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WIN-WIN-WIN APPROACHESTO ACCOUNTABLE CARE
How Providers, Hospitals, Employers, and Patients
Can All Benefit fromHealthcare Payment and Delivery Reform
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
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2© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
In Another Country,
Passage of Landmark Legislation
ACA
Affordable Car Act
Goal:
Every citizen should have affordable transportation
Method for Achieving the Goal:
Give all citizens insurance that would cover the cost
of new automobiles and repairs when needed
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3© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How to Control Spending on Cars
If Insurance Is Paying?
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4© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
To Control Spending, Payers Set
Separate Fees for Each Car Part
HCPCS Codes(Hierarchical
Car PartsCompensation
System)
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5© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Auto Workers Were Paid Based
On How Many Parts They Installed
HCPCS Codes(Hierarchical
Car PartsCompensation
System)AMA
Automobile ManufacturingAssociation
CPT System(Car Parts Tokens)
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6© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Result for Drivers?
Cars had many unnecessary parts
Cars were readmitted to the factory20% of the time to correct malfunctions
This occurred despite requirements for accreditation of factories by
the Joint Commission on Auto Creationand certification of auto workers by
the National Committee on Quality Autos
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7© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Spending on Cars Grew Rapidly
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8© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What to Do?
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9© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
More Parts Were Used
Factories Mergedto Resist Fee Cuts
$
$ $
What to Do?
Cut Fees for Parts & Assembly
Cut Fees forParts & Assembly
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10© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What to Do?
Pay for Bundles Instead of Parts
Driving Related Groups (DRGs)
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11© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Cost Per Bundle Declined, But
More Expensive Bundles Used
Consumers were given
bundles they didn’t need
Small Engines Bigger Engines Really Big Engines
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12© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What to Do?
Consumer-Directed Car Payment
Consumer Share
of Car Price
$1,000 Copayment
10% Coinsurance
w/$2,000 OOP Max
$5,000 Deductible
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13© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Since Total Price Didn’t Matter,
Consumers Chose Expensive Cars
Consumer Share
of Car Price
Price
$18,000
Price
$320,000
$1,000 Copayment $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max
$2,000 $2,000
$5,000 Deductible $5,000 $5,000
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14© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Cost-Sharing Also Applied to
Preventive Maintenance…
Consumer Share
of Car Maintenance
Preventive
Maintenance
Cost Sharing Co-payment
High Deductible Full Cost
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15© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Resulting in Deferred
Maintenance & Expensive Repairs
Consumer Share
of Car Maintenance
Preventive
Maintenance
Deferred
Maintenance
Cost Sharing Co-payment Co-insurance
High Deductible Full Cost No More Than
Out-of-Pocket
Limit
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16© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What to Do?
“Shared Savings” ProgramsSTEP 1
Continue Paying Factories & Workers Based on Parts
0-50% of Difference in Cost of PartsCompared toOther CarsIf Minimum
SavingsThreshold
and QualityTargets
Were Met
+
STEP 2Compare Cost of Parts
and Award Shared Savings
# of Partsx
Cost of Parts
# of Partsx
Cost of Parts
<
RESULT
• Some factories reduced parts but not enough to get shared savings
• Some factories spent more to meet quality targets than they received in shared savings
• Some factories left out parts where there were no quality measures
• Most factories and workers lost money and went back to business as usual
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Was There a Better Way?
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18© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay for Complete Cars With
Warranties, Not Parts & Repairs
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19© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Have People Pay the Last Dollar,
Not the First Dollar for Cost-Share
Consumer Share
of Car Price
Price
$18,000
Price
$320,000
$1,000 Copayment: $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max:
$2,000 $2,000
$5,000 Deductible: $5,000 $5,000
Highest-Value: $1,000 $303,000
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20© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Design Cost Sharing to Encourage
Preventive Maintenance
Consumer Share
of Maintenance
Preventive
Maintenance
Deferred
Maintenance
Value-Based
Cost SharingNo or Low Copay Co-insurance
High Deductible
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21© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay for What Consumers Need:
Transportation, Not (Just) Cars
Allow the flexibility to deliver services
that best meet the individual’s needs
with accountability for controlling costs
$
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22© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
In the U.S.,
A Historic Legislative Success
ACA
Affordable Care Act
Goal:
Every citizen should have affordable healthcare
Method for Achieving the Goal:
Give all citizens insurance that would cover the cost
of healthcare services when needed
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23© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How to Control Spending on Care
When Insurance Is Paying?
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24© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How to Control Spending on Care
When Insurance Is Paying?
Pay for Parts?
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25© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How to Control Spending on Care
When Insurance Is Paying?
Pay for Parts? Pay for Outcomes?
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26© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Diabetes:
A Quarter-Trillion Dollar Problem
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Bad Outcomes &High Spending
$176 Billion in
Healthcare Spending
$69 Billion in
Reduced Productivity
$245 Billion
Total Cost
Source:
“Economic Costs of Diabetes
in the U.S. in 2012,”
Diabetes Care (Volume 36)
April 2013
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27© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s America’s Strategy for
Reducing Cost, Improving Quality?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
Bad Outcomes &High Spending
$176 Billion in
Healthcare Spending
$69 Billion in
Reduced Productivity
$245 Billion
Total Cost
?
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28© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Occasional 15 Minute Visits With
Overworked PCPs to Order Meds
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
Bad Outcomes &High Spending
$176 Billion in
Healthcare Spending
$69 Billion in
Reduced Productivity
$245 Billion
Total Cost
PCP15 MinuteOffice Visit
$73/visit
Medications
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29© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
With Limited Time & Resources,
Is It Surprising Quality is Low?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
Bad Outcomes &High Spending
PCP15 MinuteOffice Visit
$73/visit
MedicationsBlood Sugar
Cholesterol
Blood Pressure
Tobacco Use
Aspirin Use
Eye Exams
Kidney Exams
Quality Metrics
D5
<40%
Source: Average
D5 Composite Measures in
Cincinnati and Minnesota
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30© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Why Don’t PCPs
Do a Better Job?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
Bad Outcomes &High Spending
PCP15 MinuteOffice Visit
$73/visit
MedicationsBlood Sugar
Cholesterol
Blood Pressure
Tobacco Use
Aspirin Use
Eye Exams
Kidney Exams
Quality Metrics
D5
<40%
Source: Average
D5 Composite Measures in
Cincinnati and Minnesota
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31© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
More Time With Patients =
Lower Revenues to PCP Practice
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Medications
20 minutes per patient
@ $73 Level 3 E&M=
25% Less Revenue
25 minutes per patient
@ $108 Level 4 E&M=
11% Less Revenue
Bad Outcomes &High Spending
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32© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Proactive Outreach to Patients
to Improve Quality?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice VisitPhone Call
or Email
Medications
$0 Payment
Bad Outcomes &High Spending
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33© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Group Visits to Deliver Care
at Lower Cost?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice VisitPhone Call
or Email
Group Visit
Medications
$0 Payment
Bad Outcomes &High Spending
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34© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hire a Nurse/Diabetes Educator
to Help Patients Manage Health?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Medications
$0 Payment
Bad Outcomes &High Spending
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35© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Call an Endocrinologist to Help
With Complex Patients?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Medications
$0 Payment
Bad Outcomes &High Spending
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36© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
No Payment for Coordination of
PCPs and Specialists
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Endocrinologist
Call w/ PCP
Medications
$0 Payment
$0 Payment
Bad Outcomes &High Spending
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37© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payers Do Pay for Office Visits
with Endocrinologists….
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit $108-166
Bad Outcomes &High Spending
Medications
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38© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Long Waits Due to Many Visits for
Issues That Needed Only a Call…
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Bad Outcomes &High Spending
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit $108-166
Medications
3-9 Month
Wait for Visit
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39© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And the Extra Copay May Deter
the Patient From Making the Visit
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
3-9 Month
Wait for Visit
ExtraPatientCopay
Bad Outcomes &High Spending
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit $108-166
Medications
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40© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
If Patients Can’t Afford Meds,
All the Rest May Be in Vain
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
MedicationsLow Copay
High CopayHigh Cost-Share
Bad Outcomes &High Spending
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
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41© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
We Don’t Pay for All the Right Parts,
And We Pay A Lot for the Repairs
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
MedicationsLow Copay
High CopayHigh Cost-Share
Bad Outcomes &High Spending
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
$0 Payment
$0 Payment
$0 Payment
$0 Payment
$0 Payment
Lower Payment
HIGH
PAYMENT
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42© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
So Is It Any Surprise that Quality
is Poor and Spending is High?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Blood Sugar
Cholesterol
Blood Pressure
Tobacco Use
Aspirin Use
Eye Exams
Kidney Exams
Quality Metrics
D5
<40%
Bad Outcomes &High Spending
MedicationsLow Copay
High Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
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43© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Are Medicare and Private
Health Plans Doing to Fix This?
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Bad Outcomes &High Spending
MedicationsLow Copay
High Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
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44© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Strategy 1:
Force PCPs to Buy an EHR
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
RequiringEHRs
• Increases expensesfor PCP practice
• Takes time away fromoffice visits with patients
• PCP EHR and endocrinologist EHR may not be able to exchange data even ifHIPAA barriers can beovercome
Bad Outcomes &High Spending
MedicationsLow Copay
High Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
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45© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Strategy 2:
Bonuses/Penalties for Quality
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
P4P/VBP
Blood Sugar
Cholesterol
Blood Pressure
Tobacco Use
Aspirin Use
Eye Exams
Kidney Exams
Quality Metrics
• No additional resourcesto address the barrierspreventing higher quality
• Unintended consequencesof over-focus on metrics
Hospitalizations& Death Due to Overtreatment
Bad Outcomes &High Spending
MedicationsLow Copay
High Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
$
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46© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
More Admits/Deaths Today Due
to Low Blood Sugar Than High
Hypoglycemia
1 Yr Mortality: 19.9%
30 Day Readmits: 16.3%
Hyperglycemia
1 Yr Mortality: 17.1%
30 Day Readmits: 15.3%
Source: National Trends in US Hospital Admissions for Hyperglycemia and HypoglycemiaAmong Medicare Beneficiaries, 1999 to 2011 JAMA Internal Medicine May 17, 2014
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47© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Strategy 3:
“Shared Savings”
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Non-DiabetesSpendingShared
Savings
• No additional upfrontresources to address the barriers preventing higher quality care
• Puts physicians at riskfor services and costs they cannot control
MedicationsLow Copay
High Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
$ $
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48© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Strategy 4:
Patient-Centered Medical Home
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
PCMH/PMPM
• Monthly payment may beto small or inflexible toovercome service barriers
• No support for specialists
• Quality improvement orshared savings requirements may beunreasonable given sizeof monthly payment
Bad Outcomes &High Spending
(Small)MonthlyPayment
PerPatient
MedicationsLow Copay
High Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
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49© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Way:
Condition-Based Payment
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Diabetes-RelatedCosts
MedicationsLow Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
Quality of Life
Low Cost of Care
Productivity
CONDITION-BASED
PAYMENT
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50© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Flexibility to Deliver Care
Without Restrictions of FFS
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Diabetes-RelatedCosts
MedicationsLow Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
Quality of Life
Low Cost of Care
Productivity
FLEXIBILITY
ABOUT
WHICH
SERVICES
TO
DELIVER
TO
HELP
PATIENTS
STAY
WELL
CONDITION-BASED
PAYMENT
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51© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Accountability to Ensure
Outcomes and Costs Improve
Patient with
Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
15 MinuteOffice Visit
PCP
LongerOffice Visit
Nurse orDiabetesEducator
Phone Callor Email
Group Visit
Call toSpecialist
Diabetes-RelatedCosts
MedicationsLow Copay
Endocrinologist
Call w/ PCP
30-45 Min.Office Visit
Quality of Life
Low Cost of Care
Productivity
FLEXIBILITY
ABOUT
WHICH
SERVICES
TO
DELIVER
TO
HELP
PATIENTS
STAY
WELL
ACCOUNTABILITY
FOR
MANAGING
AVOIDABLE
COSTS
RELATED TO
DIABETES
AND IMPROVING
OUTCOMES
CONDITION-BASED
PAYMENT
Page 52
Can We Afford to Pay More
for High-Quality, Coordinated Care
When We’re Trying
to Reduce Healthcare Spending?
Page 53
53© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money Today is
Going to Hospitals, Not Doctors
Source:
“Economic
Costs of
Diabetes
in the U.S.
in 2012,”
Diabetes
Care
(Volume 36)
April 2013
HospitalAdmissions
(43%)
Physicians (9%)
Page 54
54© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Could We Afford to Spend 20%
More on Better Care Management?
HospitalAdmits
Physicians +20%
Page 55
55© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Small Reduction in Expensive
Complications Saves A Lot of $$$
HospitalAdmits
Physicians +20%
-6%
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56© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
20% More $ on Care Mgt +
6% Fewer Admits = Lower Total $
HospitalAdmits
Physicians +20%
-6%
-1%
Page 57
57© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Upfront Investment Is Needed,
Targeted by Docs to Achieve Impact
HospitalAdmits
Physicians +20%
-6%
-1%
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58© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Today: Reactive Care for Chronic
Disease, Many HospitalizationsCURRENT
$/Patient # Pts Total $
Physician Svcs
PCP $600 500 $300,000
Hospitalizations
Admissions $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Spending 500 $2,900,000
500 ModeratelySevere Chronic
Disease Patients• PCP paid only for
periodic office visits
• Patients do not takemaintenance medicationsreliably
• 50% of patients are hospitalized each yearfor exacerbations
• Specialist only sees patient duringhospital admissions
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59© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Is There a Better Way?
CURRENT FUTURE
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs ? ?
PCP $600 500 $300,000 ? ?
Hospitalizations ? ?
Admissions $10,000 250 $2,500,000 ? ?
Specialist $400 250 $100,000 ? ?
Total Spending 500 $2,900,000 ? ?
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60© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay the PCP for
Proactive Care ManagementCURRENT FUTURE
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Hospitalizations
Admissions $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Spending 500 $2,900,000
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61© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay the Specialist to Co-Manage
The Patient’s CareCURRENT FUTURE
$/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%
Hospitalizations
Admissions $10,000 250 $2,500,000
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000
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62© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Provide Nursing Support
For Patient Education & Care MgtCURRENT FUTURE
$/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
Admissions $10,000 250 $2,500,000
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000
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Can We Afford to Double Spending
on Ambulatory Care?CURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Admissions $10,000 250 $2,500,000
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000
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Yes, If It Succeeds In
Reducing HospitalizationsCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Admissions $10,000 250 $2,500,000 $10,000 215 $2,150,000 -14%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000 500 $2,830,000 -2.5%
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Improved Chronic Disease Mgt Can
Potentially Generate Large SavingsCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000 -40%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000 500 $2,180,000 -25%
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But What About the Hospital?
CURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000 -40%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000 500 $2,180,000 -25%
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What Should Matter to Hospitals is
Margin, Not Revenues (Volume)
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Hospital Costs Are Not
Proportional to Utilization
$800$820$840$860$880$900$920$940$960$980$1,000
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$0
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#Patients
Cost & Revenue Changes With Fewer Patients
.
Costs
20% reduction in volume
7% reduction
in cost
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Reductions in Utilization Reduce
Revenues More Than Costs
$800$820$840$860$880$900$920$940$960$980$1,000
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$0
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#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
20% reduction in volume
7% reduction
in cost
20% reduction
in revenue
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Causing Negative Margins
for Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
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$0
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#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Will Be
Underpaying For
Care If
Admissions,
Readmissions, Etc.
Are Reduced
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But Spending Can Be Reduced
Without Bankrupting Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
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#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Can
Still Save $
Without Causing
Negative Margins
for Hospital
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How Can 40% Fewer Admissions
Be a Win for the Hospital?CURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000 -40%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000 500 $2,180,000 -25%
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Analyze the Hospital’s
Cost StructureCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000
Hosp. Variable $3,700 37% $925,000
Hosp. Margin $300 3% $75,000
Total $10,000 250 $2,500,000
Specialist (Inpt) $400 250 $100,000
Total Spending 500 $2,900,000
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What Happens to Hospital Finances
When Admissions Go Down?CURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000
Hosp. Variable $3,700 37% $925,000
Hosp. Margin $300 3% $75,000
Total $10,000 250 $2,500,000 150
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000
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Continue to Cover the Fixed Costs
CURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
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
Total $10,000 250 $2,500,000 150
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000
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Save on Variable Costs
With Fewer PatientsCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 $555,000 -40%
Hosp. Margin $300 3% $75,000
Total $10,000 250 $2,500,000 150
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000
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Increase the Hospital’s
Contribution MarginCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $10,000 250 $2,500,000 150
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000
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Hospital Gets Less Total Revenue,
But is Better Off FinanciallyCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $10,000 250 $2,500,000 150 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000
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And the Payer Still Spends Less
CURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $10,000 250 $2,500,000 150 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000 500 $2,817,500 -3%
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Win-Win-Win: Better Care, Higher
Physician Pay, Lower SpendingCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $10,000 250 $2,500,000 150 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000 500 $2,817,500 -3%
Payer Wins
Hospital Wins
Providers Win
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What Payment Model Supports This
Win-Win-Win Approach?CURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $10,000 250 $2,500,000 150 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000 500 $2,817,500 -3%
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You Don’t Want to Try and
Renegotiate Individual FeesCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $10,000 250 $2,500,000 $14,250 150 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending 500 $2,900,000 500 $2,817,500 -3%
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Look at What is Being Spent Today
in Total on the Patient’s ConditionCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total 250 $2,500,000 150 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending $5,800 500 $2,900,000 500 $2,817,500 -3%
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Tell the Payer You’ll Do It For Less
Than They’re Spending TodayCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total 250 $2,500,000 150 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%
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Use That Budget to Pay Doctors &
Hospitals What They Really NeedCURRENT FUTURE
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 500 $450,000 +50%
Specialist 500 $150,000 +50%
RN Care Mgr $80,000
Total $300,000 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $2,500,000 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%
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Condition-Based Payment Puts the
Providers in Charge of Care & PmtCURRENT FUTURE
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 500 $450,000 +50%
Specialist 500 $150,000 +50%
RN Care Mgr $80,000
Total $300,000 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $2,500,000 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%
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“Shared Savings” Doesn’t Solve
the Problems with FFS
• No actual change in payment to the physicians– No funding for the nurse
– No payment for phone calls instead of office visits
– No flexibility to proactive outreach instead of reactive care
• Arbitrary “share” of savings may not be sufficient to cover higher costs of care or losses from FFS revenue
– <50% of savings is not adequate if >50% of costs are fixed
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Condition-Based Payment Allows
A Win-Win-Win SolutionCURRENT FUTURE
$/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
Total $300,000 500 $680,000 127%
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Total $10,000 250 $2,500,000 150 $2,137,500 -15%
Specialist (Inpt) $400 250 $100,000 $0
Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%
Providers Win
Payer Wins
Hospital Wins
Page 89
What About Proceduralists?
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90© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing
Avoidable ProceduresTODAY
$/Patient # Pts Total $
Physician Svcs
Evaluations $100 300 $30,000
Procedures $600 200 $120,000
Subtotal $150,000
Hospital Pmt $7,000 200 $1,400,000
Total Pmt/Cost $1,550,000
Optional Procedurefor a Condition
• Physician evaluates allpatients
• Physician performsprocedure on 2/3 ofevaluated patients
• Up to 10% of proceduresmay be avoidablethrough patient choiceor alternative treatment
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Under FFS, Fewer Procedures=>
Losses for Physicians and HospitalsTODAY w/ UTILIZATION CTRL
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $100 300 $30,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $138,000 -8%
Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%
Total Pmt/Cost $1,550,000 $1,398,000 -10%
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Is There a Better Way?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 ? ? ?
Procedures $600 200 $120,000 ? ? ?
Subtotal $150,000 ?
? ? ?
Hospital Pmt $7,000 200 $1,400,000 ? ? ?
Total Pmt/Cost $1,550,000 ? ? ?
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Pay Physicians to Manage
Patient Care, Not to Do ProceduresTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%
Total Pmt/Cost $1,550,000 $1,413,000 -9%
Better Payment for Condition Management• Physician paid adequately to engage in
shared decision making process with patients and given the decision support tools to ensure quality
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Physicians Could Be Paid More
While Still Reducing Total $TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%
Total Pmt/Cost $1,550,000 $1,413,000 -9%
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What About the Hospital?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt $7,000 200 $1,400,000 $7,000 180 $1,260,000 -10%
Total Pmt/Cost $1,550,000 $1,413,000 -9%
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To Create a Win for the Hospital,
Determine the Cost StructureTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000
Variable Costs $3,150 45% $630,000
Margin $350 5% $70,000
Subtotal $7,000 200 $1,400,000 180
Total Pmt/Cost $1,550,000
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Preserve Revenues Needed
for Fixed Costs…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000 $700,000 -0%
Variable Costs $3,150 45% $630,000
Margin $350 5% $70,000
Subtotal $7,000 200 $1,400,000 180
Total Pmt/Cost $1,550,000
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…Save on Variable Costs With
Fewer Procedures…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000 $700,000 -0%
Variable Costs $3,150 45% $630,000 $567,000 -10%
Margin $350 5% $70,000
Subtotal $7,000 200 $1,400,000 180
Total Pmt/Cost $1,550,000
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…Improve Contribution Margin…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000 $700,000 -0%
Variable Costs $3,150 45% $630,000 $567,000 -10%
Margin $350 5% $70,000 $71,400 +2%
Subtotal $7,000 200 $1,400,000 180
Total Pmt/Cost $1,550,000
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100© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And The Payer
Still Saves MoneyTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000 $700,000 -0%
Variable Costs $3,150 45% $630,000 $567,000 -10%
Margin $350 5% $70,000 $71,400 +2%
Subtotal $7,000 200 $1,400,000 180 $1,338,400 -4%
Total Pmt/Cost $1,550,000 $1,491,400 -4%
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I.e., Win-Win-Win for
Physician, Hospital, and PayerTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000
Procedures $600 200 $120,000 $600 180 $108,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000 $700,000 -0%
Variable Costs $3,150 45% $630,000 $567,000 -10%
Margin $350 5% $70,000 $71,400 +2%
Subtotal $7,000 200 $1,400,000 180 $1,338,400 -4%
Total Pmt/Cost $1,550,000 $1,491,400 -4%
Physician Wins
Payer Wins
Hospital Wins
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Pay Based on the Patient’s
Condition, Not on the ProcedureTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000
Procedures $600 200 $120,000
Subtotal $150,000
Hospital Pmt
Fixed Costs $3,500 50% $700,000
Variable Costs $3,150 45% $630,000
Margin $350 5% $70,000
Subtotal $7,000 200 $1,400,000
Total Pmt/Cost $5,167 300 $1,550,000
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Plan to Offer Care of the Condition
at a Lower Cost Per PatientTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000
Procedures $600 200 $120,000
Subtotal $150,000
Hospital Pmt
Fixed Costs $3,500 50% $700,000
Variable Costs $3,150 45% $630,000
Margin $350 5% $70,000
Subtotal $7,000 200 $1,400,000
Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%
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Use the Payment as a Budget to
Redesign Care…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000
Procedures $600 200 $120,000
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000
Variable Costs $3,150 45% $630,000
Margin $350 5% $70,000
Subtotal $7,000 200 $1,400,000 $1,338,400 -4%
Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%
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…And Let the Health System
Decide How It Should Be PaidTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000 +50%
Procedures $600 200 $120,000 $600 180 $108,000 -10%
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000 $700,000 -0%
Variable Costs $3,150 45% $630,000 $567,000 -10%
Margin $350 5% $70,000 $71,400 +2%
Subtotal $7,000 200 $1,400,000 $1,338,400 -4%
Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%
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Would “Shared Savings”
Achieve the Same Thing?
Page 107
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Same Example As Before…
Year 0
Physician Svcs
Evaluations $30,000
Procedures $120,000
Subtotal $150,000
Hospital Pmt
Procedures $1,400,000
Subtotal $1,400,000
Total Pmt/Cost $1,550,000
Savings
# Patients $/Patient
300 $100
200 $600
200 $7,000
Optional Procedurefor a Condition
• Physician evaluates allpatients
• Physician performsprocedure on 2/3 ofevaluated patients
• Up to 10% of proceduresmay be avoidablethrough patient choiceor alternative treatment
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Year 1: Physicians & Hospitals Both
Lose With Fewer Procedures)Year 0 Year 1 Chg
Physician Svcs
Evaluations $30,000 $30,000
Procedures $120,000 $108,000
$0
Subtotal $150,000 $138,000 -8%
Hospital Pmt
Procedures $1,400,000 $1,260,000
Subtotal $1,400,000 $1,260,000 -10%
Total Pmt/Cost $1,550,000 $1,398,000 -10%
Savings $152,000
ReduceProcs
by 10%
Year 1:Lower
Revenuefor
Docs &Hospital
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109© 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 $30,000 $30,000 $30,000
Procedures $120,000 $108,000 $108,000
Shared Savings $0 $12,000
Subtotal $150,000 $138,000 -8% $150,000 0%
Hospital Pmt
Procedures $1,400,000 $1,260,000 $1,260,000
Shared Savings $64,000
Subtotal $1,400,000 $1,260,000 -10% $1,324,000 -5%
Total Pmt/Cost $1,550,000 $1,398,000 -10% $1,474,000 -5%
Savings $152,000 $76,000
ReduceProcs
by 10%
Year 1:Lower
Revenuefor
Docs &Hospital
Year 2:SharedSavingsOffsetsSome
Losses
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110© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…But Physicians and Hospitals Still
Have Net 2-Year LossesYear 0 Year 1 Chg Year 2 Chg Cumulative
Physician Svcs
Evaluations $30,000 $30,000 $30,000
Procedures $120,000 $108,000 $108,000
Shared Savings $0 $12,000
Subtotal $150,000 $138,000 -8% $150,000 0% -$12,000
-4%
Hospital Pmt
Procedures $1,400,000 $1,260,000 $1,260,000
Shared Savings $64,000
Subtotal $1,400,000 $1,260,000 -10% $1,324,000 -5% -$216,000
-8%
Total Pmt/Cost $1,550,000 $1,398,000 -10% $1,474,000 -5% $228,000
Savings $152,000 $76,000 -7%
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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
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Condition-Based Payment Defines
The Right Way to “Share Savings”TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $100 300 $30,000 $150 300 $45,000 +50%
Procedures $600 200 $120,000 $600 180 $108,000 -10%
Subtotal $150,000 $153,000 +2%
Hospital Pmt
Fixed Costs $3,500 50% $700,000 $700,000 -0%
Variable Costs $3,150 45% $630,000 $567,000 -10%
Margin $350 5% $70,000 $71,400 +2%
Subtotal $7,000 200 $1,400,000 $1,338,400 -4%
Total Pmt/Cost $5,167 300 $1,550,000 $4,971 300 $1,491,400 -4%
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Savings from Shifting to Lower
Cost Procedures and Settings• Maternity Care
– Vaginal delivery instead of C-Section
– Term delivery instead of early elective delivery
– Delivery in birth center instead of hospital
• Back Pain– Less radical surgery
– Physical therapy instead of surgery
• Chest Pain– History and exam before imaging
– Lower cost imaging
– Non-invasive imaging instead of invasive imaging
– Medical management instead of invasive treatment
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Higher Condition-Based Payment
For Higher-Acuity PatientsTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Higher-Acuity
Evaluations $100 150 $15,000$741
150+16%
Procedures $600 135 $81,000 122
Fixed Costs $472,500 $472,500 0%
Variable Costs $3,150 135 $425,250 $382,725 -10%
Hosp. Margin $47,250 $48,668 +3%
Total Payment $6,940 150 $1,041,000 $6,767 150 $1,014,975 -3%
Lower-Acuity
Evaluations $100 150 $15,000$455
150$68,213 +14%
Procedures $600 75 $45,000 68
Fixed Costs $262,500 $262,500 -0%
Variable Costs $3,150 75 $236,250 $212,625 -10%
Hosp. Margin $26,250 $27,038 +3%
Total Payment $3,900 150 $585,000 $3,803 150 $570,375 -3%
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Opportunities for Reducing
Spending Exist in Every Specialty
Psychiatry
OB/GYN
OrthopedicSurgery
Opportunitiesto Improve Care
and Reduce Cost
• Reduce infectionsand complications
• Use less expensivepost-acute carefollowing surgery
• Reduce ER visitsand admissions forpatients withdepression andchronic disease
• Reduce use ofelective C-sections
• Reduce earlydeliveries and use of NICU
Cardiology
• Use less invasiveand expensiveprocedures when appropriate
Page 116
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Fee-for-Service Creates
Barriers to Redesigning Care
Psychiatry
OB/GYN
OrthopedicSurgery
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
• Reduce infectionsand complications
• Use less expensivepost-acute carefollowing surgery
• Reduce ER visitsand admissions forpatients withdepression andchronic disease
• Reduce use ofelective C-sections
• Reduce earlydeliveries and use of NICU
• Similar/lower payment forvaginal deliveries
• No flexibility toincrease inpatientservices to reducecomplications &post-acute care
• No payment forphone consults with PCPs
• No payment forRN care managers
Cardiology
• Use less invasiveand expensiveprocedures when appropriate
• Payment is basedon which procedure is used,not the outcomefor the patient
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There Are Win-Win-Win Solutions
Through Better Payment Systems
Psychiatry
OB/GYN
OrthopedicSurgery
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAccountable
Payment Models
• Reduce infectionsand complications
• Use less expensivepost-acute carefollowing surgery
• Reduce ER visitsand admissions forpatients withdepression andchronic disease
• Reduce use ofelective C-sections
• Reduce earlydeliveries and use of NICU
• Similar/lower payment forvaginal deliveries
• Condition-basedpaymentfor total cost ofdelivery in low-riskpregnancy
• Episode paymentfor hospital andpost-acute carecosts withwarranty
• No flexibility toincrease inpatientservices to reducecomplications &post-acute care
• Joint condition-based payment to PCP andpsychiatrist
• No payment forphone consults with PCPs
• No payment forRN care managers
Cardiology
• Use less invasiveand expensiveprocedures when appropriate
• Condition-basedpayment coveringCABG, PCI, or medicationmanagement
• Payment is basedon which procedure is used,not the outcomefor the patient
Page 118
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Examples from Other Specialties
Oncology
Radiology
Gastroenterology
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAccountable
Payment Models
• Reduce unnecessarycolonoscopies andcolon cancer
• Reduce ER/admits forinflammatory bowel d.
• Reduce ER visitsand admissions fordehydration
• Reduce anti-emeticdrug costs
• Reduce use of high-cost imaging
• Improve diagnosticspeed & accuracy
• Low payment forreading images &penalty for 2x
• Inability to changeinapprop. orders
• Global paymentfor imaging costs
• Partnership in condition-basedpayments
• Population-basedpayment for coloncancer screening
• Condition-based pmtfor IBD
• No flexibility to focusextra resources onhighest-risk patients
• No flexibility to spendmore on care mgt
• Condition-basedpayment includingnon-oncolytic Rxand ED/hospitalutilization
• No flexibility tospend more onpreventive care
• Payment based onoffice visits, notoutcomes
Neurology
• Avoid unnecessaryhospitalizations forepilepsy patients
• Reduce strokes andheart attacks after TIA
• Condition-basedpayment for epilepsy
• Episode or condition-based payment forTIA
• No flexibility tospend more onpreventive care
• No payment tocoordinate w/ cardio
Page 119
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You Can’t Fix Fee-for-Service
With Small Add-On Payments
FFS•No payment for services that will benefit patients
•Lower revenues from reducing avoidable costs
FFS
Shared SavingsShared Savings
FFS
P4P
FFS
PMPM
Page 120
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What Takes the Time/Expertise
of an Oncology Practice?
6 Months of TreatmentNewPatient
Post-Tx Follow-Up
Page 121
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What Generates Revenues for
an Oncology Practice?
6 Months of TreatmentNewPatient
Post-Tx Follow-Up
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Mismatch Between Revenues
and Patient Care in Oncology
6 Months of TreatmentNewPatient
Post-Tx Follow-Up
Page 123
123© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment
Developed by Oncologists
6 Months of TreatmentNewPatient
Post-Tx Follow-Up
New
Patient
Payment TxMonth
Pmt
TxMonth
Pmt
TxMonth
Pmt
TxMonth
Pmt
TxMonth
Pmt
TxMonthPmt
Non-TxMo. $
Non-TxMo. $
Non-TxMo. $
Higher Payments
For More Complex Pts
Page 124
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How Does All of This
Fit Into ACOs?
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Starting With The Patients..
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
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Each Patient Should Choose &
Use a Primary Care Practice…
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
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MEDICARE/HEALTH PLAN
…Which Takes Accountability for
What PCPs Can Control/Influence
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
AccountableMedical
Home Accountability for:• Avoidable ER Visits
•Avoidable Hospitalizations
•Unnecessary Tests
•Unnecessary Referrals
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MEDICARE/HEALTH PLAN
…With a Medical Neighborhood
to Consult With on Complex Cases
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
AccountableMedical
Home
Endocrinology,
Neurology,
Psychiatry
AccountableMedicalNeighborhood
Accountability for:
•Unnecessary Tests
•Unnecessary Referrals
•Co-Managed Outcomes
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MEDICARE/HEALTH PLAN
..And Specialists Accountable for
the Conditions They Manage
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Orthopedic
Group
OB/GYN
Group
Cardiology
GroupHeart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,
Neurology,
Psychiatry
AccountableMedicalNeighborhood
Accountability for:
•Unnecessary Tests
•Unnecessary Procedures
•Infections, Complications
Page 130
130© 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
Orthopedic
Group
OB/GYN
Group
Cardiology
GroupHeart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,
Neurology,
Psychiatry
AccountableMedicalNeighborhood
ACO
Accountable PaymentModels
Page 131
131© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
Shared SavingsPayment
Primary
Care
ACO
Orthopedics OB/GYNCardiology
Shared Savings ACOs Can’t Truly
Change Care Delivery or Payment
Fee-for-ServicePayment
Expensive IT Systems
EndocrineNeurologyPsychiatry
Nurse Care Managers
Back Pain
PATIENTS
Pregnancy
Shared SavingsBonus
Diabetes
Heart
Disease
Page 132
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MEDICARE, MEDICAID, or EMPLOYER
A True ACO Can Take a Global
Payment And Make It Work
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
ACO
Orthopedic
Group
OB/GYN
Group
Cardiology
GroupHeart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,
Neurology,
Psychiatry
Risk-AdjustedGlobal Payment
AccountableMedicalNeighborhood
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You Don’t Need a Big Health
System to Manage Global Payment
• Independent PCPs & Specialists Managing Global Payments
– Northwest Physicians Network (NPN) in Tacoma, WA is an IPA with 109 PCPs
and 345 specialists in 165 practices (average size: 2.4 MDs/practice).
NPN accepts full or partial risk capitation contracts, operates its own Medicare
Advantage plan, and does third party administration for self-insured
businesses. www.npnwa.net
– North Texas Specialty Physicians, a 600 physician multi-specialty IPA in Fort
Worth, set up its own Medicare Advantage PPO plan and uses revenues from
the health plan and capitation contracts to pay its PCPs 250% of Medicare
rates and provides high quality, coordinated care to patients. www.ntsp.com
• Joint Contracting by MDs & Hospitals for Global Payments– The Mount Auburn Cambridge IPA (MACIPA) and Mount Auburn Hospital
jointly contract with three major Boston-area health plans for full-risk capitation.
The IPA is independent of the hospital; they coordinate care with each other
without any formal legal structure. www.macipa.com
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Four Things Needed
For Win-Win-Win Solutions
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Four Things Needed
For Win-Win-Win Solutions1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
Page 136
136© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How 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
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Opportunities Vary
(Significantly) By RegionBad Hearts in Detroit?Bad Backs in Grand Rapids?
Michigan
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138© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Four Things Needed
For Win-Win-Win Solutions1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
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?
Page 139
139© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Critical Element is
Shared, Trusted Data
• Healthcare Providers need to know the current utilization and
costs for their patients and the likely impact of care changes to
know whether the payment amount will cover the costs of
delivering redesigned care to the patients
• Purchasers/Payers needs to know the current utilization and
costs to know whether the proposed payment amount 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!
Page 140
140© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Four Things Needed
For Win-Win-Win Solutions1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
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?
3. Designing a Payment System 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
Page 141
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Accountability Must Be Focused on
What Each Provider Can Influence
Spendingthe
PhysicianCannotControl
Spendingthe
PhysicianCan
Controlor
Influence
Healthcare
Spendin
g
e.g., PCPs can’t reduce surgical site infections
e.g., surgeons can’t prevent diabetic foot ulcers
e.g., oncologists can’t prevent cancer
e.g., PCPs can help diabetics avoid amputations
e.g., surgeons can reduce surgical site infections
e.g., oncologists can reduce complications from
drug toxicity
Page 142
142© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Four Things Needed
For Win-Win-Win Solutions1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
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?
3. Designing a Payment System 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. Implementing the Payment and Care Delivery Changes– All payers need to change the payment system– All providers need to accept the payments and change care delivery
Page 143
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Designing Win-Win Approaches
Requires Collaboration & Trust
WIN-LOSE
Hospitals Physicians Post-Acute Purchasers
WIN-LOSE
WIN-WIN
Page 144
144© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
One Payer Changing
Is Not Enough
Payer
Provider
Payer Payer
Patient Patient Patient
Provider is only compensated for changed practices
for the subset of patients covered by participating payers
Better
Payment &
Benefits
Current
Payment &
Benefits Current
Payment &
Benefits
Page 145
145© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
All Payers Need to Change to
Enable Providers to Transform
Payer
Provider
Payer Payer
Patient Patient Patient
Better
Payment &
Benefits
Better
Payment
& Benefits Better
Payment
& Benefits
Page 146
146© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payers Need to Truly Align to
Allow Focus on Better Care
Payer
Provider
Payer Payer
Patient Patient Patient
Better
Payment
System A
Better
Payment
System B Better
Payment
System C
Even if every payer’s system is better than it was, if they’re all different, providers will spend too much time
and money on administration rather than care improvement
Page 147
147© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
State/Medicare Multi-Payer
Primary Care Demonstration
PrimaryCare
Practice
PrimaryCare
Practice
PrimaryCare
Practice
MedicarePrivatePayer
PrivatePayer Medicaid
PMPM PMPM
PrimaryCare
Practice
PrimaryCare
Practice
PMPM PMPM
Page 148
148© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Michigan “Multi-Payer”
Primary Care Demonstration
PrimaryCare
Practice
PrimaryCare
Practice
PrimaryCare
Practice
PrimaryCare
Practice
PrimaryCare
Practice
Medicare BCBSMPriorityHealthMedicaid
HigherE&M+ G-Codes
PMPMPMPM+G-Codes
PMPM
OtherPayers
$0
Page 149
149© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Differences in Payment and in
the Definitions of Payments
PrimaryCare
Practice
PrimaryCare
Practice
PrimaryCare
Practice
MiPCT Care Management Billing Collaborative
PrimaryCare
Practice
PrimaryCare
Practice
Problem: MiPCT participating practices are underutilizing the available billing codes for care management services. Further, the
descriptions and requirements for care management codes differ among payers.
Medicare BCBSMPriorityHealthMedicaid
HigherE&M+ G-Codes
PMPMPMPM+G-Codes
PMPM
OtherPayers
$0
Page 150
150© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Help for PCPs Comes With
Increased Administrative Burden
PrimaryCare
Practice
PrimaryCare
Practice
PrimaryCare
Practice
Medicare BCBSMPriorityHealthMedicaid
HigherE&M+ G-Codes
PMPMPMPM+G-Codes
PMPM
This is Collaboration?
MiPCT Care Management Billing Collaborative
PrimaryCare
Practice
PrimaryCare
Practice
Problem: MiPCT participating practices are underutilizing the available billing codes for care management services. Further, the
descriptions and requirements for care management codes differ among payers.
OtherPayers
$0
Page 151
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A Neutral Facilitator is Needed
to Achieve a Common Approach
PAYER A
Payment
Definition 1
PAYER B
Payment
Definition 1
PAYER C
Payment
Definition 1
PROVIDER A
Payment
Definition 1
PROVIDER B
Payment
Definition 1
PROVIDER C
Payment
Definition 1
Neutral
Facilitator(ideally
with
trusted
data
analytics)
Page 152
152© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example of Multi-Stakeholder
Approach to Payment Reform
EmployersWest
MichiganPaymentDesign
Workgroup
PrimaryCare
Physicians
SpecialistsUnions
HealthPlans
Alliance for Health
Michigan Institute forClinical Systems Improvement
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153© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Current Payment
for Primary Care
Payer
Payer
Payer
Office Visits forPreventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
CURRENTPAYMENT
PRIMARY CARE
Page 154
154© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Current Non-Payment
for Primary Care
Payer
Payer
Payer
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Proactive Care Mgt for Chronic Disease
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
CURRENTPAYMENT
NO PAYMENT
NO PAYMENT
PRIMARY CARE
Page 155
155© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Is Not Paid For Is Exactly
What’s Needed to Improve Quality
Payer
Payer
Payer
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Proactive Care Mgt for Chronic Disease
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
CURRENTPAYMENT
NO PAYMENT
NO PAYMENT
PRIMARY CARE
Preventive Care Quality
Chronic Disease Mgt Quality
Page 156
156© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Approach: Flexible
Payment Instead of E&M Payment
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PROPOSEDPAYMENT
Payer
Payer
Payer
MonthlyCore
Primary Care
Services Payment
PRIMARY CARE
Proactive Care Mgt for Chronic Disease
Page 157
157© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Size of Monthly Payment Should
Differ Based on Patient Health
No Chronic Diseaseand
No Major Risk Factors
PATIENT HEALTH ISSUES
SIZ
E O
F M
ON
TH
LY
PE
R-P
AT
IEN
T P
AY
ME
NT
One Chronic Diseaseor
Major Risk Factors
Two Chronic Diseasesor One Chronic Dis.
and Major Risk Factors
Complex andHigh-RiskPatients
Small Payment forLarge # of Patients H
igh P
aym
ent
for
Sm
all
# o
f P
atients
LargerPayment
forSubset ofPatientsNeeding
MoreProactive
Care
StillLarger
Payment for
Subset of
PatientsNeeding
EvenMore
ProactiveCare
Page 158
158© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Benefit Design
For Patients
BENEFIT DESIGN
• Patient enrolls as a “member” of the primary care practice, but has no restrictions on other care
• Patient has no copays for visits related to either preventive care or chronic disease care from this practice
• Patient only pays cost-sharing for acute issues
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PROPOSEDPAYMENT
Payer
Payer
Payer
MonthlyCore
Primary Care
Services Payment
PRIMARY CARE
Proactive Care Mgt for Chronic Disease
Page 159
159© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Payment for the “Medical
Neighborhood” (Specialists)
SPECIALIST PMT
• Payments for telephone calls & emails for PCP consults with specialists they work with
• Sharing of the monthly core payment if the specialist is co-managing the patient with thePCP
• Transfer of monthly payment to specialist for some patients
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PROPOSEDPAYMENT
Payer
Payer
Payer
MonthlyCore
Primary Care
Services Payment
PRIMARY CARE
Proactive Care Mgt for Chronic Disease
Page 160
160© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Accountability for Spending and
Quality That PCPs Can Control
ACCOUNTABILITY
• Monthly payment would be adjusted up or down based on quality and avoidable utilization
Quality of preventive care
Quality of chronic disease care
Avoidable ER utilization
High-tech imaging
Specialty referrals
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PROPOSEDPAYMENT
Payer
Payer
Payer
MonthlyCore
Primary Care
Services Payment
PRIMARY CARE
Proactive Care Mgt for Chronic Disease
Page 161
161© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
This is Different Than
Current PCMH Programs
Office Visits forPreventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PMPM for“Care Management”
Current PCMH Model
P4P/Shared Savings
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
Core Primary CareServices Payment
Performance Adjustment
NEW MODEL
Page 162
162© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
It’s Also Different from Traditional
PCP Capitation Programs
Office Visits forPreventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PMPM for“Care Management”
Primary CareCapitation
Current PCMH Model
P4P/Shared Savings P4P
PCP CapitationNEW MODEL
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
Core Primary CareServices Payment
Performance Adjustment
Page 163
163© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
P4P
It’s Better Than
Current PCMH or Capitation
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
Office Visits forPreventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PMPM for“Care Management”
Core Primary CareServices Payment
Primary CareCapitation
Current PCMH Model
P4P/Shared Savings
Performance Adjustment
PCP Capitation
• Most practice revenue still comes from office visits
• Fewer office visits = lower revenue, even with PMPM
• Patient still discouraged from office visits by copays
• Patients must beattributed based on claims
• No incentive for PCP practice to see patient for acute needs
• Payment is the same for patients with high needs as low needs
• Employer is paying even if patient needs few services
• Patients must enroll for all services
• PCP practice receives predictable, flexible payment for patient mgt
• Higher payment for patients withgreater needs
• Employer only pays more if patient needs or receives more services
• Patient enrollsonly for prev. & chronic care
NEW MODEL
(PARTIAL CAPITATION)
Page 164
164© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
All Stakeholders Worked Together
To Develop a Win-Win Solution
NEW MODEL
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
Core Primary CareServices Payment
Performance Adjustment
EmployersWest
MichiganPaymentDesign
Workgroup
PrimaryCare
Physicians
SpecialistsUnions
HealthPlans
Alliance for Health
Michigan Institute forClinical Systems Improvement
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165© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Payers Implement It?
NEW MODEL
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
Core Primary CareServices Payment
Performance Adjustment
EmployersWest
MichiganPaymentDesign
Workgroup
PrimaryCare
Physicians
SpecialistsUnions
HealthPlans
Alliance for Health
Michigan Institute forClinical Systems Improvement
??
Page 166
166© 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
Page 167
167© 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
Page 168
168© 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
Page 169
169© 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 mostchronic diseases involves regular use
of maintenance medication
Page 170
170© 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
Page 171
171© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Airfare Choices
from Boston to ClevelandBoston 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
Page 172
172© 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
Page 173
173© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Flat Copayments:
First Class Fare WinsBoston 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
Page 174
174© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Coinsurance:
First Class Fare Probably WinsBoston 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
Page 175
175© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Deductible:
First Class Fare WinsBoston 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
Page 176
176© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Price Difference:
Lowest Coach Fare WinsBoston 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
Page 177
177© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery CostPrice #1
$20,000
Price #2
$25,000
Price #3
$30,000
Knee Joint
Replacement
Page 178
178© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery CostPrice #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
Page 179
179© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery CostPrice #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
Page 180
180© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Current Transparency Efforts
Are Focused on Procedure PricePayment
for
Procedure
dded
Provider 1:
$25,000
Provider 2:
$23,000
-8%
Page 181
181© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Hidden Costs
Accompany the Lower Price?Payment
for
Procedure
Payment and Rate
of Complications
Provider 1:
$25,000 $30,000 2%
Provider 2:
$23,000 $30,000 10%
-8%
Page 182
182© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Total Spending May Be Higher
With the “Lower Price” ProviderPayment
for
Procedure
Payment and Rate of
Complications
Average
Total
Payment
Provider 1:
$25,000 $30,000 2% $25,600
Provider 2:
$23,000 $30,000 10% $26,000
-8% +2%
Provider 2 hasa lower starting price,but is more expensive
when lower qualityis factored in
Page 183
183© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Bundled/Warrantied Pmts Allow
Comparing Apples to ApplesPayment
for
Procedure
Payment and Rate of
Complications
Bundled/
Episode
Payment
Provider 1:
2% $25,600
Provider 2:
10% $26,000
+2%
Bundled pricesshow that
Provider 1 is thehigher-value
provider
Page 184
184© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Why Is It So Much Cheaper to Fly
to Pittsburgh Than Cleveland?Boston Cleveland
?
Boston Pittsburgh
?
Non-Stop Coach Fare: $1,107
Non-Stop Coach Fare: $188
Airfares for July 6-7, 2011 as of 6/26/11
Page 185
185© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Is It The Shorter Distance?
Boston Cleveland
?
Boston Pittsburgh
?
Non-Stop Coach Fare: $1,107
Non-Stop Coach Fare: $188
551 Air Miles
Airfares for July 6-7, 2011 as of 6/26/11
483 Air Miles
Page 186
186© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Or Greater Competition?
Boston Cleveland
?
Boston Pittsburgh
?
Choice: United Non-Stop: $1,107
(No other non-stop choice)
Choice #3: USAirways Non-Stop: $238
Choice #2: JetBlue Non-Stop: $188
Choice #1: Delta Non-Stop: $188
NON-
COMPETITIVE
MARKET
COMPETITIVE
MARKET
Airfares for July 6-7, 2011 as of 6/26/11
Page 187
187© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Which Is More Likely to Generate
True Price Competition?
DO MD DOMD
DO MD DO MD
DO MD DO MD
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
DO MD DO MD
ONE BIG
ACO
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
DO MD DO MD
Hospital ACO
VS
Physician Group ACO
IPA ACOHOSPITAL
HOSPITAL
HOSPITAL
HOSPITAL
HOSPITAL
Page 188
188© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Do Michigan Communities
Need for Higher Value Care?
Page 189
189© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Payment Systems and
Benefit Designs from All Payers
Engagementof
Purchasers
Alignment ofMultiplePayers
PaymentSystemDesign
BenefitDesign
Value-DrivenPayment /Benefits
Page 190
190© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Dramatically Better Care Delivery
Supported by Better Payment
TechnicalAssistanceto Providers
Design &Delivery of
Care
Engagementof
Purchasers
Alignment ofMultiplePayers
PaymentSystemDesign
BenefitDesign
ProviderOrganization/Coordination
Value-DrivenPayment /Benefits
Value-DrivenDeliverySystems
Page 191
191© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Educated and Engaged
Consumers
TechnicalAssistanceto Providers
Design &Delivery of
Care
ConsumerEducation/
Engagement
EducationMaterials
Engagementof
Purchasers
Alignment ofMultiplePayers
PaymentSystemDesign
BenefitDesign
ProviderOrganization/Coordination
Value-DrivenPayment /Benefits
Value-DrivenDeliverySystems
ConsumerEducation/Engagement
Page 192
192© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Data and Analysis Available to
Everyone
DataCollection &
Analysis
TechnicalAssistanceto Providers
Design &Delivery of
Care
ConsumerEducation/
Engagement
EducationMaterials
Engagementof
Purchasers
Alignment ofMultiplePayers
PaymentSystemDesign
BenefitDesign
ProviderOrganization/Coordination
Value-DrivenPayment /Benefits
Data andAnalytics
Value-DrivenDeliverySystems
ConsumerEducation/Engagement
PublicReporting
Page 193
193© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
And a Mechanism for Bringing
All the Pieces Together
DataCollection &
Analysis
TechnicalAssistanceto Providers
Design &Delivery of
Care
ConsumerEducation/
Engagement
EducationMaterials
Engagementof
Purchasers
Alignment ofMultiplePayers
PaymentSystemDesign
BenefitDesign
ProviderOrganization/Coordination
Value-DrivenPayment /Benefits
Data andAnalytics
Value-DrivenDeliverySystems
ConsumerEducation/Engagement
RegionalHealth
ImprovementCollaborative
PublicReporting
Page 194
194© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
All Stakeholders Must Be Involved
for Win-Win-Win Solutions
RegionalHealth
ImprovementCollaborative
Physicians andOther Providers
Hospitals and Post-Acute Care
Patients andFamilies
Purchasersand Payers
Page 195
195© 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 Reformwww.PaymentReform.org
Page 196
For More Information:
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
[email protected]
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org
Page 198
198© 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
Page 199
199© 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
Page 200
200© 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
PurchasersProviders
ASOHealth Plan(No Risk)
Provider Claims
Purchaser Payment
Page 201
201© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Little Incentive for Health Plans to
Support True 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
PurchasersProviders
ASOHealth Plan(No Risk)
Provider Claims
Purchaser Payment
Page 202
202© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What We Need Are
Purchaser-Provider Partnerships
Self-Funded
PurchasersProviders
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
Provider “wins” if:• Patients stay healthy
and need less care• Purchaser pays
adequately for high-quality care to those who need it
Purchasers and Patients “win” if:• Provider keeps
employees healthy • Provider delivers
high-quality care at low prices
Page 203
203© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Purchasers and Physicians Have
Common Interests, But Don’t Know It
“We’ve started talking directly to physicians,
and we’ve discovered that
what they want to sell is what we want to buy…”
Cheryl DeMars
CEO, The Alliance(Employer Coalition in Wisconsin)
Page 204
204© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Plan Implements Changes
Purchasers/Providers Agree On
Self-Funded
PurchasersProviders
HealthPlans Implementation
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
Page 205
205© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
National Companies Are
Moving in This Direction
Self-Funded
PurchasersProviders
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
Provider “wins” if:• Patients stay healthy
and need less care• Purchaser pays
adequately for high-quality care to those who need it
Purchasers and Patients “win” if:• Provider keeps
employees healthy • Provider delivers
high-quality care at low prices
Page 207
207© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Can
Improve Care for Diabetics…
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
Patient with
Diabetes
PCP+Specialist
Condition-Based Payment
Page 208
208© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…But We Need to Also Focus on
Preventing Diabetes
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
HealthyChildren
andAdults
Obesity
HealthyWeight
Patient with
Diabetes
PCP+Specialist
Patient without
Diabetes
Page 209
209© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
That Means Upstream Investment
to Combat Obesity
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
HealthyChildren
andAdults
Obesity
HealthyWeight
Patient with
Diabetes
PCP+Specialist
Pediatrics
AdultPrimary Care
Endocrinology
Patient without
Diabetes
Healthy Foodsand WalkableCommunities
Page 210
210© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
True Population-Based Payment
Has to Have a Long-Term Focus
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
HealthyChildren
andAdults
Obesity
HealthyWeight
Patient with
Diabetes
PCP+Specialist
Population-Based Payment
Patient without
Diabetes
Pediatrics
AdultPrimary Care
Endocrinology
Healthy Foodsand WalkableCommunities
Page 211
211© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MANY YEARS FOR
RETURN ON INVESTMENT
Current “Shared Savings” Models
Penalize Long-Term Prevention
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
HealthyChildren
andAdults
Obesity
HealthyWeight
Patient with
Diabetes
PCP+Specialist
Population-Based Payment
$$$ INVESTMENT
SAVINGS
Patient without
Diabetes
Pediatrics
AdultPrimary Care
Endocrinology
Healthy Foodsand WalkableCommunities
Page 212
212© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MANY YEARS FOR
RETURN ON INVESTMENT
A Public-Private Partnership
Will Be Needed For Investment
Premature Death
Amputations
Blindness
Kidney Failure
Hospitalizations
ER Visits
Inability to Work
Low Productivity
Quality of Life
Low Cost of Care
Productivity
HealthyChildren
andAdults
Obesity
HealthyWeight
Patient with
Diabetes
PCP+Specialist
Population-Based Payment
$$$ INVESTMENT
SAVINGSEmployers
Medicare
Patient without
Diabetes
Pediatrics
AdultPrimary Care
Endocrinology
Healthy Foodsand WalkableCommunities
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To Set A Fair Price,
Start With Existing Costs…
COST
TIME
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
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215© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Set a Payment Level That Is
≤ Expected Costs…
COST
TIME
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
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216© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…If All Goes Well, Costs Will Be
Lower Than the Payment Level…
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
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217© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
...And Both the Payer and
Physician Will “Win”
COST
TIME
Costs
in
New
Pmt
$$$$$$
Bonus for
Physician
Savings
For Payer
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
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218© 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
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219© 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
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Bundled
or
Episode
Payment
Level
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220© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians 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
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Provider
Performance
Risk
Insurance
Risk
Bundled
or
Episode
Payment
Level
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221© 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
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
SeverityAdjustment
Large RandomVariation
Failure to FollowGuidelines
Outlier Pmt/Stop-Loss
Risk Exclusions
RiskCorridors
PerformanceRisk
(Physician’sResponsibility)