Case Studies in Value-Based Benefit Design – Results and Lessons Learned

1. Case Studies in Value-Based Benefit Design –Results and Lessons Learned Jerry Reeves MD HEREIU Welfare Funds Health Innovations

2. Value-Based Benefit Design • VBBD is a strategy that minimizes or eliminates out-of-pocket costs for high-value services in defined patient populations • High-value services are identified through scientific evidence • The more clinically beneficial and cost-effective the therapy is for a patient group, the lower the out-of-pocket costs • Lowering out-of-pocket costs for high-value services has been found to improve access to and use of those services • More effective use of high-value services may positively impact the health of the targeted population • Preventable adverse health consequences reduced • Related high-cost health care services avoided Chernew ME et al. Health Aff (Millwood). 2008;27:103-112; Fendrick AM et al. Am J Manag Care. 2001;7:861-867; Fendrick AM, Chernew ME. Am J Manag Care. 2006;12 (special issue):SP5-SP10.

3. Identify Top Risks Cost and Use Outliers Chronic Disease Drivers Diabetes, Blood Vessels Depression/Anxiety Lung Disease, Smoking, Cancer Sedentary, Musculoskeletal Structured Interventions HRA, Screen Tests, Measures Tobacco Cessation, Medication Adherence Preventive Services Campaign Steer to Best Value Providers Steer to Best Value Services Ofc visits vs. ER, Hospital Medical Home (Top Docs) Engage the Patients & Providers Multiple Touches- Face to Face if Possible Incentives Know Their Numbers Wellness Programs Walking- Steps per Week Weight and Waist EAP/ Substance Abuse Coordinate the Partners “Connect the Dots” Measure / Report Results Prescribing Patterns, Provider Profiles Care opportunities taken Improve Value Based Intervention Strategies

4. Cost and Use Outliers - 50,000 Feet ViewImportance Index • * Importance Index by Service Category = $ pmpm times the % Change • ** For All Medical, it is % Change times the total paid in 000s

5. Surgery and anesthesia = 35% of total medical spend

6. MD Cost Variation; Same Outcome

7. Site of Care Matters –5 Plan Units • Hospital – cost per admit = $9,363 • Emergency Room – cost per visit = $737 • Urgent Care – cost per visit = $64 • Office Visit – cost per visit = $69 • Doctors receive 6 times as much payment to administer chemotherapy and specialty drugs in an outpatient facility compared to in their office.

8. Focus scheduled meetings with UM partners and PPO network partners on action plans Avoidable non value added surgery and imaging - action plans Require “expected impact on management” in prior auth for imaging studies Require independent radiologist evaluation of abused imaging studies Informed consent and patient education on alternatives as part of the prior authorization process Retrospective medical record reviews of medical necessity and impacts on subsequent treatments Consider higher co-pays or co-insurance for non value added imaging, ER visits and elective surgeries Consider contracting radiology sub-network and/or radiology benefit management company Consider contracts with Centers of Excellence (“medical tourism”) and oncology management company Steer to “Infusion Centers”, free standing surgery centers for better rates and service Consider investigations of suspected churning and upcoding Consider implementing “Tel-A-Doc”, phone nurses, “Doctor Tomorrow” & self-care guides to reduce unnecessary ER visits. Incentives to use retail clinics & doctor offices instead of ERs. Data Based Interventions

9. Focus for Lower Costs and Better Outcomes

10. Health Improvement Opportunities Acute Illness Opportunity Chronic Condition Opportunity Prevention/ Fitness Opportunity Medical and Drug Costs only From Dee Edington, University of Michigan

11. Many At Risk Are Unaware/Undiagnosed 11 From: “Metabolic Syndrome and Employer Sponsored Medical Benefits: An Actuarial Analysis’ K Fitch, B Pyenson, K Iwasaki; Milliman Consultants and Actuaries, March 2006.

12. Mean medical and drug costs by adherence-rate category over 12 months (patients with diabetes) 18,000 Medical Costs $16,498 16,000 Drug Costs 14,000 $13,077 $12,976 $11,484 12,000 10,000 $8887 $15,186* 8000 $11,008* $11,200* $9363* 6000 $6377 4000 2000 $2510 $2121 $1970 $1877 $1312 419 599 1801 259 182 0 n=182 n=259 n=419 n=599 n=1801 LeastAdherent MostAdherent Less Medium More Lower rates of medication adherence lead to higher total medical costs in patients with diabetes • Patients who were most adherent had total costs 49% lower than patients who were least adherent Cost ($) • Similar findings were reported for hypertension and hyperlipidemia • Patients who were most adherent were less likely to be hospitalized than patients with lower adherence levels (P<.05) *P<.05 compared with medical costs for most adherent. Retrospective cohort study of sample of 137,277 patients aged <65 years. Adapted from Sokol MC et al. Med Care. 2005;43:521-550.

13. Obesity Trends in the U.S.

14. Medical Complications of Obesity Idiopathic intracranial hypertension Pulmonary disease abnormal function obstructive sleep apnea hypoventilation syndrome Stroke Cataracts Nonalcoholic fatty liver disease steatosis steatohepatitis cirrhosis Coronary heart disease Diabetes Dyslipidemia Hypertension Severe pancreatitis Gall bladder disease Cancer breast, uterus, cervix colon, esophagus, pancreas kidney, prostate Gynecologic abnormalities abnormal menses infertility polycystic ovarian syndrome Osteoarthritis Phlebitis venous stasis Skin Gout

15. MEDICAL COST INCREASESBY BMI STRATA (US) From: Bachman K. Obesity, Weight Management, and Health Care Costs- A Primer. Disease Management 2007; 10:129-137

16. Impacts of Chronic Disease – 5 Plans Recommendations: Implement “Chronicare” Programs; Integrate health management outreach for primary and secondary prevention of chronic disease; Implement obesity management programs for moderate and severe obesity.

17. Chronic Disease Interventions

18. Findings – High cost patients • Obesity, chronic diseases, cancer, kidney failure (dialysis), serious heart disease, and surgery complications drive the most costs. • Chronic disease patients who take their medications have lower costs. Generic drugs cost $130 less / Rx / mo • Discontinuous care exaggerates complications and costs • Interventions • Steerage and incentives to use “Blue Distinction” and other Centers of Excellence • Cardiac, Surgery, Cancer, Bariatric, Kidney • Integrate health management- primary and secondary prevention of diabetes (obesity), cancer (smoking cessation, cancer screening), heart disease (fitness), “Connect the Dots” (PBM/ medication adherence, UM) • Consider “Chronicare Program”, high touch disease management • Value based benefit design • Lower out of pocket costs for higher value services (i.e. chronic condition drugs, preventive services) • Higher out of pocket costs for lower value services (i.e. imaging) • Consider lower out of pocket costs for health age near chronologic age

19. What We Must Do • Engage doctors and patients through incentives and consequences in rational decisions about • Elective surgery • Non value added imaging • Lifestyle choices • Handling depression • Diabetes self care • Cancer prevention/ early intervention • Adherence to chronic medications

20. Connect the Dots -Engage the Members Welfare Fund/ Health Plan (Claims Analysis, Benefit Design, Customer Service) PBM (Care Tracking, Med Adherence) Work Site Programs (Flyers, Lunch & Learns, HRA, Biometrics, Tests,) Hospitals/ Education Centers Doctors/ Clinics/ Pharmacies Dieticians Fitness Center Participant Case Managers, UM Weight Watchers Employee Cafeteria Meals/ Snacks EAP, Mental Health Tobacco Cessation Program Health Coaches Phone Nurses Laboratories Pharma Companies

21. Case Studies Lessons Learned

22. West Virginia 1340 Employees Avg. Age= 44 VBBD Case Study HEREIU Welfare Fund

23. Physician Prescribing Transparency

24. DTC Generic Alternatives Campaign

25. Aurora Units Drug Trends - Successes As medication adherence increased, inpatient med/surg dropped 4%. For 5 plans, drugs increased $1.1 M, IP med/surg dropped $0.8 M.

27. Chronicare Program Flow SheetsDiabetes, Hypertension, Lipids

28. Summary • Improvements in health and medical cost trends can be achieved through integrated health management interventions. • Value based benefit designs and care management engagement • Incentives and consequences for patients and providers aligned with desired behaviors. • Challenges remain in moving health choices from being externally motivated to becoming internally driven.