Taking Action to Address Global Problems
Emerging Payment Reform Models for Health and
Behavioral Healthcare
ACMHA Summit
Thursday, March 25,2010
Dale Jarvis, CPA
MCPP Healthcare Consulting, Inc.
dale@mcpp.net.com
My Hypotheses: Healthcare Reform
will Pass and will usher in Unprecedented Change
• Federal Healthcare reform will trigger
dramatic changes in how health and
behavioral health services are
organized and funded
• These changes will create a tipping
point in how the healthcare needs
of persons with serious mental
illness and the behavioral
healthcare needs of all Americans
are addressed
2
New Payment Reform and System Management Models
Low Risk
Low Risk
Medium Risk
Higher Risk
Community
Incentive
Pool
Provider
Bonuses &
Incentives
Direct
Payments to
Patients
Differential
Rates
Grants &
Seed Money
Bundled
Payments
Case Rates
Global
Subcapitation
Primary &
Specialty
Subcapitation
Can/Should
Mix and
Match the
Components
based on the
Design
Health
Plan
Accountable Care Organization
Clinic
Food
Mart
Specialty Clinics
Medical
Homes
Medical
Homes
Clinic
Food
Mart
Hospitals
Medical
Homes
Hospitals
Specialty Clinics
3
The Two-Part Problem
“The American healthcare system is a dysfunctional mess.” (Ezekiel
Emanuel, MD, Chair of the Department of Bioethics at the Clinical Center of the National Institutes of Health)
Preventable Deaths* per 100,000 Population
in 2002-2003 (19 Industrialized Nations,
Commonwealth Fund)
$2.3 - $5.2 Trillion
(* by conditions such as diabetes, epilepsy, stroke, influenza,
ulcers, pneumonia, infant mortality and appendicitis)
110
110
101
100
90
90
80
71 71
70
74 74
77
80
82 82
93
103 103 104
96
84 84
65
60
As much as 30% of health care costs (over $700 billion per year) could be eliminated
without reducing quality
4
The Two-Part Problem
Fixing the problem can be described as:
 Moving further upstream with prevention
& early intervention services to prevent
health conditions from becoming chronic
health conditions
 Dramatically improving the management of chronic
health conditions for the 45% of Americans with one
or more such conditions whose
treatment draws down 75%
of total medical costs
 Reducing errors and waste in the system
 Reducing incentives for high cost, low value, procedure-based care
5
Emerging Delivery System
and Payment Reform Models
Institute for Healthcare Improvement Triple Aim
- Improve the Health of the Population
- Enhance Patient Experience (quality, access,
reliability)
- Reduce (or at least) Control Costs
Where the U.S.
Healthcare System
is headed
(at a glance)
Person
Centered
HC
Homes
Increase Preventive Care
Expand the use of
Evidence-Informed Care
Promote Early Intervention
Decrease Overuse and
Underuse of Services
Improve the
Coordination of Care
Reduce Error Rates
Inpatient:
Reducing
Errors &
Waste
6
Delivery System Redesign Elephant in the Room
• Need to invert the Resource
Allocation Triangle
• Prevention Activities must be
funded and widely deployed
• Primary Care must become a
desirable occupation and
• Decrease Demand in the
Specialty and Acute Care
Systems
• These are dramatic shifts that
will not magically take place
Current Resource Allocation
Acute Care
Specialty Care
Prevention,
Primary
Care
Acute
Care
Specialty Care
Prevention &
Primary Care
Needed Resource Allocation
7
Two Types of Payment Reform are the Key
Value-Based Purchasing (VBP) Value-Based Insurance Design (VBID)
8
Value-Based Purchasing – The Holy Grail
Global Capitation to an Integrated Health System
Integrated Health Care System
Supportive Health Plan
Clinic
Mart
Food
Person
Person Centered Person
HC
Centered
Centered
Homes
HC
HC
Homes
Homes
High Performing
Specialty Clinics
Clinic
Mart
Food
High
performing
Hospitals
High
performing
Hospitals
High Performing
Specialty Clinics
But... Integrated Health Systems will be only one of many system models
9
Value-Based Purchasing – Medical Homes
• Fee for Service is headed towards extinction
• Health Care Home models will begin with a 3-layer funding design with the
goal of the FFS layer shrinking over time
• Being replaced with case rate or capitation with a pay for performance layer
Person
Centered
HC
Homes
Case Rate
· Prevention, Early Intervention, Care
Management for Chronic Medical Conditions
Fee for Service/
PPS
· Per Service Payment
· Prospective Payment System (PPS)
Settlement (FQHC model) to cover shortfalls
Bonus
· Share in Savings from Reduced Total
Healthcare Expenditures (bending the
curve)
10
Value-Based Purchasing – Inpatient Care
• Payment for inpatient care will
bundle hospital and physician
services
• Bundled payments that only pay
for part of Potentially Avoidable
Complications (PACs) will
penalize providers that have
higher error rates and reward
those with lower PAC rates
• Bundled payments may
include all costs in the 30
days post an inpatient stay,
including any return to the
hospital
11
Value-Based Purchasing – Other Strategies
• Pay for Performance funding layer
• Differential Rates for providers that use published
Practice Guidelines (EBPs)
Provider
Bonuses &
Incentives
Differential
Rates
• Capacity-Based Funding to kick start innovations
CapacityBased
Funding
• Funding to community organizations that improve
health status and bend the cost curve
Community
Incentive
Pool
12
Value-Based Insurance Design (VBID)
• Developed in response to problems related to increases in co-payments
implemented by employers and insurance companies to save money
13
Value-Based Insurance Design Features (VBID)
• Decreasing cost-sharing for
interventions that are known to be
effective
• Increasing cost-sharing for those that
are not known to be effective
• Providing financial incentives based
on behavioral economics research
• Providing a deep education
component to explicitly guide patients
to use high-value, and avoid lowvalue, interventions
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So How does the MH/SU
System Fit into this New Equation?
California Fee for Service Medi-Cal Analysis - 2007
Medi-Cal FFS Enrollees
Medi-Cal FFS Costs
Medi-Cal FFS Cost/Enrollee
Diabetes
Ischemic Heart Disease
Cerebrovascular Disease
Chronic Respiratory Disease
Arthritis
Health Failure
Inpatient Episodes
ER Visits
Inpatient Acute Days
Primary CareVisits
Specialist Visits
Medi-Cal FFS Medi-Cal FFS
Total
SMI
Metric
1,580,440
166,786 11% SMI % of Total
$6,186,331,620 $2,395,938,298 39% SMI % of Total
$3,914
$14,365 3.7 SMI/Non-Ratio
4%
2%
1%
5%
2%
1%
11%
6%
3%
13%
7%
3%
2.8
3.0
3.0
2.6
3.5
3.0
SMI/Non-Ratio
SMI/Non-Ratio
SMI/Non-Ratio
SMI/Non-Ratio
SMI/Non-Ratio
SMI/Non-Ratio
100
337
609
128
1,211
293
1,167
2,094
492
6,058
2.9
3.5
3.4
3.8
5.0
SMI/Non-Ratio
SMI/Non-Ratio
SMI/Non-Ratio
SMI/Non-Ratio
SMI/Non-Ratio
Prepared by JEN Associates, Cambridge, MA
15
So How does the MH/SU
System Fit into this New Equation?
The MH/SU delivery system has two roles to play:
• Integration of CBHOs into Person Centered Healthcare Homes
• High Performing, Recovery and Wellness-Oriented MH/SU Providers
And, in both cases,
will need to learn to
play by the payment
reform rules
Accountable Care Organizations
Payment Model to cover
Prevention, Primary Care
and Chronic Disease
Management; Bonus
Structure for managing
Total Health Expenditures
Linkages to High
Performing Specialists that
can support the
management of Total Health
Expenditures and minimize
Defect Rates
Clinic
Food
Mart
Specialty Clinics
Person
Centered
Person
Person
Centered Health Centered
Care
Health
Health
Homes
Care
Care
Homes
Homes
Bundled Case Rates that
pay a Percentage of PACs
and Non-Payment for Never
Events
Provider
Bonuses &
Incentives
Specialty
Bundled
Hospitals
Direct
Payments to
Patients
Case Rates
Payments
Clinic
Food
Mart
Global
Subcapitation
Community
Incentive Pool
Specialty
Hospitals
Primary &
Specialty
Subcapitation
Specialty Clinics
Hospitals within Hospitals
Integrated Delivery Systems
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So How does the MH/SU
System Fit into this New Equation?
• We’ve learned from 50
years of effort that if you
work in the BH Safety Net...
• Focusing inward to create a
high-performing CBHO
does not always prevent
you from ending up at the
bottom...
17
Understanding Where the
Healthcare Management Models are Headed
• Status Quo: Fee-For-Service, Non-Integrated Model: All the wrong
incentives and disincentives
Health Plan
Clinic
Food
Mart
Specialty Clinics
Primary
Care
Clinic
Primary
Care
Clinic
Clinic
Food
Mart
Primary
Care
Clinic
Hospitals
Hospitals
Specialty Clinics
18
Understanding Where the
Healthcare Management Models are Headed
• Integrated Healthcare System
Integrated Health Care System
Health Plan
Clinic
Food
Mart
Specialty Clinics
Medical
Homes
Medical
Homes
Clinic
Food
Mart
Hospitals
Medical
Homes
Hospitals
Specialty Clinics
19
Understanding Where the
Healthcare Management Models are Headed
• Accountable Care Organization (ACO) Model
Health
Plan
Accountable Care Organization
Clinic
Food
Mart
Specialty Clinics
Medical
Homes
Medical
Homes
Clinic
Food
Mart
Hospitals
Medical
Homes
Hospitals
Specialty Clinics
20
So How does the MH/SU System
Fit into this Second Part of the New Equation?
Integrated Healthcare System
• If you are operating in a state and community where integration efforts
are under way and the IHS model is being pushed, your choices are:
Integrated Health Care System
• Do nothing and hope
they ignore the SMI/
SED population
Health Plan
• Become a Preferred
Clinic
Provider of an IHS
Specialty Clinics
• Create a consortium
Clinic
Medical
of BH Providers and
Hospitals
Hospitals
Medical Homes Medical
Homes
Homes
contract with the IHS
Specialty Clinics
as a Provider Network
• Become an Acquisition Target and become part of the IHS’ BH Division
Food Mart
Food Mart
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So How does the MH/SU System
Fit into this Second Part of the New Equation?
Accountable Care Organization
• If you are operating in a state and community where integration efforts
are under way and the ACO model is being pushed, your choices are:
• I’m going to skip “do nothing”
• Become a Preferred Provider to
Health Plan
the ACO
• Become a Member
Accountable Care Organization
of the ACO
Clinic
• Get in on the ground
floor and become a
Specialty Clinics
Founding Member/
Clinic
Medical
Hospitals
Hospitals
Medical Homes Medical
Owner of the ACO
Homes
Homes
Food Mart
Food Mart
Specialty Clinics
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Get ready... it’s going to Happen
Uninsured
Insured
Dis-Integration
Integration
Fee for Service
Payment Reform
Uncoordinated Providers
Accountable Care Orgs
BH Disconnect with HC
BH is Part of Health
23