WIN-WIN-WIN APPROACHES
TO ACCOUNTABLE CARE
Payment and Delivery Reforms
That Can Improve Patient Care,
Control Healthcare Spending, and
Support Successful Physician Practices
Harold D. Miller
President and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
In the U.S.,
A Historic Legislative Success
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
2
How to Control Spending on Care
When Insurance Is Paying?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
3
How to Control Spending on Care
When Insurance Is Paying?
Pay for Parts?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
4
What’s the Real Problem With
Fee for Service Payment?
FFS
“Rewards Volume, Not Value”
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
5
What’s the Real Problem With
Fee for Service Payment?
“I wish I could stop ordering more tests,
but I can’t control myself”
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
6
The Real Problem is the Barriers
FFS Creates to High-Value Care
BARRIERS IN FFS TO
HIGH QUALITY, AFFORDABLE CARE
LACK OF
FLEXIBILITY
• No payment for
phone calls or emails
with patients
• No payment to
coordinate care
among providers
• No payment for nonphysician support
services to help
patients with selfmanagement
• No flexibility to shift
resources across
silos
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
7
The Real Problem is the Barriers
FFS Creates to High-Value Care
BARRIERS IN FFS TO
HIGH QUALITY, AFFORDABLE CARE
PENALTY FOR
LACK OF
QUALITY/EFFICIENCY
FLEXIBILITY
• Lower revenues if
• No payment for
phone calls or emails patients don’t make
frequent office visits
with patients
• Lower revenues for
• No payment to
performing fewer tests
coordinate care
and procedures
among providers
• No payment for non- • Lower revenues if
infections and
physician support
complications are
services to help
prevented instead of
patients with selftreated
management
• No flexibility to shift • No revenue at all if
patients stay healthy
resources across
silos
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
8
Most Current “Payment Reforms”
Don’t Fix The Problems with FFS
FFS
• No payment
for services
that will benefit
patients
• Lower
revenues from
reducing
avoidable
costs
P4P
PMPM
Shared Savings
Shared Savings
FFS
FFS
FFS
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
9
Medicare is Slowly Cutting FFS
Without Actually Changing It
2014
2015
2016
2017
2018
2019
-4%
-5.5-6.5%
-8%
-11%
-12%+
-13%+
FFS
FFS
FFS
FFS FFS FFS
+
+
+
+
+
MU
+
MU
MU
MU
MU
+
MU
+
+
+
+
PQRS PQRS PQRS
+
PQRS PQRS PQRS
+
+
+
+
+
VBM
+
VBM
VBM
VBM
VBM
VBM
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
10
What Other Industry Tries to Cut
Pay for Key Professionals by 25%?
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
11
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
12
What Does a (Good) Alternative
Payment Model Look Like?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
13
Three Types of Alternative Models
Offer True Payment Reform
PAYMENT
MODEL
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
14
Three Types of Alternative Models
Offer True Payment Reform
PAYMENT
MODEL
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
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
15
Three Types of Alternative Models
Offer True Payment Reform
PAYMENT
MODEL
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
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
16
Can an Alternative Payment Model
Be Better for Physicians Financially
Than Fee for Service?
Most of the Money in Healthcare
Doesn’t Go to Physicians
Physicians:
16%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
18
.. But Most Money Goes to Things
That Physicians Can Influence
Things
Physicians
Prescribe,
Control, or
Influence
84%
Physicians:
16%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
19
Medicare Payment Silos Pit
Physicians Against Each Other
Physician
Payment
(Part B)
Specialty
Payment
Specialty
Payment
PCP
Payment
PCP
Payment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
20
All Physicians Could Benefit By
Lowering Other Healthcare Costs
Total
Healthcare
Costs
(Parts A,
B, and D)
Hospital &
Post-Acute
Care Costs
(Part A)
Drug
Costs
(Part D)
Physician
Payment
(Part B)
Specialist
Payment
PCP
Payment
Hospital &
Post-Acute
Care Costs
Drug
Costs
Specialist
Payment
PCP
Payment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
21
How Do You Reduce
Spending
Without Harming Patients?
5-17% of Hospital Admissions
Are Potentially Preventable
Source:
AHRQ
HCUP
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
23
Millions of Preventable Events
Harm Patients and Increase Costs
Medical Error and
Preventable Complication
# Events
(2008)
Cost Per
Event
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
Total U.S. Cost
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
24
Many Ways to Reduce Tests &
Services Without Harming Patients
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
25
How Much Do Physicians
Have to Reduce Spending
In Order to Get
Adequate Payment
For the Services They Deliver?
10 Year Federal Budget
Projections for Medicare
Physician Payments Only
Represent 12% of
Projected Medicare Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
27
SGR Repeal & MEI Update
Increases Total Spending by 2.6%
SGR Repeal
& MEI Update:
$160 Billion
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
28
Mere 3% Savings in Non-Physician
Spending Would Pay for Repeal
$160 Billion=
3% of Non-Physician
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
29
But Nobody in DC Believes
That Physicians Can/Will Do It
CBO expects that physicians would generally choose to participate
in the payment options that offer the largest payments for the
services they provide…
CBO expects that most of the alternative payment models that
would be adopted under this legislation would increase Medicare
spending. CBO’s review of numerous Medicare demonstration
projects found that very few succeeded in reducing Medicare
spending.
CBO expects that the greater influence of providers within the
design process specified in H.R. 2810 would lead to smaller
savings than would arise from the development and adoption of
new approaches through the [current] CMMI process.
Congressional Budget Office Cost Estimate for H.R. 2810 (September 13, 2013)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
30
With “Payment Reform” Like This,
CBO Has a Right to Be Skeptical…
FFS
• No payment
for services
that will benefit
patients
• Lower
revenues from
reducing
avoidable
costs
P4P
PMPM
Shared Savings
Shared Savings
FFS
FFS
FFS
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
31
…But With True Payment Reform,
There Can Be a Win-Win-Win
PAYMENT
MODEL
HOW IT WORKS
HOW PHYSICIANS
CAN BENEFIT
HOW PAYERS
CAN BENEFIT
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
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
32
…But With True Payment Reform,
There Can Be a Win-Win-Win
PAYMENT
MODEL
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
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
33
…But With True Payment Reform,
There Can Be a Win-Win-Win
PAYMENT
MODEL
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
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
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
patient’s condition,
Based
rather than on the
Payment
procedure used
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
34
…But With True Payment Reform,
There Can Be a Win-Win-Win
PAYMENT
MODEL
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
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
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
35
How Can Everybody Win?
Doesn’t Somebody Have to Lose?
PAYMENT
MODEL
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
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
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
36
Example: Using Fewer Surgeries to
Manage A Patient’s Condition
CURRENT
$/Patient # Pts
Total $
Physician Svcs
Evaluations
$207
100
$20,700
Non-Surgery
$78
50
$3,900
$732
50
$36,600
Surgery
Subtotal
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
Treatment of
an Acute or
Chronic Condition
• Physician evaluates
patients to determine the
best approach to treating
a health problem
• Surgery is performed
on 1/2 of patients
• Non-surgical treatment
used for remaining 1/2
• Assume that 20% of
patients currently
receiving surgery would
avoid surgery if they
understood the risks and
if additional support
was available for
non-surgical treatment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
37
Most of the Money Is Not
Going to the Physician
CURRENT
$/Patient # Pts
Total $
Physician Svcs
Evaluations
$207
100
$20,700
Non-Surgery
$78
50
$3,900
$732
50
$36,600
Surgery
Subtotal
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
Physician payment
is only 25%
of total spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
38
Today, With Fewer Surgeries, Payer
Wins, Surgeons and Hospitals Lose
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$207
100
$20,700
0%
Non-Surgery
$78
50
$3,900
$78
60
$4,680
+20%
$732
50
$36,600
$732
40
$29,280
-20%
$54,660
-11%
40
$142,760
-20%
100
$197,420
-18%
Surgery
Subtotal
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
$3,569
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
39
“Value-Based Payment Modifier”
Still Causes Docs to Lose Money
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
Non-Surgery
$78
50
$732
50
Surgery
Subtotal
$20,700
+
$3,900
2%
$36,600
$211
100
$21,100
+2%
$80
60
$4,800
+23%
$747
40
$29,880
-18%
$55,780
-9%
40
$142,760
-20%
100
$198,540
-17%
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
$3,569
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
40
A Bigger “Value-Based Payment
Modifier” Doesn’t Solve Problem
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
Non-Surgery
$78
50
$732
50
Surgery
Subtotal
$20,700
+
$3,900
5%
$36,600
$217
100
$21,700
+5%
$82
60
$4,920
+26%
$769
40
$30,760
-16%
$57,380
-6%
40
$142,760
-20%
100
$200,140
-16%
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
$3,569
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
41
Is There a Better Way?
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
?
Non-Surgery
$78
50
$3,900
?
$732
50
$36,600
?
Surgery
Subtotal
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
42
A Better Way: Pay More for Shared
Decision-Making & Non-Surgical Mgt
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
Surgery
Subtotal
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
Better Payment for Condition Management
• Physicians paid adequately to engage in shared decision making
process with patients
• Physicians paid better to manage non-surgical treatment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
43
Physicians Could Be Paid More
While Still Reducing Total Spending
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$68,680
+12%
40
$142,760
-20%
100
$211,440
-12%
Surgery
Subtotal
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
$3,569
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
44
Do Hospitals Have to Lose
In Order for Physicians To Win?
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$68,680
+12%
Surgery
Subtotal
$61,200
Physicians Win
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450 Hospital
$3,569Loses
40
$142,760
-20%
100
$239,650 Payer Wins 100
$211,440
-12%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
45
What Should Matter to Hospitals is
Margin, Not Revenues (Volume)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
46
Hospital Costs Are Not
Proportional to Utilization
7% reduction
in cost
.
Costs
100
99
98
97
96
95
94
93
92
91
90
89
88
87
86
85
84
83
82
81
20% reduction in volume
$1,000
$980
$960
$940
$920
$900
$880
$860
$840
$820
$800
$000
Cost & Revenue Changes With Fewer Patients
#Patients
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
47
Reductions in Utilization Reduce
Revenues More Than Costs
7% reduction
in cost
20% reduction in volume
Revenues
Costs
100
99
98
97
96
95
94
93
92
91
90
89
88
87
86
85
84
83
82
81
20% reduction
in revenue
$1,000
$980
$960
$940
$920
$900
$880
$860
$840
$820
$800
$000
Cost & Revenue Changes With Fewer Patients
#Patients
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
48
Causing Negative Margins
for Hospitals
Revenues
Costs
100
99
98
97
96
95
94
93
92
91
90
89
88
87
86
85
84
83
82
81
Payers Will Be
Underpaying For
Care If
Procedures,
Readmissions, Etc.
Are Reduced
$1,000
$980
$960
$940
$920
$900
$880
$860
$840
$820
$800
$000
Cost & Revenue Changes With Fewer Patients
#Patients
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
49
But Spending Can Be Reduced
Without Bankrupting Hospitals
Cost & Revenue Changes With Fewer Patients
100
99
98
97
96
95
94
93
92
91
90
89
88
87
86
85
84
83
82
81
$000
Payers Can
$1,000
Still Save $
$980
Without Causing
$960
Negative Margins
$940
for Hospital
$920
$900
$880
Revenues
$860
Costs
$840
$820
$800
#Patients
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
50
We Need to Understand the
Hospital’s Cost Structure
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$68,680
+12%
40
$142,760
-20%
100
$211,440
-12%
Surgery
Subtotal
$61,200
Hospital Pmt
Surgeries
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
$3,569
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
51
Adequacy of Payment Depends
On Fixed/Variable Costs & Margins
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$68,680
+12%
Surgery
Subtotal
$61,200
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
Variable Costs
$1,606 45%
$80,300
$357 10%
$17,850
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
52
Now, if the Number of
Procedures is Reduced…
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$68,680
+12%
Surgery
Subtotal
$61,200
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
Variable Costs
$1,606 45%
$80,300
$357 10%
$17,850
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
40
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
53
…Fixed Costs Will Remain the
Same (in the Short Run)…
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
$80,300
0%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
Variable Costs
$1,606 45%
$80,300
$357 10%
$17,850
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
40
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
54
…Variable Costs Will Go Down in
Proportion to Procedures…
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
40
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
55
…And Even With a Higher Margin
for the Hospital…
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
40
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
56
…The Hospital Gets Less Total
Revenue But Higher Margin
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
$164,532
-8%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
40
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
57
…And The Payer
Still Saves Money
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
40
$164,532
-8%
100
$239,650
100
$233,212
-3%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
58
I.e., Win-Win-Win for
Physicians, Hospital, and Payer
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200 Physicians Win
$68,680
+12%
$80,300
0%
Surgery
Subtotal
Hospital Pmt
Hospital Wins
Payer Wins
Fixed Costs
$1,606 45%
$80,300
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
40
$164,532
-8%
100
$239,650
100
$233,212
-3%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
59
What Payment Model Supports
This Win-Win-Win Approach?
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
40
$164,532
-8%
100
$239,650
100
$233,212
-3%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
60
Renegotiating Individual Fees
is Impractical
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
40
$164,532
-8%
100
$233,212
-3%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
100
$239,650
$4,113
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
61
Pay Based on the Patient’s
Condition, Not on the Procedure
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
Non-Surgery
$78
50
$3,900
$732
50
$36,600
Surgery
Subtotal
$61,200
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
Variable Costs
$1,606 45%
$80,300
$357 10%
$17,850
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
$2,397
100
$239,650
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
62
Plan to Offer Care of the Condition
at a Lower Cost Per Patient
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
Non-Surgery
$78
50
$3,900
$732
50
$36,600
Surgery
Subtotal
$61,200
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
Variable Costs
$1,606 45%
$80,300
$357 10%
$17,850
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
$2,397
100
$239,650
$2,332
100
$233,212
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
-3%
63
Use the Payment as a Budget to
Redesign Care…
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
Non-Surgery
$78
50
$3,900
$732
50
$36,600
Surgery
Subtotal
$61,200
$68,680
+12%
40
$164,532
-8%
100
$233,212
-3%
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
Variable Costs
$1,606 45%
$80,300
$357 10%
$17,850
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
$2,397
100
$239,650
$2,332
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
64
…And Let Physicians & Hospitals
Decide How They Should Be Paid
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
40
$164,532
-8%
100
$233,212
-3%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
$2,397
100
$239,650
$2,332
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
65
Flexibility Allows Physicians to Set
Appropriate Compensation
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
40
$164,532
-8%
100
$233,212
-3%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
$2,397
100
$239,650
$2,332
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
66
Flexibility Allows Physicians to Set
Appropriate Compensation
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$96
60
$5,760
48%
$732
50
$36,600
$948
40
$37,920
4%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
40
$164,532
-8%
100
$233,212
-3%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
$2,397
100
$239,650
$2,332
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
67
Would “Shared Savings”
Achieve the Same Thing?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
68
Same Example As Before…
Year 0
# Patients $/Patient
Physician Svcs
Evaluations
$20,700
100
$207
Non-Surgery
$3,900
50
$78
$36,600
50
$732
50
$3,569
Surgery
Shared Savings
Subtotal
$61,200
Hospital Pmt
Surgeries
$178,450
Shared Savings
Subtotal
Total Pmt/Cost
Savings
$178,450
$239,650
Treatment of
an Acute or
Chronic Condition
• Physician evaluates
patients to determine the
best approach to treating
a health problem
• Surgery is performed
on 1/2 of patients
• Non-surgical treatment
used for remaining 1/2
• Assume that 20% of
patients currently
receiving surgery would
avoid surgery if they
understood the risks and
if additional support
was available for
non-surgical treatment
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
69
Year 1: Physicians & Hospitals
Both Lose With Fewer Procedures
Year 0
Year 1
Chg
Physician Svcs
Evaluations
$20,700
$20,700
Non-Surgery
$3,900
$4,680
Surgery
$36,600
Shared Savings
Subtotal
$29,280 -20%
$0
$61,200
$54,660 -11%
Hospital Pmt
Surgeries
$178,450
Shared Savings
Subtotal
Total Pmt/Cost
Savings
Reduce
Surgery
by 20%
Year 1:
Lower
Revenue
for
Docs &
Hospital
$142,760
$0
$178,450
$142,760 -20%
$239,650
$197,420 -18%
$42,230
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
70
Year 2: Losses Are Lower
If Shared Savings Are Paid…
Year 0
Year 1
Chg
Year 2
Chg
Physician Svcs
Evaluations
$20,700
$20,700
$20,700
Non-Surgery
$3,900
$4,680
$4,680
Surgery
$36,600
Shared Savings
Subtotal
$61,200
$29,280 -20%
$29,280
$0
$6,540
$54,660 -11%
$61,200
0%
Hospital Pmt
Surgeries
$178,450
$142,760
$142,760
$0
$14,575
$178,450
$142,760 -20%
$157,335
-12%
$239,650
$197,420 -18%
$218,535
-9%
Shared Savings
Subtotal
Total Pmt/Cost
Savings
$42,230
$21,115
Reduce
Surgery
by 20%
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
71
…But Physicians and Hospitals Still
Have Net 2-Year Losses
Year 0
Year 1
Chg
Year 2
Chg
Cumulative
Physician Svcs
Evaluations
$20,700
$20,700
$20,700
Non-Surgery
$3,900
$4,680
$4,680
Surgery
$36,600
Shared Savings
Subtotal
$61,200
$29,280 -20%
$29,280
$0
$6,540
$54,660 -11%
$61,200
0%
($6,540)
Hospital Pmt
Surgeries
$178,450
$142,760
$142,760
$0
$14,575
$178,450
$142,760 -20%
$157,335
-12%
($56,805)
$239,650
$197,420 -18%
$218,535
-9%
$63,345
Shared Savings
Subtotal
Total Pmt/Cost
Savings
$42,230
$21,115
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
72
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
73
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
74
Condition-Based Payment Allows
Doctors to Redesign Care & Pmt
CURRENT
$/Patient # Pts
FUTURE
Total $
$/Patient # Pts
Total $
Chg
Physician Svcs
Evaluations
$207
100
$20,700
$250
100
$25,000
21%
Non-Surgery
$78
50
$3,900
$240
60
$14,400
269%
$732
50
$36,600
$732
40
$29,280
-20%
$61,200
$68,680
+12%
Surgery
Subtotal
Hospital Pmt
Fixed Costs
$1,606 45%
$80,300
$80,300
0%
Variable Costs
$1,606 45%
$80,300
$64,240
-20%
$357 10%
$17,850
$19,992
+12%
40
$164,532
-8%
100
$233,212
-3%
Margin
Subtotal
Total Pmt/Cost
$3,569
50
$178,450
$2,397
100
$239,650
$2,332
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
75
Savings from Shifting to Lower
Cost Procedures and 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
–
–
–
–
History and exam before imaging
Lower cost imaging
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
76
What About
Non-Proceduralists?
Today: Reactive Care for Chronic
Disease, Many Hospitalizations
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Hospitalizations
Admissions
Specialist
Total Spending
$600
$10,000
$400
500
Total $
$300,000
250 $2,500,000
250
$100,000
500 $2,900,000
500 Moderately
Severe Chronic
Disease Patients
• PCP paid only for
periodic office visits
• Patients do not take
maintenance medications
reliably
• 50% of patients are
hospitalized each year
for exacerbations
• Specialist only
sees patient during
hospital admissions
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
78
Most of the Money
Is Not Going to the Physicians
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Hospitalizations
Admissions
Specialist
Total Spending
$600
$10,000
$400
500
Total $
$300,000
250 $2,500,000
250
Physician Payments
= 14% of
Total Spending
$100,000
500 $2,900,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
79
Is There a Better Way?
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Hospitalizations
Admissions
Specialist
Total Spending
$600
$10,000
$400
500
FUTURE
Total $
$300,000
$/Pt
?
?
# Pts
Total $
?
?
250 $2,500,000
?
?
?
?
250
$100,000
?
?
500 $2,900,000
?
?
Chg
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
80
Pay the PCP for
Proactive Care Management
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Hospitalizations
Admissions
Specialist
Total Spending
$600
$10,000
$400
500
FUTURE
Total $
$300,000
$/Pt
$900
# Pts
500
Total $
$450,000
Chg
+50%
250 $2,500,000
250
$100,000
500 $2,900,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
81
Pay the Specialist to Co-Manage
The Patient’s Care
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
$600
Hospitalizations
Admissions
$10,000
Specialist (Inpt)
$400
Total Spending
500
FUTURE
Total $
$300,000
$/Pt
$900
$300
# Pts
500
500
Total $
$450,000
$150,000
Chg
+50%
+50%
250 $2,500,000
250
$100,000
$0
500 $2,900,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
82
Provide Nursing Support
For Patient Education & Care Mgt
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
$600
Hospitalizations
Admissions
$10,000
Specialist (Inpt)
$400
Total Spending
500
FUTURE
Total $
$300,000
$/Pt
$900
$300
# Pts
500
500
Total $
$450,000
$150,000
$80,000
Chg
+50%
+50%
250 $2,500,000
250
$100,000
$0
500 $2,900,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
83
Can We Afford to Double Spending
on Ambulatory Care?
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
$600
Total $
$300,000
$300,000
Hospitalizations
Admissions
$10,000
Specialist (Inpt)
$400
Total Spending
500
FUTURE
$/Pt
$900
$300
# Pts
500
500
500
Total $
$450,000
$150,000
$80,000
$680,000
Chg
+50%
+50%
127%
250 $2,500,000
250
$100,000
$0
500 $2,900,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
84
Yes, If It Succeeds In
Reducing Hospitalizations
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
$600
Total $
$300,000
$/Pt
$900
$300
$300,000
Hospitalizations
Admissions
$10,000
Specialist (Inpt)
$400
Total Spending
500
FUTURE
250 $2,500,000
250
# Pts
500
500
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
215 $2,150,000
-14%
500
$10,000
Total $
$100,000
$0
500 $2,900,000
500 $2,830,000
127%
-2.5%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
85
Improved Chronic Disease Mgt Can
Potentially Generate Large Savings
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
$600
Total $
$300,000
$/Pt
$900
$300
$300,000
Hospitalizations
Admissions
$10,000
Specialist (Inpt)
$400
Total Spending
500
FUTURE
250 $2,500,000
250
# Pts
500
500
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
150 $1,500,000
-40%
500
$10,000
Total $
$100,000
$0
500 $2,900,000
500 $2,180,000
127%
-25%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
86
How Can 40% Fewer Admissions
Be a Win for the Hospital?
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
$600
Total $
$300,000
$/Pt
$900
$300
$300,000
Hospitalizations
Admissions
$10,000
Specialist (Inpt)
$400
Total Spending
500
FUTURE
250 $2,500,000
250
# Pts
500
500
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
150 $1,500,000
-40%
500
$10,000
Total $
$100,000
$0
500 $2,900,000
500 $2,180,000
127%
-25%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
87
Analyze the Hospital’s
Cost Structure
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
Specialist (Inpt)
Total Spending
$600
500
FUTURE
Total $
$300,000
$300,000
$/Pt
$900
$300
# Pts
500
500
500
Total $
$450,000
$150,000
$80,000
$680,000
Chg
+50%
+50%
127%
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
$10,000 250 $2,500,000
$400
250
$100,000
500 $2,900,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
88
Cover Fixed Costs, Save on
Variable Cost, Increase Margin
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
Specialist (Inpt)
Total Spending
$600
500
FUTURE
Total $
$300,000
$/Pt
$900
$300
$300,000
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
$10,000 250 $2,500,000
$400
250
$100,000
# Pts
500
500
500
$3,700
Total $
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
$1,500,000
$555,000
$82,500
-0%
-40%
+10%
127%
150
$0
500 $2,900,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
89
Hospital Gets Less Total Revenue,
But is Better Off Financially
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
Specialist (Inpt)
Total Spending
$600
500
FUTURE
Total $
$300,000
$300,000
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
$10,000 250 $2,500,000
$400
250
$100,000
$/Pt
$900
$300
# Pts
500
500
Total $
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
$1,500,000
$555,000
$82,500
150 $2,137,500
-0%
-40%
+10%
-15%
500
127%
$0
500 $2,900,000
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
90
And the Payer Still Spends Less
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
Specialist (Inpt)
Total Spending
$600
500
FUTURE
Total $
$300,000
$300,000
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
$10,000 250 $2,500,000
$400
250
$/Pt
$900
$300
# Pts
500
500
Total $
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
$1,500,000
$555,000
$82,500
150 $2,137,500
-0%
-40%
+10%
-15%
500
$100,000
$0
500 $2,900,000
500 $2,817,500
127%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
-3%
91
Win-Win-Win: Better Care, Higher
Physician Pay, Lower Spending
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
Specialist (Inpt)
Total Spending
$600
500
FUTURE
Total $
$300,000
$300,000
$/Pt
$900
$300
# Pts
500
500
500
Total $
$450,000
$150,000
$80,000
$680,000
Providers Win
Hospital Wins
$6,000 60% $1,500,000
Payer Wins $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
$10,000 250 $2,500,000
$400
250
$555,000
$82,500
150 $2,137,500
$100,000
$0
500 $2,900,000
500 $2,817,500
Chg
+50%
+50%
127%
-0%
-40%
+10%
-15%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
-3%
92
What Payment Model Supports This
Win-Win-Win Approach?
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
Specialist (Inpt)
Total Spending
$600
500
FUTURE
Total $
$300,000
$300,000
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
$10,000 250 $2,500,000
$400
250
$/Pt
$900
$300
# Pts
500
500
Total $
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
$1,500,000
$555,000
$82,500
150 $2,137,500
-0%
-40%
+10%
-15%
500
$100,000
$0
500 $2,900,000
500 $2,817,500
127%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
-3%
93
Look at What is Being Spent Today
in Total on the Patient’s Condition
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
$600
500
FUTURE
Total $
$300,000
$300,000
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
250 $2,500,000
Specialist (Inpt)
$400
Total Spending
$5,800
250
$/Pt
$900
$300
# Pts
500
500
Total $
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
$1,500,000
$555,000
$82,500
150 $2,137,500
-0%
-40%
+10%
-15%
500
$100,000
$0
500 $2,900,000
500 $2,817,500
127%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
-3%
94
Tell the Payer You’ll Do It For Less
Than They’re Spending Today
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
$600
500
FUTURE
Total $
$300,000
$/Pt
$900
$300
$300,000
$400
Total Spending
$5,800
250
$100,000
500 $2,900,000
500
500
Total $
Chg
$450,000
$150,000
$80,000
$680,000
+50%
+50%
$1,500,000
$555,000
$82,500
150 $2,137,500
-0%
-40%
+10%
-15%
500
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
250 $2,500,000
Specialist (Inpt)
# Pts
127%
$0
$5,635
500 $2,817,500
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
-3%
95
Use That Budget to Pay Doctors &
Hospitals What They Really Need
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
$600
Total $
$/Pt
Chg
$300,000
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
$2,500,000
$1,500,000
$555,000
$82,500
$2,137,500
-0%
-40%
+10%
-15%
Total Spending
$5,800
250
500
500
Total $
+50%
+50%
$400
$300,000
# Pts
$450,000
$150,000
$80,000
$680,000
Specialist (Inpt)
500
FUTURE
$100,000
500 $2,900,000
127%
$0
$5,635
500 $2,817,500
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
-3%
96
Condition-Based Payment Puts the
Providers in Charge of Care & Pmt
CURRENT
$/Patient # Pts
Physician Svcs
PCP
Specialist
RN Care Mgr
Total
Hospitalizations
Hospital Fixed
Hosp. Variable
Hosp. Margin
Total
$600
Total $
$/Pt
Chg
$300,000
$6,000 60% $1,500,000
$3,700 37%
$925,000
$300 3%
$75,000
$2,500,000
$1,500,000
$555,000
$82,500
$2,137,500
-0%
-40%
+10%
-15%
Total Spending
$5,800
250
500
500
Total $
+50%
+50%
$400
$300,000
# Pts
$450,000
$150,000
$80,000
$680,000
Specialist (Inpt)
500
FUTURE
$100,000
500 $2,900,000
127%
$0
$5,635
500 $2,817,500
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
-3%
97
“Shared Savings” Doesn’t Allow
A Feasible, Win-Win-Win Solution
• No actual change in payment to the physicians
– No funding for the nurse
– No payment for phone calls instead of office visits
– No flexibility to proactive outreach instead of reactive care
• Arbitrary “share” of savings may not be sufficient to cover
higher costs of care or losses from FFS revenue
– <50% of savings is not adequate if >50% of costs are fixed
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
98
Opportunities for Reducing
Spending Exist in Every Specialty
Opportunities
to Improve Care
and Reduce Cost
Cardiology
Orthopedic
Surgery
Psychiatry
OB/GYN
• Use less invasive
and expensive
procedures
when appropriate
• Reduce infections
and complications
• Use less expensive
post-acute care
following surgery
• Reduce ER visits
and admissions for
patients with
depression and
chronic disease
• Reduce use of
elective C-sections
• Reduce early
deliveries and
use of NICU
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
99
Fee-for-Service Creates
Barriers to Redesigning Care
Opportunities
to Improve Care
and Reduce Cost
Cardiology
Orthopedic
Surgery
Psychiatry
OB/GYN
Barriers in
Current
Payment System
• 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
• Reduce use of
elective C-sections
• Reduce early
deliveries and
use of NICU
• Similar/lower
payment for
vaginal deliveries
• No payment for
phone consults
with PCPs
• No payment for
RN care managers
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
100
There Are Win-Win-Win Solutions
Through Better Payment Systems
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
101
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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
102
True Payment Reform
Is Not Just Taking the
Current Fee-for-Service System
And Adding Bonuses or Penalties
What Takes the Time/Expertise
of an Oncology Practice?
New 6 Months of Treatment
Post-Tx Follow-Up
Patient
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
104
What Generates Revenues for
an Oncology Practice?
New 6 Months of Treatment
Post-Tx Follow-Up
Patient
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
105
Mismatch Between Revenues
and Patient Care in Oncology
New
Patient
6 Months of Treatment
Post-Tx Follow-Up
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
106
Condition-Based Payment Being
Developed for Oncology by ASCO
New
Patient
Payment
New
Patient
Higher Payments
For More Complex Pts
Tx
Tx
Tx
Tx
Tx
Tx
Month Month Month Month Month Month Non-Tx Non-Tx Non-Tx
Pmt Pmt Pmt Pmt
Pmt Pmt Mo. $ Mo. $ Mo. $
6 Months of Treatment
Post-Tx Follow-Up
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
107
You Can’t Fix a Flawed Payment
System With Tiny Add-Ons
FFS
• No payment
for services
that will benefit
patients
• Lower
revenues from
reducing
avoidable
costs
P4P
PMPM
Shared Savings
Shared Savings
FFS
FFS
FFS
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
108
The Quid Pro Quo:
Accountability for Controlling Costs
PAYMENT
MODEL
HOW IT WORKS
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
ACCOUNTABILITY NEEDED
FROM PHYSICIANS IN RETURN
FOR MORE FLEXIBLE PAYMENT
Delivering high-quality services
at a lower total cost
within the bundled payment amount
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
Reducing preventable errors
and complications,
and correcting those that occur
with no additional payment
Condition- Payment based on the
patient’s condition,
Based
rather than on the
Payment
procedure used
Managing a patient’s condition effectively
within the condition-based payment amount
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
109
Many Payers Are Unreasonable
About the Quid Pro Quo
Healthcare Spending
Total Spending
Per Patient
Payments
to the
Physician
If physicians want better payment…
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
110
Payers Try to Make Physicians
Accountable for Total Spending
Healthcare Spending
Total Spending
Per Patient
Spending
on
All
Other
Services
the
Physician’s
Patients
Receive
Payments
to the
Physician
…physicians need to take accountability for
all other spending on patients
If physicians want better payment…
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
111
Accountability Must Be Focused on
What Each Physician Can Influence
Healthcare Spending
Total Spending
Per Patient
Spending
the
Physician
Cannot
Control
e.g., PCPs can’t reduce surgical site infections
e.g., surgeons can’t prevent diabetic foot ulcers
e.g., oncologists can’t prevent cancer
Other
Spending
the
Physician
Can
Control
or
Influence
e.g., PCPs can help diabetics avoid amputations
e.g., surgeons can reduce surgical site infections
e.g., oncologists can reduce complications from
drug toxicity
Payments
to the
Physician
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
112
Good Payment Models Focus
On Costs Physicians Can Control
PAYMENT
MODEL
HOW IT WORKS
FOCUS OF ACCOUNTABILITY
Single payment to 2+
Bundled providers who are now
Payment paid separately (e.g.,
hospital+physician)
Accountability for the cost and quality
of the specific treatment
defined in the bundled payment
Higher payment for
quality care, no extra
Warrantied
payment for correcting
Payment preventable errors and
complications
Accountability for
preventable errors and complications
associated with
the specific treatment provided
Condition- Payment based on the
patient’s condition,
Based
rather than on the
Payment
procedure used
Accountability for costs and outcomes
associated with
the specific condition(s) being managed
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
113
Spending Per Patient
Accountability for Creating
“Savings” Is Easier Than It Looks…
TODAY
YEAR 1
Total
Healthcare
Spending
for a
Group
of Patients
Total
Healthcare
Spending
for a
Group
of Patients
NOTE:
Graph
Is not
drawn
to
scale
Payer
Spending
Payer
Spending
YEAR 2
Total
Healthcare
Spending
for a
Group
of Patients
Payer
Spending
YEAR 3
Total
Healthcare
Spending
for a
Group
of Patients
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
114
What Purchasers Want and Need is
to Reduce Growth in Spending
Spending Per Patient
TODAY
Total
Healthcare
Spending
for a
Group
of Patients
NOTE:
Graph
Is not
drawn
to
scale
Payer
Spending
YEAR 1
Total
Healthcare
Spending
for a
Group
of Patients
Payer
Spending
YEAR 2
Total
Healthcare
Spending
for a
Group
of Patients
Payer
Spending
YEAR 3
Total
Healthcare
Spending
for a
Group
of Patients
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
115
“Savings” Means
Slower Growth Each Year
Spending Per Patient
TODAY
Total
Healthcare
Spending
for a
Group
of Patients
NOTE:
Graph
Is not
drawn
to
scale
Payer
Spending
YEAR 1
Total
SlowerHealthcare
Growing
Spending
Spending
for a
for
Group
of Patients
Payer
Spending
YEAR 2
Total
Healthcare
Spending
for a
Group
of Patients
Payer
Spending
YEAR 3
Total
Healthcare
Spending
for a
Group
of Patients
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
116
So Significant Savings Is Achieved
Even Though Spending is Higher
Spending Per Patient
TODAY
Total
Healthcare
Spending
for a
Group
of Patients
NOTE:
Graph
Is not
drawn
to
scale
Payer
Spending
YEAR 1
Total
SlowerHealthcare
Growing
Spending
Spending
for a
for
Group
of Patients
Payer
Spending
YEAR 2
YEAR 3
Total
Healthcare
SlowerSpending
Growing
for a
Spending
Group
for
of
Patients
of Patients
Total
Healthcare
Spending
SlowerGrowing
for a
Spending
Group
of Patients
for
of Patients
Payer
Spending
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
117
How Do You Control The Trend?
Spending Per Patient
TODAY
Total
Healthcare
Spending
for a
Group
of Patients
NOTE:
Graph
Is not
drawn
to
scale
Payer
Spending
YEAR 1
Total
SlowerHealthcare
Growing
Spending
Spending
for a
for
Group
of Patients
Payer
Spending
YEAR 2
YEAR 3
Total
Healthcare
SlowerSpending
Growing
for a
Spending
Group
for
of
Patients
of Patients
Total
Healthcare
Spending
SlowerGrowing
for a
Spending
Group
of Patients
for
of Patients
Payer
Spending
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
118
Identify the Avoidable Spending..
Spending Per Patient
TODAY
YEAR 2
Avoidable
Spending
Avoidable
Spending
Necessary
Spending
NOTE:
Graph
Is not
drawn
to
scale
YEAR 1
Payer
Spending
YEAR 3
Avoidable
Spending
Avoidable
Spending
Necessary
Spending
Payer
Spending
Necessary
Spending
Payer
Spending
Necessary
Spending
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
119
…And Reduce It Over Time…
Spending Per Patient
TODAY
YEAR 2
Avoidable
Spending
Avoidable
Spending
Necessary
Spending
NOTE:
Graph
Is not
drawn
to
scale
YEAR 1
Payer
Spending
YEAR 3
Avoidable
Spending
Avoidable
Spending
Necessary
Spending
Payer
Spending
Necessary
Spending
Payer
Spending
Necessary
Spending
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
120
…While the Appropriate Spending
Can Still Increase….
Spending Per Patient
TODAY
YEAR 2
YEAR 3
Avoidable
Spending
Avoidable
Spending
Necessary
Spending
NOTE:
Graph
Is not
drawn
to
scale
YEAR 1
Payer
Spending
Avoidable
Spending
Necessary
Spending
Payer
Spending
Avoidable
Spending
Necessary
Spending
Payer
Spending
Necessary
Spending
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
121
So Patients Are Getting Better
Care at Lower Cost
Spending Per Patient
TODAY
Avoidable
Spending
Necessary
Spending
NOTE:
Graph
Is not
drawn
to
scale
Payer
Spending
YEAR 1
Avoidable
Spending
Necessary
Spending
Payer
Spending
YEAR 2
Avoidable
Spending
Necessary
Spending
Payer
Spending
YEAR 3
Avoidable $
Necessary
Spending
Payer
Spending
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
122
Don’t These Other
Payment Models
Involve a Lot of “Risk?”
The Goal: Slower Growth in
Spending Than Under FFS
COST
FFS
Pmts
Actual
FFS
Pmts
FFS
Pmts
Actual Projected
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
124
To Attract Payers, New Payment
Must Be < Projected FFS Spend
COST
Bundled
or
ConditionBased
Payment
Level
Lower
Pmt
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Actual Proposed
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
125
…If All Goes Well, Provider’s Costs
Are Lower Than the Payment…
COST
Bundled
or
ConditionBased
Payment
Level
Lower
Pmt
Lower
Costs
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Costs
of
Svcs
Actual Proposed Actual
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
126
...And Both the Payer and
Provider Will “Win”
Savings
For Payer
COST
Bundled
or
ConditionBased
Payment
Level
WINWIN
Profit for
Provider
Lower
Pmt
Lower
Costs
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Costs
of
Svcs
Actual Proposed Actual
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
127
The Risk Physicians Fear:
All Won’t Go Well (Costs Go Up)..
COST
Bundled
or
ConditionBased
Payment
Level
Excess
Cost
Lower
Pmt
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Costs
of
Svcs
Actual Proposed Actual
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
128
…Creating a Win-Lose Situation
Savings
For Payer
COST
Bundled
or
ConditionBased
Payment
Level
FFS
Pmts
Actual
Loss for
Provider
Excess
Cost
Lower
Pmt
FFS
Pmts
WINLOSE
Alt.
Pmt
Model
$
Costs
of
Svcs
Actual Proposed Actual
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
129
Many Different Reasons Costs
May Increase Beyond Payment
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
Costs
of
Svcs
Actual Proposed Actual
Many Avoidable
Complications
Failure to Follow
Guidelines
Overutilization
of Services
Large Random
Variation
New, High-Cost
Treatment
Unusually
Costly Patient
Higher-Severity
Patients
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
130
Physicians CAN Control Many of
the Factors Causing Higher Costs
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
Costs
of
Svcs
Actual Proposed Actual
Many Avoidable
Complications
Failure to Follow
Guidelines
Overutilization
of Services
Large Random
Variation
New, High-Cost
Treatment
Unusually
Costly Patient
Higher-Severity
Patients
What
Physicians
CAN Control
(Performance
Risk)
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
131
But Other Causes of Higher Costs
CANNOT Be Controlled by Doctors
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
Costs
of
Svcs
Actual Proposed Actual
Many Avoidable
Complications
Failure to Follow
Guidelines
Overutilization
of Services
Large Random
Variation
New, High-Cost
Treatment
Unusually
Costly Patient
Higher-Severity
Patients
What
Physicians
CAN Control
(Performance
Risk)
What
Physicians
CANNOT
Control
(Insurance
Risk)
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
132
Physicians Should NOT Be
Expected To Take Insurance Risk
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
Costs
of
Svcs
Actual Proposed Actual
Many Avoidable
Complications
Failure to Follow
Guidelines
Overutilization
of Services
Large Random
Variation
New, High-Cost
Treatment
Unusually
Costly Patient
Higher-Severity
Patients
What
Physicians
CAN Control
(Performance
Risk)
What
Physicians
CANNOT
Control
(Insurance
Risk)
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
133
Four Mechanisms for Separating
Insurance and Performance Risk
COST
Bundled
or
ConditionBased
Payment
Level
Savings
FFS
Pmts
Actual
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
Costs
of
Svcs
Actual Proposed Actual
Many Avoidable
Complications
Failure to Follow
Guidelines
Overutilization
of Services
Large Random
Variation
New, High-Cost
Treatment
Unusually
Costly Patient
Higher-Severity
Patients
Performance
Risk
(Provider’s
Responsibility)
Risk
Corridors
Risk
Exclusions
Outlier Pmt/
Stop-Loss
Risk
Adjustment
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
134
How Many Patients
Do You Need to
(Successfully)
Manage Total Risk?
Who Is the Biggest Commercial
Insurer in America?
•
•
•
•
Aetna?
Anthem/Wellpoint?
Cigna?
United Healthcare?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
136
Who Is the Biggest Commercial
Insurer in America?
•
•
•
•
•
Aetna?
Anthem/Wellpoint?
Cigna?
United Healthcare?
None of the Above
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
137
For Most Workers, Employers are
the Insurer, Not a Health Plan
Source:
Employer
Health
Benefits
2012 Annual
Survey.
The Kaiser
Family
Foundation
and Health
Research
and
Educational
Trust
60% of Workers Are Now in Self-Insured Plans
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
138
How Big is the Smallest
Commercial Insurer in America?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
139
Companies With <1,000 Workers
Take Total Healthcare Cost Risk
Sources:
Employer
Health
Benefits
2012 Annual
Survey.
The Kaiser
Family
Foundation
and Health
Research
and
Educational
Trust;
State-Level
Trends in
EmployerSponsored
Health
Insurance,
April 2013.
State Health
Access Data
Assistance
Center and
Robert
Wood
Johnson
Foundation
Fewer
employees
than typical
physician
practice panel
size
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
140
The Keys to Managing Risk
• How Do Small Employers Manage Self-Insurance Risk?
–
–
–
–
They know who their employees are and can estimate spending
They start with what they spent last year and try to control growth
They have reserves to cover year-to-year variation
They purchase stop-loss insurance to cover unusually expensive cases
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
141
The Keys to Managing Risk
• How Do Small Employers Manage Self-Insurance Risk?
–
–
–
–
They know who their employees are and can estimate spending
They start with what they spent last year and try to control growth
They have reserves to cover year-to-year variation
They purchase stop-loss insurance to cover unusually expensive cases
• How Would Physician Practices Manage Risk?
–
–
–
–
They need to know who their patients are in order to project spending
They need to start with last year’s payments and control growth
They need some reserves to cover year-to-year variation
They need to purchase stop-loss insurance to cover unusually
expensive cases
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
142
Should Physicians Fear the
Risks of New 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
143
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?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
144
Fee for Service Looks
Increasingly Risky
2014
2015
2016
2017
2018
2019
-4%
-5.5-6.5%
-8%
-11%
-12%+
-13%+
FFS
FFS
FFS
FFS FFS FFS
+
+
+
+
+
MU
+
MU
MU
MU
MU
+
MU
+
+
+
+
PQRS PQRS PQRS
+
PQRS PQRS PQRS
+
+
+
+
+
VBM
+
VBM
VBM
VBM
VBM
VBM
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
145
Where Do ACOs
Fit Into All of This?
Total Healthcare Spending Stems
From Many Health Problems
PATIENTS
Heart
Disease
Diabetes
Back Pain
Pregnancy
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
147
Each Patient Should Choose &
Use a Primary Care Practice…
PATIENTS
Heart
Disease
Diabetes
Primary Care
Practice
Back Pain
Pregnancy
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
148
…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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
149
…With a Medical Neighborhood
to Consult With on Complex Cases
MEDICARE/HEALTH PLAN
PATIENTS
Heart
Disease
Diabetes
Accountable
Medical
Home
Primary Care
Practice
Back Pain
Pregnancy
Radiology,
Urology,
Dermatology
Accountability for:
•Unnecessary Tests
•Unnecessary Referrals
•Co-Managed Outcomes
Accountable
Medical
Neighborhood
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
150
..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
Cardiology
Group
Heart Episode/
Condition Pmt
Neurosurg.
Group
Back Episode/
Condition Pmt
OB/GYN
Group
Pregnancy
Management
Pmt
Back Pain
Pregnancy
Radiology,
Urology,
Dermatology
Accountable
Medical
Neighborhood
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
151
That’s Building the ACO
from the Bottom Up
MEDICARE/HEALTH PLAN
Accountable Payment
Models
PATIENTS
Heart
Disease
Diabetes
Accountable
Medical
Home
Primary Care
Practice
ACO
Cardiology
Group
Heart Episode/
Condition Pmt
Neurosurg.
Group
Back Episode/
Condition Pmt
OB/GYN
Group
Pregnancy
Management
Pmt
Back Pain
Pregnancy
Radiology,
Urology,
Dermatology
Accountable
Medical
Neighborhood
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
152
Most ACOs Today Aren’t Truly
Reinventing Care or Payment
MEDICARE/HEALTH PLAN
Fee-for-Service
Payment
Shared Savings
Payment
ACO
PATIENTS
Expensive
IT Systems
Heart
Disease
Nurse Care
Managers
Shared Savings
Bonus
Diabetes
Back Pain
Pregnancy
Primary
Care
Radiol.,
Psych.
Cardiology
Neurosurg.
OB/GYN
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
153
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
154
You Don’t NEED an ACO to
Improve Payment for Each Specialty
MEDICARE/HEALTH PLAN
PATIENTS
Heart
Disease
Diabetes
Accountable
Medical
Home
Primary Care
Practice
Back Pain
Pregnancy
Radiology,
Urology,
Dermatology
Cardiology
Group
Heart
Condition
Pmt
Neurosurg.
Back
Group
Condition
Pmt
OB/GYN
Group
Pregnancy
Management
Accountable
Pmt
Medical
Neighborhood
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
155
But Docs Working Together As An
ACO Can Take a Global Payment
MEDICARE/MEDICAID/EMPLOYER
Risk-Adjusted
Global Payment
PATIENTS
Heart
Disease
Diabetes
Accountable
Medical
Home
Primary Care
Practice
ACO
Cardiology
Group
Heart Episode/
Condition Pmt
Neurosurg.
Group
Back Episode/
Condition Pmt
OB/GYN
Group
Pregnancy
Management
Pmt
Back Pain
Pregnancy
Radiology,
Urology,
Dermatology
Accountable
Medical
Neighborhood
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
156
For Most Employees, the Employer
is the Insurer, Not a Health Plan
Source:
Employer
Health
Benefits
2012 Annual
Survey.
The Kaiser
Family
Foundation
and Health
Research
and
Educational
Trust
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
157
For Self-Funded Employers, The
Health Plan is Just a Pass Through
Purchaser Payment
SelfFunded
Purchasers
ASO
Health Plan
(No Risk)
Providers
Provider Claims
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
158
No Incentive for Health Plans to
Change w/o Customer Demand
Purchasers
Health
Plans
Providers
For Health Plan:
• Higher costs of implementing new payment models
• Savings will (should) go to the purchasers, not the plans
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
159
What We Need Are
Purchaser-Provider Partnerships
Better Payment and Benefit Structure
SelfFunded
Purchasers
Providers
Lower Cost, Higher Quality Care
Purchasers and
Patients “win” if:
• Provider keeps
employees healthy
• Provider delivers
high-quality care
at low prices
Provider “wins” if:
• Patients stay healthy
and need less care
• Purchaser pays
adequately for
high-quality care to
those who need it
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
160
Purchasers and Physicians Have
Common Interests, But Don’t Know It
“We’ve started talking directly to physicians,
and we’ve discovered that
what they want to sell is what we want to buy…”
Cheryl DeMars
CEO, The Alliance
(Employer Coalition in Wisconsin)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
161
Health Plan Implements Changes
Purchasers/Providers Agree On
Health
Plans
Implementation
Better Payment and Benefit Structure
SelfFunded
Purchasers
Providers
Lower Cost, Higher Quality Care
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
162
Provider-Owned Health Plans
Make This Much Easier
ProviderOwned
Health
Plan
Better Payment and Benefit Structure
SelfFunded
Purchasers
Providers
Lower Cost, Higher Quality Care
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
163
Can Small Physician Practices
Manage Accountable Payments?
• Infrastructure/Services
– Small physician practices may not have enough patients to justify staff
or other services to coordinate care, particularly for patients with
complex illnesses (e.g., nurse care managers, patient registries, etc.)
• Quality/Cost Measurement
– Small numbers of patients make measurement unreliable; physicians
may be inappropriately labeled low quality, high cost, or vice versa
MD
DO
MD
DO
DO
MD
DO
MD
MD
DO
MD
DO
MD
DO
MD
DO
DO
MD
DO
MD
?
Better
Patient
Outcomes &
Lower Cost
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
164
Physicians Working Together via
IPAs Can Manage Payments
Shared Services
through IPA
Data and analytics to measure and
monitor utilization and quality
Coordinated relationships with
specialists and hospitals
Capability for tracking patient care
and ensuring followup (e.g., registry)
Method for targeting high-risk
patients (e.g., predictive modeling
Resources for patient educ. & selfmgt support (e.g., RN care mgr)
MD
DO
MD
DO
MD
DO
MD
DO
DO
MD
DO
MD
DO
MD
DO
MD
MD
DO
MD
DO
DO
MD
DO
MD
MD
DO
MD
DO
MD
DO
MD
DO
DO
MD
DO
MD
DO
MD
DO
MD
Better
Patient
Outcomes &
Lower Cost
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
165
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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
166
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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
167
Key Role for Medical Societies:
Helping Physicians Organize Care
• Why would you want a health insurance plan to define a
“network” of physicians?
– A “network” is not just a list of physicians willing to give a discount
– A true “network” is a group of physicians working to coordinate care
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
168
Key Role for Medical Societies:
Helping Physicians Organize Care
• Why would you want a health insurance plan to define a
“network” of physicians?
– A “network” is not just a list of physicians willing to give a discount
– A true “network” is a group of physicians working to coordinate care
• Why would you want a hospital to define a “clinically
integrated network” of physicians?
– If the hospital controls the physicians, it will likely focus on how to
preserve and increase admissions, not how to keep patients healthy
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
169
Key Role for Medical Societies:
Helping Physicians Organize Care
• Why would you want a health insurance plan to define a
“network” of physicians?
– A “network” is not just a list of physicians willing to give a discount
– A true “network” is a group of physicians working to coordinate care
• Why would you want a hospital to define a “clinically
integrated network” of physicians?
– If the hospital controls the physicians, it will likely focus on how to
preserve and increase admissions, not how to keep patients healthy
• Physicians should define their own networks that deliver truly
coordinated care, but they need help to do it
– Who convenes the meeting to plan the IPA?
– Where do the physicians get the technical assistance to help them
succeed in new payment models and direct contracting?
– Will every physician practice have to pay high consulting fees for the
same set of services?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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What About Medicare?
CMS Wants to “Test” Models,
Which Will Take Forever…
6-7 Years
SpecialtyDeveloped
Accountable
Payment
Model
Proposal
SpecialtyDeveloped
Accountable
Payment
Model
Proposal
SpecialtyDeveloped
Accountable
Payment
Model
Proposal
2-3 Years
1-2 Years
Multi-Year
CMS
Demonstration
1 Year
Develop
Program
Rules
Review
Applications
Evaluate
Demonstrations
Multi-Year
CMS
Demonstration
6 Mo.
Develop
Program
Rules
Use of
Payment
to
Improve
Care,
Reduce
Costs
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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…And “Testing” May Not
Convince Anyone Anyway
• Demonstrations and Pilots will not result in significant or rapid
change or accurately predict future results
– Physicians and hospitals are unlikely to fundamentally redesign care for
temporary payment changes
– Good or bad results for demonstration providers do not guarantee
results for other providers in other communities
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Testing Has Not Been Used in the
Past for Major Payment Reforms
• Demonstrations and Pilots will not result in significant or rapid
change or accurately predict future results
– Physicians and hospitals are unlikely to fundamentally redesign care for
temporary payment changes
– Good or bad results for demonstration providers do not guarantee
results for other providers in other communities
• Most major Medicare payment systems have been
implemented without formal demonstrations and evaluations in
advance
– DRGs were implemented in 14 months after Congress required them,
with no prior testing
– RBRVS was phased in over a 5 year period with no prior testing
– OPPS was implemented with no prior testing
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Instead, Allow Physician Practices
to Voluntarily Implement Reforms
• Demonstrations and Pilots will not result in significant or rapid
change or accurately predict future results
– Physicians and hospitals are unlikely to fundamentally redesign care for
temporary payment changes
– Good or bad results for demonstration providers do not guarantee
results for other providers in other communities
• Most major Medicare payment systems have been
implemented without formal demonstrations and evaluations in
advance
– DRGs were implemented in 14 months after Congress required them,
with no prior testing
– RBRVS was phased in over a 5 year period with no prior testing
– OPPS was implemented with no prior testing
• Instead of testing and evaluating, implement better payment
models with willing physician practices and evolve over time
–
–
–
–
Allow “pioneers” to be paid differently without forcing everyone in
Provide short-run protections against big swings in revenue
Improve payment design, risk adjustment, etc. over time
Additional physician practices can join as they see the benefits
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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SGR Repeal Provides a Vehicle
for True Physician Payment Reform
• AMA has been working to get provisions in the SGR Repeal
legislation that would require CMS to implement physiciandesigned payment reforms that improve patient care and
control Medicare spending, and to exempt physicians from the
Value-Based Modifier approach if they participate in
accountable payment models
• All Specialty Societies and State Medical Societies need to
work TOGETHER with the AMA to make this happen in 2015
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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The Question is: How Will
Purchasers Get The Savings?
PURCHASER
?
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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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The Payer-Driven Approach
to Achieving Savings
Managed Fee-for-Service
Readmission
Penalty
Physician
P4P/VBM
High
Deductibles
Prior
Authorization
Narrow
Networks
Tiering on
Cost
PURCHASER
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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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The Physician-Driven Approach
to Achieving Savings
PURCHASER
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
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Very Different Models…
Managed Fee-for-Service
Readmission
Penalty
Physician
P4P/VBM
High
Deductibles
Prior
Authorization
Narrow
Networks
Tiering on
Cost
PURCHASER
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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…And Very Different Impacts
on Physicians
Managed Fee-for-Service
PURCHASER
Global Pmt/Budget
1. Payer defines how care
should be redesigned
1. Physicians determine how
care should be redesigned
2. Payer obtains all savings
from lower utilization
2. Physicians
and Purchaser/Payer
agree on adequate price
for quality care and amount
of savings for payer
3. Payer decides how much
savings to share with
physicians, if any
3. Physicians get to keep any
additional savings and to
determine how to divide it
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Roles for Specialty Societies
and State Medical Societies
STATE MEDICAL SOCIETIES
• Educate physicians about how alternative payment models can help them
deliver better care to their patients and improve their finances
• Help physicians organize IPAs and successfully manage contracts with
payers and purchasers
• Advocate for changes in state law to remove barriers to physician success
in new payment models and contracting arrangements
• Support AMA efforts to accelerate implementation of physician-friendly
alternative payment models in Medicare
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Roles for Specialty Societies
and State Medical Societies
STATE MEDICAL SOCIETIES
• Educate physicians about how alternative payment models can help them
deliver better care to their patients and improve their finances
• Help physicians organize IPAs and successfully manage contracts with
payers and purchasers
• Advocate for changes in state law to remove barriers to physician success
in new payment models and contracting arrangements
• Support AMA efforts to accelerate implementation of physician-friendly
alternative payment models in Medicare
SPECIALTY SOCIETIES
• Educate physicians about how alternative payment models can help them
deliver better care to their patients and improve their finances
• Help physicians to develop specialty-specific payment models that can be
used for direct payment and compensation within global payment
• Work with other specialty societies through the AMA to coordinate payment
reforms so they are consistent and easier for payers to implement
• Support AMA efforts to accelerate implementation of physician-friendly
alternative payment models in Medicare
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
187
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
188
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
APPENDIX
What About Patients?
Payment Reform Is Only
Part of the Solution
Payment
System
Patient
Provider
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded
services
• Deliver services
efficiently
• Coordinate
services with other
providers
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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
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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
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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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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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
196
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
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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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

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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%
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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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
200
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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APPENDIX
Steps to Develop
Win-Win-Win Approaches
How Do You Develop
Win-Win-Win Solutions?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
204
How Do You Develop
Win-Win-Win Solutions?
1. Defining the Change in Care Delivery
–
How can care be redesigned to improve quality and reduce costs?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
205
Best Way to Find Savings
Opportunities? Ask Physicians
“I have zero control over
utilization or studies ordered.
I don’t get paid for calling
a referring doctor and
telling him/her the imaging test
is worthless.”
Radiologist in Maine
“I strongly suspect overutilization
of abdominal CT scans in the ER
and in the hospital; CT scans lead
to further CT scans to follow up
lung and adrenal nodules. The
hospital focuses on length of stay,
but never looks at appropriateness
of radiologic studies.”
Internist at AMA HOD Meeting
“Patients often need to be in
extended care to receive antibiotics
because Medicare doesn’t pay for
home IV therapy. Patient stays
in the hospital for 3 days to justify
a nursing home/rehab stay.”
Orthopedist at AMA HOD Meeting
“I do many unnecessary
colonoscopies on young men.
Give every PCP an anuscope
to allow diagnosis of bleeding
hemorrhoids in the office.”
Gastroenterologist in Maine
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
206
How Do You Develop
Win-Win-Win Solutions?
1. Defining the Change in Care Delivery
–
How can care be redesigned to improve quality and reduce costs?
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?
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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A Critical Element is
Shared, Trusted Data
• Physician/Hospital need to know the current utilization and
costs for their patients to know whether the new payment
model will cover the costs of delivering effective care to the
patients
• Purchaser/Payer needs to know the current utilization and
costs to know whether the new payment model 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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How Do You Develop
Win-Win-Win Solutions?
1. Defining the Change in Care Delivery
–
How can care be redesigned to improve quality and reduce costs?
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?
3. Designing a Payment Model That Supports Change
–
–
–
–
Flexibility to change the way care is delivered
Accountability for costs and quality/outcomes related to care
Adequate payment to cover lowest-achievable costs
Protection for the provider from insurance risk
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
209
How Do You Develop
Win-Win-Win Solutions?
1. Defining the Change in Care Delivery
–
How can care be redesigned to improve quality and reduce costs?
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?
3. Designing a Payment Model That Supports Change
–
–
–
–
Flexibility to change the way care is delivered
Accountability for costs and quality/outcomes related to care
Adequate payment to cover lowest-achievable costs
Protection for the provider from insurance risk
4. Designing an Appropriate Internal Compensation System
–
Changing payment to the provider organization does not
automatically change compensation to physicians
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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How Do You Develop
Win-Win-Win Solutions?
1. Defining the Change in Care Delivery
–
How can care be redesigned to improve quality and reduce costs?
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?
3. Designing a Payment Model That Supports Change
–
–
–
–
Flexibility to change the way care is delivered
Accountability for costs and quality/outcomes related to care
Adequate payment to cover lowest-achievable costs
Protection for the provider from insurance risk
4. Designing an Appropriate Internal Compensation System
–
Changing payment to the provider organization does not
automatically change compensation to physicians
5. Getting Payers to Use the Payment Model
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
211
APPENDIX
Designing a Payment Model
For a Particular Specialty or Condition
Start With How It Works Today…
Health
Care
Spending
Per
Patient
CURRENT
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
PAYMENT TO
PHYSICIAN
PRACTICE
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…Identify What Is Not Adequately
Supported Today…
Health
Care
Spending
Per
Patient
CURRENT
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
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…Define The Payment Amount
Needed for Good Care
Health
Care
Spending
Per
Patient
CURRENT
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
FUTURE
Larger, More
Flexible Payment to
More Effectively
Address Patient
Health Needs
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Define the Structure of the Payment
to Match How Care is Delivered
Health
Care
Spending
Per
Patient
CURRENT
FUTURE
Billable Services
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
Flexible Payment
Based on Patient
Health Needs
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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You “Pay” for Higher Payments
By Looking at Other Services…
Health
Care
Spending
Per
Patient
CURRENT
FUTURE
Other Providers
and Costs
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Services
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
Flexible Payment
Based on Patient
Health Needs
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
217
…And Reducing Spending Enough
to Support Better Payment + Savings
Health
Care
Spending
Per
Patient
CURRENT
Other Providers
and Costs
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
FUTURE
PAYER SAVINGS
Other Providers
and Costs
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Services
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
Flexible Payment
Based on Patient
Health Needs
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Savings Come From Identifying
Avoidable Spending Today…
Health
Care
Spending
Per
Patient
CURRENT
• Unnecessary tests
and procedures
• Avoidable
hospitalizations
• Complications
• Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
FUTURE
PAYER SAVINGS
Other Providers
and Costs
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Services
Flexible Payment
Based on Patient
Health Needs
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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…Reducing the Avoidable Costs to
Produce Savings Without Rationing
Health
Care
Spending
Per
Patient
• Unnecessary tests
and procedures
• Avoidable
hospitalizations
• Complications
• Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
FUTURE
CURRENT
PAYER SAVINGS
•
•
•
•
Unnecessary tests and procedures
Avoidable hospitalizations
Complications
Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Services
Flexible Payment
Based on Patient
Health Needs
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
220
Accountability Has to Accompany
Higher, More Flexible Payment
Health
Care
Spending
Per
Patient
• Unnecessary tests
and procedures
• Avoidable
hospitalizations
• Complications
• Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
FUTURE
CURRENT
PAYER SAVINGS
•
•
•
•
Unnecessary tests and procedures
Avoidable hospitalizations
Complications
Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
How can the
payer be sure
the avoidable
costs will
actually
decrease??
Billable Services
Flexible Payment
Based on Patient
Health Needs
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
221
Option 1: Adjust the Payment
Based on Performance
Health
Care
Spending
Per
Patient
• Unnecessary tests
and procedures
• Avoidable
hospitalizations
• Complications
• Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
FUTURE
CURRENT
PAYER SAVINGS
•
•
•
•
Unnecessary tests and procedures
Avoidable hospitalizations
Complications
Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Performance Bonus
Billable Services
Flexible Payment
Based on Patient
Health Needs
Adjustment
to Payment
Based on
Success in
Controlling
Other
Spending
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
222
Option 2: Bundle the Other Service
Costs Into the Payment
Health
Care
Spending
Per
Patient
• Unnecessary tests
and procedures
• Avoidable
hospitalizations
• Complications
• Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
FUTURE
CURRENT
PAYER SAVINGS
•
•
•
•
Unnecessary tests and procedures
Avoidable hospitalizations
Complications
Readmissions
• Tests and Imaging
• Facility Costs for
Procedures
• Hospitalizations
• Post-Acute Care
• Medications
Billable Services
PAYMENT TO
PHYSICIAN
PRACTICE
Flexible Payment
Based on Patient
Health Needs
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
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Accountability Must Focus on What
Physicians Can Control/Influence
Health
Care
Spending
Per
Patient
CURRENT
Services
Physician
CANNOT Control
Services
Physician
CANNOT Control
Exclude Other
Costs From
Accountability
PAYER SAVINGS
Avoidable Spending
Physician(s)
Can Control
Appropriate/
Necessary
Services
Physician(s)
Can Control
Billable Procedures
Billable Office Visits
NOTE: Relative
sizes of different
services are not
to scale
FUTURE
Avoidable Spending
Physician Can Control
Appropriate/
Necessary
Services
Performance Bonus
Billable Services
Flexible Payment
Based on Patient
Health Needs
Adjustment
to Payment
Based on
Success in
Controlling
Other
Spending
PAYMENT TO
PHYSICIAN
PRACTICE
Unbillable Services
(e.g., phone calls,
nurses, social svcs)
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7 Key Issues in Designing
Successful Payment Reform
1. What are the barriers in current physician payment that need
to be fixed?
2. Are there opportunities to reduce total spending
through better patient care?
3. What different size and form of payment will allow reduction
of the avoidable spending?
4. Will there be enough savings to offset any increase in
physician payment and to offset the costs of implementing
more flexible payment?
5. How will the physician practice be held accountable for
ensuring total spending is lower than it would have otherwise
been?
6. How do you assure that quality Is being preserved or
improved (i.e. only avoidable services are reduced) if
spending is being controlled?
7. How should payment amounts be adjusted for higher-need,
higher-risk patients?
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New Focus for Specialty Society
Work on Payment
UNDER
FEE FOR SERVICE
UNDER ALTERNATIVE
PAYMENT MODELS
• Defining CPT codes
• Fighting for coverage of
CPT codes
• Estimating RVUs for
CPT Codes
• Battling pay cuts to CPT
codes
• Defining quality measures
to get small bonuses
under “value-based”
payment adjustments to
CPT codes
• Defining patient
conditions that drive need
for services (“ConditionBased Payment” codes
and risk adjustment)
• Estimating the total cost
of delivering the best care
for a patient’s condition or
a particular treatment
• Defining appropriate use
criteria to protect against
underuse
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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APPENDIX
Risk Corridors
No One Expects That the Payment
Amount Will Be Exactly Right
Actual Cost
of Services
Cost = Payment
Payment
Amount
Actual Cost
of Services
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Some Random Variation in Costs
Will Occur From Year to Year
Actual Cost
of Services
Cost = Payment
Payment
Amount
Actual Cost
of Services
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Physician Practice Can Handle
Some Variation, As It Does Today
Actual Cost
of Services
Cost=Pmt+x%
Cost = Payment
Provider
Pays
100% of Extra
Cost in this
Range
Provider
Retains
100% of
Savings
Risk Corridor #1
Risk Corridor #1
Payment
Amount
Cost=Pmt-x%
Actual Cost
of Services
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Payers Should Remain Responsible
for All or Part of Large Variation
Actual Cost
of Services
Cost=Pmt+x%
Cost = Payment
Payer
Pays All or
Part
of Excess
Cost
Provider
Pays
100% of Extra
Cost in this
Range
Provider
Retains
100% of
Savings
Cost=Pmt-x%
Risk Corridor #2
Risk Corridor #1
Risk Corridor #1
Payment
Amount
Risk Corridor #2
Payer
Receives
All or Part of
Savings
Actual Cost
of Services
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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New Payments Can Start with
Narrow Risk Corridors
Actual Cost
of Services
Payer
Pays All of
Excess Cost
Risk Corridor #2
Cost=Pmt+x%
Cost = Payment
Provider Pays
100% of Extra Cost
Provider Retains
100% of Savings
Cost=Pmt-x%
Risk Corridor #1
Risk Corridor #1
Payment
Amount
Risk Corridor #2
Payer
Receives
All of
Savings
Actual Cost
of Services
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Expand Risk Corridors Over Time,
As Medicare Did in Part D
TIME
© 2009-2015 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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Complex Risk Corridor
Arrangements Possible
EXAMPLE OF ASYMMETRIC TIERED RISK CORRIDORS
Actual Cost
of Services
Cost=Base+10%
Cost=Base+5%
Cost = Payment
Payer
Pays
80% of Extra Cost
Provider
Pays
20%
Provider
Pays
50% of Extra Cost
Payer
Pays
50% of Extra Cost
Provider
Pays
80% of Extra Cost in this Range
Payer
Pays
20%
Provider
Retains
100% of Savings in this Range
Cost=Base-8%
Cost=Base-15%
Actual Cost
of Services
Provider
Retains
60% of Savings
Provider
Retains
34% of Savings
Base
Payment
Amount
Payer
Receives
40% of Savings
Payer
Receives
66% of Savings
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APPENDIX
Skills Needed by Physician Practices
to Manage New Payment Models
What Skills Do Physicians Need to
Take Accountability for Cost/Value?
Hospital
Admits
Physician
Practice
?
Patient
Unneeded
Testing
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Resources/Capabilities Needed
for PCPs to Take Accountability
Data and analytics to measure and
monitor utilization and quality
Coordinated relationships with
other specialists and hospitals
Method for targeting high-risk
patients (e.g., predictive modeling)
Physician
Practice
Capability for tracking patient care
and ensuring followup (e.g., registry)
Resources for patient educ. & selfmgt support (e.g., RN care mgr)
Hospital
Admits
Patient
Unneeded
Testing
Physician w/ time for diagnosis,
treatment planning, and followup
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Capabilities Exist Today, But
Don’t Coordinate w/ Physicians
Data and analytics to measure and
monitor utilization and quality
Health
Plan
or
Disease
Mgt
Vendor
Coordinated relationships with
other specialists and hospitals
Method for targeting high-risk
patients (e.g., predictive modeling)
Capability for tracking patient care
and ensuring followup (e.g., registry)
Resources for patient educ. & selfmgt support (e.g., RN care mgr)
Physician
Practice
Hospital
Admits
Patient
Unneeded
Testing
Physician w/ time for diagnosis,
treatment planning, and followup
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Medical Home Initiatives Expand
PCP Capacity, But Not Enough
Data and analytics to measure and
monitor utilization and quality
Health
Plan
Coordinated relationships with
other specialists and hospitals
Method for targeting high-risk
patients (e.g., predictive modeling)
PatientCentered
Medical
Home
Capability for tracking patient care
and ensuring followup (e.g., registry)
Resources for patient educ. & selfmgt support (e.g., RN care mgr)
Hospital
Admits
Patient
Unneeded
Testing
Physician w/ time for diagnosis,
treatment planning, and followup
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Goal: Give Doctors the Capacity
to Deliver “Accountable Care”
Data and analytics to measure and
monitor utilization and quality
Physician
Practice
Capable
of
Managing
New
Payment
Models
Coordinated relationships with
other specialists and hospitals
Capability for tracking patient care
and ensuring followup (e.g., registry)
Method for targeting high-risk
patients (e.g., predictive modeling)
Resources for patient educ. & selfmgt support (e.g., RN care mgr)
Hospital
Admits
Patient
Unneeded
Testing
Physician w/ time for diagnosis,
treatment planning, and followup
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