MaineCare Redesign Task Force Results of Health Care Cost Workgroup: Savings Opportunities

1. Maine Health Management Coalition Foundation MaineCare Redesign Task ForceResults of Health Care Cost Workgroup: Savings Opportunities Sept 12th, 2012

2. Purchasers 19 Private Employers 5 Public Purchasers Providers 21 Hospitals 14 Physician Groups Health Plans 5 Health Plans Maine Health Management Coalition\Foundation • Coalition: • purchaser-led partnership among multiple stakeholders working collaboratively to • maximize improvement in the value of healthcare services delivered to MHMC members’employees and dependents. • Foundation: • is a public charity • bring the purchaser, consumer and provider communities together into a partnership • measure and report to the people of Maine on the value of healthcare services • educate the public to use information on cost and quality to make informed decisions. Collectively 35% of Comm. Market

3. Cost Workgroup Process Cost Workgroup identifies potential opportunities to reduce total per capita cost Using data, assess opportunities. Describe variation, identify drivers of variation. Approximate impacts of interventions, no precise estimates Identify barriers, complexities, other considerations Set targets for reducing costs

4. Data • Coalition members (commercial) • Adults 18-64 only • No Medicare Supplement • Medical Claims for October 2009 – September 2010 • Verified with 2011-2012 data • Residents of Maine by County of Residence • Risk: retrospective based on age, gender, Dx, Tx • Cost: Allowed Amount $ PMPM • PMPM: per member per month

5. Why Do Costs Vary?

8. PMPM Health Care Risk (Morbidity)

9. PMPM Health Care Risk (Morbidity)

11. Issues identified by Cost Workgroup Admissions and readmissions for people with chronic illness Variation in prices for inpatient care Variation in price and utilization of outpatient services Variation in treatment for Preference Sensitive Conditions Mental health care Wellness and community health Consumer education and benefit incentives Cost shifting from public to private payers Healthcare infrastructure, capacity Administrative costs

12. Inpatient

14. Reduce PMPM 1.6% ?

15. Outpatient

16. > 80 % variation

18. Mental Health

20. Infrastructure

21. Impact to Health Systems For every $1 dollar that we take out of the revenue stream … A health system must take $1 out of its costs… Revenue Cost $1 $.30 Variable Yet, only $.30 is variable, so the fixed costs remain. The hit to the bottom line is $.70. $.70 Fixed

22. Benchmark Comparisons

23. Benchmark Comparisons

24. Conclusions • Morbidity: Significant, but not major factor in regional population cost differences within the state • Inpatient: Price is a major driver of regional population cost differences • Outpatient: Price and utilization are major drivers, across regions and through time • Reductions in PMPM for most interventions range from at least 1 – 3%, some more. Feasibility ….. • Within state major drivers confirmed by regional benchmarks