More Related Content Similar to Accountable Care Through Physician Leadership (20) Accountable Care Through Physician Leadership3. 3© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #1:
In which U.S. industries
are the key employees told
that at the end of the year,
they can expect to receive
a 25% pay cut
regardless of how well
they’ve performed?
4. 4© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #1:
In which U.S. industries
are the key employees told
that at the end of the year,
they can expect to receive
a 25% pay cut
regardless of how well
they’ve performed?
ANSWER:
Health Care
5. 5© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare SGR Is a Big Problem,
But So Is Lack of Annual Updates
Physician
Practice
Costs
Physician
Payment
Increases
If SGR Cut
Is Made
23% Effective
Reduction
6. 6© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #2:
In which U.S. industries
are businesses
only able to sell
their products and services
through an intermediary who
demands large discounts and
increases prices by 18-25%?
7. 7© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #2:
In which U.S. industries
are businesses
only able to sell
their products and services
through an intermediary who
demands large discounts and
increases prices by 18-25%?
ANSWER:
Health Care
9. 9© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #3:
In which U.S. industries
can one set of employees
only get a raise if other
employees take a pay cut,
even when the business is
performing well?
10. 10© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #3:
In which U.S. industries
can one set of employees
only get a raise if other
employees take a pay cut,
even when the business is
performing well?
ANSWER:
Health Care
11. 11© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The SGR Also Pits Physicians
Against Each Other
PCP Fees
Specialty
Fees
PCP Fees
Specialty
Fees
Physician Payments Capped by the Sustainable Growth Rate
12. 12© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #4:
In which U.S. industries
does government policy
favor large businesses
over small businesses?
13. 13© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #4:
In which U.S. industries
does government policy
favor large businesses
over small businesses?
ANSWER:
Health Care
14. 14© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Unlike Physicians, Hospitals
Have Received Pay Increases
Physicians
Hospitals
Inflation
15. 15© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #5:
Who is to blame for
the way physicians
are paid and
micromanaged?
16. 16© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #5:
Who is to blame for
the way physicians
are paid and
micromanaged?
ANSWER:
Physicians
17. 17© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Blame Rests With Physicians
• Physicians haven’t defined solutions to control healthcare
costs without rationing
• Physicians are seen as the drivers of higher costs
• Physicians haven’t defined payment models that will support
lower-cost, higher-quality care and maintain financial viability
for physician practices
• Physicians aren’t organized to manage and deliver
high-value population health care to purchasers and patients
18. 18© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Three Paths to the Future: Which
Door Will Physicians Choose?
TODAY
FUTURE #1
FUTURE #2
FUTURE #3
19. 19© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:
High-Quality Care at Lower Cost
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
TODAY TOMORROW
20. 20© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:
High-Quality Care at Lower Cost
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
TODAY TOMORROW
Where Will The Savings Come From?
21. 21© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:
High-Quality Care at Lower Cost
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
TODAY TOMORROW
Where Will The Savings Come From?
It Depends on Who’s the Last in Line
In Getting Paid
22. 22© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Door #1:
Continuation of the Status Quo
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Traditional
Insurance
Company/
TPA
Savings
TODAY TOMORROW
23. 23© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Who’s First in Line?
Health Plans
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Traditional
Insurance
Company/
TPA
Savings
TODAY TOMORROW
24. 24© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Who’s Last in Line?
Physicians
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
Savings
TODAY TOMORROW
25. 25© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will Savings Come From?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
Savings
TODAY TOMORROW
26. 26© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Health Plans Voluntarily
Reduce Their Fees/Profits?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
Health Plan
Adm/Profit
Hospital
Payments
Physician
Payments
Savings
27. 27© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Health Plans Voluntarily
Reduce Their Fees/Profits?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
Health Plan
Adm/Profit
Hospital
Payments
Physician
Payments
Savings
Not
Likely
28. 28© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can Health Plans Cut Payments
to the Big Hospital in Town?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
Health Plan
Adm/Profit
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Savings
29. 29© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can Health Plans Cut Payments
to the Big Hospital in Town?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
Health Plan
Adm/Profit
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Savings
Not
Likely
30. 30© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Or Will Payers Continue Cutting
(or Not Increasing) Doctor Pay?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
Health Plan
Adm/Profit
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Savings
31. 31© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not Just Lower Fees, But
Interference in Physician Decisions
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Savings
• Lower Fees
(“Discounts”)
• Prior Authorization
• Step Therapy
• Utilization Review
• Disease Mgt Vendors
32. 32© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Employment by Hospitals
Protect Physicians?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Health
System
Payments
Physician
Salaries
Traditional
Insurance
Company/
TPA
SavingsHealth Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
33. 33© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
When Health Systems Get Less,
Where Will They Make the Cuts?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Health
System
Payments
Physician
Salaries
Traditional
Insurance
Company/
TPA
Savings
Health Plan
Admin Cost
& Profit
Health
System
Payments
Physician
Salaries
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
34. 34© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Systems Want to Ensure
They Don’t Get Cut by Payers…
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health Plan
Admin Cost
& Profit
Health
System
Payments
Physician
Salaries
Traditional
Insurance
Company/
TPA
Savings
Health Plan
Admin Cost
& Profit
Health
System
Payments
Physician
Salaries
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Traditional
Insurance
Company/
TPA
35. 35© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health
System w/
Insurance
Company
Door #2:
Hospital-Owned Health Plans
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Savings
Health Plan
Admin/Prof.
36. 36© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health
System w/
Insurance
Company
If Hospitals Are Now First In Line,
Where Will Savings Come From?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Savings
Health Plan
Admin/Prof.
37. 37© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health
System w/
Insurance
Company
Maybe Health Plan Expenses
Can Be Reduced…
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Savings
Health Plan
Admin/Prof.
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
38. 38© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health
System w/
Insurance
Company
…But Hospital Will Still Need the
Health Plan to Watch the Docs
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Savings
Health Plan
Admin/Prof.
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
39. 39© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health
System w/
Insurance
Company
So Physicians Will Likely Still Be
Subject to Cuts and Interference
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Savings
Health Plan
Admin/Prof.
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
Hospital
Payments
Physician
Payments
Health Plan
Admin/Prof.
40. 40© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s Behind Door #3?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
41. 41© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-
Led Health
Plans &
Contracting
Physician Leadership to
Control Both Cost & Quality
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Savings
42. 42© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-
Led Health
Plans &
Contracting
Physicians Can Watch Themselves,
They Don’t Need Health Plans…
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
Savings
43. 43© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-
Led Health
Plans &
Contracting
Better Care of Patients Will Reduce
Avoidable Hospitalizations…
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
Savings
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
Savings
44. 44© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-
Led Health
Plans &
Contracting
…Allowing Better Pay for Doctors
AND More Savings for Purchasers
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
Savings
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
Savings
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
Savings
45. 45© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-
Led Health
Plans &
Contracting
Door #3 = A Physician-Led
Healthcare Future
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Hospital
Payments
Physician
Payments
Health Plan
Admin Cost
& Profit
Savings
Hospital
Payments
Physician
Payments
Health Plan
Adm/Profit
• Significant savings
for purchasers and patients
• Better pay for physicians
• Less spending on health plan
overhead
• Less interference in
physician-patient relationship
• Less spending on avoidable
expensive, risky procedures
• Better health and
quality of life for patients
46. 46© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Quality Health Plans
Run By Physician Groups
47. 47© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
If Physicians Choose Door #3,
What Must They Do to Succeed?
TODAY
PHYSICIAN-LED
HEALTHCARE
48. 48© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Physician’s Real Business
is More Than Their Salary…
Physician Salary
49. 49© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And More Than Their
Total Practice Costs..
Physician Salary
Practice Expenses
50. 50© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…It’s the Tests They Order, Even
If Someone Else Does Them
Physician Salary
Practice Expenses
Tests and Imaging
51. 51© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…It’s the Procedures They Do,
And Where They Do Them
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
Tests and Imaging
52. 52© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And the Unplanned Admissions
of Their Patients…
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Tests and Imaging
53. 53© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Post-Acute Care Costs
After Hospital Stays…
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Tests and Imaging
54. 54© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Unplanned Readmissions
and Repeat Procedures…
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Tests and Imaging
Readmissions
55. 55© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And the Number and Types of
Medications They Prescribe
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
56. 56© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money in Healthcare
Doesn’t Go to Physicians
Physicians:
16%
57. 57© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
.. But Most Money Goes to Things
That Physicians Can Influence
Things
Physicians
Prescribe,
Control, or
Influence
84%
Physicians:
16%
58. 58© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare Payment Silos Pit
Physicians Against Each Other
PCP Fees
Specialty
Fees
PCP Fees
Specialty
Fees
Physician
Fees
(Part B)
59. 59© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Should Benefit From
Lowering Other Healthcare Costs
PCP Fees
Specialty
Fees
PCP Fees
Drug
Costs
Hospital &
Post-Acute
Care Costs
Specialty
FeesPhysician
Fees
(Part B)
Total
Healthcare
Costs
(Parts A,
B, and D)
Drug
Costs
(Part D)
Hospital &
Post-Acute
Care Costs
(Part A)
60. How Do You Repeal the SGR
and Give Physicians Reasonable
Payment Increases?
61. 61© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
10 Year Federal Budget
Projections for Medicare
Physician Fees Only
Represent 12% of
Projected Medicare Spending
62. 62© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
SGR Repeal & MEI Update
Increases Total Spending by 2.6%
SGR Repeal
& MEI Update:
$160 Billion
63. 63© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
3% Savings in Non-Physician
Spending Would Pay for Repeal
$160 Billion=
3% of Non-Physician
Spending
64. 64© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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)
65. 65© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce
Costs w/o Rationing or Fee Cuts
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
66. 66© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce
Costs w/o Rationing or Fee Cuts
•Fewer unnecessary tests
•Use of lower-cost tests
•Use of lower cost testing facilities
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
67. 67© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce
Costs w/o Rationing or Fee Cuts
•Fewer unnecessary procedures
•Use of lower-cost procedures
•Reducing the cost of procedures
•Use of lower-cost facilities
•Fewer unnecessary tests
•Use of lower-cost tests
•Use of lower cost testing facilities
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
68. 68© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce
Costs w/o Rationing or Fee Cuts
•Fewer unnecessary procedures
•Reducing the cost of procedures
•More procedures in outpatient settings
•Fewer ER visits for chronic disease
•Fewer admissions for chronic disease
•Z•Fewer unnecessary procedures
•Use of lower-cost procedures
•Reducing the cost of procedures
•Use of lower-cost facilities
•Fewer unnecessary tests
•Use of lower-cost tests
•Use of lower cost testing facilities
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
69. 69© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce
Costs w/o Rationing or Fee Cuts
•Less use of expensive inpatient rehab
•More in-home services
•Fewer unnecessary procedures
•Reducing the cost of procedures
•More procedures in outpatient settings
•Fewer ER visits for chronic disease
•Fewer admissions for chronic disease
•Z•Fewer unnecessary procedures
•Use of lower-cost procedures
•Reducing the cost of procedures
•Use of lower-cost facilities
•Fewer unnecessary tests
•Use of lower-cost tests
•Use of lower cost testing facilities
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
70. 70© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce
Costs w/o Rationing or Fee Cuts
•Better post-discharge care management
•Fewer complications from procedures
•Less use of expensive inpatient rehab
•More in-home services
•Fewer unnecessary procedures
•Reducing the cost of procedures
•More procedures in outpatient settings
•Fewer ER visits for chronic disease
•Fewer admissions for chronic disease
•Z•Fewer unnecessary procedures
•Use of lower-cost procedures
•Reducing the cost of procedures
•Use of lower-cost facilities
•Fewer unnecessary tests
•Use of lower-cost tests
•Use of lower cost testing facilities
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
71. 71© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Can Reduce
Costs w/o Rationing or Fee Cuts
•Use of lower-cost medications
•Avoiding unnecessary medications
•Better post-discharge care management
•Fewer complications from procedures
•Less use of expensive inpatient rehab
•More in-home services
•Fewer unnecessary procedures
•Reducing the cost of procedures
•More procedures in outpatient settings
•Fewer ER visits for chronic disease
•Fewer admissions for chronic disease
•Z•Fewer unnecessary procedures
•Use of lower-cost procedures
•Reducing the cost of procedures
•Use of lower-cost facilities
•Fewer unnecessary tests
•Use of lower-cost tests
•Use of lower cost testing facilities
Physician Salary
Practice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
72. 72© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Big Are the Opportunities?
73. 73© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
5-17% of Hospital Admissions
Are Potentially Preventable
Source:
AHRQ
HCUP
74. 74© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Millions of Preventable Events
Harm Patients and Increase Costs
Medical Error
# Errors
(2008)
Cost Per
Error Total U.S. Cost
Pressure Ulcers 374,964 $10,288 $3,857,629,632
Postoperative Infection 252,695 $14,548 $3,676,000,000
Complications of Implanted Device 60,380 $18,771 $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
Source: The Economic Measurement of Medical Errors, Milliman and the Society of Actuaries, 2010
3 Adverse Events Every Minute
75. 75© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Ways to Reduce Tests &
Procedures w/o Harming Patients
76. 76© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-Service Payment is a
Barrier to Success
Lack of Flexibility in FFS
• No payment for phone
calls or emails with
patients
• No payment to coordinate
care among providers
• No payment for non-
physician support
services to help patients
with self-management
• No flexibility to shift
resources across silos
(hospital <-> physician,
post-acute <->hospital,
SNF <-> home health,
etc.)
77. 77© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-Service Payment is a
Barrier to Success
Lack of Flexibility in FFS
• No payment for phone
calls or emails with
patients
• No payment to coordinate
care among providers
• No payment for non-
physician support
services to help patients
with self-management
• No flexibility to shift
resources across silos
(hospital <-> physician,
post-acute <->hospital,
SNF <-> home health,
etc.)
Penalty for Quality/Efficiency
• Lower revenues if
patients don’t make
frequent office visits
• Lower revenues for
performing fewer tests
and procedures
• Lower revenues if
infections and
complications are
prevented instead of
treated
• No revenue at all if
patients stay healthy
78. 78© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most “Payment Reforms”
Don’t Fix The Problems with FFS
FFS
•No payment
for services
that will benefit
patients
•Lower
revenues from
reducing
avoidable
costs
FFS
Shared Savings
Shared Savings
FFS
P4P
FFS
PMPM
79. 79© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good
Alternatives to Fee for Service
BUILDING
BLOCKS HOW IT WORKS
Bundled
Payment
Single payment to 2+
providers who are now
paid separately (e.g.,
hospital+physician)
80. 80© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good
Alternatives to Fee for Service
BUILDING
BLOCKS HOW IT WORKS
Bundled
Payment
Single payment to 2+
providers who are now
paid separately (e.g.,
hospital+physician)
Warrantied
Payment
Higher payment for
quality care, no extra
payment for correcting
preventable errors and
complications
81. 81© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good
Alternatives to Fee for Service
BUILDING
BLOCKS HOW IT WORKS
Bundled
Payment
Single payment to 2+
providers who are now
paid separately (e.g.,
hospital+physician)
Warrantied
Payment
Higher payment for
quality care, no extra
payment for correcting
preventable errors and
complications
Condition-
Based
Payment
Payment based on the
patient’s condition,
rather than on the
procedure used
82. 82© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Accountable Payment Models
Allow Win-Win-Win Approaches
BUILDING
BLOCKS HOW IT WORKS
HOW PHYSICIANS
AND HOSPITALS
CAN BENEFIT
HOW PAYERS
CAN BENEFIT
Bundled
Payment
Single payment to 2+
providers who are now
paid separately (e.g.,
hospital+physician)
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
Warrantied
Payment
Higher payment for
quality care, no extra
payment for correcting
preventable errors and
complications
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-
Based
Payment
Payment based on the
patient’s condition,
rather than on the
procedure used
No loss of payment
for physicians and
hospitals using fewer
tests and procedures
Medicare or health
plan no longer pays
more for unnecessary
procedures
83. 83© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing
Avoidable Procedures
TODAY
$/Patient # Pts Total $
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $2,415,000
Optional Procedure
for a Condition
• Physician evaluates all
patients
• Physician performs
procedure on 2/3 of
evaluated patients
• Up to 10% of procedures
may be avoidable
through patient choice
or alternative treatment
84. 84© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money Today
Is NOT Going to the Physician
TODAY
$/Patient # Pts Total $
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $2,415,000
Physician Payment is
9% of Total Spending
85. 85© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Typical Health Plan Approach:
Prior Auth/Utilization Controls
TODAY w/ UTILIZATION CTRL
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $150 300 $45,000
Procedures $850 200 $170,000 $850 180 $153,000
Subtotal $215,000 $198,000
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000
Total Pmt/Cost $2,415,000 $2,178,000 -10%
86. 86© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under FFS, Payer Wins,
Physicians and Hospitals Lose
TODAY w/ UTILIZATION CTRL
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $150 300 $45,000
Procedures $850 200 $170,000 $850 180 $153,000
Subtotal $215,000 $198,000 -8%
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,178,000 -10%
87. 87© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Is There a Better Way?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 ? ? ?
Procedures $850 200 $170,000 ? ? ?
Subtotal $215,000 ?
? ? ?
Hospital Pmt $11,000 200 $2,200,000 ? ? ?
Total Pmt/Cost $2,415,000 ? ? ?
88. 88© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Way:
Pay Physicians Differently
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000
Total Pmt/Cost $2,415,000 $2,202,000
Better Payment for Condition Management
• Physician paid adequately to engage in shared
decision making process with patients
• Physician paid adequately for procedures without
needing to increase volume of procedures
89. 89© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Could Be Paid More
While Still Reducing Total $
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,202,000 -9%
90. 90© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Do Hospitals Have to Lose In Order
for Physicians To Win?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,202,000 -9%
Physician Wins
Payer Wins
Hospital Loses
91. 91© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Should Matter to Hospitals is
Margin, Not Revenues (Volume)
92. 92© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hospital Costs Are Not
Proportional to Utilization
$800
$820
$840
$860
$880
$900
$920
$940
$960
$980
$1,000
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
$000
#Patients
Cost & Revenue Changes With Fewer Patients
.
Costs
20% reduction in volume
7% reduction
in cost
93. 93© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Reductions in Utilization Reduce
Revenues More Than Costs
$800
$820
$840
$860
$880
$900
$920
$940
$960
$980
$1,000
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
$000
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
20% reduction in volume
7% reduction
in cost
20% reduction
in revenue
94. 94© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Causing Negative Margins
for Hospitals
$800
$820
$840
$860
$880
$900
$920
$940
$960
$980
$1,000
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
$000
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Will Be
Underpaying For
Care If
Adverse Events,
Readmissions, Etc.
Are Reduced
95. 95© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
But Spending Can Be Reduced
Without Bankrupting Hospitals
$800
$820
$840
$860
$880
$900
$920
$940
$960
$980
$1,000
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
$000
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Can
Still Save $
Without Causing
Negative Margins
for Hospital
96. 96© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Adequacy of Payment Depends On
Fixed/Variable Costs & Margins
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000
Total Pmt/Cost $2,415,000
97. 97© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Now, if the Number of Procedures
is Reduced…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $2,415,000
98. 98© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Fixed Costs Will Remain the
Same (in the Short Run)…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $2,415,000
99. 99© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Variable Costs Will Go Down in
Proportion to Procedures…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $3,300 $594,000 -10%
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $2,415,000
100. 100© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Even With a Higher Margin
for the Hospital…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $2,415,000
101. 101© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Hospital Gets Less Total
Revenue (But More Per Case)…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000
102. 102© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And The Payer
Still Saves Money
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000 $2,359,000 -2%
103. 103© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
I.e., Win-Win-Win for
Physician, Hospital, and Payer
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000 $2,359,000 -2%
Physician Wins
Payer Wins
Hospital Wins
104. 104© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Payment Model Supports
This Win-Win-Win Approach?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000 $2,359,000 -2%
105. 105© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
It’s Impractical to Renegotiate
Fees for Individual Services
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $2,415,000 $2,359,000 -2%
106. 106© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay Based on the Patient’s
Condition, Not on the Procedure
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $2,359,000 -2%
107. 107© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Plan to Offer Care of the Condition
at a Lower Cost Per Patient
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
108. 108© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use the Payment as a Budget to
Redesign Care…
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
109. 109© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Let the Providers Decide
How They Should Be Paid
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 $11,872 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
110. 110© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Would “Shared Savings”
Achieve the Same Thing?
111. 111© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Same Example As Before…
Year 0
Physician Svcs
Evaluations $45,000
Procedures $170,000
Subtotal $215,000
Hospital Pmt
Procedures $2,200,000
Subtotal $2,200,000
Total Pmt/Cost $2,415,000
Savings
# Patients $/Patient
300 $150
200 $850
200 $11,000
Optional Procedure
for a Condition
• Physician evaluates all
patients
• Physician performs
procedure on 2/3 of
evaluated patients
• Up to 10% of procedures
may be avoidable
through patient choice
or alternative treatment
112. 112© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Year 1: Physicians & Hospitals Both
Lose With Fewer Procedures)
Year 0 Year 1 Chg
Physician Svcs
Evaluations $45,000 $45,000
Procedures $170,000 $153,000
$0
Subtotal $215,000 $198,000 -8%
Hospital Pmt
Procedures $2,200,000 $1,980,000
Subtotal $2,200,000 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,178,000 -10%
Savings $237,000
Reduce
Procs
by 10%
Year 1:
Lower
Revenue
for
Docs &
Hospital
113. 113© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Year 2: Losses Are Lower If Shared
Savings Are Paid…(No)
Year 0 Year 1 Chg Year 2 Chg
Physician Svcs
Evaluations $45,000 $45,000 $45,000
Procedures $170,000 $153,000 $153,000
Shared Savings $0 $17,000
Subtotal $215,000 $198,000 -8% $215,000 -0%
Hospital Pmt
Procedures $2,200,000 $1,980,000 $1,980,000
Shared Savings $0 $101,500
Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -6%
Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5%
Savings $237,000 $118,500
Reduce
Procs
by 10%
Year 1:
Lower
Revenue
for
Docs &
Hospital
Year 2:
Shared
Savings
Offsets
Some
Losses
114. 114© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…But Physicians and Hospitals Still
Have Net 2-Year Losses
Year 0 Year 1 Chg Year 2 Chg Cumulative
Physician Svcs
Evaluations $45,000 $45,000 $45,000
Procedures $170,000 $153,000 $153,000
Shared Savings $0 $17,000
Subtotal $215,000 $198,000 -8% $215,000 -0% -$17,000
-4%
Hospital Pmt
Procedures $2,200,000 $1,980,000 $1,980,000
Shared Savings $0 $101,500
Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -5% -$338,500
-8%
Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% $355,500
Savings $237,000 $118,500 -7%
115. 115© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
116. 116© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
117. 117© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
“Shared Savings” Forces Hospitals
To Consider Hiring Physicians
• Hospitals are not directly eligible for shared savings;
all savings are attributed to primary care physicians
• Even if the hospital reduces readmissions, infections,
complications, etc., it may receive no reward for doing so
• Reducing hospitalizations, ER visits, etc. will reduce the
hospital’s revenues, but the hospital may receive no share
of the savings to help it cover its stranded fixed costs
• Consequently, hospitals may feel compelled to own
physician practices, either to capture a portion of the
shared savings revenue, or to prevent there from being
any savings!
118. 118© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
119. 119© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Puts
the Physicians in Control
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $200 300 $60,000
Procedures $850 200 $170,000 $900 180 $162,000
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
120. 120© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
If The Physician Can Reduce the
Hospital’s Costs Per Procedure….
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000 -45%
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
121. 121© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Both the Hospital & Physician Can
“Win” Even More Inside the Budget
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $139,000 +26%
Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
122. 122© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Both the Hospital & Physician Can
“Win” Even More Inside the Budget
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $300 300 $90,000
Procedures $850 200 $170,000 $1700 180 $340,000
Subtotal $215,000 $430,000 100%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $139,000 +26%
Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,863 300 $2,359,000 -2%
123. 123© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Or Reduce The Price to Reduce
Healthcare Spending
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $189 300 $56,700
Procedures $850 200 $170,000 $1,190 180 $214,200
Subtotal $215,000 $270,900 +26%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $139,000 +26%
Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,455 300 $2,199,900 -9%
124. 124© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
$2,200 Variation in Average Cost of
Drug-Eluting Stents in CA Hospitals
Source: Coronary Angioplasty with Drug Eluting Stents: Device Costs, Hospital
Costs, and Insurance Payments, Emma L. Dolan and James C. Robinson
Berkeley Center for Health Technology, September 2010
125. 125© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
$8,000 Variation in Avg Costs of
Joint Implants Across CA Hospitals
Source: Implantable Medical Devices for Hip Replacement Surgery: Economic Implications for California Hospitals,
Emma L. Dolan and James C. Robinson , Berkeley Center for Health Technology, May 2010
126. 126© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
$16,000 Variation in Avg Costs of
Defibrillators Across CA Hospitals
Source: Pacemaker and Implantable Cardioverter-Defibrillator Implant Procedures in California Hospitals,
James C. Robinson and Emma L. Dolan, Berkeley Center for Health Technology, 2010
127. 127© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not Just Devices: Other Savings
Opportunities From Bundling
• Better scheduling of scarce resources (e.g., surgery suites) to
reduce both underutilization & overtime
• Coordination among multiple physicians and departments to
avoid duplication and conflicts in scheduling
• Standardization of equipment and supplies to facilitate bulk
purchasing
• Less wastage of expensive supplies
• Reduced length of stay
• Etc.
128. 128© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Puts
the Physicians in Control
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $189 300 $56,700
Procedures $850 200 $170,000 $1,190 180 $214,200
Subtotal $215,000 $270,900 +26%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $139,000 +26%
Subtotal $11,000 200 $2,200,000 180 $1,929,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,455 300 $2,199,900 -9%
129. 129© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Steps to
Successful Payment Reform
1. Defining the Change in Care Delivery
– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
130. 130© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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 do many unnecessary
colonoscopies on young men.
Give every PCP an anuscope
to allow diagnosis of bleeding
hemorrhoids in the office.”
Gastroenterologist 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
131. 131© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Steps to
Successful Payment Reform
1. Defining the Change in Care Delivery
– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings
– What will there be less of, and how much does that save?
– What will there be more of, and how much does that cost?
– Will the savings offset the costs on average?
– How much variation in costs and savings is likely?
132. 132© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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!
133. 133© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Steps to
Successful Payment Reform
1. Defining the Change in Care Delivery
– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings
– What will there be less of, and how much does that save?
– What will there be more of, and how much does that cost?
– Will the savings offset the costs on average?
– How much variation in costs and savings is likely?
3. Designing a Payment Model 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
134. 134© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities and Solutions
Vary By Specialty
Psychiatry
OB/GYN
Orthopedic
Surgery
Opportunities
to Improve Care
and Reduce Cost
Barriers in
Current
Payment System
Solutions via
Accountable
Payment Models
• 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
• Similar/lower
payment for
vaginal deliveries
• Condition-based
payment
for total cost of
delivery in low-risk
pregnancy
• Episode payment
for hospital and
post-acute care
costs with
warranty
• No flexibility to
increase inpatient
services to reduce
complications &
post-acute care
• Joint condition-
based payment
to PCP and
psychiatrist
• No payment for
phone consults
with PCPs
• No payment for
RN care managers
Cardiology
• Use less invasive
and expensive
procedures
when appropriate
• Condition-based
payment covering
CABG, PCI, or
medication
management
• Payment is based
on which
procedure is used,
not the outcome
for the patient
135. 135© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Examples from Other Specialties
Oncology
Radiology
Gastroenterology
Opportunities
to Improve Care
and Reduce Cost
Barriers in
Current
Payment System
Solutions via
Accountable
Payment Models
• 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
• Low payment for
reading images &
penalty for 2x
• Inability to change
inapprop. orders
• Global payment
for imaging costs
• Partnership in
condition-based
payments
• Population-based
payment for colon
cancer screening
• Condition-based pmt
for IBD
• No flexibility to focus
extra resources on
highest-risk patients
• No flexibility to spend
more on care mgt
• Condition-based
payment including
non-oncolytic Rx
and ED/hospital
utilization
• No flexibility to
spend more on
preventive care
• Payment based on
office visits, not
outcomes
Neurology
• Avoid unnecessary
hospitalizations for
epilepsy patients
• Reduce strokes and
heart attacks after TIA
• Condition-based
payment for epilepsy
• Episode or condition-
based payment for
TIA
• No flexibility to
spend more on
preventive care
• No payment to
coordinate w/ cardio
136. 136© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Steps to
Successful Payment Reform
1. Defining the Change in Care Delivery
– How can the physician, hospital, or other provider change the way
care is delivered to reduce costs without harming patients?
2. Analyzing Expected Costs and Savings
– What will there be less of, and how much does that save?
– What will there be more of, and how much does that cost?
– Will the savings offset the costs on average?
– How much variation in costs and savings is likely?
3. Designing a Payment Model 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. Compensating Physicians Appropriately
– Changing payment to the provider organization
(physician practice/group/IPA/health system) does not
automatically change compensation to physicians
137. 137© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Does This All Fit Into ACOs?
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
138. 138© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Each Patient Should Choose &
Use a Primary Care Practice…
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
139. 139© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
…Which Takes Accountability for
What PCPs Can Control/Influence
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Accountable
Medical
Home Accountability for:
• Avoidable ER Visits
•Avoidable Hospitalizations
•Unnecessary Tests
•Unnecessary Referrals
140. 140© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
…With a Medical Neighborhood
to Consult With on Complex Cases
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Accountable
Medical
Home
Endocrinology,
Neurology,
Psychiatry
Accountable
Medical
Neighborhood
Accountability for:
•Unnecessary Tests
•Unnecessary Referrals
•Co-Managed Outcomes
141. 141© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
..And Specialists Accountable for
the Conditions They Manage
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Neurosurg.
Group
OB/GYN
Group
Cardiology
Group
Heart Episode/
Condition Pmt
Back Episode/
Condition Pmt
Pregnancy
Management
Pmt
Accountable
Medical
Home
Endocrinology,
Neurology,
Psychiatry
Accountable
Medical
Neighborhood
Accountability for:
•Unnecessary Tests
•Unnecessary Procedures
•Infections, Complications
142. 142© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
That’s Building the ACO
from the Bottom Up
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Neurosurg.
Group
OB/GYN
Group
Cardiology
Group
Heart Episode/
Condition Pmt
Back Episode/
Condition Pmt
Pregnancy
Management
Pmt
Accountable
Medical
Home
Endocrinology,
Neurology,
Psychiatry
Accountable
Medical
Neighborhood
ACO
Accountable Payment
Models
143. 143© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
Shared Savings
Payment
Primary
Care
ACO
Orthopedics OB/GYNCardiology
Most ACOs Today Aren’t Truly
Reinventing Care or Payment
Fee-for-Service
Payment
Expensive
IT Systems
Psych.,
Neuro
Nurse Care
Managers
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Shared Savings
Bonus
144. 144© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
A True ACO Can Take a Global
Payment And Make It Work
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
ACO
Neurosurg.
Group
OB/GYN
Group
Cardiology
Group
Heart Episode/
Condition Pmt
Back Episode/
Condition Pmt
Pregnancy
Management
Pmt
Accountable
Medical
Home
Endocrinology,
Neurology,
Psychiatry
Risk-Adjusted
Global Payment
Accountable
Medical
Neighborhood
145. 145© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Levels
Adjusted Based on
Patient Conditions
Providers Lose Money
On Unusually
Expensive Cases
Limits on Total Risk
Providers Accept for
Unpredictable Events
Providers Are Paid
Regardless of the
Quality of Care
Bonuses/Penalties
Based on Quality
Measurement
Provider Makes
More Money If
Patients Stay Well
Provider Makes
More Money If
Patients Stay Well
Flexibility to Deliver
Highest-Value
Services
Flexibility to Deliver
Highest-Value
Services
No Additional Revenue
for Taking Sicker
Patients
CAPITATION
(WORST VERSIONS)
RISK-ADJUSTED
GLOBAL PMT
Isn’t This Capitation?
No – It’s Different
146. 146© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: BCBS MA
Alternative Quality Contract
• Single payment for all costs of care for a population of patients
– Adjusted up/down annually based on severity of patient conditions
– Initial payment set based on past expenditures, not arbitrary estimates
– Provides flexibility to pay for new/different services
– Bonus paid for high quality care
• Five-year contract
– Savings for payer achieved by controlling increases in costs
– Allows provider to reap returns on investment in preventive care,
infrastructure
• Broad participation
– 14 physician groups/health systems participating with over 400,000
patients, including one primary care IPA with 72 physicians
• Positive two year results
– Higher ambulatory care quality than non-AQC practices, better patient
outcomes, lower readmission rates and ER utilization, lower costs
http://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html
147. 147© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barrier: Gaining Support from a
Critical Mass of Payers
Health Plan
Provider
Health Plan Health Plan
Patient Patient Patient
Provider is only compensated for changed practices
for the subset of patients covered by participating payers
Better
Payment
System
Current
Payment
System Current
Payment
System
148. 148© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
149. 149© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
For Self-Funded Employers, The
Health Plan is Just a Pass Through
Self-
Funded
Purchasers
Providers
ASO
Health Plan
(No Risk)
Provider Claims
Purchaser Payment
150. 150© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Little Incentive for Health Plans to
Support Payment Reforms
True Payment Reform Means:
• Health plan incurs the costs of
implementing new payment models
• Purchaser gains all the savings from
reduced utilization and spending
(because all claims are passed through)
Self-
Funded
Purchasers
Providers
ASO
Health Plan
(No Risk)
Provider Claims
Purchaser Payment
151. 151© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Approach:
Purchaser/Provider Partnerships
Self-
Funded
Purchasers
Providers
Willing to
Manage
Costs
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
Provider “wins” if:
• Patients stay healthy
and need less care
• Purchaser pays
provider adequately to
manage care efficiently
Purchasers and
Patients “win” if:
• Providers reduce
purchasers’ costs
• Patients stay healthy
and have lower cost-
sharing
152. 152© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Plan Implements Changes
Purchasers/Providers Agree On
Self-
Funded
Purchasers
Providers
Willing to
Manage
Costs
ASO
Health Plan
(No Risk) Implementation
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
154. 154© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
Employer-
Sponsored
Health
Insurance,
April 2013.
State Health
Access Data
Assistance
Center and
Robert
Wood
Johnson
Foundation
Fewer
employees
than typical
physician
practice panel
size
155. 155© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
156. 156© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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 & Hospitals 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
157. 157© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s the Patient’s
Role and Accountability?
ProviderPatient
Payment
System
Ability and
Incentives to:
•Keep patients well
•Avoid unneeded
services
•Deliver services
efficiently
•Coordinate
services with other
providers
158. 158© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Benefit Design Changes Are
Also Critical to Success
ProviderPatient
Payment
System
Benefit
Design
Ability and
Incentives to:
•Keep patients well
•Avoid unneeded
services
•Deliver services
efficiently
•Coordinate
services with other
providers
Ability and
Incentives to:
•Improve health
•Take prescribed
medications
•Allow a provider to
coordinate care
•Choose the
highest-value
providers and
services
159. 159© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
160. 160© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: No Coordination of
Pharmacy & Medical Benefits
Hospital
Costs
Physician
Costs
Other
Services
Medical Benefits
Drug
Costs
Pharmacy Benefits
Single-minded focus on
reducing costs here...
...often results in higher
spending on hospitalizations
•High copays for brand-names
when no generic exists
•Doughnut holes & deductibles
Principal treatment for most
chronic diseases involves regular use
of maintenance medication
161. 161© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
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
162. 162© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Airfare Choices
from Boston to Cleveland
Boston Cleveland
?
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
Airfares for July 6-7, 2011 as of 6/26/11
163. 163© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What If We Paid for Travel
the Way We Pay for Healthcare?
Boston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
Airfares for July 6-7, 2011 as of 6/26/11
164. 164© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Flat Copayments:
First Class Fare Wins
Boston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
$100 Copayment: $100 $100 $100
Airfares for July 6-7, 2011 as of 6/26/11
165. 165© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Coinsurance:
First Class Fare Probably Wins
Boston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
Airfares for July 6-7, 2011 as of 6/26/11
166. 166© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Deductible:
First Class Fare Wins
Boston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
$500 Deductible: $500 $500 $500
Airfares for July 6-7, 2011 as of 6/26/11
167. 167© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Price Difference:
Lowest Coach Fare Wins
Boston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
$500 Deductible: $500 $500 $500
Lowest Coach Fare: $0 $485 $733
Airfares for July 6-7, 2011 as of 6/26/11
168. 168© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery Cost
Price #1
$20,000
Price #2
$25,000
Price #3
$30,000
Knee Joint
Replacement
169. 169© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery Cost
Price #1
$20,000
Price #2
$25,000
Price #3
$30,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Knee Joint
Replacement
170. 170© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery Cost
Price #1
$20,000
Price #2
$25,000
Price #3
$30,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Highest-Value: $0 $5,000 $10,000
Knee Joint
Replacement
171. 171© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Which Health System or ACO
Will You Choose?
Total Annual Cost
Per Patient/Member
Health
System/
ACO #1
$6,000
Health
System/
ACO #2
$8,000
Health
System/
ACO #3
$10,000
Consumer Share $0 $2,000 $4,000
172. 172© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Would Happen If Consumers
Had Choice & Considered Value?
• Minnesota Patient Choice
– started by the Buyers Health Care Action Group (BHCAG) in the 1990s
– “care systems” bid on risk-adjusted (total) cost of patient care (i.e., risk-
adjusted global payment)
– care systems are divided into cost/quality tiers based on their relative
bids
– consumers pay the difference in the bid price to select a care system in
a higher cost tier
• Results
– Many consumers switched to lower cost providers
– High cost providers reduced their costs to retain/attract patients
174. Can’t We Just Keep Doing
What We’re Doing Today
Until We Retire?
This All Sounds Really Hard
175. 175© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Opportunities to Reduce Costs
Without Rationing Are Widely Known
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
176. 176© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Question is: How Will
Purchasers Get The Savings?
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PURCHASER
?
177. 177© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Payer-Driven Approach
to Achieving Savings
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PURCHASER
Physician P4P
High
Deductibles
Narrow
Networks
Prior
Authorization
Tiering on
Cost
Readmission
Penalty
Managed Fee-for-Service
178. 178© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Provider-Driven Approach
to Achieving Savings
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PURCHASER
Coordinated
Care/
Accountable
Care
Organization
Global Pmt/Budget
179. 179© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Very Different Models…
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PURCHASER
Coordinated
Care/
Accountable
Care
Organization
Physician P4P
High
Deductibles
Narrow
Networks
Prior
Authorization
Tiering on
Cost
Readmission
Penalty
Managed Fee-for-Service Global Pmt/Budget
180. 180© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Very Different Impacts
on Physicians and Hospitals
PURCHASER
Managed Fee-for-Service
1. Payer defines how care
should be redesigned
2. Payer obtains all savings
from lower utilization
3. Payer decides how much
savings to share with
provider
1. Provider determines how
care should be redesigned
2. Provider and Purchaser
or Payer agree on
adequate price for provider
care and amount of savings
for payer
3. Providers get to keep any
additional savings and to
determine how to divide it
Global Pmt/Budget
181. 181© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities From Completely
Redesigning Payment & Delivery
• Better Payment for Physicians and Hospitals
– No threats of major fee cuts
– No health plan/benefit manager utilization review
– Physicians and hospitals paid based on quality, not volume
• Truly High Quality, Patient-Centric Care
– Coordinated care by multiple physicians
– Care mgt from providers, not health plans or disease mgt co’s
– Flexibility for telephone, internet, & home visits if patients need them
• Greater Patient Engagement
– Zero or low copayments for essential medications and services
– Higher cost-sharing for unnecessary tests and services
– Incentives for patient wellness and adherence
• Less Spending on Administrative Costs
– Less spending for health plan administrative costs and profits
– Less spending by providers on payer-imposed administrative costs
• Lower Government Spending and Smaller Deficits
• Better Health for Citizens and More Affordable Insurance
182. 182© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Learn More About Win-Win-Win
Payment and Delivery Reform
Center for Healthcare Quality
and Payment Reform
www.PaymentReform.org
183. For More Information:
Harold D. Miller
President and CEO
Center for Healthcare Quality and Payment Reform
Miller.Harold@GMail.com
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org
186. 186© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Today: Reactive Care for Chronic
Disease, Many Hospitalizations
TODAY
$/Patient # Pts Total $
Physician Svcs
PCP $600 500 $300,000
Specialist 0 $0
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Pmt (Cost) $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
187. 187© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay the PCP for
Proactive Care Management
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Pmt (Cost) $2,900,000
188. 188© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay the Specialist to Be a
Responsive Medical Neighbor
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
$80,000
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
189. 189© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Provide Adequate Resources to
Support Patients
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Pmt (Cost) $2,900,000
190. 190© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can We Afford a 127% Increase in
Spending on Ambulatory Care?
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
$80,000
Hospitalizations
Hospital $10,000 250 $2,500,000
Specialist $400 250 $100,000
Total Pmt (Cost) $2,900,000
191. 191© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Yes, If It Succeeds In
Reducing Hospitalizations
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
$80,000
Hospitalizations
Hospital $10,000 250 $2,500,000 150 $1,500,000 -40%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000 $2,180,000 -25%
192. 192© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
But What About the Hospital?
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist 0 $0 $300 500 $150,000 +50%
$80,000
Hospitalizations
Hospital $10,000 250 $2,500,000 150 $1,500,000 -40%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000 $2,180,000 -25%
193. 193© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Analyze the Hospital’s
Cost Structure
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000
Hosp. Variable $3,700 37% $925,000
Hosp. Margin $300 3% $75,000
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
194. 194© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Continue to Cover the Fixed Costs
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000
Hosp. Margin $300 3% $75,000
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
195. 195© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Save on Variable Costs
With Fewer Patients
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
196. 196© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Increase the Hospital’s
Contribution Margin
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000
197. 197© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payer Still Spends Less
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000 $2,817,500 -3%
198. 198© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Win-Win-Win: Better Care, Higher
Physician Pay, Lower Spending
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $2,900,000 $2,817,500 -3%
Physicians Win
Payer Wins
Hospital Wins
199. 199© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use a Condition-Based Payment
for the Patients to Support Care
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
PCP $600 500 $300,000 $900 500 $450,000 +50%
Specialist $300 500 $150,000 +50%
RN Care Mgr $80,000
Hospitalizations
Hospital Fixed $6,000 60% $1,500,000 $1,500,000 -0%
Hosp. Variable $3,700 37% $925,000 $3,700 150 $555,000 -40%
Hosp. Margin $300 3% $75,000 $82,500 +10%
Specialist $400 250 $100,000 $0
Total Pmt (Cost) $5,800 500 $2,900,000 $5,635 500 $2,817,500 -3%
201. 201© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Instead of Having To Accept What
Medicare and Health Plans Pay…
CMS
Physician
Group,
IPA,
or Health
System
Commercial
Health Plans
Medicaid
MCOs
Self-Insured
Employers
Individuals &
Small Groups
Fully Insured
Large Groups
State
Medicaid
Medicare
Beneficiaries
Medicare FFS
Medicaid FFS
MA Plans
Commercial FFS
202. 202© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Could Happen If Physicians
Had Their Own Health Plans?
CMS
Physician
Group,
IPA,
or Health
System
Commercial
Health Plans
Medicaid
MCOs
Self-Insured
Employers
Individuals &
Small Groups
Fully Insured
Large Groups
State
Medicaid
Medicare
Beneficiaries
MA Plans
Physician
-Owned
Health
Plan
?
?
?
203. 203© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Get Risk-Adjusted Payment from
Medicare, Pay Physicians Better
CMS
Physician
Group,
IPA,
or Health
System
Commercial
Health Plans
Medicaid
MCOs
Self-Insured
Employers
Individuals &
Small Groups
Fully Insured
Large Groups
State
Medicaid
Medicare
Beneficiaries
Physician
-Owned
Health
Plan
Risk-Adjusted
Medicare
Advantage
Payment
Better
Physician
Payment
204. 204© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Contract Directly with Self-Insured
Employers, Pay Physicians Better
CMS
Physician
Group,
IPA,
or Health
System
Commercial
Health Plans
Medicaid
MCOs
Self-Insured
Employers
Individuals &
Small Groups
Fully Insured
Large Groups
State
Medicaid
Medicare
Beneficiaries
Physician
-Owned
Health
Plan
Risk-Adjusted
Medicare
Advantage
Payment
Better
Physician
Payment
Risk-Adjusted Direct Contract
205. 205© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use Exchanges for Small Group
Business, Pay Physicians Better
CMS
Physician
Group,
IPA,
or Health
System
Commercial
Health Plans
Medicaid
MCOs
Self-Insured
Employers
Individuals &
Small Groups
Fully Insured
Large Groups
State
Medicaid
Medicare
Beneficiaries
Physician
-Owned
Health
Plan
Risk-Adjusted
Medicare
Advantage
Payment
Better
Physician
Payment
Insurance
Exchanges Risk-Adjusted
Premium
Revenue
Risk-Adjusted Direct Contract
206. 206© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Contract Directly With State for
Medicaid, Pay Physicians Better
CMS
Physician
Group,
IPA,
or Health
System
Commercial
Health Plans
Self-Insured
Employers
Individuals &
Small Groups
Fully Insured
Large Groups
State
Medicaid
Medicare
Beneficiaries
Physician
-Owned
Health
Plan
Risk-Adjusted
Medicare
Advantage
Payment
Better
Physician
Payment
Risk-Adjusted
Premium
Revenue
Risk-Adjusted Direct Contract
Insurance
Exchanges
Risk-Adjusted
Global Payment
207. 207© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Get Global Payment for Large
Groups, Pay Physicians Better
CMS
Physician
Group,
IPA,
or Health
System
Physician
-Owned
Health
Plan
Self-Insured
Employers
Individuals &
Small Groups
Fully Insured
Large Groups
Insurance
Exchanges
State
Medicaid
Medicare
Beneficiaries
Risk-Adjusted Direct Contract
Risk-Adjusted
Medicare
Advantage
Payment
Better
Physician
Payment
Risk-Adjusted
Premium
Revenue
Risk-Adjusted
Global Payment
208. 208© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Result: A “Single Payer System”
Controlled by Physicians
CMS
Physician
Group,
IPA,
or Health
System
Physician
-Owned
Health
Plan
Self-Insured
Employers
Individuals &
Small Groups
Fully Insured
Large Groups
Insurance
Exchanges
State
Medicaid
Medicare
Beneficiaries
Risk-Adjusted Direct Contract
Risk-Adjusted
Medicare
Advantage
Payment
Better
Physician
Payment
Risk-Adjusted
Premium
Revenue
Risk-Adjusted
Global Payment
ONE PAYER,
MANY
CUSTOMERS
210. 210© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
To Set A Fair Price,
Start With Existing Costs…
COST
TIME
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
211. 211© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Set a Payment Level That Is
≤ Expected Costs…
COST
TIME
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
Exp.
Costs
in
FFS
$
212. 212© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…If All Goes Well, Costs Will Be
Lower Than the Payment Level…
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
213. 213© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
...And Both the Purchaser and
Provider Will “Win”
COST
TIME
Costs
in
New
Pmt
$$$
$$$
Bonus for
Provider
Savings
For Purchaser
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
214. 214© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Everybody Fears:
All Won’t Go Well (Costs Go Up)
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
215. 215© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Different Reasons Costs
May Increase Beyond Payment
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Excess
Cost
Unusually
Costly Patient
Overutilization
of Services
New, High-Cost
Treatment
Many Avoidable
Complications
Higher-Severity
Patients
Large Random
Variation
Failure to Follow
Guidelines
Bundled
or
Episode
Payment
Level
216. 216© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Providers Should NOT Be
Expected To Take Insurance Risk
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Excess
Cost
Unusually
Costly Patient
Overutilization
of Services
New, High-Cost
Treatment
Many Avoidable
Complications
Higher-Severity
Patients
Large Random
Variation
Failure to Follow
Guidelines
Provider
Performance
Risk
Insurance
Risk
Bundled
or
Episode
Payment
Level
217. 217© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Four Mechanisms for Separating
Insurance and Performance Risk
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
Excess
Cost
Unusually
Costly Patient
Overutilization
of Services
New, High-Cost
Treatment
Many Avoidable
Complications
Higher-Severity
Patients
Severity
Adjustment
Large Random
Variation
Failure to Follow
Guidelines
Outlier Pmt/
Stop-Loss
Risk
Exclusions
Risk
Corridors
Performance
Risk
(Provider’s
Responsibility)