Payment Reform To
Achieve Better Health Care
Susan Dentzer
Editor-in-Chief
Health Affairs Thanks Our Sponsors For
Their Generous Support Of The September
2012 Issue And Today’s Briefing
Jonathan Blum
Deputy Administrator and Director, Center for Medicare
Centers for Medicare & Medicaid Services
Payment Reform To Achieve
Better Health Care
Sam Nussbaum, MD
Executive Vice President, Clinical Health Policy and
Chief Medical Officer
WellPoint, Inc.
A Tale Of Health Care In Our Nation
“It was the best of times…
Unprecedented advances in medical technology, treatments, and
pharmaceuticals can improve population health
It was the worst of times…”
The state of public health, unsustainable health care costs, the
quality of medical care delivered and access to services challenge
clinical care and overall health
From “A Tale of Two Cities”
By Charles Dickens
Challenges In The US Health Care System
•
Ranks last or next-to-last
on:
– Quality
•
Variation in quality,
safety, outcomes and cost
•
Escalating
costs/technology
advancements
•
Aging population and
increased chronic diseases
•
Lack of information and
infrastructure for optimal
care
•
Primary care shortage
•
Fragmented system
– Access
– Efficiency
– Equity
– Healthy lives*
*The Commonwealth Fund – June 2010
Health Expenditures
$4.48 Trillion
19.3% GDP
$4,500
$4,000
$3,500
19.0%
$2.57 Trillion
17.3% GDP
18.5%
$2,500
18.0%
$2,000
17.5%
% GDP
Billions
$3,000
Average Annual Health Insurance Premiums and
Worker Contributions for Family Coverage,
2001–2011
19.5%
$1,500
17.0%
$1,000
$500
$0
16.5%
16.0%
2008 version of the National Health Expenditures (NHE) released in January 2010
Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2001-2011.
The State Of US Population Health
Key Drivers of Health Status
Obesity
66% obese or
overweight
Physical Inactivity
28% inactive
Smoking
23% smokers
Contribution to Premature Death
Genetic
Predisposition
Social
Circumstances
15%
30%
Environmental
5% Exposure
10%
Health Care
40%
Stress
36% high stress
Aging
22% > 55 years old
Behavioral
Patterns
Schroeder S. N Engl J Med 2007;357:1221-1228
Healthcare Costs Are Concentrated
23 Million Beneficiaries
•Spending $1,130 each
•Total Spending = 5%
($26 B)
16.1 Million Beneficiaries
•Spending $6,150 each
•Total Spending = 20%
($104 B)
7 Million Beneficiaries
•Spending $55,000 each
•Total Spending = 75%
($391 B)
Meaningful Health Reform Requires A Focus On The
Delivery System To Address Cost And Quality In
Addition To Expanding Access And Coverage
•
•
•
•
•
Promote evidence based medicine; determine real-world
outcomes; advance health care quality
Align payment incentives for improved health outcomes
Focus on prevention and management of chronic illness through
coordination of care
Improve effective use of drug therapies and new medical
technologies; enhance patient and drug safety
Engage patients/consumers in shared decision making and
advance knowledge of value in health care services
Hospitals And Physicians: An Evolving Landscape
• Half of US physicians are
employed by hospitals/
integrated delivery
systems
• Hospitals “lose”
$150,000-$250,000 per
year over the first 3 years
of employing a physician
• Hospitals absorb this loss
to influence referrals to
their specialists or to
create ACOs
Source: Robert Kocher, M.D., and Nikhil R. Sahni, B.S. N Engl J Med 2011;
364:1790-1793 and MGMA Physician Placement Starting Salary Survey;
2010 Report based on 2009 Data
Insurers And Providers: An Evolving Landscape
• $475M contribution to
5-hospital West Penn
Allegheny
•300 medical centers in
42 states; 240 worksite
health-care facilities
• This “affiliation” will
enable West Penn to
move from fee for
service to salaries for
physicians and offer
incentives for quality
and efficiency goals
•Will provide urgent
care, wellness
programs, and physical
and occupational
therapy to 3 million
Humana members near
a Concentra center
•United’s OptumHealth
services unit acquires
Monarch: 2300 doctors;
30+ urgent care centers;
access to 20 hospitals in
Orange County
•Provides Medicare
Advantage coverage and
coordinated care for
54,000 people in
California, Arizona and
Nevada
•OptumHealth: previously
entered into management
agreements of two
California groups,
AppleCare Medical Group
and Memorial HealthCare
Independent Practice
Association
•CareMore’s 26 Care
Centers are models for
integrated health care
and include a variety of
services including
medical evaluations and
diabetes care
Invention Versus Innovation
Discovery And Innovation
Statins reduce cardiac
deaths
Anti-viral drugs
transform HIV
Screening and drugs
improve cancer survival
The Architecture For Innovation
Improved Health Care and Lower Costs
Payment
Innovation
Care
Management
Innovation
Public
Health
Innovation
Health Information
Consumer
Innovation
Payment Innovation:
Improving Value And Affordability
Old Model
New Model
Reward unit cost
Reward health
outcomes and
population health
Inadequate focus on
care efficiency and
patient centeredness
Lower cost while
improving patient
experience
Payment for unproven
services; limited
alignment with quality
Improve quality, safety
and evidence
Public And Private Payer Partnerships To Test And Accelerate
Better Health, Improved Health Care And Affordability
•
•
•
•
•
Multi-payer advanced primary care practice model
Pioneer ACOs
Comprehensive Primary Care Initiative
Partnership for Patients
Health Care Innovation Challenge
Level Of Integration Drives Payment Models
Payment for Value
Global payments/
budgets and
shared financial
“risk”
Value-Based
Reimbursement
ACOs and Delivery
System Integration
Bundled
Payments
Patient Centered
Medical Homes
Physician and Hospital
Pay for Performance
Fee-for-Service
Early Integration
Integration of Care Delivery
Fully Integrated
The Race To Value-Based Care
Key Principles for the Race:
Start:
Fee For Service
•Primary Care is central
•Commit to evidence-based medicine
•Information at the point of care
•Focus on health, prevention, risk reduction for
chronic illness
•Coordination of care
Concerns Along the Way:
•Attribution and more limited networks of care
•Overuse of supply sensitive care increases revenue;
optimized FFS revenue model
•Payment shifting to private sector; will gain sharing
overpower FFS
•Acquisition of specialty practices drive revenue
•Can “Big Medicine” reduce waste and drive efficiency
Finish:
Value-Based Care
Medicare’s New Hospital Value-Based
Purchasing Program Is Likely To
Have Only A Small Impact On
Hospital Payments
Rachel M. Werner, MD, PhD
Core Faculty, Center for Health Equity Research and Promotion,
Philadelphia Veterans Affairs Medical Center
Associate Professor of Medicine, University of Pennsylvania
R. Adams Dudley, MD, MBA
Professor of Medicine and Health Policy
Assoc. Dir. for Research, Philip R. Lee Institute for Health Policy Studies
University of California, San Francisco
Support: Agency for Healthcare Research and Quality,
Veterans Affairs Health Services Research and Development
Summary Of Key Findings
If CMS’ new hospital pay-for-performance
(PFP) system had been in place in 2009…
• 65% of hospitals would have seen payment
changes of less than ¼ of 1%
• Just over 5% of hospitals would have payment
change over ½ of 1%
— 71 hospitals (2.4%) would have earned bonuses of >½ of
1% (average bonus ~$55,000)
— 90 hospitals (3.0%) would have had losses greater than
½ of 1% (average loss ~$125,000)
— Only 8 hospitals nationwide would have seen payment
changes of more than 1.5%
Is ¼ of 1% Enough Incentive To Change
Behavior?: Comparison To Other Markets
Coupon value = 13-36% of purchase price
Source: Google search “coupon”, click first link
Is ¼ of 1% Enough Incentive To Change
Behavior? Comparison To Other Markets
Coupon value = 11-44% of purchase price
Source: Google search “coupon”, click first link, then “health care” tab
Conclusions
• Like most private insurance PFP programs,
the magnitude of the incentive CMS is
offering is much lower on a percentage basis
than the magnitude of incentives used to
change behavior in other industries
• Until performance becomes a more highly
weighted determinant of pay, the payment
system is unlikely to stimulate providers to
improve quality or efficiency
If Music Were Like US Health Care
• Observations
– CMS must contract with any willing provider
– the vast majority of CMS’ payment is based on the
number of units produced, not the quality or efficiency
of care
• So, if music were like US health care...
– CMS would have to contract with me (not just people
like the Beatles, Maria Callas, the Chicago Symphony
Orchestra) for record albums
– I could expect to get ~99.75% of what the Beatles do for
each album I produced
– Since CMS doesn’t limit how many albums I can
produce, my income from CMS could be near that of the
Beatles
The Lessons Of Medicare’s
Prospective Payment System
Show That The Bundled
Payment Program Faces
Challenges
Stuart H. Altman, PhD
Sol C. Chaikin Professor
The Heller School for Social Policy and Management
Brandeis University
The Medicare Prospective Payment
System (PPS): First Bundled Payment
System
• Changed Medicare Hospital Payment
System
– Ended Fee-for-Service Payments Based on Cost of Care
– Paid Hospitals Based upon Illness of Patient
• Used Diagnostic Related Grouping System (DRGs) to
Categorize Patient Illness
• Used National Data (Not Hospital-Specific) to
Determine Resource Use Per DRG
• Allowed Medicare To Pre-Determine How Much It
Would Spend for Hospital Care
The Medicare Prospective Payment
System (PPS):
First Bundled Payment System
• PPS Only Included Hospital Services
– Current Bundled Payments Include Physician
Services and Post-Acute Care
• PPS Required a Number of Important
Adjustments:
Extra Payments For:
Excluded:
Teaching Hospitals
Children
High Labor Cost Areas
Psychiatric
Most Rural Hospitals
Critical Access Hospitals
Long-Term Hospitals
PPS Overpaid Hospitals In Early
Years: Later Years Extra Payments
Repaid
Helped Hospitals Learn How To Restructure
Care Without Tight Budget Constraint
SOURCE: ProPAC and MedPAC Reports
Lessons of PPS for Bundled Payments
• Might Be Better to Limit Savings for Government
in Early Years
• Cannot Use Same System for All Geographic
Areas or Types of Hospitals
• Requires Changes over Time
• Bundled Payments Will Require Hospitals to
Coordinate Care With Physicians and Post-Acute
Care Facilities
• Need to Link Medicare Payment System to
Payment Methods Used by Private Insurance
• Future Bundled Payments May Need A Budget
Constraint Similar to DRGs
Medicare Post-acute Care Payment
Reforms Have Potential To Improve
Efficiency But May Need Changes
To Cut Long-run Costs
David C. Grabowski
Peter Huckfeldt
Neeraj Sood
Jose Escarce
Joseph Newhouse
Background And Motivation
• Medicare spent $58 billion on postacute care (PAC) in 2010
– Value of services within/across four
PAC settings is unclear
• ACA changes what and how
Medicare pays for PAC
• What can experience with adoption
of PAC prospective payment
systems (PPS) tell us about expected
changes under the ACA?
PPS Changed Both Generosity
And Method Of PAC Payment
• Lowered short-term utilization/costs
but no change in long-run growth
Medicare SNF Expenditures
$20,000
PPS
$15,000
$10,000
$5,000
05
20
03
20
01
20
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
$0
19
Dollars in Millions
$25,000
Implications Of Short-run
Decline In PAC Costs Under
PPS
• Generally no patient selection
• Did not affect mortality or
readmissions
• Mixed evidence of substitution
across settings
PAC Payment Changes Under The
ACA
• Large decline in PAC payment levels
– Should lower PAC utilization with no
major increase in readmissions/
mortality
– Other outcomes?
• Bundled payment/ACOs demos
– Should lead providers to eliminate less
efficient PAC services
• Bending the long-run cost curve?
INNOVATION PROFILE
Global Budget Pilot Project Among Provider
Partners And Blue Shield Of California Led
To Savings In First Two Years
Paul Markovich
President and Chief Operating Officer
Blue Shield of California
Sept. 7, 2012
4 Goals
Launched pilot ACO with Dignity Health and Hill Physicians
in January 2010 for 41,000 CalPERS employees and
dependents
4 goals:
1. Deliver $15.5M savings to CalPERS
2. Grow membership
3. Maintain or improve the quality of health care
4. Create a sustainable model for expansion
Approach
Developed an annual global budget with all parties sharing
upside and downside risk
5 tactics:
1. Improve information exchange (trust)
2. Coordinate processes such as discharge planning
3. Eliminate unnecessary care
4. Reduce variation in practices and resources
5. Reduce pharmacy costs
Results
2010:
• $15.5M in savings to CalPERS ($20.5M total savings)
• Major reductions in readmissions, inpatient days, inpatient
stays of 20 or more days and ALOS
Results validated by Milliman
2010-11 combined :
• $37M in savings to CalPERS
• CAGR for PMPM costs was ~ 3% vs. ~7% for everyone else
Why A Global Budget Model Works
• Creates financial alignment for the healthy and
unhealthy
• Easy to implement without complicated budget analytics
or changes in payment methods
• Partners can quickly identify clinical and cost “hot spots”
• Customer gets immediate, visible premium relief
Conclusion
Global budget with risk share:
• Aligns incentives among independent hospitals, doctors
and payers so that each party can share in the risk of
their collective performance
• Enables clinical and financial integration that supports
more timely and effective care
• Is proven -- has gotten meaningful results over multiple
years
• Is replicable and scalable
– Blue Shield now has 8 ACOs and >100,000 members in this
model
Beyond Capitation: How
New Payment Experiments
Seek To Find The ‘Sweet
Spot’ In Amount Of Risk
Providers And Payers Bear
Austin Frakt and Rick Mayes
Financial Risk By Payment Type
Authors’ adaptation of a figure in Averill et al. J Ambul Care Manage. 2010;33(1):2–23. Omitted are paying physicians
by salary (like the VA) and providing an institution with a budget for many or all patients. FFS is fee-for-service.
The Design And Application
Of Shared Savings
Programs: Lessons From
Early Adopters
Joel S. Weissman
Michael H. Bailit
Guy D’Andrea
Meredith B. Rosenthal
Shared Savings Arrangements
• A cornerstone of new payment
models under Obama health care
reform, and spreading rapidly
among public and private payers
• An incremental approach toward
accepting full risk and global
payments
• Details affect size of distribution
Findings - The Devil In The Details
• “Sharing” is not necessarily equal
• Characteristics vary across
programs
• Complicated formulas involving
savings thresholds, minimum panel
sizes, exclusions, starting points,
and attribution
• It’s not just about the money – the
use of quality “gates” and “ladders”
For more detail, also see: Bailit & Hughes, Key Design Elements of SharedSavings Payment Arrangements. Commonwealth Fund, 2011
Principles And Recommendations
Group together similar small practices
Risk adjustment where appropriate
Sliding scales to distribute savings
Prefer multi-payer initiatives and
aligned measures and incentives
• Transparency and education
• Pilot programs are different
• Practice support and data sharing
•
•
•
•
Many Large Medical Groups
Will Need To Acquire New
Sills And Tools To Be Ready
For Payment Reform
Robert E. Mechanic
September 7, 2012
2010 Patient Revenue By Contract Type
FFS-based
Risk-based
Source: Self-reported survey data from 21 CAPP medical groups.
2010 PCP Compensation Method
FFS-based
Risk-based
Source: Self-reported survey data from 21 CAPP medical groups.
Medical Group Data Management
Percent of Groups Reporting “Fully Implemented”
Source: Author’s analysis of self-reported survey data from 21 CAPP medical groups.
Medical Group Patient Management
Percent of Groups Reporting They are “Far Along”
Source: Author’s analysis of self-reported survey data from 21 CAPP medical groups.
Payer-Provider Collaboration
Reduced Use And Improved Quality
In Maine Medicare Advantage Plan
Dr. Thomas Claffey, MD
President, InterMed
Medical Director, NovaHealth
Care Management
• Thesis: Population based care
management, by members within a
primary care team, informed by an
electronic health record, supported
by an information system and
analytic talent will improve health
and lower cost.
Provider / Payer Relationship
• Recognition of the mutual interests,
complimentary contributions and a
collaborative approach facilitate the
delivery of high value patient
centered care.
Design
A. Identify Population (i.e. reconcile
roster/panel)
B. Collaboration with Aetna care
management team
C. Assign each patient to a physician
assistant or nurse practitioner from
their primary care providers team
D. Stratify patients by intensity of need
Design (cont.)
E. Carefully track clinical quality metrics
and identify potential gaps in care
F. Monitor inpatient census to facilitate
safe transition from hospital to home
(avoid readmissions)
G. Analyze cost data to inform potential
future improvement efforts
Needed For Success:
A. Support from health plan
B. Electronic health record
C. Buy in from doctors
D. Dedicated time for NP/PA’s
E. Data capture and analysis inside
the medical practice
Contributes To Success:
A stable patient cohort increases the
chances for success.
Translated:
Practice based care management delivered in the
context of a highly effective, trusted, proactive
care team, with a focus on providing access,
results in long term relationships which
increases the likelihood of success.
Optimistic Outlook:
The success of this type of model will
lead to expansion to other
populations and ultimately affect the
way other payers pay for care.
Fee-For-Service Will Remain A
Feature Of Major Payment
Reforms, Requiring More Changes
In Medicare Physician Payment
Paul B. Ginsburg, PhD
President
Center for Studying Health System Change
Early Results From Medical
Home Pilots
Health Affairs Briefing
“Payment Reform To Achieve
Better Health Care”
September 7, 2012
WellPoint, Inc.
Medical Home Participation
PCMH States
All Payer
Members/
Patients
WellPoint*
Fully Insured
WellPoint*
ASO
Physician
Participation
20,000**
6,200
None
58
30,000
10,000
3,500
73
39,931
17,335
15,564
250
Colorado
New Hampshire
New York
*WellPoint refers to its affiliated health plans’ participants
**There were 100,000 patients in the practices; financial and quality results are based on 20,000 funded by payers
Source: Colorado, New Hampshire and New York Medical Home Pilots and WellPoint Data.
Preliminary Utilization Results from Colorado Pilot
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Acute IP Admissions/1000
Base period: July 2008 through June 2009
Post period: July 2010 through June 2011
Source: WellPoint Internal Analysis
ER Visits/1000
Percent Change from Baseline
PCMH
Control Group
Specialty Visits/1000
Colorado: All-Payer Quality Results (preliminary) June 2009 through December 2011
Source: Self reported from physicians’ practices in the Colorado medical home pilot.
New York Medical Home and Control Group
Comparison
PCMH vs. Non-PCMH Outcomes
100%
90%
80%
PMPM Calculation
PCMH
NonPCMH
Difference
Pediatric
$210.06
$229.86
-8.62%
Adult
$546.26
$638.87
-14.50%
82.10%
77.70%
72.50%
70%
64.60%
60%
50%
HbAic Testing*
*p=.001
Emergency Department utilization for
PCMH and non-PCMH cohorts
PCMH
Results are from Calendar Year 2009
Source: HealthCore Analysis
Appropriate
Antibiotic
Prescribing*
Non-PCMH
Risk Adjusted
PMPM
Patient-Centered Primary Care
Aligning economic incentives and providing tools for success
Value-based
reimbursement
• Fee Schedules
• Coordination fees
• Shared savings
Expanded access,
i.e. alternatives
for visits “after
hours,” virtual
visits
Payment
for care
management
Exchange of
meaningful
information, i.e.
identifying high
risk individuals
Horizon’s Patient-Centered Medical
Home Program Shows Practices Need
Much More Than Payment Changes To
Transform
Urvashi B. Patel, PhD, MPH
Carl Rathjen, MPA
Elizabeth Rubin, MPA
September 7, 2012
National Press Club, Washington, DC
Diabetes Medical Home
Began 2009
Number of Practices
33
Attributed Patients
5,000
Monetary Resources
•
•
•
•
•
Non-monetary Resources
Results
Support NCQA PCMH recognition process
Continue fee-for-service
PMPM care coordination payment
Annual outcome-based payment
Data exchange
• 33 of 35 practices recognized as medical homes by
NCQA
• Few practices met quality goals
• Overall costs decreased for patients compared to the
comparison group, but not enough to cover upfront
costs of implementing the medical home program
Enhanced Medical Home Program
Began January, 2011
Number of Practices
Attributed Patients
Monetary Resources
Non-monetary Resources
Early Results
8
24,000
• Continue fee-for-service
• PMPM care coordination payment
• Annual outcome-based payment (quality and
utilization)
• Data exchange
• Population care coordinators (Horizon nurses)
•
•
•
•
•
•
8% higher rate, improved HbA1c control
6% higher rate, breast and cervical cancer screenings
12% lower cost of care, per member per month
26% lower rate, emergency room visits
25% lower rate, hospital readmissions
5% higher rate, use of generic prescriptions
Current Medical Home Program
Began January, 2012
Number of Practices
Attributed Patients
Monetary Resources
48
154,000
• Continue fee-for-service
• PMPM care coordination payment
• PMPM subsidy to support care coordinators
• Annual outcome-based or shared savings payment
(quality, patient experience, utilization/cost of care)
Non-monetary Resources
•
•
•
•
•
•
Results
Enhanced data exchange/care plan tool
Population care coordinator education program
Patient engagement materials
Medical Home Playbook
Learning network
Not Available until 2013
Conclusions
• Through strong provider/health plan collaboration, a new
payment structure and incentive approach for primary care
providers must be developed to support the establishment and
expansion of high-performing medical homes.
• The new approach must develop and support both monetary
and non-monetary incentives focused on improving care
coordination and quality, but also the transformation of the
practices themselves.
• It is critical that we find a sustainable payment and care model
that can support the additional personnel and infrastructure
required to successfully deliver effective and efficient care within
the medical home.
Colorado’s Patient-Centered
Medical Home Pilot Met
Numerous Obstacles, Yet Saw
Results Such As Reduced
Hospital Admissions
Authors:
Marjie Harbrecht, MD
Lisa Latts, MD
Multi-Stakeholder Pilot
• One of the first in the nation - voluntary
• Three year pilot
– Included 6 health plans, 16 primary care practices, others
• Blended reimbursement model
– FFS, Care management fee (PMPM), P4P
• Over 100,000 patients involved
– 20,000 included in blended reimbursement
• HealthTeamWorks – convener/practice coaches
• Harvard researcher as formal evaluator
– Final evaluation in process
Implementation challenges
Health Plans
•
•
•
•
•
•
Antitrust and distrust - required neutral “negotiator”
Engaging self-funded groups - penetration
Administering blended reimbursement
Data critical – to manage and achieve goals
Preferred Provider Benefit Plans (PPO)
Greater transparency – quality and pricing
Practices
•
•
Need support to transform care – coaching/shared learning
Complex care managers
– Integral part of practice team or shared among multiple practices
– Able to work with all patients, regardless of plan
Success is Achievable
• Preliminary Results Positive
–
–
–
–
Infrastructure and quality metrics improved
Significantly reduced ER Visits and hospital admissions (multiple chronic conditions)
One payer: ROI 250 – 400 percent
Patient and provider satisfaction
• BUT need strong commitments, culture change and
collaborative efforts on multiple fronts
– Need all players at table including ASO employers
– Agree on definitions, measures and target goals, data - avoid TOP DOWN approach
• Payment
– Sufficient upfront funding to build new infrastructure
– Incentives to drive outcomes and sustain initial efforts
– Reduce Fee-for-Service ratio to allow panel management
• Data to help practices drive improvement
– Actionable, complete, timely, collated in consistent format, risk stratified, and sortable
Conclusions
• PCMH is a critical strategy to improve quality,
manage rising costs and improve satisfaction
– Foundation for ACOs / Integrated Community Care
• Period of discovery
– Need to continuously improve on these models
• Transformation is hard - will take time, resources
and patience
– Culture change for many
• Investment in our future
– Several plans and practices moving forward (i.e., CPCI)
• Greater risk to continue status quo
• Can't afford to keep starting over
Reference Pricing As An
Employer & Insurer
Strategy For Cost Control
James C. Robinson
Leonard D. Schaeffer Professor of Health Economics
Director, Berkeley Center for Health Technology
University of California, Berkeley
What Is Reference Pricing?
– Insurer/employer establishes a maximum benefit limit for
each product or procedure, and pays provider up to that
benchmark. The employee/patient pays the difference
between that benchmark and the price actually charged by
the provider.
– Patient payments above reference price limit do not count
towards deductible or annual out-of-pocket maximum.
– Reference pricing is applicable to services that exhibit wide
range in prices but only narrow range in quality, as
insurers/employers do not want to be accused of
channeling to low quality options
– The wide range in prices comes from market consolidation
and aggressive pricing strategies by providers in the face of
historical indifference by patients to price differences
CalPERS Reference Pricing For Orthopedic
Surgery (Limit=$30,000)
Safeway Reference Pricing For Colonoscopy
(Limit = $1,250)
Range of Prices Paid by Safeway for Colonoscopy in Three
Markets, plus Reference Price Limit Established in 2010
$6,000
$5,984
$5,000
$4,571
$4,000
$3,508
$3,000
MIN
MAX
$2,000
$848
$1,000
$1,386
$443
$Houston
Source: Safeway Health
San Francisco
Portland, OR
Safeway
reference price
set at $1,250
Centers Of Excellence (COE)
– Insurer/employer contracts with one hospital nationally
(or one in each region) for particular procedures.
Insurance benefits for employees are structured to favor
use of those facilities
– Blue Shield of California (orthopedic surgery):
One COE in each of 16 regions
– Lowes self-insured (interventional cardiology):
One COE nationally (Cleveland Clinic)
– COE strategy limits consumer choice but offers
insurer/employer greater leverage to improve quality
and cost performance by providers
– Similar goals with less cost sharing but less consumer
choice, compared to reference pricing
Conclusion
• There exists considerable variation in prices,
unrelated to product and provider quality
• Insurer/employer contracting leverage is limited
due to market consolidation
• Reference pricing is an increasingly popular and
effective benefit design innovation
• “Defined contribution” applied to the product or
procedure (rather than to the health plan)
• Drugs, lab tests, imaging, routine surgery
Wide Variation In Episode
Costs Within A Commercially
Insured Population Highlights
Potential To Improve The
Efficiency Of Care
Philip Ellis
Center for Health Reform &
Modernization
UnitedHealth Group
Data and Methods
• Data drawn from “Premium Designation” program used to
assess physician performance on quality and efficiency
• Uses claims for UnitedHealthcare’s commercial insurance
plans – employer and individual market
• Covers nearly 250,000 doctors in 21 specialties (including
primary care) across 41 states, mostly for 2007 and 2008
• Measures allowed costs, not billed charges, including
covered costs and out-of-pocket expenses
• Episode costs calculated using Optum’s Symmetry
groupers, with differing levels of complexity/severity
• Uses more than 300 evidence-based quality measures;
Quality Successes / Opportunities = Quality Score
• Data aggregated by Hospital Referral Region (HRR)
Results
• 43% of physicians designated for quality and
efficiency; they had 14% lower costs, on average
• Episode costs varied widely across procedures:
– For selected major procedures – such as knee and back
surgery – costs varied by a factor of about 2.5
– For common chronic conditions – such as asthma and
diabetes – costs varied by a factor of about 15
• Episode costs also varied across markets, but
some markets had much higher cost variability
• Across markets, little or no correlation between
median episode costs and quality scores (among
physicians providing higher-quality care)
Variation Across Markets in Episode Costs and Care Quality
for Cardiac Catheterization (Diagnostic)
100%
98%
96%
Market Quality Score
94%
92%
90%
88%
86%
84%
82%
80%
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
Median Episode Costs in Market
Note: Data includes only physicians designated as providing higher-quality care.
$16,000
Implications/Next Steps
Broad implications for reforms:
• Improve quality measures
• Share data to assess performance
• Tailor payment reforms – one size
does not fit all
• Help providers succeed under new
models with support and tools
Framework To Guide
Government’s Role In Payment
And Delivery System Reform
Neeraj Sood and Aparna Higgins
Background
• Widespread private sector payment
and delivery system reform efforts
– Alternative Quality Contract (Chernew
et al. 2011, 2012 )
– Accountable Care Models (Higgins et al.
2011)
• Public sector payment and delivery
reform – Affordable Care Act
Public Sector Efforts
• Several programs launched by
Medicare
– Advanced Primary Care Demo
– Comprehensive Primary Care
– Medicare Shared Savings Program
– Bundled Payment
• Success depends on interactions of
public-private efforts
Framework For Government’s Role
• Promote an efficient high-quality
health care system
• Balance benefits and costs
• Consider “spillover” effects
• Ensure level playing field
Government’s Role
• Calibrate approach based on scope
and maturity of private sector
efforts
• Advancing research on methods
– Measures and attribution
– Benchmarks and tools
• Rapid Cycle dissemination on what
works
Large Employers That Have Lived
Through Transformation Say
Payment Reform Alone Won’t Cut
Costs And Reengineer Care
By Martín J. Sepúlveda and Helen Darling
Challenges to payment reform and transformation
• Prices in health care
– level, variation, transparency
• Complexity and waste in processes in health care organizations
• Work context in health care organizations
– people: leadership, skills, communication, performance, pay
– culture: values, beliefs, behaviors, attitudes
– process: what, how, where, when and by whom
– technology and information
Price variation, transparency, = quality
• Importance to employers:
– largest contributor to cost increases
– can’t negotiate well for insurance coverage
– employees can’t make use choices efficiently
• Variation Between States*
– 147%-210% private inpatient payment rates to hospitals as
% Medicare
Variation Within States**
– 300%-600% variation in hospital prices for numerous diagnoses (Mass.)
*: Ginsburg, “Wide Variation in Hospital and Physician Payment Rates Evidence of Provider Market Power,” Center for Studying Health System
Change Research Brief No 16 2010.
**http://www.mass.gov/eohhs/docs/dhcfp/cost-trend-docs/cost-trends-docs-2011/health-expenditures-report.pd
Price variation: transnational
Service
(US$)
Cost*
(US$; 25 and 95%tile)
Medical Tourism**
(US$)
Cost/Hosp. Stay
7,707 Canada
14,427 US (4,001; 45,902)
India CA Bypass 4,525
Angioplasty
12,581 New Zealand
29,055 US (18,266 – 60,448)
US CA Bypass
Normal Delivery
1,336
2,997
India Hip R.
MRI Imaging
874
1,009
France
US (2,380 – 4,848)
Switzerland
US (509-2590)
*International Federation Health Plans 2010 Report
US Hip R.
67,583
4,308
38,017
IBM Great Company Transformation
CUSTOMERS (Customer-driven)
• client focused: problems, priorities,
EMPLOYEES
Become the employer of choice:
 World-class management team
 Learning and skills
 Culture that prizes knowledge,
expertise & problem solving
 Flexibility
 Access to opportunity
competitors, strategies
• Competitor and industry insight
• Innovation that matters to clients
• Trust, ethics and integrity
Value(s)
PROCESS AND TECHNOLOGY
• Re-engineer
• Measure and continuously improve
• Innovate
• Automate, locate
• Optimize: structure, capacity
• Become the premier e-business
• Uphold the highest standards of ethical
business conduct
Brand
 Performance based pay
CULTURE
• Re-invigorate our core values
• Collaboration, Teaming and Learning
• Communities value knowledge,
experience and involvement of IBMers
• Expanded commitment to diversity
Waste and Work Context Key To Transformation
Workforce
Supply
Chain
Hospitals
Leadership
Product
Training
Skills
Pay
Rewards
Performanc
e
Assessment
Communicatio
n
Modified after P. Gabow MD; IBM
Capacity
Services
Payment
Operations
and
Revenue
Clinical
care
Process
People
Building
and Assets
Technology
Assessment
Diffusion
Culture
Learning
Improvement
Collaboration
Transparency
Measurement
Medical
Devices
and
Equipment
: LEAN, Engineering 5S Projects
Year
Total Supply/R&M
From 2005
Total Savings From
Black Belt From
2005
2005-1Q2011
$2,99,696
$36,692,627
P. Gabow MD MACP, CEO, Denver Health, ABIM-F 2012, July 30, 2012
Policy Recommendations
1.
Efficiency-related: Federal support for industrial engineering
application for small and medium sized health care organizations
- “extension services” concept as for medical home and information
technology
- financial incentives
2.
Waste and work context: Federal research support for
organizational change, culture and labor compensation systems for
high performance in health care organizations
- total rewards approaches for compensation
- adoption of new models of professionalism in health care
incorporating resources stewardship
-PCORI and AHRQ potential funders
How Should Physicians Be Paid?
How Geisinger Structures Its
Physician Compensation To Support
Improvements In Quality, Efficiency,
And Volume
Thomas Lee, MD
Partners Community HealthCare Inc.
Context
• Payment reform needs to be followed
by delivery system reform
• Clinicians need to collaborate to
integrate care, reduce waste, and
improve outcomes
• Still … fee-for-service remains
dominant payment system, and most
of US medicine is not sufficiently
organized for alternatives
Geisinger MD Compensation System
• 20% variable compensation, paid every six
months
• 80% base compensation set based on “expected
performance”
– Goal: 60th percentile for wRVUs and for overall
compensation
• Variable compensation based upon:
– Strategic, quality goals for specialty
– Some beyond control of individual MD
– wRVUs in last six months
• No direct financial incentives for cost reduction
Is It Working?
• Quality and efficiency is improving
– Faster than rest of region
– Implication: Relative modest amounts
of money needed to drive improvement
• Shorter term practical goals being
met:
– Growth
– Low turnover
– Sufficient margin to pursue mission
Health Affairs Thanks Our Sponsors For
Their Generous Support Of The September
2012 Issue And Today’s Briefing