Improving Health Care Quality and Reducing Costs through Payment and Delivery System Reform

1. Improving Health Care Qualityand Reducing Coststhrough Payment and Delivery System Reform Harold D. MillerExecutive Director Center for Healthcare Quality and Payment Reformand President and CEO Network for Regional Healthcare Improvement

2. Health Care Costs are the Coreof the National Budget Problem “Our health-care problem is our deficit problem. Nothing else even comes close.” President ObamaSeptember 2010

3. But Federal Healthcare Costs AreJust The Tip of a Bigger Iceberg…

4. What Makes Our % of GDP High is Private Expenditures on Health Source: Organisation for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database) Notes: Data from Australia and Japan are 2007 data. Figures for Canada, Norway and Switzerland, are OECD estimates. Numbers are PPP adjusted.

5. Large Size and Growth in Costs for Both Employers & Workers 11 Years

6. Insurance Cost Growth Quadruplethe Rate of Wages and Inflation Cumulative Changes in Health Insurance Premiums, Inflation, and Workers’ Earnings, 1999-2010 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2010; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2010 (April to April).

7. Health Care Costs Have Wiped Out Real Income Gains $ 870 for inflation $ 945 for health care $ 95 for spending $1910 more income

8. From a Manufacturing Economyto Dependence on Healthcare

9. Challenge: Can We Reduce Costs Without Rationing?

10. Reducing Costs Without Rationing:Prevention and Wellness HealthyConsumer ContinuedHealth HealthCondition

11. Reducing Costs Without Rationing:Avoiding Hospitalizations HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Acute Care Episode

12. Reducing Costs Without Rationing:Efficient, Successful Treatment HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode High-CostSuccessfulOutcome Complications, Infections,Readmissions

13. Reducing Costs Without Rationing:Is Also Quality Improvement! Better Outcomes/Higher Quality HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode High-CostSuccessfulOutcome Complications, Infections,Readmissions

14. How is Cleveland Doing? HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode High-CostSuccessfulOutcome Complications, Infections,Readmissions

15. Cleveland Has 6th HighestHospital Spending Per Person Cleveland

16. Cleveland is Below U.S. Averagein Physician Spending Per Person

17. Cleveland Residents Get More Surgeries Than Other Regions Cleveland

18. Worse Hips and Hearts, Better Backs and Prostates in Cleveland?

19. Cleveland Has 8th Highest Rate of Preventable Hospitalizations Cleveland

20. Chronic Disease Patients More Likely to Be Admitted in Cleveland

21. 1 Out of 4 Hospitalized Patients is Readmitted Within 30 Days

22. Are There Similar Issues WithCommercial/Medicaid Patients?

23. Are There Similar Issues WithCommercial/Medicaid Patients? • The only way to know is to get data on all patients in Cleveland/NEO and analyze it • Data from Electronic Medical Records/HIE • provides most comprehensive, accurate information on the care a patient received from an individual provider and characteristics of the patient • but only covers services from providers on EHRs and who are linked to an HIE • Data from Health Insurance Claims • provides most complete information on all services a patient received from all providers + cost of services • but does not provide clinical data on nature of services or characteristics of patients • Both Are Needed, Particularly in the Short Run

24. What You Can Learn from Claims:Prometheus Analysis of PACs Significant Spending on Potentially Avoidable Complicationsfor Chronic Disease Patients www.HCI3.org

25. Current Payment Systems Reward Bad Outcomes, Not Better Health HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode $ High-CostSuccessfulOutcome Complications, Infections,Readmissions

26. Are There Better Ways to Pay for Health Care? HealthyConsumer ContinuedHealth PreventableCondition NoHospitalization Efficient Successful Outcome Acute Care Episode ? $ High-CostSuccessfulOutcome Complications, Infections,Readmissions

27. “Episode Payments” to Reward Value Within Episodes HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode $ High-CostSuccessfulOutcome EpisodePayment Complications, Infections,Readmissions A Single Payment For All Care Needed From All Providers inthe Episode, With a Warranty ForComplications

28. 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

29. Payment + Process Improvement = Better Outcomes, Lower Costs

31. What a Single Physician and Hospital Can Do • 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: • Surgeon received over 80% more in payment than otherwise • Hospital received 13% more than otherwise, despite fewer rehospitalizations • Health insurer paid 40% less than otherwise • Method: • Reducing unnecessary auxiliary services such as radiography and physical therapy • Reducing the length of stay in the hospital • Reducing complications and readmissions.

32. The Weakness of Episode Payment HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode How do you preventunnecessary episodes of care? (e.g., preventable hospitalizationsfor chronic disease, overuse of cardiac surgery, back surgery, etc.) High-CostSuccessfulOutcome EpisodePayment Complications, Infections,Readmissions

33. Comprehensive Care PaymentsTo Avoid Episodes HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode $ High-CostSuccessfulOutcome ComprehensiveCarePayment or “Global”Payment Complications, Infections,Readmissions A Single Payment For All Care Needed For A Condition

34. Isn’t This Capitation?No – It’s Different COMPREHENSIVE CARE PAYMENT CAPITATION (WORST VERSIONS) Payment Levels Adjusted Based on Patient Conditions No Additional Revenuefor Taking SickerPatients Limits on Total RiskProviders Accept forUnpredictable Events Providers Lose Money On Unusually Expensive Cases Bonuses/PenaltiesBased on QualityMeasurement Providers Are Paid Regardless of the Quality of Care Provider Makes More Money If Patients Stay Well Provider Makes More Money If Patients Stay Well Flexibility to DeliverHighest-Value Services Flexibility to DeliverHighest-ValueServices

35. Example: BCBS MassachusettsAlternative Quality Contract • Single payment for all costs of care for a population of patients • Adjusted up/down annually based on severity of patient conditions • Initial payment set based on past expenditures, not arbitrary estimates • Provides flexibility to pay for new/different services • Bonus paid for high quality care • Five-year contract • Savings for payer achieved by controlling increases in costs • Allows provider to reap returns on investment in preventive care, infrastructure • Broad participation • 14 physician groups/health systems participating with over 400,000 patients, including one primary care IPA with 72 physicians • Positive first-year results • Higher ambulatory care quality than non-AQC practices, better patient outcomes, lower readmission rates and ER utilization http://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html

36. Comprehensive Care & Episode Payment Can Be Complementary HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode $ Comp.Care/Global Payment High-CostSuccessfulOutcome EpisodePayment Complications, Infections,Readmissions E.g., annual pmtto manage an individual’s chronic disease, includinghospitalizations E.g., the payment madewhen the individualhas an exacerbationrequiring hospitalization

37. Payment Reform Allows Pursuing a Different “Triple Aim” • Better Care for Patients (Win) • Lower Costs for Purchasers/Payers (Win) • Equal or Better Margins for Providers (Win)

38. Example: $10,000 Procedure

39. Actual Average Payment for Procedure is Higher than $10,000

40. Starting Point for Warranty Price:Actual Current Average Payment

41. Limited Warranty Gives Financial Incentive to Improve Quality ReducingAdverseEvents… ...ReducesCosts... …ImprovesThe Bottom Line

42. Higher-Quality Provider Can Charge Less, Attract More Patients EnablesLowerPrices

43. A Virtuous Cycle of QualityImprovement & Cost Reduction ReducingAdverseEvents… ...ReducesCosts... …ImprovesThe Bottom Line

44. Win-Win-Win for Patients, Payers, and Providers Quality is Better... ...Cost is Lower... ...Providers More Profitable

45. In Contrast, Non-Payment Alone Creates Financial Losses Non-Payment forInfections Causes Losses WhileImproving

46. Not Just Better Acute Care,But Reducing the Need for It HealthyConsumer ContinuedHealth HealthCondition NoHospitalization Efficient Successful Outcome Acute Care Episode High-CostSuccessfulOutcome Complications, Infections,Readmissions

47. 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 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 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 M.A. Gadoury, K. Schwartzman, et al, “Self-Management Reduces Both Short- and Long-Term Hospitalisation in COPD,” European Respiratory Journal 26(5), 2005

48. We Don’t Pay for the Things That Will Prevent Overutilization CURRENT PAYMENT SYSTEMS Health Insurance Plan $ $ $ Office Visits ERVisits HospitalStay PhysicianPractice Avoidable Avoidable Phone Calls Lab Work/Imaging ...No penalty or reward forhigh utilizationelsewhere NurseCare Mgr Avoidable No payment for services that can prevent utilization...

49. Option 1: Add New Fee Codes for Unreimbursed PCP Services MEDICAL HOME PROGRAM Health Insurance Plan $ $ $ Office Visits ERVisits HospitalStay PhysicianPractice Avoidable Avoidable Phone Calls Lab Work/Imaging NurseCare Mgr Avoidable $ Higher payment for primary care

50. Option 2: Pay for Monthly “Care Mgt” to Cover Missing Services MEDICAL HOME PROGRAM Health Insurance Plan $ $ $ Office Visits ER Visits HospitalStay PhysicianPractice Avoidable Avoidable MonthlyCare MgtPayment Lab Work/Imaging Phone Calls Avoidable RN Care Mgr $ Higher payment for primary care