CREATINGWIN-WIN-WIN APPROACHES
TO ACCOUNTABLE CARETHROUGH PHYSICIAN LEADERSHIP
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
2© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
3© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #1:In which U.S. industries
are the key employees told that at the end of the year, they can expect to receive
a 25% pay cutregardless of how well
they’ve performed?
4© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #1:In which U.S. industries
are the key employees told that at the end of the year, they can expect to receive
a 25% pay cutregardless of how well
they’ve performed?
ANSWER:Health Care
5© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare SGR Is a Big Problem, But So Is Lack of Annual Updates
PhysicianPractice Costs
PhysicianPaymentIncreases
If SGR CutIs Made
23% EffectiveReduction
6© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #2:In which U.S. industries
are businessesonly able to sell
their products and servicesthrough an intermediary who demands large discounts andincreases prices by 18-25%?
7© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #2:In which U.S. industries
are businessesonly able to sell
their products and servicesthrough an intermediary who demands large discounts andincreases prices by 18-25%?
ANSWER:Health Care
8© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
9© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #3:In which U.S. industries
can one set of employeesonly get a raise if other
employees take a pay cut,even when the business is
performing well?
10© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #3:In which U.S. industries
can one set of employeesonly get a raise if other
employees take a pay cut,even when the business is
performing well?
ANSWER:Health Care
11© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The SGR Also Pits PhysiciansAgainst Each Other
PCP Fees
SpecialtyFees
PCP Fees
SpecialtyFees
Physician Payments Capped by the Sustainable Growth Rate
12© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #4:In which U.S. industries does government policyfavor large businessesover small businesses?
13© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #4:In which U.S. industries does government policyfavor large businessesover small businesses?
ANSWER:Health Care
14© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Unlike Physicians, Hospitals Have Received Pay Increases
Physicians
Hospitals
Inflation
15© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #5:Who is to blame forthe way physicians
are paid andmicromanaged?
16© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #5:Who is to blame forthe way physicians
are paid andmicromanaged?
ANSWER:Physicians
17© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Blame Rests With Physicians
• Physicians haven’t defined solutions to control healthcare costs without rationing
• Physicians are seen as the drivers of higher costs
• Physicians haven’t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices
• Physicians aren’t organized to manage and deliver high-value population health care to purchasers and patients
18© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Three Paths to the Future: Which Door Will Physicians Choose?
TODAY
FUTURE #1
FUTURE #2
FUTURE #3
19© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:High-Quality Care at Lower Cost
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Savings
TODAY TOMORROW
20© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:High-Quality Care at Lower Cost
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Savings
TODAY TOMORROW
Where Will The Savings Come From?
21© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:High-Quality Care at Lower Cost
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Savings
TODAY TOMORROW
Where Will The Savings Come From?
It Depends on Who’s the Last in LineIn Getting Paid
22© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Door #1: Continuation of the Status Quo
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
TraditionalInsuranceCompany/
TPA
Savings
TODAY TOMORROW
23© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Who’s First in Line? Health Plans
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
TraditionalInsuranceCompany/
TPA
Savings
TODAY TOMORROW
24© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Who’s Last in Line?Physicians
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Savings
TODAY TOMORROW
25© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will Savings Come From?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Savings
TODAY TOMORROW
26© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Health Plans VoluntarilyReduce Their Fees/Profits?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Savings
27© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Health Plans VoluntarilyReduce Their Fees/Profits?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Savings
Not Likely
28© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can Health Plans Cut Payments to the Big Hospital in Town?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Savings
29© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can Health Plans Cut Payments to the Big Hospital in Town?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Savings
Not Likely
30© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Or Will Payers Continue Cutting(or Not Increasing) Doctor Pay?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Savings
31© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not Just Lower Fees, But Interference in Physician Decisions
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Savings
• Lower Fees(“Discounts”)
• Prior Authorization
• Step Therapy
• Utilization Review
• Disease Mgt Vendors
32© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Employment by Hospitals Protect Physicians?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
TraditionalInsuranceCompany/
TPA
SavingsHealth PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
33© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
When Health Systems Get Less, Where Will They Make the Cuts?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
TraditionalInsuranceCompany/
TPA
Savings
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
34© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Systems Want to Ensure They Don’t Get Cut by Payers…
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
TraditionalInsuranceCompany/
TPA
Savings
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
35© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
Door #2: Hospital-Owned Health Plans
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
36© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
If Hospitals Are Now First In Line,Where Will Savings Come From?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
37© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
Maybe Health Plan Expenses Can Be Reduced…
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
38© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
…But Hospital Will Still Need the Health Plan to Watch the Docs
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
39© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
So Physicians Will Likely Still Be Subject to Cuts and Interference
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin/Prof.
40© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s Behind Door #3?
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
Savings
41© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
Physician Leadership toControl Both Cost & Quality
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
Savings
42© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
Physicians Can Watch Themselves, They Don’t Need Health Plans…
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
43© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
Better Care of Patients Will Reduce Avoidable Hospitalizations…
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
44© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
…Allowing Better Pay for Doctors AND More Savings for Purchasers
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
45© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
Door #3 = A Physician-Led Healthcare Future
HighCostsand
WeakQuality
HighQuality
Careat
LowerCost
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
Savings
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
• Significant savingsfor purchasers and patients
• Better pay for physicians
• Less spending on health planoverhead
• Less interference in physician-patient relationship
• Less spending on avoidableexpensive, risky procedures
• Better health and quality of life for patients
46© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Quality Health PlansRun By Physician Groups
47© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
If Physicians Choose Door #3,What Must They Do to Succeed?
TODAY
PHYSICIAN-LEDHEALTHCARE
48© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Physician’s Real Businessis More Than Their Salary…
Physician Salary
49© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And More Than Their Total Practice Costs..
Physician SalaryPractice Expenses
50© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…It’s the Tests They Order, Even If Someone Else Does Them
Physician SalaryPractice Expenses
Tests and Imaging
51© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…It’s the Procedures They Do, And Where They Do Them
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
Tests and Imaging
52© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And the Unplanned Admissions of Their Patients…
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Tests and Imaging
53© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Post-Acute Care CostsAfter Hospital Stays…
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Tests and Imaging
54© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Unplanned Readmissions and Repeat Procedures…
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Tests and Imaging
Readmissions
55© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And the Number and Types of Medications They Prescribe
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
56© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money in HealthcareDoesn’t Go to Physicians
Physicians:16%
57© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
.. But Most Money Goes to Things That Physicians Can Influence
ThingsPhysiciansPrescribe,Control, orInfluence
84%
Physicians:16%
58© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare Payment Silos Pit Physicians Against Each Other
PCP Fees
SpecialtyFees
PCP Fees
SpecialtyFees
PhysicianFees
(Part B)
59© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Should Benefit From Lowering Other Healthcare Costs
PCP Fees
SpecialtyFees
PCP Fees
DrugCosts
Hospital &Post-AcuteCare Costs
SpecialtyFeesPhysician
Fees(Part B)
TotalHealthcare
Costs(Parts A,B, and D)
DrugCosts
(Part D)
Hospital &Post-AcuteCare Costs
(Part A)
How Do You Repeal the SGRand Give Physicians Reasonable
Payment Increases?
61© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
10 Year Federal Budget Projections for Medicare
Physician Fees OnlyRepresent 12% of Projected Medicare Spending
62© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
SGR Repeal & MEI Update Increases Total Spending by 2.6%
SGR Repeal & MEI Update: $160 Billion
63© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
3% Savings in Non-Physician Spending Would Pay for Repeal
$160 Billion=3% of Non-PhysicianSpending
64© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
But Nobody in DC BelievesThat Physicians Can/Will Do It
CBO expects that physicians would generally choose to participate in the payment options that offer the largest payments for the services they provide…
CBO expects that most of the alternative payment models that would be adopted under this legislation would increase Medicare spending. CBO’s review of numerous Medicare demonstration projects found that very few succeeded in reducing Medicare spending.
CBO expects that the greater influence of providers within the design process specified in H.R. 2810 would lead to smaller savings than would arise from the development and adoption ofnew approaches through the [current] CMMI process.
Congressional Budget Office Cost Estimate for H.R. 2810 (September 13, 2013)
65© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
66© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts
• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
67© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts
• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
68© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts
• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
69© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts
• Less use of expensive inpatient rehab• More in-home services• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
70© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts
• Better post-discharge care management• Fewer complications from procedures• Less use of expensive inpatient rehab• More in-home services• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
71© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce Costs w/o Rationing or Fee Cuts
• Use of lower-cost medications• Avoiding unnecessary medications• Better post-discharge care management• Fewer complications from procedures• Less use of expensive inpatient rehab• More in-home services• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Physician SalaryPractice Expenses
Outpatient Procedures
Inpatient Proceduresand Admissions ofChronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
72© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Big Are the Opportunities?
73© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
5-17% of Hospital AdmissionsAre Potentially Preventable
Source:AHRQHCUP
74© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Millions of Preventable Events Harm Patients and Increase Costs
Medical Error# Errors (2008)
Cost Per Error Total U.S. Cost
Pressure Ulcers 374,964 $10,288 $3,857,629,632
Postoperative Infection 252,695 $14,548 $3,676,000,000
Complications of Implanted Device 60,380 $18,771 $1,133,392,980
Infection Following Injection 8,855 $78,083 $691,424,965
Pneumothorax 25,559 $24,132 $616,789,788
Central Venous Catheter Infection 7,062 $83,365 $588,723,630
Others 773,808 $11,640 $9,007,039,005
TOTAL 1,503,323 $13,019 $19,571,000,000
Source: The Economic Measurement of Medical Errors, Milliman and the Society of Actuaries, 2010
3 Adverse Events Every Minute
75© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Ways to Reduce Tests & Procedures w/o Harming Patients
76© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-Service Payment is aBarrier to Success
Lack of Flexibility in FFS• No payment for phone
calls or emails with patients
• No payment to coordinate care among providers
• No payment for non-physician support services to help patients with self-management
• No flexibility to shift resources across silos(hospital <-> physician,post-acute <->hospital,SNF <-> home health, etc.)
77© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-Service Payment is aBarrier to Success
Lack of Flexibility in FFS• No payment for phone
calls or emails with patients
• No payment to coordinate care among providers
• No payment for non-physician support services to help patients with self-management
• No flexibility to shift resources across silos(hospital <-> physician,post-acute <->hospital,SNF <-> home health, etc.)
Penalty for Quality/Efficiency• Lower revenues if
patients don’t make frequent office visits
• Lower revenues for performing fewer tests and procedures
• Lower revenues if infections and complications are prevented instead of treated
• No revenue at all ifpatients stay healthy
78© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most “Payment Reforms” Don’t Fix The Problems with FFS
FFS•No payment for services that will benefit patients
•Lower revenues from reducing avoidable costs
FFS
Shared SavingsShared Savings
FFS
P4P
FFS
PMPM
79© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good Alternatives to Fee for Service
BUILDING BLOCKS HOW IT WORKS
Bundled Payment
Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
80© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good Alternatives to Fee for Service
BUILDING BLOCKS HOW IT WORKS
Bundled Payment
Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
Warrantied Payment
Higher payment for quality care, no extra
payment for correcting preventable errors and
complications
81© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good Alternatives to Fee for Service
BUILDING BLOCKS HOW IT WORKS
Bundled Payment
Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
Warrantied Payment
Higher payment for quality care, no extra
payment for correcting preventable errors and
complications
Condition-Based
Payment
Payment based on the patient’s condition, rather than on the procedure used
82© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Accountable Payment ModelsAllow Win-Win-Win Approaches
BUILDING BLOCKS HOW IT WORKS
HOW PHYSICIANSAND HOSPITALS
CAN BENEFITHOW PAYERSCAN BENEFIT
Bundled Payment
Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
Higher payment for physicians if they
reduce costs paid by hospitals
Physician and hospital offer a lower total price to Medicare or health
plan than today
Warrantied Payment
Higher payment for quality care, no extra
payment for correcting preventable errors and
complications
Higher payment for physicians and
hospitals with low rates of infections and complications
Medicare or health plan no longer pays
more for high rates of infections or
complications
Condition-Based
Payment
Payment based on the patient’s condition, rather than on the procedure used
No loss of payment for physicians and
hospitals using fewer tests and procedures
Medicare or health plan no longer pays
more for unnecessary procedures
83© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing Avoidable Procedures
TODAY
$/Patient # Pts Total $
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $2,415,000
Optional Procedurefor a Condition
• Physician evaluates allpatients
• Physician performsprocedure on 2/3 ofevaluated patients
• Up to 10% of proceduresmay be avoidablethrough patient choiceor alternative treatment
84© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money Today Is NOT Going to the Physician
TODAY
$/Patient # Pts Total $
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $2,415,000
Physician Payment is 9% of Total Spending
85© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Typical Health Plan Approach:Prior Auth/Utilization Controls
TODAY w/ UTILIZATION CTRL
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $150 300 $45,000
Procedures $850 200 $170,000 $850 180 $153,000
Subtotal $215,000 $198,000
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000
Total Pmt/Cost $2,415,000 $2,178,000 -10%
86© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under FFS, Payer Wins,Physicians and Hospitals Lose
TODAY w/ UTILIZATION CTRL
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $150 300 $45,000
Procedures $850 200 $170,000 $850 180 $153,000
Subtotal $215,000 $198,000 -8%
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,178,000 -10%
87© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Is There a Better Way?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 ? ? ?
Procedures $850 200 $170,000 ? ? ?
Subtotal $215,000 ?
? ? ?
Hospital Pmt $11,000 200 $2,200,000 ? ? ?
Total Pmt/Cost $2,415,000 ? ? ?
88© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Way:Pay Physicians Differently
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000
Total Pmt/Cost $2,415,000 $2,202,000
Better Payment for Condition Management• Physician paid adequately to engage in shared
decision making process with patients• Physician paid adequately for procedures without
needing to increase volume of procedures
89© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Could Be Paid More While Still Reducing Total $
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,202,000 -9%
90© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Do Hospitals Have to Lose In Order for Physicians To Win?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,202,000 -9%
Physician Wins
Payer WinsHospital Loses
91© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Should Matter to Hospitals is Margin, Not Revenues (Volume)
92© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hospital Costs Are Not Proportional to Utilization
$800$820$840$860$880$900$920$940$960$980$1,000
81828384858687888990919293949596979899100
$000
#Patients
Cost & Revenue Changes With Fewer Patients
.
Costs
20% reduction in volume
7% reduction in cost
93© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Reductions in Utilization Reduce Revenues More Than Costs
$800$820$840$860$880$900$920$940$960$980$1,000
81828384858687888990919293949596979899100
$000
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
20% reduction in volume
7% reduction in cost
20% reduction in revenue
94© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Causing Negative Marginsfor Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
81828384858687888990919293949596979899100
$000
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Will BeUnderpaying For
Care If Adverse Events,
Readmissions, Etc. Are Reduced
95© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
But Spending Can Be Reduced Without Bankrupting Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
81828384858687888990919293949596979899100
$000
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers CanStill Save $Without CausingNegative Marginsfor Hospital
96© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Adequacy of Payment Depends On Fixed/Variable Costs & Margins
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000
Total Pmt/Cost $2,415,000
97© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Now, if the Number of Procedures is Reduced…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $2,415,000
98© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Fixed Costs Will Remain the Same (in the Short Run)…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $2,415,000
99© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Variable Costs Will Go Down in Proportion to Procedures…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $3,300 $594,000 -10%
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $2,415,000
100© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Even With a Higher Margin for the Hospital…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $2,415,000
101© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Hospital Gets Less Total Revenue (But More Per Case)…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000
102© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And The Payer Still Saves MoneyTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000 $2,359,000 -2%
103© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
I.e., Win-Win-Win for Physician, Hospital, and Payer
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000 $2,359,000 -2%
Physician Wins
Payer WinsHospital Wins
104© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Payment Model Supports This Win-Win-Win Approach?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000 $2,359,000 -2%
105© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
It’s Impractical to Renegotiate Fees for Individual Services
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000 $2,359,000 -2%
106© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay Based on the Patient’s Condition, Not on the Procedure
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $2,359,000 -2%
107© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Plan to Offer Care of the Condition at a Lower Cost Per Patient
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
108© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use the Payment as a Budget to Redesign Care…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
109© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Let the Providers DecideHow They Should Be Paid
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
110© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Would “Shared Savings” Achieve the Same Thing?
111© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Same Example As Before…
Year 0
Physician Svcs
Evaluations $45,000
Procedures $170,000
Subtotal $215,000
Hospital Pmt
Procedures $2,200,000
Subtotal $2,200,000
Total Pmt/Cost $2,415,000
Savings
# Patients $/Patient
300 $150
200 $850
200 $11,000
Optional Procedurefor a Condition
• Physician evaluates allpatients
• Physician performsprocedure on 2/3 ofevaluated patients
• Up to 10% of proceduresmay be avoidablethrough patient choiceor alternative treatment
112© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Year 1: Physicians & Hospitals Both Lose With Fewer Procedures)
Year 0 Year 1 Chg
Physician Svcs
Evaluations $45,000 $45,000
Procedures $170,000 $153,000
$0
Subtotal $215,000 $198,000 -8%
Hospital Pmt
Procedures $2,200,000 $1,980,000
Subtotal $2,200,000 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,178,000 -10%
Savings $237,000
ReduceProcs by 10%
Year 1:Lower
Revenuefor
Docs &Hospital
113© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Year 2: Losses Are Lower If Shared Savings Are Paid…(No)Year 0 Year 1 Chg Year 2 Chg
Physician Svcs
Evaluations $45,000 $45,000 $45,000
Procedures $170,000 $153,000 $153,000
Shared Savings $0 $17,000
Subtotal $215,000 $198,000 -8% $215,000 -0%
Hospital Pmt
Procedures $2,200,000 $1,980,000 $1,980,000
Shared Savings $0 $101,500
Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -6%
Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5%
Savings $237,000 $118,500
ReduceProcs by 10%
Year 1:Lower
Revenuefor
Docs &Hospital
Year 2:SharedSavingsOffsetsSome
Losses
114© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…But Physicians and Hospitals Still Have Net 2-Year Losses
Year 0 Year 1 Chg Year 2 Chg Cumulative
Physician Svcs
Evaluations $45,000 $45,000 $45,000
Procedures $170,000 $153,000 $153,000
Shared Savings $0 $17,000
Subtotal $215,000 $198,000 -8% $215,000 -0% -$17,000
-4%
Hospital Pmt
Procedures $2,200,000 $1,980,000 $1,980,000
Shared Savings $0 $101,500
Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -5% -$338,500
-8%
Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% $355,500
Savings $237,000 $118,500 -7%
115© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
It’s Even Worse Than That…
• There is no shared savings payment at all if a minimum total savings level is not reached
• If there is a shared savings payment, it’s reduced if quality thresholds aren’t met, even if the quality measures have nothing to do with where savings occurred
• The shared savings payment ends at the end of the 3-year contract period, even if utilization remains lower, and the payer keeps 100% of the savings in future years
116© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
So Why Do Payers Like The Shared Savings Model So Much??
It’s easy for them to implement:• No changes in underlying fee for service payment and no
costs to change claims payment system• Additional payments only made if savings are achieved• The payer sets the rules as to how “savings” are calculated• Shared savings payments are made well after savings are
achieved, helping the payers’ cash flow• All of the savings goes back to the payer after the end of the
shared savings contract
117© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
“Shared Savings” Forces Hospitals To Consider Hiring Physicians
• Hospitals are not directly eligible for shared savings;all savings are attributed to primary care physicians
• Even if the hospital reduces readmissions, infections, complications, etc., it may receive no reward for doing so
• Reducing hospitalizations, ER visits, etc. will reduce the hospital’s revenues, but the hospital may receive no share of the savings to help it cover its stranded fixed costs
• Consequently, hospitals may feel compelled to own physician practices, either to capture a portion of the shared savings revenue, or to prevent there from being any savings!
118© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
It Hasn’t Been Working Too Well in Medicare So Far
• Of the 109 Track 1 (Upside Only) ACOs that started in 2012:– 57 (52%) Track 1 ACOs did not achieve savings in 2013– 25 (23%) Track 1 ACOs achieved savings, but not enough to receive
shared savings payments– 27 (25%) Track 1 ACOs received shared savings payments
• Of the 5 Track 2 (Downside Risk) ACOs that started in 2012:– 2 (33%) Track 2 ACOs received shared savings payments– 3 (67%) Track 2 ACOs had to repay a share of losses to CMS
119© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Putsthe Physicians in Control
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
120© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
If The Physician Can Reduce the Hospital’s Costs Per Procedure….
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000 -45%
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
121© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Both the Hospital & Physician Can “Win” Even More Inside the Budget
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $139,000 +26%
Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
122© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Both the Hospital & Physician Can “Win” Even More Inside the Budget
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $300 300 $90,000
Procedures $850 200 $170,000 $1700 180 $340,000
Subtotal $215,000 $430,000 100%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $139,000 +26%
Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
123© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Or Reduce The Price to Reduce Healthcare Spending
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $189 300 $56,700
Procedures $850 200 $170,000 $1,190 180 $214,200
Subtotal $215,000 $270,900 +26%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $139,000 +26%
Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,455 300 $2,199,900 -9%
124© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
$2,200 Variation in Average Cost of
Drug-Eluting Stents in CA Hospitals
Source: Coronary Angioplasty with Drug Eluting Stents: Device Costs, HospitalCosts, and Insurance Payments, Emma L. Dolan and James C. Robinson Berkeley Center for Health Technology, September 2010
125© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
$8,000 Variation in Avg Costs of Joint Implants Across CA Hospitals
Source: Implantable Medical Devices for Hip Replacement Surgery: Economic Implications for California Hospitals, Emma L. Dolan and James C. Robinson , Berkeley Center for Health Technology, May 2010
126© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
$16,000 Variation in Avg Costs of Defibrillators Across CA Hospitals
Source: Pacemaker and Implantable Cardioverter-Defibrillator Implant Procedures in California Hospitals, James C. Robinson and Emma L. Dolan, Berkeley Center for Health Technology, 2010
127© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not Just Devices: Other Savings Opportunities From Bundling
• Better scheduling of scarce resources (e.g., surgery suites) to reduce both underutilization & overtime
• Coordination among multiple physicians and departments to avoid duplication and conflicts in scheduling
• Standardization of equipment and supplies to facilitate bulk purchasing
• Less wastage of expensive supplies• Reduced length of stay• Etc.
128© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Putsthe Physicians in Control
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $189 300 $56,700
Procedures $850 200 $170,000 $1,190 180 $214,200
Subtotal $215,000 $270,900 +26%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $139,000 +26%
Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,455 300 $2,199,900 -9%
129© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Steps toSuccessful Payment Reform
1. Defining the Change in Care Delivery– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
130© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Best Way to Find Savings Opportunities? Ask Physicians
“I have zero control over utilization or studies ordered.
I don’t get paid for calling a referring doctor and
telling him/her the imaging test is worthless.”
Radiologist in Maine
“I do many unnecessarycolonoscopies on young men. Give every PCP an anuscopeto allow diagnosis of bleeding
hemorrhoids in the office.”Gastroenterologist in Maine
“I strongly suspect overutilizationof abdominal CT scans in the ERand in the hospital; CT scans lead
to further CT scans to follow uplung 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 inextended care to receive antibioticsbecause Medicare doesn’t pay for
home IV therapy. Patient stays in the hospital for 3 days to justify
a nursing home/rehab stay.”Orthopedist at AMA HOD Meeting
131© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Steps toSuccessful Payment Reform
1. Defining the Change in Care Delivery– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?– How much variation in costs and savings is likely?
132© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Critical Element isShared, Trusted Data
• Physician/Hospital need to know the current utilization and costs for their patients to know whether the new payment model will cover the costs of delivering effective care to the patients
• Purchaser/Payer needs to know the current utilization and costs to know whether the new payment model is a better deal than they have today
• Both sets of data have to match in order for providers and payers to agree on the new approach!
133© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Steps toSuccessful Payment Reform
1. Defining the Change in Care Delivery– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?– How much variation in costs and savings is likely?
3. Designing a Payment Model That Supports Change– Flexibility to change the way care is delivered– Accountability for costs and quality/outcomes related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk
134© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities and SolutionsVary By Specialty
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
135© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
136© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Steps toSuccessful Payment Reform
1. Defining the Change in Care Delivery– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?– How much variation in costs and savings is likely?
3. Designing a Payment Model That Supports Change– Flexibility to change the way care is delivered– Accountability for costs and quality/outcomes related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk
4. Compensating Physicians Appropriately– Changing payment to the provider organization
(physician practice/group/IPA/health system) does not automatically change compensation to physicians
137© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Does This All Fit Into ACOs?
Heart Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
138© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Each Patient Should Choose & Use a Primary Care Practice…
Heart Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care Practice
139© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
…Which Takes Accountability for What PCPs Can Control/Influence
Heart Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care Practice
AccountableMedical
Home Accountability for:• Avoidable ER Visits•Avoidable Hospitalizations•Unnecessary Tests•Unnecessary Referrals
140© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
…With a Medical Neighborhoodto 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
141© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
..And Specialists Accountable for the Conditions They Manage
Heart Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care Practice
Neurosurg.Group
OB/GYNGroup
CardiologyGroup
Heart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,Neurology,Psychiatry
AccountableMedicalNeighborhood
Accountability for:•Unnecessary Tests•Unnecessary Procedures• Infections, Complications
142© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
That’s Building the ACOfrom the Bottom Up
Heart Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care Practice
Neurosurg.Group
OB/GYNGroup
CardiologyGroup
Heart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,Neurology,Psychiatry
AccountableMedicalNeighborhood
ACO
Accountable PaymentModels
143© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
Shared SavingsPayment
Primary Care
ACO
Orthopedics OB/GYNCardiology
Most ACOs Today Aren’t Truly Reinventing Care or Payment
Fee-for-ServicePayment
Expensive IT Systems
Psych.,Neuro
Nurse Care Managers
Heart Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Shared SavingsBonus
144© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
A True ACO Can Take a Global Payment And Make It Work
Heart Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care Practice
ACO
Neurosurg.Group
OB/GYNGroup
CardiologyGroup
Heart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,Neurology,Psychiatry
Risk-AdjustedGlobal Payment
AccountableMedicalNeighborhood
145© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Levels Adjusted Based on Patient Conditions
Providers Lose Money On Unusually
Expensive Cases
Limits on Total RiskProviders Accept forUnpredictable Events
Providers Are Paid Regardless of the
Quality of Care
Bonuses/PenaltiesBased on Quality
Measurement
Provider Makes More Money If
Patients Stay Well
Provider Makes More Money If
Patients Stay Well
Flexibility to DeliverHighest-Value
Services
Flexibility to DeliverHighest-Value
Services
No Additional Revenuefor Taking Sicker
Patients
CAPITATION (WORST VERSIONS)
RISK-ADJUSTEDGLOBAL PMT
Isn’t This Capitation?No – It’s Different
146© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: BCBS MAAlternative Quality Contract
• Single payment for all costs of care for a population of patients– Adjusted up/down annually based on severity of patient conditions– Initial payment set based on past expenditures, not arbitrary estimates– Provides flexibility to pay for new/different services– Bonus paid for high quality care
• Five-year contract – Savings for payer achieved by controlling increases in costs– Allows provider to reap returns on investment in preventive care,
infrastructure• Broad participation
– 14 physician groups/health systems participating with over 400,000 patients, including one primary care IPA with 72 physicians
• Positive two year results– Higher ambulatory care quality than non-AQC practices, better patient
outcomes, lower readmission rates and ER utilization, lower costshttp://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html
147© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barrier: Gaining Support from a Critical Mass of Payers
Health Plan
Provider
Health Plan Health Plan
Patient Patient Patient
Provider is only compensated for changed practices for the subset of patients covered by participating payers
Better Payment
System
CurrentPaymentSystem Current
PaymentSystem
148© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
For Most Employees, the Employer is the Insurer, Not a Health Plan
Source: Employer
Health Benefits
2012 Annual Survey. The
Kaiser Family
Foundation and Health Research
and Educational
Trust
149© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
For Self-Funded Employers, TheHealth Plan is Just a Pass Through
Self-Funded
PurchasersProviders
ASOHealth Plan(No Risk)
Provider Claims
Purchaser Payment
150© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Little Incentive for Health Plans to Support Payment Reforms
True Payment Reform Means:• Health plan incurs the costs of
implementing new payment models• Purchaser gains all the savings from
reduced utilization and spending(because all claims are passed through)
Self-Funded
PurchasersProviders
ASOHealth Plan(No Risk)
Provider Claims
Purchaser Payment
151© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Approach: Purchaser/Provider Partnerships
Self-Funded
Purchasers
ProvidersWilling to ManageCosts
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
Provider “wins” if:
• Patients stay healthy and need less care
• Purchaser pays provider adequately tomanage care efficiently
Purchasers and Patients “win” if:
• Providers reduce purchasers’ costs
• Patients stay healthy and have lower cost-sharing
152© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Plan Implements Changes Purchasers/Providers Agree On
Self-Funded
Purchasers
ProvidersWilling toManageCosts
ASOHealth Plan(No Risk) Implementation
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
How Many Patients Do You Need to (Successfully)
Manage Total Risk?
154© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Companies With <1,000 Workers Take Total Healthcare Cost Risk
Sources: Employer
Health Benefits
2012 Annual Survey. The
Kaiser Family
Foundation and Health Research
and Educational
Trust;State-Level Trends in Employer-Sponsored
Health Insurance, April 2013. State Health Access Data Assistance Center and
Robert Wood
Johnson Foundation
Fewer employeesthan typicalphysician
practice panel size
155© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Keys to Managing Risk
• How Do Small Employers Manage Self-Insurance Risk?– They know who their employees are and can estimate spending– They start with what they spent last year and try to control growth– They have reserves to cover year-to-year variation– They purchase stop-loss insurance to cover unusually expensive cases
156© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Keys to Managing Risk
• How Do Small Employers Manage Self-Insurance Risk?– They know who their employees are and can estimate spending– They start with what they spent last year and try to control growth– They have reserves to cover year-to-year variation– They purchase stop-loss insurance to cover unusually expensive cases
• How Would Physician Practices & Hospitals Manage Risk?– They need to know who their patients are in order to project spending– They need to start with last year’s payments and control growth– They need some reserves to cover year-to-year variation– They need to purchase stop-loss insurance to cover unusually
expensive cases
157© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s the Patient’s Role and Accountability?
ProviderPatient
Payment System
Ability and Incentives to:
• Keep patients well• Avoid unneeded
services• Deliver services
efficiently• Coordinate
services with other providers
158© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Benefit Design Changes AreAlso 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 andIncentives to:• Improve health• Take prescribed
medications• Allow a provider to
coordinate care• Choose the highest-value providers and
services
159© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barriers In CurrentBenefit Designs
• Co-pays, co-insurance, and high deductibles discourage or prevent patients from using primary care, preventive treatments, and chronic disease maintenance medications
160© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: No Coordination ofPharmacy & Medical Benefits
Hospital Costs
PhysicianCosts
OtherServices
Medical Benefits
DrugCosts
Pharmacy Benefits
Single-minded focus onreducing costs here...
...often results in higherspending on hospitalizations
• High copays for brand-nameswhen no generic exists
• Doughnut holes & deductibles
Principal treatment for mostchronic diseases involves regular use
of maintenance medication
161© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barriers In CurrentBenefit Designs
• Co-pays, co-insurance, and high deductibles discourage or prevent patients from using primary care, preventive treatments, and chronic disease maintenance medications
• Co-pays, co-insurance, and high deductibles provide little or no incentive for patients to choose the highest-value providers for expensive services
162© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Airfare Choices from Boston to Cleveland
Boston Cleveland
?
USAirways1-StopCoach$622
UnitedNon-Stop
Coach$1,107
UnitedNon-Stop
First Class$1,355
Airfares for July 6-7, 2011 as of 6/26/11
163© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What If We Paid for Travel the Way We Pay for Healthcare?
Boston Cleveland
?
Consumer Shareof Travel Cost
USAirways1-StopCoach$622
UnitedNon-Stop
Coach$1,107
UnitedNon-Stop
First Class$1,355
Airfares for July 6-7, 2011 as of 6/26/11
164© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Flat Copayments:First Class Fare Wins
Boston Cleveland
?
Consumer Shareof Travel Cost
USAirways1-StopCoach$622
UnitedNon-Stop
Coach$1,107
UnitedNon-Stop
First Class$1,355
$100 Copayment: $100 $100 $100
Airfares for July 6-7, 2011 as of 6/26/11
165© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Coinsurance:First Class Fare Probably Wins
Boston Cleveland
?
Consumer Shareof Travel Cost
USAirways1-StopCoach$622
UnitedNon-Stop
Coach$1,107
UnitedNon-Stop
First Class$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
Airfares for July 6-7, 2011 as of 6/26/11
166© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Deductible:First Class Fare Wins
Boston Cleveland
?
Consumer Shareof Travel Cost
USAirways1-StopCoach$622
UnitedNon-Stop
Coach$1,107
UnitedNon-Stop
First Class$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
$500 Deductible: $500 $500 $500
Airfares for July 6-7, 2011 as of 6/26/11
167© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Price Difference:Lowest Coach Fare Wins
Boston Cleveland
?
Consumer Shareof Travel Cost
USAirways1-StopCoach$622
UnitedNon-Stop
Coach$1,107
UnitedNon-Stop
First Class$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
$500 Deductible: $500 $500 $500
Lowest Coach Fare: $0 $485 $733
Airfares for July 6-7, 2011 as of 6/26/11
168© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get Your Knee Replaced?
Consumer Shareof Surgery Cost
Price #1$20,000
Price #2$25,000
Price #3$30,000
Knee JointReplacement
169© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get Your Knee Replaced?
Consumer Shareof Surgery Cost
Price #1$20,000
Price #2$25,000
Price #3$30,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurancew/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Knee JointReplacement
170© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get Your Knee Replaced?
Consumer Shareof Surgery Cost
Price #1$20,000
Price #2$25,000
Price #3$30,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurancew/$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 JointReplacement
171© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Which Health System or ACO Will You Choose?
Total Annual CostPer Patient/Member
Health System/ACO #1$6,000
Health System/ACO #2$8,000
Health System/ACO #3$10,000
Consumer Share $0 $2,000 $4,000
172© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Would Happen If Consumers Had Choice & Considered Value?
• Minnesota Patient Choice– started by the Buyers Health Care Action Group (BHCAG)
in the 1990s– “care systems” bid on risk-adjusted (total) cost of patient
care (i.e., risk-adjusted global payment)– care systems are divided into cost/quality tiers based on
their relative bids– consumers pay the difference in the bid price to select a
care system in a higher cost tier
• Results– Many consumers switched to lower cost providers– High cost providers reduced their costs to retain/attract
patients
This All Sounds Really Hard
Can’t We Just Keep DoingWhat We’re Doing Today
Until We Retire?
This All Sounds Really Hard
175© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Opportunities to Reduce Costs Without Rationing Are Widely Known
Helping Patients with ChronicDisease Stay Out of Hospital
Reducing Hospital Readmissions
Reducing Overutilization ofOutpatient Services
Shifting Preference-SensitiveCare to Lower-Cost Options
Reducing the Cost of Expensive Inpatient Care
176© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Question is: How Will Purchasers Get The Savings?
Helping Patients with ChronicDisease Stay Out of Hospital
Reducing Hospital Readmissions
Reducing Overutilization ofOutpatient Services
Shifting Preference-SensitiveCare to Lower-Cost Options
Reducing the Cost of Expensive Inpatient Care
PURCHASER
?
177© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Payer-Driven Approachto Achieving Savings
Helping Patients with ChronicDisease Stay Out of Hospital
Reducing Hospital Readmissions
Reducing Overutilization ofOutpatient Services
Shifting Preference-SensitiveCare to Lower-Cost Options
Reducing the Cost of Expensive Inpatient Care
PURCHASER
Physician P4P
HighDeductibles
NarrowNetworks
PriorAuthorization
Tiering onCost
ReadmissionPenalty
Managed Fee-for-Service
178© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Provider-Driven Approachto Achieving Savings
Helping Patients with ChronicDisease Stay Out of Hospital
Reducing Hospital Readmissions
Reducing Overutilization ofOutpatient Services
Shifting Preference-SensitiveCare to Lower-Cost Options
Reducing the Cost of Expensive Inpatient Care
PURCHASER
CoordinatedCare/
AccountableCare
Organization
Global Pmt/Budget
179© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Very Different Models…
Helping Patients with ChronicDisease Stay Out of Hospital
Reducing Hospital Readmissions
Reducing Overutilization ofOutpatient Services
Shifting Preference-SensitiveCare to Lower-Cost Options
Reducing the Cost of Expensive Inpatient Care
PURCHASER
CoordinatedCare/
AccountableCare
Organization
Physician P4P
HighDeductibles
NarrowNetworks
PriorAuthorization
Tiering onCost
ReadmissionPenalty
Managed Fee-for-Service Global Pmt/Budget
180© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Very Different Impactson Physicians and Hospitals
PURCHASERManaged Fee-for-Service
1. Payer defines how care should be redesigned
2. Payer obtains all savingsfrom lower utilization
3. Payer decides how muchsavings to share withprovider
1. Provider determines how care should be redesigned
2. Provider and Purchaser or Payer agree onadequate price for providercare and amount of savings for payer
3. Providers get to keep any additional savings and todetermine how to divide it
Global Pmt/Budget
181© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities From Completely Redesigning Payment & Delivery
• Better Payment for Physicians and Hospitals– No threats of major fee cuts– No health plan/benefit manager utilization review– Physicians and hospitals paid based on quality, not volume
• Truly High Quality, Patient-Centric Care– Coordinated care by multiple physicians– Care mgt from providers, not health plans or disease mgt co’s– Flexibility for telephone, internet, & home visits if patients need them
• Greater Patient Engagement– Zero or low copayments for essential medications and services– Higher cost-sharing for unnecessary tests and services– Incentives for patient wellness and adherence
• Less Spending on Administrative Costs– Less spending for health plan administrative costs and profits– Less spending by providers on payer-imposed administrative costs
• Lower Government Spending and Smaller Deficits• Better Health for Citizens and More Affordable Insurance
182© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Learn More About Win-Win-WinPayment and Delivery Reform
Center for Healthcare Quality and Payment Reformwww.PaymentReform.org
For More Information:
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org
APPENDIX
What About Primary Care and Non-Proceduralists?
186© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Today: Reactive Care for Chronic Disease, Many Hospitalizations
TODAY
$/Patient # Pts Total $
Physician Svcs
PCP $600 500 $300,000
Specialist 0 $0
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Pmt (Cost) $2,900,000
500 ModeratelySevere Chronic
Disease Patients• PCP paid only for
periodic office visits• Patients do not take
maintenance medicationsreliably
• 50% of patients are hospitalized each yearfor exacerbations
• Specialist only sees patient duringhospital admissions
187© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay the PCP for Proactive Care Management
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Pmt (Cost) $2,900,000
188© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay the Specialist to Be a Responsive Medical Neighbor
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
$80,000
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
189© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Provide Adequate Resources to Support Patients
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Pmt (Cost) $2,900,000
190© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can We Afford a 127% Increase in Spending on Ambulatory Care?
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
$80,000
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Pmt (Cost) $2,900,000
191© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Yes, If It Succeeds In Reducing Hospitalizations
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
$80,000
Hospitalizations
Hospital $10,000 250 $2,500,000 150 $1,500,000 -40%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000 $2,180,000 -25%
192© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
But What About the Hospital?
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
$80,000
Hospitalizations
Hospital $10,000 250 $2,500,000 150 $1,500,000 -40%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000 $2,180,000 -25%
193© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Analyze the Hospital’s Cost Structure
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000
Hosp. Variable $3,700 37% $925,000
Hosp. Margin $300 3% $75,000
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
194© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Continue to Cover the Fixed Costs
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000
Hosp. Margin $300 3% $75,000
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
195© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Save on Variable Costs With Fewer Patients
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
196© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Increase the Hospital’s Contribution Margin
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
197© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payer Still Spends Less
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000 $2,817,500 -3%
198© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Win-Win-Win: Better Care, Higher Physician Pay, Lower Spending
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000 $2,817,500 -3%
Physicians Win
Payer WinsHospital Wins
199© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use a Condition-Based Payment for the Patients to Support Care
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%
APPENDIX
201© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Instead of Having To Accept What Medicare and Health Plans Pay…
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Medicare FFS
Medicaid FFS
MA Plans
Commercial FFS
202© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Could Happen If PhysiciansHad Their Own Health Plans?
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
MA Plans
Physician-Owned Health
Plan
?
?
?
203© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Get Risk-Adjusted Payment from Medicare, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Physician-Owned Health
Plan
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
204© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Contract Directly with Self-Insured Employers, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Physician-Owned Health
Plan
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
Risk-Adjusted Direct Contract
205© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use Exchanges for Small Group Business, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Physician-Owned Health
Plan
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
InsuranceExchanges Risk-Adjusted
PremiumRevenue
Risk-Adjusted Direct Contract
206© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Contract Directly With State for Medicaid, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Physician-Owned Health
Plan
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
Risk-AdjustedPremiumRevenue
Risk-Adjusted Direct Contract
InsuranceExchanges
Risk-Adjusted Global Payment
207© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Get Global Payment for Large Groups, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Physician-Owned Health
Plan
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
InsuranceExchanges
State Medicaid
MedicareBeneficiaries
Risk-Adjusted Direct Contract
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
Risk-AdjustedPremiumRevenue
Risk-Adjusted Global Payment
208© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Result: A “Single Payer System”Controlled by Physicians
CMS
Physician Group,
IPA,or Health System
Physician-Owned Health
Plan
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
InsuranceExchanges
State Medicaid
MedicareBeneficiaries
Risk-Adjusted Direct Contract
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
Risk-AdjustedPremiumRevenue
Risk-Adjusted Global Payment
ONE PAYER,MANY
CUSTOMERS
APPENDIX
210© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
To Set A Fair Price,Start With Existing Costs…
COST
TIME
Costsin
FFS
Costsin
FFS
Costsin
FFS
211© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Set a Payment Level That Is ≤ Expected Costs…
COST
TIME
Costsin
FFS
Costsin
FFS
Costsin
FFS
Bundledor
EpisodePayment
Level Exp.Costs
inFFS
$
212© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…If All Goes Well, Costs Will Be Lower Than the Payment Level…
COST
TIME
Costsin
NewPmt
Costsin
FFS
Costsin
FFS
Costsin
FFS
Bundledor
EpisodePayment
Level
213© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
...And Both the Purchaser and Provider Will “Win”
COST
TIME
Costsin
NewPmt
$$$$$$
Bonus forProvider
SavingsFor Purchaser
Costsin
FFS
Costsin
FFS
Costsin
FFS
Bundledor
EpisodePayment
Level
214© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Everybody Fears: All Won’t Go Well (Costs Go Up)
COST
TIME
Costsin
NewPmt
Costsin
FFS
Costsin
FFS
Costsin
FFS
Bundledor
EpisodePayment
Level
215© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Different Reasons Costs May Increase Beyond Payment
COST
TIME
Costsin
NewPmt
Costsin
FFS
Costsin
FFS
Costsin
FFS
ExcessCost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Bundledor
EpisodePayment
Level
216© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Providers Should NOT Be Expected To Take Insurance Risk
COST
TIME
Costsin
NewPmt
Costsin
FFS
Costsin
FFS
Costsin
FFS
ExcessCost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
ProviderPerformanceRisk
InsuranceRisk
Bundledor
EpisodePayment
Level
217© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Four Mechanisms for Separating Insurance and Performance Risk
COST
TIME
Costsin
NewPmt
Costsin
FFS
Costsin
FFS
Costsin
FFS
Bundledor
EpisodePayment
Level
ExcessCost
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
(Provider’sResponsibility)