Emergency Medicine and Value-
Driven Healthcare Reform
EDPMA, April 2013
Brent R. Asplin, MD, MPH
President and Chief Clinical Officer
Fairview Health Services
Minneapolis, MN
E-mail: basplin1@fairview.org

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Overview of Healthcare Macroeconomics
– Drivers of “population health”
Value Based Purchasing and Payment
Reform
Disruptive Innovation
Strategic Landscape for EM

Average Annual Premiums for Single and Family Coverage,
1999-2012
* Estimate is statistically different from estimate for the previous year shown (p<.05).
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012.
$ 15,745 *

Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to
Premiums, Inflation, and Workers’ Earnings, 1999-2012
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012. Bureau of Labor Statistics,
Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2012; Bureau of Labor Statistics,
Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2012 (April to April).

Variations in practice and spending
The Dartmouth Atlas
1. The paradox of plenty
2. What’s going on?
3. What might we do?
4. Is there reason for hope?

NO BANNER + NO LOGO
150
100
Mortality Amenable to Health Care—Global
Deaths per 100,000 population*
1997–98 2006–07
134
127
120
116
115
109
113
106
99
97 97
89
88 88
81
76
50
55 57
60 61 61
64 66 67
74
76 77 78 79
80 83
96
0
F ra n ce
A us tr al ia
It al y
Ja p an
S w ed en
N or w ay
N et h er la n ds
A us tr ia
F in la n d
G er m an y
G re ec e
Ir el an
N d ew
Z ea la n d k
D en m ar te d
U ni
K in g do m
U ni te d
S ta te s
* Countries’ age-standardized death rates before age 75; including ischemic heart disease, diabetes, stroke, and bacterial infections. See Appendix B for list of all conditions considered amenable to health care in the analysis. Data: E. Nolte, RAND Europe, and M. McKee, London School of Hygiene and Tropical
Medicine, analysis of World Health Organization mortality files and CDC mortality data for U.S. (Nolte and McKee, 2011).
Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011.

Implications for Us
Percent of GDP
25
Total Federal Spending for Medicare and Medicaid Under Assumptions
About the Health Cost Growth Differential
Actual Projection
20
Differential of:
2.5 Percentage Points
1 Percentage Point
Tax rates 2050:
10% 26%
25% 66%
35% 92%
Zero
15
10
5
0
1966 1972 1978 1984 1990 1996 2002 2008 2014 2020 2026 2032 2038 2044 2050

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What needs to happen?
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Who is going to make it happen?

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Paul Starr’s account of the rise of the
American medical industry during the
20 th century

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What is Value?
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Value is a function of quality (safety, outcomes, service) divided by cost over time

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Fee for service reimbursement drives inflation in the system
If you want different performance, you have to change financial incentives
For a population, high quality care (i.e. care that eliminates unnecessary utilization) costs less than low quality care in any given year
Global payments will drive efficiencies

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Pay for performance
– PQRS
– Value-based Modifier
Episodes of care & bundled payments
Hospital readmissions
Accountable care organizations (ACOs)

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The Affordable Care Act requires that Medicare phase in a value-based payment modifier (VM) that would apply to
Medicare Fee for Service Payments starting in 2015, phase-in complete by 2017.
The VM assesses both quality of care and the costs of care.
CMS applies the VM to physician payment in all groups of 100 or more eligible professionals starting in 2015, based on your calendar year 2013 claims!
Meant to encourage shared responsibility and systems-based care for multi-specialty group practices
Attempt to “align” with Medicare Shared Savings program and
Accountable Care Organizations (ACOs)

Value Based Modifier for Groups of ≥ 100 Eligible Professionals CY
2013 Claims
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Eligible Professionals = physicians, PAs, NPs, etc
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“Group” ≥ 100 “eligible professionals” reporting under one TIN
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Bonus or Ding –> TIN Physician Payments only

Value-Based Modifier and the Physician
Quality Reporting System
Groups of ≥100 Eligible
Professionals
(MDs, DOs, PAs, NPs)
Satisfactory PQRS Reporters
Elect Quality
Tiering
Calculation
Upward or
Downward
Adjustment Based on Quality Tiering
No Election
0.0%
No adjustment
Non-satisfactory PQRS
Reporters
(including those who do not report)
-1.0 % VBM Adjustment
-1.5 % PQRS
Adjustment
-2.5 % Total
Adjustment

Interaction Between PQRS &
Value-Based Modifier
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To avoid -1.5% payment adjustment in 2015, based on CY 2013 claims must successfully report PQRS
To avoid all penalties, groups ≥ 100 eligible professionals must report at the group level
If the group reports at the individual level instead, they will all be subject to the value modifier of -1.0%
Total Failure to Report PQRS = -2.5% (2015 payment adjustment, based on CY 2013 claims)
Total Failure to Report PQRS = -3.0% (2016 payment adjustment, based on CY 2014 claims)

CMS Readmission Measures 2013
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Hospital Readmission Reduction Program
 HRRP
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“Program is designed to reduce CMS payments to hospitals with higher than expected risk-adjusted readmission rates.”
 Baseline period 6.1.2008 – 6.30.2011
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Began 10.1.2012
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Reductions of 1% increasing to 3% in 2015
 Acute Myocardial Infarction
 Heart Failure
 Pneumonia
21

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Adds knee and hip implants and COPD admissions to the readmissions reduction program starting in 2015
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Pays for the 2013 physician “SGR fix” with $11B in hospital cuts over 4 years

Accountable Care Organizations
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Provider-led organizations with a strong primary care base that take accountability for the full spectrum of healthcare services for a defined population
Financial incentives tied to:
– Total cost of care
– Quality and patient satisfaction

CMS ACO Programs
(260 Participating Organizations)
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Physician Group Practice Transitions Program
– Six organizations (started Jan 2011)
Pioneer ACO Program
– 32 organizations (started Jan 2012)
Medicare Shared Savings Program
– 27 organizations began in April 2012
– 89 organizations began in July 2012
– 106 organizations announced in Jan 2013

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“Diagnostic Clinic Walgreens Well Network”
– All of Florida
“Scott and White Healthcare Walgreens Well
Network, LLC”
– Texas

Private Exchanges and
Narrow Network Products
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Don’t underestimate how quickly markets will move toward value-based insurance products
– Partnerships between payers and delivery systems
– Many of the providers are Independent
Practice Associations (IPAs)

New payer/provider partnerships are emerging in the Twin Cities market
Providers Relationship Payer
New products
50% ownership; new products
New product
Merger
27

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Every dollar of waste in healthcare is somebody’s dollar of revenue
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Hospitals stand to lose the most from reductions in TCOC
– Admissions for chronic diseases
– Readmissions
– ED visits

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Reduction of avoidable ED visits is a goal for every one of the 260 ACOs and private insurance products in the US today
Contrary to what you may hear, this is based on sound economics
Every smart ACO should try to partner with
EDs to coordinate care and create alternatives to admissions/readmissions

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Solution shops
– “All things to all people”
– Fee for service reimbursement
– E.g. consulting firms, hospitals
Value added process (VAP) business
– Reliable, rules-based processes
– Fee for outcome reimbursement
– E.g. MinuteClinic, Shouldice Hospital

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Facilitated networks
– Businesses where people exchange things with one another
– Fee for membership
– E.g. Insurance

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An innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network.
A “value network” is the collection of upstream suppliers, downstream channels to market, and ancillary providers that support a common business model in an industry.

Requirements for Disruptive
Innovation
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Technological enabler
– E.g. the microprocessor
Business model innovation
– Ability to profitably deliver the new technological innovation
Value network
– A commercial infrastructure of constituencies that reinforce and support the new business model

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Both were supercomputer giants of the 1970s
Enjoyed huge profit margins on mainframe supercomputers
Responded very differently to the advent of the microprocessor and personal computing

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Emergency medicine is integrally tied to the hospital business model
Much of the criticism of the economics of emergency medicine is tied to the hospital business model in which it lives

Source: Christensen et al. The Innovator’s Prescription

Source: Christensen et al. The Innovator’s Prescription

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A simple question:
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Will your economics be disrupted or will you do the disrupting?

(Peter Smulowitz, MD and colleagues)
Opportunity #1
Opportunity #2
Source: Smulowitz et al. Annals of EM. 2012

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Biggest drivers of satisfaction for most acute unscheduled conditions:
– Timely access
– Low cost

Marginal Cost of Acute Care for Low Acuity Conditions
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Regardless of setting, the marginal cost of producing acute care is relatively low
– How expensive is it for you to diagnose acute otitis in your ED?
This is much different than the cost incurred by the payer (i.e. patient, health plan, government)
– Widely variable depending on the location

Source: Smulowitz et al. Annals of EM. 2012 (In Press)

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We already know how to deliver acute unscheduled care quickly and at a low marginal cost
Why are we content to do this in an environment that has:
– Long waiting times due to hospital boarding; and
– High fixed hospital costs that drive a noncompetitive business model?

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Free-standing centers
Target complexity is above standard urgent care
Rapid throughput and lower cost
Not hospital-based
(no EMTALA)

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We have already solved the most difficult challenge of acute unscheduled care:
The 168 Hour Work-Week!
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There are important opportunities to step out of the hospital (literally and virtually) to capture demand for low-cost alternatives to
ED care

Original Provider
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Hospital OR
Inpatient Stay
Surgical Specialists
Specialty Care
Primary Care
Retail Clinics
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The Hospital ED
Disruptive Alternative
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Ambulatory Surgery
ED Observation
Non-Surgical Specialists
Primary Care
Retail Clinics
Virtual Care
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Free-Standing EDs plus which of the above???

(Peter Smulowitz, MD and colleagues)
Opportunity #1
Source: Smulowitz et al. Annals of EM. 2012

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The most expensive routine decision in healthcare
The more “accountability” we take for reducing potentially avoidable admissions and re-admissions, the more “value” we will create for the system

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“Accountability” + “Value” = ?
A new revenue stream for emergency medicine?
Why wouldn’t you become part of risk based products?
– Private insurance, ACOs, Medicare
Advantage plans, etc….

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Coordination of transitions
Reducing avoidable admissions and readmissions
Rapid complex diagnostic evaluations
– Especially for patients with complex conditions
Communication interface with other care delivery hubs
– PCMH and geriatrics

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We are often pushed to the fringe as a provider to avoid rather than pulled into the middle of the operation
Providing better care for complex patients is the answer---won’t happen without better coordination in the ED

Hubs for Managing
Population Health
Primary Care
Patient-Centered
Medical Home
Geriatric Services
Continuum
The Emergency Care
System
Behavioral Health Capabilities

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What needs to happen?
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Who is going to make it happen?

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Move away from fee for service payment for the majority of services
– Global payments tied to population outcomes and cost (i.e. value)
Re-orient care delivery and financing toward a health outcomes framework
– Across entire population spectrum
Engage consumers in dramatically different ways

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E-mail: basplin1@fairview.org