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2. Health Care Spending & Value: New Dimensions Elisabeth Rosenthal – Moderator & Rapporteur • Editor-in-Chief, Kaiser Health News Author, An American Sickness Dan PolskyProfessor, Bloomberg School of Public Health & Carey Business School, Johns Hopkins University Rena ContiAssoc. Professor, Markets, Public Policy & Law, QuestromBusiness School, Boston University ZiadHaydarFormer Senior Vice President & Chief Clinical Officer, Ascension Healthcare Chapin WhiteAdjunct Senior Policy Researcher, Rand Corporation

3. Health Care Spending & Value: New Dimensions Elisabeth RosenthalEditor-in-Chief, Kaiser Health News, Author, An American Sickness Dan PolskyProfessor, Bloomberg School of Public Health and Carey Business School, Johns Hopkins University Rena ContiAssoc. Professor, Markets, Public Policy & Law, QuestromBusiness School, Boston University ZiadHaydar Former Senior Vice President & Chief Clinical Officer, Ascension Healthcare Chapin WhiteAdjunct Senior Policy Researcher, Rand Corporation

4. Volume to Value and The Invisible Gorilla Daniel Polsky, PhD Bloomberg Distinguished Professor Johns Hopkins Carey Business School Johns Hopkins Bloomberg School of Public Health

5. The Invisible Gorilla • Most of you have seen this famous video where you are asked to count of the number of passes made by the people in white shirts among the 3 in white and 3 in black. • At some point, a gorilla strolls into the middle of the action, faces the camera and thumps its chest, and then leaves, spending nine seconds on screen. Would you see the gorilla? • Half don’t see the gorilla because they are too busy counting the passes. • A lesson here is that once we have the solution in mind it is too difficult to consider alternatives. The focus on the transformation of payment and delivery from volume to value may keep us from seeing the gorillas that drive rising health care spending

6. Consider 3 ‘volume to value’ solutions • Payment reform. The move towards ‘value’ and away from volume is slowly transforming delivery. But how has it changed overall health care spending? • Consumer directed health plans do engage consumers in their choices. But is the reduction in volume a move towards value? • Value-based pricing - A misnomer. Quality-based pricing Classic misdirection - A ‘value’ based health care delivery system may be a better system, but is it a false solution to health spending growth?

7. Payment Reform • About half of all commercial payments to doctors and hospitals now flow through value-oriented methods. • From almost nothing to more than 50% in 10 years • Rather than payment based on traditional fee-for-service, payment rewards • processes of care • achieving certain outcomes for their patients • providing a superior patient experience • financial accountability

8. How has payment reform affected overall health spending growth and value? • Pay for performance • Some evidence of improved processes, but no consistent evidence of improved health outcomes • Suggestive evidence that payment is not big enough to see significant changes • Shared Savings • One sided risk – some underspend which results in shared savings, but those that overspend don’t face risk – Medicare, on the whole, has lost money. • Shared Risk • Can work (AQC). But hard to impose. • Bundled payment • Mixed as it depends on many factors, including the definition of the episode. May incentivize episodes which would bring us back to paying for volume

9. Payment Reform and Prices • When providers are accountable for outcomes they take on more risk • To manage risk, bigger is better • Bigger health care systems have more market power. • Health systems with more market power can negotiate higher prices • The shift from ‘volume to value’ is, at best, a shift from ‘volume to outcomes’. • Prices are an essential component of value

10. Consumer directed health plans – engaging the consumer in shopping for value • What does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics. Zarek C. Brot-Goldberg Amitabh Chandra Benjamin R. Handel Jonathan T. Kolstad. The Quarterly Journal of Economics, Volume 132, Issue 3, August 2017, Pages 1261–1318. • High-deductible plan reduced firm-wide spending by about 12% • spending reductions are entirely due to outright reductions in quantity. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g., preventive services) and potentially wasteful care (e.g., imaging services). • No evidence consumers learn to price shop

11. Consumers have trouble evaluating health care quality – it is all about parking and WiFi

13. Value-based pricing • Value-based pricing is an umbrella term: • Manufactures links the price it charges for a drug to an assessment of how well it works. • More sophisticated versions might provide rebates from drug manufacturers if a drug failed to work - “outcome-based pricing.” • Companies charge different prices for the same drug when it is used to treat different conditions - “indication-based pricing” • This is not value-based, but quality-based pricing. • Quality-based pricing for unique products that can save a life give the power to manufactures to capture all the ‘rents’ from an innovation. Public policy to provide incentives for innovation should insist that rents from innovations are shared rather than fully captured by producers. • If polio vaccine was priced at its full value, we would be broke or we’d still have a polio epidemic.

14. What is Value-Based Pricing? 1962 Ferrari 250 GTO. Sold for $48M in 2018.

15. Beware of the false solution • Providers and suppliers are setting the ‘volume to value’ agenda. • One-sided risk and consolidation • Parking and WiFi • Pricing for quality when life is on the line Attention must be paid to prices and market power if our health system is to indeed transform from one based on volume to one based on value

17. Health Care Spending & Value: New Dimensions Elisabeth RosenthalEditor-in-Chief, Kaiser Health News, Author, An American Sickness Dan PolskyProfessor, Bloomberg School of Public Health & Carey Business School, Johns Hopkins University Rena ContiAssoc. Professor, Markets, Public Policy & LawQuestromBusiness School, Boston University ZiadHaydar Former Senior Vice President & Chief Clinical Officer, Ascension Healthcare Chapin WhiteAdjunct Senior Policy Researcher, Rand Corporation

18. Health Care Spending & Value: New Dimensions Elisabeth RosenthalEditor-in-Chief, Kaiser Health News, Author, An American Sickness Dan PolskyProfessor, Bloomberg School of Public Health & Carey Business School, Johns Hopkins University Rena ContiAssoc. Professor, Markets, Public Policy & Law, QuestromBusiness School, Boston University ZiadHaydarFormerSenior Vice President & Chief Clinical Officer Ascension Healthcare Chapin WhiteAdjunct Senior Policy Researcher, Rand Corporation

19. Ziad Haydar, M.D.,M.B.A. Reducing Preventable Hospitalizations Transitioning to Population Health in a Health Care DeliveryOrganization

20. Objectives • Discuss challenges facing hospital based delivery organizations in transitioning to populationhealth • Discuss societal implications on total health care expenditure

21. Disclaimers • The Ascension story is only used as an exampleto discuss the economic challenges facing delivery organizations. • All information in this presentation has already been communicatedpublicly. • As of July 1, I am no longer atAscension.

22. AboutAscension • Ascension is a faith-based healthcare organization that delivers personalized, compassionate care • to all, especially to thosewho • are poor andvulnerable. • In FY18, Ascension providednearly • $2 billion for care of persons living in poverty and communitybenefit. Ascension is one of the largest Catholic healthcare organizations in the country, with over 156,000 associates and 34,000 aligned providers working as one to connect care and deliver services to individuals andcommunities. • Our Mission-driven work is carried out through a number of subsidiaries dedicated to providing healthcare services and delivery to support personalizedcare. 4

23. Advocacy and services for those most vulnerable • Focus on eliminating preventabledisparities incare • Socially just minimumwage • Speaking out against drugprice hyperinflation, and insupportof 100 percent access/coverage, Medicaid expansion, and mental and behavioral healthreform • Addressing human traffickingthrough advocacy and service • Ascension Medical Missions AtHome,supportofVeterans • 5

24. AnnualGoals • Linking Annual (short term and long term goals)to mission andstrategy: • Focus on advancing health care equity and reducing outcomesdisparity • Specifically, improving chronic illness management and cancer screening in vulnerablepopulations

25. SpecificMeasures • Specific targets for reducing hospitalizations as a measure of improving chronic illness management in heart failure andCOPD • Specific targets for reducing hospitalizations in the Medicaidpopulation • Specific targets for improving Diabetes care in African AmericanPopulation • Specific targets for increasing cancer screening all and in Medicaidbeneficiaries

26. Heart FailureResults CHFHospitalizations(All) CHF Hospitalizations(Medicaid) admissionsperperson-year admissions perperson-year 60 120 100 50 80 40 2017 2018 2019 2017 2018 2019 ❖

27. Not a Zero SumGame • A matter of SimpleMath • Irrespective of fee for service or fee for value, there is an erosion of hospital revenue • Can market based competition result in some winners and some hospitalclosures? • Public and political reactions to hospital closures • Can regulation and policy create the environment where market competition drive higher quality and lowercost?

28. ThankYou ContactInformation: ZiadHaydar, M.D., M.B.A. ziad.haydar@gmail.com Cell:314-402-8723 ❖

29. Health Care Spending & Value: New Dimensions Elisabeth RosenthalEditor-in-Chief, Kaiser Health News, Author, An American Sickness Dan PolskyProfessor, Bloomberg School of Public Health & Carey Business School, Johns Hopkins University Rena ContiAssoc. Professor, Markets, Public Policy & Law, QuestromBusiness School, Boston University ZiadHaydarFormerSenior Vice President & Chief Clinical Officer, Ascension Healthcare Chapin WhiteAdjunct Senior Policy Researcher Rand Corporation

30. The Glitch Sustainable U.S. Health Spending: Cost Control with Improved Value? July 9, 2019 Chapin White Adjunct Senior Policy Researcher, RAND Independent Consultant This briefing represents the views of the author, and not RAND or RAND’s funders.

31. RAND Hospital Price Transparency Study (“2.0”) • Prices paid to hospitals by private health plans • Private allowed amount as % of Medicare allowed amount • 1598 hospitals in 25 states White, C., & Whaley, C. (2019). Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led Transparency Initiative. Retrieved from https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

32. Hospital Prices: What We Found • Average private price in 2017 241% of Medicare • Wide variation across • states • systems • service lines (inpatient vs outpatient) • hospitals White, C., & Whaley, C. (2019). Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led Transparency Initiative. Retrieved from https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

33. State Average Relative Prices, 2017 White, C., & Whaley, C. (2019). Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led Transparency Initiative. Retrieved from https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.pdf.

34. Within a Single Multi-Hospital System:Hospital Prices 2x Higher in Indiana vs. Michigan White, C., & Whaley, C. (2019). Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an Employer-Led Transparency Initiative (Detailed Data). Retrieved from https://www.rand.org/content/dam/rand/pubs/research_reports/RR3000/RR3033/RAND_RR3033.data.zip, tabs “Table 6.5 IN Trends” and “Table 6.11 MI Trends”.

35. Hospital Prices: What Does it Mean? Prices paid to hospitals by private health plans do not reflect a functioning competitive market

36. The Three-legged Glitch Leg 1. bilateral negotiations over prices & networks + Leg 2. uncapped obligation for out-of-network care + Leg 3. widespread unshoppability a. natural monopolies b. humanmade monopolies c. emergencies ⇒ dysfunctional pricing

37. The Three-legged Glitch Leg 1. bilateral negotiations over prices & networks + Leg 2. uncapped obligation for out-of-network care + Leg 3. widespread unshoppability a. natural monopolies b. humanmade monopolies c. emergencies ⇒ dysfunctional pricing

38. Glitch Tests

39. How Big is the Glitch? Private health plans spend $500B+/year on hospital care * 25%? 35%? 45%? = hundreds of $Bs/year

40. Takeaways • Price transparency by itself does not fix dysfunctional pricing • Which leg of the glitch stool is most easily fixed? • Focus on employers, health plans, and policy makers "Partners Shrugged" Leg 2. Cap the financial obligation for out-of-network care Don't expect patients to fix dysfunctional pricing

41. Health Care Spending & Value: New Dimensions • Discussion

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43. Discussion

44. Meeting Adjourned

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