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Revised Agenda

l Contextè Value

- Why has it been hard to achieve?

l Value based Care Trends for 2018è The evolution of value-based reimbursement

- Hawaii example

- APMs

- Bundles

è Greater access to convenient, low cost care- Virtual medicine

- National low cost provider systems

- “The provider (who is not a doctor) will see you now”

è Patient centered care—moving beyond lip service- examples of responding to patients as consumer

1

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Top 12 takeaways from the 2018 JP Morgan Healthcare Conference — while the destination is uncertain, the direction is clearWritten by Dan Michelson, CEO, Strata Decision Technology | January 10, 2018


What is value?

3

“If I had an hour to solve a problem I’d spend 55 minutes thinking about the problem and

five minutes thinking about solutions.”


The medical system had done what it so often does: performed tests, unnecessarily, to reveal problems that aren’t quite problems to then be fixed, unnecessarily, at great expense and no little risk. Meanwhile, we avoid taking adequate care of the biggest problems that people face—problems like diabetes, high blood pressure, or any number of less technologically intensive conditions. An entire health-care system has been devoted to this game.

Americas Epidemic Of Unnecessary Care

Atul Gawande, MD MPH

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Activity Expected Impact Time to Impact

Effects Within

Months

Transitions of care management Reduce readmissions 3 mos

Case management for high-risk patients with targeted conditions: diabetes, heart failure, COPD

Reduce primary admissions and ED 3–6 mos

Case management for other high-risk patients Reduce primary admissions and ED 6–12 mos

Pharmacy management Increase generic use 6–12 mos

Effects within

1 – 2 yr.

Nursing home management Reduce readmissions/primary admissions 12–18 mos

More efficient specialists and ancillary providers Decrease cost per episode of care 12–18 mos

High-end imaging Reduce unnecessary testing 12–18 mos

Effects within

3–5+ yr.

Interventions for low-risk chronic disease patients: disease registries, chronic disease care optimization

Improved control; avoid complications 2–5 yr.

Preventive care; screening; lifestyle change; wellness

Earlier identification and treatment; decrease incidence of chronic diseases 2–5+ yr.

Interventions Works…But Take Time

Source: Geisenger

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13

Revenue Sources: Federal Overall

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2016 2017

Bundled Payment

Medicaid Managed Care

ACOs

Medicaid FFS

Fee for Service

Medicare Advantage

2015100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2017 2018

2016100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2018 2019

2017

Slide 4Revenue Sources: Federal Overall

10%

45%

11%

10%

22%

9%

41%

12%

11%

24%

8%

34%

15%

12%

27%

4%

11%

41%

15%

7%

24%

10%

37%

16%

8%

26%

8%

31%

18%

10%

29%

3%3%2%

11%

35%

14%

14%

25%

11%

34%

14%

15%

26%

10%

29%

15%

14%

28%

2%

Revenue Sources: Commercial Overall

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2018 2019

Bundled Payment

Fee for Service

Full CapitationPartial Capitation

Shared Risk

Shared Savings

2017100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2017 2018

2016100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2016 2017

2015

Slide 5Revenue Sources: Commercial Overall

15%

71%

6%4%4%

14%

70%

6%5%4%

15%

63%

10%

5%5%

12%

77%

4%3%3%

15%

71%

8%

3%3% 3%

18%

61%

11%

3%4%

7%

78%

5%4%

4% 4%

12%

68%

8%

4%5%

14%

59%

11%

6%

7%

13


100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2016 2017

Bundled Payment


ACOs

Medicaid FFS

Fee for Service

Medicare Advantage

2015100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2017 2018

2016100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2018 2019

2017


10%

45%

11%

10%

22%

9%

41%

12%

11%

24%

8%

34%

15%

12%

27%

4%

11%

41%

15%

7%

24%

10%

37%

16%

8%

26%

8%

31%

18%

10%

29%

3%3%2%

11%

35%

14%

14%

25%

11%

34%

14%

15%

26%

10%

29%

15%

14%

28%

2%


100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2018 2019

Bundled Payment

Fee for Service


Shared Risk

Shared Savings

2017100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2017 2018

2016100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2016 2017

2015


15%

71%

6%4%4%

14%

70%

6%5%4%

15%

63%

10%

5%5%

12%

77%

4%3%3%

15%

71%

8%

3%3% 3%

18%

61%

11%

3%4%

7%

78%

5%4%

4% 4%

12%

68%

8%

4%5%

14%

59%

11%

6%

7%

13


100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2016 2017

Bundled Payment


ACOs

Medicaid FFS

Fee for Service

Medicare Advantage

2015100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2017 2018

2016100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2018 2019

2017


10%

45%

11%

10%

22%

9%

41%

12%

11%

24%

8%

34%

15%

12%

27%

4%

11%

41%

15%

7%

24%

10%

37%

16%

8%

26%

8%

31%

18%

10%

29%

3%3%2%

11%

35%

14%

14%

25%

11%

34%

14%

15%

26%

10%

29%

15%

14%

28%

2%


100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2018 2019

Bundled Payment

Fee for Service


Shared Risk

Shared Savings

2017100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2017 2018

2016100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2016 2017

2015


15%

71%

6%4%4%

14%

70%

6%5%4%

15%

63%

10%

5%5%

12%

77%

4%3%3%

15%

71%

8%

3%3% 3%

18%

61%

11%

3%4%

7%

78%

5%4%

4% 4%

12%

68%

8%

4%5%

14%

59%

11%

6%

7%

13


100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2016 2017

Bundled Payment


ACOs

Medicaid FFS

Fee for Service

Medicare Advantage

2015100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2017 2018

2016100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2018 2019

2017


10%

45%

11%

10%

22%

9%

41%

12%

11%

24%

8%

34%

15%

12%

27%

4%

11%

41%

15%

7%

24%

10%

37%

16%

8%

26%

8%

31%

18%

10%

29%

3%3%2%

11%

35%

14%

14%

25%

11%

34%

14%

15%

26%

10%

29%

15%

14%

28%

2%


100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2018 2019

Bundled Payment

Fee for Service


Shared Risk

Shared Savings

2017100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2017 2018

2016100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Current 2016 2017

2015


15%

71%

6%4%4%

14%

70%

6%5%4%

15%

63%

10%

5%5%

12%

77%

4%3%3%

15%

71%

8%

3%3% 3%

18%

61%

11%

3%4%

7%

78%

5%4%

4% 4%

12%

68%

8%

4%5%

14%

59%

11%

6%

7%

19

Revenue Sources: Medicare Advantage (2017)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%All 1 49 50 149 150 249 250 499 500 999 West Midwest South NortheastIPA MSMG IDS IDS

w/Plan

Slide 16Revenue Sources: Medicare Advantage (2017)

Fee for Service

Fee for Servicewith Bonus

Full Capitation

Partial Capitation

Shared Risk

Shared Savings

1,000+

15%

2%

13%

11%

28%

30%

62%

7%

32%

10%

12%

13%

30%

34%

13%

2%

6%

11%

33%

36%

24%

5%

18%

16%

24%

13%

13%

13%

8%

31%

36%

14%

13%

29%

43%

24%

3%6%

9%

35%

23%

8%

19%

35%

34%

23%

2%

25%

24%

25%

28%

8%

21%

5%

18%

21%

21%

5%

17%

10%

26%

21%

8%

7%

33%

41%

20%

16%

8%

26%

29%

37%

38%

23%

8%

Accountable Care OrganizationsThe survey data shows that ACOs remain a key part of AMGA membersí risk based payments, making up 14% to 15% of total revenues for the next two years. AMGA members largely view ACOs as a well known delivery model that provides experience on how to eventually take downside risk. Meeting quality and cost targets requires infrastructure investments in people and technology, as well as a change in management techniques to be successful. ACOs allow providers the opportunity to develop these competencies in an upside risk only model.

That said, the survey data also suggests that interest in ACOs is beginning to plateau, especially for federal ACOs. Comments suggest that a!er six years of experience with the federal ACO program, many providers are experiencing limited opportunities to be successful, despite multimillion dollar investments. Programmatic rules around patient a"ribution and fi nancial benchmarking, as well as a lack of patient incentives to receive care at the ACO, limit the opportunities for an ACO to recoup its investments, let alone be fi nancially successful. This plateauing may be mitigated by MACRA, however, as groups look to federal two sided ACOs as a way to avoid remaining in MIPS.

19

Revenue Sources: Medicare Advantage (2017)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%All 1 49 50 149 150 249 250 499 500 999 West Midwest South NortheastIPA MSMG IDS IDS

w/Plan

Slide 16Revenue Sources: Medicare Advantage (2017)

Fee for Service

Fee for Servicewith Bonus

Full Capitation

Partial Capitation

Shared Risk

Shared Savings

1,000+

15%

2%

13%

11%

28%

30%

62%

7%

32%

10%

12%

13%

30%

34%

13%

2%

6%

11%

33%

36%

24%

5%

18%

16%

24%

13%

13%

13%

8%

31%

36%

14%

13%

29%

43%

24%

3%6%

9%

35%

23%

8%

19%

35%

34%

23%

2%

25%

24%

25%

28%

8%

21%

5%

18%

21%

21%

5%

17%

10%

26%

21%

8%

7%

33%

41%

20%

16%

8%

26%

29%

37%

38%

23%

8%

Accountable Care OrganizationsThe survey data shows that ACOs remain a key part of AMGA membersí risk based payments, making up 14% to 15% of total revenues for the next two years. AMGA members largely view ACOs as a well known delivery model that provides experience on how to eventually take downside risk. Meeting quality and cost targets requires infrastructure investments in people and technology, as well as a change in management techniques to be successful. ACOs allow providers the opportunity to develop these competencies in an upside risk only model.

That said, the survey data also suggests that interest in ACOs is beginning to plateau, especially for federal ACOs. Comments suggest that a!er six years of experience with the federal ACO program, many providers are experiencing limited opportunities to be successful, despite multimillion dollar investments. Programmatic rules around patient a"ribution and fi nancial benchmarking, as well as a lack of patient incentives to receive care at the ACO, limit the opportunities for an ACO to recoup its investments, let alone be fi nancially successful. This plateauing may be mitigated by MACRA, however, as groups look to federal two sided ACOs as a way to avoid remaining in MIPS.

2

AMGA conducted its third annual risk survey to determine whether AMGA members are transitioning from reimbursements based on volume to payment models based on value and to identify impediments to taking insurance risk. The fi ndings in this yearí s survey are similar to the past two surveys in that the responses show that a transition to value is occurring, despite structural impediments that make this change extremely challenging.

Based on respondent comments and a structured set of follow up questions, survey respondents provided a clear rationale for pursuing risk, including local employer and payer network demands, qualifying as an Advanced Alternative Payment Model (AAPM) in Medicare, serving as a market leader, and purposefully pursuing risk because feef ors ervice (FFS) payments are considered unsustainable over time. It is also clear from the data and respondent comments that medical group leaders are carefully assessing their entrance into or increased participation in riskbased arrangements. Impediments to taking risk, fi rst identifi ed in 2015, have not been addressed and create a disincentive to moving toward value. Lack of access to risk products is problematic, as are publicized stories regarding uneven provider success in risk contracts.

Importantly, AMGA respondents noted that this transition to value is happening largely in the provider se!ing only, while other key industry players continue to be relatively unengaged. Congress and the Department of Health and Human Services (HHS) need to address the structural impediments and create incentives for other industry players to enter into the risk market or many of these current market leaders will reassess their active involvement in making this transition successful.

AMGA Advocacy

Taking Risk, 3.0: Medical Groups Are Moving to Risk Ö Is Anyone Else?AMGAí s Third Annual Survey on Taking Risk Chester A. Speed, J.D., L.L.M.Vice President, Public Policy, AMGA

Alison Graziano, M.S.Population Health Analyst, AMGA

White Paper, December 2017


A well-designed contract establishes a sweet spot where a provider can create value through lower costs and capture an appropriate portion of the value created, through shared savings and market share gains.

Managing a complex patient population requires finding the “sweet spot” in value-based contracts.

10Source: BDC Advisors


Case Example: primary care engagementBlue Cross and Blue Shield of Hawaii (HMSA)

l HMSA is an independent licensee of the Blue Cross and Blue Shield Association and is the largest managed care plan in the state.

l 2015 initiative: Māhie (pronounced Mah-hee-ay) 2020. è Māhie refers to a “transformation” in the native Hawaiian language. è The Māhie 2020 initiative “envisions a community health system that unifies

consumers, providers, employers, government and community…”è Pilot began in April 2016 with 6 provider groupsè Pilots ran for 6 months followed by evaluation and refinement period with a full

network rollout scheduled for 2017

HMSA envisioned a system where all stakeholders work together to advance the health and well-being of Hawaii.

11Source: HMSA and Jefferson


Case Example: Blue Cross and Blue Shield of Hawaii (HMSA)The new primary care payment model includes a base payment, as well as dollars based on engagement and performance measures.

12Source: HMSA


Case Example: Blue Cross and Blue Shield of Hawaii (HMSA)Each of the 4 elements of the new payment model incentivize providers to deliver high quality care for the lowest cost.

13Source: HMSA

Base PMPM Paymentl 80% is based on previous FFS reimbursement (2013-2015)

l Desire to keep providers close to whole in year 1l Beginning in year 2, other 20% is scored as foundational engagement measures and

will affect the base PMPMl PMPM will be risk-adjusted beginning in year 2 based on clinical riskl In the future, risk-adjustment methodology will expand to include social determinants

of health and well-being

80%



14Source: HMSA

Engagement to Encourage Active Participationl Beginning in 2018, 20% of the PMPM payment will be at risk and scored based on

work done in 2017 l Ensures providers are engaged in the systems to succeed in the new payment

model

l Examples:è Using Cozeva (performance dashboard) frequentlyè Engaging all attributed members through visits, calls, emails, texts or online careè Referring patients to health programs

20%



15Source: HMSA

Performance (Quality) Measures and Incentives l Clinically meaningful measures set based on providers’ input and HMSA priorities

è New goals for patient care, including prevention, well-being, access, patient-centeredness, and population health management

è Meaningful to patients and providers

l Financial rewards – both at individual physician and physician organization levels

l One set of measures for all lines of business

l Simplified scoring system – scored annually but payment advanced in each quarter

è Calendar year measurement period instead of rolling 12 months for most measures

15 –25%



16Source: HMSA

Total Cost of Care Shared Savings Incentivel Scored and distributed at the physician organization level

è Scored at the organization level to balance riskè Distribution to PCPs determined by organization

l Total cost of care includes all medical expenses (inpatient, outpatient, imaging, labs). It excludes drugs and behavioral health services.

l Scores organization against itself (historical trend) and against network trends

l Physician organization will receive up to 40% of savings achieved; the rest is shared with employer groups, members, and HMSA


More providers will be in APMs in 2018

l 2018 will see more Providers in APMs than in 2017è CMS goal: 50% of Medicare fee-for-service payments through alternative

payment models by 2018

l More ACOs anticipated in 2018è To avoid MIPS and qualify as an APM – if ready

l Challenges have caused ~100 ACOs to drop outè There is no pop health switchè Engaging providersè Infrastructure

l Comprehensive Primary Care Plus (CPC+)è CMS pays primary care practices a monthly care management fee in addition to

(reduced) fee-for-service (FFS) paymentsè Up-front payments

- Comprehensive primary care payments- Incentive payments

t Keep or repay based on their performance on quality and utilization metrics

17


CPC+ creates incentive for practice innovation

Care Management Fee (PBPM)

Performance Based Incentive Payment (PBPM)

Payment Structure Redesign

Objective Support augmented staffing and training for comprehensiveprimary care

Reward practice performance on utilization and quality of care

Reduce dependence on visit-based FFS to offer flexibility in care setting

Track 1 $15 average $2.50 opportunity N/A (std FFS)

Track 2 $28 average $4.00 opportunity Reduced FFS withprospective “comprehensive primary care” payment

18


It is anticipated that adoption will increase for payment models involving full financial risk.Global capitation and ACO models require the highest levels of care coordination and physician/hospital alignment.

19Source: Deloitte University Press


Bundles: one of the few ways to get specialists engaged

l Mandatory cardiac and surgical hip and femur fx episode payment models (EPMs) were cancelled in late 2017

l 2 years into the Comprehensive Care for Joint Replacement (CCJR)è Half the 67 sites changed from mandatory to voluntary

l A voluntary Bundled Payment for Care Improvement (BPCI) Advanced initiative came out Jan 9 2018è Qualifies as APM, but not until MACRA year 3è Retrospective 90 day bundle

- 29 inpatient dx: AMI, CABG, Cardiac defibrillator, etc- 3 outpatient dx

è Quality performance adjusts incentive paymentsè Enrollment Jan 11-March 12è Starts 10/1/2018, runs for 5 years

- Next enrollment data: 1/1/2020

20

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!Bundle Definition

; “Trigger event” starts episode (specific DRG or procedure)

; Defined end date - 90-day episode length

; Providers are given a bundle-specific Target Price

; All clinically relevant costs are included in the Target Price

; Providers share in savings below Target Price

; Retrospective payment model

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State average post acute care cost for LEJR w/o CC/MCC ranges from $4,800 to $12,700

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OrthoOrtho Practice A B C# of Surgeons in Practice 1 12 35

Annual Volume 211 252 1,783

Bundled Price $23,161 $25,348 $25,768

Savings per Case $2,491 $3,841 $2,050

New Practice Revenue $525,658 $967,884 $3,654,487

New Revenue per Surgeon $525,658 $80,657 $104,414

Bundle: Lower Extremity Joint Replacement (DRG 470)

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56


Telehealth is poised to reshape care delivery in 2018.Virtual care offerings are continuing to increase from vendors, as well as directly from health systems.

25Sources: OSF OnCall and American Well

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23


Nurse practitioners are the primary care providers of the future.The growing number of NPs in our health care system could alleviate pressures on primary care capacity.

27Source: KFF

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Now much primary care provided by APCs

56%33%

11%

Primary Care Provider Type in NMHS CIN Network

MD APC with MD Independent APC

29* Based on BDC interviews 2016

l APCs provide a significant amount of primary careè 1/3-1/2 of specialist

referrals come from APCs*

l Many of these APCs are in solo practice or small group practices


”The provider will see you now…”effective Use of Team-Based Care Models

Stanford Study of 11 High Performing Single and Multi-specialty Medical Groups …

l Patients have a sense their care teams are always available to them

l Clinicians encourage patient feedback and participationl Tests are performed in-house rather than being outsourcedl The practices keep in touch with patients after specialty referrals, and

follow up after hospital dischargesl The clinician compensation model balances productivity, Triple-Aim

performance, and citizenshipl Clinicians work in “hived” team environmentsl Nurse practitioners and physician assistants work at the top of their

licenses to support primary care physicians

30

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Summary

l Majority of provider revenue is still in FFS, even in 2018

l Physicians must be engaged to create healthcare valueè Challenging with FFS reimbursement - but expect strong attempts!è More providers entering into APMsè Interest in bundled payments will rebound

l New provider systems emerging to compete with traditional provider groupsè Convenientè Low costè And truly patient centered

l Prediction:è 2018 will see the meaningful advancement in the volume to value transition

- Many ways to get there…

33

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