The Myra Kraft Open Classroom Series Fall 2013: Policy for a Healthy America

1. The Myra Kraft Open Classroom Series Fall 2013:Policy for a Healthy America • Every Wednesday, 6pm – 8pm • September 4, 2013 through December 4, 2013 • West Village F, Room 20 • Northeastern University • School of Public Policy and Urban Affairs

2. This Week (October 16, 2013) “Why Paying Physicians and Hospitals for their Performance Scares Everyone” Sarah Iselin, MS Senior Vice President of Strategy, Policy and Community Partnerships and Chief Strategy Officer, Blue Cross Blue Shield of Massachusetts Gary Young, JD, PhD Director of The Center for Health Policy and Healthcare Research and Professor of Strategic Management and Healthcare Systems, Northeastern University School of Public Policy & Urban Affairs | Northeastern University

3. School of Public Policy & Urban Affairs | Northeastern University

4. US Health Care Reform: Paying for Value Not Volume Gary Young, J.D., Ph.D. Center for Health Policy and Healthcare Research, School of Business and College of Health Sciences, Northeastern University Health Policy Open Classroom October 16, 2013

5. Paying for Health Care Services in the US • Fee-for-Service • Diagnostic Related Groups • Capitation • Pay-for-Performance (P4P) • Value-based purchasing through global payment

6. Why P4P in Health Care? • Quality problems • Escalating costs – business case for quality

10. What is P4P? • Financial incentive • Assigned performance targets – (quality, efficiency) • e.g., annual blood sugar test for patients with diabetes • Target recipient/Unit of accountability – individuals, teams, organizations

11. P4P: Centerpiece of US Health Policy Over 200 P4P programs in private sector Over half of state Medicaid programs have adopted P4P ACA – Medicare value-based purchasing Provider-specific P4P programs Accountable care organization (ACO) shared savings program

12. ACA – Provider-Specific Programs • Law requires implementation of VBP: • -- for most hospitals in 2012, • -- physicians in 2015, and • -- the planning of P4P for nursing homes, home health • agencies, and other types of organizations

13. ACA – Outline of Medicare P4P for Hospitals • Funding: Budget neutral as funded from reduction in DRG • payments -- initially 1% reduction in DRG • payments transitioning to a 2% reduction in 2017. • Performance measures: clinical process measures; patient • experience, patient outcome measures (2014); efficiency (2014). • Performance standards for both achievement and improvement. • Incentive payments: A hospital’s performance score determines • the percentage of the DRG payments it earns as an incentive • payment.

14. Medicare Hospital P4P: Examples of Measures • Clinical process • Prophylactic antibiotics for surgical patients within one hour of surgery • Discharge instructions for patients w/ heart failure • Clinical outcome • Mortality for heart attack, heart failure • Patient experience • Pain management • Communication about medicines

15. ACA -- ACO Shared Savings ACO bears financial risk for spending in excess of a budget. ACO gains for reducing spending below budget. ACO receives bonuses for meeting designated performance targets on quality measures including measures to promote population health (e.g., influenza immunization, colorectal cancer screening.

16. Global Payment/ACO Private-Sector Initiatives Blue Cross Blue Shield of Massachusetts Alternative Quality Contract

18. Are Providers Scared?

19. General Attitudes Toward VBP

20. General Attitudes Toward VBP

21. Should You be Scared? P4P may not work Unintended consequences Patient selection Teach to the test

22. Limited Evidence that P4P Works Selected Findings: • Rosenthal et al. (2006) Relative increase of 3.6 percentage points for cervical cancer screening. • Young et al. (2007) Absolute increase of 7 percentage points for diabetes measure (e.g., eye exam). _ Lindenauer et al. (2007) Relative increase of 2.6 percentage points for AMI measures; 3.4 points for pneumonia measures; 4.1 points for heart failure measures. -- Petersen et al. (2013) Relative increase of 8.3 percentage points. --Jha et al. (2012) No improvement in hospital mortality rates for cardiac care or pneumonia.

23. Pre-Post Study of Diabetes Quality Indicators

25. What are the Barriers ? • Money may not be an effective motivator in the long run. -- Some providers may perceive significant tradeoffs between money and autonomy. -- Monetizing quality may not be sustainable and even counter productive. • Infrastructure and training may be inadequate. • Our knowledge for designing programs may be insufficient. • Who should be incentivized and by how much? • How should we structure incentives and performance measures?

29. Are Any Improvements Sustainable in the Long Run?

31. What About Unintended Consequences? Unintended Consequences --Patient selection --Teaching to the test

32. What Does the Future Hold? • No turning back (why be scared of stepping into the dark when you are already wearing a blindfold) • More experimentation -- payment incentives to keep people healthy! • Strong cooperation needed between purchasers and providers • Dollars per quality adjusted life years

33. School of Public Policy & Urban Affairs | Northeastern University

34. HEALTH REFORM IN MASSACHUSETTS: THE ROAD TO PAYMENT REFORM Sarah Iselin October 16, 2013 Northeastern University Open Classroom Series

35. Massachusetts Now Has the Lowest Rate of Uninsurance in the Country PERCENT UNINSURED, ALL AGES U.S.AVERAGE MASS. 2002 2006 2008 2009 2010 2000 2004 2007 NOTE:The Massachusetts specific results are from a state-funded survey — the Massachusetts Health Insurance Survey (MHIS). Using a different methodology, researchers at the Urban Institute estimated that 507,000 Massachusetts residents were uninsured in 2005, or approximately 8.1 percent of the total population. Starting in 2008, the MHIS sampling methodology and survey questionnaire were enhanced. These changes may affect comparability of the 2008 and later results to prior years. The national comparison presented here utilizes a different survey methodology, the Current Population Survey, which is known to undercount Medicaid enrollment in some states. SOURCES:Urban Institute, Health Insurance Coverage and the Uninsured in Massachusetts: An Update Based on 2005 Current Population Survey Data In Massachusetts, 2007; Massachusetts Center for Health Information and Analysis (formerly the Division of Health Care Finance and Policy), Massachusetts Health Insurance Survey 2000, 2002, 2004, 2006, 2007, 2008, 2009, 2010, 2011; U.S. Census Bureau, Current Population Survey, Health Insurance Historical Tables (HIB Series).

36. But the Highest Per PersonHealth Care Spending… PER CAPITA PERSONAL HEALTH CARE EXPENDITURES, 2009 NATIONAL AVERAGE State NOTE:District of Columbia is not included. SOURCE:Centers for Medicare & Medicaid Services, Health Expenditures by State of Residence, CMS, 2011.

37. …In the World NOTE: U.S. dollars are current-year values. Other currencies are converted based on purchasing power parity. SOURCE: OECD Health Data; National Health Expenditures by State of Residence, CMS Office of the Actuary, 2011.

38. Though Health Reform Helped, Costs Are Still a Problem for Many Massachusetts Residents SOURCES:Massachusetts Health Reform Survey, 2010

39. With Wages Stagnant, Increasing Health Care CostsConsume a Greater Portion of Household Budgets MASSACHUSETTS PER CAPITA PERSONAL HEALTH EXPENDITURES AND MEDIAN INCOME, 1999-2009 MA PER CAPITA PERSONAL HEALTH CARE EXPENDITURES MA MEDIAN HOUSEHOLD INCOME Year NOTE:Health care expenditures and household income reported in current year (unadjusted) dollars. SOURCES:Data for health care expenditures from CMS, Health Expenditures by State of Residence, 1991-2009. Data for median income from U.S. Census Bureau, State Median Income.

40. The Increasing Costs of Health Care Squeeze Out Other Public Spending Priorities, Too STATE BUDGET, FY2001 VS. FY2011 (BILLIONS OF DOLLARS) FY2011 FY2001 +$5.1 B (+59%) -$4.0 B (-20%) -15% -13% -11% -23% -50% -33% -38% Health Coverage(State Employees/GIC; Medicaid/Health Reform) PublicHealth MentalHealth Education Infrastructure/Housing HumanServices LocalAid PublicSafety NOTE: Dollar figures are inflation adjusted using a measure specific to government spending as developed by the U.S. Bureau of Labor and Statistics. SOURCE: Massachusetts Budget and Policy Center Budget Browser.

41. Costs Are the Most Important Health Care Issue for Massachusetts Residents Q PLEASE TELL ME IF YOU CONSIDER IT TO BE A CRISIS, A MAJOR PROBLEM, A MINOR PROBLEM, OR NOT A PROBLEM IN THE STATE OF MASSACHUSETTS. Crisis Major problem A High cost of health care 78% Limited ability to get needed health care 46% Low quality of health care services 33% Long wait time for medical appointments 31% SOURCE:Blendon, R.J et al., “Public Perceptions of Health Care Costs in Massachusetts,” October 2011

42. Key Affordability/Cost-Related Developments in Massachusetts 2006 2007 2008 2009 2010 2011 2012

43. “How Effective Do You Think Each of the Following Policy Strategies Would Be In Improving U.S. Health System Performance (Improving Quality and/or Reducing Costs)?” Fundamental provider payment reform with broader incentives to provide high-quality and efficient care over time 85% Bonus payments for high-quality providers and/or efficient providers 55% Public reporting of information on provider quality and efficiency 53% Incentives for patients to choose high-quality, efficient providers 42% 28% Increased competition among health care providers 25% Increased government regulation of providers 19% More consumer cost-sharing SOURCE:Commonwealth Fund Health Care Opinion Leaders Survey, September/October 2008.

44. Special Commission on the Health Care Payment System’s Recommendation CURRENT FEE-FOR-SERVICE PAYMENT SYSTEM PATIENT-CENTERED GLOBALPAYMENT SYSTEM THE PROBLEM Care is fragmented instead of coordinated. Each provider is paid for doing work in isolation, and no one is responsible for coordinating care. Quality can suffer, costs rise and there is little accountability for either. THE SOLUTION Global payments made to a group of providers for all care. Providers are not rewarded for delivering more care, but for delivering the right care to meet patient’s needs. $ $ $ $ $ $ PRIMARY CARE HOSPITAL SPECIALIST HOSPITAL SPECIALIST PRIMARYCARE HOMEHEALTH HOME HEALTH GOVERNMENT, PAYERS AND PROVIDERS WILL SHARE RESPONSIBILITY FOR PROVIDINGINFRASTRUCTURE, LEGAL AND TECHNICAL SUPPORT TO PROVIDERS IN MAKING THIS TRANSITION.

45. Ahead of the Curve – The Alternative Quality Contract • July 2012 Year 2 resultspublished • Model developed • Jan 2009 First full contracts begin • Sept 2011 Year 1 results published • ~85% of network physicians participating in AQC AQC TIMELINE 2006 2007 2008 2009 2010 2011 2012 2013 LEGISLATIVE/GOV’T TIMELINE • Health reform passes (Ch. 58) • Begins path to near universal coverage • Cost Containment Part 1 (Ch. 305) passes • Increased transparency about cost drivers • Special Commission on Payment Reform • Recommends move to global payment • Government reports and hearings on cost drivers • Governor rejects small group premiums • Cost Containment Part 2 (Ch. 288) passes • Aims to control premiums for small business, individuals • Governor Patrick files payment reform legislation • Payment Reform (Ch. 224) passes • Sets health care cost growth target at state GDP

46. The AQC Model 1. Global Budget • Based on historical total medical expenses • Annual inflation for each year of the five-year contract period is defined up front and designed to continually moderate spending growth 2. Efficiency Opportunity • Budget constraint creates incentive to carefully steward resource use • Provider organizations share in budget savings and share risk for budget deficits 3. Quality Performance Incentive • Based on a broad set of nationally accepted, validated measures of ambulatory and hospital care • Range of performance targets on each measure reward “good to great” performance Initial Global Budget Level

47. AQC Measure Set for Performance Incentives

48. Insurance Risk Versus Incentive Risk • Insurance Risk • Variation in costs and outcomes due to factors beyond providers’ control • Example: Flu pandemic • AQC aims to hold providers responsible for incentive risk—but not insurance risk • BCBSMA employs several strategies to insulate providers from insurance risk in the AQC: • Health status adjustment • Use of network-wide trend as benchmark for budget-setting • Prescription drug benefit adjustment • Reinsurance requirements/ contract terms • Caps on provider liability for budget deficits • Upside risk-only in payment for quality performance • Incentive Risk • Variation in costs and outcomes due to factors within providers’ control—care processes, unnecessary utilization, etc. • Examples: HbA1c control among diabetics, ED use for ambulatory-care sensitive visits

49. AQC Physician Participation Specialty Care Physicians Primary Care Physicians 86% 82% 12,986 5,136 11,731 4,592 2,303 5,065 1,420 1,373 2,618 2,577 2009 2010 2011 2012 2013 2013 2009 2010 2011 2012

50. AQC Groups