Payer/Provider Collaboration in the Post-Reform World

1. Payer/Provider Collaboration in the Post-Reform World Pat Hemingway Hall President & CEO Health Care Service Corporation

2. Who is HCSC? 4th Largest U.S. Health Insurer 13 Million Members

3. Who is HCSC?

4. We Have a Great Health Care System • Highly trained physicians and health care professionals • World-class teaching hospitals • Advanced emergency medicine • Continual innovation • Complex diagnostic capabilities • Nobel prize winning medical research • Leading-edge data analytics

5. Change, or Change Will Change You

6. PCMH HMO ACO IOCP OMG! 6

7. Guiding Principles • The goal of any new model is to improve the quality, safety and experience of the care of members while lowering cost trend. • The parties must share a well-defined vision and core values. • The strengths, experience and capabilities of each party needs to be recognized. • Health care is local and there is no single model. • Data exchange and transparency are key ingredients for achieving objectives.

8. The Blues 2011 Care Delivery Initiatives Development Lab Launched Pay-for-Performance Program* PCMH Pilot * Based on latest Plan surveys, programs are either currently in market or in development 8

9. HCSC Advocate Health Care, Illinois Blues Agreement Focusing on Improving Quality, Bending Cost Curve Blue Cross Blue Shield of Texas Setting Up ‘Medical Home’ Program Illinois Blues, Hospitals in Quality Pact Insurer Pledges $4 Million to Reduce Readmissions Health Plans Use Diabetes Disease Management to Reduce Costs and Improve Health Texas Hospital Association Launches Patient Safety Institute Blue Cross and Blue Shield of Texas Is Founding Underwriter CareFusion, Blue Cross Create Illinois Hospital Quality Initiative to Help Eliminate Health Care Infections 9

10. Proven Models - HMO Illinois • Delivering patient-centered care for 28 years • Grandfather of medical home/ACO models of today • Global payment built around savings • Primary care physician-guided care, which delivers verifiable results in improved member health

11. Value vs. Broad PPO: Cost: 27.6%lower PMPM Over 800,000 Members Demonstrably higher quality with a total annual physician incentive payout of $70.2M Overall Member Satisfaction:92.2%vs.91.5% Proven Models - HMO Illinois

12. Proven Models - Texas Hospital Quality Initiative (THQI) Goal: Reduce the incidence of hospital acquired infections • Partnership – BCBSTX and 36 Select Hospitals • HCSC provides technology (surveillance tool) to identify correctable process breakdowns

13. Proven Models - Texas Hospital Quality Initiative (THQI) Since July of 2009, hospitals participating in program have: • Reduced the occurrence of hospital acquired infections by 6.59% • Prevented 1,232 patients from acquiring an infection • Eliminated $14 million in hospital direct cost • Avoided over 10,965 patient days

14. Proven Models – Bridges to Excellence Goals: Help patients get healthier, help the best clinicians build their practices, and help insurers and employers manage costs better. • Diabetes Care Recognition Program • HCSC has identified 331 physicians with high numbers of diabetics • Pay physician $100 per patient, per year • 13,344 participating members • Suite of tools provided to assist in diabetic management • NCQA recognition of participating physicians • Physicians required to submit biometric data

15. Proven Models – Bridges to Excellence • Results • BTE physicians deliver care with 10-15% less cost than non-BTE physicians • Savings of $37 PMPM or $4.4 million annually • Demonstrated clinical improvement in BP, LDL, HbA1c, Ophthalmologic and podiatry exams, Nephropathy assessments

16. New Models - Intensive Outpatient Care Program (IOCP) Goal: Improve quality of care, reduce cost of care and enhance the experience of complex, chronically ill patients. • Targets the 10-15% highest risk patients • Highly coordinated team-based care • Embedded RN to coordinate care and intensively manage a small panel of patients

17. New Models - Intensive Outpatient Care Program (IOCP) HCSC’s Role • Identification of high-risk members and attribution to primary care provider • Provision of actionable data to provider • Reimbursement of program through: • PMPM care management fee • Shared savings • Fee for service

18. New Models - Intensive Outpatient Care Program (IOCP) One Employer’s Experience • High levels of quality of care • Improvement in patient experience • Higher levels of functioning, productivity and presenteeism • Lower utilization – fewer emergency visits and hospitalizations • Increase in office visits (positive), pharmacy use, behavioral health • 20% reduction in per-patient cost

19. New Models - ACO Shared Savings Agreement Goal: Improve the quality, safety, and affordability of patient care by aligning incentives and leveraging the synergies of the partners

20. New Models - ACO Shared Savings Agreement What? Advocate Health Care Who? • Three-year (2011 – 2013) shared savings PPO agreement with upside and downside risk • Three-year global risk HMO agreement • 10 hospitals and 2700 physicians • 250,000 attributed Blue Cross PPO lives • 120,000 Blue Cross HMO lives • $2,000,000,000 annual Blue Cross volume Where? How? Metro Chicago, IL (9 hospitals) Exceed threshold medical cost trend better than network and meet patient quality, safety, and satisfaction metrics THEN share in savings. Bloomington, IL (1 hospital)

21. New Models - ACO Shared Savings Agreement Total BCBSIL Members seeking care at the ACO PPO “Attributed” members Total cost of care, including: Acute Episodic Care (ex. Surgery) • Physician • Hospital • Ancillary • Rx, if applicable Personal Physician Shared savings model for beating aggregate network medical trend • Guaranteed threshold • Then shared savings

22. Illustrative Only PPO New Models - ACO Shared Savings Agreement 10% 8% Blue Cross Share Percent Medical Trend 6% 4% Network Trend ACO Share ACO w/Actual Incentive 2% ACO Actual 0% 2011 2012 2013

23. New Models - ACO Shared Savings Agreement • Aligned incentive to encourage innovation in care delivery and process redesign Patient Experience • Hospital readmission rates Clinical Quality Measures • Patient satisfaction • Ambulatory care sensitive admission rates • Never events • Access to outpatient physician visits • Hospital acquired conditions • Avoidable hospital days Financial penalties for degradation in any of these measures • Appropriateness of advanced imaging utilization 23

24. Guiding Principles • The goal of any new model is to improve the quality, safety and experience of the care of members while lowering cost trend. • The parties must share a well-defined vision and core values. • The strengths, experience and capabilities of each party needs to be recognized. • Health care is local and there is no single model. • Data exchange and transparency are key ingredients for achieving objectives.

25. Conclusion Providers and payers can work together to transform our system. Change – or change will change you.