session 94 panel discussion: the emergence of acos in u.s ... · represents projection of 9% of...

Session 94 PD, The Emergence of ACOs in U.S. and International Health Markets: An Examination of Converging Health Systems

Moderator/Presenter:

Chris Pallot, MSc, BA, DipM, DipHSM

Presenters: Alison L. Pool, ASA, MAAA

Jeremiah D. Reuter, ASA, MAAA

Chris PallotDirector of Strategy & Partnerships

Northampton General Hospital NHS Trust

[email protected]

mailto:[email protected]

The NHS• Established on 5 July 1948

• Founded by the post-war Labour government

• Funded through general taxation

• Free at the point of delivery

• Since then, charges for prescriptions and some dental treatment commenced

• Primary care physician and all hospital treatment is free

Northampton General Hospital

• Founded in 1744

• On present site since 1793

• 700 beds

• Serves population of 400,000 (700,000 for specialist services)

• 4,700 staff

• Income £244m (c$360m) in 2015/16

The Standard Acute Contract

• Nationally mandated

• Some elements varied locally

• Payment activity generated mainly for outpatients, diagnostic and admissions

• Elective and Non-Elective patients are coded to Health Resource Groups (HRGs)

• Each HRG attracts a set level of income for the hospital (the “tariff”)

• Demand increasing 3-10% per year

• Set nationally, no negotiation, deflated by 3% annually

• Example tariff prices

‒ Carpal tunnel surgery - £849 ($1275) – $1252

‒ Cataract surgery - £762 ($1143) - $2146

‒ C-section delivery - £3,250 ($4712) - $9,000

‒ Varicose vein surgery - £1083 ($1624) - $3660

The National Tariff

N.B. U.S. values derived from Medicare FFS reimbursement

Extremely Challenging Times

A Focus on Urgent CareAccident and Emergency Attendances -England

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

15,000,000

16,000,000

17,000,000

18,000,000

19,000,000

20,000,000

21,000,000

22,000,000

23,000,000

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Atte

ndan

ces

Total attendances Growth Year on year

Source: Unify data submissions

Emergency Admissions Growth - England

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

6,000,000

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Adm

issi

ons

Total NEL Admissions Growth Year on year


AE Attendance Growth - NGH

7,500

8,000

8,500

9,000

9,500

10,000

10,500

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Atte

ndan

ces

2013-14 2014-15 2015-16


Proportion of Patients Spending 4 Hours or Less in AE

Source: Dept of Health

Focus on Finance

World-Wide GDP Percentage Spend (2013)

NHS Trust End-of-Year Financial Results

But Despite This, the NHS is Efficient….“Gross Value Added Per Hours Worked”

Ref: Centre for Health Economics; ONS

The Challenges Will Only Increase

Ref: Growing Old Together, NHS Confederation

Increase in Dementia

Ref: Growing Old Together, NHS Confederation

Public Health Projections

What is the NHS Doing About This?

NHS-Wide Initiatives

Lord Carter Report – February 2015


New Models of Care


NHS Learning from ACOs in the US

• Focus on the small numbers of patients who consume the most healthcare

• Introduce standardised care management and care co-ordination

• Sustained increase in IT investment

• Support patients to self-care

Ref: Stephen Shortell, Rachael Addicott, Nicola Walsh, Chris Ham. Kings Fund 2014

Enablers for Integrated Care

• Align payment systems and incentives

• System-wide improvement measures and targets

• Networks and alliances replace competition with strong clinical leadership

• Commissioners using leverage to support the emerge of ICOs via contracts

Ref: Stephen Shortell, Rachael Addicott, Nicola Walsh, Chris Ham. Kings Fund 2014

The Future

• £22bn of recurrent savings required

• Growing demand and expectation

• Pressure on the funding mechanism

• Structural change is inevitable

• Sustainability and Transformation Plans

Alison Pool, ASA, MAAA

Senior Consulting Actuary

Wakely Consulting Group

[email protected]

727-507-9858, ext. 7469

Converging Health Systems – an Overview16 June 2016


Health Systems Around The World

2

3

“Global spending is expected to increase from US$7.83 trillion in 2013 to $18.28 trillion” in 2040 [adjusted dollars]….” *

Implies annual medical trend of approximately 5%

Represents projection of 9% of global GDP by 2040.

*http://www.healthdata.org/news-release/global-spending-health-expected-increase-1828-trillion-worldwide-2040-many-countries


4


Health Systems – Financial Flow

5

Insurer / Government: Collector of premium or

taxes, payer to seller

Sellers of services; Providers –

Professionals / Hospitals, etc.

Users of services & payers of premiums or taxes: Consumer

/ Patient

Who is paying?

Patients

Insurers

Central Government

6


Who are the sellers?

Hospitals

Acute/Inpatient

Emergency Care

Professionals

Primary Care

Specialty Care

Mental Health

7


8

Who wants the services?

Citizens

Patients



9

Health expenditures as a percentage of GDP 2010*

*http://www.euro.who.int/en/about-us/partners/observatory/publications/health-system-reviews-hits/full-list-of-country-hits

9.6%11.4% 11.6% 12%

17.6%

UnitedKingdom -

England

Switzerland Germany Netherlands UnitedStates

10

Health Systems – Financial FlowGovernment Health expenditures as a percentage of total

national health expenditures - 2010

48.2%

United States

65.2%

Switzerland

76.8%

Germany83.2%

United Kingdom -England

85.5%

Netherlands

11

Insurer / Government: Collector of premium or

taxes, payer to seller



12

United States Germany Switzerland Netherlands

United Kingdom -

England

Medicare (Public)

Statutory Health

Insurance (SHI) – 85% of the population

Mandatory Health

Insurance (MHI)

SHI - Social Health

Insurance -"Basic Health

Insurance"Health services predominantly publicly funded

via Primary Care Trusts (PCTs)

Medicaid (Public)

Private Health Insurance (PHI)

- 11% of the population Complementary

VHI - voluntary health insurance

Voluntary Health

Insurance (VHI) 7.2%

Private health insurance –

90% of PH is Employer Sponsored

Sector specific schemes (e.g. military) - 4%

Basic Funding Mechanisms (Health Insurance) by Country

Select Health Systems - Public

13

Overview of the Publicly Funded Insurances


United Kingdom -

EnglandMedicare & Medicare

Advantage

Statutory Health Insurance (SHI)

Mandatory Health Insurance (MHI)

SHI - Social Health Insurance -

Long term Care

Health services predominantly

publicly funded via Primary Care Trusts (PCTs)

FFS, Medicare Fee Schedule

Resources distributed to 132

sickness funds according to a

morbidity-based risk adjustment

scheme.

Premiums are collected by MHI companies and

reallocated among MHI companies

Health Insurance Fund and Risk adjustment are

administered by the Health Care Insurance Board Allocation among insurers is based on health risks profile of their

insured population.

Risk Adjusted Payments to MA

Plans

Select Health Systems - Private

14

Overview of the Privately Funded Insurances


United Kingdom -

EnglandMedicare & Medicare

Advantage

Statutory Health Insurance (SHI)

Mandatory Health Insurance (MHI)

SHI - Social Health Insurance - Long term

Care (AWBZ)

Health services predominantly

publicly funded.Only private

component is voluntary health

insurance –provides access to

elective care.

FFS, Medicare Fee Schedule

Resources distributed to 132

sickness funds according to a

morbidity-based risk adjustment

scheme. –Shortfalls are made up by

charging premium. Competition

between sickness funds is

encouraged.

Premiums are collected by MHI companies and

reallocated between MHI

companies. HealthInsurance is

purchased from competing MHI companies. In 2014 61 private

insurance companies offered

MHI policies.

Health Insurance Fund and Risk adjustment are administered by

the Health Care Insurance Board (CVZ)

Allocation among insurers is based on

health risks profile of their insured

population. As of 2006, managed

competition has been the driver of the health

care system.

US Government contracts with

Private Insurers to provide coverage through Medicare Advantage plans -

Risk Adjusted Payments to MA

Plans

15

Select Health SystemsRisk Adjusting for funding – Common factor

USRisk

AdjustingMedicare

Advantageand ACA

premiums

GermanySHI

contributions redistributed

using Risk Adjustment

Scheme

Switzerland Premiums reallocated

between MHI companies

based on risk equalization mechanism

NetherlandsIncome

dependent premium

reallocated to health insurers

using a risk adjustment

system

United Kingdom

Allocation of resources to

PCT includes a health

inequalities component

16

Sellers of services; Providers –

Professionals / Hospitals, etc.


17

Who decides how much to pay for services?

Traditional supply and demand rules do not apply


18


Methods of Reimbursing

Providers

Fee for Services

DRG

Per Diems

Capitation

Negotiated Fees

Cost Sharing

How is the Seller Compensated?

19


Provider Payments -Hospital


United Kingdom -

England

DRG(*) (*)

FFS

Per Diems

Notes

(*) G-DRG-----------------

Normalized budgets then risk adjusted

(*) Diagnosis Treatment

Combinations

Payment by Results (PbR)

Hospital Payment System.

20

How is the seller compensated? (continued)

Provider Payments -Professional US Germany Switzerland Netherlands UK-England

FFS

Capitation (*)B

Fee Schedules (*) (**)

Negotiated

Morbidity based / Risk Adjusted

(*)

Preventive Identified Separately

Notes

(*) For SHI services -

with a ceiling

Nationally Uniform FFS

system

(*) Consultation Fees

(*) Basic Services

(**) Quality & Outcomes

Framework


21

Users of services & payers of premiums or taxes: Consumer

/ Patient

22


Mandatory Health

InsuranceCenters for Medicare

& Medicaid Services

National Health Service

Social Health

Insurance

Statutory Health

Insurance

23

Converging Health Systems

ACA European systems


24

% confidence of ability to afford necessary care if individualsbecome seriously ill

Source: 2013, Rice et al. United States Health System in Review. Health Systems in Transition Volume 15 No 3 2013

90%

78%

70%

81%

58%

UnitedKingdom

Switzerland Germany Netherlands United States


25

Challenges: Quality and Accessibility


United Kingdom -

England

Costs, AccessQuality considered average among the

EU countries

Facing rising costs to citizens

Managed Competition

Rising costs - need for increased

efficiencyChanging individual and provider

behaviors

Burdon on lower income

Measuring to verify the

presumption of increased

efficiency and quality

Increasing OOP costs

Access to care


26

Quality

Controlling Costs

Managing Care

Accessibility

Thank You

27

Alison Pool, ASA, MAAA

Senior Consulting Actuary

Wakely Consulting Group

[email protected]

727-507-9858, ext. 7469


The changing and converging health systems in the United States and United KingdomJune 16, 2016

The Changing Landscape of Healthcare

2

• Current state of health care• Stakeholder Incentives• The Future: ACOs?

Topics of Discussion

3

Healthcare Expenditures as a Percent of GDP

Source: The World Bank

0%2%4%6%8%

10%12%14%16%18%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Argentina AustraliaAustria BelgiumBulgaria Bosnia and HerzegovinaBelarus BrazilCanada SwitzerlandChile ChinaCzech Republic GermanyDenmark SpainFinland FranceGreece CroatiaHungary IndiaIreland IcelandIsrael ItalyJapan Korea, Rep.Luxembourg MexicoNetherlands NorwayNew Zealand PhilippinesPoland PortugalRussian Federation Saudi ArabiaSerbia SloveniaSweden ThailandTurkey UkraineUnited States South AfricaUnited Kingdom

4

Healthcare Crisis in the United Kingdom

5

The figures highlight a sharp rise of 25% in the number of people waiting to be discharged from hospital compared to this time last year. While this reflects a significant increase in the number of patients waiting for social care support, the majority of delays are caused by NHS related problems. As the National Audit Office reported last week delayed discharges are costing the NHS in excess of £800 million a

year but more importantly impose a significant human cost on patients and their families.

A&E departments continue to breach the maximum four hour wait. And though the number of patients waiting over 4 hours to be admitted to hospital from emergency departments (so-called ‘trolley waits’) has fallen compared to March (as expected at this time of year), this year’s April figure is 38 per cent

higher than a year ago. There are also 3.8 million people waiting for an operation, the highest since 2007, the key cancer target – 62 days from GP referral to first treatment – continues to be missed and the proportion of patients still waiting for a planned hospital admission after 18 weeks also

remains above target.

Healthcare Crisis in the United Kingdom

Source: King’s Fund; June 9, 2016

6

In 2006, U.S. health spending exceeded two trillion dollars, with three-fourths of that spending directed at treating chronic diseases. Almost two-thirds of the growth in spending is attributable to Americans’ worsening health habits, particularly the epidemic rise in obesity. The U.S. care delivery system favors paying for treatment of chronic diseases rather than preventing them in the first

place. For the United States to continue to be an economic leader worldwide, supported by a healthy and productive workforce, more attention needs to be directed toward health promotion and disease

prevention. Prevention is a key element of a comprehensive health reform strategy aimed at improving the health of Americans and reducing the social and financial burdens imposed by preventable illnesses.

United States Approach to Healthcare

Source: R. Goetzel, “Do Prevention Or Treatment Services Save Money? The Wrong Debate,”Health Affairs 28 no. 1 (2009).

7

Misaligned Stakeholder Incentives (UK)

Providers, payers and patients have not historically shared aligned incentives:

• Regulators – Focus on implementing government policy and integrated care models

• Commissioners - worried about limited budgets with escalating medical expenses

• Providers – Payment by results incentivises outputs rather than outcomes. Innovations which achieve better outcomes while also increasing efficiency are disincentivised.

• Patients - typically do not make decisions on affordability as care is free at the point of use

8

Stakeholder Incentives (UK)Overview of Funds Flow

9

Misaligned Stakeholder Incentives (US)

Providers, payers and patients have not historically shared aligned incentives:

• Private payers - worried about ACA, Health Benefit Exchanges, MLR requirements, etc. and impacts to PMPMs and bottom-line

• Government payers - worried about limited budgets with escalating medical expenses & expanding covered populations (baby boomers, Medicaid)

• Providers - worried about market share, medical care (as opposed to health care) and payment reform

• Patients - typically worried about affordability and “make me better…fast” rather than staying healthy

10

NHS Five Year Forward View

11

Patient Protection and Affordable Care Act

12

“We need clinical commissioning groups to become accountable care organisations”

-Jeremy Hunt, Secretary of State for Health (UK)

The Future

13

Triple Aim

Triple AimBetter care

for individuals

Better health for

populations

Slower growth in

costs

14

CMS Definition: Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give

coordinated high quality care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.

What is an Accountable Care Organization?

Source: CMS.gov

15

Generically, what is an ACO?

An ACO is a provider organization that accepts accountability for the cost and quality of health care services for a defined population (i.e. value-based contract)

An ACO establishes a benchmark based on expected spending and quality metrics; if ACO meets quality targets while slowing spending growth, providers share in savings

There is no single ACO model….if you have seen one ACO, then you have seen one ACO

ACOs currently do not change underlying insurance coverage; organized around provider capacity to improve outcomes and quality and manage costs

ACA Federal/Medicare ACO (MSSP, Pioneer, variations thereof)

Non-CMS ACO models adapt CMS principles to commercial, Medicaid, self-insured employer populations (e.g. CALPERS, Hill Physicians, Blue Shield, UHC, Aetna, Boeing)

16

ACO Organizational Structure

PCP Group

Hospital

Multi-Specialty Group Practice

Hospital Affiliated PCP Group

Post-Acute Care

ProvidersAffiliated Specialist

Group

Employed PCPs

ACO Model 1 ACO Model 2

ACO Model 3ACO Model 4

PCP Group

17

ACO Models

• Adapted Integrated Delivery System

‒ Organized around existing integrated delivery systems that feature either a single entity that acts as Payer and provider or an association of providers with multiple care settings and employed physicians already affiliated with an external Payer

• Virtually Integrated ACOs

‒ Composed of multiple providers organizing in association with a Payer, who contributes the financial incentives that support collective accountability for patient health outcomes and the technological infrastructure used to connect the disparate providers

‒ Two variations:

• Primary care-focused

• Full spectrum

• Provider-Led ACOs

‒ Composed of physicians, with or without hospital participation, and often they substitute Payers with third parties that provide support functions, such as middle office operations and claims

18

Basic Business Model - Gross Shared Savings

$8,500

$9,000

$9,500

$10,000

$10,500

$11,000

BY1 BY2 BY3 PY1 PY2 PY3

Annual Per Capita Benchmarks, Targets, and Actual Expenditures

ACO Beneficiary Expenditures

(projected/actual)

19

• Kent– 20 GPs and almost 150 staff operate from three modern sites providing many of the tests,

investigations, minor injuries and minor surgery usually provided in hospital. It shows what can be done when general practice operates at scale. Better results, better care, a better experience for patients and significant savings

• Airedale– nursing and residential homes are linked by secure video to the hospital allowing consultations with

nurses and consultants both in 17 and out of normal hours – for everything from cuts and bumps to diabetes management to the onset of confusion. Emergency admissions from these homes have been reduced by 35% and A&E attendances by 53%. Residents rate the service highly.

• Cornwall– trained volunteers and health and social care professionals work side-by-side to support patients

with long term conditions to meet their own health and life goals.

Examples of New Models of Care in the UK

Source: NHS England

20

• Rotherham– GPs and community matrons work with advisors who know what voluntary services are available for

patients with long term conditions. This “social prescribing service” has cut the need for visits to accident and emergency, out-patient appointments and hospital admissions.

• London– integrated care pioneers that combine NHS, GP and social care services have improved services

for patients, with fewer people moving permanently into nursing care homes. They have also shown early promise in reducing emergency admissions. Greenwich has saved nearly £1m for the local authority and over 5% of community health expenditure.

Examples of New Models of Care in the UK

Source: NHS England

21

ACO Prevalence and Geographic Distribution (US)

600 Total ACOs 400 Medicare ACOs 20 million covered lives 50 million patients served under ACO providers

7 million covered lives

22

• NHS (UK)– Quality and Outcomes Framework (QOF)

• The Quality and Outcomes Framework (QOF) is the annual reward and incentive programme detailing GP practice achievement results.

• It rewards practices for the provision of quality care and helps standardise improvement in the delivery of primary medical services.

– Commissioning for Quality and Innovation (CQUIN)• Rewards excellence by linking a proportion of English healthcare providers' income to the achievement of local quality improvement goals

• Medicare ACOs– 34 quality metrics

• Patient / caregiver experience, care coordination / patient safety, preventive health, at-risk population

• Medicare Advantage– STARS

• Medicare FFS– Value Based Purchasing, Readmission Penalties, Hospital Acquired Conditions

Reimbursement for Quality

23

Future of ACOs

• ACOs look more and more like payers

‒ Accumulating assets to control value-chain‒ Absorb more financial “risks”

‒ Take on more administrative health plan capabilities‒ Increased solvency regulations

• Continued growth in number of ACOs, then consolidation

• Will likely see some catastrophic provider enterprise failures directly from

‒ Hospital-sponsored ACOs risk and growth strategy‒ Market characteristics

• Look-alike staff model delivery systems/health plan

• Medicare ACOs will become substantial competitors to Medicare Advantage plans

• Introduction of other Innovation Center initiatives interact with ACOs

‒ ACO receives target price for any episodes that trigger a bundle under BPCI. However, BPCI program receives any savings beyond the 2% or 3% discount.

How can ACOs impact the value chain of services and

thus dollars associated with these services?

Contact information

Jeremiah Reuter, ASA, MAAADirector, Provider Risk [email protected]

Thank you

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