Anne K. Gauthier Kristin Sims-Kastelein Academy Health Annual Conference

1. Anne K. Gauthier Kristin Sims-Kastelein Academy Health Annual Conference State Health Policy Research Interest Group June 26, 2010 Reforming Health Care Delivery Through Payment Change and Transparency: Innovations in Minnesota and Massachusetts This project is supported by The Commonwealth Fund. 1

2. Overview &Objectives • Project Methodology • Minnesota’s Legislation • Findings: Progress to date and implementation challenges • Massachusetts’s Legislation and Major Recommendations • Findings: Current status and implementation challenges • Key Lessons from Each State • Concluding Analysis: Cross Cutting Themes

3. Study Design & Project Methodology • Extensive document review of the two states’ initiatives • Legislation, key workgroup reports, news articles, literature review • 34 semi-structured telephone interviews with high level state officials and private sector executives • Interview lasted roughly 60 minutes • Recorded, transcribed, and analyzed to identify key themes, issues, and lessons • Separate case studies written; analysis of cross-cutting themes

4. Minnesota’s Landmark Legislation, 2008: Price and Quality Transparency Statewide Measures and All-Payer Database What it is: Standardized set of quality measures for health care providers across the state. • Collection and use of all-payer encounter data and contracted prices Provider Peer Grouping What it is:A method of for comparing health care providers based on a combination of risk-adjusted cost and quality. • Transparent ranking of providers based on a combination of risk-adjusted cost and quality

5. Minnesota’s Landmark Legislation,2008: Delivery and Payment Redesign Baskets of Care What it is: A collection of services, paid separately under fee-for-service, but combined by a provider in delivery of a full diagnostic or treatment procedure. • Uniform definitions and quality measurements for 7 baskets Quality Incentive Payments What it is: A statewide system of quality-based incentive payment to health care providers. • Initial focus on diabetes, vascular care, depression, AMI, heart attack, pneumonia care Health Care Homes What it is: A primary care approach where providers, families, and patients work in partnership to improve health outcomes and quality of life. • Voluntary certification. Certification tied to incentive payment for coordinated care. 5

6. Software Data Collection Analysis Minnesota Findings: Statewide Standardized Quality Measures and All-Payer Database • Progress to date • Sept. 2009: Uniform definitions and measure have been developed • Registration of medical groups underway • January 2010: providers began submitting data on the measures • July 2010: data on the measures will publically reported • Implementation Challenges • 100% physician participation • Lack of enforcement mechanism • Technical issues in exactly what is reported and how

7. Minnesota Findings: Provider Peer Grouping • Progress to Date • July 2009: Collection of third-party administrators and health plans encounter data • June 2010: Data distributed to providers • Implementation Challenges • Technical details • How do you score high cost/ high quality versus low cost/low quality? How do you weigh process measures versus outcome measures? • Program design • How should like organizations be grouped? How is location being taken into account? • Impact on access • Are rural providers to be unfairly penalized?

8. Minnesota Findings: Baskets of Care • Progress to Date • Dec. 2009 MDH finalized Baskets • Jan 2010: Providers can offer baskets. Price cannot vary by payer. • Implementation Challenges • Definitions – balance breadth with simplicity • Operational – payment, combining different systems, and more • Voluntary – will they be used? • 7 (+ 1) baskets of care • Total Knee Replacement • Low Back Pain • Obstetric Care • Preventative Care (Adults & Children) • Diabetes and Pre-Diabetes • Asthma

9. Minnesota Findings: Quality Incentive Based Payments • Progress to Date • July 2009: Rules for implementation • January 2010: Health plans use standard quality measures. Providers submit measures electronically • July 2010: First public quality reports published. Public programs use quality incentive payment system • Implementation Challenges • Risk adjustment • Applies only to state programs • Alignment with existing pay for performance programs

10. Minnesota Findings: Health Care Homes (HCH) • Progress to Date/Next Steps • November 2009: HCH criteria finalized • January 2010: Care coordination methodology finalized • July 2010: Care coordination payment begin for public programs and health plans. Health plans have HCH available in network. • Implementation Challenges • Conceptual definition varies • Debate over coordination payments • HCH certification criteria • Access and communication • Use of registries • Care coordination • Care planning • Practice level quality improvement

11. Massachusetts’ 2008 Legislation : Chapter 305 Payment and Delivery Redesign • Established the Special Commission on the Health Care Payment System • Strengthened role of the Health Care Quality and Cost Council to "promote public transparency of the quality and cost of health care in the commonwealth“ Other Key Legislative Provisions • Creation the Massachusetts e-Health Institute • Charging DPH to develop, implement, and promotion of an evidence-based outreach about cost-effective utilization of prescription drugs • Uniform reporting • Establishment of a Medicaid medical home demonstration • Annual public hearings from providers and hospitals on cost containment and quality

12. Recommendations of the Special Commission on the Health Care Payment System All payers move to a global payment system within 5 years • Development of Accountable Care Organizations (ACOs) • Focus on patient-centered primary care • Preservation of patient choice • Cost and quality reporting • Risk-sharing between ACOs and payers • Development of risk adjustment models • Widespread adoption of medical homes • Creation of an independent entity to oversee implementation and transition strategy 12

13. Health Care Quality & Cost Council’s Roadmap to Cost Containment Comprehensive reform phased in over 10 years • All payersincrease use of payment methodologies that support health care delivery redesign: • P4P, episode-based payments, medical homes, and reduced payments for avoidable hospitalization and preventable readmissions • Statewide adoption of global payments • HCQCC should set cost control targets and monitor cost growth. • Explore rate regulation if cost targets are not met. • Continue state efforts to work with CMS on alternative payment models and system redesign.

14. Massachusetts Findings: Bold Consensus: Wow! How? • Special Payment Commission’s unanimous endorsement of global payment signaled understanding that transparency will not control costs alone • Ambitious recommendations still quite conceptual; many details still to come – process on next slide • Stakeholders (especially hospitals and physicians) given political cover through Commission process • Media spotlight provided additional support: national leader on access, Boston Globe series on Partners’ prices, and overall cost trends • All the way to global payment? What about episodes?

15. Massachusetts Findings: Technical and Environmental Issues • Further legislation needed? Yes, say most observers • Independent entity to oversee implementation will be critical • Composition is contentious • Numerous specific decisions to come identified by Special Payment Commission and many more by stakeholders • Moderately strong support for transition strategy recommendations • Significant activity led by the private sector helping to prepare market • Blue Cross’s Alternative Quality Contract helpful in changing provider payment “mindset” • Reorganization and alignment of hospitals & physicians • Rate regulation “stick” recommendation by HCQCC does not have wide support, but limits on insurer administrative costs appears to have “legs” 15

16. Current Status of Massachusetts’ Payment Reform • April 2010: Attorney General denied insurance rate increases • March 2010: Cost Hearings • May 2010: Senate passed legislation to control health care premiums; payment reform NOT included • State leaders plan, private leaders continue discussions and pilots

17. Minnesota’s Lessons Passing Major Reform • Leadership, leadership and leadership • System reform is bipartisan issue • Articulation of clear goals motivates action – Triple Aim resonated • Good data on variation and cost coupled with personal stories instrumental in building shared sense that status quo unacceptable • Mutually valued public-private partnerships to gain critical mass and buy-in for the process • Major reform element: “total cost of care” introduced too late to gain stakeholder support, was poorly written, and misunderstood

18. Minnesota’s Lessons Payment and Transparency Reforms: A Solid Base Hit • Care coordination, episodes of care and value based payments are essential building blocks for future reform • Alignment with other existing reporting and payment pilots bolsters work already done • An imperfect package is far preferable to a “do nothing” alternative but will it work as a package? • Ambitious timetable fueled action and promoted efficiency but didn’t allow time to simplify package • Despite the significant collaboration already underway in Minnesota, the legislation has potential to accelerate efforts and improve impact • Will enough stakeholders be affected? (and what about Medicare?)

19. Massachusetts’ Lessons Culture of Reform Provides Momentum, Recommendations to Actions Still Tough • Political landscape and active reform culture have no doubt shaped the current discussion • Unique and expensive health care environment and role of provider as major employer makes controlling costs imperative and difficult • Consensus that MA needed to tackle access before costs (“Reform I” did not produce individual winners & losers) • Leadership, leadership, and leadership • Major bill with infrastructure steps and a high profile Commission and a short timeframe creates momentum • Stakeholders signed on to bold recommendations of Commission; later, they supported slower and voluntary adoption and other reforms, along lines of Roadmap report

20. Massachusetts’ Lessons Global Payment in 5 Years? Made SenseBut Not the Whole Answer • A significant first step in payment reform is deep understanding of FFS payment problems – restating the problem is critical • Why go right to global payment? Building a system of episode-based payment would take just as long and is seen only as an interim step • The devil is always in the details: What will the ACO’s look like? Can they be virtual? How can gains be shared? • The stakeholder tensions: which reforms are most critical for controlling costs? Relative impact of administrative simplification, malpractice reform, consumer incentives – and rate regulation (HCQCC) versus payment reform

21. Cross-CuttingThemes (1) • Both states provide models for replication – what they passed or recommended and in how they’ve brought stakeholders along • Payment change and transparency reforms: • Require an upfront financial investment • Critical decisions in implementation – that will reflect local culture and • Should start with a core set of measures, add over time – selection process is as important as the measures selected. • Payment reform legislated or not? May depend on the culture of the state. But the building blocks -- quality and cost measure and reports on providers and plans need to span system. ,

22. Cross-CuttingThemes (2) • Leadership, leadership, and leadership • Timing is everything: In MN, “level 3, total cost of care payment” was ahead of its time in early 2008; MA had another year of national conversation to assist • Role of payment reform and transparency in delivery system reform – and need for delivery reform – now more understood than ever. But winners & losers make the road tough. • Multiple opportunities in national health reform to propel these states’ efforts on a multi-payer basis!

23. Contact Information and Sources • Anne Gauthier Senior Fellow National Academy for State Health Policy 202-903-0101 agauthier@nashp.org • Kristin Sims-Kastelein 207-874-6524 ksimskastelein@gmail.com www.nashp.org Gauthier, Anne and Cullen, Ann, “Reforming Health Care Delivery Through payment Change and Transparency: Minnesota’s Innovations, “ The Commonwealth Fund #1375, April 2010. Gauthier, Anne and Sims-Kastelein, Kristin, “Health Care Reform Phase Two in Massachusetts: The Road to Payment Reform and Restructured Health Care Delivery,” The Commonwealth Fund, forthcoming.