Value Based Purchasing

1. Value Based Purchasing Division of Quality, Evaluation, and Health Outcomes CMS

2. Price and Quality Transparency. “ The President seeks the commitment of medical providers, insurance companies, and business leaders to help consumers obtain better information on health care prices and quality. The Administration will leverage Federal resources and work with the private sector to develop meaningful measures for health care quality and to emphasize the importance of all-inclusive price information.” Budget of the United States, FY07

3. Driving Forces • Secretary Leavitt’s 500 Day Plan/250 Day Update Vision • Wellness and prevention are sought as rigorously as treatment. • Information about the quality and price of health care is widely available and Americans have a sense of ownership about choices for health care and their health. • Inequalities in health care are eliminated. • Medicare and Medicaid are modernized to provide high-quality health care in a financially sustainable way. • Medicare and Medicaid beneficiaries are cost-conscious consumers. • Medicare and Medicaid are leaders in the use of advanced technologies and performance measures.

4. CMS Quality Council Forums

5. CMS Quality Improvement Roadmap Released in August 2005 • Vision: The right care for every person every time • Aims: Make care safe, effective, efficient, patient-centered, timely; and equitable

6. Medicaid/SCHIP Quality Strategy • Builds upon the CMS Quality Roadmap and structured to recognize the unique relationship between the Federal Government and States. • The pillars of the Medicaid/SCHIP framework are: • Evidenced-Based Care and Quality Measurement • Supporting Performance based Payment • Health Information Technology • Partnerships • Information Dissemination and Technical Assistance

7. Evidenced Based Care and Quality Measurement Encourage development and utilization of validated and tested measures for assessing the performance of health care providers and plans

11. Linking Quality and Cost: Pay for Performance and Efficiency • Efficiency Is One of the Institute of Medicine's Key Dimensions of Quality • Safety • Effectiveness • Patient-Centeredness • Timeliness • Efficiency: absence of waste, overuse, misuse, and errors • Equity Institute of Medicine: Crossing the Quality Chasm: A New Health System for the 21st Century, March, 2001.

12. What Is Efficiency? • Efficiency: When a given level of “output” is achieved at the lowest total cost • For health policy purposes, efficiency is attained when a given level of “quality of care” is achieved at the lowest total cost

13. Overarching Principles: Medicaid P4P programs should be: • Data driven • Beneficiary-centered • Transparent • Developed through partnerships • Administratively flexible

14. IOM: Rewarding Provider Performance • Payment incentives to reward quality “can serve as a powerful stimulus to drive institutional and provider behavior toward better quality” • Incentives alone would be insufficient without certain conditions such as public reporting, beneficiary incentives, and education of boards of directors.”

15. Quality Components: P4P programs should be built on: • Evidence-based guidelines • Consistent measures of access, quality, costs, and satisfaction • Coordinated care programs • Health information technology

16. Incentive Structure: P4P incentives consideration: • Equitable and fair to program participants including the beneficiary • Timely • Sufficient to motivate improvement • Flexible enough to provide payment for innovative care processes • Structured to avoid unintended consequences

17. Considerations for States • What are the State’s goals of the pay for performance strategy? • What is the overall strategy to achieve the goal(s) listed? • What is the delivery system and population for which the pay for performance program will be implemented (e.g. fee-for-service, managed care, disabled and elderly, children, etc.)? • What performance measure sets, data sources and abstraction methodologies will serve as the basis of the pay for performance strategy? • Who will receive the incentive payments – providers or beneficiaries? If provider, specify the provider type, i.e. physicians, managed care organization?

18. Considerations for States • Can efforts be aligning with other standardized quality reporting efforts reduces the burden on providers in providing disparate information and allows States to join established programs and processes. Identify current purchaser coalitions currently in the State, such as Bridges to Excellence that the State may leverage in development of its plan. Describe the nature of the coalition – statewide, regional, particular provider groups or other? • Does the State anticipate cost increases in the first year of project implementation? If so, to what will the costs be attributed? If no savings are anticipated in the first year, how will incentives be financed?

19. Consideration for States • States should consider establishing the link between quality and resource usage. Efficiency measures are useful to measure cost savings in the implementation of pay for performance programs. If the goal of the pay for performance strategy is to achieve cost savings, indicate the efficiency measures the State has investigated or proposes to use. Identify how savings will be quantified in subsequent years. • Will the State publicly report the quality results and payment incentives that were made during the year? If so, what vehicle will be used for reporting? • Identify how unintended consequences of pay for performance will be monitored and addressed.

20. Also needed to make pay for performance more effective is coordination among payers in using measures, Rosenthal said. "If only a few of the many payers that a provider contracts with are paying for performance, or if each payer focuses on a different measure set, the effects of pay for performance may be diluted.“ testimony before the Employer-Employee Relations Subcommittee of the House Committee on Education and the Workforce.

21. Medicaid/SCHIP State Health Official Letter • Provides a brief description of pay-for-performance as a strategy to stimulate improvements in the quality of care and more appropriately align resources. • Indicates the authority under which States may implement pay-for-performance strategies. • Answers questions regarding financial considerations, including the Federal Financial Participation, budget neutrality and cost effectiveness issues when implementing pay-for-performance strategies. • Provides a chart describing strategies several States have implemented to provide performance incentives to providers and managed care organizations including the measures and incentive methodologies used. • Informs States of potential opportunities to partner with CMS in a nursing home pay-for-performance demonstration. • Informs of the availability of technical assistance to States interested in pursuing pay-for-performance purchasing mechanisms.

22. Obtaining Approval for P4P • Each State exercises great flexibility in the operation of their Medicaid program therefore each program is different. • While there are general regulatory consideration, each State will have to work with CMS to determine if their proposed payment plans are in compliance with the law. • It is much better to do this at the beginning of the program than to set up expectations in the State that may have to be modified later.

23. Considerations in P4P • Most managed care incentives are accomplished through the contractual process with the MCO • In managed care, contracts with incentive arrangements may not provide for payments in excess of 105% of the approved capitation payments attributable to the enrollees or services covered by the incentive arrangement, since such total payments would not be considered actuarially sound.

24. Considerations in P4P • For states that pay a PCCM on a fee-for-service basis, incentive payments are permitted as an enhancement to the PCCM’s case management fee, if certain conditions are met. • Incentive payments to the PCCM will not exceed 5% of the total FFS payments for those services provided or authorized by the PCCM for the period covered. • Incentives will be based upon specific activities and targets. • Incentives will be based upon a fixed period of time. • Incentives will not be renewed automatically. • Incentives will be made available to both public and private PCCMs. • Incentives will not be conditioned on intergovernmental transfer agreements.

25. Considerations in P4P • Value based purchasing proposals in fee-for-service must be requested in writing via the State Plan (pre-print available for managed care and PCCMs not requested under section 1115 or section 1915(b) waiver authority). • Federal officials will review the proposed payment structures in the State Plan to assure that the proposed payments are consistent with economy and efficiency and the upper payment limits established for those services. • Fee-for-Service payment proposals should be linked to a service

26. 3 items must be considered: Any alternative payment methodology under PPS must be agreed to by the State and each individual FQHC the methodology must result in a payment that is at least equal to what is entitled under PPS. the methodology must be described in the approved State plan. Considerations of P4P for Federally Qualified Health Centers

27. Incentives Currently Used in the Industry • Public reporting of quality information • Performance based rate adjustments • Performance based bonuses • Competitive payment schedule • Tiered payment levels • Performance based fee schedules • Performance based payment withholds • Quality Grants • Autoassignments

28. The Right Care for Every Person Every Time