Payment reform and gainsharing in the US

1. Payment reform and gainsharing in the US What can the UK learn from the CMS Bundled Payment program?

2. Introductions • About Matrix • We provide advisory services and software products to public and private sector organisations, foundations and charities in the health, justice, education and pharmaceutical markets. • We are internationally recognised experts within our sectors and aim to add value to our clients by bringing clarity, insight and knowledge from complexity. Facts, evidence and data are within our DNA and we believe that they enable better decision making, improved accountability and ultimately can change lives. • Our work is primarily focused in UK, Mainland Europe and North America and we are engaged in a number of leading edge policy implementation and developments across these territories. Our people are principally based in our offices in London, Brussels and Washington DC. • About Econometrica • Econometrica, Inc. is a private research and management consulting firm committed to providing high-quality, cost-effective analyses, modeling, and economic evaluations for clients in the public and private sectors. The firm serves governmental and commercial clients with a broad range of requirements in the energy, health, homeland security, housing, and transportation markets. • Econometrica was founded by Cyrus Baghelai in 1998 to answer a growing demand for directed economic and analytical consulting services. • Located in the heart of Bethesda, Maryland, Our location enables us to rapidly focus our resources to assist the many organizations and agencies proximate to our Nation's Capital, and provides immediate access to resources unique to the seat of national government.

3. Background and context • The Centers for Medicare and Medicaid (CMS) programs currently provide care for almost 1 in 3 Americans, including health insurance for more than 44.6 million elderly and disabled Americans. • The CMS operating budget in FY 2008 was $606.9bn. • An Institutes of Medicine report published in 2012 identified that approximately 1/3 of health expenditures do not improve health outcomes- approximately $750bn across the entire US healthcare system.

4. Background and context • Medicare inpatient care is paid to the hospitals (Medicare part A) using a pre-determined ‘Inpatient Prospective Payment System’ based on DRGs • Medicare part B pays for outpatient medical care, such as doctor visits, home health services, some laboratory tests, some medications, and some medical equipment. • Bundled Payments pay hospitals a discounted fee for Part A, but Part B remains unchanged • Accountable Care Organizations (not the focus of this session!) are accountable for the care of a defined patient population

5. 1 out of 5 elderly patients are readmitted within 30 days Background and context Less than 50% of elderly patients are up to date on preventive clinical services Elderly patients with co-morbidities require up to 19 medication doses daily The average elderly patient sees 7 doctors across 4 practices The average patient is seen by 27 different healthcare providers Less than half of non-surgical patients follow-up with their primary care provider after discharge The healthcare challenge Preventive Self Management Outpatient Care Hospital Follow-Up Source: Institute of Medicine, Better care at lower cost, September 2012

6. The Bundled Payment Models Model 1 Model 1 Acute episode only Bundled Payment for Care Intitiatiive Model 1 Implementation challenges: -attribution: which physician behaviours are driving changes in quality and cost -cost shifting: is more care being delivered elsewhere in the system? Preventive Self Management Outpatient Care Hospital Follow-Up

7. The Bundled Payment Models Model 2

8. The Bundled Payment Models Model 3

9. The Bundled Payment Models Model 4

10. The Bundled Payment Models Monique’s slides

11. Payment reform in the NHS Current challenges within NHS reimbursement • ‘Cherry picking’: The NHS Future Forum reported cases of hospitals selecting relatively less complex patients while receiving a payment for the costs of care of a more complex case • Poor quality information with which to set prices: A Monitor study found that 40% of prices set under PbR change by 10% or more each year • Variation of costs relative to income within HRGs: A Nuffield Trust study found only 1 in 6 tariff-chargeable incurred costs within 10% of tariff price

12. Payment reform in the NHS Payment and signals The current NHS payment system does not: • drive efficiency within individual hospital specialities • support larger scale shifts of care from hospital to other settings • reimburse or incentivise care coordination • incentivise investment in preventive care or self management Source: Payment by Results: How can payment systems help to deliver better care? Kings Fund, 2012

13. Payment reform in the NHS Monitor’s review of the NHS payment system Objectives: • Reimburse providers for delivering specified outcomes for patients rather than particular treatments or inputs • Promote the long-term, sustainable well-being of the whole system • Allow for different payment approaches where people’s care needs differ, with room for local flexibility bounded by a clear structure of rules; and • Signal clearly to commissioners and providers the choices available to them that will promote sustainably better outcomes for patients. Source: A discussion paper: how can the NHS payment system do more for patients? (Monitor, May 2013)

14. Payment reform in the NHS Different types of patient need and patient care Source: A discussion paper: how can the NHS payment system do more for patients? (Monitor, May 2013)

15. Payment reform in the NHS What do we want from the NHS payment system? Source: A discussion paper: how can the NHS payment system do more for patients? (Monitor, May 2013)

16. Payment reform in the NHS Discussion Questions • What are the main barriers and challenges to implementing innovative approaches to payment reform at a CCG level? • What are the main risks in implementing a ‘payment for outcomes’ approach to reimbursement? • How can we involve patients and the public in the design of new approaches? • What research/evidence is needed to support innovation initiatives?