February 23, 2016 12:00 – 1:15 pm ET

1. Accelerating and Aligning Clinical Episode Payment Models:Preliminary Recommendations on Elective Joint Replacement • February 23, 2016 • 12:00 – 1:15 pm ET

2. Welcome • Anne Gauthier • LAN Project Leader, • CMS Alliance to Modernize Healthcare (CAMH)

3. Session Objectives • Learn About • Clinical Episode Payment (CEP) Work Group’s recommendations around episode payment for elective joint replacement • Arkansas Payment Improvement Initiative • Innovations in Clinical and Patient-Reported Outcome Measurement for Joint Replacement • Engage • Ask your questions of the presenters

4. Agenda

5. Poll

6. Guiding committee welcome Mark Smith Guiding Committee Co-Chair Visiting Professor, University of California at Berkeley Clinical Professor of Medicine, University of California at San Francisco

7. OUR GOAL Goals for U.S. Health Care Adoption of Alternative Payment Models (APMs) 2016 30% In 2016, at least 30% of U.S. health care payments are linked to quality and value through APMs. 2018 50% In 2018, at least 50% of U.S. health care payments are so linked. These payment reforms are expected to demonstrate better outcomes and lower costs for patients. Better Care, Smarter Spending, Healthier People

8. LEADERSHIP GROUPS • LAN has established 7 groups with varying purposes Guiding Committee Work Groups PBP Population Based Payment APM FPT APM Framework & Progress Tracking CEP Clinical EpisodePayment Payer Collaborative Affinity Groups States State Engagement PAG Purchaser CPAG Consumer & Patient

9. APM FRAMEWORK Population-Based Payment • The framework situates existing and potential APMs into a series of categories. The framework is a critical first step toward the goal of better care, smarter spending, and healthier people. • Serves as the foundation for generating evidence about what works and lessons learned • Provides a road map for payment reform capable of supporting the delivery of person-centered care. • Acts as a "gauge" for measuring progress towards adoption of alternative payment models • Establishes a common nomenclature and a set of conventions that will facilitate discussions within and across stakeholder communities

10. APM Measurement Payer Collaborative A diverse group of health plans assembled to inform the LAN's approach for measuring adoption of APMs Measurement Pilot The LAN intends to use the APM Framework as a "gauge" for measuring progress towards adoption of APMs The resulting approach will be used to measure the nation's progress towards the goals of 30 percent adoption by 2016 and 50 percent adoption by 2018 A subset of Payer Collaborative participants will take part in an exercise to further inform and test the feasibility of the approach

11. Pbp and cep work groups • Sprints Launched • Patient Attribution • Financial Benchmarking • Performance Measurement • Data Sharing Population-Based Payment (PBP) Work Group Clinical Episode Payment (CEP) Work Group • Sprints Launched • Elective Hip and Knee Replacement • Maternity • Cardiac Care

12. CONTACT US • We want to hear from you! Website www.hcp-lan.org | www.lansummit.org Twitter @Payment_Network Linked-In https://www.linkedin.com/groups/8352042 YouTube http://bit.ly/1nHSf1H Email PaymentNetwork@mitre.org

13. LAN SUMMIT • https://www.lansummit.org • Spring LAN Summit • April 25-26, 2016 • Sheraton Hotel • 8661 Leesburg PikeTysons, VA 22182Tysons, VA • Save the Date • Presentations Planned from Work Groups on Work Group Products • Call for Sessions Coming Soon! (end of February)

14. Guiding committee q&A

15. Panel facilitator Lewis Sandy Member, LAN Guiding Committee Chair, HCPLAN Clinical Episode Payment (CEP) Work Group Executive Vice President, UnitedHealth Group

16. ELECTIVE JOINT REPLACEMENT Elective hip and knee replacement for CEP models Development Dec. 2015 – Feb. 2016 • The draft white paper titled Accelerating and Aligning Joint Replacement Episode Payment: Considerations and Recommendations describes bundled payment for episodes of elective hip and knee replacement. The white paper reviews previous and existing joint replacement episode payment efforts in order to develop a set of recommendations that can potentially pave the way for broad adoption of bundled payment in a way that has not yet occurred. • Key Components • Design Elements • Recommendations • Operational Issues Draft Release Feb. 26, 2016 Public Comment Feb. 26 – Mar. 28, 2016 Revise TBD Final Release TBD

17. Work Group Members Brooks DavermanDirector of Strategic Planning and InnovationState of Tennessee François de BrantesExecutive DirectorHealth Care Incentives Improvement Mark Froimson, MDExecutive Vice President, Chief Clinical OfficerTrinity Health Robert LazerowPractice Manager, Research and InsightsThe Advisory Board Company Catherine MacLean, MD, PhDChief Value Medical OfficerHospital for Special Surgery • Amy BassanoDirector, Patient Care Models GroupCenter for Medicare and Medicaid Innovation, CMS • Edward Bassin, PhDChief Analytics Officer • Archway Health • John BertkoChief ActuaryCovered California • Kevin Bozic, MDChair, Department of Surgery and Perioperative CareDell Medical SchoolThe University of Texas at Austin • Alexandra ClydeCorporate Vice PresidentGlobal Health Policy, Reimbursement, and Health Economics, Medtronic Jennifer Malin, MDStaff Vice President, Clinical StrategyAnthem Carol SakalaDirector of Childbirth Connection ProgramsNational Partnership for Women & Families Richard Shonk, MD, PhD Chief Medical Officer The Health Collaborative Steven SpauldingSenior Vice President, Enterprise NetworksArkansas Blue Cross Blue Shield Barbara Wachsman Chair Pacific Business Group on Health

18. Work group charge • Provide a Directional Roadmap to: • Promote Alignment: • Design Approach • Alignment Approach • Find a Balance Between: • Alignment/consistency and flexibility/innovation • Short-term realism and long-term aspiration

19. Clinical episode • Clinical episode or episode of care is a series of temporally continuous healthcare services related to the treatment of a given spell of illness or provided in response to a specific request by the patient or other entity.

20. Clinical episode payment • Clinical episode payment is a bundled payment model that considers the quality, costs, and outcomes for a patient-centered course of care over a longer time period and across care settings.

21. Purpose of episode payment • Episode Payments Reflect How Patients Experience Care: • A person develops symptoms or has health concerns • He or she seeks medical care • Providers treat the condition • The patient receives care for his or her illness or condition • Episode Payment Can: • Create incentives to break down existing siloes of care • Promote communication and coordination among care providers • Improve care transitions • Respond to data and feedback on the entire course of illness or treatment • Goal: The treatments the patients receive along the way reflect their wishes and cultural values.

22. Episode Selection Criteria  $ Unexplained Variation Conditions & procedures for which there is high variation in the care that patients receive, despite the existence evidenced based “best” practices. Empowering Consumers Conditions & procedures with opportunities to include patients and family caregivers’ through the use of decision aids support for shared decision-making; goal setting and support for identifying high-value providers. High Volume, High Cost Conditions & procedures for which high cost is due to non-clinical factors such as inappropriate service utilization and poor care coordination that correlate with avoidable complications, hospital readmissions and poor patient outcomes. Care Trajectory Conditions & procedures for which there is a well-established care trajectory, which would facilitate defining the episode start, length and bundle of services to be included. Availability of Quality Measures Conditions & procedures with availability of performance measures that providers must meet in order to share savings which will eliminate the potential to incentivize reductions in appropriate levels of care.

23. Why Joint Replacement?

24. Episode parameters 1. Episode Definition 10. Quality Metrics  2. Episode Timing 9. Type and Level of Risk Role & Perspective of Stakeholders Data Infrastructure Issues $ 8. Episode Price 3. Patient Population Regulatory Environment 4. Services 7. Payment Flow 5. Patient Engagement 6. Accountable Entity

25. EPISODE DESIGN RECOMMENDATIONS Design Elements

26. Operational Considerations • Stakeholder Perspectives: Ensure that the voices of all stakeholders – consumers, patients, providers, payers, states and purchasers – are heard in the design and operation of episode payments • Data Infrastructure: Understand and develop the systems that are needed to successfully operationalize episode payment • Regulatory Environment: Recognize and understand relevant state and/or federal regulations, and understand how theysupport or potentially impede episode payment implementation

27. Panel speaker Steve Spaulding Senior Vice President, Enterprise Networks Arkansas Blue Cross Blue Shield

28. Arkansas Healthcare Payment Improvement Initiative Steve Spaulding Senior Vice President, Enterprise Networks Arkansas Blue Cross and Blue Shield February 23, 2016

29. Arkansas Healthcare Payment Improvement Initiative Today, we face major healthcare challenges in Arkansas • The health status of Arkansans is poor, the state is ranked at or near the bottom of all states on national health indicators, such as heart disease and diabetes • The healthcare system is hard for patients to navigate, and it does not reward providers who work as a team to coordinate care for patients • Healthcare spending is growing unsustainably: • Insurance premiums doubled for employers and families in past 10 years (adding to uninsured population) • Large projected budget shortfalls for Medicaid

30. Arkansas Healthcare Payment Improvement Initiative Our vision to improve care for Arkansas is a comprehensive, patient-centered delivery system … Objectives • Improve the health of the population • Enhance the patient experience of care • Enable patients to take an active role in their care • Reward providers for high-quality, efficient care • Reduce or control the cost of care For patients For providers How care is delivered • Population-based care • Medical homes • Health homes • Episode-based care • Acute, procedures or defined conditions Four aspects of broader program • Results-based payment and reporting • Health care workforce development • Health information technology (HIT) adoption • Expanded access for health care services

31. Arkansas Healthcare Payment Improvement Initiative Payers recognize the value of working together to improve our system, with close involvement from other stakeholders … 1 Center for Medicare and Medicaid Services Coordinated multi-payer leadership … • Creates consistent incentives and standardized reporting rules and tools • Enables change in practice patterns as program applies to many patients • Generates enough scale to justify investments in new infrastructure and operational models • Helps motivate patients to play a larger role in their health and healthcare

32. Arkansas Healthcare Payment Improvement Initiative  Medicaid and private insurers believe paying for results, not just individual services, is the best option to improve quality and control costs • Transition to payment system that rewards value and patient health outcomes by aligning financial incentives  • Reduce payment levels for all providers regardless of their quality of care or efficiency in managing costs • Pass growing costs on to consumers through higher premiums, deductibles and copayments (private payers), or higher taxes (Medicaid)  • Intensify payer intervention in decisions though managed care or elimination of expensive services (e.g. through prior authorizations) based on restrictive guidelines   • Eliminate coverage of expensive services or eligibility

33. Arkansas Healthcare Payment Improvement Initiative Ensuring high-quality care for every Arkansan is at the heart of this initiative, and is a requirement to receive performance incentives Two types of quality metrics for providers Description 1 Quality metric(s) “to pass”are linked to payment • Core measures indicating basic standard of care was met • Quality requirements set for these metrics, a provider must meet required level to be eligible for incentive payments • In select instances, quality metrics must be entered in portal (heart failure, ADHD) 2 Quality metric(s) “to track”are not linked to payment • Key to understand overall quality of care and quality improvement opportunities • Shared with providers but not linked to payment 1 There are five or fewer per episode

34. Arkansas Healthcare Payment Improvement Initiative We have worked closely with providers and patients across Arkansas to shape an approach and set of initiatives to achieve this goal • Providers, patients, family members and other stakeholders who helped shape the new model in public workgroups 500+ • Public workgroup meetings connected to 6-8 sites across the state through videoconference 21 • Months of research, data analysis, expert interviews and infrastructure developmentto design and launch episode-based payments 16 • Updates with many Arkansas provider associations (e.g., AHA, AMS, Arkansas Waiver Association, Developmental Disabilities Provider Association) Monthly

35. The goal Accountability Incentives Arkansas Healthcare Payment Improvement Initiative DETAILS FOLLOW The episode-based model is designed to reward coordinated, team-based, high-quality care for specific conditions or procedures • Coordinated, team-based care for all services related to a specific condition, procedure, or disability (e.g., pregnancy episode includes all care prenatal through delivery) • A provider “quarterback,” or Principal Accountable Provider (PAP) is designated as accountable for all pre-specified services across the episode (PAP is provider in best position to influence quality and cost of care) • High-quality, cost-efficient care is rewarded beyond current reimbursement, based on the PAP’s average cost and total quality of care across each episode

36. Core provider for episode Episode “Quarterback” Performance management Arkansas Healthcare Payment Improvement Initiative The model rewards a Principal Accountable Provider (PAP) for leading and coordinating services and ensuring quality of care across providers PAP role What it means … • PAP selection: • Payers review claims to see which providers patients chose for episode related care • Payers select PAP based on main responsibility for the patient’s care • Physician, practice, hospital or other providerin the best position to influence overall quality, cost of care for episode • Leads and coordinates the team of care providers • Helps drive improvement across system (e.g., through care coordination, early intervention, patient education, etc.) • Rewarded for leading high-quality, cost-effective care • Receives performance reports and data to support decision-making NOTE: Episode and health home model for adult DD population in development. Model will utilize lead provider and health home to drive coordination

37. Arkansas Healthcare Payment Improvement Initiative How episodes work for patients and providers (1/2) Patients and providers deliver care as today (performance period) 1 2 3 Patients seek care and select providers as they do today Providers submit claims as they do today Payers reimburse for all services as they do today

38. Arkansas Healthcare Payment Improvement Initiative How episodes work for patients and providers (2/2) Payers calculate average cost per episode for each PAP1 Compare average costs to predetermined “commendable” and “acceptable” levels2 • Based on results, providers will: • Share savings: if average costs below commendable levels and quality targets are met • Pay part of excess cost: if average costs are above acceptable level • See no change in pay: if average costs are between commendable and acceptable levels 4 5 6 Calculate incentive payments based on outcomes after close of 12-month performance period Review claims from the performance period to identify a “Principal Accountable Provider” (PAP) for each episode 1 Appropriate cost and quality metrics based on latest and best clinical evidence, nationally recognized clinical guidelines and local considerations

39. Arkansas Healthcare Payment Improvement Initiative Five initial episodes launched in July 2012 (1/2) Details Total Hip/ Knee replacement • Care from 30 days before to 90 days after the surgical procedure • Prenatal care, delivery and postnatal care for the mother • 40 weeks before to 60 days after delivery • Excludes neonatal care Perinatal (non-NICU1) Ambulatory URI • Includes colds, sore throats, sinusitis • Care from initial consultation to 21 days after • Excludes inpatient hospitalizations and surgical procedures Acute-, post-acute heart failure • Care from hospital admission for heart failure to 30 days after discharge ADHD • Care over 12-month period, including all ADHD services and pharmacy costs (with exception of initial assessment of patient) NOTE: Episode and health home model for adult DD population in development. 1 Neonatal intensive care unit

40. Arkansas Healthcare Payment Improvement Initiative Five initial episodes launched in July 2012 (1/2) Principal Accountable Provider (PAP) Total Hip/ Knee replacement • Orthopedic surgeon • Delivering provider Perinatal (non-NICU1) • First provider to diagnose patient in-person Ambulatory URI Acute-, post-acute heart failure • Admitting hospital ADHD • Depends on care pathway • Physician • Licensed clinical psychologist, and/or • RSPMI provider NOTE: Episode and health home model for adult DD population in development. 1 Neonatal intensive care unit

41. Arkansas Healthcare Payment Improvement Initiative Guiding principles that payers use to determine cost levels (e.g., ‘commendable’ and ‘acceptable’ thresholds) and incentive payments • Reward high-quality, efficient delivery of clinical care • Promote fairness by considering patient access, provider economics and changes required for improvement • Acknowledge that poor performance is a reality and should not be rewarded • Protect quality and access by setting a gain-sharing limit at a reasonable, achievable level • Sustain thresholds for reasonable period to allow for adjustment and learning

42. Arkansas Healthcare Payment Improvement Initiative Each payer assesses historic provider average costs for an episode Year 1: Distribution of provider costs Year 1: Preparatory period

43. Arkansas Healthcare Payment Improvement Initiative … then selects thresholds to promote high- quality, guideline-based and cost-effective care Year 1: Distribution of provider costs Year 1: Preparatory period High Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost

44. Arkansas Healthcare Payment Improvement Initiative Selected thresholds applied to provider performance in the following year … even though we expect that cost effectiveness will have improved Year 2: Performance period Year 1: Distribution of provider costs Year 2: Distribution of provider costs High Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost

45. Arkansas Healthcare Payment Improvement Initiative Shared savings Shared costs PAPs that meet quality standards and have average costs below the commendable threshold will share in savings up to a limit No change Year 2: Performance period High Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost

46. Arkansas Healthcare Payment Improvement Initiative What this approach means for a PAP’s opportunity to share in gains • What this means for PAPs • There can be many winners • Aim to have as many providers as possible gain • Risk/reward levels are set to make this a reality • Average costs are what count • Episode costs are risk adjusted to ensure fairness • Outliers are removed

47. Arkansas Healthcare Payment Improvement Initiative PAPs will be provided new tools to help measure and improve patient care • Reports provide performance information for PAP’s episode(s): • Overview of quality across a PAP’s episodes • Overview of cost effectiveness (how a PAP is doing relative to cost thresholds and relative to other providers) • Overview of utilization and drivers of a PAP’s average episode cost Example of provider reports

48. Arkansas Healthcare Payment Improvement Initiative PAP performance reports have summary results and detailed analysis of episode costs, quality and utilization Details on the reports • First time PAPs receive detailed analysis on costs and quality for their patients increasing performance transparency • Guide to Reading Your Reports available online and at this event • Valuable to both PAPs and non-PAPs to understand the reports • Reports issued quarterly starting July 2012 • July 2012 report is informational only • Gain/risk sharing results reflect claims data from Jan – Dec 2011 • Reports will be available online via the provider portal

49. Arkansas Healthcare Payment Improvement Initiative The provider portal is a multi-payer tool that allows providers to enter quality metrics for certain episodes and access their PAP reports Login to portal from payment initiative website Details on the provider portal • Accessible to all PAPs • Login with existing username/ password • New users follow enrollment process detailed online • Key components of the portal are to provide a way for providers to • Enter additional quality metrics for select episodes (Hip, Knee, CHF and ADHD with potential for other episodes in the future) • Access current and past performance reports for all payers where designated the PAP

50. Arkansas Healthcare Payment Improvement Initiative AHCPII: Quarterly and Annual Reports