Medicare Chronic Care Improvement Program CCIP: Update Implications

1. Medicare Chronic Care Improvement Program (CCIP): Update & Implications March 2005 DM Strategy>>>Medical Mgmt Strat>>>Business Strat>>>ShHolder ValueDM Strategy>>>Medical Mgmt Strat>>>Business Strat>>>ShHolder Value

2. 2 Overview Capsulizing DM Today The Event of the Decade for DM: Medicare�s Chronic Care Improvement Program (CCIP) DM Tomorrow: Medicare�s CCIP Pilot Project Awards -- Observations/Implications

3. 3 I. Capsulizing Disease Management (DM) Today

4. Over The Past Few Years A Number of Publications Have Rigorously Examined DM....

5. 5 DM penetration is increasing Cost as a major driver Data on ROI: imperfect, controversial Physician reactions: �skepticism to limited support� Stand alone DM IT; integration challenges DM improves quality of care Patient satisfaction is high Focus on 4-6 diseases/conditions DM is a qualified success Common Themes in Describing DM Today

6. 6 The CMS CCIP RFP Wished for the Pot of Gold at the End of the Rainbow Specialization Integration Local Delivery System Integration Information and Communication Technology (ICT) Integration

7. 7 II. The Event of the Decade for DM � Medicare�s Chronic Care Improvement Program (CCIP)

8. 8 Medicare�s Chronic Care Improvement Program is the Event of the Decade for DM December 8, 2003 � President Bush signs the Medicare Modernization Act, including Section 721, the Chronic Care Improvement Act (see Appendix C for details) April 20, 2004 � CMS releases the CCIP Phase 1 request for proposal (see Appendix D for details) August 8, 2004 � final date to submit proposals to CMS December 8, 2004 � CMS announces CCIP Phase 1 awards

9. Highlights From the CMS Website

10. 10 And the CCIP Winners Are.... On December 8, 2004 the Centers for Medicare and Medicaid Services (CMS) announced nine awardees for CCIP pilot projects: Humana, Inc. - Central Florida XLHealth Corporation- Tennessee Aetna Health Management, LLC - Chicago, Illinois Lifemasters Supported SelfCare, Inc. - Oklahoma McKesson Health Solutions, LLC - Mississippi CIGNA HealthCare - Georgia Health Dialog Services Corporation - Pennsylvania American Healthways, Inc. - Washington, D.C. and Maryland Visiting Nurse Service of New York Home Care and United HealthCare Services, Inc. - Evercare - NYC: Queens & Brooklyn

11. Both Integration AND Specialization Are Key Dimensions of Care Management Value Propositions Integration Patients - �do my health care providers talk to one another, do they share appropriate information about my clinical condition, do they NOT share information inappropriately�� Provider consortia - �We coordinate care across the continuum and provide one-stop-shopping in a defined geographic region, thereby lowering costs and improving quality.� Specialization Patients - �do my providers use world-class, state-of-the-art clinical guidelines, equipment, facilities, people�� Disease Management Service Companies (DMSCs) - �As a national company, we treat more people with (a specific disease, e.g., diabetes, asthma, CHF) than anybody else, so we do it better and cheaper.� �In theory there is no difference between theory and practice. In practice there is.� �Yogi Berra �In theory there is no difference between theory and practice. In practice there is.� �Yogi Berra

12. 12 To Date DM Clinical/Business Models Have Emphasized Specialization Specialized companies providing services Specialized contracting/financing model -- guaranteed savings Specialized focus on individual diseases (migrating toward multiple comorbid conditions) Specialized technologies: predictive modeling, call centers, medical management workflow software, etc. Specialized delivery models are developing for unique customers Managed Care Organizations HMOs PPOs other Medicaid (in various flavors) Medicare Employers

13. 13 DM Models Have Emphasized Specialization Carve outs problematic Delivery systems problematicCarve outs problematic Delivery systems problematic

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17. 17 III. DM Tomorrow: Medicare�s CCIP Pilot Project Awards --Observations/Implications While Medicare�s RFP Said �We want local integration�, All CCIP Awards Went to Specialized Companies Wall Street is Increasingly Impacting DM Scale, Scale, Scale One-Stop-Shopping (OSS) Beats Best-of-Breed (BOB) Distinctions Between Care and Care Coordination Blur Even Further

18. 18 While Medicare�s RFP Said �We want local integration�, All CCIP Awards Went to Specialized Companies All awardees are large, publicly traded DM service companies or health plans (with 1 possible exception, discussed later) No awards were made to locally driven consortia, e.g., hospitals/delivery systems, physician groups There are major gains yet to be made in integrating DM models into local care Physician relations, financial incentives Information technology: data sharing, EHR Can specialized DM companies achieve better local integration??

19. 19 2) Wall Street is Increasingly Impacting DM �The score at the bottom of the third inning is Wall Street 8.5, Main Street 0.5�

20. 20 The score at the bottom of the third inning is Wall Street 8.5, Main Street 0.5 �bottom of the third inning� � it�s still very early in the game; the CCIP awards are not the end of the game � they are a very important milestone that hopefully will result in a major restructuring in the way that chronic care in America is delivered and financed. �Wall Street 8.5� � of the 9 CCIP awards, all included major health plans or disease companies that are publicly traded and/or venture capital backed.

21. 21 �Main Street 0.5� � it is remarkable (and disappointing) that none of the CCIP awards went to locally driven and backed consortia, i.e., hospitals/delivery systems, physician groups, and the like. The Main Street team does score 0.5 for the Visiting Nurse Service of NY (VNSNY)/Evercare award. VNSNY is a home health agency based in New York City, and thus is distinguished from the other health plan/DM company awardees. Nonetheless, it is the largest home health agency in the US, completing 20,000 patient visits every day!

22. 22 Several DM companies are actively exploring options to become publicly traded on a stock exchange. Many other DM related companies are putting themselves up for an auction. They have hired investment bankers and are exploring options for sale, acquisition, merger. Several ventures are actively attempting to consolidate a number of DM companies.

23. 23 Expect to See More Deals Like This One....

24. 24 3) Scale, Scale, Scale Medicare�s awards suggest that company scale (size), IT systems, and experience in DM processes weighed heavily in Medicare�s determination. The most likely scenario for the future is that Medicare will continue to contract with a few large, specialized companies for disease management services; it will likely NOT contract with hundreds of regionally based hospital and/or doctor organizations.

25. 25 4) One-Stop-Shopping (OSS) Beats Best-of-Breed (BOB) In the past, there has been an ongoing marketplace battle between two competing clinical/business models: One-stop-shopping (OSS): vendors covering multiple disease states, e.g., American Healthways, Lifemasters Best-of-breed (BOB): vendors cover individual disease states, e.g., Alere for CHF, AirLogix for respiratory. Prediction: the Medicare CCIP awards will strike a final blow to BOB. BOB companies are a dying breed � expect to see consolidations and mergers.

26. 26 5) Distinctions Between Care and Care Coordination Blur Even Further DM companies and health plans traditionally have seen themselves in the business of coordinating care, NOT in the business of providing clinical care. Licensing issues with providing �care�, e.g., avoiding the practice of medicine which requires a MD license Liability issues associated with providing care and/or being obligated to provide care Desire not to interfere with local providers, especially physicians While conceptually defensible, the practical distinctions between clinical care and care coordination are muddy. Due to the challenges associated with the unique Medicare population, the distinctions between providing clinical care and providing care coordination will become even more blurred. The CCIP projects will be caring for some very sick patients, ones� whose conditions are subject to day-to-day and hour-to-hour changes requiring clinical intervention and action

27. 27 One example: sub-acute and long-term care Matrix www.matrixhealth.net is a physician practice company developed to provide care to patients in the long-term care setting. Matrix� CEO Mike Quilty estimates that 10% of CCIP patients will be residents of sub-acute or long-term care facilities. McKesson�s CCIP award embeds Matrix� services to provide care to patients in sub-acute and long-term care facilities. Are Matrix� services �care� or �care coordination�? It�s becoming increasingly hard to defend the traditional DM business/clinical model that works hard to draw this distinction.

28. 28 Predictions: expect to see two schools of thought about the distinction between care and care coordination Defensive �As a DM company, we are not in the business of providing clinical care. For example, gathering real-time patient data through remote patient monitoring (RPM) technologies apprises us of situations which might require immediate clinical intervention. We don�t have a license to practice medicine and we want to avoid liability. Therefore, we should avoid using RPM technologies.� Offensive. �There is no way that we can worry about the semantic differences between care and care coordination. To provide the best service to patients, we must gather real time data about patients using RPM technology. We must act on that data ASAP. We must set up systems to get patients care when they need it, e.g., getting standing orders from physicians when clinical parameters exceed pre-established norms.� A further prediction: The �offensive� school of thought will become predominant.

29. 29 APPENDICES

30. 30 APPENDIX ABetter Health Technologies, LLC

31. 31 Better Health Technologies, LLC Creating value for patients and shareholders Strategy, business models, partnerships Disease/care management and e-health Consulting/Business Development E-Care Management News Complimentary e-newsletter 3,000+ subscribers in 27 countries worldwide Subscribe at www.bhtinfo.com/pastissues.htm BCG Epiphany Both a business opportunity and right thing to to 3 National HC Mgmt Consulting Co. 2 FP Hospital Mgmt 10 Regional DS Pres. Medical Call Ctr Venture 3 BHT BCG Epiphany Both a business opportunity and right thing to to 3 National HC Mgmt Consulting Co. 2 FP Hospital Mgmt 10 Regional DS Pres. Medical Call Ctr Venture 3 BHT

32. 32 BHT Clients Pre-IPO Companies Cardiobeat EZWeb Sensitron Life Navigator Medical Peace Stress Less DiabetesManager.com CogniMed Caresoft Benchmark Oncology SOS Wireless Click4Care eCare Technologies The Healan Group Fitsense Established organizations Samsung Electronics, South Korea -- Global Research Group -- Samsung Advanced Institute of Technology Medtronic -- Neurological Disease Management -- Cardiac Rhythm Patient Management Siemens Medical Solutions Joslin Diabetes Center National Rural Electric Cooperative Association Disease Management Association of America Blue Cross Blue Shield of Massachusetts PCS Health Systems Varian Medical Systems VRI Washoe Health System S2 Systems CorpHealth Physician IPA Centocor

33. 33 APPENDIX BDescribing Medicare�s Challenges With Chronic Conditions

34. 34 Acute Care is Fundamentally Different than Chronic Care

35. Patients Have Increasing Life Spans

36. 36 The Prevalence of Chronic Conditions Increases With Age

37. 37 The Number of People with Chronic Conditions is Increasing

38. 38 Medicare Beneficiaries With Chronic Conditions Account for Disproportionate Expenditures

39. The CBO Sums Up Medicare�s Problem:A Sea of Red Ink

40. 40 APPENDIX C Overview and Background -- The Chronic Care Improvement Act

41. 41 Sections 721-23 of the Medicare Modernization Act (MMA) are known as the Chronic Care Improvement Act. With this program, Medicare will pilot coverage of chronic care services to fee-for-service beneficiaries. The Act is aimed at improving clinical quality, improving beneficiary and provider satisfaction, and reducing Medicare spending.

42. 42 The legislation calls for a two-phased approach Phase I requires a three-year pilot project. The Centers for Medicaid and Medicare Services (CMS) is required to enter into contracts with chronic care improvement organizations (CCIOs) using randomized controlled groups. Phase II. If results of Phase I indicate improved clinical quality of care, improved beneficiary satisfaction and achieved spending targets, CMS is required to expand the program nationwide. Phase II reflects the full implementation of the program for all beneficiaries.

43. The CCIP-I RFP informs interested parties of an opportunity to apply to implement and operate a chronic care improvement program as part of Phase I under Section 721 of the MMA. The RFP is 75 pages long! The RFP is available on the Chronic Care Improvement Program page of the Medicare website. The RFP incorporates CMS� thinking-to-date about broader chronic care improvement opportunities, as well as laying out the path for prospective applicants to submit applications. THIS IS A VERY IMPORTANT DOCUMENT!

44. Timeline Summary December 8, 2003 -- MMA legislation enacted April 20, 2004 -- CMS releases the CCIP-I (Chronic Care Improvement, Phase 1) RFP August 6, 2004 -- proposals due back to CMS Mid-Fall 2004 -- awardee selection Late-Fall 2004 -- negotiations with presumptive awardees December 8, 2004 -- latest date on which CMS can announce the first contract December 2005 -- Interim progress report due from Medicare to Congress December 2006 -- earliest date on which Medicare could announce that the projects are successful and begin Phase II -- national implementation of contracting December 2007 -- end date for 3 year demonstration projects (assuming all contracts are announced in December 2004) May 2008 -- Final project analysis report due from Medicare to Congress May 2008 -- Latest date at which Phase II can begin if Phase I projects prove successful

45. Don�t Be Confused by Other Medicare Chronic Care Improvement Projects and/or other MMA Demonstration Projects. For the past several years, Medicare has already been experimenting with various ways of financing and delivering chronic care improvement services to chronically ill patients. These programs are described on the Demonstration Projects and Evaluation Reports page on the Medicare website. The MMA also authorizes many other demonstration projects. These are summarized on the CMS Demonstrations Projects under the Medicare Modernization Act (MMA) page of the Medicare website.

46. Acronyms CMS: - Centers for Medicaid and Medicare Services CCIP-I: Phase I of the CMS Chronic Care Improvement project CCIP-II: Phase 2 of the CMS Chronic Care Improvement project CCIO: Chronic Care Improvement Organization -- organizations that are awardees of Chronic Care Improvement contracts from CMS DM: disease management MMA: Medicare Modernization Act RFP: request for proposal

47. 47 APPENDIX DA Summary of the CMS Chronic Care Improvement-I RFP

48. Chronic Care Improvement Program:Highlights From the CMS Website

49. 49 A Conceptual Model of the CCIP

50. 50 Purpose/Design of the RFP (pp. 15-39) Eligible Organizations: DM organizations, health insurers, integrated delivery systems, physician groups, a consortium of entities, and anybody else that CMS �deems appropriate� Identification of Intervention Groups CMS is focusing on patients with CHF, complex diabetes, COPD CMS will identify eligible beneficiaries through claims data Beneficiaries will be randomized into intervention and control groups

51. 51 Identification of Potential Geographic Areas. CMS is interested in applications that target areas with higher than average prevalence of CHF or complex diabetes, or COPD with low Medicare quality rankings that do not conflict with current chronic care improvement projects

52. 52 Outreach to Intervention Group Beneficiary participation will be �voluntary� Eligible beneficiaries in the intervention group will receive a letter and given an opportunity to opt-out of participation. Organizations awarded contracts will then be expected to confirm participation with those who do not decline to participate. Applicant�s proposals are expected to specify detailed outreach protocols; the outreach period will be 6 months. The control group will be passive -- they will not be offered participation, nor will they be aware of their status

53. 53 Program Characteristics Programs must develop a care management plan for each participant Guide the participant in managing their health Use decision support tools such as evidence based guidelines Develop a clinical information database CMS expects �transparency� of proprietary protocols and systems, but does not expect to transfer any intellectual property rights

54. 54 Billing and Payment Each awardee will be paid a Per Member Per Month Fee for each participant �The fee amounts to be paid to awardees may vary because we envision testing a range of program models that may have different cost structures. We will establish fee amounts by agreement with each awardee.�

55. 55 Performance Standards: Clinical Quality, Beneficiary Satisfaction and Savings Guarantees Applicants are expected to set forth projected improvements in clinical quality and savings Awardees will be penalized financially for not meeting agreed upon performance standards; applicants will be expected to propose performance guarantees for quality improvement and beneficiary satisfaction Performance will be measured on the entire intervention group (including those who chose not to be contacted, those who dropped out, and those unable to be reached) Awardees are required to guarantee 5% net financial savings to Medicare

56. 56 Organizations must assume financial risk for performance. In the event that 5% net savings are not achieved, the awardee will be required to refund the difference to the government, up to the total amount of fees paid to the awardee (i.e., awardees assume financial risk for fees, not insurance risk) Reconciliation Process An independent contractor will monitor outcomes Applicants will need to demonstrate financial solvency (presumably through a strong balance sheet and/or by obtaining reinsurance)

57. 57 Program Monitoring CMS will conduct ongoing program monitoring Awardees will be expected to provide ongoing program monitoring information Independent Formal Evaluation CMS will hire an independent contractor for formal evaluation of program results Experience of intervention groups will be compared to control groups

58. 58 Requirements for SubmissionAwardee Selection Process (pp. 39-41) Awardee Selection Process. There will be a 2 stage process. Stage 1: Prospective applicants will be given a de-identified set of Medicare claims data Applicants will analyze the data and submit an application and bid Applicants should base their proposals on 20,000 beneficiaries in the intervention group Stage 2: CMS� review panel will evaluate applications and will recommend applicants for the second stage of the process Applicants selected as finalists will be provided actual historical data for the applicable target population in the applicant�s proposed geographic area.

59. 59 Finalists will be allowed to propose adjustments in proposed payments or savings guarantees The CMS administrator will make final decisions

60. 60 Requirements for SubmissionApplication (pp. 41-67) Cover Letter Application Form Executive Summary Rationale for Proposed Geographic Area and Target Population Chronic Care Improvement Program Design A plan for outreach A plan to assess and stratify participants Frequency and type of interventions Appropriate services and educational materials for participants Adequate mechanisms for ensuring physician integration with the program Adequate mechanisms for ensuring coordination with State and local agencies Adequate mechanisms for supporting participants with more intensive needs Data to be collected, data sources, and data analyses

61. Organizational Structure and Capabilities Staff Facilities Equipment Strong working relationships with local providers Strong working relationships with community organizations Appropriate information and financial systems Clinical protocols to guide care delivery and management Ongoing performance monitoring Organizational background and references Accreditation Performance Results Past Performance: Clinical Quality, Beneficiary and Provider Satisfaction and Savings Performance Projections core set of clinical quality indicators projected savings for each year projections on operational metrics

62. 62 Payment Methodology & Budget Neutrality Implementation Plan Supplemental Materials (Appendices)

63. 63 Application Evaluation Process Criteria (pp. 67-72) Application Evaluation Criteria and Weights Rationale for Proposed Geographic Area and Target Population (5 points) Chronic Care Improvement Program (25 points) Organizational Capabilities and Structure (25 points) Performance Results: Past Performance and Performance Projections (25 points) Payment Methodology & Budget Neutrality (20 points)

64. 64 What will winning proposals look like? The Foundation: Demonstrate proficiency at the basics -- a rigorous understanding of DM contracting and program design elements Differentiators: Demonstrate creativity at the �discretionary� elements Physician integration Working with community organizations, local, state agencies Integrative information infrastructures Application of information and communication technologies

65. 65 END