Putting It All Together and Driving Quality: GM’s Value-Based Purchasing Strategy

1. Putting It All Together and Driving Quality:GM’s Value-Based Purchasing Strategy Tricia Marine Barrett Managed Care Consultant GM Health Care Initiatives MichPHA Fall Kick-off Ann Arbor, Michigan September 21, 2006

2. The Big Picture • General Motors is the largest private purchaser of health care in the United States • 1.1 million employees, retirees & dependents • 30 percent in fully insured HMOs • Older population with more than three retirees/surviving spouses for each active worker • Total 2005 health care expenditure - $5.3 billion • ~$1.2 billion in HMOs • HMO Portfolio • Over 120 Plans administered by ~35 carriers nationwide

3. GM U.S. Health Care Total Cash Expenditures

4. U.S. Health Care Trends In Double Digits 13.5% 3.3% Growing Utilization and Increasing Prices Driving Health Care Inflation To Unsustainable Levels Per Watson Wyatt Worldwide

5. Responsible Healthcare Purchasing • “The current cost crisis is inextricably linked to quality and the perverse payment structures that discourage quality while driving up costs.” • (IOM Crossing the Quality Chasm, chapter 8).

6. Health Plan Role Consumer Purchaser Expect to Meet Needs Hold Accountable Health Plan • Provide Quality Leadership • Hold Delivery System Accountable for Value • Provide Delivery System With • - Information - Coordination • - Support - Communication • Selection and Contracting Delivery System Hospital Primary Care Physician Pharmacy Behavioral Health Home Health Care Specialty Physician Other Therapeutic Services Diagnostic Services Centers of Excellence

7. Value Based Purchasing QUALITY _______________________ = VALUE COST

8. General Motors Value Purchasing Strategy • GM’s 3-Pronged Strategy • Health Plan Accountability • Annual quality assessment through eValue8 RFI, NCQA accreditation and HEDIS/CAHPS scores (CARS Project) • Motivate migration of enrollees to higher value health plans • Compare quality and cost of HMOs • 4 performance bands • Salaried monthly contribution is tied to HMO performance • Requires significant communication with employees • Aggressive Supplier Development • Best practice sharing among Plans eValue8 is an integral part of each prong

9. Accountability: Coordinated Autos Reporting System (CARS) • Partnership with Ford, GM, Delphi and the State of Michigan (DaimlerChrysler participated until 2006) • Purchasers contract with NCQA to conduct the analysis • NCQA uses CAHPS and HEDIS performance to assign 1-5 stars in four categories: • Getting Better/Living with Illness • Staying Healthy • Access and Service • Doctor Communication and Service • Methodology consistent with NCQA/US News & World Report health plan report card

10. Accountability: National Business Coalition on Health eValue8 RFI • Common RFI sets expectations and assesses performance of HMOs and PPOs • Plan Profile • Health Information Technology • Consumer Engagement • Provider Measurement, Incentives and Rewards • Primary Prevention and Health Promotion • Chronic Disease Management • Behavioral Health • Pharmaceutical Management

11. Key Objectives of Common RFI • Create and Implement Standardized Performance Expectations • Reduce Redundancy by Consolidating Purchaser Requests • Promote Health Plan Accountability & Transparency • Recognition of the Importance of Health on Productivity and the Bottom Line • Foster Market Reform • Sustained Movement to Higher Value = Fn(Quality/Price)

12. Why GM uses the eValue8 RFI • The eValue8 RFI tool enables GM to: • Measure health plan quality and monitor improvements • Differentiate among health plans • Support rate negotiations • Inform and target supplier development activities

13. Motivate Migration: 2006 Salaried Flex Pricing Health Plan Scoring Table HMO A HMO B HMO D HMO C Raw Score Flex Score (25) 211 24 221 25 176 16 129 5 eValue8 RFI Results Raw Score Flex Score (20) 7 7 14 14 13 13 13 13 HEDIS / CAHPS (CARS evaluation) Commendable 2 Excellent 5 Excellent 5 Accredited 1 NCQA Accreditation Raw Score Flex Score (5) Total QualityScore (50) 14 44 42 30 • National Rate Rankings • Relationships of rates to Local Indemnity • Total CostScore (50) 24 23 47 20 13 33 19 12 31 22 14 36 Total Quality + Cost (100) 66 77 61 73 Rating Benchmark Good Avg Strong $180 $200 $150 $100 Sample Employee Contribution

14. Changes to Quality Score Methodology for 2007 Enrollment • Increased score for eValue8 from 25 to 30 points • Relative performance evaluation completed for each eValue8 section rather than by total score • Removed points dedicated to NCQA accreditation • Accreditation is required • 90% of GM HMOs have Excellent accreditation • Subtract points for HMOs with less than Excellent rating • Bring these points back when Quality Plus elements have been fully integrated and new rating system developed • Subtract 4 points from the CARS ‘stars’ (minimum score) • Add 4 points for ‘Partnership” rating

15. 2005 Top HMOs Cost/Quality Comparison Improve Quality H & S Members = 0 Well Performing H & S Members = 101,318 Low Cost High Cost Improve Quality & Cost H & S Members = 24,689 Improve Cost H & S Members = 86,752 High Quality Low Quality B-Band ∎ C-Band + D-Band ▬ E- Band ∗ F-Band X G-Band ▲ Based on Salaried Banding Study – 2005

16. Motivate Migration: Salaried Health Care Monthly Contributions Monthly Employee Contribution (Family) EMP PPO Average HMO HSA PPO Good HMO Strong HMO Benchmark HMO 2006 $ 0 $100 $125 $150 $180 $200 $ 0 $45 $145 -$190 2005 $70-$85 $85 $110

17. Motivate Migration Employees/ Retirees can compare Plan options on aggregate quality performance

18. Motivate Migration Results of annual CARS analysis: Values represent the number of “Stars” earned

19. Employees/Retirees can also use the Asparity Plan Finder tool to compare performance on individual measures of interest to them. Motivate Migration

20. Motivate Migration

21. Migration Results Salaried HMO Migration % of HMO Members By Band Number Of Plans By Band - 2006

22. Aggressive Supplier Development Using eValue8:Driving HMO Collaboration for Quality Improvement • Quarterly Meetings with High Volume HMOs • Monitor Work Plans in areas of poor performance • Monthly Conference Calls (Accelerating Improvement in Managed Care)

23. Summary • Accountability for Quality motivates improvement • Premium adjustment and performance transparency effectively migrates members to higher performing health plans • GM believes the way to reduce health care cost is to improve quality…and provide people with the information to make smart health care decisions

24. Parting Thoughts ... “We’ve concluded that the quality of care cannot improve until physicians and hospitals [and health plans] nationwide are held accountable to common measures of performance.” McGlynn and Brook, Rand Institute, “Full Disclosure: Time for the Naked Truth About Healthcare” RAND Review, Summer 2001