WIN-WIN-WIN APPROACHES
TO ACCOUNTABLE CARE
How Physicians, Hospitals, Patients,
and Payers Can All Benefit From
Healthcare Payment & Delivery Reform
Harold D. Miller
President and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
Healthcare Spending Is the
Biggest Driver of Federal Deficits
Medicare,
Medicaid &
Insurance
Subsidies
Biggest
Share of
Spending
Growth is
Healthcare
Social
Security
Interest
on Debt
Other Mandatory
Spending
Source:
CBO
Budget
Projections
April 2014
Discretionary
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
2
Federal Cost Containment
Policy Choices
Cut Services
to Seniors?
MEDICARE
SPENDING
=
Cut Pay for
Providers?
SERVICES
PAYMENTS TO
TO SENIORS X PROVIDERS
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
3
If The Choice is Rationing or
Payment Cuts, Which is Likely?
Cut Services
to Seniors?
MEDICARE
SPENDING
=
Cut Pay for
Providers?
SERVICES
PAYMENTS TO
TO SENIORS X PROVIDERS
Guess which one
they’ll try to reduce?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
4
What Other Industry Tries to Cut
Pay for Key Professionals by 20%?
Physician
Practice
Costs
23% Effective
Reduction
Physician
Payment
Increases
If SGR Cut
Is Made
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
5
Repealing SGR Is Seen as Higher
Payment That Increases Spending
MEDICARE
SPENDING
Repealing
SGR
Increases
Projected
Spending
=
SERVICES
PAYMENTS TO
TO SENIORS X PROVIDERS
Repealing
SGR
“Increases”
Physician
Payment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
6
So to Pay for SGR Repeal,
Congress Looks for Other Cuts
Cut Pay for
Providers?
MEDICARE
SPENDING
=
SERVICES
PAYMENTS TO
TO SENIORS X PROVIDERS
Repealing
SGR
“Increases”
Physician
Payment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
7
Win-Lose Approaches:
Pit Physicians Against Hospitals
Cut Pay for
Hospitals?
MEDICARE
SPENDING
=
SERVICES
PAYMENTS TO
TO SENIORS X PROVIDERS
Increase
Pay for
Physicians?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
8
Win-Lose Approaches Abound:
PCPs vs. Specialists
Cut Pay for
Specialists?
MEDICARE
SPENDING
=
SERVICES
PAYMENTS TO
TO SENIORS X PROVIDERS
Increase
Pay for
PCPs?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
9
Win-Lose Federal Cuts Lead to
Cost-Shifting to Private Payers
Hospital Payment-to-Cost Ratios
for Private Payers, Medicare, and Medicaid, 1988 – 2008
140%
Private Payer
130%
120%
110%
100%
Medicare
90%
80%
Medicaid
70%
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
10
Employer Costs for Insurance
Growing Faster in Hawaii Than U.S.
$3,000
Higher
Than
Inflation
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
11
The Same Win-Lose Approach
Occurs for Commercial Payers
Cut Services
to Patients?
HEALTHCARE
=
SPENDING
Cut Pay for
Providers?
SERVICES
PAYMENTS TO
TO PATIENTS X PROVIDERS
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
12
What Providers Can Do
That Congress & Payers Can’t
Cut Services
to Patients?
HEALTHCARE
=
SPENDING
Cut Pay for
Providers?
SERVICES
PAYMENTS TO
TO PATIENTS X PROVIDERS
Redesign
CARE
to Reduce
Spending
Without
Harming
Quality
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
13
Payment Reform is Also Needed to
Make Providers Financially Viable
Cut Services
to Patients?
HEALTHCARE
=
SPENDING
Cut Pay for
Providers?
SERVICES
PAYMENTS TO
TO PATIENTS X PROVIDERS
Redesign
CARE
to Reduce
Spending
Without
Harming
Quality
Redesign
PAYMENT
to Make
Good Care
Financially
Viable for
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
14
Only Win-Win-Win Approaches
Are Sustainable
Win for
Payers
HEALTHCARE
=
SPENDING
Control or
Reduce
Spending
Win for
Patients
Win for
Providers
SERVICES
PAYMENTS TO
TO PATIENTS X PROVIDERS
Redesign
CARE
to Reduce
Spending
Without
Harming
Quality
Redesign
PAYMENT
to Make
Good Care
Financially
Viable for
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
15
Reducing Costs Without Rationing:
Can It Be Done?
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Reducing Costs Without Rationing:
Prevention and Wellness
Healthy
Consumer
Continued
Health
Health
Condition
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
17
Reducing Costs Without Rationing:
Avoiding Hospitalizations
Healthy
Consumer
Continued
Health
Health
Condition
No
Hospitalization
Acute Care
Episode
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
18
Reducing Costs Without Rationing:
Efficient, Successful Treatment
Healthy
Consumer
Continued
Health
Health
Condition
No
Hospitalization
Acute Care
Episode
Efficient
Successful
Outcome
High-Cost
Successful
Outcome
Complications,
Infections,
Readmissions
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
19
Reducing Costs Without Rationing:
Is Also Quality Improvement!
Healthy
Consumer
Continued
Health
Better Outcomes/Higher Quality
Health
Condition
No
Hospitalization
Acute Care
Episode
Efficient
Successful
Outcome
High-Cost
Successful
Outcome
Complications,
Infections,
Readmissions
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
20
Instead of Starting With How to
Limit Care for Patients…
Contributors to Healthcare Costs
How Do We Limit:
•New Technologies
•Higher-Cost Drugs
•Potentially Life-Saving
Treatment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
21
We Should Focus First on
How to Improve Patient Care
Contributors to Healthcare Costs
How Do We Help:
How Do We Limit:
•Patients Stay Well
•New Technologies
•Avoid Preventable Emergencies
and Hospitalizations
•Higher-Cost Drugs
•Eliminate
Errors and Safety Problems
•Potentially Life-Saving
Treatment
•Reduce Costs of Treatment
•Reduce Complications and
Readmissions
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
22
How Big Are the Opportunities?
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5-17% of Hospital Admissions
Are Potentially Preventable
Source:
AHRQ
HCUP
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Millions of Preventable Events
Harm Patients and Increase Costs
# Errors
(2008)
Medical Error
Cost Per
Error
Total U.S. Cost
Pressure Ulcers
374,964
$10,288
$3,857,629,632
Postoperative Infection
252,695
$14,548
Complications of Implanted Device
60,380
$18,771
$3,676,000,000
$1,133,392,980
Infection Following Injection
8,855
$78,083
$691,424,965
Pneumothorax
25,559
$24,132
$616,789,788
Central Venous Catheter Infection
7,062
$83,365
$588,723,630
Others
773,808
$11,640
$9,007,039,005
TOTAL 1,503,323
$13,019
$19,571,000,000
3 Adverse Events Every Minute
Source: The Economic Measurement of Medical Errors, Milliman and the Society of Actuaries, 2010
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Many Ways to Reduce Tests &
Services Without Harming Patients
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
26
Fee-for-Service Penalizes
Better Outcomes & Lower Cost
Healthy
Consumer
Continued
Health
Health
Condition
No
Hospitalization
Acute Care
Episode
FFS $
Efficient
Successful
Outcome
High-Cost
Successful
Outcome
Complications,
Infections,
Readmissions
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
27
What If We Paid for Cars
the Way We Pay for Care?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
28
What If We Paid for Cars
the Way We Pay for Care?
ACA
Affordable Car Act
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What If We Paid for Cars
the Way We Pay for Care?
ACA
Affordable Car Act
Goal:
Every citizen should have affordable transportation
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What If We Paid for Cars
the Way We Pay for Care?
ACA
Affordable Car Act
Goal:
Every citizen should have affordable transportation
Method for Achieving the Goal:
Give all citizens insurance that would cover the cost
of new automobiles and repairs when needed
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
31
How to Control Spending on Cars
If Insurance Is Paying For Them?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
32
To Control Spending, Government
Would Set Fees for Each Car Part…
HCPCS Codes
(Hierarchical
Car Parts
Compensation
System)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
33
…And Pay Auto Workers Based
On How Many Parts They Installed
HCPCS Codes
(Hierarchical
Car Parts
Compensation
System)
AMA
Automobile Manufacturing
Association
CPT System
(Car Parts Tokens)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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The Result for Drivers?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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The Result for Drivers?
Cars would get many unnecessary parts
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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The Result for Drivers?
Cars would get many unnecessary parts
Cars would be readmitted to the factory
20% of the time to correct malfunctions
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
37
The Result for Drivers?
Cars would get many unnecessary parts
Cars would be readmitted to the factory
20% of the time to correct malfunctions
This would occur even though
all factories were accredited by
the Joint Commission (on Auto Creation)
and all auto workers were certified as
Personal Car Making Heros (PCMH) by the
National Committee on Quality Autos (NCQA)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
38
Spending on Cars
Would Grow Rapidly
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Spending on Cars
Would Grow Rapidly
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What to Do?
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What to Do?
Cut Fees for Parts & Assembly
Cut Fees for
Parts & Assembly
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What to Do?
Cut Fees for Parts & Assembly
More Parts Used
Cut Fees for
Parts & Assembly
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What to Do?
Cut Fees for Parts & Assembly
More Parts Used
Cut Fees for
Parts & Assembly
Factories Merge
to Resist Fee Cuts
$
$
$
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
Pay for Bundles Instead of Parts
Driving Related Groups (DRGs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Cost Per Bundle Would Decrease
Lower-Cost Engines
$
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Cost Per Bundle Would Decrease
But More Expensive Bundles Used
Lower-Cost Engines
Bigger Engines
$
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Cost Per Bundle Would Decrease
But More Expensive Bundles Used
Lower-Cost Engines
Bigger Engines
Really Big Engines
$
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Cost Per Bundle Would Decrease
But More Expensive Bundles Used
Lower-Cost Engines
Bigger Engines
Really Big Engines
$
Consumers would get
bundles they didn’t need
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
“Managed Cars”
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What to Do?
“Managed Cars”
Waiting for Prior Authorization
to Buy a New Car
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
“Managed Cars”
Waiting for Prior Authorization
to Buy a New Car
Requirements to Try
Lower-Cost Services First
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
Consumer-Directed Car Payment
Consumer Share
of Car Price
$1,000 Copayment
10% Coinsurance
w/$2,000 OOP Max
$5,000 Deductible
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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People Would Think Twice
About Whether to Buy a Car…
Consumer Share
of Car Price
Price
$18,000
$1,000 Copayment
10% Coinsurance
w/$2,000 OOP Max
$1,000
$5,000 Deductible
$5,000
$2,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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… But Choose Expensive Cars
Since Their Cost Is The Same
Consumer Share
of Car Price
Price
$18,000
Price
$320,000
$1,000 Copayment
10% Coinsurance
w/$2,000 OOP Max
$1,000
$1,000
$5,000 Deductible
$5,000
$2,000

$2,000 
$5,000

© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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High Cost-Sharing Would Also
Apply to Preventive Maintenance…
Consumer Share
of Car Maintenance
Cost Sharing
High Deductible
Preventive
Maintenance
Co-payment
Full Cost
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
56
People Would Avoid Maintenance
Until Costly Repairs Were Needed
Consumer Share
of Car Maintenance
Cost Sharing
High Deductible
Preventive
Maintenance
Deferred
Maintenance
Co-payment
Co-insurance
Full Cost
No More Than
Out-of-Pocket
Limit
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
“Shared Savings” Program
STEP 1
Continue Paying Factories
& Workers Based on Parts
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
“Shared Savings” Program
STEP 1
Continue Paying Factories
& Workers Based on Parts
STEP 2
After Cars Are Built & Sold,
Compare Total Cost of Parts
and Award “Shared Savings”
# of Parts
x
Cost of Parts
<
# of Parts
x
Cost of Parts
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
“Shared Savings” Program
STEP 1
Continue Paying Factories
& Workers Based on Parts
STEP 2
After Cars Are Built & Sold,
Compare Total Cost of Parts
and Award “Shared Savings”
Give
# of Parts
Factory
x
+ 0-50% of
Cost of Parts
Difference in
Cost of Parts
Compared to
Other Cars
<
If Minimum
Savings
Threshold
# of Parts
and Quality
x
Targets
Cost of Parts
Were Met
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
“Shared Savings” Program
STEP 1
Continue Paying Factories
& Workers Based on Parts
STEP 2
After Cars Are Built & Sold,
Compare Total Cost of Parts
and Award “Shared Savings”
RESULT
Give
# of Parts
Factory
x
+ 0-50% of
Cost of Parts
Difference in
Cost of Parts
Compared to
Other Cars
<
If Minimum
Savings
Threshold
# of Parts
and Quality
x
Targets
Cost of Parts
Were Met
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What to Do?
“Shared Savings” Program
STEP 1
Continue Paying Factories
& Workers Based on Parts
STEP 2
After Cars Are Built & Sold,
Compare Total Cost of Parts
and Award “Shared Savings”
Give
# of Parts
Factory
x
+ 0-50% of
Cost of Parts
Difference in
Cost of Parts
Compared to
Other Cars
<
If Minimum
Savings
Threshold
# of Parts
and Quality
x
Targets
Cost of Parts
Were Met
RESULT
• Some factories
would reduce
parts, but not
enough to get
shared savings
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
62
What to Do?
“Shared Savings” Program
STEP 1
Continue Paying Factories
& Workers Based on Parts
STEP 2
After Cars Are Built & Sold,
Compare Total Cost of Parts
and Award “Shared Savings”
Give
# of Parts
Factory
x
+ 0-50% of
Cost of Parts
Difference in
Cost of Parts
Compared to
Other Cars
<
If Minimum
Savings
Threshold
# of Parts
and Quality
x
Targets
Cost of Parts
Were Met
RESULT
• Some factories
would reduce
parts, but not
enough to get
shared savings
• Some factories
would spend
more to meet
quality targets
than they receive
in shared
savings
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
63
What to Do?
“Shared Savings” Program
STEP 1
Continue Paying Factories
& Workers Based on Parts
STEP 2
After Cars Are Built & Sold,
Compare Total Cost of Parts
and Award “Shared Savings”
Give
# of Parts
Factory
x
+ 0-50% of
Cost of Parts
Difference in
Cost of Parts
Compared to
Other Cars
<
If Minimum
Savings
Threshold
# of Parts
and Quality
x
Targets
Cost of Parts
Were Met
RESULT
• Some factories
would reduce
parts, but not
enough to get
shared savings
• Some factories
would spend
more to meet
quality targets
than they receive
in shared
savings
• Some factories
would leave out
parts where
there were no
quality measures
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
64
What to Do?
“Shared Savings” Program
STEP 1
Continue Paying Factories
& Workers Based on Parts
STEP 2
After Cars Are Built & Sold,
Compare Total Cost of Parts
and Award “Shared Savings”
Give
# of Parts
Factory
x
+ 0-50% of
Cost of Parts
Difference in
Cost of Parts
Compared to
Other Cars
<
If Minimum
Savings
Threshold
# of Parts
and Quality
x
Targets
Cost of Parts
Were Met
RESULT
• Some factories
would reduce
parts, but not
enough to get
shared savings
• Some factories
would spend
more to meet
quality targets
than they receive
in shared
savings
• Some factories
would leave out
parts where
there were no
quality measures
• Most factories
and workers
would lose
money and go
back to business
as usual
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
65
Is There a Better Way?
Pay for Complete Cars With
Warranties, Not Parts & Repairs
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
67
Have People Pay the Last Dollar,
Not the First Dollar for Cost-Share
Consumer Share
of Car Price
Price
$18,000
Price
$320,000
$1,000 Copayment:
10% Coinsurance
w/$2,000 OOP Max:
$1,000
$1,000
$5,000 Deductible:
Highest-Value:
$5,000

$2,000 
$2,000
$1,000
$5,000

$303,000

© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Design Cost Sharing to Encourage
Preventive Maintenance
Consumer Share
of Maintenance
Preventive
Maintenance
Value-Based
No or Low Copay
Cost Sharing
High Deductible
Deferred
Maintenance
Co-insurance
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
69
Pay for What Consumers Need:
Transportation, Not (Just) Cars
$
Allow the flexibility to deliver services
that best meet the individual’s needs
with accountability for controlling costs
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What Are the Lessons
for Healthcare?
ACA
Affordable Care Act
Goal:
Every citizen should have affordable healthcare
Method for Achieving the Goal:
Give all citizens insurance that would cover the cost
of healthcare services when needed
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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How to Control Spending on Care
When Insurance Is Paying?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Should We Keep Paying
Part by Part?
Pay for Parts?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Instead of Parts, We Should Pay
for What We Really Want
Pay for Parts
Pay for High Quality,
Coordinated Care
with Good Outcomes
at an Affordable Cost
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Is “Value-Based Purchasing”
The Answer?
• Pay for Performance
–
–
–
–
Hospital Readmission Penalties
Hospital-Acquire Condition Penalties
Hospital Value-Based Purchasing
Physician Value-Based Modifier
• Transparency
• Narrow Networks
• Centers of Excellence
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Hospital Readmission Penalties
$
Current Payment
& High Readmit Rate
Revenue from
High
Readmit Rate
Reduce
Readmissions
OR
Revenue
from
Admissions
Payments
for All
Admissions
Will Be Cut
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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The Hope: Hospitals Will Reduce
Readmissions to Avoid Penalties
$
Current Payment
& High Readmit Rate
Lower Readmits
& No Payment Cut
Revenue from
High
Readmit Rate
Revenue from
Average
Readmit Rate
Revenue
from
Admissions
Revenue
from
Admissions
w/ no
Change in
Payment Rate
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
77
The Myth: Hospitals Control All of
the Reasons for Readmissions
$
Current Payment
& High Readmit Rate
Lower Readmits
& No Payment Cut
Revenue from
High
Readmit Rate
Revenue from
Average
Readmit Rate
Revenue
from
Admissions
• Access to Primary
Care
• Quality of Post-Acute
Care
• Capacity for SelfCare and Availability
of Home Support
Revenue
from
Admissions
w/ no
Change in
Payment Rate
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Losses From Fewer Readmits
May Be Bigger Than the Penalty
$
Current Payment
& High Readmit Rate
Lower Readmits
& No Payment Cut
Lower Payment
& High Readmit Rate
Lost Revenue
Revenue from
High
Readmit Rate
Lost Revenue
Revenue from
Average
Readmit Rate
Revenue
from
Admissions
Net Revenue
from
Admissions
w/ no
Change in
Payment Rate
and Costs of
Readmission
Reduction
Programs
Revenue from
High
Readmit Rate
w/ 3% Penalty
Revenue
from
Admissions
w/ 3%
Reduction
in Payment
Rate
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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No Incentive to Be
Better Than Average
$
Current Payment
& High Readmit Rate
Lower Readmits
& No Payment Cut
Lower Payment
& High Readmit Rate
Lost Revenue
Revenue from
High
Readmit Rate
Lost Revenue
Revenue from
Average
Readmit Rate
Revenue
from
Admissions
Revenue
PenaltiesNetOnly
Imposed
from
For Admissions
Hospitals
w/ no
Change in
Significantly
Worse
Payment Rate
and
Costs of
Than
Average;
Readmission
Reduction
No Reward
for Being
Programs
Better Than Average
Revenue from
High
Readmit Rate
w/ 3% Penalty
Revenue
from
Admissions
w/ 3%
Reduction
in Payment
Rate
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Do Bonuses for Higher Quality
Provide the Right “Incentive?”
$
Payer’s View of
“Value-Based Payment”
P4P
FFS
Payment
FFS
Payment
+
Quality
Measures
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
81
The Payer Only Sees Payment,
But The Provider Also Sees Cost
$
Payer’s View of
“Value-Based Payment”
Provider’s View of
“Value-Based Payment”
P4P
FFS
Payment
FFS
Payment
+
Quality
Measures
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
82
If the Provider Has Managed to
Make FFS Payment Cover Costs…
$
Payer’s View of
“Value-Based Payment”
Provider’s View of
“Value-Based Payment”
P4P
Margin
FFS
Payment
FFS
Payment
+
Quality
Measures
FFS
Payment Costs
for
of
Current Current
Services Services
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
83
Higher Quality May Mean
Lower FFS Revenues…
$
Payer’s View of
“Value-Based Payment”
Provider’s View of
“Value-Based Payment”
P4P
Margin
FFS
Payment
FFS
Payment
+
Quality
Measures
FFS
Payment Costs
for
of
Current Current
Services Services
Lower
FFS
Payment
for
Fewer
Current
Services
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
84
…And Added Costs to Achieve
the Higher Quality
$
Payer’s View of
“Value-Based Payment”
Provider’s View of
“Value-Based Payment”
P4P
Margin
FFS
Payment
FFS
Payment
+
Quality
Measures
FFS
Payment Costs
for
of
Current Current
Services Services
Added
Costs of
New
Services
Lower
FFS
Costs
Payment
of
for
(Fewer)
Fewer Current
Current Services
Services
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
85
Even With the
Payer’s “Incentive” Payment...
$
Payer’s View of
“Value-Based Payment”
Provider’s View of
“Value-Based Payment”
P4P
Margin
FFS
Payment
FFS
Payment
+
Quality
Measures
FFS
Payment Costs
for
of
Current Current
Services Services
P4P
Added
Costs of
New
Services
Lower
FFS
Costs
Payment
of
for
(Fewer)
Fewer Current
Current Services
Services
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
86
…P4P May Not Offset Provider’s
Added Costs & Revenue Losses
$
Payer’s View of
“Value-Based Payment”
Provider’s View of
“Value-Based Payment”
Loss
P4P
Margin
FFS
Payment
FFS
Payment
+
Quality
Measures
FFS
Payment Costs
for
of
Current Current
Services Services
P4P
Added
Costs of
New
Services
Lower
FFS
Costs
Payment
of
for
(Fewer)
Fewer Current
Current Services
Services
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
87
More Measures Every Year,
With the Same Small Bonuses
• Mammograms
• Colon Cancer
Screening
• HbA1c Control
• LDL
P4P
Bonus
• Mammograms
• Colon Cancer
Screening
• Flu Vaccine
• Tobacco
Counseling
• Hypertension
Control
• HbA1c Control
• LDL
• Eye Exams
• Aspirin Use
P4P
Bonus
• Mammograms
• Colon Cancer
Screening
• Flu Vaccine
• BMI Screens
• Tobacco
Counseling
• Fall Risk
Assessment
• Hypertension
Control
• HbA1c Control
• LDL
• Eye Exams
• Aspirin Use
• Beta Blockers
for CHF
P4P
Bonus
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
88
Over-Emphasis on Narrow Quality
Measures Can Harm Patients
Hypoglycemia
1 Yr Mortality: 19.9%
30 Day Readmits: 16.3%
Hyperglycemia
1 Yr Mortality: 17.1%
30 Day Readmits: 15.3%
Source: National Trends in US Hospital Admissions for Hyperglycemia and Hypoglycemia
Among Medicare Beneficiaries, 1999 to 2011 JAMA Internal Medicine May 17, 2014
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
89
The End of Collaboration?
• In the CMS Value-Based Payment Modifier, bonuses are only
paid to physicians who have above average quality if penalties
are assessed on other physicians with below average quality
• To maintain budget neutrality, the size of bonuses depends on
the size of penalties
• Under this system, why would high-performing physicians
want to help under-performing physicians to improve?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
90
Is “Transparency” the Answer?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
91
Current Transparency Efforts
Are Focused on the Price of Parts
Payment
for
Procedure
dded
Provider 1:
$25,000
Provider 2:
$23,000
-8%
The Lower
Cost
Provider?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
92
What Hidden Costs
Accompany the Lower Price?
Payment
for
Procedure
Payment and Rate
of Complications
Provider 1:
$25,000
$30,000
2%
Provider 2:
$23,000
-8%
$30,000
10%
More
Costs
Later
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
93
Total Spending May Be Higher
With the “Lower Price” Provider
Payment
for
Procedure
Payment and Rate of
Complications
Average
Total
Payment
$30,000
$25,600
Provider 1:
$25,000
2%
Provider 2:
$23,000
-8%
$30,000
10%
$26,000
+2%
Lower Price
for Parts,
Higher
Total Cost
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
94
Transparency Based on FFS
May Lead to Wrong Conclusions
Payment
for
Procedure
Payment and Rate of
Complications
Bundled/
Episode
Payment
Provider 1:
2%
$25,600
10%
$26,000
The True Lower
Cost,
Higher Quality
Provider
Provider 2:
+2%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
95
Providers Don’t Need
“Incentives” to Deliver
Higher-Quality, Lower-Cost Care
Providers Don’t Need
“Incentives” to Deliver
Higher-Quality, Lower-Cost Care
They Need a
Sustainable Financial Model
For Doing So
Providers Don’t Need
“Incentives” to Deliver
Higher-Quality, Lower-Cost Care
They Need a
Sustainable Financial Model
For Doing So
Current Fee-for-Service Systems
Don’t Provide That and
“Value-Based Payment”
Usually Doesn’t Either
HHS Announced Its Intent to Move
Away From VBP & FFS+P4P
NOW
FFS
2016
2018
Alternative
Payment Models
“Built on FFS
30%
Architecture” &
Population-Based
Payment
Alternative
Payment
Models
“Built on FFS 50%
Architecture” &
PopulationBased
Payment
Fee for
Service –
“Link to
Quality”
55%
FFS - No Link to 15%
Qualty
Fee for
Service –
40%
“Link to Quality”
FFS - No Link to
Qualty
10%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
99
HHS Announced Its Intent to Move
Away From VBP & FFS+P4P
NOW
2016
2018
Alternative
Payment Models
“Built on FFS
30%
Architecture” &
Population-Based
Payment
FFS
Alternative
Payment
Models
“Built on FFS 50%
Architecture” &
PopulationBased
What the heck is an Payment
Fee for
“Alternative
Payment Model
55%
Service –
Built
on FFS Architecture?”
Fee for
“Link to Quality”
Service –
40%
And is that better than“Link to Quality”
FFS+P4P?
FFS - No Link to 15%
Qualty
FFS - No Link to
Qualty
10%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
100
CMS “Alternative Payment Models”
Built on FFS Architecture” To Date
TYPE OF PROVIDER
CMS PROGRAM
PAYMENT STRUCTURE
Health Systems,
Multi-Specialty Groups,
PHOs, and IPAs
Accountable Care
Organizations
(MSSP & Pioneer)
FFS
+
Shared Savings on
Attributed Total Spending
FFS
+
PMPM $ for Attributed Patients
+
Shared Savings on
Attributed Total Spending
(for State or Region)
FFS
+
PMPM $ for Attributed Patients
+
Shared Savings on
Attributed Total Spending
(for 6-month window)
Primary Care
Comprehensive
Primary Care Initiative
Specialty Care
Oncology Care Model
Hospitals and
Post-Acute Care
Bundled Payments for
Care Improvement
Initiative
Discounted Bundles
+
Warranties
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
101
Mostly FFS With Add-Ons:
PMPM + Shared Savings
TYPE OF PROVIDER
CMS PROGRAM
PAYMENT STRUCTURE
Health Systems,
Multi-Specialty Groups,
PHOs, and IPAs
Accountable Care
Organizations
(MSSP & Pioneer)
FFS
+
Shared Savings on
Attributed Total Spending
FFS
+
PMPM $ for Attributed Patients
+
Shared Savings on
Attributed Total Spending
(for State or Region)
FFS
+
PMPM $ for Attributed Patients
+
Shared Savings on
Attributed Total Spending
(for 6-month window)
Primary Care
Comprehensive
Primary Care Initiative
Specialty Care
Oncology Care Model
Hospitals and
Post-Acute Care
Bundled Payments for
Care Improvement
Initiative
Discounted Bundles
+
Warranties
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
102
Most Systems Based on
“Attributed” Patients and Spending
TYPE OF PROVIDER
CMS PROGRAM
PAYMENT STRUCTURE
Health Systems,
Multi-Specialty Groups,
PHOs, and IPAs
Accountable Care
Organizations
(MSSP & Pioneer)
FFS
+
Shared Savings on
Attributed Total Spending
FFS
+
PMPM $ for Attributed Patients
+
Shared Savings on
Attributed Total Spending
(for State or Region)
FFS
+
PMPM $ for Attributed Patients
+
Shared Savings on
Attributed Total Spending
(for 6-month window)
Primary Care
Comprehensive
Primary Care Initiative
Specialty Care
Oncology Care Model
Hospitals and
Post-Acute Care
Bundled Payments for
Care Improvement
Initiative
Discounted Bundles
+
Warranties
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
103
Problems with “Attributing”
Patients and Spending to Providers
• Providers don’t know which patients they’re responsible for
• Inability for providers to control attributed spending
• Attributed spending includes services before provider
became involved
• Attribution results only known after care is delivered
• Many patients and spending not attributed to anyone
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
104
Two Hypothetical PCPs
Caring for Chronic Disease Patients
$
PCP #1
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
105
PCP #1: Sees Patients
Infrequently, Poor Rx Adherence
$
Frequent
ER Visits
&
Admissions
+
Poor
Outpatient
Management
Medications
Office Visits
PCP #1
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
106
PCP #1: Patients Have Problems
Frequently, Go to ER & Hospital
Attributed
Spending
$
Attributed
Spending
Avoidable
Hospitalization
ER Visit
Avoidable
Hospitalization
Frequent
ER Visits
&
Admissions
+
Poor
Outpatient
Management
ER Visit
ER Visit
ER Visit
ER Visit
Medications
Office Visits
PCP #1
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
107
PCP #2: Sees Patients Frequently
and Helps Them Manage Disease
Attributed
Spending
$
Attributed
Spending
ER Visit
Spending &
Complications
of Elective
Surgery
Chosen by
Patient
Avoidable
Hospitalization
+
Avoidable
Hospitalization
Frequent
ER Visits
&
Admissions
+
Poor
Outpatient
Management
ER Visit
ER Visit
ER Visit
ER Visit
Medications
Office Visits
PCP #1
Few
ER Visits
Medications
+
Office Visits
Office Visits
Office Visits
Office Visits
Good
Outpatient
Management
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
108
PCP #2: Well-Managed Patients
Rarely Need ER Visits
Attributed
Spending
$
Attributed
Spending
ER Visit
Spending &
Complications
of Elective
Surgery
Chosen by
Patient
Avoidable
Hospitalization
+
Avoidable
Hospitalization
Frequent
ER Visits
&
Admissions
+
Poor
Outpatient
Management
ER Visit
ER Visit
ER Visit
ER Visit
Medications
Office Visits
PCP #1
ER Visit
Few
ER Visits
Medications
+
Office Visits
Office Visits
Office Visits
Office Visits
Good
Outpatient
Management
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
109
PCP #2 Is Doing the Better Job,
Right?
Attributed
Spending
$
Attributed
Spending
ER Visit
Spending &
Complications
of Elective
Surgery
Chosen by
Patient
Avoidable
Hospitalization
+
Avoidable
Hospitalization
Frequent
ER Visits
&
Admissions
+
Poor
Outpatient
Management
HIGH
ER Visit
Few
ER Visits
Medications
LOW
+
SPENDING
Office Visits
Good
Outpatient
Management
ER Visit
SPENDING
ER Visit
ER Visit
ER Visit
Medications
Office Visits
Office Visits
Office Visits
Office Visits
PCP #1
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
110
PCP #2 Is Attributed All Spending,
Including What Other Doctors Do
Attributed
Spending
$
Avoidable
Hospitalization
ER Visit
Avoidable
Hospitalization
Frequent
ER Visits
&
Admissions
+
Poor
Outpatient
Management
HIGH
ER Visit
SPENDING
ER Visit
ER Visit
ER Visit
Medications
Office Visits
PCP #1
Attributed
Spending
Post-Acute Care Spending &
Complications
of Elective
Infection,
Surgery
Complications
Chosen by
from Surgery
Patient
Elective
+
Surgery
Few
ER Visit
ER Visits
Medications
LOW
+
SPENDING
Office Visits
Good
Outpatient
Management
Office Visits
Office Visits
Office Visits
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
111
Healthier Patients Getting Other
Types of Care Make PCP Look “Bad”
Attributed
Spending
$
Avoidable
Hospitalization
Frequent
ER Visits
&
Admissions
+
Poor
Outpatient
Management
HIGH
ER Visit
SPENDING
ER Visit
ER Visit
ER Visit
Medications
Office Visits
PCP #1
Medications
+
Office Visits
Office Visits
Office Visits
Office Visits
Good
Outpatient
Management
Controllable
by PCP
Controllable
by PCP
ER Visit
Post-Acute Care Spending &
Complications
of Elective
Infection,
Surgery
Complications
Chosen by
from Surgery
Patient
Elective
+
Surgery
HIGHER
Few
ER Visit
SPENDING
ER Visits
Not
Controllable
by PCP
Avoidable
Hospitalization
Attributed
Spending
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
112
Accountability Should Only Be for
What Each Physician Can Control
Attributed
Spending
$
Attributed
Spending
ER Visit
Spending &
Complications
of Elective
Surgery
Chosen by
Patient
Avoidable
Hospitalization
+
Frequent
ER Visits
&
Admissions
+
Poor
Outpatient
Management
ER Visit
ER Visit
ER Visit
ER Visit
Medications
Office Visits
PCP #1
ER Visit
Few
ER Visits
Medications
+
Office Visits
Office Visits
Office Visits
Office Visits
Good
Outpatient
Management
Controllable
by PCP
Controllable
by PCP
Avoidable
Hospitalization
PCP #2
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
113
Most Systems Based on
“Shared Savings” for Patients
TYPE OF PROVIDER
CMS PROGRAM
PAYMENT STRUCTURE
Health Systems,
Multi-Specialty Groups,
PHOs, and IPAs
Accountable Care
Organizations
(MSSP & Pioneer)
FFS
+
Shared Savings on
Attributed Total Spending
FFS
+
PMPM $ for Attributed Patients
+
Shared Savings on
Attributed Total Spending
(for State or Region)
FFS
+
PMPM $ for Attributed Patients
+
Shared Savings on
Attributed Total Spending
(for 6-month window)
Primary Care
Comprehensive
Primary Care Initiative
Specialty Care
Oncology Care Model
Hospitals and
Post-Acute Care
Bundled Payments for
Care Improvement
Initiative
Discounted Bundles
+
Warranties
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
114
Payer Spending =
Provider Revenue
Spending Per Patient
CURRENT
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Revenue
to
Providers
for
Attributed
Patients
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
115
Providers Work Hard to
Create Positive Margins
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
116
Reducing Avoidable Spending
Creates Savings for Payer, But…
FUTURE
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Payer
Savings
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
Total
Payments
for
Attributed
Patients
Payer
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
117
Savings for Payer =
Loss of Revenue for Provider
FUTURE
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Payer
Savings
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
Total
Payments
for
Attributed
Patients
Payer
Revenue
to
Providers
for
Attributed
Patients
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
118
Providers’ Costs Will Decrease,
But Not As Much as Revenues
FUTURE
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Payer
Savings
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
Total
Payments
for
Attributed
Patients
Provider
Costs to
Deliver
Revenue Services
to
for
Providers Attributed
for
Patients
Attributed
Patients
Payer
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
119
Resulting in Losses for Providers
FUTURE
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Payer
Savings
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
Loss
Total
Payments
for
Attributed
Patients
Provider
Costs to
Deliver
Revenue Services
to
for
Providers Attributed
for
Patients
Attributed
Patients
Payer
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
120
Arbitrary Shared Savings Payment
May Not Offset the Losses
FUTURE
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Remaining
Savings
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Loss
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
Shared
Savings
Shared
Savings
Total
Payments
for
Attributed
Patients
Provider
Costs to
Deliver
Revenue Services
to
for
Providers Attributed
for
Patients
Attributed
Patients
Payer
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
121
Shared Savings Payments Are Also
Unpredictable and Favor Payers
FUTURE
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Remaining
Savings
Loss
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
Shared
Savings
Shared
Savings
Total
Payments
for
Attributed
Patients
Provider
Costs to
Deliver
Revenue Services
to
for
Providers Attributed
for
Patients
Attributed
Patients
Payer
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
122
“Shared Savings” is a Payer-Driven
System That’s Often a Win-Lose
FUTURE
Win - Lose
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Remaining
Savings
Loss
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
Shared
Savings
Shared
Savings
Total
Payments
for
Attributed
Patients
Provider
Costs to
Deliver
Revenue Services
to
for
Providers Attributed
for
Patients
Attributed
Patients
Payer
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
123
There Can Be Win-Win Results
With Better Payment Systems
FUTURE
Win - Win
CURRENT
Spending Per Patient
Profit
NOTE:
Graph
Is not
drawn
to
scale
Total
Payments
to
Hospital,
Physician
Practice,
or
Health
System
for
Attributed
Patients
Payer
Savings
for Payer
Profit
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Payments
Under
a
Better
Payment
System
Revenue Provider
to
Costs to
Providers
Deliver
for
Services
Attributed
for
Patients Attributed
Patients
Providers
Payer
Providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
124
Instead of Trying to Put Bandaids
on a Broken System…
Value-Based
Purchasing
Bonuses &
Penalties
FFS
FFS
“Alternative”
Payment
Models
(Shared
Savings +
PMPMs+P4P
FFS
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
125
We Need True Payment Reforms:
Accountable Payment Models
Value-Based
Purchasing
Bonuses &
Penalties
FFS
FFS
“Alternative”
Payment
Models
(Shared
Savings +
PMPMs+P4P
FFS
Accountable
Payment
Models
• Flexibility to
deliver services
patients need
• Accountability for
costs the provider
can control
• Accountability for
quality the
provider can
control
• Adequate
payment for
high-quality care
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
126
Three Major Types of
Accountable Payment Models
PAYMENT
MODEL
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
127
Three Major Types of
Accountable Payment Models
PAYMENT
MODEL
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
128
Most Major Industries Are Paid
Using Bundles & Warranties
PAYMENT
MODEL
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
129
Condition-Based Payment Provides
What Patients Most Want
PAYMENT
MODEL
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
Condition- Payment based on the
patient’s condition,
Based
rather than on the
Payment
procedure used
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Condition-Based Payment Is the
Most Flexible Payment
PAYMENT
MODEL
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
Condition- Payment based on the
patient’s condition,
Based
rather than on the
Payment
procedure used
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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With True Payment Reform,
There Can Be a Win-Win-Win
PAYMENT
MODEL
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
WIN-WIN-WIN APPROACH
• Patients get better quality care
• Payers spend less for care
• Providers do better financially
for delivering high-quality care
Condition- Payment based on the
patient’s condition,
Based
rather than on the
Payment
procedure used
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Win-Win-Wins Through Bundles
PAYMENT
MODEL
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
HOW PHYSICIANS
CAN BENEFIT
HOW PAYERS
CAN BENEFIT
Higher payment for
physicians if they
reduce costs paid by
hospitals
Physician and hospital
offer a lower total price
to Medicare or health
plan than today
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
Condition- Payment based on the
patient’s condition,
Based
rather than on the
Payment
procedure used
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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A Hypothetical Case of Surgery
COST TYPE
TODAY
Physician Fee
$2,000
Hospital Cost
$20,900
Hosp. Margin (5%)
$ 1,100
Total Hospital Pmt
$22,000
Total Cost to Payer
$24,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What if the Surgeon Could
Reduce The Hospital’s Costs?
COST TYPE
TODAY
Physician Fee
$2,000
Hospital Cost
$20,900
Hosp. Margin (5%)
$ 1,100
Total Hospital Pmt
$22,000
Total Cost to Payer
$24,000
CHANGE
-3% ($630)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Today: All Savings Goes to the
Hospital, No Reward for Physician
COST TYPE
TODAY
Physician Fee
$2,000
Hospital Cost
$20,900
Hosp. Margin (5%)
$ 1,100
Total Hospital Pmt
$22,000
Total Cost to Payer
$24,000
CHANGE
SPLIT
+ 0%
-3% ($630)
+57% ($630)
-0%
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Bundling Eliminates Boundary
Between Hospital & Physician Pmt
COST TYPE
TODAY
Physician Fee
$ 2,000
Hospital Cost
$20,900
Hospital Margin
$ 1,100
Total Cost to Payer
$24,000
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Bundling Allows Savings Split
Among Docs, Hospitals, Payers
COST TYPE
TODAY
Physician Fee
$ 2,000
Hospital Cost
$20,900
Hospital Margin
$ 1,100
Total Cost to Payer
$24,000
CHANGE
SPLIT
+ 5% ($100)
-3% ($630)
+5% ($ 50)
-
2% ($480)
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So Price of Surgery is Lower
But More Profitable
COST TYPE
TODAY
Physician Fee
$ 2,000
Hospital Cost
$20,900
Hospital Margin
$ 1,100
Total Cost to Payer
$24,000
CHANGE
SPLIT
NEW
+ 5% ($100)
$ 2,100
-3% ($630)
$20,270
+5% ($ 50)
-
2% ($480)
$ 1,150
$23,520
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Opportunities to
Reduce Hospital Costs
• Use of lower-cost medical devices and equipment, or
negotiating for better prices on devices
• Better scheduling of scarce resources (e.g., surgery suites) to
reduce both underutilization & overtime
• Coordination among multiple physicians and departments to
avoid duplication and conflicts in scheduling
• Standardization of equipment and supplies to facilitate bulk
purchasing
• Less wastage of expensive supplies
• Reduced length of stay
• Etc.
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Medicare Acute Care Episode
(ACE) Demonstration
• Bundled Medicare Part A (hospital) and Part B (physician) payments
together for cardiac and orthopedic (hips & knees) procedures
• Total Medicare payment was 1%-8% lower than what the standard
Medicare DRG + physician fee would have been
• Payment was made to a Physician-Hospital Organization, which
then divided the payment between hospital and surgeon
• Surgeon could receive up to 25% above Medicare fee
• Patient cost-sharing reduced by up to 50% of Medicare’s savings
• CMS waived Stark rules for gainsharing
• Implemented in 2009/2010 in five hospital systems based on
competitive bids:
–
–
–
–
–
Hillcrest Medical Center, Oklahoma (cardiac + orthopedic procedures)
Baptist Health System, Texas (cardiac + orthopedic procedures)
Oklahoma Heart Hospital, Oklahoma (cardiac procedures)
Lovelace Health System, New Mexico (cardiac + orthopedic procedures)
Exempla Saint Joseph Hospital, Colorado (cardiac procedures)
• Most hospitals achieved significant savings, and physicians
received increases in payment for procedures
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What About Warranties?
BUILDING
BLOCKS
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
HOW PHYSICIANS
AND HOSPITALS
CAN BENEFIT
HOW PAYERS
CAN BENEFIT
Higher payment for
physicians if they
reduce costs paid by
hospitals
Physician and hospital
offer a lower total price
to Medicare or health
plan than today
Higher payment for
physicians and
hospitals with low
rates of infections
and complications
Medicare or health
plan no longer pays
more for high rates of
infections or
complications
Condition- Payment based on the No loss of payment
patient’s condition,
for physicians and
Based
rather than on the
hospitals using fewer
Payment
procedure used
tests and procedures
Medicare or health
plan no longer pays
more for unnecessary
procedures
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Yes, a Health Care Provider
Can Offer a Warranty
SM
Geisinger Health System ProvenCare
– A single payment for an ENTIRE 90 day period including:
•
•
•
•
ALL related pre-admission care
ALL inpatient physician and hospital services
ALL related post-acute care
ALL care for any related complications or readmissions
– Types of conditions/treatments
currently offered:
•
•
•
•
•
•
•
•
Cardiac Bypass Surgery
Cardiac Stents
Cataract Surgery
Total Hip Replacement
Bariatric Surgery
Perinatal Care
Low Back Pain
Treatment of Chronic Kidney Disease
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Payment + Process Improvement =
Better Outcomes, Lower Costs
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Warranties Can Be Offered By
Individual Docs & Small Hospitals
• In 1987, an orthopedic surgeon in Lansing, Michigan and the
local hospital, Ingham Medical Center, offered:
– a fixed total price for surgical services for shoulder and knee problems
– a warranty for any subsequent services needed for a two-year period,
including repeat visits, imaging, rehospitalization and additional surgery
• Results:
– Health insurer paid 40% less than otherwise
– Surgeon received over 80% more in payment than otherwise
– Hospital received 13% more than otherwise, despite fewer
rehospitalizations
• Method:
– Reducing unnecessary auxiliary services such as radiography and
physical therapy
– Reducing the length of stay in the hospital
– Reducing complications and readmissions.
Johnson LL, Becker RL. An alternative health-care reimbursement system—application of arthroscopy
and financial warranty: results of a two-year pilot study. Arthroscopy. 1994 Aug;10(4):462–70
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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A Warranty is Not an
Outcome Guarantee
• Offering a warranty on care does not imply that you are
guaranteeing a cure or a good outcome
• It merely means that you are agreeing to correct avoidable
problems at no (additional) charge
• Most warranties are “limited warranties,” in the sense that they
agree to pay to correct some problems, but not all
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Prices for Warrantied Care
Will Likely Be Higher
• Q: “Why should we pay more to get good-quality care??”
• A: In most industries, warrantied products cost more, but
they’re desirable because TOTAL spending on the product
(repairs & replacement) is lower than without the warranty
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Scenario: Surgery with 4% Rate
of Re-Operation for Complications
Payment
for
Surgery
Rate
of 2nd
Surgery
$24,000
4%
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Total Payment is Higher Than
Nominal Price Due to 2nd Surgeries
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
$24,000
4%
$24,960
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Let’s Assume Surgery Is
Currently Profitable
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
(5% Margin)
Provider
Margin
$24,000
4%
$24,960
$23,712
$1,248
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What Happens if
Quality is Improved?
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
(5% Margin)
Provider
Margin
$24,000
4%
$24,960
$23,712
$1,248
$24,000
3%
$24,000
2%
$24,000
1%
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Spending and Costs
Will Decrease
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
3%
$24,720
$23,484
-1%
$24,000
2%
$24,480
$23,256
-2%
$24,000
1%
$24,240
$23,028
-3%
(5% Margin)
Payer
Change
Provider
Margin
Provider
Change
$1,248
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But Provider Margins Will Also
Decrease With Fewer Surgeries
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
3%
$24,720
$23,484
-1%
$1,236
-1%
$24,000
2%
$24,480
$23,256
-2%
$1,224
-2%
$24,000
1%
$24,240
$23,028
-3%
$1,212
-3%
(5% Margin)
Payer
Change
Provider
Margin
Provider
Change
$1,248
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Result is a Win-Lose Scenario:
Better Quality = Lower Margins
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
3%
$24,720
$23,484
-1%
$1,236
-1%
$24,000
2%
$24,480
$23,256
-2%
$1,224
-2%
$24,000
1%
$24,240
$23,028
-3%
$1,212
-3%
Better Quality =
(5% Margin)
Payer
Change
Provider
Margin
Provider
Change
$1,248
Win for Payer + Loss for Provider
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Result is a Win-Lose Scenario:
Better Quality = Lower Margins
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
3%
$24,720
$23,484
(5% Margin)
Payer
Change
Provider
Margin
Provider
Change
$1,248
IS -1% $1,236 -1%
$24,000
2%
$24,480
$23,256
-2%
$1,224
-2%
THERE
$24,000
1%
$24,240
$23,028
-3%
$1,212
-3%
A
BETTER
Better Quality =
Win for Payer + Loss for Provider
WAY?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Starting With Current Payment
and Complication Rates….
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
(5% Margin)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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If You Want to Offer a Warranty,
How Much Should You Charge?.
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
4%
$24,960
$23,712
(5% Margin)
Price
With
Warranty
$?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Starting Point for Warranty Price:
Actual Current Average Payment
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
4%
$24,960
$23,712
(5% Margin)
Price
With
Warranty
$24,960
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What Good Does It Do To
Charge What’s Being Paid Now?
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
4%
$24,960
$23,712
(5% Margin)
Price
With
Warranty
Payer
Change
Provider
Margin
Provider
Change
$1,248
$24,960
$1,248
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Warranty Pricing Gives Financial
Incentive to Improve Quality
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
4%
$24,960
$23,712
$24,960
$24,000
3%
$24,720
$23,484
$24,960
Reducing
Adverse
Events…
(5% Margin)
Price
With
Warranty
Payer
Change
Provider
Margin
Provider
Change
$1,248
...w/o
...Reduces Reducing
Costs...
Payment...
$1,248
-0.0%
$1,476
+18%
…Improves
The Bottom
Line
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Price to Payer Can Be Reduced
Without Harming Provider Margins
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
4%
$24,960
$23,712
$24,960
$24,000
3%
$24,720
$23,484
$24,960
-0.0%
$1,476
+18%
$24,000
3%
$24,720
$23,484
$24,800
-0.6%
$1,316
+5%
Higher
Quality
(5% Margin)
Price
With
Warranty
Payer
Change
Provider
Margin
Provider
Change
$1,248
Enables
Lower
Prices
$1,248
Still With
Better
Margin
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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A Virtuous Cycle of Quality
Improvement & Cost Reduction
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
4%
$24,960
$23,712
$24,960
$24,000
3%
$24,720
$23,484
$24,960
-0.0%
$1,476
+18%
$24,000
3%
$24,720
$23,484
$24,800
-0.6%
$1,316
+5%
$24,000
2%
$24,480
$23,256
$24,800
-0.6%
$1,544
+24%
Reducing
Adverse
Events…
(5% Margin)
...Reduces
Costs...
Price
With
Warranty
Payer
Change
Provider
Margin
Provider
Change
$1,248
$1,248
…Improves
The Bottom
Line
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Quality and Financial Incentives
Are Now (Finally) Aligned
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
4%
$24,960
$23,712
$24,960
$24,000
3%
$24,720
$23,484
$24,960
-0.0%
$1,476
+18%
$24,000
3%
$24,720
$23,484
$24,800
-0.6%
$1,316
+5%
$24,000
2%
$24,480
$23,256
$24,800
-0.6%
$1,544
+24%
$24,000
2%
$24,480
$23,256
$24,570
-1.6%
$1,314
+5%
$24,000
1%
$24,240
$23,028
$24,570
-1.6%
$1,542
+24%
Better
Quality
(5% Margin)
Price
With
Warranty
Payer
Change
Provider
Margin
Provider
Change
$1,248
Allows
Lower Prices
$1,248
Improves
Margins
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Win-Win-Win Through
Appropriate Payment & Pricing
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
$24,000
4%
$24,960
$23,712
$24,000
4%
$24,960
$23,712
$24,960
$24,000
3%
$24,720
$23,484
$24,960
-0.0%
$1,476
+18%
$24,000
3%
$24,720
$23,484
$24,800
-0.6%
$1,316
+5%
$24,000
2%
$24,480
$23,256
$24,800
-0.6%
$1,544
+24%
$24,000
2%
$24,480
$23,256
$24,570
-1.6%
$1,314
+5%
$24,000
1%
$24,240
$23,028
$24,570
-1.6%
$1,542
+24%
(5% Margin)
Price
With
Warranty
Payer
Change
Provider
Margin
Provider
Change
$1,248
$1,248
Quality is Better...
...Spending is Lower...
...Providers Are More Profitable
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Different Warranty Prices for
Cases With Different Risks
Payment
for
Surgery
Rate
of 2nd
Surgery
Average
Current
Payment
Average
Total Cost
(5% Margin)
Price
With
Warranty
Payer
Change
Provider
Margin
Provider
Change
HIGH RISK CASES
$24,000
6%
$25,440
$24,168
$24,000
4%
$24,960
$23,712
$1,272
$25,200
-1%
$1,488
+17%
LOW RISK CASES
$24,000
2%
$24,480
$23,256
$24,000
0%
$24,000
$22,800
$1,314
$24,200
-1%
$1,400
+7%
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A Critical Element is
Shared, Trusted Data
• Physicians and Hospitals need to know the current
utilization and costs for their patients to determine whether a
bundled/warrantied payment amount will cover the costs of
delivering effective care to the patients
• Purchasers and Payers need to know the current utilization
and costs for their employees/members to determine whether
the bundled/warrantied payment amount is a better deal than
they have today
• Both sets of data have to match in order for providers and
payers to agree on the new approach!
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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CMS Is Pursuing
Bundles & Warranties in Medicare
• Model 1 (Inpatient Gainsharing, No Warranty)
– Hospitals can share savings with physicians
– No actual change in the way Medicare payments are made
• Model 2 (Virtual Full Episode Bundle + Warranty)
– Budget for Hospital+Physician+Post-Acute+Readmissions
– Medicare pays bonus if actual cost < budget
– Providers repay Medicare if actual cost > budget
• Model 3 (Virtual Post-Acute Bundle + Warranty)
– Budget for Post-Acute Care+Physicians+Readmissions
– Bonuses/penalties paid based on actual cost vs. budget
• Model 4 (Prospective Inpatient Bundle + Warranty)
– Single Hospital + Physician payment for inpatient care & readmissions
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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But Bundled Payments Don’t Help
If You Want Fewer Procedures
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Significant Potential Savings From
Lower Cost Procedures & Settings
• Maternity Care
– Vaginal delivery instead of C-Section
– Term delivery instead of early elective delivery
– Delivery in birth center instead of hospital
• Back Pain
– Less radical surgery
– Physical therapy instead of surgery
• Chest Pain
– Non-invasive imaging instead of invasive imaging
– Medical management instead of invasive treatment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Significant Potential Savings From
Lower Cost Procedures & Settings
• Maternity Care
– Vaginal delivery instead of C-Section
– Term delivery instead of early elective delivery
– Delivery in birth center instead of hospital
•
•
Savings
=
Back Pain
Lower
– Less radical surgery
– Physical therapy instead of surgery
Revenues
for
Chest Pain
– Non-invasive imaging instead of invasive imaging Specialists
and
– Medical management instead of invasive treatment
Hospitals
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Alternative Payment Models
Allow Win-Win-Win Approaches
BUILDING
BLOCKS
HOW IT WORKS
Single payment to ALL
Bundled providers involved in
Payment delivering ALL of the
care the patient needs
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
HOW PHYSICIANS
AND HOSPITALS
CAN BENEFIT
HOW PAYERS
CAN BENEFIT
Higher payment for
physicians if they
reduce costs paid by
hospitals
Physician and hospital
offer a lower total price
to Medicare or health
plan than today
Higher payment for
physicians and
hospitals with low
rates of infections
and complications
Medicare or health
plan no longer pays
more for high rates of
infections or
complications
Condition- Payment based on the No loss of payment
patient’s condition,
for physicians and
Based
rather than on the
hospitals using fewer
Payment
procedure used
tests and procedures
Medicare or health
plan no longer pays
more for unnecessary
procedures
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Example: Reducing
Avoidable Procedures
TODAY
$/Patient # Pts
Total $
Physician Svcs
Evaluations
$160
300
$48,000
Procedures
$2,000
200
$400,000
Subtotal
Hospital Pmt
Total Pmt/Cost
$448,000
$22,000
200 $4,400,000
300 $4,848,000
Optional Procedure
for a Condition
• Physician evaluates all
patients
• Physician performs
procedure on 2/3 of
evaluated patients
• Up to 10% of procedures
may be avoidable
through patient choice
or alternative treatment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
172
Typical Health Plan Approach:
Prior Auth/Utilization Controls
TODAY
$/Patient # Pts
w/ UTILIZATION CTRL
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$160
300
$48,000
Procedures
$2,000
200
$400,000
$2,000
180
$360,000
Subtotal
Hospital Pmt
Total Pmt/Cost
$448,000
$22,000
200 $4,400,000
300 $4,848,000
$408,000
$22,000
180 $3,960,000
300 $4,368,000
-10%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
173
Under FFS, Payer Wins,
Physicians and Hospitals Lose
TODAY
$/Patient # Pts
w/ UTILIZATION CTRL
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$160
300
$48,000
Procedures
$2,000
200
$400,000
$2,000
180
$360,000
Subtotal
Hospital Pmt
Total Pmt/Cost
$448,000
$22,000
200 $4,400,000
300 $4,848,000
$22,000
$408,000
-9%
180 $3,960,000
-10%
300 $4,368,000
-10%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
174
Is There a Better Way?
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
?
?
?
Procedures
$2,000
200
$400,000
?
?
?
Subtotal
Hospital Pmt
Total Pmt/Cost
$448,000
$22,000
?
?
?
?
200 $4,400,000
?
?
?
300 $4,848,000
?
?
?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
175
A Better Way:
Pay Physicians Differently
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
Hospital Pmt
Total Pmt/Cost
$22,000
$477,000
200 $4,400,000
300 $4,848,000
Better Payment for Condition Management
• Physician paid adequately to engage in shared
decision making process with patients
• Physician paid adequately for procedures without
needing to increase volume of procedures
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
176
Physicians Could Be Paid More
While Still Reducing Total $
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
Hospital Pmt
Total Pmt/Cost
$448,000
$22,000
200 $4,400,000
300 $4,848,000
$22,000
$477,000
+6%
180 $3,960,000
-10%
300 $4,437,000
-8.5%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
177
Do Hospitals Have to Lose In Order
for Physicians To Win?
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
Hospital Pmt
$448,000
$22,000
Total Pmt/Cost
200 $4,400,000
300 $4,848,000
$22,000
$477,000
+6%
180 $3,960,000
-10%
300 $4,437,000
-8.5%
Physician Wins
Hospital Loses
Payer Wins
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
178
What Should Matter to Hospitals is
Margin, Not Revenues (Volume)
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
Hospital Pmt
$448,000
$22,000
Total Pmt/Cost
200 $4,400,000
300 $4,848,000
$22,000
$477,000
+6%
180 $3,960,000
-10%
300 $4,437,000
-8.5%
Revenue Loss
But What About Margin??
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
179
We Need to Understand the
Hospital’s Cost Structure
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
Hospital Pmt
Total Pmt/Cost
$448,000
$22,000
200 $4,400,000
300 $4,848,000
$22,000
$477,000
+6%
180 $3,960,000
-10%
300 $4,437,000
-8.5%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
180
Savings for Both Payer and
Hospital Come From Variable Costs
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
Hospital Pmt
Fixed Costs
$13,200 60% $2,640,000
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$220,000
200 $4,400,000
300 $4,848,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
181
Now, if the Number of Procedures
is Reduced…
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
Hospital Pmt
Fixed Costs
$13,200 60% $2,640,000
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$220,000
200 $4,400,000
180
300 $4,848,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
182
…Fixed Costs Will Remain the
Same (in the Short Run)…
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$220,000
200 $4,400,000
180
300 $4,848,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
183
…Variable Costs Will Go Down in
Proportion to Procedures…
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$7,700
$220,000
200 $4,400,000
180
300 $4,848,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
184
…And Even With a Higher Margin
for the Hospital…
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$233,200
+6%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$7,700
$220,000
200 $4,400,000
180
300 $4,848,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
185
…The Hospital Can Do Better With
Less Total Revenue
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
200 $4,400,000
180 $4,259,200
-3%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$7,700
300 $4,848,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
186
…And The Payer
Still Saves Money
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
200 $4,400,000
180 $4,259,200
-3%
300 $4,848,000
300 $4,736,200
-2%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$7,700
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
187
I.e., Win-Win-Win for
Physician, Hospital, and Payer
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
200 $4,400,000
180 $4,259,200
-3%
300 $4,848,000
300 $4,736,200
-2%
Hospital Pmt
Fixed Costs
$13,200 60% $2,640,000
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
Physician Wins
Hospital Wins
Payer Wins
$7,700
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
188
If The Physician Can Reduce the
Hospital’s Costs Per Procedure….
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
$1,260,000
-18%
Physician Svcs
Evaluations
$160
300
$48,000
Procedures
$2,000
200
$400,000
Subtotal
$448,000
Hospital Pmt
Fixed Costs
$13,200 60% $2,640,000
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$7,000
$220,000
200 $4,400,000
180
300 $4,848,000
300
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
189
Everyone Can Win Even More
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,250
180
$405,000
Subtotal
$448,000
$495,000
+10%
$13,200 60% $2,640,000
$2,640,000
0%
$1,260,000
-18%
$220,000
$245,000
+11%
200 $4,400,000
180 $4,145,000
-6%
300 $4,848,000
300 $4,640,000
-4%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$7,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
190
What Payment Model Supports
This Win-Win-Win Approach?
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
200 $4,400,000
180 $4,259,200
-3%
300 $4,848,000
300 $4,736,200
-2%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$7,700
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
191
Renegotiating Individual Fees
is Impractical
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$233,200
+6%
180 $4,259,200
-3%
300 $4,736,200
-2%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
$22,000
5%
$7,700
$220,000
200 $4,400,000
300 $4,848,000
$23,662
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
192
Pay Based on the Patient’s
Condition, Not on the Procedure
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
$22,000
200 $4,400,000
180 $4,259,200
-3%
$16,160
300 $4,848,000
300 $4,736,200
-2%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
5%
$7,700
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
193
Plan to Offer Care of the Condition
at a Lower Cost Per Patient
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
$22,000
200 $4,400,000
180 $4,259,200
-3%
$16,160
300 $4,848,000
300 $4,736,200
-2%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
5%
$7,700
$15,787
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
194
Use the Payment as a Budget to
Redesign Care…
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
$22,000
200 $4,400,000
180 $4,259,200
-3%
$16,160
300 $4,848,000
300 $4,736,200
-2%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
5%
$7,700
$15,787
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
195
…And Let Physicians & Hospitals
Decide How They Should Be Paid
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
$22,000
200 $4,400,000
180 $4,259,200
-3%
$16,160
300 $4,848,000
300 $4,736,200
-2%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
5%
$7,700
$15,787
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
196
Would “Shared Savings”
Achieve the Same Thing?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
197
Same Example As Before…
Year 0
# Patients $/Patient
Physician Svcs
Evaluations
$48,000
300
$160
Procedures
$400,000
200
$2,000
Subtotal
$448,000
Hospital Pmt
Procedures
$4,400,000
Subtotal
$4,400,000
Total Pmt/Cost
200
$22,000
Optional Procedure
for a Condition
• Physician evaluates all
patients
• Physician performs
procedure on 2/3 of
evaluated patients
• Up to 10% of procedures
may be avoidable
through patient choice
or alternative treatment
$4,848,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
198
Year 1: Physicians & Hospitals Both
Lose With Fewer Procedures)
Year 0
Year 1
Chg
Physician Svcs
Evaluations
$48,000
$48,000
Procedures
$400,000
$360,000
$0
Subtotal
$448,000
$408,000 -9%
Hospital Pmt
Procedures
Reduce
Procs
by 10%
Year 1:
Lower
Revenue
for
Docs &
Hospital
$4,400,000 $3,960,000
$0
Subtotal
Total Pmt/Cost
Savings
$4,400,000 $3,960,000 -10%
$4,848,000 $4,368,000 -10%
$480,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
199
Year 2: Losses Are Lower If Shared
Savings Are Paid…(No)
Year 0
Year 1
Chg
Year 2
Chg
Physician Svcs
Evaluations
$48,000
$48,000
$48,000
Procedures
$400,000
$360,000
$360,000
$0
$40,000
$408,000 -9%
$448,000
Shared Savings
Subtotal
$448,000
0%
Hospital Pmt
Procedures
Shared Savings
Subtotal
Total Pmt/Cost
Savings
$4,400,000 $3,960,000
$3,960,000
$0
$200,000
$4,400,000 $3,960,000 -10% $4,160,000
-5%
$4,848,000 $4,368,000 -10% $4,608,000
-5%
$480,000
$240,000
Reduce
Procs
by 10%
Year 1:
Lower
Revenue
for
Docs &
Hospital
Year 2:
Shared
Savings
Offsets
Some
Losses
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
200
…But Physicians and Hospitals Still
Have Net 2-Year Losses
Year 0
Year 1
Chg
Year 2
Chg
Cumulative
Physician Svcs
Evaluations
$48,000
$48,000
$48,000
Procedures
$400,000
$360,000
$360,000
$0
$40,000
$408,000 -9%
$448,000
Shared Savings
Subtotal
$448,000
0%
-$40,000
-4%
Hospital Pmt
Procedures
Shared Savings
Subtotal
$4,400,000 $3,960,000
$3,960,000
$0
$200,000
$4,400,000 $3,960,000 -10% $4,160,000
-5%
-$680,000
-8%
Total Pmt/Cost
Savings
$4,848,000 $4,368,000 -10% $4,608,000
$480,000
$240,000
-5%
$720,000
-7%
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It’s Even Worse Than That…
• There is no shared savings payment at all if a minimum
total savings level is not reached
• If there is a shared savings payment, it’s reduced if
quality thresholds aren’t met, even if the quality measures
have nothing to do with where savings occurred
• The shared savings payment ends at the end of the
3-year contract period, even if utilization remains lower,
and the payer keeps 100% of the savings in future years
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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So Why Do Payers Like The
Shared Savings Model So Much??
It’s easy for them to implement:
• No changes in underlying fee for service payment and no
costs to change claims payment system
• Additional payments only made if savings are achieved
• The payer sets the rules as to how “savings” are calculated
• Shared savings payments are made well after savings are
achieved, helping the payers’ cash flow
• All of the savings goes back to the payer after the end of the
shared savings contract
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Condition-Based Payment Puts
the Hospital+Physicians in Control
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 60% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$220,000
$233,200
+6%
$22,000
200 $4,400,000
180 $4,259,200
-3%
$16,293
300 $4,888,000
300 $4,267,000
-13%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
5%
$7,700
$14,223
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Total Hospital Margins Depend on
High-Margin Services
Profit
Loss
Profit
Profit
Loss
Loss
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Starting With the Earlier Example
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
Hospital Pmt
Fixed Costs
$13,200 60% $2,640,000
Variable Costs
$7,700 35% $1,540,000
Margin
$1,100
Subtotal
Total Pmt/Cost
5%
$220,000
$22,000
200 $4,400,000
$16,293
300 $4,888,000
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What if This is a VERY High
Margin Procedure for the Hospital?
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
Hospital Pmt
Fixed Costs
$13,200 44% $2,640,000
Variable Costs
$7,700 26% $1,540,000
Margin
$9,100 30% $1,820,000
Subtotal
Total Pmt/Cost
$30,000
200 $6,000,000
300 $6,448,000
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Cover Fixed Costs, Reduce Variable
Costs, and Preserve/Improve Margin
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$13,200 44% $2,640,000
$2,640,000
0%
$1,386,000
-10%
$1,838,200
+1%
200 $6,000,000
180 $5,864,200
-2.3%
300 $6,448,000
300 $6,341,200
-1.7%
Hospital Pmt
Fixed Costs
Variable Costs
$7,700 26% $1,540,000
Margin
$9,100 30% $1,820,000
Subtotal
Total Pmt/Cost
$30,000
$7,700
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Reducing Procedures and Cost Per
Procedure Can Be a Win-Win-Win
TODAY
$/Patient # Pts
TOMORROW
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$160
300
$48,000
$300
300
$90,000
Procedures
$2,000
200
$400,000
$2,150
180
$387,000
Subtotal
$448,000
$477,000
+6%
$2,640,000
0%
$1,386,000
-10%
$1,838,200
+1%
200 $6,000,000
180 $5,864,200
-2.3%
300 $6,448,000
300 $6,341,200
-1.7%
Hospital Pmt
Fixed Costs
$13,200 44% $2,640,000
Variable Costs
$7,700 26% $1,540,000
Margin
$9,100 30% $1,820,000
Subtotal
Total Pmt/Cost
$30,000
Physician Wins
Hospital Wins
Payer Wins
$7,700
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Opportunities for Reducing
Spending Exist in Every Specialty
Opportunities
to Improve Care
and Reduce Cost
Cardiology
Orthopedic
Surgery
Psychiatry
OB/GYN
Barriers in
Current
Payment System
Solutions via
Accountable
Payment Models
• Use less invasive
and expensive
procedures
when appropriate
• Payment is based
on which
procedure is used,
not the outcome
for the patient
• Reduce infections
and complications
• Use less expensive
post-acute care
following surgery
• Reduce ER visits
and admissions for
patients with
depression and
chronic disease
• No flexibility to
increase inpatient
services to reduce
complications &
post-acute care
• No payment for
phone consults
with PCPs
• No payment for
RN care managers
• Joint conditionbased payment
to PCP and
psychiatrist
• Reduce use of
elective C-sections
• Reduce early
deliveries and
use of NICU
• Similar/lower
payment for
vaginal deliveries
• Condition-based
payment
for total cost of
delivery in low-risk
pregnancy
• Condition-based
payment covering
CABG, PCI, or
medication
management
• Episode payment
for hospital and
post-acute care
costs with
warranty
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Examples from Other Specialties
Opportunities
to Improve Care
and Reduce Cost
Neurology
Gastroenterology
Oncology
Radiology
• Avoid unnecessary
hospitalizations for
epilepsy patients
• Reduce strokes and
heart attacks after TIA
• Reduce unnecessary
colonoscopies and
colon cancer
• Reduce ER/admits for
inflammatory bowel d.
• Reduce ER visits
and admissions for
dehydration
• Reduce anti-emetic
drug costs
• Reduce use of
high-cost imaging
• Improve diagnostic
speed & accuracy
Barriers in
Current
Payment System
• No flexibility to
spend more on
preventive care
• No payment to
coordinate w/ cardio
• No flexibility to focus
extra resources on
highest-risk patients
• No flexibility to spend
more on care mgt
• No flexibility to
spend more on
preventive care
• Payment based on
office visits, not
outcomes
• Low payment for
reading images &
penalty for 2x
• Inability to change
inapprop. orders
Solutions via
Accountable
Payment Models
• Condition-based
payment for epilepsy
• Episode or conditionbased payment for
TIA
• Population-based
payment for colon
cancer screening
• Condition-based pmt
for IBD
• Condition-based
payment including
non-oncolytic Rx
and ED/hospital
utilization
• Global payment
for imaging costs
• Partnership in
condition-based
payments
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Should Providers Fear the Risks
of Accountable Payment Models?
Risks Under Payment Reform
• Will the bundled payment be
adequate to cover the services
patients need?
• Will risk adjustment be adequate to
control for differences in need?
•How will you control the costs of
other providers involved in the care
in the bundled payment?
• What portion of payments will be
withheld based on quality
measures?
• Will you have enough patients to
cover the costs of managing the new
payment?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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It’s Not More Risk Than Today,
It’s Just Different Risk
Risks Under FFS
Risks Under Payment Reform
•Will fee levels from payers be
adequate to cover the costs of
delivering services?
•What utilization controls will payers
impose on your services?
•What “value-based” reductions will
be made in your payments based
on “efficiency” measures?
•What “value-based” reductions will
be made in your fees based on
quality measures?
•Will you have enough patients to
cover your practice expenses?
• Will the bundled payment be
adequate to cover the services
patients need?
• Will risk adjustment be adequate to
control for differences in need?
•How will you control the costs of
other providers involved in the care
in the bundled payment?
• What portion of payments will be
withheld based on quality
measures?
• Will you have enough patients to
cover the costs of managing the new
payment?
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Protections For Providers Against
Taking Inappropriate Risk
•
Risk Adjustment: The payment rates to the provider would be adjusted based on
objective characteristics of the patient and treatment that would be expected to
result in the need for more services or increase the risk of complications.
•
Outlier Payment or Individual Stop Loss Insurance: The payment to the
provider from the payer would be increased if spending on an individual patient
exceeds a pre-defined threshold. An alternative would be for the provider to
purchase individual stop loss insurance (sometimes referred to as reinsurance) and
include the cost of the insurance in the payment bundle.
•
Risk Corridors or Aggregate Stop Loss Insurance: The payment to the provider
would be increased if spending on all patients exceeds a pre-defined percentage
above the payments. An alternative would be for the provider to purchase
aggregate stop loss insurance and include the cost of the insurance in the payment
bundle.
•
Adjustment for External Price Changes: The payment to the provider would be
adjusted for changes in the prices of drugs or services from other providers that are
beyond the control of the provider accepting the payment.
•
Excluded Services: Services the provider does not deliver, or order, or otherwise
have the ability to influence would not be included as part of accountability
measures in the payment system.
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How Does This All Fit Into ACOs?
PATIENTS
Heart
Disease
Diabetes
Back Pain
Pregnancy
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Each Patient Should Choose &
Use a Primary Care Practice…
PATIENTS
Heart
Disease
Diabetes
Primary Care
Practice
Back Pain
Pregnancy
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…Which Takes Accountability for
What PCPs Can Control/Influence
MEDICARE/HEALTH PLAN
PATIENTS
Heart
Disease
Diabetes
Back Pain
Accountable
Medical
Home
Primary Care
Practice
Accountability for:
• Avoidable ER Visits
• Avoidable Hospitalizations
• Unnecessary Tests
• Unnecessary Referrals
Pregnancy
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…With a Medical Neighborhood
to Consult With on Complex Cases
MEDICARE/HEALTH PLAN
PATIENTS
Heart
Disease
Diabetes
Accountable
Medical
Home
Primary Care
Practice
Accountability for:
•Unnecessary Tests
•Unnecessary Referrals
•Co-Managed Outcomes
Back Pain
Pregnancy
Endocrinology,
Cardiology,
Urogynecology
Accountable
Medical
Neighborhood
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..And Specialists Accountable for
the Conditions They Manage
MEDICARE/HEALTH
PLAN for:
Accountability
•Unnecessary Tests
•Unnecessary Procedures
•Infections, Complications
PATIENTS
Heart
Disease
Diabetes
Accountable
Medical
Home
Primary Care
Practice
Cardiovasc.
Group
Heart Episode/
Condition Pmt
Neurosurg.
Group
Back Episode/
Condition Pmt
OB/GYN
Group
Pregnancy
Condition Pmt
Back Pain
Pregnancy
Endocrinology,
Cardiology,
Urogynecology
Accountable
Medical
Neighborhood
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That’s Building the ACO
from the Bottom Up
MEDICARE/HEALTH PLAN
Accountable Payment
Models
PATIENTS
Heart
Disease
Diabetes
ACO
Accountable
Medical
Home
Primary Care
Practice
Cardiovasc.
Group
Heart Episode/
Condition Pmt
Neurosurg.
Group
Back Episode/
Condition Pmt
OB/GYN
Group
Pregnancy
Condition Pmt
Back Pain
Pregnancy
Endocrinology,
Cardiology,
Urogynecology
Accountable
Medical
Neighborhood
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Most ACOs Today
Aren’t Truly Reinventing Care
MEDICARE/HEALTH PLAN
Fee-for-Service
Payment
Shared Savings
Payment
ACO
Expensive
IT Systems
PATIENTS
Heart
Disease
Nurse Care
Managers
Share of
Shared Savings
Payment??
Diabetes
Back Pain
Pregnancy
Primary
Care
Psych.,
Neuro
Cardiology
Card. Surg.
Neurosurg.
OB/GYN
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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It Hasn’t Been Working Too Well in
Medicare So Far
• Of the 109 Track 1 (Upside Only) ACOs that started in 2012:
– 57 (52%) Track 1 ACOs did not achieve savings in 2013
– 25 (23%) Track 1 ACOs achieved savings, but not enough to receive
shared savings payments
– 27 (25%) Track 1 ACOs received shared savings payments
• Of the 5 Track 2 (Downside Risk) ACOs that started in 2012:
– 2 (33%) Track 2 ACOs received shared savings payments
– 3 (67%) Track 2 ACOs had to repay a share of losses to CMS
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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A True ACO Can Take a Global
Payment And Make It Work
MEDICARE/HEALTH PLAN
Risk-Adjusted
Global Payment
PATIENTS
Heart
Disease
Diabetes
ACO
Accountable
Medical
Home
Primary Care
Practice
Cardiovasc.
Group
Heart Episode/
Condition Pmt
Neurosurg.
Group
Back Episode/
Condition Pmt
OB/GYN
Group
Pregnancy
Condition Pmt
Back Pain
Pregnancy
Endocrinology,
Cardiology,
Urogynecology
Accountable
Medical
Neighborhood
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Example: BCBS MA
Alternative Quality Contract
• Single payment for all costs of care for a population of patients
–
–
–
–
Adjusted up/down annually based on severity of patient conditions
Initial payment set based on past expenditures, not arbitrary estimates
Provides flexibility to pay for new/different services
Bonus paid for high quality care
• Five-year contract
– Savings for payer achieved by controlling increases in costs
– Allows provider to reap returns on investment in preventive care,
infrastructure
• Broad participation
– 14 physician groups/health systems participating with over 400,000
patients, including one primary care IPA with 72 physicians
• Better care at lower cost
– Higher ambulatory care quality than non-AQC practices, better patient
outcomes, lower readmission rates and ER utilization, lower costs
http://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html
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You Don’t Need a Big Health
System to Manage Global Payment
• Independent PCPs & Specialists Managing Global Payments
– Northwest Physicians Network (NPN) in Tacoma, WA is an IPA with 109 PCPs
and 345 specialists in 165 practices (average size: 2.4 MDs/practice).
NPN accepts full or partial risk capitation contracts, operates its own Medicare
Advantage plan, and does third party administration for self-insured
businesses. www.npnwa.net
– North Texas Specialty Physicians, a 600 physician multi-specialty IPA in Fort
Worth, set up its own Medicare Advantage PPO plan and uses revenues from
the health plan and capitation contracts to pay its PCPs 250% of Medicare
rates and provides high quality, coordinated care to patients. www.ntsp.com
• Joint Contracting by MDs & Hospitals for Global Payments
– The Mount Auburn Cambridge IPA (MACIPA) and Mount Auburn Hospital
jointly contract with three major Boston-area health plans for full-risk capitation.
The IPA is independent of the hospital; they coordinate care with each other
without any formal legal structure. www.macipa.com
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It’s Not Necessary to
Control Total Spending All at Once
Spending Per Patient
TODAY
NOTE:
Graph
Is not
drawn
to
scale
Total
Spending
for a
Group
of
Patients
Total
Spending
for a
Group
of
Patients
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226
Spending Per Patient
Transition to Lower Costs
Over A Multi-Year Period
NOTE:
Graph
Is not
drawn
to
scale
TODAY
YEAR 1
Total
Spending
for a
Group
of
Patients
Total
Spending
for a
Group
of
Patients
YEAR 2
Total
Spending
for a
Group
of
Patients
YEAR 3
Total
Spending
for a
Group
of
Patients
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1. Look at Patients By Condition,
Not Procedure or Service
TODAY
YEAR 1
YEAR 2
YEAR 3
Spending Per Patient
Other
Bones/Joints
Cancer
Maternity
Chronic
Diseases
NOTE:
Graph
Is not
drawn
to
scale
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2. Identify Avoidable Services
and Spending
TODAY
YEAR 1
YEAR 2
YEAR 3
Avoidable $
Spending Per Patient
Other
Avoidable $
Bones/Joints
Avoidable $
Cancer
Avoidable $
Maternity
Avoidable $
Chronic
Diseases
NOTE:
Graph
Is not
drawn
to
scale
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229
3. Start With High-Opportunity
Conditions and Low-Hanging Fruit
TODAY
YEAR 1
YEAR 2
YEAR 3
Spending Per Patient
Avoidable $
Other
Avoidable $
Avoidable $
Other
Bones/Joints
Avoidable $
Avoidable $
Bones/Joints
Cancer
Cancer
Avoidable $
Maternity
Avoidable $
Chronic
Diseases
NOTE:
Graph
Is not
drawn
to
scale
Avoidable $
Avoidable $
Maternity
Avoidable $
Chronic
Diseases
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
230
Redesign More Types of Care and
Reduce More Costs Over Time
TODAY
YEAR 1
YEAR 2
YEAR 3
Spending Per Patient
Avoidable $
Other
Avoidable $
Avoidable $
Other
Bones/Joints
Avoidable $
Avoidable $
Bones/Joints
Avoidable $
Avoidable $
Bones/Joints
Cancer
Avoidable $
Avoidable $
Cancer
Cancer
Avoidable $
Maternity
Avoidable $
Chronic
Diseases
NOTE:
Graph
Is not
drawn
to
scale
Maternity
Avoidable $
Other
Avoidable $
Maternity
Avoidable $
Avoidable $
Chronic
Diseases
Chronic
Diseases
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
231
Achieve Bigger Reductions in
A More Feasible Way
TODAY
YEAR 1
YEAR 2
YEAR 3
Spending Per Patient
Avoidable $
Other
Avoidable $
Avoidable $
Other
Bones/Joints
Avoidable $
Avoidable $
Cancer
Avoidable $
Chronic
Diseases
NOTE:
Graph
Is not
drawn
to
scale
Avoidable $
Bones/Joints
Other
Avoidable $
Other
Avoidable $
Bones/Joints
Cancer
Avoidable $
Avoidable $
Cancer
Cancer
Avoidable $
Avoidable $
Maternity
Maternity
Avoidable $
Avoidable $
Avoidable $
Chronic
Diseases
Chronic
Diseases
Chronic
Diseases
Avoidable $
Maternity
Avoidable $
Maternity
Avoidable $
Bones/Joints
Avoidable $
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What’s the Patient’s
Role and Accountability?
Payment
System
Patient
Provider
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded
services
• Deliver services
efficiently
• Coordinate
services with other
providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Benefit Design Changes Are
Also Critical to Success
Ability and
Incentives to:
• Improve health
• Take prescribed
medications
• Allow a provider to
coordinate care
• Choose the
highest-value
providers and
services
Benefit
Design
Payment
System
Patient
Provider
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded
services
• Deliver services
efficiently
• Coordinate
services with other
providers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
234
Barriers In Current
Benefit Designs
• Co-pays, co-insurance, and high deductibles discourage or
prevent patients from using primary care, preventive
treatments, and chronic disease maintenance medications
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Example: No Coordination of
Pharmacy & Medical Benefits
Single-minded focus on
reducing costs here...
Pharmacy Benefits
Drug
Costs
• High copays for brand-names
when no generic exists
• Doughnut holes & deductibles
...often results in higher
spending on hospitalizations
Medical Benefits
Hospital
Costs
Physician
Costs
Other
Services
Principal treatment for most
chronic diseases involves regular use
of maintenance medication
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Barriers In Current
Benefit Designs
• Co-pays, co-insurance, and high deductibles discourage or
prevent patients from using primary care, preventive
treatments, and chronic disease maintenance medications
• Co-pays, co-insurance, and high deductibles provide little or
no incentive for patients to choose the highest-value providers
for expensive services
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Airfare Choices
from Boston to Cleveland
Boston
Cleveland
?
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
Airfares for July 6-7, 2011 as of 6/26/11
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
238
What If We Paid for Travel
the Way We Pay for Healthcare?
Boston
Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
Airfares for July 6-7, 2011 as of 6/26/11
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
239
Flat Copayments:
First Class Fare Wins
Boston
Cleveland
?
Consumer Share
of Travel Cost
$100 Copayment:
USAirways
1-Stop
Coach
$622
$100
United
Non-Stop
Coach
$1,107
$100
United
Non-Stop
First Class
$1,355

$100
Airfares for July 6-7, 2011 as of 6/26/11
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
240
Coinsurance:
First Class Fare Probably Wins
Boston
Cleveland
?
Consumer Share
of Travel Cost
$100 Copayment:
10% Coinsurance:
USAirways
1-Stop
Coach
$622
$100
$62
United
Non-Stop
Coach
$1,107
$100
$111
United
Non-Stop
First Class
$1,355


$100
$136
Airfares for July 6-7, 2011 as of 6/26/11
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241
High Deductible:
First Class Fare Wins
Boston
Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
$100 Copayment:
10% Coinsurance:
$100
$62
$100
$111
$500 Deductible:
$500
$500
United
Non-Stop
First Class
$1,355


$500
$100
$136
Airfares for July 6-7, 2011 as of 6/26/11
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Price Difference:
Lowest Coach Fare Wins
Boston
Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355


$500
$100 Copayment:
10% Coinsurance:
$100
$62
$100
$111
$100
$136
$500 Deductible:
Lowest Coach Fare:
$500
$0
$500
$485
$733

Airfares for July 6-7, 2011 as of 6/26/11
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Where Will You Get
Your Knee Replaced?
Knee Joint
Replacement
Consumer Share
of Surgery Cost
Price #1
$20,000
Price #2
$25,000
Price #3
$30,000
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Where Will You Get
Your Knee Replaced?
Knee Joint
Replacement
Consumer Share
of Surgery Cost
$1,000 Copayment:
10% Coinsurance
w/$2,000 OOP Max:
$5,000 Deductible:
Price #1
$20,000
Price #2
$25,000
$1,000
$2,000
$1,000
$2,000
$5,000
$5,000
Price #3
$30,000


$5,000
$1,000
$2,000
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Where Will You Get
Your Knee Replaced?
Knee Joint
Replacement
Consumer Share
of Surgery Cost
$1,000 Copayment:
10% Coinsurance
w/$2,000 OOP Max:
$5,000 Deductible:
Highest-Value:
Price #1
$20,000
Price #2
$25,000
Price #3
$30,000


$5,000
$1,000
$2,000
$1,000
$2,000
$1,000
$2,000
$5,000
$0
$5,000
$5,000
$10,000

© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Current Transparency Efforts
Are Focused on Procedure Price
Payment
for
Procedure
dded
Provider 1:
$25,000
Provider 2:
$23,000
-8%
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What Hidden Costs
Accompany the Lower Price?
Payment
for
Procedure
Payment and Rate
of Complications
Provider 1:
$25,000
$30,000
2%
$30,000
10%
Provider 2:
$23,000
-8%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Total Spending May Be Higher
With the “Lower Price” Provider
Payment
for
Procedure
Payment and Rate of
Complications
Average
Total
Payment
$30,000
2%
$25,600
$30,000
10%
$26,000
Provider 1:
$25,000
Provider 2:
$23,000
-8%
+2%
Provider 2 has
a lower starting price,
but is more expensive
when lower quality
is factored in
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Bundled/Warrantied Pmts Allow
Comparing Apples to Apples
Payment
for
Procedure
Payment and Rate of
Complications
Bundled/
Episode
Payment
Provider 1:
2%
$25,600
10%
$26,000
Provider 2:
Bundled prices
show that
Provider 1 is the
higher-value
provider
+2%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Why Is It So Much Cheaper to Fly
to Pittsburgh Than Cleveland?
Boston
Cleveland
?
Non-Stop Coach Fare: $1,107
Boston
Pittsburgh
?
Non-Stop Coach Fare: $188
Airfares for July 6-7, 2011 as of 6/26/11
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Is It The Shorter Distance?
Boston
Cleveland
?
551 Air Miles
Non-Stop Coach Fare: $1,107
Boston
Pittsburgh
?
483 Air Miles
Non-Stop Coach Fare: $188
Airfares for July 6-7, 2011 as of 6/26/11
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Or Greater Competition?
Boston
NONCOMPETITIVE
MARKET
Cleveland
?
Choice: United Non-Stop: $1,107
(No other non-stop choice)
Boston
Pittsburgh
?
COMPETITIVE
MARKET
Airfares for July 6-7, 2011 as of 6/26/11
Choice #1: Delta Non-Stop: $188
Choice #2: JetBlue Non-Stop: $188
Choice #3: USAirways Non-Stop: $238
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Which Is More Likely to Generate
True Price Competition?
Hospital ACO
ONE BIG
ACO
HOSPITAL
MD
DO
MD
DO
DO
MD
DO
MD
DO
MD
DO
MD
MD
DO
MD
DO
DO
MD
DO
MD
MD
DO
MD
DO
DO
MD
DO
MD
DO
MD
DO
MD
MD
DO
MD
DO
DO
MD
DO
MD
DO
MD
DO
MD
IPA ACO
HOSPITAL
VS
HOSPITAL
MD
DO
MD
DO
DO
MD
DO
MD
MD
DO
MD
DO
Physician
Group ACO
HOSPITAL
MD
DO
MD
DO
HOSPITAL
DO
MD
DO
MD
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This All Sounds Really Hard
This All Sounds Really Hard
Can’t We Just Keep Doing
What We’re Doing Today
Until We Retire?
The Opportunities to Reduce Costs
Without Rationing Are Widely Known
Reducing Hospital
Readmissions
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
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The Question is: How Will Payers
Get The Savings?
PAYER
?
Reducing Hospital
Readmissions
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
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The Payer-Driven Approach
to Achieving Savings
Managed Fee-for-Service
Readmission
Penalty
PCP P4P
High
Deductibles
Prior
Authorization
Narrow
Networks
Tiering on
Cost
PAYER
Reducing Hospital
Readmissions
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
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The Provider-Driven Approach
to Achieving Savings
PAYER
Global Pmt/Budget
Reducing Hospital
Readmissions
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Coordinated
Care/
Accountable
Care
Organization
Reducing the Cost of
Expensive Inpatient Care
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260
Very Different Models…
Managed Fee-for-Service
Readmission
Penalty
PCP P4P
High
Deductibles
Prior
Authorization
Narrow
Networks
Tiering on
Cost
PAYER
Global Pmt/Budget
Reducing Hospital
Readmissions
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Coordinated
Care/
Accountable
Care
Organization
Reducing the Cost of
Expensive Inpatient Care
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
261
…And Very Different Impacts
on Physicians and Hospitals
Managed Fee-for-Service
PAYER
Global Pmt/Budget
1. Payer defines how care
should be redesigned
1. Provider determines how
care should be redesigned
2. Payer obtains savings
from lower utilization, if any
2. Provider and Payer agree
on adequate price for
appropriate care that
reduces/controls spending
3. Payer decides whether and
how much savings to share
with providers
3. Providers get to keep any
additional savings they
create and determine how
to use it
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A Different “Triple Aim”
• Better Care for Patients
– Physicians having the flexibility to design care that matches patient
needs
• Lower Spending for Payers
– Physicians able to use the best combination of services for patients
without worrying about which service generates more profits
• Financially Viable Physician Practices (and Hospitals)
–
–
–
–
Physicians paid adequately to deliver high-quality care
Physicians able to remain independent if they want to
Hospitals paid adequately to cover their standby costs
Hospitals able to thrive without acquiring physician practices
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What Can You Do?
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264
What Can You Do?
OPTION 1:
• Attend conferences, listen to PowerPoint presentations, and
deliver or pay for healthcare the same way you always have
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
265
What Can You Do?
OPTION 1:
• Attend conferences, listen to PowerPoint presentations, and
deliver or pay for healthcare the same way you always have
OPTION 2:
• Embrace the need for controlling healthcare spending and for
redesigning the way health care is delivered and paid for
• Play a leadership role in helping your organization prepare for,
transition to, and succeed in a better and more affordable
healthcare system:
–
–
–
–
Identify ways to improve care and reduce costs
Develop the business case for a win-win-win approach
Create the systems needed to manage accountable payment models
Work collaboratively with other stakeholders – physicians, hospitals,
health plans, government, employers, and patients – to ensure
win-win-win results
• HFMA members are the critical link between better care and
win-win-win financial results
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Learn More About Win-Win-Win
Payment and Delivery Reform
Center for Healthcare Quality and Payment Reform
www.PaymentReform.org
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
267
For More Information:
Harold D. Miller
President and CEO
Center for Healthcare Quality and Payment Reform
[email protected]
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org