FROM VOLUME TO VALUE: Better Ways to Pay for Healthcare Harold D. Miller Executive Director Center for Healthcare Quality and Payment Reform and President

FROM VOLUME TO VALUE:Better Ways to Pay for Healthcare

Harold D. MillerExecutive Director

Center for Healthcare Quality and Payment Reformand

President and CEO Network for Regional Healthcare Improvement

What’s the Biggest IssueFederal Health Reform

Didn’t Solve?

How to Reduce HealthcareCosts Without Rationing

What’s the Biggest IssueFederal Health Reform

Didn’t Solve?

4© 2009, 2010 Center for Healthcare Quality and Payment Reform, Network for Regional Healthcare Improvement

Reducing Costs Without Rationing:Prevention

PreventableCondition

ContinuedHealth

HealthyConsumer


Reducing Costs Without Rationing:Avoiding Hospitalizations


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode


Reducing Costs Without Rationing:Efficient, Successful Treatment


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode

Efficient Successful Outcome

Complications,Infections,

Readmissions

High-CostSuccessfulOutcome


Go Where the Money Is: Maternity Care & Chronic Disease

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000

Osteoarthritis and other non-traumatic joint …Back problems

Infectious diseasesMental disorders

PneumoniaOther CNS disorders

COPD, asthmaKidney Disease

Other endocrine, nutritional & immune …Hypertension

Gallbladder, pancreatic, and liver diseaseDiabetes mellitus

Other circulatory conditions arteries, veins, …Trauma-related disorders

CancerHeart conditions

Normal birth/live born

U.S. Expenditures on Hospital Inpatient Stays, Age 0-65, 2006 (Millions)

Medical Expenditure Panel Survey, 2006


Maternity Care Costs Can Be Reduced By Using Birth Centers...

$0 $3,000 $6,000 $9,000 $12,000

Vaginal Delivery - Birth Center

Vaginal Delivery (No Complications) -Hospital

-

Average Facility Labor & Birth Charge, 2003

Source: Carol Sakala and Maureen Corry, Evidence-Based Maternity Care:

What It Is and What It Can Achieve, Milbank Memorial Fund

2008

75% Lower Cost


...And By Avoiding Unnecessary Cesareans

$0 $3,000 $6,000 $9,000 $12,000

Vaginal Delivery - Birth Center

Vaginal Delivery (No Complications) -Hospital

Cesarean Delivery (No Complications)

Average Facility Labor & Birth Charge, 2003

75% Lower Cost

50% Lower Cost

Source: Carol Sakala and Maureen Corry, Evidence-Based Maternity Care:

What It Is and What It Can Achieve, Milbank Memorial Fund

2008


Nevada is Above Average in the Rate of Cesarean Births...

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

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% of Births by Cesarean Section, 2007


...and Has Had the 5th Highest Growth in Cesareans in the U.S.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Rhod

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Conn

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a

% Change in Cesarean Birth Rate, 1996-2007


It Takes Some Leadership and a Little Training

• With training in Perfecting Patient CareSM from the Pittsburgh Regional Health Initiative, a team from Magee Womens Hospital in Pittsburgh:– Reduced by 64% the rate of elective inductions of

birth prior to full gestation (which reduces neonatal intensive care (NICU) usage and complications for both mother and child)

– Reduced by 60% the use of Cesarean sections for elective inductions of birth in first-time mothers


Current Payment Systems Reward Bad Outcomes, Not Better Health


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions

High-CostSuccessfulOutcome$


“Episode Payments” to Reward Value Within Episodes


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions

High-CostSuccessfulOutcomeEpisode

Payment$A Single Payment

For All Care Needed From All Providers in

the Episode, With a Warranty For

Complications


The Weakness of Episode Payment


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions

High-CostSuccessfulOutcomeEpisode

Payment

How do you preventunnecessary episodes

of care?(e.g., preventable hospitalizations

for chronic disease, overuse of cardiac

surgery,back surgery, etc.)


Comprehensive Care PaymentsTo Avoid Episodes


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions


A Single Payment

For All CareNeeded ForA Condition

$ ComprehensiveCare

Paymentor

“Global”Payment


No Additional Revenuefor Taking Sicker

Patients

Payment Levels Adjusted Based on Patient Conditions

Providers Lose Money On Unusually

Expensive Cases

Limits on Total RiskProviders Accept forUnpredictable Events

Providers Are Paid Regardless of the

Quality of Care

Bonuses/PenaltiesBased on Quality

Measurement

Provider Makes More Money If

Patients Stay Well

Provider Makes More Money If

Patients Stay Well

Flexibility to DeliverHighest-Value

Services

Flexibility to DeliverHighest-Value

Services

CAPITATION (WORST VERSIONS)

COMPREHENSIVE CARE PAYMENT

Isn’t This Capitation?No – It’s Different


Who Should Be AccountableFor Achieving Higher Value Care?

• Hospitals?• Integrated Delivery Systems?• Multi-Specialty Group Practices?


Keeping People Well?Primary Care


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions


PRIMARYCARE


Avoiding Hospitalizations?Primary + Specialty Care


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions


PRIMARYCARE

PRIMARY +SPECIALTY


Better Acute Care?Hospitals and Specialists


ContinuedHealth

HealthyConsumer

NoHospitalization

Acute Care Episode



Readmissions


PRIMARYCARE

PRIMARY +SPECIALTY

HOSPITALS& SPECIALISTS


Implications

• Hospitals and physicians will need to work together to improve quality and lower costs for inpatient care to ensure they are the acute care provider of choice in the community

• Physicians, particularly primary care physicians, will need to improve skills in preventing hospitalizations and managing patient utilization to control total patient care costs

• Payment systems will need to provide the support that physicians and hospitals need to deliver higher-quality, lower-cost care


PhysicianPayment

Hospitals & MDs Paid SeparatelyFor Hospital Care...

Costs and PaymentToday

DRG orPer Diem

MDFees

HospitalPayment


Physician“Cost”

PhysicianPayment

...MDs and Hospitals Expected to Cover Their “Own” Costs


HospitalPayment Hospital

Staff/FacilityCosts

Drug/DeviceCosts


HospitalPayment

PhysicianPayment


So Any Savings in Hospital Costs Go to Hospitals, Not Physicians

Hospital MarginImproves

No Rewardfor Physician

HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”

HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”

Initiative to ReduceDevice Costs &

Improve Efficiency


HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”

BundledHospital

+PhysicianPayment

BundledEpisodePayment

Bundled Payment Covers All Costs in a Single Payment...


HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”

BundledHospital

+PhysicianPayment


HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”


Improve Efficiency

...So if MDs & Hospitals Cooperate to Generate Savings...


HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”

BundledHospital

+PhysicianPayment

HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”


Improve EfficiencyReallocation

of Savings

HigherPhysicianPayment

Episode payment would givehospitals & MDs incentives to

collaborate to reduce costs

...MDs, Hospitals, and PayersCan All Benefit

Physician“Cost”

HospitalStaff/

FacilityCosts

MD Bonus

Payer Savings

Hosp. Margin

Drug/DeviceCosts

Lower Price

Capital toReinvest



HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”

BundledHospital

+PhysicianPayment

HospitalStaff/

FacilityCosts

Drug/DeviceCosts

Physician“Cost”


Improve EfficiencyReallocation

of Savings

A Mechanism to Allocate the Payments is Needed

Physician“Cost”

HospitalStaff/

FacilityCosts

MD Bonus

Payer Savings

Hosp. Margin

Drug/DeviceCosts

PHO orOther

Hospital/MDCollaborative

• Plan initiatives• Set targets• Monitor progress• Allocate payments



Today: Separate Payments for Hospitals & Physicians

Hospital Services

Drugs & Devices

Non-MD Staff

Facilities/Equipment

Treatment for ConditionsPresent on Admission

Physician Services

Physician Services

DRG

FeeFee


“Bundled Payment”: Aligning Hospital and MD Incentives

Hospital Services

Drugs & Devices

Non-MD Staff



Physician Services

Physician Services

INPATIENT BUNDLE


Today: Higher Payment for Hospital-Acquired Conditions


Hospital Services

Drugs & Devices

Non-MD Staff


Treatment for Hospital-Acquired

Conditions

Physician Services

Physician Services

INPATIENT BUNDLE


“Inpatient Warranty:” No AdditionalPayment for Adverse Events


Hospital Services

Drugs & Devices

Non-MD Staff



Conditions

Physician Services

Physician Services

INPATIENT BUNDLEINPATIENT WARRANTY


Today: Separate Payments for Inpatient and Post-Acute Care


Post-Hospital

Care


Conditions

Rehab

HomeHealth

Long-TermCare

MDServices



“Inpatient + Post-Acute Bundle”Pays for Both Jointly


Post-Hospital

Care


Conditions

Rehab

HomeHealth

MDServices


INPATIENT+POST-ACUTE BUNDLE

Long-TermCare


Today: Extra Payment for Preventable Readmissions


Post-Hospital

Care

ReadmissionPreventableDuring InitialAdmission

ReadmissionPreventable

By Post-Acute Care

No Readmit;Planned or

UnpreventableReadmission


Conditions

HospitalReadmission




Full Episode Payment With A Limited Warranty


Post-Hospital

Care

ReadmissionPreventableDuring InitialAdmission

ReadmissionPreventable

By Post-Acute Care

UnpreventableReadmission


Conditions

HospitalReadmission



FULL EPISODE WITH WARRANTY


Different Episode/Bundling Concepts for Different Problems

PROBLEM/GOAL PAYMENT METHODEncourage physicians to work

with hospitals to eliminate inpatient inefficiencies

INPATIENT BUNDLED PAYMENT

Encourage reduction in adverse events during inpatient care

INPATIENT WARRANTY

Encourage more efficient combinations of inpatient &

post-acute care

BUNDLED INPATIENT & POST-ACUTE CARE

PAYMENT

Encourage efficiency and quality across the full episode of care

FULL EPISODE PAYMENT WITH LIMITED WARRANTY


It’s Not A New Concept; Results Documented Over 20 Years Ago

• In 1987, an orthopedic surgeon in Lansing, MI and the local hospital, Ingham Medical Center, offered:– a fixed total price for surgical services for shoulder and knee problems– a warranty for any subsequent services needed for a two-year period,

including repeat visits, imaging, rehospitalization and additional surgery.

• Results:– Health insurer paid 40% less than otherwise– Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer

rehospitalizations

• Method: – Reducing unnecessary auxiliary services such as radiography and

physical therapy– Reducing the length of stay in the hospital– Reducing complications and readmissions.


Yes, a Health Care ProviderCan Offer a Warranty

Geisinger Health System ProvenCareSM

– A single payment for an ENTIRE 90 day period including:• ALL related pre-admission care

• ALL inpatient physician and hospital services

• ALL related post-acute care

• ALL care for any related complications or readmissions

– Types of conditions/treatments currently offered:• Cardiac Bypass Surgery• Cardiac Stents• Cataract Surgery• Total Hip Replacement• Bariatric Surgery• Perinatal Care• Low Back Pain• Treatment of Chronic Kidney Disease


Payment + Process Improvement = Better Outcomes, Lower Costs


GWV Primary C-Sections Jan 2008-Dec 2009

Avg=21.4

Avg=29.0UCL=31.4

UCL=45.5

LCL=11.4LCL=12.5

2

7

12

17

22

27

32

37

42

47

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

Per

cent

Implementation of electronic process

Geisinger Perinatal ProvenCare:26% Reduction in Cesareans


A Single Case Rate for Allor Different Rates by Severity?

• Severity adjustment is essential to episode payment– FFS implicitly adjusts for patient severity/risk/complexity by paying

more for patients who have more complex problems– FFS doesn’t distinguish which patients have higher needs from those

the provider overtreats– Episode payment needs to make the distinction

• Are there severity adjustment systems?– DRGs, MS-DRGs, APR-DRGs for hospital episodes, HHRGs for home

care, CMS-HCC for Medicare Advantage, etc.– Clinical category systems:

• e.g., 3M® Potentially Preventable Readmissions, Clinical Risk Groups

– Regression-based category systems:• e.g, CMS Readmission measures being used for Hospital Compare

• e.g., PROMETHEUSTM system for Potentially Avoidable Complications


Better Payment for EpisodesDoesn’t Prevent Episodes

Patient w/ Chronic

Disease(s)

Hospitalization Episode

Readmission

No Hospitalization

Episode Payment


Significant Reduction in Rate of Hospitalizations Possible

Examples:• 40% reduction in hospital admissions, 41% reduction in ER visits for

exacerbations of COPD using in-home & phone patient education by nurses or respiratory therapists (2003)J. Bourbeau, M. Julien, et al, “Reduction of Hospital Utilization in Patients with Chronic Obstructive Pulmonary Disease: A Disease-Specific Self-Management Intervention,” Archives of Internal Medicine 163(5), 2003

• 66% reduction in hospitalizations for CHF patients using home-based telemonitoring (1999)M.E. Cordisco, A. Benjaminovitz, et al, “Use of Telemonitoring to Decrease the Rate of Hospitalization in Patients With Severe Congestive Heart Failure,” American Journal of Cardiology 84(7), 1999

• 27% reduction in hospital admissions, 21% reduction in ER visits through self-management education (2005)M.A. Gadoury, K. Schwartzman, et al, “Self-Management Reduces Both Short- and Long-Term Hospitalisation in COPD,” European Respiratory Journal 26(5), 2005


20-40% Reduction in Surgery Through Shared Decision-Making

-50%

-40%

-30%

-20%

-10%

0%

Coronary Revascularization

for Angina

Mastectomy for Breast Cancer

Back Surgery Prostatectomy for BPH

Reduction in Use of Surgery Among Patients Using Decision Aids


PCPs Can’t Get Paid for Many Tools To Avoid Hospitalization

Patient w/ Chronic

Disease(s)

PrimaryCare MD

Hospitalization Episode

Nurse Care Mgt

Readmission

No Hospitalization

MD Phone Calls

MD Office Visits

Remote Monitoring

Specialist Consults

Episode Payment


OfficeVisits

NurseCare Mgr

PhoneCalls

SpecialtyConsults

Lab Work/Imaging

HospitalStay

Health Insurance Plan

PhysicianPractice

$ $ $

How It Works Today

CURRENT PAYMENT SYSTEMS

Avoidable

Avoidable

Avoidable

No payment for services that can

prevent utilization

Payment forpreventable

andunnecessary

utilizationof expensive

care


SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice

$ $

Option 1: Add New Fee Codes for Unreimbursed PCP Services

MEDICAL HOME PROGRAM

Avoidable

Avoidable

Avoidable

OfficeVisits

NurseCare Mgr

PhoneCalls

$Higher payment for primary care

$


SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice

$ $

Option 2: Pay for Monthly “Care Mgt” to Cover Missing Services

MEDICAL HOME PROGRAM

Avoidable

Avoidable

Avoidable


OfficeVisits

RN Care Mgr

PhoneCalls

MonthlyCare MgtPayment

$


SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice

$ $

Weakness: More $ for PCPs, But Any Savings Elsewhere?MEDICAL HOME PROGRAM

Avoidable

Avoidable

Avoidable


...But no commitment

to reduceutilizationelsewhere

OfficeVisits

RN Care Mgr

PhoneCalls


$



PhysicianPractice

$ $

Option 3: No New Money for PCPs, but More Flexibility

PRACTICE CAPITATION

$

$

SpecialtyConsults

Lab Work/Imaging

HospitalStay

Avoidable

Avoidable

Avoidable

Ability to Allocate $to Most Effective

Services

Condition-Adjusted

Per PersonPayment Office

Visits

NurseCare Mgr

PhoneCalls

$


SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice

$ $

Option 4: “Shared Savings” (More $ Only If Total Costs Decrease)

SHARED SAVINGS MODEL

Avoidable Avoidable

Avoidable$Portion of savings from reducedspending in other areas...

...Returnedto physician

practice aftersavings

determined...

...but no upfront $for better care

OfficeVisits

NurseCare Mgr

PhoneCalls

$


Weaknesses of “Shared Savings”

• No upfront money to enable primary care practices to hire nurse care managers, install information technology, etc.

• It rewards those who are currently poor performers more than those who are good performers

• It’s not sustainable – once costs are reduced, there is less to be saved and so shared savings payments go down



PhysicianPractice

$ $ $

Option 5: The Beginnings of “Accountable Care” Payment

CARE MGT PAYMENT + UTILIZATION P4P

SpecialtyConsults

Lab Work/Imaging

HospitalStay

Avoidable Avoidable

Avoidable

P4P Bonus/PenaltyBased on Utilization

$

$

OfficeVisits

$ $

$

RN Care Mgr

PhoneCalls


More $for PCP

Targets forReduction

In Utilization

$



PhysicianPractice

$ $

Option 6: More ACO-ness:Partial Global Payment

PARTIAL GLOBAL PMT (Professional Svcs)

SpecialtyConsults

Lab Work/Imaging

HospitalStay

Avoidable Avoidable

Avoidable

$

$

Condition-Adjusted

Per PersonPayment

Flexibility and accountabilityfor a condition-adjusted budget

covering all professional services

OfficeVisits

NurseCare Mgr

PhoneCalls

$

$ $P4P Bonus/PenaltyBased on Utilization


SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice/

ACO

Option 7: True ACO: Flexibility & Accountability w/o Insurance RiskFULL COMP. CARE/GLOBAL PAYMENT

Avoidable Avoidable

Avoidable

$


covering all services

$Condition-

AdjustedPer PersonPayment Office

Visits

NurseCare Mgr

PhoneCalls


SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice/

ACO

Option 7a: Ensuring IncentivesExist for Quality as Well as Cost

FULL COMP. CARE/GLOBAL PMT + QUALITY P4P

Avoidable Avoidable

Avoidable

$

$Condition-


Visits

NurseCare Mgr

PhoneCalls

P4P Bonus/PenaltyBased on Quality

$ $


Example: BCBS MassachusettsAlternative Quality Contract

• A single payment amount is established to cover all costs of care for a population of patients

• The initial payment is set based on past expenditures; the amount increases each year at an inflation rate based on CPI, not on medical inflation, so savings come from controlling increases over time

• The payment amount functions as a budget; the budget is adjusted up or down based on the types and severity of conditions the patients have, so providers aren’t taking insurance risk, only performance risk

• The provider doesn’t need to pay claims; BCBS still pays individual providers fee-for-service, but fees are adjusted up or down to keep total costs within the payment budget

• Payments are increased by annual bonuses based on the quality of care delivered


SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice/

ACO

Episode Payments for Acute Care Help the ACO Manage Costs


Avoidable Avoidable

Avoidable

$

$Condition-

AdjustedPer PersonPayment

Episode Payment to Hospital

OfficeVisits

NurseCare Mgr

PhoneCalls

$ $



Primary Care Must Be the Core of an ACO

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

PrimaryCare

Practice

SpecialistHospital

Specialist

Specialist

Specialist

SpecialistHospital

Accountable Care Requires Coordinated Relationships,

Not Necessarily Corporate Integration


Transitioning to Accountable Care Payment

SpecialtyConsults

Lab Work/Imaging

HospitalStay


PhysicianPractice/

ACO


Avoidable Avoidable

Avoidable

$

$Condition-


Visits

NurseCare Mgr

PhoneCalls


$ $


PhysicianPractice

$ $

PARTIAL GLOBAL PMT (Professional Svcs)


SpecialtyConsults

Lab Work/Imaging

HospitalStay

Avoidable Avoidable

Avoidable

$

$

Condition-Adjusted

Per PersonPayment


covering all professional services

OfficeVisits

NurseCare Mgr

PhoneCalls

$

$ $


PhysicianPractice

$ $ $

CARE MGT PAYMENT + UTILIZATION P4P

SpecialtyConsults

Lab Work/Imaging

HospitalStay

Avoidable Avoidable

Avoidable


$

$

OfficeVisits

$ $

$

RN Care Mgr

PhoneCalls


More $for PCP

Targets forReduction

In Utilization

$


One Payer Changing Isn’t Enough

Payer

Provider

Payer Payer

Patient Patient Patient

Provider is only compensated for changed practices for the subset of patients covered by participating payers

Better Payment

System

CurrentPaymentSystem Current

PaymentSystem


Payers Need to Align to Enable Providers to Transform

Payer

Provider

Payer Payer

Patient Patient Patient

Better Payment

System

BetterPaymentSystem Better

PaymentSystem


Payer Coordination Is Beginningto Occur Around the Country

• Examples of Multi-Payer Payment Reforms:– Minnesota: Multi-payer change in payments for primary care

practices and psychiatrists to help manage patients with depression

– Pennsylvania: Multi-payer initiative to support medical home/chronic care services in primary care practices

– Rhode Island: Multi-payer chronic care/medical home project in primary care practices

– Vermont: Multi-payer medical home project

• A Facilitator of Coordination is Needed– PA, RI, VT: State Government– Minnesota: Institute for Clinical Systems Improvement

• Medicare Needs to Participate in Local Projects


How Do You Set the Price?

• If price is too high, inefficiencies will exist, regardless of what incentives may exist in the payment method

• If price is too low, providers will be unable to deliver high-quality care

• So how does the “right” price get determined?


Our Standard Methods of Controlling Prices Don’t Work

• Price Negotiations as Part of Contracting– Even large insurers can’t demand price concessions from

large/monopoly providers





• Narrow Networks– In theory, could steer patients to lower-cost providers and give

providers greater volume to reduce prices– In practice, prohibits patients from using the providers they prefer and

creates consumer backlash– Networks are based on providers, not services, so providers with some

good services are either in or out for all services





• Narrow Networks– In theory, could steer patients to lower-cost providers and give

providers greater volume to reduce prices– In practice, prohibits patients from using the providers they prefer and

creates consumer backlash– Networks are based on providers, not services, so providers with some

good services are either in or out for all services

• Copays, Co-insurance and High-Deductible Health Plans– Create little incentive for consumers to choose lower-cost providers on

the expensive items that make a difference– Create significant disincentive to pursue preventive care that may

prevent the expensive items in the first place


Your Choices With Auto Purchase Insurance

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5 yr/60,000m warranty 5 star crash rating

4 yr/50,000m warranty No crash rating


Copayment: Lexus Wins


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$1,000 Copay: $1,000 $1,000




Coinsurance: Lexus Wins for Most People


MSRP: $22,450 MSRP: $63,825

$1,000 Copay:

10% Coinsurance:

$1,000 $1,000

$2,245 $6,383




High Deductible:Lexus Wins


MSRP: $22,450 MSRP: $63,825

$1,000 Copay:

10% Coinsurance:

High Deductible:

$1,000 $1,000

$2,245 $6,383

$10,000 $10,000




Price Difference:Hyundai Wins for Most PeopleHYUNDAI SONATA LEXUS LS 460

MSRP: $22,450 MSRP: $63,825

$1,000 Copay:

10% Coinsurance:

High Deductible:

Price Difference:

$1,000 $1,000

$2,245 $6,383

$10,000 $10,000

$0 $41,375




Better Ways of Controlling Prices

• Value-Based Competition by Providers for Consumers– Define episode prices and global fees so it’s easier to compare costs of

different providers and procedures– Publish information on prices and quality of all providers– Require consumers to pay the “last dollar” of providers’ prices (i.e., the

difference between the prices of more expensive and less expensive providers/services with equivalent quality)

– Create shared decision-making processes to help consumers decide among services based on benefits and costs


Better Ways of Controlling Prices

• Value-Based Competition by Providers for Consumers– Define episode prices and global fees so it’s easier to compare costs of

different providers and procedures– Publish information on prices and quality of all providers– Require consumers to pay the “last dollar” of providers’ prices (i.e., the

difference between the prices of more expensive and less expensive providers/services with equivalent quality)

– Create shared decision-making processes to help consumers decide among services based on benefits and costs

• Ensuring There Are Competitors– Prevent anti-competitive consolidations and encourage limited

duplication of services (assuming consumers are made price-sensitive)– Regulate prices where monopolies exist (e.g., the Maryland Hospital

rate-setting commission)– Prohibit all-or-nothing contracting for services by large providers


Benefit Design Changes AreAlso 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 andIncentives to:

•Improve health•Take prescribed medications•Allow a provider to coordinate care•Choose the highest-value providers and services


Extreme Views of Patient Role in Use of Medical Home/ACO

CONSUMERS/PATIENTS CAN

CHANGE OR USE MULTIPLE

PROVIDERSAT WILL

CONSUMERS/PATIENTS ARE

“LOCKED IN”TO A SINGLEGATEKEEPER

PROVIDER

MIDDLE GROUNDROCK HARD PLACE


Creating a Middle Ground to Support the Medical Home/ACO

CONSUMERS/PATIENTS CAN

CHANGE OR USE MULTIPLE

PROVIDERSAT WILL

CONSUMERS/PATIENTS ARE

“LOCKED IN”TO A SINGLEGATEKEEPER

PROVIDER

CONSUMERS/PATIENTS HAVE

INCENTIVESTO CHOOSE &

USE AN ACO ORMEDICAL HOME

MIDDLE GROUNDROCK HARD PLACE


Importance of Coordinating Pharmacy & Medical Benefits

Hospital Costs

PhysicianCosts

OtherServices

Medical Benefits

DrugCosts

Pharmacy Benefits

Single-minded focus onreducing costs here...

...could result in higherspending on hospitalizations

• High copays for brand-nameswhen no generic exists

• Doughnut holes & deductibles

Principal treatment for mostchronic diseases involves regular use

of maintenance medication


Better Payment Systems Require Good Quality Measurement

• Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care




• Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs




• Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs

• Ideal: Develop quality measures with participationof physicians, as RegionalHealth ImprovementCollaboratives do

Massachusetts Health Quality Partners

Wisconsin Collaborative for Healthcare Quality

Minnesota Community Measurement


Value-DrivenDeliverySystems

Quality/CostMeasurement &

Reporting

ConsumerEducation &Engagement

Functions Needed for HealthcarePayment & Delivery Reform...

Value-DrivenPayment Systems& Benefit Designs




Reporting


...Functions Can’t Proceed in Silos...


?




Reporting


Coordinated Support for All Functions at the Regional Level...


RegionalHealth

ImprovementCollaborative




Reporting


Coordinated Support for All Functions at the Regional Level...


NevadaPartnership forValue-DrivenHealthcare

(HealthInsight)


...With Active Involvement of All Healthcare Stakeholders

RegionalHealth

ImprovementCollaborative

HealthcareProviders

HealthcarePayers

HealthcareConsumers

HealthcarePurchasers


For More Information on Payment and Delivery Reforms

www.PaymentReform.org

For More Information:

Harold D. MillerExecutive Director, Center for Healthcare Quality and Payment Reform

andPresident & CEO, Network for Regional Healthcare Improvement

[email protected]

(412) 803-3650

www.CHQPR.org

www.NRHI.org

www.PaymentReform.org

Documents

FROM VOLUME TO VALUE: Better Ways to Pay for Healthcare Harold D. Miller Executive Director Center for Healthcare Quality and Payment Reform and President