Understanding Accountable Care
Organizations
Timothy J. Fisher, MD, MS, FACOG
July 10, 2014
How My Brain Works
VALUE=
QUALITY/COST
TRANSFORMING MATERNITY CARE
How Payment Reform Can Help
Improve Quality and Lower Costs
Harold D. Miller
President and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
Big Opportunity for Commercial
Payers & Medicaid is Maternity
U.S. Expenditures on Hospital Inpatient Stays, Age 0-65, 2006 (Millions)
Normal birth/live born
Heart conditions
Cancer
Trauma-related disorders
Other circulatory conditions arteries, veins, …
Diabetes mellitus
Gallbladder, pancreatic, and liver disease
Hypertension
Other endocrine, nutritional & immune …
Kidney Disease
COPD, asthma
Other CNS disorders
Pneumonia
Mental disorders
Infectious diseases
Back problems
Osteoarthritis and other non-traumatic joint …
Medical Expenditure Panel Survey, 2006
$0
$5,000 $10,000 $15,000 $20,000 $25,000 $30,000
Can We Reduce Maternity Care
Costs Without Rationing?
Pregnant
Woman
Reducing Costs Without Rationing:
Better Pregnancy Management
Pregnant
Woman
Uncomplicated
Pregnancy
Complicated
Pregnancy
Reducing Costs Without Rationing:
Better Choices About Delivery
Pregnant
Woman
Uncomplicated
Pregnancy
Complicated
Pregnancy
Term Vaginal
Delivery
Pre-Term,
C-Section
Reducing Costs Without Rationing:
Better Management of Delivery
Pregnant
Woman
Uncomplicated
Pregnancy
Complicated
Pregnancy
Term Vaginal
Delivery
Pre-Term,
C-Section
Efficient
Successful
Delivery
High-Cost
Successful
Delivery
Maternal
Complications,
Readmissions
Infants with Low
Birth Weight,
Injuries, Etc.
Better for Moms and Babies
As Well as Payers
Pregnant
Woman
Uncomplicated
Pregnancy
Complicated
Pregnancy
Better Outcomes/Lower Cost
Term Vaginal
Delivery
Pre-Term,
C-Section
Efficient
Successful
Delivery
High-Cost
Successful
Delivery
Maternal
Complications,
Readmissions
Infants with Low
Birth Weight,
Injuries, Etc.
Current Payment Systems
Reward Bad Outcomes
Pregnant
Woman
Uncomplicated
Pregnancy
Complicated
Pregnancy
Term Vaginal
Delivery
Pre-Term,
C-Section
$
Efficient
Successful
Delivery
High-Cost
Successful
Delivery
Maternal
Complications,
Readmissions
Infants with Low
Birth Weight,
Injuries, Etc.
How Payment Systems Impede
Better Maternity Care
Goals for
High-Value Maternity Care
Achieve Good Birth Outcomes
Barriers Created by
Current Payment Systems
• No financial penalty for poor outcomes,
and no reward for good outcomes;
• More/higher payments to physicians and
hospitals when adverse events occur;
• Same payment to physicians regardless
of quality of prenatal care provided
How Payment Systems Impede
Better Maternity Care
Goals for
High-Value Maternity Care
Achieve Good Birth Outcomes
Avoid Use of Expensive/
Undesirable Procedures
Barriers Created by
Current Payment Systems
• No financial penalty for poor outcomes,
and no reward for good outcomes;
• More/higher payments to physicians and
hospitals when adverse events occur;
• Same payment to physicians regardless
of quality of prenatal care provided
• Higher payment/higher margins for
hospitals for C-sections
How Payment Systems Impede
Better Maternity Care
Goals for
High-Value Maternity Care
Barriers Created by
Current Payment Systems
Achieve Good Birth Outcomes
• No financial penalty for poor outcomes,
and no reward for good outcomes;
• More/higher payments to physicians and
hospitals when adverse events occur;
• Same payment to physicians regardless
of quality of prenatal care provided
Avoid Use of Expensive/
Undesirable Procedures
• Higher physician payment/higher hospital
margins for C-sections
Reduce Costs of Delivery
and Post-Partum Care
• No reward for physicians to help hospitals
reduce costs or to use lower-cost settings
such as birth centers;
• No incentive for mothers to choose lowercost/higher-value providers
Accountable Payment Models
Provide Flexibility + Accountability
BUILDING
BLOCKS
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
Warrantied
Payment
Higher payment for
quality care, no extra
payment for avoiding
complications
Condition- Payment based on the
patient’s condition,
Based
rather than on the
Payment
procedure used
Accountable Payment Models
Allow Win-Win-Win Approaches
BUILDING
BLOCKS
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
Warrantied
Payment
Higher payment for
quality care, no extra
payment for avoiding
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 Medicaid or health
plan than today
Higher payment for
physicians and
hospitals with low
rates of
complications
Medicaid or health
plan no longer pays
more for high rates of
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
Medicaid or health
plan no longer pays
more for unnecessary
procedures
Improving Payment for
Maternity Care: Part 1
Goals for
High-Value Maternity Care
Barriers Created by
Current Payment Systems
Achieve Good Birth Outcomes
• No financial penalty for poor outcomes,
and no reward for good outcomes;
• More/higher payments to physicians and
hospitals when adverse events occur;
• Same payment to physicians regardless
of quality of prenatal care provided
Avoid Use of Expensive/
Undesirable Procedures
• Higher physician payment/higher hospital
margins for C-sections
Reduce Costs of Delivery
and Post-Partum Care
• No reward for physicians to help hospitals
reduce costs or to use lower-cost settings
such as birth centers;
• No incentive for mothers to choose lowercost/higher-value providers
Normal Pregnancy,
Term Delivery, No Complications
Vaginal
Delivery
in Hospital
Normal
Pregnancy
Term
Delivery
w/ No CCs
C-Section
in Hospital
Today: Higher Payment for
C-Sections, Regardless of Need
Lower Payment
Vaginal
Delivery
in Hospital
Normal
Pregnancy
HEALTH
PLAN
Term
Delivery
w/ No CCs
C-Section
in Hospital
Higher Payment
Condition-Based Payment
Encourages Lower-Cost Care
Condition-Specific Payment
Vaginal
Delivery
in Hospital
Normal
Pregnancy
Single
Payment
Term
Delivery
w/ No CCs
C-Section
in Hospital
HEALTH
PLAN
Payment Would Vary Based
on Patient Conditions/Needs
Delivery w/o Complications
Vaginal
Delivery
Term
in Hospital
Delivery
w/ No CCs
C-Section
in Hospital
Normal
Pregnancy
Lower
Payment
HEALTH
PLAN
Delivery with Complications
Term
Delivery
w/ CCs
Vaginal
Delivery
in Hospital
C-Section
in Hospital
Higher
Payment
Condition-Based Payment Also
Encourages Lower-Cost Locations
Condition-Specific Payment
Vaginal
Delivery in
Birth Center
Vaginal
Delivery
in Hospital
Normal
Pregnancy
Single
Payment
Term
Delivery
w/ No CCs
C-Section
in Hospital
HEALTH
PLAN
Improving Payment for
Maternity Care: Part 2
Goals for
High-Value Maternity Care
Achieve Good Birth Outcomes
Barriers Created by
Current Payment Systems
• No financial penalty for poor outcomes,
and no reward for good outcomes;
• More/higher payments to physicians and
hospitals when adverse events occur;
• Same payment to physicians regardless
of quality of prenatal care provided
Avoid Use of Expensive/
Undesirable Procedures
• Higher payment/higher margins for
hospitals for C-sections
Reduce Costs of Delivery
and Post-Partum Care
• No reward for physicians to help hospitals
reduce costs or to use lower-cost settings
such as birth centers;
• No incentive for mothers to choose lowercost/higher-value providers
Accountable Payment Models
Allow Win-Win-Win Approaches
BUILDING
BLOCKS
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
Warrantied
Payment
Higher payment for
quality care, no extra
payment for avoiding
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
complications
Medicaid or health
plan no longer pays
more for high rates of
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
Yes, a Health Care Provider
Can Offer a Warranty
Geisinger Health System ProvenCare
SM
– 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
Major Improvements in
Outcomes, and Quickly
Geisinger Perinatal ProvenCare
• 103 discrete evidence-based elements of care are
incorporated, measured and tracked for compliance
• Redesign, from the ground up, all aspects of provider
workflow
–
–
–
–
Drive fundamental efficiency improvements
Increase patient safety and process reliability
Reduce/eliminate documentation redundancy
Streamline patient education and cut costs
• Seek observable reductions in C-section rates and
premature births
• Enhance management of comorbid conditions
• Improve fetal/child health and wellness
Results of Geisinger
Perinatal ProvenCare
• 26% Reduction in Cesarean Sections
• 68% Reduction in Birth Trauma
• 23% Reduction in NICU Use
Berry SA, et al, “ProvenCare Perinatal: A Model for Delivering Evidence/Guideline-Based Care for Perinatal Populations,”
Joint Commission Journal on Quality and Safety, May 2011
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
Prices for Warranted 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
Prices for Warranted Care May
Be Higher, But Spending Lower
• 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
• In healthcare, a procedure with a warranty would need to have
a higher payment rate than the equivalent non-warrantied
procedure, but the higher price would be offset by fewer
costs of complications, outlier payments, and readmissions
Example: $6,000 Cost of Delivery
Cost of
Delivery
$6,000
Actual Average Payment is
Higher Due to NICU Use
Cost of
Delivery
$6,000
Cost and Rate of
NICU Use
$20,000
8%
Average
Total Cost
$7,600
How Much Should be Charged
for Delivery With a Warranty?
Cost of
Delivery
$6,000
Cost and Rate of
NICU Use
$20,000
8%
Average
Total Cost
Price
Charged
$7,600
?
Starting Point for Warranty Price:
Actual Current Average Payment
Cost of
Delivery
$6,000
Cost and Rate of
NICU Use
$20,000
8%
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$7,600
$7,600
$0
Limited Warranty Gives Financial
Incentive to Improve Quality
Cost of
Delivery
Cost and Rate of
NICU Use
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$6,000
$20,000
8%
$7,600
$7,600
$0
$6,000
$20,000
7%
$7,400
$7,600
$200
Reducing
Adverse
Events…
...Reduces
Costs...
…Improves
The Bottom
Line
Higher-Quality Provider Can
Charge Less, Attract More Patients
Cost of
Delivery
Cost and Rate of
NICU Use
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$6,000
$20,000
8%
$7,600
$7,600
$0
$6,000
$20,000
7%
$7,400
$7,600
$200
$6,000
$20,000
7%
$7,400
$7,500
$100
Enables
Lower
Prices
A Virtuous Cycle of Quality
Improvement & Cost Reduction
Cost of
Delivery
Cost and Rate of
NICU Use
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$6,000
$20,000
8%
$7,600
$7,600
$0
$6,000
$20,000
7%
$7,400
$7,600
$200
$6,000
$20,000
7%
$7,400
$7,500
$100
$6,000
$20,000
6%
$7,200
$7,500
$300
Reducing
Adverse
Events…
...Reduces
Costs...
…Improves
The Bottom
Line
Win-Win-Win for
Patients, Payers, and Providers
Cost of
Delivery
Cost and Rate of
NICU Use
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$6,000
$20,000
8%
$7,600
$7,600
$0
$6,000
$20,000
7%
$7,400
$7,600
$200
$6,000
$20,000
7%
$7,400
$7,500
$100
$6,000
$20,000
6%
$7,200
$7,500
$300
$6,000
$20,000
6%
$7,200
$7,400
$200
$6,000
$20,000
5%
$7,000
$7,400
$400
Quality is Better...
...Spending is Lower...
...Providers More Profitable
To Make It Work:
Shared, Trusted Data for Pricing
• Physician/Hospital needs to know their current rates
of utilization and how many are preventable to know
whether the warranty price will cover its costs of
delivering care
• Purchaser/Payer needs to know its current rates of
utilization to know whether the warranty price is a
better deal than they have today
• Both sets of data have to match in order for both
providers and payers to agree!
Many Potential Opportunities for
Warranties in Maternity Care
• Maternal injuries, infections, complications
• Birth injuries, infections, complications
• Neonatal problems (e.g., respiratory distress
syndrome) after induced birth
• Readmissions (both maternal and infant)
Many Variations of
Payment Reform
Normal
Pregnancy
Vaginal
OB/CNM $
Delivery
in Hospital Hospital $$
No Complications
C-Section OB/CNM $
in Hospital Hospital $$$
No Complications
Complications
Term
Delivery
w/ No CCs
Complications
Bundled Payments
Bundled Payment
Vaginal
OB/CNM $
Delivery
in Hospital Hospital $$
Normal
Pregnancy
Term
Delivery
w/ No CCs
No Complications
Complications
Bundled Payment
C-Section OB/CNM $
in Hospital Hospital $$$
No Complications
Complications
Payments with Warranties
Bundled Payment with Warranty
Vaginal
OB/CNM $
Delivery
in Hospital Hospital $$
Normal
Pregnancy
Term
Delivery
w/ No CCs
No Complications
Complications
Bundled Payment with Warranty
C-Section OB/CNM $
in Hospital Hospital $$$
No Complications
Complications
Condition-Based Payment
Condition-Based Bundled Payment with Warranty
Normal
Pregnancy
Vaginal
OB/CNM $
Delivery
in Hospital Hospital $$
No Complications
C-Section OB/CNM $
in Hospital Hospital $$$
No Complications
Complications
Term
Delivery
w/ No CCs
Complications
Authorizing/Enabling Use of
Alternative Delivery Sites
Condition-Based Bundled Payment with Warranty
Normal
Pregnancy
Term
Delivery
w/ No CCs
Vaginal
OB/CNM $
Delivery
in Hospital Hospital $$
No Complications
Delivery OB/CNM $
in
Birth Center Birth Ctr $
No Complications
C-Section OB/CNM $
in Hospital Hospital $$$
Complications
Complications
No Complications
Complications
Moving Upstream to Broader
Range of Conditions
Broader Condition-Based Bundled Payment with Warranty
Normal
Pregnancy
Term
Delivery
w/ No CCs
Pre-Term
Elective
Induction
Vaginal
OB/CNM $
Delivery
in Hospital Hospital $$
No Complications
Delivery OB/CNM $
in
Birth Center Birth Ctr $
No Complications
C-Section OB/CNM $
in Hospital Hospital $$$
Complications
Complications
No Complications
Complications
A Maternity Care ACO
Bundled Condition-Based Payment with Warranty
Normal
Pregnancy
Term
Delivery
w/ No CCs
High-Risk
Pregnancy
Pre-Term
Elective
Induction
Vaginal
OB/CNM $
Delivery
in Hospital Hospital $$
No Complications
Delivery OB/CNM $
in
Birth Center Birth Ctr $
No Complications
C-Section OB/CNM $
in Hospital Hospital $$$
Complications
Complications
No Complications
Complications
Payment rates would still be adjusted based on maternal risk factors at the beginning
of pregnancy and unpreventable factors that occur during pregnancy, but not for
preventable complications or discretionary choice of delivery timing, method, or site
Four Things Needed
For Win-Win-Win Solutions
1. Defining the Change in Care Delivery
–
How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
Four Things Needed
For Win-Win-Win Solutions
1. Defining the Change in Care Delivery
–
How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings
–
–
–
–
What will there be less of, and how much does that save?
What will there be more of, and how much does that cost?
Will the savings offset the costs on average?
How much variation in costs and savings is likely?
Four Things Needed
For Win-Win-Win Solutions
1. Defining the Change in Care Delivery
–
How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings
–
–
–
–
What will there be less of, and how much does that save?
What will there be more of, and how much does that cost?
Will the savings offset the costs on average?
How much variation in costs and savings is likely?
3. Designing a Payment Model To Support Change
–
–
–
–
Flexibility to change the way care is delivered
Accountability for costs and quality related to care
Adequate payment to cover lowest-achievable costs
Protection for the provider from insurance risk
Four Things Needed
For Win-Win-Win Solutions
1. Defining the Change in Care Delivery
–
How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings
–
–
–
–
What will there be less of, and how much does that save?
What will there be more of, and how much does that cost?
Will the savings offset the costs on average?
How much variation in costs and savings is likely?
3. Designing a Payment Model To Support Change
–
–
–
–
Flexibility to change the way care is delivered
Accountability for costs and quality related to care
Adequate payment to cover lowest-achievable costs
Protection for the provider from insurance risk
4. Compensating Providers Appropriately
–
Changing payment to the provider organization
(physician practice/group/IPA/health system) does not
automatically change compensation to physicians or hospitals
Lack of Effective Incentives for
Value-Based Choice by Patients
• Copays, Co-insurance, and High Deductibles do little
to encourage patients to be cost-conscious in
choosing among high-cost providers and services
Where Will You Have
Your Baby Delivered?
Consumer Share
of Delivery Cost
Price #1
$5,000
Price #2
$6,000
$1,000 Copayment:
10% Coinsurance
w/$2,000 OOP Max:
$1,000
$2,000
$1,000
$2,000
$5,000 Deductible:
$5,000
$5,000
Price #3
$7,000


$5,000
$1,000
$2,000
Where Will You Have
Your Baby Delivered?
Consumer Share
of Delivery Cost
Price #1
$5,000
Price #2
$6,000
Price #3
$7,000


$5,000
$1,000 Copayment:
10% Coinsurance
w/$2,000 OOP Max:
$1,000
$2,000
$1,000
$2,000
$1,000
$2,000
$5,000 Deductible:
Highest-Value:
$5,000
$0
$5,000
$1,000
$2,000

Lack of Effective Incentives for
Value-Based Choice by Patients
• Copays, Co-insurance, and High Deductibles do little
to encourage patients to be cost-conscious in
choosing among high-cost providers and services
• Copays, Co-insurance, and High Deductibles can
discourage patients from getting preventive
treatments they need
– If we want mothers to get adequate prenatal care, why do
we make them pay in order to get it?
– What if mothers need medications to improve pregnancy
outcomes, but can’t afford them?
Moving to Higher-Quality,
More Affordable Maternity Care
• There is no one-size-fits-all solution to healthcare
transformation; each region will need to actually
make it happen in its own unique environment. The
best federal policy will support regional innovation.
• Payment reform is necessary, but not sufficient.
Delivery system reform, lean redesign of care
processes, changes in benefit design, and effective
quality measurement are also essential. Everything
needs to focus on delivering the best outcomes for
patients at the lowest cost to the purchasers.
• All stakeholders need to come together with shared
data in a neutral forum to look for win-win-win
solutions and then implement them successfully.
Learn More About Win-Win-Win
Payment and Delivery Reform
Center for Healthcare Quality
and Payment Reform
www.PaymentReform.org
Acknowledgement and Thanks:
Harold D. Miller
President and CEO
Center for Healthcare Quality and Payment Reform
[email protected]
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org