Emergency Medicine and Value-Driven Healthcare Reform

1. Emergency Medicine and Value-Driven Healthcare Reform EDPMA, April 2013 Brent R. Asplin, MD, MPH President and Chief Clinical Officer Fairview Health Services Minneapolis, MN E-mail: basplin1@fairview.org

2. Goals • Overview of Healthcare Macroeconomics • Drivers of “population health” • Value Based Purchasing and Payment Reform • Disruptive Innovation • Strategic Landscape for EM

3. US Gross HC Spending

4. 2010 Healthcare Spending as a Percent of GDP

5. Average Annual Premiums for Single and Family Coverage, 1999-2012 $15,745* * Estimate is statistically different from estimate for the previous year shown (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012.

6. Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 1999-2012 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2012; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2012 (April to April).

7. Variations in practice and spending The Dartmouth Atlas 1. The paradox of plenty 2. What’s going on? 3. What might we do? 4. Is there reason for hope?

10. Mortality Amenable to Health Care—Global Deaths per 100,000 population* * Countries’ age-standardized death rates before age 75; including ischemic heart disease, diabetes, stroke, and bacterial infections. See Appendix B for list of all conditions considered amenable to health care in the analysis. Data: E. Nolte, RAND Europe, and M. McKee, London School of Hygiene and Tropical Medicine, analysis of World Health Organization mortality files and CDC mortality data for U.S. (Nolte and McKee, 2011). Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011.

11. Implications for Us 25 Projection Actual Differential of: 2.5 Percentage Points 20 1 Percentage Point Zero 15 10 5 0 1966 1984 1990 1996 2002 2008 2014 2020 2026 2032 2038 2044 2050 1972 1978 Total Federal Spending for Medicare and Medicaid Under Assumptions About the Health Cost Growth Differential Percent of GDP Tax rates 2050: 10% 26% 25% 66% 35% 92%

12. Leadership in a New Age for Healthcare • What needs to happen? • Who is going to make it happen?

13. Paul Starr’s account of the rise of the American medical industry during the 20th century

14. Value-Based Reimbursement • What is Value? • Value is a function of quality (safety, outcomes, service) divided by cost over time

15. Strategic Bets of Value Based Purchasing • Fee for service reimbursement drives inflation in the system • If you want different performance, you have to change financial incentives • For a population, high quality care (i.e. care that eliminates unnecessary utilization) costs less than low quality care in any given year • Global payments will drive efficiencies

16. Value Based Purchasing Pay for performance PQRS Value-based Modifier Episodes of care & bundled payments Hospital readmissions Accountable care organizations (ACOs)

17. What is the Value Based Modifier? • The Affordable Care Act requires that Medicare phase in a value-based payment modifier (VM) that would apply to Medicare Fee for Service Payments starting in 2015, phase-in complete by 2017. • The VM assesses both quality of care and the costs of care. • CMS applies the VM to physician payment in all groups of 100 or more eligible professionals starting in 2015, based on your calendar year 2013 claims! • Meant to encourage shared responsibility and systems-based care for multi-specialty group practices • Attempt to “align” with Medicare Shared Savings program and Accountable Care Organizations (ACOs)

18. Value Based Modifier for Groups of ≥ 100 Eligible Professionals CY 2013 Claims • Eligible Professionals = physicians, PAs, NPs, etc • “Group” ≥ 100 “eligible professionals” reporting under one TIN • Bonus or Ding –> TIN Physician Payments only

19. Value-Based Modifier and the Physician Quality Reporting System Groups of ≥100 Eligible Professionals (MDs, DOs, PAs, NPs) Satisfactory PQRS Reporters Non-satisfactory PQRS Reporters (including those who do not report) Elect Quality Tiering Calculation No Election -1.0 % VBM Adjustment -1.5 % PQRS Adjustment -2.5 % Total Adjustment Upward or Downward Adjustment Based on Quality Tiering 0.0% No adjustment

20. Interaction Between PQRS & Value-Based Modifier • To avoid -1.5% payment adjustment in 2015, based on CY 2013 claims must successfully report PQRS • To avoid all penalties, groups ≥ 100 eligible professionals must report at the group level • If the group reports at the individual level instead, they will all be subject to the value modifier of -1.0% • Total Failure to Report PQRS = -2.5% (2015 payment adjustment, based on CY 2013 claims) • Total Failure to Report PQRS = -3.0% (2016 payment adjustment, based on CY 2014 claims)

21. CMS Readmission Measures 2013 • Hospital Readmission Reduction Program • HRRP • “Program is designed to reduce CMS payments to hospitals with higher than expected risk-adjusted readmission rates.” • Baseline period 6.1.2008 – 6.30.2011 • Began 10.1.2012 • Reductions of 1% increasing to 3% in 2015 • Acute Myocardial Infarction • Heart Failure • Pneumonia

22. CMS Inpatient Proposed Rule (released 4/26/13) Adds knee and hip implants and COPD admissions to the readmissions reduction program starting in 2015 Pays for the 2013 physician “SGR fix” with $11B in hospital cuts over 4 years

23. Accountable Care Organizations • Provider-led organizations with a strong primary care base that take accountability for the full spectrum of healthcare services for a defined population • Financial incentives tied to: • Total cost of care • Quality and patient satisfaction

24. CMS ACO Programs(260 Participating Organizations) • Physician Group Practice Transitions Program • Six organizations (started Jan 2011) • Pioneer ACO Program • 32 organizations (started Jan 2012) • Medicare Shared Savings Program • 27 organizations began in April 2012 • 89 organizations began in July 2012 • 106 organizations announced in Jan 2013

25. Interesting ACOs • “Diagnostic Clinic Walgreens Well Network” • All of Florida • “Scott and White Healthcare Walgreens Well Network, LLC” • Texas

26. Private Exchanges and Narrow Network Products • Don’t underestimate how quickly markets will move toward value-based insurance products • Partnerships between payers and delivery systems • Many of the providers are Independent Practice Associations (IPAs)

27. New payer/provider partnerships are emerging in the Twin Cities market ProvidersRelationshipPayer New products 50% ownership; new products New product Merger 27

28. The Paradox of ACOs(public and private) • Every dollar of waste in healthcare is somebody’s dollar of revenue • Hospitals stand to lose the most from reductions in TCOC • Admissions for chronic diseases • Readmissions • ED visits

29. Implications for Emergency Medicine • Reduction of avoidable ED visits is a goal for every one of the 260 ACOs and private insurance products in the US today • Contrary to what you may hear, this is based on sound economics • Every smart ACO should try to partner with EDs to coordinate care and create alternatives to admissions/readmissions

32. Types of Business Models • Solution shops • “All things to all people” • Fee for service reimbursement • E.g. consulting firms, hospitals • Value added process (VAP) business • Reliable, rules-based processes • Fee for outcome reimbursement • E.g. MinuteClinic, Shouldice Hospital

33. Types of Business Models • Facilitated networks • Businesses where people exchange things with one another • Fee for membership • E.g. Insurance

34. Disruptive Innovation • An innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network. • A “value network” is the collection of upstream suppliers, downstream channels to market, and ancillary providers that support a common business model in an industry.

35. Requirements for Disruptive Innovation • Technological enabler • E.g. the microprocessor • Business model innovation • Ability to profitably deliver the new technological innovation • Value network • A commercial infrastructure of constituencies that reinforce and support the new business model

36. Control Data vs. IBM • Both were supercomputer giants of the 1970s • Enjoyed huge profit margins on mainframe supercomputers • Responded very differently to the advent of the microprocessor and personal computing

37. The Hospital Value Network • Emergency medicine is integrally tied to the hospital business model • Much of the criticism of the economics of emergency medicine is tied to the hospital business model in which it lives

38. Source: Christensen et al. The Innovator’s Prescription

39. Source: Christensen et al. The Innovator’s Prescription

40. Disrupting Healthcare • A simple question: • Will your economics be disrupted or will you do the disrupting?

41. ED Acute Care Framework(Peter Smulowitz, MD and colleagues) Opportunity #1 Opportunity #2 Source: Smulowitz et al. Annals of EM. 2012

42. Acute Unscheduled Care Patient Satisfiers • Biggest drivers of satisfaction for most acute unscheduled conditions: • Timely access • Low cost

43. Marginal Cost of Acute Care for Low Acuity Conditions • Regardless of setting, the marginal cost of producing acute care is relatively low • How expensive is it for you to diagnose acute otitis in your ED? • This is much different than the cost incurred by the payer (i.e. patient, health plan, government) • Widely variable depending on the location

44. Medicare ReimbursementED vs. Office Visit Source: Smulowitz et al. Annals of EM. 2012 (In Press)

46. The Strategic Opportunity • We already know how to deliver acute unscheduled care quickly and at a low marginal cost • Why are we content to do this in an environment that has: • Long waiting times due to hospital boarding; and • High fixed hospital costs that drive a non-competitive business model?

47. Disruptive Alternatives to ED Care • Free-standing centers • Target complexity is above standard urgent care • Rapid throughput and lower cost • Not hospital-based (no EMTALA)

48. Disruptive Alternatives to ED Care

49. Disruptor vs. Disruptee? • We have already solved the most difficult challenge of acute unscheduled care: The 168 Hour Work-Week! • There are important opportunities to step out of the hospital (literally and virtually) to capture demand for low-cost alternatives to ED care

50. The Cycle of Disruption Original Provider Disruptive Alternative Ambulatory Surgery ED Observation Non-Surgical Specialists Primary Care Retail Clinics Virtual Care Free-Standing EDs plus which of the above??? • Hospital OR • Inpatient Stay • Surgical Specialists • Specialty Care • Primary Care • Retail Clinics • The Hospital ED