Improving Orthopedic Value from the Buy Side – Perspectives From The Alliance

1. Improving Orthopedic Value from the Buy Side – Perspectives From The Alliance Minnesota Health Action GroupCommunity DialogueImproving Value for Hip and Knee Replacements March 28, 2014

2. About The Alliance® • Not-for-profit, employer-owned cooperative • Shareholders = customers • Founded in 1990 by 7 employers; now over 200 employers • 90,000 employees and family members • 23 counties in WI, IA and IL • $500,000,000 in health care/yr • Move health care forward by controlling costs, improving quality and engaging individuals in their health

3. Our Genesis • Mid 1980’s: State of WI pursues “managed competition” • Large multi-specialty medical groups and hospitals form their own HMO’s • Favorable unit prices made up by shifting costs to the rest of the market • 1990: The Alliance • Direct contracting with providers, data warehouse, cost and quality comparisons

5. Employer Perspectives on Orthopedic Care • Source of significant and rising costs • Increase in volume • Shift to younger patients • Questions about appropriate use (NEJM Sept 11, 2008) • Uncertain quality • Limited information to distinguish better and worse performance

6. Left to Choose Based on Cost • Mortality not a factor • All hospitals received “As Expected” rating on 6 types of preventable complications • Cost is remaining differentiator Source: QualityCounts Inpatient Hospital Report, Fall 2009

7. 33 miles in 49 minutes = $7,994 difference .25 miles + elevator turn = $2,725 difference 11 miles in 20 minutes = $4,781 difference • Janesville and Beloit Arthroscopic Knee Surgery for Torn Cartilage Examples From The Alliance Market • Fort Atkinson and Madison • Madison and Madison Source: QualityCounts Outpatient Procedures & Tests Report, 2010; Source for Distance and Time: www.mapquest.com

8. AAOS’ Modest Choosing Wisely List • Avoid performing routine post-operative deep vein thrombosis ultrasonography screening in patients who undergo elective hip or knee arthroplasty • Don’t use needle lavage to treat patients with symptomatic osteoarthritis of the knee for long-term relief. • Don’t use glucosamine and chondroitin to treat patients with symptomatic osteoarthritis of the knee. • Don’t use lateral wedge insoles to treat patients with symptomatic medial compartment osteoarthritis of the knee. • Don’t use post-operative splinting of the wrist after carpal tunnel release for long-term relief.

9. The QualityPath to Higher Value • Identify common, expensive elective procedures • Evaluate physicians + hospitals on important quality measures and characteristics • Involve clinicians in the process • Negotiate lower bundled payments • Use benefit plan designs to move market share to high value physicians + hospitals

10. Common, Expensive Elective Procedures • Heart Bypass Surgery • Elective Angiography and Angioplasty • Knee Replacement • Hip Replacement

11. Unit of Analysis • Physician/surgeon + Hospital Pairs • Physician-level information important to employers to create benefit plan-based incentives • Variation in performance between physicians • Role of steward/fiduciary of resources • Impact of ordering and billing practices • Specialists account for 8 – 15% of charges, but can control/influence much more

12. Hip and Knee Criteria • Registry Participation • Accelerate progress to include patient-reported outcomes • Full transparency with results at or above average for individual physicians + hospitals • 5-year revision rates • THA/TKA 30-day readmission rates • THA/TKA complication rates • Patient experience/CAHPS results • Additional measures via CMS “Compare” programs

13. Hip and Knee Criteria cont. • Standardized Clinical Processes in Routine Use • Consistently collected pre and post patient-reported outcome measures • Decision support for ordering high tech imaging (e.g. MRI) • Shared decision-making • Quality of process assessed • Pre-procedure joint school

14. Hip and Knee Criteria cont. • Disclosure of all industry payments to patients • Conversation about future care needs documented in an advanced directive, as appropriate

15. Quality First, Then Price • Bundled payments for episodes of care • Less than today’s reimbursement

16. Employer Commitment • Benefit plans to encourage patients to use QualityPath designated hospital and physicians • Reference pricing: 100% coverage for QualityPath providers • Lower co-pays and deductibles for QualityPath providers

17. Positive Incentives • Patients • Better odds of getting appropriate, high quality care • Lower cost • Easy to understand and use • Physicians and Hospitals • Reputation – public reporting, QualityPath designation • Financial – greater market share • Employers • Better odds of getting appropriate, high quality care • Lower cost

18. Process and Timeline • Provider engagement - ongoing • Quality criteria established – review and comment period: Jan 2014 • RFI released – Feb 13 • Responses due – April 3 • Employer engagement – ongoing • Evaluation period – April 4 – April 27 • Feedback to applicants – April 27 – 30

19. Process and Timeline cont. • Designated hospitals + surgeons announced • Contract Negotiations: 5/1 – 9/1 • Aggressive bundled pricing + warranties • Benefit plan design: 5/1 – 8/1 • Consumer support: 2/1 – 12/1 • Evaluation: 2/14 - ongoing

20. Cheryl DeMars, President and CEO The Alliance (608) 210-6621 cdemars@the-alliance.org