Quality and Pricing Transparency from a Payor’s Perspective

1. Quality and Pricing Transparency from a Payor’s Perspective Bill Fried, M.D.Medical DirectorMidAtlantic RegionAetna

2. Agenda The Changing Health Care Environment Consumerism Price Transparency Quality Transparency Consumer Decision-Support Tools

3. The Financial Projections Employer Funding Breaking Point The Changing Health Care Environment 4.6% Annual Growth Rate inHousehold Income 12% Annual Growth Rate in Health Insurance Premiums $68,277 $48,769 $34,836 $24,882 $17,773 $12,695 $9,068(1) 19% 23% 28% 34% 42% 51% 63% Health Benefits as a % of Total Compensation (1) Projected 2003 Average Health Insurance Premium for Family Coverage Source: Kaiser/HRET Survey of Employer-Sponsored Health Plans, Bureau of Labor Statistics 2003 National Compensation Survey

4. Percentage of U.S. Firms Offering Health Coverage Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000-2005

5. Executive Order on Transparency • August 2006 – President Bush signed Executive Order on Transparency • Requires federal health programs to make health care quality and cost transparency information available to consumers • The “Four Cornerstones” • Support Health Information Technology • Provide Quality Information • Provide Pricing Information • Promote Quality and Efficiency of Care More information available at: www.hhs.gov/transparency

6. American Medical Association statement on Executive Order "Today's Executive Order is a step toward increased price transparency in the health care system. However, gone are the days when a doctor posts fees and patients pay the doctor directly. Now, it's third-party payers — insurers and the government — who set prices. If we want patients to become more prudent purchasers of health care, they need to be in greater control of their own health insurance choices and decisions, and need price transparency from all insurers — not just the federal government.”

7. Four Cornerstones of Value-Driven Health Care: Health Plans’ Responses • Support Health Information Technology • Personal Health Records • Physician incentives to increase use of electronic services • Provide Quality Information • High Performance Networks • Hospital Comparison Tools • Leapfrog Group Hospital Quality and Safety Survey • NCQA accreditation • NCQA Physician Recognition Programs

8. Four Cornerstones of Value-Driven Health Care: Health Plans’ Responses • Provide Pricing Information • Physician-specific pricing • Average cost information for a variety of office-based, ambulatory, and inpatient services and procedures, drug costs, and episodes of care • CMS posting of rates for elective inpatient procedures and common hospital admissions • Promote Quality and Efficiency of Care • Support of Leapfrog Group’s “Never Events” policy • Care Focused Purchasing initiative, which focuses on the quality and efficiency of health care providers • Pay for Performance programs • Bridges to Excellence program

9. Consumerism Consumerism • Individuals will have more responsibility for health decisions; will pay more of costs • Content, tools, programs and services to encourage smarter, informed decisions • Requires individuals to acknowledge that they each have a personal responsibility in achieving optimal health care outcomes

10. Placing the Patient at the Center • HDHP, HRA, HSA plans • Decision tools for value-based purchasing • Performance networks • Personal Health Record • Health incentives • Health care transparency • Integrated medical management • Wellness programs • Effective communications and education

11. Do Consumers Really Understand the Cost of Health Care? Employee Estimated Average Average Actual Cost Consumer Perceptions vs. Reality of Medical Costs Source: Lehman Brothers, Health Insurance & Consumerism, May 2006

12. The True Cost of Care: Physician Unit Price Price Transparency • Actual negotiated rate available to consumers before they receive care • Via secure website, members can access doctors’ rates for up to 30 different services most commonly delivered by that physician’s specialty • Rates appear in 5 categories: office visits, diagnostic services, minor procedures, major procedures and other services

13. Price Transparency Rates Available to Members View Rates for the Selected Doctor

14. Price Transparency Rates Available to Members (cont’d)

15. Consumer Research: How Do People Select Facilities?

16. Do Consumers Really Understand the Site of Service Cost Differences of Health Care? Radiology and Diagnostic Imaging Average Cost per Unit

17. Consumer Research: What We Have Found • Consumers like the idea of site of service transparency • Information in one online location, ability to match right facility to medical condition, convenience, and peace of mind • Searching by site location or by name of health care professional depends on the procedure type • Relatively high risk (e.g., cataract eye surgery, cardiac catheterization), consumers prefer searching by physician • Relatively low risk diagnostic procedures (e.g., CT scans, sleep study), site location is preferred method for searching

18. Procedure-Based Site of ServiceTool • Facility-specific information – not regional averages • Includes ambulatory and inpatient facility types • Reasonable bundle of services for the procedure • All costs included • Range of costs based on payer claims experience • Costs are broken down into two categories • Managing physician charges • Facility & Ancillary charges combined (medical supplies, laboratory, etc.)

19. Procedure-Based Site of ServiceProcedures • Elective services where people are more likely to consider their out-of-pocket costs • Common and familiar to consumers • Planned for by a consumer • High volume • Multiple options for locations to seek care • MRI, CT scan, colonoscopy, common maternity and cardiac procedures are a few examples of procedures that are available

20. Medical Procedure by Facility Cost - Search on Procedure

21. The Current System Needs Improving Quality Transparency • Quality reliability • Average patient has 50% chance of getting the right care at the first physician’s visit* • Health care inefficiencies** • The right treatment • The right delivery • 40% opportunity to improve costs • Public perceptions about health care • 42% say they, or a family member, experienced a preventable medical error • Consumers not using quality data *** * Shuster (Rand) ** Wennberg *** Kaiser Family Foundation

22. Consumers Want Information on Physicians/Hospitals Types of Information Health Plans (Provide): Doing Now Not Doing/Want Not Doing/Don't Want 58% 36% 6% Info. to choose best plan 55% 34% 11% 1-800 RN/med. prof. hotline 35% 52% 12% Providing Info. on best MDs/hospitals Working hard to keep me 34% 48% 18% well Making sure I get tests I need 29% 46% 25% Ensuring all my MDs have 26% 47% 27% current Rx info Full info. on meds/alt. meds 23% 44% 23% Helping with Q's to ask/tests 20% 45% 35% to be done Source: Consumer Habits and Practices Study, 2005

23. “New” Health Care System Value Assessment Patients Information & Accountability Payers Health Care Professionals Information & Accountability

24. Mitigate increases in medical trends through consumerism by identifying and selecting physicians responsible for significant portions of health care spending who have met certain thresholds for clinical performance and effective use of health care resources An Approach Whose Time Has Come?

25. High Performance Networks • Subset of broad network • High numbers of physicians within each specialty • Responsible for high dollars • Measures available to allow for differentiation • Significant variability in efficiency and quality • Sufficient claims experience for credible analysis • Viability of new network

26. High Performance Networks: Caveats • Significant employer commitment • Collaboration with physicians • Clinical and efficiency measures externally validated using established national standards • Rankings not based solely on cost • Disclosure to physicians and consumers • Measures understandable and meaningful to consumers • Independent oversight

27. Designation Evaluation Process High Performance Networks: Designation Process

28. Stakeholders inPerformance Improvement

29. Quality Transparency Available to MembersPhysician met all standards

30. Quality Transparency Available to Members Physician not meeting volume

31. Driving Improvement Opportunities:Virginia Mason Medical Center • Collaborative relationship with high quality, nationally respected health care system • Employer support • Collaborative experiment created • New clinical pathway for delivery of care for back pain • New reimbursement strategy required to align incentives • Improved ways of working with PCPs, specialists and/or facilities • Documentation and publicity of initiative designed to assist in repeating new approach in other locations, with other provider organizations

32. Cost of care Cost advantages of using network doctors and hospitals Quality of care Health information Health risk assessment Management of HRA, HSA or FSA dollars Helping Plan Members Make the Change to Consumerism Consumer Decision- Support Tools The right decision-support tools can help consumers

33. Intuitive, easy navigation Delivers what users want Links to related information Easy on the eye Secure Resources to Help Consumers Research Cost & Quality Access to Online Tools 24/7

34. Estimate the Cost of Care

35. Estimate the Cost of Care – Diseases and Conditions

36. Informed Care Decisions – Treatment Options

37. Price-A-DrugSM* • Cost of medications based on the consumer’s pharmacy benefit plan • Retail & mail-order, including mail-order savings • Generic/brand alternatives consumers can discuss with their doctor * Available only if enrolled in this benefit with Aetna

38. Hospital Comparison Tool Nationwide quality outcomes information on hospitals for certain diagnoses and procedures: • Number of patients • Mortality rates • Complication rates • Length of stay Links to Leapfrog Data

39. Consumers Give Feedback on Their Doctors