from volume to value: better ways to pay for healthcare
DESCRIPTION
FROM VOLUME TO VALUE: Better Ways to Pay for Healthcare. Harold D. Miller Executive Director Center for Healthcare Quality and Payment Reform and President and CEO Network for Regional Healthcare Improvement. What’s the Biggest Issue Federal Health Reform Didn’t Solve?. - PowerPoint PPT PresentationTRANSCRIPT
FROM VOLUME TO VALUE:Better Ways to Pay for Healthcare
Harold D. MillerExecutive Director
Center for Healthcare Quality and Payment Reformand
President and CEO Network for Regional Healthcare Improvement
What’s the Biggest IssueFederal Health Reform
Didn’t Solve?
How to Reduce HealthcareCosts Without Rationing
What’s the Biggest IssueFederal Health Reform
Didn’t Solve?
4© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Reducing Costs Without Rationing:Prevention
PreventableCondition
ContinuedHealth
HealthyConsumer
5© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Reducing Costs Without Rationing:Avoiding Hospitalizations
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
6© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Reducing Costs Without Rationing:Efficient, Successful Treatment
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
Efficient Successful Outcome
Complications,Infections,
Readmissions
High-CostSuccessfulOutcome
7© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Go Where the Money Is: Maternity Care & Chronic Disease
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000
Osteoarthritis and other non-traumatic joint …Back problems
Infectious diseasesMental disorders
PneumoniaOther CNS disorders
COPD, asthmaKidney Disease
Other endocrine, nutritional & immune …Hypertension
Gallbladder, pancreatic, and liver diseaseDiabetes mellitus
Other circulatory conditions arteries, veins, …Trauma-related disorders
CancerHeart conditions
Normal birth/live born
U.S. Expenditures on Hospital Inpatient Stays, Age 0-65, 2006 (Millions)
Medical Expenditure Panel Survey, 2006
8© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Maternity Care Costs Can Be Reduced By Using Birth Centers...
$0 $3,000 $6,000 $9,000 $12,000
Vaginal Delivery - Birth Center
Vaginal Delivery (No Complications) -Hospital
-
Average Facility Labor & Birth Charge, 2003
Source: Carol Sakala and Maureen Corry, Evidence-Based Maternity Care:
What It Is and What It Can Achieve, Milbank Memorial Fund
2008
75% Lower Cost
9© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
...And By Avoiding Unnecessary Cesareans
$0 $3,000 $6,000 $9,000 $12,000
Vaginal Delivery - Birth Center
Vaginal Delivery (No Complications) -Hospital
Cesarean Delivery (No Complications)
Average Facility Labor & Birth Charge, 2003
75% Lower Cost
50% Lower Cost
Source: Carol Sakala and Maureen Corry, Evidence-Based Maternity Care:
What It Is and What It Can Achieve, Milbank Memorial Fund
2008
10© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Nevada is Above Average in the Rate of Cesarean Births...
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
New
Jers
eyFl
orid
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ississ
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Loui
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ork
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ates
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aska
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Miss
ouri
Penn
sylv
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hing
ton
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h Da
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min
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rmon
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uth
Dako
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izona
Min
neso
taCo
lora
doW
iscon
sinId
aho
New
Mex
ico
Alas
kaUt
ah
% of Births by Cesarean Section, 2007
11© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
...and Has Had the 5th Highest Growth in Cesareans in the U.S.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Rhod
e Isl
and
Conn
ectic
utW
ashi
ngto
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orid
aN
evad
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assa
chus
etts
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gon
Arizo
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iscon
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rsey
Virg
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Iow
alli
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Ohi
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ska
Calif
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sylv
ania
Min
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est V
irgin
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ates
Tenn
esse
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and
Geor
gia
Dist
rict o
f Col
umbi
aDe
law
are
New
Ham
pshi
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wai
iM
ichi
gan
Nor
th D
akot
aId
aho
Okl
ahom
aM
issou
riSo
uth
Caro
lina
New
York
Wyo
min
gTe
xas
Nor
th C
arol
ina
Alab
ama
Indi
ana
Mai
neU
tah
Arka
nsas
Miss
issip
piLo
uisia
naN
ew M
exic
oAl
aska
Sout
h Da
kota
% Change in Cesarean Birth Rate, 1996-2007
12© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
It Takes Some Leadership and a Little Training
• With training in Perfecting Patient CareSM from the Pittsburgh Regional Health Initiative, a team from Magee Womens Hospital in Pittsburgh:– Reduced by 64% the rate of elective inductions of
birth prior to full gestation (which reduces neonatal intensive care (NICU) usage and complications for both mother and child)
– Reduced by 60% the use of Cesarean sections for elective inductions of birth in first-time mothers
13© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Current Payment Systems Reward Bad Outcomes, Not Better Health
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
Efficient Successful Outcome
Complications,Infections,
Readmissions
High-CostSuccessfulOutcome$
14© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
“Episode Payments” to Reward Value Within Episodes
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
Efficient Successful Outcome
Complications,Infections,
Readmissions
High-CostSuccessfulOutcomeEpisode
Payment$A Single Payment
For All Care Needed From All Providers in
the Episode, With a Warranty For
Complications
15© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
The Weakness of Episode Payment
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
Efficient Successful Outcome
Complications,Infections,
Readmissions
High-CostSuccessfulOutcomeEpisode
Payment
How do you preventunnecessary episodes
of care?(e.g., preventable hospitalizations
for chronic disease, overuse of cardiac
surgery,back surgery, etc.)
16© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Comprehensive Care PaymentsTo Avoid Episodes
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
Efficient Successful Outcome
Complications,Infections,
Readmissions
High-CostSuccessfulOutcome
A Single Payment
For All CareNeeded ForA Condition
$ ComprehensiveCare
Paymentor
“Global”Payment
17© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
No Additional Revenuefor Taking Sicker
Patients
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
CAPITATION (WORST VERSIONS)
COMPREHENSIVE CARE PAYMENT
Isn’t This Capitation?No – It’s Different
18© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Who Should Be AccountableFor Achieving Higher Value Care?
• Hospitals?• Integrated Delivery Systems?• Multi-Specialty Group Practices?
19© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Keeping People Well?Primary Care
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
Efficient Successful Outcome
Complications,Infections,
Readmissions
High-CostSuccessfulOutcome
PRIMARYCARE
20© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Avoiding Hospitalizations?Primary + Specialty Care
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
Efficient Successful Outcome
Complications,Infections,
Readmissions
High-CostSuccessfulOutcome
PRIMARYCARE
PRIMARY +SPECIALTY
21© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Better Acute Care?Hospitals and Specialists
PreventableCondition
ContinuedHealth
HealthyConsumer
NoHospitalization
Acute Care Episode
Efficient Successful Outcome
Complications,Infections,
Readmissions
High-CostSuccessfulOutcome
PRIMARYCARE
PRIMARY +SPECIALTY
HOSPITALS& SPECIALISTS
22© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Implications
• Hospitals and physicians will need to work together to improve quality and lower costs for inpatient care to ensure they are the acute care provider of choice in the community
• Physicians, particularly primary care physicians, will need to improve skills in preventing hospitalizations and managing patient utilization to control total patient care costs
• Payment systems will need to provide the support that physicians and hospitals need to deliver higher-quality, lower-cost care
23© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
PhysicianPayment
Hospitals & MDs Paid SeparatelyFor Hospital Care...
Costs and PaymentToday
DRG orPer Diem
MDFees
HospitalPayment
24© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Physician“Cost”
PhysicianPayment
...MDs and Hospitals Expected to Cover Their “Own” Costs
Costs and PaymentToday
HospitalPayment Hospital
Staff/FacilityCosts
Drug/DeviceCosts
25© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
HospitalPayment
PhysicianPayment
Costs and PaymentToday
So Any Savings in Hospital Costs Go to Hospitals, Not Physicians
Hospital MarginImproves
No Rewardfor Physician
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
Initiative to ReduceDevice Costs &
Improve Efficiency
26© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
BundledHospital
+PhysicianPayment
BundledEpisodePayment
Bundled Payment Covers All Costs in a Single Payment...
27© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
BundledHospital
+PhysicianPayment
BundledEpisodePayment
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
Initiative to ReduceDevice Costs &
Improve Efficiency
...So if MDs & Hospitals Cooperate to Generate Savings...
28© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
BundledHospital
+PhysicianPayment
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
Initiative to ReduceDevice Costs &
Improve EfficiencyReallocation
of Savings
HigherPhysicianPayment
Episode payment would givehospitals & MDs incentives to
collaborate to reduce costs
...MDs, Hospitals, and PayersCan All Benefit
Physician“Cost”
HospitalStaff/
FacilityCosts
MD Bonus
Payer Savings
Hosp. Margin
Drug/DeviceCosts
Lower Price
Capital toReinvest
BundledEpisodePayment
29© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
BundledHospital
+PhysicianPayment
HospitalStaff/
FacilityCosts
Drug/DeviceCosts
Physician“Cost”
Initiative to ReduceDevice Costs &
Improve EfficiencyReallocation
of Savings
A Mechanism to Allocate the Payments is Needed
Physician“Cost”
HospitalStaff/
FacilityCosts
MD Bonus
Payer Savings
Hosp. Margin
Drug/DeviceCosts
PHO orOther
Hospital/MDCollaborative
• Plan initiatives• Set targets• Monitor progress• Allocate payments
BundledEpisodePayment
30© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Today: Separate Payments for Hospitals & Physicians
Hospital ServicesDrugs & Devices
Non-MD StaffFacilities/Equipment
Treatment for ConditionsPresent on Admission
Physician Services
Physician Services
DRG
FeeFee
31© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
“Bundled Payment”: Aligning Hospital and MD Incentives
Hospital ServicesDrugs & Devices
Non-MD StaffFacilities/Equipment
Treatment for ConditionsPresent on Admission
Physician Services
Physician Services
INPATIENT BUNDLE
32© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Today: Higher Payment for Hospital-Acquired Conditions
Treatment for ConditionsPresent on Admission
Hospital ServicesDrugs & Devices
Non-MD StaffFacilities/Equipment
Treatment for Hospital-Acquired
Conditions
Physician Services
Physician Services
INPATIENT BUNDLE
33© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
“Inpatient Warranty:” No AdditionalPayment for Adverse Events
Treatment for ConditionsPresent on Admission
Hospital ServicesDrugs & Devices
Non-MD StaffFacilities/Equipment
Treatment for Hospital-Acquired
Conditions
Physician Services
Physician Services
INPATIENT BUNDLEINPATIENT WARRANTY
34© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Today: Separate Payments for Inpatient and Post-Acute Care
Treatment for ConditionsPresent on Admission
Post-Hospital
Care
Treatment for Hospital-Acquired
Conditions
Rehab
HomeHealth
Long-TermCareMD
Services
INPATIENT BUNDLEINPATIENT WARRANTY
35© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
“Inpatient + Post-Acute Bundle”Pays for Both Jointly
Treatment for ConditionsPresent on Admission
Post-Hospital
Care
Treatment for Hospital-Acquired
Conditions
Rehab
HomeHealth
MDServices
INPATIENT BUNDLEINPATIENT WARRANTY
INPATIENT+POST-ACUTE BUNDLE
Long-TermCare
36© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Today: Extra Payment for Preventable Readmissions
Treatment for ConditionsPresent on Admission
Post-Hospital
Care
ReadmissionPreventableDuring InitialAdmission
ReadmissionPreventable
By Post-Acute Care
No Readmit;Planned or
UnpreventableReadmission
Treatment for Hospital-Acquired
Conditions
HospitalReadmission
INPATIENT BUNDLEINPATIENT WARRANTY
INPATIENT+POST-ACUTE BUNDLE
37© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Full Episode Payment With A Limited Warranty
Treatment for ConditionsPresent on Admission
Post-Hospital
Care
ReadmissionPreventableDuring InitialAdmission
ReadmissionPreventable
By Post-Acute Care
UnpreventableReadmission
Treatment for Hospital-Acquired
Conditions
HospitalReadmission
INPATIENT BUNDLEINPATIENT WARRANTY
INPATIENT+POST-ACUTE BUNDLEFULL EPISODE WITH WARRANTY
38© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Different Episode/Bundling Concepts for Different Problems
PROBLEM/GOAL PAYMENT METHODEncourage physicians to work
with hospitals to eliminate inpatient inefficiencies
INPATIENT BUNDLED PAYMENT
Encourage reduction in adverse events during inpatient care INPATIENT WARRANTY
Encourage more efficient combinations of inpatient &
post-acute care
BUNDLED INPATIENT & POST-ACUTE CARE
PAYMENT
Encourage efficiency and quality across the full episode of care
FULL EPISODE PAYMENT WITH LIMITED WARRANTY
39© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
It’s Not A New Concept; Results Documented Over 20 Years Ago
• In 1987, an orthopedic surgeon in Lansing, MI and the local hospital, Ingham Medical Center, offered:– a fixed total price for surgical services for shoulder and knee problems– a warranty for any subsequent services needed for a two-year period,
including repeat visits, imaging, rehospitalization and additional surgery.
• Results:– Health insurer paid 40% less than otherwise– Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer
rehospitalizations
• Method: – Reducing unnecessary auxiliary services such as radiography and
physical therapy– Reducing the length of stay in the hospital– Reducing complications and readmissions.
40© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Yes, a Health Care ProviderCan Offer a Warranty
Geisinger Health System ProvenCareSM
– A single payment for an ENTIRE 90 day period including:• ALL related pre-admission care• ALL inpatient physician and hospital services• ALL related post-acute care• ALL care for any related complications or readmissions
– Types of conditions/treatments currently offered:• Cardiac Bypass Surgery• Cardiac Stents• Cataract Surgery• Total Hip Replacement• Bariatric Surgery• Perinatal Care• Low Back Pain• Treatment of Chronic Kidney Disease
41© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Payment + Process Improvement = Better Outcomes, Lower Costs
42© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
GWV Primary C-Sections Jan 2008-Dec 2009
Avg=21.4
Avg=29.0UCL=31.4
UCL=45.5
LCL=11.4LCL=12.5
2
7
12
17
22
27
32
37
42
47
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09
Perc
ent
Implementation of electronic process
Geisinger Perinatal ProvenCare:26% Reduction in Cesareans
43© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
A Single Case Rate for Allor Different Rates by Severity?
• Severity adjustment is essential to episode payment– FFS implicitly adjusts for patient severity/risk/complexity by paying
more for patients who have more complex problems– FFS doesn’t distinguish which patients have higher needs from those
the provider overtreats– Episode payment needs to make the distinction
• Are there severity adjustment systems?– DRGs, MS-DRGs, APR-DRGs for hospital episodes, HHRGs for home
care, CMS-HCC for Medicare Advantage, etc.– Clinical category systems:
• e.g., 3M® Potentially Preventable Readmissions, Clinical Risk Groups– Regression-based category systems:
• e.g, CMS Readmission measures being used for Hospital Compare• e.g., PROMETHEUSTM system for Potentially Avoidable Complications
44© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Better Payment for EpisodesDoesn’t Prevent Episodes
Patient w/ Chronic
Disease(s)
Hospitalization Episode
Readmission
No Hospitalization
Episode Payment
45© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Significant Reduction in Rate of Hospitalizations Possible
Examples:• 40% reduction in hospital admissions, 41% reduction in ER visits for
exacerbations of COPD using in-home & phone patient education by nurses or respiratory therapists (2003)J. Bourbeau, M. Julien, et al, “Reduction of Hospital Utilization in Patients with Chronic Obstructive Pulmonary Disease: A Disease-Specific Self-Management Intervention,” Archives of Internal Medicine 163(5), 2003
• 66% reduction in hospitalizations for CHF patients using home-based telemonitoring (1999)M.E. Cordisco, A. Benjaminovitz, et al, “Use of Telemonitoring to Decrease the Rate of Hospitalization in Patients With Severe Congestive Heart Failure,” American Journal of Cardiology 84(7), 1999
• 27% reduction in hospital admissions, 21% reduction in ER visits through self-management education (2005)M.A. Gadoury, K. Schwartzman, et al, “Self-Management Reduces Both Short- and Long-Term Hospitalisation in COPD,” European Respiratory Journal 26(5), 2005
46© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
20-40% Reduction in Surgery Through Shared Decision-Making
-50%
-40%
-30%
-20%
-10%
0%
Coronary Revascularization
for Angina
Mastectomy for Breast Cancer
Back Surgery Prostatectomy for BPH
Reduction in Use of Surgery Among Patients Using Decision Aids
47© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
PCPs Can’t Get Paid for Many Tools To Avoid Hospitalization
Patient w/ Chronic
Disease(s)PrimaryCare MD
Hospitalization Episode
Nurse Care Mgt
Readmission
No Hospitalization
MD Phone Calls
MD Office Visits
Remote Monitoring
Specialist Consults
Episode Payment
48© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
OfficeVisits
NurseCare Mgr
PhoneCalls
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice
$ $ $
How It Works Today
CURRENT PAYMENT SYSTEMS
Avoidable
Avoidable
Avoidable
No payment for services that can
prevent utilization
Payment forpreventable
andunnecessary
utilizationof expensive
care
49© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice
$ $
Option 1: Add New Fee Codes for Unreimbursed PCP Services
MEDICAL HOME PROGRAM
Avoidable
Avoidable
Avoidable
OfficeVisits
NurseCare Mgr
PhoneCalls
$Higher payment for primary care
$
50© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice
$ $
Option 2: Pay for Monthly “Care Mgt” to Cover Missing Services
MEDICAL HOME PROGRAM
Avoidable
Avoidable
Avoidable
$Higher payment for primary care
OfficeVisits
RN Care Mgr
PhoneCalls
MonthlyCare MgtPayment
$
51© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice
$ $
Weakness: More $ for PCPs, But Any Savings Elsewhere?MEDICAL HOME PROGRAM
Avoidable
Avoidable
Avoidable
$Higher payment for primary care
...But no commitment
to reduceutilizationelsewhere
OfficeVisits
RN Care Mgr
PhoneCalls
MonthlyCare MgtPayment
$
52© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Health Insurance Plan
PhysicianPractice
$ $
Option 3: No New Money for PCPs, but More Flexibility
PRACTICE CAPITATION
$
$
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Avoidable
Avoidable
Avoidable
Ability to Allocate $to Most Effective
Services
Condition-Adjusted
Per PersonPayment Office
Visits
NurseCare Mgr
PhoneCalls
$
53© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice
$ $
Option 4: “Shared Savings” (More $ Only If Total Costs Decrease)
SHARED SAVINGS MODEL
Avoidable Avoidable
Avoidable$Portion of savings from reducedspending in other areas...
...Returnedto physician
practice aftersavings
determined...
...but no upfront $for better care
OfficeVisits
NurseCare Mgr
PhoneCalls
$
54© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Weaknesses of “Shared Savings”
• No upfront money to enable primary care practices to hire nurse care managers, install information technology, etc.
• It rewards those who are currently poor performers more than those who are good performers
• It’s not sustainable – once costs are reduced, there is less to be saved and so shared savings payments go down
55© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Health Insurance Plan
PhysicianPractice
$ $ $
Option 5: The Beginnings of “Accountable Care” Payment
CARE MGT PAYMENT + UTILIZATION P4P
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Avoidable Avoidable
Avoidable
P4P Bonus/PenaltyBased on Utilization
$
$
OfficeVisits
$ $
$
RN Care Mgr
PhoneCalls
MonthlyCare MgtPayment
More $for PCP
Targets forReduction
In Utilization
$
56© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Health Insurance Plan
PhysicianPractice
$ $
Option 6: More ACO-ness:Partial Global Payment
PARTIAL GLOBAL PMT (Professional Svcs)
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Avoidable Avoidable
Avoidable
$
$
Condition-Adjusted
Per PersonPayment
Flexibility and accountabilityfor a condition-adjusted budget
covering all professional services
OfficeVisits
NurseCare Mgr
PhoneCalls
$
$ $P4P Bonus/PenaltyBased on Utilization
57© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice/
ACO
Option 7: True ACO: Flexibility & Accountability w/o Insurance RiskFULL COMP. CARE/GLOBAL PAYMENT
Avoidable Avoidable
Avoidable
$
Flexibility and accountabilityfor a condition-adjusted budget
covering all services
$Condition-
AdjustedPer PersonPayment Office
Visits
NurseCare Mgr
PhoneCalls
58© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice/
ACO
Option 7a: Ensuring IncentivesExist for Quality as Well as Cost
FULL COMP. CARE/GLOBAL PMT + QUALITY P4P
Avoidable Avoidable
Avoidable
$
$Condition-
AdjustedPer PersonPayment Office
Visits
NurseCare Mgr
PhoneCalls
P4P Bonus/PenaltyBased on Quality
$ $
59© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Example: BCBS MassachusettsAlternative Quality Contract
• A single payment amount is established to cover all costs of care for a population of patients
• The initial payment is set based on past expenditures; the amount increases each year at an inflation rate based on CPI, not on medical inflation, so savings come from controlling increases over time
• The payment amount functions as a budget; the budget is adjusted up or down based on the types and severity of conditions the patients have, so providers aren’t taking insurance risk, only performance risk
• The provider doesn’t need to pay claims; BCBS still pays individual providers fee-for-service, but fees are adjusted up or down to keep total costs within the payment budget
• Payments are increased by annual bonuses based on the quality of care delivered
60© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice/
ACO
Episode Payments for Acute Care Help the ACO Manage Costs
FULL COMP. CARE/GLOBAL PMT + QUALITY P4P
Avoidable Avoidable
Avoidable
$
$Condition-
AdjustedPer PersonPayment
Episode Payment to Hospital
OfficeVisits
NurseCare Mgr
PhoneCalls
$ $
P4P Bonus/PenaltyBased on Quality
61© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Primary Care Must Be the Core of an ACO
PrimaryCare
Practice
PrimaryCare
PracticePrimary
CarePractice
PrimaryCare
PracticePrimary
CarePractice
PrimaryCare
Practice
SpecialistHospital
Specialist
Specialist
Specialist
SpecialistHospital
Accountable Care Requires Coordinated Relationships,
Not Necessarily Corporate Integration
62© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Transitioning to Accountable Care Payment
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Health Insurance Plan
PhysicianPractice/
ACO
FULL COMP. CARE/GLOBAL PMT + QUALITY P4P
Avoidable Avoidable
Avoidable
$
$Condition-
AdjustedPer PersonPayment Office
Visits
NurseCare Mgr
PhoneCalls
P4P Bonus/PenaltyBased on Quality
$ $
Health Insurance Plan
PhysicianPractice
$ $
PARTIAL GLOBAL PMT (Professional Svcs)
P4P Bonus/PenaltyBased on Utilization
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Avoidable Avoidable
Avoidable
$
$
Condition-Adjusted
Per PersonPayment
Flexibility and accountabilityfor a condition-adjusted budget
covering all professional services
OfficeVisits
NurseCare Mgr
PhoneCalls
$
$ $
Health Insurance Plan
PhysicianPractice
$ $ $
CARE MGT PAYMENT + UTILIZATION P4P
SpecialtyConsults
Lab Work/Imaging
HospitalStay
Avoidable Avoidable
Avoidable
P4P Bonus/PenaltyBased on Utilization
$
$
OfficeVisits
$ $
$
RN Care Mgr
PhoneCalls
MonthlyCare MgtPayment
More $for PCP
Targets forReduction
In Utilization
$
63© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
One Payer Changing Isn’t Enough
Payer
Provider
Payer Payer
Patient Patient Patient
Provider is only compensated for changed practices for the subset of patients covered by participating payers
Better Payment
System
CurrentPaymentSystem Current
PaymentSystem
64© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Payers Need to Align to Enable Providers to Transform
Payer
Provider
Payer Payer
Patient Patient Patient
Better Payment
System
BetterPaymentSystem Better
PaymentSystem
65© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Payer Coordination Is Beginningto Occur Around the Country
• Examples of Multi-Payer Payment Reforms:– Minnesota: Multi-payer change in payments for primary care
practices and psychiatrists to help manage patients with depression
– Pennsylvania: Multi-payer initiative to support medical home/chronic care services in primary care practices
– Rhode Island: Multi-payer chronic care/medical home project in primary care practices
– Vermont: Multi-payer medical home project• A Facilitator of Coordination is Needed
– PA, RI, VT: State Government– Minnesota: Institute for Clinical Systems Improvement
• Medicare Needs to Participate in Local Projects
66© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
How Do You Set the Price?
• If price is too high, inefficiencies will exist, regardless of what incentives may exist in the payment method
• If price is too low, providers will be unable to deliver high-quality care
• So how does the “right” price get determined?
67© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Our Standard Methods of Controlling Prices Don’t Work
• Price Negotiations as Part of Contracting– Even large insurers can’t demand price concessions from
large/monopoly providers
68© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Our Standard Methods of Controlling Prices Don’t Work
• Price Negotiations as Part of Contracting– Even large insurers can’t demand price concessions from
large/monopoly providers
• Narrow Networks– In theory, could steer patients to lower-cost providers and give
providers greater volume to reduce prices– In practice, prohibits patients from using the providers they prefer and
creates consumer backlash– Networks are based on providers, not services, so providers with some
good services are either in or out for all services
69© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Our Standard Methods of Controlling Prices Don’t Work
• Price Negotiations as Part of Contracting– Even large insurers can’t demand price concessions from
large/monopoly providers
• Narrow Networks– In theory, could steer patients to lower-cost providers and give
providers greater volume to reduce prices– In practice, prohibits patients from using the providers they prefer and
creates consumer backlash– Networks are based on providers, not services, so providers with some
good services are either in or out for all services
• Copays, Co-insurance and High-Deductible Health Plans– Create little incentive for consumers to choose lower-cost providers on
the expensive items that make a difference– Create significant disincentive to pursue preventive care that may
prevent the expensive items in the first place
70© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Your Choices With Auto Purchase Insurance
HYUNDAI SONATA LEXUS LS 460
MSRP: $22,450 MSRP: $63,825
5 yr/60,000m warranty 5 star crash rating
4 yr/50,000m warranty No crash rating
71© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Copayment: Lexus Wins
HYUNDAI SONATA LEXUS LS 460
MSRP: $22,450 MSRP: $63,825$1,000 Copay: $1,000 $1,000
5 yr/60,000m warranty 5 star crash rating
4 yr/50,000m warranty No crash rating
72© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Coinsurance: Lexus Wins for Most People
HYUNDAI SONATA LEXUS LS 460
MSRP: $22,450 MSRP: $63,825$1,000 Copay:10% Coinsurance:
$1,000 $1,000$2,245 $6,383
5 yr/60,000m warranty 5 star crash rating
4 yr/50,000m warranty No crash rating
73© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
High Deductible:Lexus Wins
HYUNDAI SONATA LEXUS LS 460
MSRP: $22,450 MSRP: $63,825$1,000 Copay:10% Coinsurance:High Deductible:
$1,000 $1,000$2,245 $6,383
$10,000 $10,000
5 yr/60,000m warranty 5 star crash rating
4 yr/50,000m warranty No crash rating
74© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Price Difference:Hyundai Wins for Most PeopleHYUNDAI SONATA LEXUS LS 460
MSRP: $22,450 MSRP: $63,825$1,000 Copay:10% Coinsurance:High Deductible:Price Difference:
$1,000 $1,000$2,245 $6,383
$10,000 $10,000$0 $41,375
5 yr/60,000m warranty 5 star crash rating
4 yr/50,000m warranty No crash rating
75© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Better Ways of Controlling Prices
• Value-Based Competition by Providers for Consumers– Define episode prices and global fees so it’s easier to compare costs of
different providers and procedures– Publish information on prices and quality of all providers– Require consumers to pay the “last dollar” of providers’ prices (i.e., the
difference between the prices of more expensive and less expensive providers/services with equivalent quality)
– Create shared decision-making processes to help consumers decide among services based on benefits and costs
76© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Better Ways of Controlling Prices
• Value-Based Competition by Providers for Consumers– Define episode prices and global fees so it’s easier to compare costs of
different providers and procedures– Publish information on prices and quality of all providers– Require consumers to pay the “last dollar” of providers’ prices (i.e., the
difference between the prices of more expensive and less expensive providers/services with equivalent quality)
– Create shared decision-making processes to help consumers decide among services based on benefits and costs
• Ensuring There Are Competitors– Prevent anti-competitive consolidations and encourage limited
duplication of services (assuming consumers are made price-sensitive)– Regulate prices where monopolies exist (e.g., the Maryland Hospital
rate-setting commission)– Prohibit all-or-nothing contracting for services by large providers
77© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
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
78© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Extreme Views of Patient Role in Use of Medical Home/ACO
CONSUMERS/PATIENTS CAN
CHANGE OR USE MULTIPLE
PROVIDERSAT WILL
CONSUMERS/PATIENTS ARE
“LOCKED IN”TO A SINGLEGATEKEEPER
PROVIDER
MIDDLE GROUNDROCK HARD PLACE
79© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Creating a Middle Ground to Support the Medical Home/ACO
CONSUMERS/PATIENTS CAN
CHANGE OR USE MULTIPLE
PROVIDERSAT WILL
CONSUMERS/PATIENTS ARE
“LOCKED IN”TO A SINGLEGATEKEEPER
PROVIDER
CONSUMERS/PATIENTS HAVE
INCENTIVESTO CHOOSE &
USE AN ACO ORMEDICAL HOME
MIDDLE GROUNDROCK HARD PLACE
80© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Importance of Coordinating Pharmacy & Medical Benefits
Hospital Costs
PhysicianCosts
OtherServices
Medical Benefits
DrugCosts
Pharmacy Benefits
Single-minded focus onreducing costs here...
...could result 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
81© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Better Payment Systems Require Good Quality Measurement
• Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care
82© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Better Payment Systems Require Good Quality Measurement
• Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care
• Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs
83© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Better Payment Systems Require Good Quality Measurement
• Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care
• Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs
• Ideal: Develop quality measures with participationof physicians, as RegionalHealth ImprovementCollaboratives do
Massachusetts Health Quality Partners
Wisconsin Collaborative for Healthcare Quality
Minnesota Community Measurement
84© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Value-DrivenDeliverySystems
Quality/CostMeasurement &
Reporting
ConsumerEducation &Engagement
Functions Needed for HealthcarePayment & Delivery Reform...
Value-DrivenPayment Systems& Benefit Designs
85© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Value-DrivenDeliverySystems
Quality/CostMeasurement &
Reporting
ConsumerEducation &Engagement
...Functions Can’t Proceed in Silos...
Value-DrivenPayment Systems& Benefit Designs
?
86© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Value-DrivenDeliverySystems
Quality/CostMeasurement &
Reporting
ConsumerEducation &Engagement
Coordinated Support for All Functions at the Regional Level...
Value-DrivenPayment Systems& Benefit Designs
RegionalHealth
ImprovementCollaborative
87© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
Value-DrivenDeliverySystems
Quality/CostMeasurement &
Reporting
ConsumerEducation &Engagement
Coordinated Support for All Functions at the Regional Level...
Value-DrivenPayment Systems& Benefit Designs
NevadaPartnership forValue-DrivenHealthcare
(HealthInsight)
88© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
...With Active Involvement of All Healthcare Stakeholders
RegionalHealth
ImprovementCollaborative
HealthcareProviders
HealthcarePayers
HealthcareConsumers
HealthcarePurchasers
89© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement
For More Information on Payment and Delivery Reforms
www.PaymentReform.org
For More Information:Harold D. Miller
Executive Director, Center for Healthcare Quality and Payment Reformand
President & CEO, Network for Regional Healthcare Improvement
[email protected](412) 803-3650
www.CHQPR.orgwww.NRHI.org
www.PaymentReform.org