understanding accountable care organizations timothy j. fisher, md, ms, facog july 10, 2014
TRANSCRIPT
Understanding Accountable Care Organizations
Timothy J. Fisher, MD, MS, FACOG
July 10, 2014
How My Brain Works
VALUE=
QUALITY/COST
TRANSFORMING MATERNITY CAREHow Payment Reform Can Help
Improve Quality and Lower Costs
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
Big Opportunity for Commercial Payers & Medicaid is Maternity
$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
Can We Reduce Maternity Care Costs Without Rationing?
PregnantWoman
Reducing Costs Without Rationing:Better Pregnancy Management
ComplicatedPregnancy
UncomplicatedPregnancy
PregnantWoman
Reducing Costs Without Rationing:Better Choices About Delivery
ComplicatedPregnancy
UncomplicatedPregnancy
PregnantWoman
Term Vaginal Delivery
Pre-Term,C-Section
Reducing Costs Without Rationing:Better Management of Delivery
ComplicatedPregnancy
UncomplicatedPregnancy
PregnantWoman
Term Vaginal Delivery
Pre-Term,C-Section
Efficient Successful
Delivery
MaternalComplications,Readmissions
High-CostSuccessful
Delivery
Infants with Low Birth Weight, Injuries, Etc.
Better for Moms and BabiesAs Well as Payers
Better Outcomes/Lower Cost
ComplicatedPregnancy
UncomplicatedPregnancy
PregnantWoman
Term Vaginal Delivery
Pre-Term,C-Section
Efficient Successful
Delivery
MaternalComplications,Readmissions
High-CostSuccessful
Delivery
Infants with Low Birth Weight, Injuries, Etc.
Current Payment Systems Reward Bad Outcomes
$
ComplicatedPregnancy
UncomplicatedPregnancy
PregnantWoman
Term Vaginal Delivery
Pre-Term,C-Section
Efficient Successful
Delivery
MaternalComplications,Readmissions
High-CostSuccessful
Delivery
Infants with Low Birth Weight, Injuries, Etc.
How Payment Systems ImpedeBetter Maternity Care
Goals for High-Value Maternity Care
Barriers Created byCurrent Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
How Payment Systems ImpedeBetter Maternity Care
Goals for High-Value Maternity Care
Barriers Created byCurrent Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/ Undesirable Procedures
•Higher payment/higher margins for hospitals for C-sections
How Payment Systems ImpedeBetter Maternity Care
Goals for High-Value Maternity Care
Barriers Created byCurrent Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/ Undesirable Procedures
•Higher physician payment/higher hospital margins for C-sections
Reduce Costs of Deliveryand Post-Partum Care
•No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers;
•No incentive for mothers to choose lower-cost/higher-value providers
Accountable Payment ModelsProvide Flexibility + Accountability
BUILDING BLOCKS HOW IT WORKS
Bundled Payment
Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
Warrantied Payment
Higher payment for quality care, no extra payment for avoiding
complications
Condition-Based
Payment
Payment based on the patient’s condition, rather than on the procedure used
Accountable Payment ModelsAllow Win-Win-Win Approaches
BUILDING BLOCKS HOW IT WORKS
HOW PHYSICIANSAND HOSPITALS
CAN BENEFITHOW PAYERSCAN BENEFIT
Bundled Payment
Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
Higher payment for physicians if they
reduce costs paid by hospitals
Physician and hospital offer a lower total price to Medicaid or health
plan than today
Warrantied Payment
Higher payment for quality care, no extra payment for avoiding
complications
Higher payment for physicians and
hospitals with low rates of
complications
Medicaid or health plan no longer pays
more for high rates of complications
Condition-Based
Payment
Payment based on the patient’s condition, rather than on the procedure used
No loss of payment for physicians and
hospitals using fewer tests and procedures
Medicaid or health plan no longer pays
more for unnecessary procedures
Improving Payment for Maternity Care: Part 1
Goals for High-Value Maternity Care
Barriers Created byCurrent Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/ Undesirable Procedures
•Higher physician payment/higher hospital margins for C-sections
Reduce Costs of Deliveryand Post-Partum Care
•No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers;
•No incentive for mothers to choose lower-cost/higher-value providers
Normal Pregnancy, Term Delivery, No Complications
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
C-Sectionin Hospital
Today: Higher Payment for C-Sections, Regardless of Need
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
C-Sectionin Hospital
HEALTHPLAN
Lower Payment
Higher Payment
Condition-Based PaymentEncourages Lower-Cost Care
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
C-Sectionin Hospital
Condition-Specific Payment
HEALTHPLAN
SinglePayment
Payment Would Vary Basedon Patient Conditions/Needs
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
C-Sectionin Hospital
Delivery w/o Complications
HEALTHPLAN
LowerPayment
Term Deliveryw/ CCs
VaginalDelivery
in Hospital
C-Sectionin Hospital
Delivery with Complications
HigherPayment
Condition-Based Payment AlsoEncourages Lower-Cost Locations
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
C-Sectionin Hospital
Condition-Specific Payment
HEALTHPLAN
SinglePayment
VaginalDelivery in
Birth Center
Improving Payment for Maternity Care: Part 2
Goals for High-Value Maternity Care
Barriers Created byCurrent Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/ Undesirable Procedures
•Higher payment/higher margins for hospitals for C-sections
Reduce Costs of Deliveryand Post-Partum Care
•No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers;
•No incentive for mothers to choose lower-cost/higher-value providers
Accountable Payment ModelsAllow Win-Win-Win Approaches
BUILDING BLOCKS HOW IT WORKS
HOW PHYSICIANSAND HOSPITALS
CAN BENEFITHOW PAYERSCAN BENEFIT
Bundled Payment
Single payment to 2+ providers who are now paid separately (e.g., hospital+physician)
Higher payment for physicians if they
reduce costs paid by hospitals
Physician and hospital offer a lower total price to Medicare or health
plan than today
Warrantied Payment
Higher payment for quality care, no extra payment for avoiding
complications
Higher payment for physicians and
hospitals with low rates of
complications
Medicaid or health plan no longer pays
more for high rates of complications
Condition-Based
Payment
Payment based on the patient’s condition, rather than on the procedure used
No loss of payment for physicians and
hospitals using fewer tests and procedures
Medicare or health plan no longer pays
more for unnecessary procedures
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
Major Improvements in Outcomes, and Quickly
• 103 discrete evidence-based elements of care are incorporated, measured and tracked for compliance
• Redesign, from the ground up, all aspects of provider workflow– Drive fundamental efficiency improvements– Increase patient safety and process reliability– Reduce/eliminate documentation redundancy– Streamline patient education and cut costs
• Seek observable reductions in C-section rates and premature births
• Enhance management of comorbid conditions• Improve fetal/child health and wellness
Geisinger Perinatal ProvenCare
Results of Geisinger Perinatal ProvenCare
• 26% Reduction in Cesarean Sections• 68% Reduction in Birth Trauma• 23% Reduction in NICU Use
Berry SA, et al, “ProvenCare Perinatal: A Model for Delivering Evidence/Guideline-Based Care for Perinatal Populations,” Joint Commission Journal on Quality and Safety, May 2011
A Warranty is Not an Outcome Guarantee
• Offering a warranty on care does not imply that you are guaranteeing a cure or a good outcome
• It merely means that you are agreeing to correct avoidable problems at no (additional) charge
• Most warranties are “limited warranties,” in the sense that they agree to pay to correct some problems, but not all
Prices for Warranted Care Will Likely Be Higher
• Q: “Why should we pay more to get good-quality care??”• A: In most industries, warrantied products cost more, but
they’re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty
Prices for Warranted Care May Be Higher, But Spending Lower
• Q: “Why should we pay more to get good-quality care??”• A: In most industries, warrantied products cost more, but
they’re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty
• In healthcare, a procedure with a warranty would need to have a higher payment rate than the equivalent non-warrantied procedure, but the higher price would be offset by fewer costs of complications, outlier payments, and readmissions
Example: $6,000 Cost of Delivery
Cost of Delivery
$6,000
Actual Average Payment is Higher Due to NICU Use
Cost of Delivery
Cost and Rate ofNICU Use
AverageTotal Cost
$6,000 $20,000 8% $7,600
How Much Should be Charged for Delivery With a Warranty?
Cost of Delivery
Cost and Rate ofNICU Use
AverageTotal Cost
Price Charged
$6,000 $20,000 8% $7,600 ?
Starting Point for Warranty Price:Actual Current Average Payment
Cost of Delivery
Cost and Rate ofNICU Use
AverageTotal Cost
Price Charged
Change in Net
Revenue
$6,000 $20,000 8% $7,600 $7,600 $0
Limited Warranty Gives Financial Incentive to Improve Quality
Cost of Delivery
Cost and Rate ofNICU Use
AverageTotal Cost
Price Charged
Change in Net
Revenue
$6,000 $20,000 8% $7,600 $7,600 $0
$6,000 $20,000 7% $7,400 $7,600 $200
ReducingAdverseEvents…
…ImprovesThe Bottom
Line
...ReducesCosts...
Higher-Quality Provider Can Charge Less, Attract More Patients
Cost of Delivery
Cost and Rate ofNICU Use
AverageTotal Cost
Price Charged
Change in Net
Revenue
$6,000 $20,000 8% $7,600 $7,600 $0
$6,000 $20,000 7% $7,400 $7,600 $200
$6,000 $20,000 7% $7,400 $7,500 $100
EnablesLowerPrices
A Virtuous Cycle of QualityImprovement & Cost Reduction
Cost of Delivery
Cost and Rate ofNICU Use
AverageTotal Cost
Price Charged
Change in Net
Revenue
$6,000 $20,000 8% $7,600 $7,600 $0
$6,000 $20,000 7% $7,400 $7,600 $200
$6,000 $20,000 7% $7,400 $7,500 $100
$6,000 $20,000 6% $7,200 $7,500 $300
ReducingAdverseEvents…
…ImprovesThe Bottom
Line
...ReducesCosts...
Win-Win-Win for Patients, Payers, and Providers
Cost of Delivery
Cost and Rate ofNICU Use
AverageTotal Cost
Price Charged
Change in Net
Revenue
$6,000 $20,000 8% $7,600 $7,600 $0
$6,000 $20,000 7% $7,400 $7,600 $200
$6,000 $20,000 7% $7,400 $7,500 $100
$6,000 $20,000 6% $7,200 $7,500 $300
$6,000 $20,000 6% $7,200 $7,400 $200
$6,000 $20,000 5% $7,000 $7,400 $400
Quality is Better......Spending is Lower...
...Providers More Profitable
To Make It Work:Shared, Trusted Data for Pricing
• Physician/Hospital needs to know their current rates of utilization and how many are preventable to know whether the warranty price will cover its costs of delivering care
• Purchaser/Payer needs to know its current rates of utilization to know whether the warranty price is a better deal than they have today
• Both sets of data have to match in order for both providers and payers to agree!
Many Potential Opportunities for Warranties in Maternity Care
• Maternal injuries, infections, complications• Birth injuries, infections, complications• Neonatal problems (e.g., respiratory distress
syndrome) after induced birth• Readmissions (both maternal and infant)
Many Variations of Payment Reform
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
No Complications
C-Sectionin Hospital
Complications
No Complications
Complications
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
Bundled Payments
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
No Complications
C-Sectionin Hospital
Complications
No Complications
Complications
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
Bundled Payment
Bundled Payment
Payments with Warranties
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
No Complications
C-Sectionin Hospital
Complications
No Complications
Complications
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
Bundled Payment with Warranty
Bundled Payment with Warranty
Condition-Based Payment
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
No Complications
C-Sectionin Hospital
Complications
No Complications
Complications
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
Condition-Based Bundled Payment with Warranty
Authorizing/Enabling Use ofAlternative Delivery Sites
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
No Complications
C-Sectionin Hospital
Complications
Deliveryin
Birth Center
OB/CNM $
Birth Ctr $
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
No Complications
Complications
No Complications
Complications
Condition-Based Bundled Payment with Warranty
Moving Upstream to Broader Range of Conditions
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
No Complications
Pre-Term Elective
Induction
C-Sectionin Hospital
Complications
Deliveryin
Birth Center
OB/CNM $
Birth Ctr $
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
No Complications
Complications
No Complications
Complications
Broader Condition-Based Bundled Payment with Warranty
A Maternity Care ACO
NormalPregnancy
Term Delivery
w/ No CCs
VaginalDelivery
in Hospital
No Complications
Pre-Term Elective
Induction
C-Sectionin Hospital
Complications
Deliveryin
Birth Center
OB/CNM $
Birth Ctr $
Bundled Condition-Based Payment with Warranty
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
No Complications
Complications
High-RiskPregnancy
No Complications
Complications
Payment rates would still be adjusted based on maternal risk factors at the beginning of pregnancy and unpreventable factors that occur during pregnancy, but not for
preventable complications or discretionary choice of delivery timing, method, or site
Four Things Needed For Win-Win-Win Solutions
1. Defining the Change in Care Delivery– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
Four Things Needed For Win-Win-Win Solutions
1. Defining the Change in Care Delivery– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?– How much variation in costs and savings is likely?
Four Things Needed For Win-Win-Win Solutions
1. Defining the Change in Care Delivery– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?– How much variation in costs and savings is likely?
3. Designing a Payment Model To Support Change– Flexibility to change the way care is delivered– Accountability for costs and quality related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk
Four Things Needed For Win-Win-Win Solutions
1. Defining the Change in Care Delivery– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?– How much variation in costs and savings is likely?
3. Designing a Payment Model To Support Change– Flexibility to change the way care is delivered– Accountability for costs and quality related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk
4. Compensating Providers Appropriately– Changing payment to the provider organization
(physician practice/group/IPA/health system) does not automatically change compensation to physicians or hospitals
Lack of Effective Incentives for Value-Based Choice by Patients
• Copays, Co-insurance, and High Deductibles do little to encourage patients to be cost-conscious in choosing among high-cost providers and services
Where Will You HaveYour Baby Delivered?
Consumer Shareof Delivery Cost
Price #1$5,000
Price #2$6,000
Price #3$7,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurancew/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Where Will You HaveYour Baby Delivered?
Consumer Shareof Delivery Cost
Price #1$5,000
Price #2$6,000
Price #3$7,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurancew/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Highest-Value: $0 $1,000 $2,000
Lack of Effective Incentives for Value-Based Choice by Patients
• Copays, Co-insurance, and High Deductibles do little to encourage patients to be cost-conscious in choosing among high-cost providers and services
• Copays, Co-insurance, and High Deductibles can discourage patients from getting preventive treatments they need– If we want mothers to get adequate prenatal care, why do
we make them pay in order to get it?– What if mothers need medications to improve pregnancy
outcomes, but can’t afford them?
Moving to Higher-Quality, More Affordable Maternity Care
• There is no one-size-fits-all solution to healthcare transformation; each region will need to actually make it happen in its own unique environment. The best federal policy will support regional innovation.
• Payment reform is necessary, but not sufficient. Delivery system reform, lean redesign of care processes, changes in benefit design, and effective quality measurement are also essential. Everything needs to focus on delivering the best outcomes for patients at the lowest cost to the purchasers.
• All stakeholders need to come together with shared data in a neutral forum to look for win-win-win solutions and then implement them successfully.
Learn More About Win-Win-WinPayment and Delivery Reform
Center for Healthcare Quality and Payment Reformwww.PaymentReform.org
Acknowledgement and Thanks:
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org