Reasons Costs May Increase Beyond Payment COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Excess Cost Unusually Costly Patient Overutilization of Services New, High-Cost Treatment Many Avoidable Complications Higher-Severity Patients Large Random Variation Failure to Follow Guidelines Bundled or Episode Payment Level
216© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Providers Should NOT Be Expected To Take Insurance Risk COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Excess Cost Unusually Costly Patient Overutilization of Services New, High-Cost Treatment Many Avoidable Complications Higher-Severity Patients Large Random Variation Failure to Follow Guidelines Provider Performance Risk Insurance Risk Bundled or Episode Payment Level
217© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Four Mechanisms for Separating Insurance and Performance Risk COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level Excess Cost Unusually Costly Patient Overutilization of Services New, High-Cost Treatment Many Avoidable Complications Higher-Severity Patients Severity Adjustment Large Random Variation Failure to Follow Guidelines Outlier Pmt/ Stop-Loss Risk Exclusions Risk Corridors Performance Risk (Provider’s Responsibility)

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Accountable Care Through Physician Leadership

  • 1. CREATING WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE THROUGH PHYSICIAN LEADERSHIP Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform www.CHQPR.org
  • 2. 2© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz
  • 3. 3© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #1: In which U.S. industries are the key employees told that at the end of the year, they can expect to receive a 25% pay cut regardless of how well they’ve performed?
  • 4. 4© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #1: In which U.S. industries are the key employees told that at the end of the year, they can expect to receive a 25% pay cut regardless of how well they’ve performed? ANSWER: Health Care
  • 5. 5© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Medicare SGR Is a Big Problem, But So Is Lack of Annual Updates Physician Practice Costs Physician Payment Increases If SGR Cut Is Made 23% Effective Reduction
  • 6. 6© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #2: In which U.S. industries are businesses only able to sell their products and services through an intermediary who demands large discounts and increases prices by 18-25%?
  • 7. 7© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #2: In which U.S. industries are businesses only able to sell their products and services through an intermediary who demands large discounts and increases prices by 18-25%? ANSWER: Health Care
  • 8. 8© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
  • 9. 9© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #3: In which U.S. industries can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well?
  • 10. 10© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #3: In which U.S. industries can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well? ANSWER: Health Care
  • 11. 11© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The SGR Also Pits Physicians Against Each Other PCP Fees Specialty Fees PCP Fees Specialty Fees Physician Payments Capped by the Sustainable Growth Rate
  • 12. 12© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #4: In which U.S. industries does government policy favor large businesses over small businesses?
  • 13. 13© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #4: In which U.S. industries does government policy favor large businesses over small businesses? ANSWER: Health Care
  • 14. 14© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Unlike Physicians, Hospitals Have Received Pay Increases Physicians Hospitals Inflation
  • 15. 15© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #5: Who is to blame for the way physicians are paid and micromanaged?
  • 16. 16© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Short Quiz QUESTION #5: Who is to blame for the way physicians are paid and micromanaged? ANSWER: Physicians
  • 17. 17© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Blame Rests With Physicians • Physicians haven’t defined solutions to control healthcare costs without rationing • Physicians are seen as the drivers of higher costs • Physicians haven’t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices • Physicians aren’t organized to manage and deliver high-value population health care to purchasers and patients
  • 18. 18© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Three Paths to the Future: Which Door Will Physicians Choose? TODAY FUTURE #1 FUTURE #2 FUTURE #3
  • 19. 19© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Purchasers & Patients Want: High-Quality Care at Lower Cost High Costs and Weak Quality High Quality Care at Lower Cost Savings TODAY TOMORROW
  • 20. 20© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Purchasers & Patients Want: High-Quality Care at Lower Cost High Costs and Weak Quality High Quality Care at Lower Cost Savings TODAY TOMORROW Where Will The Savings Come From?
  • 21. 21© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Purchasers & Patients Want: High-Quality Care at Lower Cost High Costs and Weak Quality High Quality Care at Lower Cost Savings TODAY TOMORROW Where Will The Savings Come From? It Depends on Who’s the Last in Line In Getting Paid
  • 22. 22© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Door #1: Continuation of the Status Quo High Costs and Weak Quality High Quality Care at Lower Cost Traditional Insurance Company/ TPA Savings TODAY TOMORROW
  • 23. 23© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Who’s First in Line? Health Plans High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Traditional Insurance Company/ TPA Savings TODAY TOMORROW
  • 24. 24© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Who’s Last in Line? Physicians High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Savings TODAY TOMORROW
  • 25. 25© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Where Will Savings Come From? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Savings TODAY TOMORROW
  • 26. 26© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Will Health Plans Voluntarily Reduce Their Fees/Profits? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Savings
  • 27. 27© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Will Health Plans Voluntarily Reduce Their Fees/Profits? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Savings Not Likely
  • 28. 28© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Can Health Plans Cut Payments to the Big Hospital in Town? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Savings
  • 29. 29© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Can Health Plans Cut Payments to the Big Hospital in Town? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Savings Not Likely
  • 30. 30© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Or Will Payers Continue Cutting (or Not Increasing) Doctor Pay? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Adm/Profit Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Savings
  • 31. 31© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Not Just Lower Fees, But Interference in Physician Decisions High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA Health Plan Admin Cost & Profit Hospital Payments Physician Payments Savings • Lower Fees (“Discounts”) • Prior Authorization • Step Therapy • Utilization Review • Disease Mgt Vendors
  • 32. 32© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Will Employment by Hospitals Protect Physicians? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Health System Payments Physician Salaries Traditional Insurance Company/ TPA SavingsHealth Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA
  • 33. 33© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org When Health Systems Get Less, Where Will They Make the Cuts? High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Health System Payments Physician Salaries Traditional Insurance Company/ TPA Savings Health Plan Admin Cost & Profit Health System Payments Physician Salaries Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA
  • 34. 34© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health Systems Want to Ensure They Don’t Get Cut by Payers… High Costs and Weak Quality High Quality Care at Lower Cost Health Plan Admin Cost & Profit Health System Payments Physician Salaries Traditional Insurance Company/ TPA Savings Health Plan Admin Cost & Profit Health System Payments Physician Salaries Health Plan Admin Cost & Profit Hospital Payments Physician Payments Traditional Insurance Company/ TPA
  • 35. 35© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company Door #2: Hospital-Owned Health Plans High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof.
  • 36. 36© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company If Hospitals Are Now First In Line, Where Will Savings Come From? High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof.
  • 37. 37© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company Maybe Health Plan Expenses Can Be Reduced… High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof. Hospital Payments Physician Payments Health Plan Adm/Profit
  • 38. 38© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company …But Hospital Will Still Need the Health Plan to Watch the Docs High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof. Hospital Payments Physician Payments Health Plan Adm/Profit
  • 39. 39© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health System w/ Insurance Company So Physicians Will Likely Still Be Subject to Cuts and Interference High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Savings Health Plan Admin/Prof. Hospital Payments Physician Payments Health Plan Adm/Profit Hospital Payments Physician Payments Health Plan Admin/Prof.
  • 40. 40© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What’s Behind Door #3? High Costs and Weak Quality High Quality Care at Lower Cost Savings
  • 41. 41© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting Physician Leadership to Control Both Cost & Quality High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Savings
  • 42. 42© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting Physicians Can Watch Themselves, They Don’t Need Health Plans… High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Health Plan Adm/Profit Savings
  • 43. 43© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting Better Care of Patients Will Reduce Avoidable Hospitalizations… High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Health Plan Adm/Profit Savings Hospital Payments Physician Payments Health Plan Adm/Profit Savings
  • 44. 44© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting …Allowing Better Pay for Doctors AND More Savings for Purchasers High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Hospital Payments Physician Payments Health Plan Adm/Profit Savings Hospital Payments Physician Payments Health Plan Adm/Profit Savings Hospital Payments Physician Payments Health Plan Adm/Profit Savings
  • 45. 45© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physician- Led Health Plans & Contracting Door #3 = A Physician-Led Healthcare Future High Costs and Weak Quality High Quality Care at Lower Cost Hospital Payments Physician Payments Health Plan Admin Cost & Profit Savings Hospital Payments Physician Payments Health Plan Adm/Profit • Significant savings for purchasers and patients • Better pay for physicians • Less spending on health plan overhead • Less interference in physician-patient relationship • Less spending on avoidable expensive, risky procedures • Better health and quality of life for patients
  • 46. 46© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org High Quality Health Plans Run By Physician Groups
  • 47. 47© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org If Physicians Choose Door #3, What Must They Do to Succeed? TODAY PHYSICIAN-LED HEALTHCARE
  • 48. 48© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Physician’s Real Business is More Than Their Salary… Physician Salary
  • 49. 49© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And More Than Their Total Practice Costs.. Physician Salary Practice Expenses
  • 50. 50© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …It’s the Tests They Order, Even If Someone Else Does Them Physician Salary Practice Expenses Tests and Imaging
  • 51. 51© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …It’s the Procedures They Do, And Where They Do Them Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures Tests and Imaging
  • 52. 52© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And the Unplanned Admissions of Their Patients… Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Tests and Imaging
  • 53. 53© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …The Post-Acute Care Costs After Hospital Stays… Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Tests and Imaging
  • 54. 54© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …The Unplanned Readmissions and Repeat Procedures… Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Tests and Imaging Readmissions
  • 55. 55© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And the Number and Types of Medications They Prescribe Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
  • 56. 56© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Most of the Money in Healthcare Doesn’t Go to Physicians Physicians: 16%
  • 57. 57© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org .. But Most Money Goes to Things That Physicians Can Influence Things Physicians Prescribe, Control, or Influence 84% Physicians: 16%
  • 58. 58© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Medicare Payment Silos Pit Physicians Against Each Other PCP Fees Specialty Fees PCP Fees Specialty Fees Physician Fees (Part B)
  • 59. 59© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physicians Should Benefit From Lowering Other Healthcare Costs PCP Fees Specialty Fees PCP Fees Drug Costs Hospital & Post-Acute Care Costs Specialty FeesPhysician Fees (Part B) Total Healthcare Costs (Parts A, B, and D) Drug Costs (Part D) Hospital & Post-Acute Care Costs (Part A)
  • 60. How Do You Repeal the SGR and Give Physicians Reasonable Payment Increases?
  • 61. 61© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 10 Year Federal Budget Projections for Medicare Physician Fees Only Represent 12% of Projected Medicare Spending
  • 62. 62© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org SGR Repeal & MEI Update Increases Total Spending by 2.6% SGR Repeal & MEI Update: $160 Billion
  • 63. 63© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 3% Savings in Non-Physician Spending Would Pay for Repeal $160 Billion= 3% of Non-Physician Spending
  • 64. 64© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org But Nobody in DC Believes That Physicians Can/Will Do It CBO expects that physicians would generally choose to participate in the payment options that offer the largest payments for the services they provide… CBO expects that most of the alternative payment models that would be adopted under this legislation would increase Medicare spending. CBO’s review of numerous Medicare demonstration projects found that very few succeeded in reducing Medicare spending. CBO expects that the greater influence of providers within the design process specified in H.R. 2810 would lead to smaller savings than would arise from the development and adoption of new approaches through the [current] CMMI process. Congressional Budget Office Cost Estimate for H.R. 2810 (September 13, 2013)
  • 65. 65© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
  • 66. 66© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
  • 67. 67© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
  • 68. 68© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Fewer unnecessary procedures •Reducing the cost of procedures •More procedures in outpatient settings •Fewer ER visits for chronic disease •Fewer admissions for chronic disease •Z•Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
  • 69. 69© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Less use of expensive inpatient rehab •More in-home services •Fewer unnecessary procedures •Reducing the cost of procedures •More procedures in outpatient settings •Fewer ER visits for chronic disease •Fewer admissions for chronic disease •Z•Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
  • 70. 70© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Better post-discharge care management •Fewer complications from procedures •Less use of expensive inpatient rehab •More in-home services •Fewer unnecessary procedures •Reducing the cost of procedures •More procedures in outpatient settings •Fewer ER visits for chronic disease •Fewer admissions for chronic disease •Z•Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
  • 71. 71© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts •Use of lower-cost medications •Avoiding unnecessary medications •Better post-discharge care management •Fewer complications from procedures •Less use of expensive inpatient rehab •More in-home services •Fewer unnecessary procedures •Reducing the cost of procedures •More procedures in outpatient settings •Fewer ER visits for chronic disease •Fewer admissions for chronic disease •Z•Fewer unnecessary procedures •Use of lower-cost procedures •Reducing the cost of procedures •Use of lower-cost facilities •Fewer unnecessary tests •Use of lower-cost tests •Use of lower cost testing facilities Physician Salary Practice Expenses Outpatient Procedures Inpatient Procedures and Admissions of Chronic Disease Patients Post-Acute Care Medications Tests and Imaging Readmissions
  • 72. 72© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org How Big Are the Opportunities?
  • 73. 73© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 5-17% of Hospital Admissions Are Potentially Preventable Source: AHRQ HCUP
  • 74. 74© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Millions of Preventable Events Harm Patients and Increase Costs Medical Error # Errors (2008) Cost Per Error Total U.S. Cost Pressure Ulcers 374,964 $10,288 $3,857,629,632 Postoperative Infection 252,695 $14,548 $3,676,000,000 Complications of Implanted Device 60,380 $18,771 $1,133,392,980 Infection Following Injection 8,855 $78,083 $691,424,965 Pneumothorax 25,559 $24,132 $616,789,788 Central Venous Catheter Infection 7,062 $83,365 $588,723,630 Others 773,808 $11,640 $9,007,039,005 TOTAL 1,503,323 $13,019 $19,571,000,000 Source: The Economic Measurement of Medical Errors, Milliman and the Society of Actuaries, 2010 3 Adverse Events Every Minute
  • 75. 75© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Many Ways to Reduce Tests & Procedures w/o Harming Patients
  • 76. 76© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fee-for-Service Payment is a Barrier to Success Lack of Flexibility in FFS • No payment for phone calls or emails with patients • No payment to coordinate care among providers • No payment for non- physician support services to help patients with self-management • No flexibility to shift resources across silos (hospital <-> physician, post-acute <->hospital, SNF <-> home health, etc.)
  • 77. 77© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fee-for-Service Payment is a Barrier to Success Lack of Flexibility in FFS • No payment for phone calls or emails with patients • No payment to coordinate care among providers • No payment for non- physician support services to help patients with self-management • No flexibility to shift resources across silos (hospital <-> physician, post-acute <->hospital, SNF <-> home health, etc.) Penalty for Quality/Efficiency • Lower revenues if patients don’t make frequent office visits • Lower revenues for performing fewer tests and procedures • Lower revenues if infections and complications are prevented instead of treated • No revenue at all if patients stay healthy
  • 78. 78© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Most “Payment Reforms” Don’t Fix The Problems with FFS FFS •No payment for services that will benefit patients •Lower revenues from reducing avoidable costs FFS Shared Savings Shared Savings FFS P4P FFS PMPM
  • 79. 79© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fortunately, There Are Good Alternatives to Fee for Service BUILDING BLOCKS HOW IT WORKS Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
  • 80. 80© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fortunately, There Are Good Alternatives to Fee for Service BUILDING BLOCKS HOW IT WORKS Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician) Warrantied Payment Higher payment for quality care, no extra payment for correcting preventable errors and complications
  • 81. 81© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Fortunately, There Are Good Alternatives to Fee for Service BUILDING BLOCKS HOW IT WORKS Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician) Warrantied Payment Higher payment for quality care, no extra payment for correcting preventable errors and complications Condition- Based Payment Payment based on the patient’s condition, rather than on the procedure used
  • 82. 82© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Accountable 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
  • 83. 83© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Example: Reducing Avoidable Procedures TODAY $/Patient # Pts Total $ Physician Svcs Evaluations $150 300 $45,000 Procedures $850 200 $170,000 Subtotal $215,000 Hospital Pmt $11,000 200 $2,200,000 Total Pmt/Cost $2,415,000 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
  • 84. 84© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Most of the Money Today Is NOT Going to the Physician TODAY $/Patient # Pts Total $ Physician Svcs Evaluations $150 300 $45,000 Procedures $850 200 $170,000 Subtotal $215,000 Hospital Pmt $11,000 200 $2,200,000 Total Pmt/Cost $2,415,000 Physician Payment is 9% of Total Spending
  • 85. 85© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Typical Health Plan Approach: Prior Auth/Utilization Controls TODAY w/ UTILIZATION CTRL $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $150 300 $45,000 Procedures $850 200 $170,000 $850 180 $153,000 Subtotal $215,000 $198,000 Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 Total Pmt/Cost $2,415,000 $2,178,000 -10%
  • 86. 86© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Under FFS, Payer Wins, Physicians and Hospitals Lose TODAY w/ UTILIZATION CTRL $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $150 300 $45,000 Procedures $850 200 $170,000 $850 180 $153,000 Subtotal $215,000 $198,000 -8% Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10% Total Pmt/Cost $2,415,000 $2,178,000 -10%
  • 87. 87© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Is There a Better Way? TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 ? ? ? Procedures $850 200 $170,000 ? ? ? Subtotal $215,000 ? ? ? ? Hospital Pmt $11,000 200 $2,200,000 ? ? ? Total Pmt/Cost $2,415,000 ? ? ?
  • 88. 88© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Better Way: Pay Physicians Differently TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 Total Pmt/Cost $2,415,000 $2,202,000 Better Payment for Condition Management • Physician paid adequately to engage in shared decision making process with patients • Physician paid adequately for procedures without needing to increase volume of procedures
  • 89. 89© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Physicians Could Be Paid More While Still Reducing Total $ TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10% Total Pmt/Cost $2,415,000 $2,202,000 -9%
  • 90. 90© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Do Hospitals Have to Lose In Order for Physicians To Win? TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10% Total Pmt/Cost $2,415,000 $2,202,000 -9% Physician Wins Payer Wins Hospital Loses
  • 91. 91© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Should Matter to Hospitals is Margin, Not Revenues (Volume)
  • 92. 92© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Hospital Costs Are Not Proportional to Utilization $800 $820 $840 $860 $880 $900 $920 $940 $960 $980 $1,000 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 #Patients Cost & Revenue Changes With Fewer Patients . Costs 20% reduction in volume 7% reduction in cost
  • 93. 93© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Reductions in Utilization Reduce Revenues More Than Costs $800 $820 $840 $860 $880 $900 $920 $940 $960 $980 $1,000 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 #Patients Cost & Revenue Changes With Fewer Patients Revenues Costs 20% reduction in volume 7% reduction in cost 20% reduction in revenue
  • 94. 94© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Causing Negative Margins for Hospitals $800 $820 $840 $860 $880 $900 $920 $940 $960 $980 $1,000 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 #Patients Cost & Revenue Changes With Fewer Patients Revenues Costs Payers Will Be Underpaying For Care If Adverse Events, Readmissions, Etc. Are Reduced
  • 95. 95© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org But Spending Can Be Reduced Without Bankrupting Hospitals $800 $820 $840 $860 $880 $900 $920 $940 $960 $980 $1,000 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 #Patients Cost & Revenue Changes With Fewer Patients Revenues Costs Payers Can Still Save $ Without Causing Negative Margins for Hospital
  • 96. 96© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Adequacy of Payment Depends On Fixed/Variable Costs & Margins TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 Variable Costs $3,300 30% $660,000 Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 Total Pmt/Cost $2,415,000
  • 97. 97© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Now, if the Number of Procedures is Reduced… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 Variable Costs $3,300 30% $660,000 Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $2,415,000
  • 98. 98© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …Fixed Costs Will Remain the Same (in the Short Run)… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $2,415,000
  • 99. 99© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …Variable Costs Will Go Down in Proportion to Procedures… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $3,300 $594,000 -10% Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $2,415,000
  • 100. 100© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And Even With a Higher Margin for the Hospital… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $2,415,000
  • 101. 101© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …The Hospital Gets Less Total Revenue (But More Per Case)… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000
  • 102. 102© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And The Payer Still Saves Money TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000 $2,359,000 -2%
  • 103. 103© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org I.e., Win-Win-Win for Physician, Hospital, and Payer TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000 $2,359,000 -2% Physician Wins Payer Wins Hospital Wins
  • 104. 104© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Payment Model Supports This Win-Win-Win Approach? TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000 $2,359,000 -2%
  • 105. 105© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org It’s Impractical to Renegotiate Fees for Individual Services TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $2,415,000 $2,359,000 -2%
  • 106. 106© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Pay Based on the Patient’s Condition, Not on the Procedure TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $2,359,000 -2%
  • 107. 107© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Plan to Offer Care of the Condition at a Lower Cost Per Patient TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
  • 108. 108© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Use the Payment as a Budget to Redesign Care… TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
  • 109. 109© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And Let the Providers Decide How They Should Be Paid TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
  • 110. 110© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Would “Shared Savings” Achieve the Same Thing?
  • 111. 111© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Same Example As Before… Year 0 Physician Svcs Evaluations $45,000 Procedures $170,000 Subtotal $215,000 Hospital Pmt Procedures $2,200,000 Subtotal $2,200,000 Total Pmt/Cost $2,415,000 Savings # Patients $/Patient 300 $150 200 $850 200 $11,000 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
  • 112. 112© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Year 1: Physicians & Hospitals Both Lose With Fewer Procedures) Year 0 Year 1 Chg Physician Svcs Evaluations $45,000 $45,000 Procedures $170,000 $153,000 $0 Subtotal $215,000 $198,000 -8% Hospital Pmt Procedures $2,200,000 $1,980,000 Subtotal $2,200,000 $1,980,000 -10% Total Pmt/Cost $2,415,000 $2,178,000 -10% Savings $237,000 Reduce Procs by 10% Year 1: Lower Revenue for Docs & Hospital
  • 113. 113© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Year 2: Losses Are Lower If Shared Savings Are Paid…(No) Year 0 Year 1 Chg Year 2 Chg Physician Svcs Evaluations $45,000 $45,000 $45,000 Procedures $170,000 $153,000 $153,000 Shared Savings $0 $17,000 Subtotal $215,000 $198,000 -8% $215,000 -0% Hospital Pmt Procedures $2,200,000 $1,980,000 $1,980,000 Shared Savings $0 $101,500 Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -6% Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% Savings $237,000 $118,500 Reduce Procs by 10% Year 1: Lower Revenue for Docs & Hospital Year 2: Shared Savings Offsets Some Losses
  • 114. 114© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …But Physicians and Hospitals Still Have Net 2-Year Losses Year 0 Year 1 Chg Year 2 Chg Cumulative Physician Svcs Evaluations $45,000 $45,000 $45,000 Procedures $170,000 $153,000 $153,000 Shared Savings $0 $17,000 Subtotal $215,000 $198,000 -8% $215,000 -0% -$17,000 -4% Hospital Pmt Procedures $2,200,000 $1,980,000 $1,980,000 Shared Savings $0 $101,500 Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -5% -$338,500 -8% Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% $355,500 Savings $237,000 $118,500 -7%
  • 115. 115© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 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
  • 116. 116© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 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
  • 117. 117© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org “Shared Savings” Forces Hospitals To Consider Hiring Physicians • Hospitals are not directly eligible for shared savings; all savings are attributed to primary care physicians • Even if the hospital reduces readmissions, infections, complications, etc., it may receive no reward for doing so • Reducing hospitalizations, ER visits, etc. will reduce the hospital’s revenues, but the hospital may receive no share of the savings to help it cover its stranded fixed costs • Consequently, hospitals may feel compelled to own physician practices, either to capture a portion of the shared savings revenue, or to prevent there from being any savings!
  • 118. 118© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org It Hasn’t Been Working Too Well in Medicare So Far • Of the 109 Track 1 (Upside Only) ACOs that started in 2012: – 57 (52%) Track 1 ACOs did not achieve savings in 2013 – 25 (23%) Track 1 ACOs achieved savings, but not enough to receive shared savings payments – 27 (25%) Track 1 ACOs received shared savings payments • Of the 5 Track 2 (Downside Risk) ACOs that started in 2012: – 2 (33%) Track 2 ACOs received shared savings payments – 3 (67%) Track 2 ACOs had to repay a share of losses to CMS
  • 119. 119© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Condition-Based Payment Puts the Physicians in Control TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $200 300 $60,000 Procedures $850 200 $170,000 $900 180 $162,000 Subtotal $215,000 $222,000 +3% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0% Variable Costs $3,300 30% $660,000 $594,000 -10% Margin $550 5% $110,000 $113,000 +3% Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
  • 120. 120© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org If The Physician Can Reduce the Hospital’s Costs Per Procedure…. TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 Procedures $850 200 $170,000 Subtotal $215,000 Hospital Pmt Fixed Costs $7,150 65% $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 -45% Margin $550 5% $110,000 Subtotal $11,000 200 $2,200,000 180 Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
  • 121. 121© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Both the Hospital & Physician Can “Win” Even More Inside the Budget TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 Procedures $850 200 $170,000 Subtotal $215,000 Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 Margin $550 5% $110,000 $139,000 +26% Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
  • 122. 122© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Both the Hospital & Physician Can “Win” Even More Inside the Budget TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $300 300 $90,000 Procedures $850 200 $170,000 $1700 180 $340,000 Subtotal $215,000 $430,000 100% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 Margin $550 5% $110,000 $139,000 +26% Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13% Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
  • 123. 123© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Or Reduce The Price to Reduce Healthcare Spending TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $189 300 $56,700 Procedures $850 200 $170,000 $1,190 180 $214,200 Subtotal $215,000 $270,900 +26% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 Margin $550 5% $110,000 $139,000 +26% Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13% Total Pmt/Cost $8,050 300 $2,415,000 $7,455 300 $2,199,900 -9%
  • 124. 124© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org $2,200 Variation in Average Cost of Drug-Eluting Stents in CA Hospitals Source: Coronary Angioplasty with Drug Eluting Stents: Device Costs, Hospital Costs, and Insurance Payments, Emma L. Dolan and James C. Robinson Berkeley Center for Health Technology, September 2010
  • 125. 125© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org $8,000 Variation in Avg Costs of Joint Implants Across CA Hospitals Source: Implantable Medical Devices for Hip Replacement Surgery: Economic Implications for California Hospitals, Emma L. Dolan and James C. Robinson , Berkeley Center for Health Technology, May 2010
  • 126. 126© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org $16,000 Variation in Avg Costs of Defibrillators Across CA Hospitals Source: Pacemaker and Implantable Cardioverter-Defibrillator Implant Procedures in California Hospitals, James C. Robinson and Emma L. Dolan, Berkeley Center for Health Technology, 2010
  • 127. 127© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Not Just Devices: Other Savings Opportunities From Bundling • Better scheduling of scarce resources (e.g., surgery suites) to reduce both underutilization & overtime • Coordination among multiple physicians and departments to avoid duplication and conflicts in scheduling • Standardization of equipment and supplies to facilitate bulk purchasing • Less wastage of expensive supplies • Reduced length of stay • Etc.
  • 128. 128© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Condition-Based Payment Puts the Physicians in Control TODAY TOMORROW $/Patient # Pts Total $ $/Patient # Pts Total $ Chg Physician Svcs Evaluations $150 300 $45,000 $189 300 $56,700 Procedures $850 200 $170,000 $1,190 180 $214,200 Subtotal $215,000 $270,900 +26% Hospital Pmt Fixed Costs $7,150 65% $1,430,000 $1,430,000 Variable Costs $3,300 30% $660,000 $2,000 $360,000 Margin $550 5% $110,000 $139,000 +26% Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13% Total Pmt/Cost $8,050 300 $2,415,000 $7,455 300 $2,199,900 -9%
  • 129. 129© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Steps to Successful Payment Reform 1. Defining the Change in Care Delivery – How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients?
  • 130. 130© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Best Way to Find Savings Opportunities? Ask Physicians “I have zero control over utilization or studies ordered. I don’t get paid for calling a referring doctor and telling him/her the imaging test is worthless.” Radiologist in Maine “I do many unnecessary colonoscopies on young men. Give every PCP an anuscope to allow diagnosis of bleeding hemorrhoids in the office.” Gastroenterologist in Maine “I strongly suspect overutilization of abdominal CT scans in the ER and in the hospital; CT scans lead to further CT scans to follow up lung and adrenal nodules. The hospital focuses on length of stay, but never looks at appropriateness of radiologic studies.” Internist at AMA HOD Meeting “Patients often need to be in extended care to receive antibiotics because Medicare doesn’t pay for home IV therapy. Patient stays in the hospital for 3 days to justify a nursing home/rehab stay.” Orthopedist at AMA HOD Meeting
  • 131. 131© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Steps to Successful Payment Reform 1. Defining the Change in Care Delivery – How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2. Analyzing Expected Costs and Savings – What will there be less of, and how much does that save? – What will there be more of, and how much does that cost? – Will the savings offset the costs on average? – How much variation in costs and savings is likely?
  • 132. 132© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Critical Element is Shared, Trusted Data • Physician/Hospital need to know the current utilization and costs for their patients to know whether the new payment model will cover the costs of delivering effective care to the patients • Purchaser/Payer needs to know the current utilization and costs to know whether the new payment model is a better deal than they have today • Both sets of data have to match in order for providers and payers to agree on the new approach!
  • 133. 133© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Steps to Successful Payment Reform 1. Defining the Change in Care Delivery – How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2. Analyzing Expected Costs and Savings – What will there be less of, and how much does that save? – What will there be more of, and how much does that cost? – Will the savings offset the costs on average? – How much variation in costs and savings is likely? 3. Designing a Payment Model That Supports Change – Flexibility to change the way care is delivered – Accountability for costs and quality/outcomes related to care – Adequate payment to cover lowest-achievable costs – Protection for the provider from insurance risk
  • 134. 134© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Opportunities and Solutions Vary By Specialty Psychiatry OB/GYN Orthopedic Surgery Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System Solutions via Accountable Payment Models • 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 • 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 Cardiology • Use less invasive and expensive procedures when appropriate • Condition-based payment covering CABG, PCI, or medication management • Payment is based on which procedure is used, not the outcome for the patient
  • 135. 135© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Examples from Other Specialties Oncology Radiology Gastroenterology Opportunities to Improve Care and Reduce Cost Barriers in Current Payment System 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
  • 136. 136© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Steps to Successful Payment Reform 1. Defining the Change in Care Delivery – How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2. Analyzing Expected Costs and Savings – What will there be less of, and how much does that save? – What will there be more of, and how much does that cost? – Will the savings offset the costs on average? – How much variation in costs and savings is likely? 3. Designing a Payment Model That Supports Change – Flexibility to change the way care is delivered – Accountability for costs and quality/outcomes related to care – Adequate payment to cover lowest-achievable costs – Protection for the provider from insurance risk 4. Compensating Physicians Appropriately – Changing payment to the provider organization (physician practice/group/IPA/health system) does not automatically change compensation to physicians
  • 137. 137© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org How Does This All Fit Into ACOs? Heart Disease Diabetes Back Pain PATIENTS Pregnancy
  • 138. 138© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Each Patient Should Choose & Use a Primary Care Practice… Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice
  • 139. 139© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN …Which Takes Accountability for What PCPs Can Control/Influence Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice Accountable Medical Home Accountability for: • Avoidable ER Visits •Avoidable Hospitalizations •Unnecessary Tests •Unnecessary Referrals
  • 140. 140© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN …With a Medical Neighborhood to Consult With on Complex Cases Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice Accountable Medical Home Endocrinology, Neurology, Psychiatry Accountable Medical Neighborhood Accountability for: •Unnecessary Tests •Unnecessary Referrals •Co-Managed Outcomes
  • 141. 141© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN ..And Specialists Accountable for the Conditions They Manage Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice Neurosurg. Group OB/GYN Group Cardiology Group Heart Episode/ Condition Pmt Back Episode/ Condition Pmt Pregnancy Management Pmt Accountable Medical Home Endocrinology, Neurology, Psychiatry Accountable Medical Neighborhood Accountability for: •Unnecessary Tests •Unnecessary Procedures •Infections, Complications
  • 142. 142© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN That’s Building the ACO from the Bottom Up Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice Neurosurg. Group OB/GYN Group Cardiology Group Heart Episode/ Condition Pmt Back Episode/ Condition Pmt Pregnancy Management Pmt Accountable Medical Home Endocrinology, Neurology, Psychiatry Accountable Medical Neighborhood ACO Accountable Payment Models
  • 143. 143© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN Shared Savings Payment Primary Care ACO Orthopedics OB/GYNCardiology Most ACOs Today Aren’t Truly Reinventing Care or Payment Fee-for-Service Payment Expensive IT Systems Psych., Neuro Nurse Care Managers Heart Disease Diabetes Back Pain PATIENTS Pregnancy Shared Savings Bonus
  • 144. 144© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org MEDICARE/HEALTH PLAN A True ACO Can Take a Global Payment And Make It Work Heart Disease Diabetes Back Pain PATIENTS Pregnancy Primary Care Practice ACO Neurosurg. Group OB/GYN Group Cardiology Group Heart Episode/ Condition Pmt Back Episode/ Condition Pmt Pregnancy Management Pmt Accountable Medical Home Endocrinology, Neurology, Psychiatry Risk-Adjusted Global Payment Accountable Medical Neighborhood
  • 145. 145© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org 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 No Additional Revenue for Taking Sicker Patients CAPITATION (WORST VERSIONS) RISK-ADJUSTED GLOBAL PMT Isn’t This Capitation? No – It’s Different
  • 146. 146© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Example: BCBS MA Alternative Quality Contract • Single payment for all costs of care for a population of patients – Adjusted up/down annually based on severity of patient conditions – Initial payment set based on past expenditures, not arbitrary estimates – Provides flexibility to pay for new/different services – Bonus paid for high quality care • Five-year contract – Savings for payer achieved by controlling increases in costs – Allows provider to reap returns on investment in preventive care, infrastructure • Broad participation – 14 physician groups/health systems participating with over 400,000 patients, including one primary care IPA with 72 physicians • Positive two year results – Higher ambulatory care quality than non-AQC practices, better patient outcomes, lower readmission rates and ER utilization, lower costs http://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html
  • 147. 147© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Barrier: Gaining Support from a Critical Mass of Payers Health Plan Provider Health Plan Health Plan Patient Patient Patient Provider is only compensated for changed practices for the subset of patients covered by participating payers Better Payment System Current Payment System Current Payment System
  • 148. 148© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org For Most Employees, the Employer is the Insurer, Not a Health Plan Source: Employer Health Benefits 2012 Annual Survey. The Kaiser Family Foundation and Health Research and Educational Trust
  • 149. 149© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org For Self-Funded Employers, The Health Plan is Just a Pass Through Self- Funded Purchasers Providers ASO Health Plan (No Risk) Provider Claims Purchaser Payment
  • 150. 150© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Little Incentive for Health Plans to Support Payment Reforms True Payment Reform Means: • Health plan incurs the costs of implementing new payment models • Purchaser gains all the savings from reduced utilization and spending (because all claims are passed through) Self- Funded Purchasers Providers ASO Health Plan (No Risk) Provider Claims Purchaser Payment
  • 151. 151© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org A Better Approach: Purchaser/Provider Partnerships Self- Funded Purchasers Providers Willing to Manage Costs Better Payment and Benefit Structure Lower Cost, Higher Quality Care Provider “wins” if: • Patients stay healthy and need less care • Purchaser pays provider adequately to manage care efficiently Purchasers and Patients “win” if: • Providers reduce purchasers’ costs • Patients stay healthy and have lower cost- sharing
  • 152. 152© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Health Plan Implements Changes Purchasers/Providers Agree On Self- Funded Purchasers Providers Willing to Manage Costs ASO Health Plan (No Risk) Implementation Better Payment and Benefit Structure Lower Cost, Higher Quality Care
  • 153. How Many Patients Do You Need to (Successfully) Manage Total Risk?
  • 154. 154© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Companies With <1,000 Workers Take Total Healthcare Cost Risk Sources: Employer Health Benefits 2012 Annual Survey. The Kaiser Family Foundation and Health Research and Educational Trust; State-Level Trends in Employer- Sponsored Health Insurance, April 2013. State Health Access Data Assistance Center and Robert Wood Johnson Foundation Fewer employees than typical physician practice panel size
  • 155. 155© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Keys to Managing Risk • How Do Small Employers Manage Self-Insurance Risk? – They know who their employees are and can estimate spending – They start with what they spent last year and try to control growth – They have reserves to cover year-to-year variation – They purchase stop-loss insurance to cover unusually expensive cases
  • 156. 156© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Keys to Managing Risk • How Do Small Employers Manage Self-Insurance Risk? – They know who their employees are and can estimate spending – They start with what they spent last year and try to control growth – They have reserves to cover year-to-year variation – They purchase stop-loss insurance to cover unusually expensive cases • How Would Physician Practices & Hospitals Manage Risk? – They need to know who their patients are in order to project spending – They need to start with last year’s payments and control growth – They need some reserves to cover year-to-year variation – They need to purchase stop-loss insurance to cover unusually expensive cases
  • 157. 157© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What’s the Patient’s Role and Accountability? ProviderPatient Payment System Ability and Incentives to: •Keep patients well •Avoid unneeded services •Deliver services efficiently •Coordinate services with other providers
  • 158. 158© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Benefit Design Changes Are Also Critical to Success ProviderPatient Payment System Benefit Design Ability and Incentives to: •Keep patients well •Avoid unneeded services •Deliver services efficiently •Coordinate services with other providers Ability and Incentives to: •Improve health •Take prescribed medications •Allow a provider to coordinate care •Choose the highest-value providers and services
  • 159. 159© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Barriers In Current Benefit Designs • Co-pays, co-insurance, and high deductibles discourage or prevent patients from using primary care, preventive treatments, and chronic disease maintenance medications
  • 160. 160© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Example: No Coordination of Pharmacy & Medical Benefits Hospital Costs Physician Costs Other Services Medical Benefits Drug Costs Pharmacy Benefits Single-minded focus on reducing costs here... ...often results in higher spending on hospitalizations •High copays for brand-names when no generic exists •Doughnut holes & deductibles Principal treatment for most chronic diseases involves regular use of maintenance medication
  • 161. 161© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Barriers In Current Benefit Designs • Co-pays, co-insurance, and high deductibles discourage or prevent patients from using primary care, preventive treatments, and chronic disease maintenance medications • Co-pays, co-insurance, and high deductibles provide little or no incentive for patients to choose the highest-value providers for expensive services
  • 162. 162© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Airfare Choices from Boston to Cleveland Boston Cleveland ? USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 Airfares for July 6-7, 2011 as of 6/26/11
  • 163. 163© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What If We Paid for Travel the Way We Pay for Healthcare? Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 Airfares for July 6-7, 2011 as of 6/26/11
  • 164. 164© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Flat Copayments: First Class Fare Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 $100 Copayment: $100 $100 $100 Airfares for July 6-7, 2011 as of 6/26/11 
  • 165. 165© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Coinsurance: First Class Fare Probably Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 $100 Copayment: $100 $100 $100 10% Coinsurance: $62 $111 $136 Airfares for July 6-7, 2011 as of 6/26/11  
  • 166. 166© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org High Deductible: First Class Fare Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 $100 Copayment: $100 $100 $100 10% Coinsurance: $62 $111 $136 $500 Deductible: $500 $500 $500 Airfares for July 6-7, 2011 as of 6/26/11   
  • 167. 167© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Price Difference: Lowest Coach Fare Wins Boston Cleveland ? Consumer Share of Travel Cost USAirways 1-Stop Coach $622 United Non-Stop Coach $1,107 United Non-Stop First Class $1,355 $100 Copayment: $100 $100 $100 10% Coinsurance: $62 $111 $136 $500 Deductible: $500 $500 $500 Lowest Coach Fare: $0 $485 $733 Airfares for July 6-7, 2011 as of 6/26/11    
  • 168. 168© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Where Will You Get Your Knee Replaced? Consumer Share of Surgery Cost Price #1 $20,000 Price #2 $25,000 Price #3 $30,000 Knee Joint Replacement
  • 169. 169© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Where Will You Get Your Knee Replaced? Consumer Share of Surgery Cost Price #1 $20,000 Price #2 $25,000 Price #3 $30,000 $1,000 Copayment: $1,000 $1,000 $1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 $2,000 $2,000 $5,000 Deductible: $5,000 $5,000 $5,000   Knee Joint Replacement
  • 170. 170© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Where Will You Get Your Knee Replaced? Consumer Share of Surgery Cost Price #1 $20,000 Price #2 $25,000 Price #3 $30,000 $1,000 Copayment: $1,000 $1,000 $1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 $2,000 $2,000 $5,000 Deductible: $5,000 $5,000 $5,000 Highest-Value: $0 $5,000 $10,000     Knee Joint Replacement
  • 171. 171© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Which Health System or ACO Will You Choose? Total Annual Cost Per Patient/Member Health System/ ACO #1 $6,000 Health System/ ACO #2 $8,000 Health System/ ACO #3 $10,000 Consumer Share $0 $2,000 $4,000
  • 172. 172© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Would Happen If Consumers Had Choice & Considered Value? • Minnesota Patient Choice – started by the Buyers Health Care Action Group (BHCAG) in the 1990s – “care systems” bid on risk-adjusted (total) cost of patient care (i.e., risk- adjusted global payment) – care systems are divided into cost/quality tiers based on their relative bids – consumers pay the difference in the bid price to select a care system in a higher cost tier • Results – Many consumers switched to lower cost providers – High cost providers reduced their costs to retain/attract patients
  • 173. This All Sounds Really Hard
  • 174. Can’t We Just Keep Doing What We’re Doing Today Until We Retire? This All Sounds Really Hard
  • 175. 175© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Opportunities to Reduce Costs Without Rationing Are Widely Known Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care
  • 176. 176© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Question is: How Will Purchasers Get The Savings? Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care PURCHASER ?
  • 177. 177© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Payer-Driven Approach to Achieving Savings Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care PURCHASER Physician P4P High Deductibles Narrow Networks Prior Authorization Tiering on Cost Readmission Penalty Managed Fee-for-Service
  • 178. 178© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org The Provider-Driven Approach to Achieving Savings Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care PURCHASER Coordinated Care/ Accountable Care Organization Global Pmt/Budget
  • 179. 179© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Very Different Models… Helping Patients with Chronic Disease Stay Out of Hospital Reducing Hospital Readmissions Reducing Overutilization of Outpatient Services Shifting Preference-Sensitive Care to Lower-Cost Options Reducing the Cost of Expensive Inpatient Care PURCHASER Coordinated Care/ Accountable Care Organization Physician P4P High Deductibles Narrow Networks Prior Authorization Tiering on Cost Readmission Penalty Managed Fee-for-Service Global Pmt/Budget
  • 180. 180© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …And Very Different Impacts on Physicians and Hospitals PURCHASER Managed Fee-for-Service 1. Payer defines how care should be redesigned 2. Payer obtains all savings from lower utilization 3. Payer decides how much savings to share with provider 1. Provider determines how care should be redesigned 2. Provider and Purchaser or Payer agree on adequate price for provider care and amount of savings for payer 3. Providers get to keep any additional savings and to determine how to divide it Global Pmt/Budget
  • 181. 181© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Opportunities From Completely Redesigning Payment & Delivery • Better Payment for Physicians and Hospitals – No threats of major fee cuts – No health plan/benefit manager utilization review – Physicians and hospitals paid based on quality, not volume • Truly High Quality, Patient-Centric Care – Coordinated care by multiple physicians – Care mgt from providers, not health plans or disease mgt co’s – Flexibility for telephone, internet, & home visits if patients need them • Greater Patient Engagement – Zero or low copayments for essential medications and services – Higher cost-sharing for unnecessary tests and services – Incentives for patient wellness and adherence • Less Spending on Administrative Costs – Less spending for health plan administrative costs and profits – Less spending by providers on payer-imposed administrative costs • Lower Government Spending and Smaller Deficits • Better Health for Citizens and More Affordable Insurance
  • 182. 182© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Learn More About Win-Win-Win Payment and Delivery Reform Center for Healthcare Quality and Payment Reform www.PaymentReform.org
  • 183. For More Information: Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform Miller.Harold@GMail.com (412) 803-3650 www.CHQPR.org www.PaymentReform.org
  • 185. What About Primary Care and Non-Proceduralists?
  • 186. 186© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Today: Reactive Care for Chronic Disease, Many Hospitalizations TODAY $/Patient # Pts Total $ Physician Svcs PCP $600 500 $300,000 Specialist 0 $0 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 Total Pmt (Cost) $2,900,000 500 Moderately Severe Chronic Disease Patients • PCP paid only for periodic office visits • Patients do not take maintenance medications reliably • 50% of patients are hospitalized each year for exacerbations • Specialist only sees patient during hospital admissions
  • 187. 187© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Pay the PCP for Proactive Care Management TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 Total Pmt (Cost) $2,900,000
  • 188. 188© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Pay the Specialist to Be a Responsive Medical Neighbor TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
  • 189. 189© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Provide Adequate Resources to Support Patients TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 Total Pmt (Cost) $2,900,000
  • 190. 190© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Can We Afford a 127% Increase in Spending on Ambulatory Care? TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 Specialist $400 250 $100,000 Total Pmt (Cost) $2,900,000
  • 191. 191© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Yes, If It Succeeds In Reducing Hospitalizations TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 150 $1,500,000 -40% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000 $2,180,000 -25%
  • 192. 192© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org But What About the Hospital? TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist 0 $0 $300 500 $150,000 +50% $80,000 Hospitalizations Hospital $10,000 250 $2,500,000 150 $1,500,000 -40% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000 $2,180,000 -25%
  • 193. 193© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Analyze the Hospital’s Cost Structure TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
  • 194. 194© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Continue to Cover the Fixed Costs TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
  • 195. 195© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Save on Variable Costs With Fewer Patients TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
  • 196. 196© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Increase the Hospital’s Contribution Margin TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 $82,500 +10% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000
  • 197. 197© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Payer Still Spends Less TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 $82,500 +10% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000 $2,817,500 -3%
  • 198. 198© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Win-Win-Win: Better Care, Higher Physician Pay, Lower Spending TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 $82,500 +10% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $2,900,000 $2,817,500 -3% Physicians Win Payer Wins Hospital Wins
  • 199. 199© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Use a Condition-Based Payment for the Patients to Support Care TODAY TOMORROW $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Specialist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0% Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40% Hosp. Margin $300 3% $75,000 $82,500 +10% Specialist $400 250 $100,000 $0 Total Pmt (Cost) $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%
  • 201. 201© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Instead of Having To Accept What Medicare and Health Plans Pay… CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Medicare FFS Medicaid FFS MA Plans Commercial FFS
  • 202. 202© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Could Happen If Physicians Had Their Own Health Plans? CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries MA Plans Physician -Owned Health Plan ? ? ?
  • 203. 203© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Get Risk-Adjusted Payment from Medicare, Pay Physicians Better CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Physician -Owned Health Plan Risk-Adjusted Medicare Advantage Payment Better Physician Payment
  • 204. 204© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Contract Directly with Self-Insured Employers, Pay Physicians Better CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Physician -Owned Health Plan Risk-Adjusted Medicare Advantage Payment Better Physician Payment Risk-Adjusted Direct Contract
  • 205. 205© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Use Exchanges for Small Group Business, Pay Physicians Better CMS Physician Group, IPA, or Health System Commercial Health Plans Medicaid MCOs Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Physician -Owned Health Plan Risk-Adjusted Medicare Advantage Payment Better Physician Payment Insurance Exchanges Risk-Adjusted Premium Revenue Risk-Adjusted Direct Contract
  • 206. 206© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Contract Directly With State for Medicaid, Pay Physicians Better CMS Physician Group, IPA, or Health System Commercial Health Plans Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups State Medicaid Medicare Beneficiaries Physician -Owned Health Plan Risk-Adjusted Medicare Advantage Payment Better Physician Payment Risk-Adjusted Premium Revenue Risk-Adjusted Direct Contract Insurance Exchanges Risk-Adjusted Global Payment
  • 207. 207© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Get Global Payment for Large Groups, Pay Physicians Better CMS Physician Group, IPA, or Health System Physician -Owned Health Plan Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups Insurance Exchanges State Medicaid Medicare Beneficiaries Risk-Adjusted Direct Contract Risk-Adjusted Medicare Advantage Payment Better Physician Payment Risk-Adjusted Premium Revenue Risk-Adjusted Global Payment
  • 208. 208© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Result: A “Single Payer System” Controlled by Physicians CMS Physician Group, IPA, or Health System Physician -Owned Health Plan Self-Insured Employers Individuals & Small Groups Fully Insured Large Groups Insurance Exchanges State Medicaid Medicare Beneficiaries Risk-Adjusted Direct Contract Risk-Adjusted Medicare Advantage Payment Better Physician Payment Risk-Adjusted Premium Revenue Risk-Adjusted Global Payment ONE PAYER, MANY CUSTOMERS
  • 210. 210© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org To Set A Fair Price, Start With Existing Costs… COST TIME Costs in FFS Costs in FFS Costs in FFS
  • 211. 211© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …Set a Payment Level That Is ≤ Expected Costs… COST TIME Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level Exp. Costs in FFS $
  • 212. 212© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org …If All Goes Well, Costs Will Be Lower Than the Payment Level… COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level
  • 213. 213© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org ...And Both the Purchaser and Provider Will “Win” COST TIME Costs in New Pmt $$$ $$$ Bonus for Provider Savings For Purchaser Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level
  • 214. 214© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org What Everybody Fears: All Won’t Go Well (Costs Go Up) COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level
  • 215. 215© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Many Different Reasons Costs May Increase Beyond Payment COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Excess Cost Unusually Costly Patient Overutilization of Services New, High-Cost Treatment Many Avoidable Complications Higher-Severity Patients Large Random Variation Failure to Follow Guidelines Bundled or Episode Payment Level
  • 216. 216© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Providers Should NOT Be Expected To Take Insurance Risk COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Excess Cost Unusually Costly Patient Overutilization of Services New, High-Cost Treatment Many Avoidable Complications Higher-Severity Patients Large Random Variation Failure to Follow Guidelines Provider Performance Risk Insurance Risk Bundled or Episode Payment Level
  • 217. 217© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org Four Mechanisms for Separating Insurance and Performance Risk COST TIME Costs in New Pmt Costs in FFS Costs in FFS Costs in FFS Bundled or Episode Payment Level Excess Cost Unusually Costly Patient Overutilization of Services New, High-Cost Treatment Many Avoidable Complications Higher-Severity Patients Severity Adjustment Large Random Variation Failure to Follow Guidelines Outlier Pmt/ Stop-Loss Risk Exclusions Risk Corridors Performance Risk (Provider’s Responsibility)