FROM VOLUME TO VALUE: Better Ways to Pay for Healthcare

1. FROM VOLUME TO VALUE:Better Ways to Pay for Healthcare Harold D. MillerExecutive Director Center for Healthcare Quality and Payment Reformand President and CEO Network for Regional Healthcare Improvement

2. What’s the Biggest IssueFederal Health ReformDidn’t Solve?

3. What’s the Biggest IssueFederal Health ReformDidn’t Solve? How to Reduce HealthcareCosts Without Rationing

4. Reducing Costs Without Rationing:Prevention HealthyConsumer ContinuedHealth PreventableCondition

5. Reducing Costs Without Rationing:Avoiding Hospitalizations HealthyConsumer ContinuedHealth PreventableCondition NoHospitalization Acute Care Episode

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

7. Go Where the Money Is: Maternity Care & Chronic Disease Medical Expenditure Panel Survey, 2006

8. Maternity Care Costs Can Be Reduced By Using Birth Centers... 75% Lower Cost Source: Carol Sakala and Maureen Corry, Evidence-Based Maternity Care: What It Is and What It Can Achieve,Milbank Memorial Fund2008

9. ...And By Avoiding Unnecessary Cesareans 50% Lower Cost 75% Lower Cost Source: Carol Sakala and Maureen Corry, Evidence-Based Maternity Care: What It Is and What It Can Achieve,Milbank Memorial Fund2008

10. Nevada is Above Average in the Rate of Cesarean Births...

11. ...and Has Had the 5th Highest Growth in Cesareans in the U.S.

12. It Takes Some Leadership and a Little Training • With training in Perfecting Patient CareSM from the Pittsburgh Regional Health Initiative, a team from Magee Womens Hospital in Pittsburgh: • Reduced by 64% the rate of elective inductions of birth prior to full gestation (which reduces neonatal intensive care (NICU) usage and complications for both mother and child) • Reduced by 60% the use of Cesarean sections for elective inductions of birth in first-time mothers

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

14. “Episode Payments” to Reward Value Within Episodes HealthyConsumer ContinuedHealth PreventableCondition 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

15. The Weakness of Episode Payment HealthyConsumer ContinuedHealth PreventableCondition 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

16. Comprehensive Care PaymentsTo Avoid Episodes HealthyConsumer ContinuedHealth PreventableCondition 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

17. 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

18. Who Should Be AccountableFor Achieving Higher Value Care? • Hospitals? • Integrated Delivery Systems? • Multi-Specialty Group Practices?

19. Keeping People Well?Primary Care HealthyConsumer ContinuedHealth PreventableCondition NoHospitalization Efficient Successful Outcome Acute Care Episode High-CostSuccessfulOutcome Complications, Infections,Readmissions PRIMARYCARE

20. Avoiding Hospitalizations?Primary + Specialty Care HealthyConsumer ContinuedHealth PreventableCondition NoHospitalization Efficient Successful Outcome Acute Care Episode High-CostSuccessfulOutcome Complications, Infections,Readmissions PRIMARYCARE PRIMARY +SPECIALTY

21. Better Acute Care?Hospitals and Specialists HealthyConsumer ContinuedHealth PreventableCondition NoHospitalization Efficient Successful Outcome Acute Care Episode High-CostSuccessfulOutcome Complications, Infections,Readmissions PRIMARYCARE PRIMARY +SPECIALTY HOSPITALS& SPECIALISTS

22. Implications • Hospitals and physicians will need to work together to improve quality and lower costs for inpatient care to ensure they are the acute care provider of choice in the community • Physicians, particularly primary care physicians, will need to improve skills in preventing hospitalizations and managing patient utilization to control total patient care costs • Payment systems will need to provide the support that physicians and hospitals need to deliver higher-quality, lower-cost care

23. Hospitals & MDs Paid SeparatelyFor Hospital Care... Costs and PaymentToday MD Fees PhysicianPayment HospitalPayment DRG orPer Diem

24. ...MDs and Hospitals Expected to Cover Their “Own” Costs Costs and PaymentToday PhysicianPayment Physician“Cost” HospitalPayment Drug/DeviceCosts Hospital Staff/FacilityCosts

25. So Any Savings in Hospital Costs Go to Hospitals, Not Physicians Initiative to ReduceDevice Costs &Improve Efficiency Costs and PaymentToday PhysicianPayment Physician“Cost” Physician“Cost” No Rewardfor Physician HospitalPayment Drug/DeviceCosts Hospital MarginImproves Drug/DeviceCosts Hospital Staff/FacilityCosts HospitalStaff/FacilityCosts

26. Bundled Payment Covers All Costs in a Single Payment... BundledEpisodePayment BundledHospital+PhysicianPayment Physician“Cost” Drug/DeviceCosts Hospital Staff/FacilityCosts

27. ...So if MDs & Hospitals Cooperate to Generate Savings... BundledEpisodePayment Initiative to ReduceDevice Costs &Improve Efficiency BundledHospital+PhysicianPayment Physician“Cost” Physician“Cost” Drug/DeviceCosts Drug/DeviceCosts Hospital Staff/FacilityCosts HospitalStaff/FacilityCosts

28. ...MDs, Hospitals, and PayersCan All Benefit BundledEpisodePayment Initiative to ReduceDevice Costs &Improve Efficiency Reallocation of Savings Lower Price BundledHospital+PhysicianPayment Physician“Cost” Physician“Cost” Payer Savings Physician“Cost” HigherPhysicianPayment Drug/DeviceCosts MD Bonus Capital toReinvest Hosp. Margin Drug/DeviceCosts Drug/DeviceCosts Hospital Staff/FacilityCosts HospitalStaff/FacilityCosts HospitalStaff/FacilityCosts Episode payment would give hospitals & MDs incentives tocollaborate to reduce costs

29. A Mechanism to Allocate the Payments is Needed BundledEpisodePayment Initiative to ReduceDevice Costs &Improve Efficiency Reallocation of Savings BundledHospital+PhysicianPayment Physician“Cost” Physician“Cost” Payer Savings PHO orOtherHospital/MDCollaborative Physician“Cost” Drug/DeviceCosts MD Bonus Hosp. Margin Drug/DeviceCosts Drug/DeviceCosts • Plan initiatives • Set targets • Monitor progress • Allocate payments Hospital Staff/FacilityCosts HospitalStaff/FacilityCosts HospitalStaff/FacilityCosts

30. Today: Separate Payments for Hospitals & Physicians Treatment for ConditionsPresent on Admission Hospital Services Drugs & Devices DRG Non-MD Staff Facilities/Equipment Fee Physician Services Fee Physician Services

31. “Bundled Payment”: Aligning Hospital and MD Incentives Treatment for ConditionsPresent on Admission Hospital Services Drugs & Devices Non-MD Staff Facilities/Equipment Physician Services Physician Services INPATIENT BUNDLE

32. Today: Higher Payment for Hospital-Acquired Conditions Treatment for ConditionsPresent on Admission Treatment for Hospital-AcquiredConditions Hospital Services Drugs & Devices Non-MD Staff Facilities/Equipment Physician Services Physician Services INPATIENT BUNDLE

33. “Inpatient Warranty:” No AdditionalPayment for Adverse Events Treatment for ConditionsPresent on Admission Treatment for Hospital-AcquiredConditions Hospital Services Drugs & Devices Non-MD Staff Facilities/Equipment Physician Services Physician Services INPATIENT BUNDLE INPATIENT WARRANTY

34. Today: Separate Payments for Inpatient and Post-Acute Care Post-HospitalCare Treatment for ConditionsPresent on Admission Treatment for Hospital-AcquiredConditions Rehab HomeHealth Long-TermCare MDServices INPATIENT BUNDLE INPATIENT WARRANTY

35. “Inpatient + Post-Acute Bundle”Pays for Both Jointly Post-HospitalCare Treatment for ConditionsPresent on Admission Treatment for Hospital-AcquiredConditions Rehab HomeHealth Long-TermCare MDServices INPATIENT BUNDLE INPATIENT WARRANTY INPATIENT+POST-ACUTE BUNDLE

36. Today: Extra Payment for Preventable Readmissions Post-HospitalCare HospitalReadmission Treatment for ConditionsPresent on Admission Treatment for Hospital-AcquiredConditions No Readmit; Planned or UnpreventableReadmission ReadmissionPreventableBy Post-Acute Care ReadmissionPreventableDuring InitialAdmission INPATIENT BUNDLE INPATIENT WARRANTY INPATIENT+POST-ACUTE BUNDLE

37. Full Episode Payment With A Limited Warranty Post-HospitalCare HospitalReadmission Treatment for ConditionsPresent on Admission Treatment for Hospital-AcquiredConditions UnpreventableReadmission ReadmissionPreventableBy Post-Acute Care ReadmissionPreventableDuring InitialAdmission INPATIENT BUNDLE INPATIENT WARRANTY INPATIENT+POST-ACUTE BUNDLE FULL EPISODE WITH WARRANTY

38. Different Episode/Bundling Concepts for Different Problems

39. It’s Not A New Concept; Results Documented Over 20 Years Ago • 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: • Health insurer paid 40% less than otherwise • Surgeon received over 80% more in payment than otherwise • Hospital received 13% more than otherwise, despite fewer rehospitalizations • Method: • Reducing unnecessary auxiliary services such as radiography and physical therapy • Reducing the length of stay in the hospital • Reducing complications and readmissions.

40. 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

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

42. Geisinger Perinatal ProvenCare:26% Reduction in Cesareans Implementation of electronic process

43. A Single Case Rate for Allor Different Rates by Severity? • Severity adjustment is essential to episode payment • FFS implicitly adjusts for patient severity/risk/complexity by paying more for patients who have more complex problems • FFS doesn’t distinguish which patients have higher needs from those the provider overtreats • Episode payment needs to make the distinction • Are there severity adjustment systems? • DRGs, MS-DRGs, APR-DRGs for hospital episodes, HHRGs for home care, CMS-HCC for Medicare Advantage, etc. • Clinical category systems: • e.g., 3M® Potentially Preventable Readmissions, Clinical Risk Groups • Regression-based category systems: • e.g, CMS Readmission measures being used for Hospital Compare • e.g., PROMETHEUSTM system for Potentially Avoidable Complications

44. Better Payment for EpisodesDoesn’t Prevent Episodes Episode Payment Readmission Patient w/ Chronic Disease(s) Hospitalization Episode No Hospitalization

45. 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 (2003)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 (1999)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 (2005)M.A. Gadoury, K. Schwartzman, et al, “Self-Management Reduces Both Short- and Long-Term Hospitalisation in COPD,” European Respiratory Journal 26(5), 2005

46. 20-40% Reduction in Surgery Through Shared Decision-Making

47. PCPs Can’t Get Paid for Many Tools To Avoid Hospitalization Episode Payment Readmission Patient w/ Chronic Disease(s) Hospitalization Episode PrimaryCare MD No Hospitalization MD Office Visits MD Phone Calls Nurse Care Mgt Remote Monitoring Specialist Consults

48. How It Works Today CURRENT PAYMENT SYSTEMS Health Insurance Plan $ $ $ Office Visits SpecialtyConsults HospitalStay PhysicianPractice Avoidable Avoidable Phone Calls Lab Work/Imaging Payment forpreventableandunnecessaryutilizationof expensivecare 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 SpecialtyConsults 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 SpecialtyConsults HospitalStay PhysicianPractice Avoidable Avoidable MonthlyCare MgtPayment Lab Work/Imaging Phone Calls Avoidable RN Care Mgr $ Higher payment for primary care