CREATING A PHYSICIAN-LED HEALTHCARE FUTURE Better Care … · CREATING A PHYSICIAN-LED HEALTHCARE...

CREATING A PHYSICIAN-LEDHEALTHCARE FUTUREBetter Care for Patients,

Lower Healthcare Spending,& Financially Viable Physician Practices

Harold D. MillerPresident and CEO

Center for Healthcare Quality and Payment Reform

www.CHQPR.org

2© Center for Healthcare Quality and Payment Reform www.CHQPR.org

Goals of Today’s Presentation

• How to Eliminate the Federal Deficit

• How to Increase Physicians’ Pay (While Reducing Healthcare Spending)

• How to Improve Care for Patients and Lower Their Insurance Premiums

• How to Get Rid of Health Insurance Companies(or Make Them Work for Doctors, Rather Than the Other Way Around)


A Short Quiz

About the U.S. Economy


A Short Quiz


QUESTION #1:Which U.S. industry

told its employees every yearfor the past decade that

their pay would be cut by 15-30%regardless of how well

they performed?


A Short Quiz


QUESTION #1:Which U.S. industry

told its employees every yearfor the past decade that

their pay would be cut by 15-30%regardless of how well

they performed?

ANSWER:Health Care


Medicare SGR Is Now Gone, But

Physician Pay Is Behind Inflation

28% LowerThan

Inflation

If SGR Cut

Had Been Made


A Short Quiz


QUESTION #2:In which U.S. industry

can one set of employeesonly get a raise if other

employees take a pay cut,even when the business is

performing well?


A Short Quiz


QUESTION #2:In which U.S. industry

can one set of employeesonly get a raise if other

employees take a pay cut,even when the business is

performing well?

ANSWER:Health Care


Even Without the SGR, Physician

Pay Must Be “Budget-Neutral”

Paymentsfor

PCPs

Paymentsfor

Specialists

Paymentsfor

PCPs

Paymentsfor

Specialists

Physician Payment Budget Neutrality


A Short Quiz


QUESTION #3:In which U.S. industries

are businessesonly able to sell

their products and servicesto consumers

through an intermediary who demands large discounts andincreases prices by 18-25%?


A Short Quiz


QUESTION #3:In which U.S. industries

are businessesonly able to sell

their products and servicesto consumers

through an intermediary who demands large discounts andincreases prices by 18-25%?

ANSWER:Health Care


Health Plans Spend As Much on

Administration/Profit as on Drugs

Admin: $110 billion

Drugs: $117 billion

Physicians

Hospitals


A Lot of a Physician’s Pay Goes To

Costs of Dealing with Health Plans

Admin: $110 billion

Drugs: $117 billion

Admin: $30 billion

Physicians

Hospitals


A Short Quiz


QUESTION #4:Who is to blame forthe way physicians

are paid andmicromanaged?


A Short Quiz


QUESTION #4:Who is to blame forthe way physicians

are paid andmicromanaged?

ANSWER:Physicians


The Blame Rests With Physicians

• Physicians haven’t defined solutions to control healthcare costs without rationing

• Physicians have allowed themselves to be seen as the causes of higher spending

• Physicians don’t collaborate to manage and deliver high-value population health care to purchasers and patients

• Physicians haven’t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices


Healthcare Spending Is the

Biggest Driver of Federal Deficits

Source:

CBO

Budget Outlook

August 2012

46% of

Spending

Growth is

Healthcare


Three Paths to the Future:

Which Door Will Doctors Choose?

SGR

RepealFUTURE #2

FUTURE #3

FUTURE #1


Door #1:

Pay for Performance (P4P)

PAY FOR PERFORMANCE

SGR

Repeal


P4P Assumes Providers Need

“Incentives” for Higher Value Care

Bonus

$

Feefor

Service

Penalty

Pay forPerformance

(“P4P”)Based on

Qualityand CostMeasures


Hospital Value-Based Payment

• Hospital Readmission Penalties

• Hospital-Acquired Condition Penalties

• Hospital Value-Based Purchasing


Hospital Readmission Penalties

Revenuefrom

Admissions

Revenue from High

Readmit Rate

Current Payment& High Readmit Rate$

Paymentsfor All

AdmissionsWill Be Cut

ReduceReadmissions

OR


The Hope: Hospitals Will Reduce

Readmissions to Avoid Penalties

Revenuefrom

Admissions

Revenue from High

Readmit Rate

Revenuefrom

Admissionsw/ no

Change inPayment Rate


Lower Readmits& No Payment Cut

Revenue from Average

Readmit Rate


The Myth: Hospitals Control All of

the Reasons for Readmissions

Revenuefrom

Admissions

Revenue from High

Readmit Rate

Revenuefrom

Admissionsw/ no




Revenue from Average

Readmit Rate

•Poor Access to Primary Care

•Low Quality of Post-Acute Care

•Patients w/o Capacity for Self-Care orInadequate Home Support


Hospitals May Be Penalized for

Having Patients With Higher Needs

JAMA Intern Med. Published online September 14, 2015. doi:10.1001/jamainternmed.2015.4660


Under Current Pmt System, Fewer

Readmissions = Lower Margins

Revenuefrom

Admissions

Revenue from High

Readmit Rate

Revenuefrom

Admissionsw/ no




HospitalCosts

(Don’tDecrease

inProportion

toRevenues)

LossesRevenue from

AverageReadmit Rate

HospitalCosts

Margin


So Hospitals Are Hurt Financially

One Way or the Other

ReducedRevenue

fromAdmissions

Due toReadmission

Penalties

Revenue from High

Readmit Rate

Revenuefrom

Admissionsw/ no




HospitalCosts

(Don’tDecrease

inProportion

toRevenues)

LossesRevenue from

AverageReadmit Rate

HospitalCosts

Losses


Pay for Performance Started as

Small Quality Bonuses for Docs

FFS

P4P+

$

QUALITYMEASURES

• Mammograms• Colon Cancer Screening

• HbA1c Control• LDL


P4P Hasn’t Worked Well Because

It Doesn’t Fix FFS Problems

FFS

P4P+

LOSSES/UNPAIDSVCS

$

QUALITYMEASURES



• A small bonus may not be enough to pay for the added costs of improving quality

• A small bonus may not be enough to offset loss of fee-for-service revenuefrom healthier patients or lower utilization

• A small bonus may not be enough to offset the costs of collecting and reporting the quality data


Over-Emphasis on Narrow Quality

Measures Can Harm Patients

Hypoglycemia

1 Yr Mortality: 19.9%

30 Day Readmits: 16.3%

Hyperglycemia

1 Yr Mortality: 17.1%

30 Day Readmits: 15.3%

Source: National Trends in US Hospital Admissions for Hyperglycemia and HypoglycemiaAmong Medicare Beneficiaries, 1999 to 2011 JAMA Internal Medicine May 17, 2014


Solution? Add More Measures

FFS

P4P+

$

QUALITYMEASURES



FFS

P4P+

QUALITYMEASURES


• Flu Vaccine• Tobacco Counseling

• Hypertension Control

• HbA1c Control• LDL• Eye Exams• Aspirin Use

LOSSES/UNPAIDSVCS

LOSSES/UNPAIDSVCS


When That Didn’t Work, Bonuses

Were Converted Into Penalties

FFS

P4P+

$

QUALITYMEASURES



QUALITYMEASURES


• Flu Vaccine• BMI Screens• Tobacco Counseling

• Fall Risk Assessment



FFS

P4P+

FFS

P4P-

QUALITYMEASURES


• Flu Vaccine• Tobacco Counseling



LOSSES/UNPAIDSVCS

LOSSES/UNPAIDSVCS

LOSSES/UNPAIDSVCS


Medicare P4P Will First Hit

Small Practices (<10) Next Year

FFS

$

-4.5%

+x%

FFS

-6%

+x%

FFS

-9%

+x%

FFS

-10%

+x%

2015 2016 2017 2018

2015 2016 2017 2018

100+Docs

100+Docs

10-99Docs

100+Docs

10-99Docs

1-9Docs

100+Docs

10-99Docs

1-9Docs

Chart Not Drawn to Scale

2017Value-Based Modifier: 4% Penalties or Bonuses

Meaningful Use: 3% Penalties

Physician Quality Reporting (PQRS): 2% Penalties

TOTAL Potential Penalties: 9% Penalty

2018Value-Based Modifier: 4+% Penalties or Bonuses

Meaningful Use: 4% Penalties

Physician Quality Reporting (PQRS): 2% Penalties

TOTAL Potential Penalties: 10+% Penalty

Small

Practices

Start 2017

NPs,PAs


The End of Collaboration?

• In the CMS Value-Based Payment Modifier, bonuses are only

paid to physicians who have above average quality if penalties

are assessed on other physicians with below average quality

• To maintain budget neutrality, the size of bonuses depends on

the size of penalties

• Under this system, why would high-performing physicians

want to help under-performing physicians to improve?


Merit-Based Incentive Payment

System (MIPS) is P4P on Steroids

FFS

$

-4.5%

+x%

FFS

-6%

+x%

FFS

-9%

+x%

FFS

-10%

+x%

FFS

-4%

+4x%

FFS

-5%

+5x%

FFS

-9%

+9x%

FFS

-9%

+9x%

FFS

-9%

+9x%

FFS

-7%

+7x%

FFS

-9%

+9x%

FFS

-9%

+9x%

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

+10% +10% +10% +10% +10% +10%

TODAY• Meaningful Use (MU)

• Quality Reporting (PQRS)

• Value Modifier (VM)

MIPS• “Advancing Care Information” (EHR Use)

• Quality Performance Program

• Resource Use

• Clinical Practice Improvement


Physicians Will Be Increasingly

Penalized for High Resource Use

Quality

Resource Use

“Clinical Practice Improvement

Activities”

“Advancing Care

Information”

(EHR Use)

50%

10%

25%

15%

Quality

Resource Use

“Clinical Practice Improvement

Activities”

“Advancing Care

Information”

(EHR Use)

30%

30%

25%

15%

2020 2021+


Resource Use

Performance Measures• Average of all applicable resource use measures

– Total Per Capita Costs (total spending per patient per year)• Dropped condition-specific groups currently used in Value Modifier

– Medicare Spending Per Beneficiary (spending in hospital + 30 days)

– Episode measures, e.g.,• Spending during and after admission for exacerbation of heart failure

• Spending during surgery and rehabilitation for knee replacement

• Spending during treatment and rehabilitation for stroke

• Measures are calculated from claims data, attributed to physicians based on measure-specific attribution formulas, and used for MIPS if there are a minimum number of cases– Total Per Capita Costs attributed to PCP with most office visits

– Medicare Spending Per Beneficiary (MSPB) attributed to hospital physician with most physician billings during hospital stay

– Episodes attributed based on physician who billed for trigger event


Door #1: Accountability Without

Resources or Flexibility

PAY FOR PERFORMANCE

(MIPS)

• Accountability for:• Quality Measures• Spending on Patients• “Meaningful Use”• “Practice Improvement”

• No Change in the Services Physicians are Paid For or the Adequacy of Payment

SGR

Repeal


Door #2:

Alternative Payment Models

ALTERNATIVE PAYMENT MODELS

(APMs)

PAY FOR PERFORMANCE

(MIPS)

SGR

Repeal


MACRA Encourages

Use of APMs Instead of MIPS

• Physicians who participate in approved Alternative Payment Models (APMs) at more than a minimum level:– are exempt from MIPS

– receive a 5% lump sum bonus

– receive a higher annual update (increase) in their FFS revenues

– receive the benefits of participating in the APM


The Need for

“Alternative Payment Models”

PROBLEM

Barriers infee-for-service

prevent physicians from delivering

higher-quality careat lower total cost


The Need for


PROBLEM




BARRIER #1No payment or inadequate paymentfor many high-value services, e.g.,• Responding to patient phone calls

that can avoid office or ER visits• Calls among physicians to determine

a diagnosis or coordinate care delivery• Hiring nurses to help chronic disease

patient avoid exacerbations• Providing palliative care, not just hospice


The Need for


PROBLEM




BARRIER #1No payment or inadequate paymentfor many high-value services, e.g.,• Responding to patient phone calls

that can avoid office or ER visits• Calls among physicians to determine

a diagnosis or coordinate care delivery• Hiring nurses to help chronic disease

patient avoid exacerbations• Providing palliative care, not just hospice

BARRIER #2Loss of revenue when patients stayhealthy and don’t need procedures



Being Implemented by MedicareTYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE

Health Systems,Multi-Specialty Groups,

PHOs, and IPAs

Accountable Care Organizations

(MSSP & Pioneer)

FFS+

Shared Savings on Attributed Total Spending

Primary Care ComprehensivePrimary Care Initiative

FFS +

PMPM $ for Attributed Patients+

Shared Savings onAttributed Total Spending

(for State or Region)

Specialty Care Oncology Care Model

FFS+



(for 6-month window)

Hospitals and Post-Acute Care

Comprehensive Carefor Joint Replacement

FFS+

Bonuses/Penalties on Attributed Total Spending


CMS “Alternative Payment Models”

Don’t Change Current PaymentsTYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE


PHOs, and IPAs


(MSSP & Pioneer)

FFS+



FFS+





FFS+






FFS+

Hospital Bonuses/Penalties for Attributed Total Spending


…Most Only Provide More $

After Other Spending is ReducedTYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE


PHOs, and IPAs


(MSSP & Pioneer)

FFS+



FFS+





FFS+






FFS+

Hospital Bonuses/Penalties forAttributed Total Spending


Problems With “Shared Savings”

• Physicians receive no upfront resources to improve care management for patients

• Conservative physicians receive little or no additionalrevenue and may be forced out of business

• Physicians who have been practicing inefficiently or inappropriately can receive bonuses to practice more appropriately

• Physicians could be paid more for denying needed care

• Physicians are placed at risk for costs they cannot control

• Shared savings bonuses are temporary and “re-benchmarking” leaves physicians with inadequate payment to deliver necessary services


Medicare ACOs Aren’t Succeeding

Due to Flaws in Shared Savings2013 Results for Medicare Shared Savings ACOs• 46% of ACOs (102/220) increased Medicare spending

• Only 24% (52/220) received shared savings payments

• After making shared savings payments, Medicare spent more than it saved

• Net loss to Medicare: $78 million

2014 Results for Medicare Shared Savings ACOs• 45% of ACOs (152/333) increased Medicare spending




2015 Results for Medicare Shared Savings ACOs

• 48% of ACOs (189/392) increased Medicare spending





Private Shared Savings ACOs

Are Also Floundering


MEDICARE

Primary

Care

ACO

Neurosurgery OB/GYN

Why?? No Change in the Way

Physicians or Hospitals Are Paid

Fee-for-ServicePayment

Cardiology

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Radiology,

Endocrinology


MEDICARE

Primary

Care

ACO

Neurosurgery OB/GYN

Most ACOs Spend a Lot on IT

and Nurse Care Managers


Expensive IT Systems

Cardiology

Nurse Care Managers

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Radiology,

Endocrinology


MEDICARE

Primary

Care

ACO

Neurosurgery OB/GYN

Possible Future “Shared Savings”

Doesn’t Support Better Care Today



Cardiology

Nurse Care Managers

Shared SavingsPayment???

Share ofShared SavingsPayment??

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Radiology,

Endocrinology


MEDICARE


Primary

Care

ACO

Neurosurgery OB/GYN

Most ACOs Today Aren’t Truly

Redesigning Care



Cardiology

Nurse Care Managers

Share ofShared SavingsPayment??

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Radiology,

Endocrinology


MEDICARE


Primary

Care

ACO~HEALTH PLAN

Neurosurgery OB/GYN

ACOs Try to “Manage Care” Like

Health Plans Do & It Works As Badly



Cardiology

Nurse Care Managers

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Radiology,

Endocrinology


Are Bundled Payments

Better Than ACOs?


CMS “Comprehensive

Care for Joint Replacement”

PATIENTHospital Costs

for SurgeryPost-Acute Care(IRF, SNF, HH)Readmits

EPISODE PAYMENT FOR SURGERIES


Principal Goal of CMS Proposal

Is Reducing Post-Acute Care Cost



Hospital Costsfor Surgery

Post-Acute CareReadmits SAVINGS



Proposed Structure Encourages

Lower Spending, Not Better Care






• No risk adjustment – target spending amount is the same for high-risk, poor functional status patients as low-risk patients

• No flexibility to deliver different types of post-acute care orto be paid differently – no change in current payment systems


Hospitals at Risk for Total Cost

With Everyone Still Paid the Same



CMS

Hospital

Providersand

Post-AcuteCare






• Hospital is at risk for higher post-acute care spending


Over Time, CMS Keeps More of

the Savings, If There Are Any






CMS

Hospital



• Hospital is at risk for higher post-acute care spending

• Target spending is reduced every year to match lower FFS spending, even if “savings” were being used to pay forservices not supported by FFS

Providersand

Post-AcuteCare


If There Are Fewer Surgeries,

CMS Keeps ALL of the Savings






CMS

Hospital

Non-Surg.Treatment SAVINGS

Providersand

Post-AcuteCare


CMS Proposing Same Approach for

AMI, CABG, and Hip Fracture


How Will the Future Unfold?

CMSAPMs

CurrentFFS

System


Starting with Hip & Knee Surgery,

CABG, and AMI…

CurrentFFS

System

HospitalAt-Risk for

Total Cost of Joint Care


…CMS Could Put Hospitals “In

Charge” of All Inpatient Procedures

HospitalAt-Risk for


HospitalSuper-DRG

For AllHospital

Admissions

CurrentFFS

System


CMS Puts Physicians at Risk for

Total Cost of Outpatient Services

PhysicianP4P Based

on TotalEpisode

Spending

PhysicianAt-Riskfor Total Cost of

Outpatient Services

(SGR Redux)

HospitalAt-Risk for


HospitalSuper-DRG

For AllHospital

Admissions

CurrentFFS

System


The Likely Result: Everyone Will

Need to Work for a Health System

PhysicianP4P Based

on TotalEpisode

Spending

HospitalAt-Risk for


HospitalSuper-DRG

For AllHospital

Admissions

CurrentFFS

SystemPhysicianAt-Riskfor Total Cost of

Outpatient Services

(SGR Redux)

Physicians,Small

Hospitals,and OtherProviders Have NoChoiceBut to

Be Part ofLargeHealth

Systems


Big Health Systems Are Much

Easier for CMS to Control

PhysicianP4P Based

on TotalEpisode

Spending

SimpleSystem

ForMedicare

toRegulate

HospitalAt-Risk for


HospitalSuper-DRG

For AllHospital

Admissions

CurrentFFS


Outpatient Services

(SGR Redux)

Physicians,Small



Systems


Result: Lack of Choice and

High Prices For Everyone Else

PhysicianP4P Based

on TotalEpisode

Spending

Physicians,Small



Systems

SimpleSystem

ForMedicare

toRegulate

Few/NoChoices

forPatients orPhysicians,

HigherPrivate

Spending

HospitalAt-Risk for


HospitalSuper-DRG

For AllHospital

Admissions

CurrentFFS


Outpatient Services

(SGR Redux)


What’s Behind Door #3?


(APMs)

PAY FOR PERFORMANCE

(MIPS)

DOOR #3

SGR

Repeal


Door #1 and Door #2 are

Payer-Designed Payment Systems

HOW PAYMENT REFORMS ARE DESIGNED TODAY

Medicare and

Health Plans

Define

Payment Systems

Physicians Have

To Change Care

to Align With

Payment Systems

Patients and

Physicians

May Not

Come Out Ahead


Physicians Need to Design

Payments to Support Good Care

Medicare and

Health Plans

Define

Payment Systems

Physicians Have

To Change Care

to Align With

Payment Systems

Patients and

Physicians

May Not

Come Out Ahead

Physicians

Redesign Care

and Identify

Payment Barriers

Payers Change

Payment to

Support

Redesigned Care

Patients Get

Better Care and

Physicians Stay

Financially Viable

THE RIGHT WAY TO DESIGN PAYMENT REFORMS



The Third Door Under MACRA


(APMs)

PAY FOR PERFORMANCE

(MIPS)

PHYSICIAN-FOCUSEDPAYMENT MODELS

SGR

Repeal


MACRA Requires Development

of Physician-Focused APMs

• Physician-Focused Payment Model Technical Advisory Committee (PTAC) created by Congress to solicit and review proposals from physician groups, medical specialty societies, and others for “physician-focused payment models” and to make recommendations to CMS as to which models to implement

• Under MACRA, CMS must respond to PTAC recommendations, but is not required to implement them. (However, there will considerable pressure on CMS, from Congress and others, to implement the recommendations.)

What HappensWhen Physicians

Redesign Patient Careand Receive

Adequate Payments to Support It?


Better Care at Lower Cost for

Total Joint ReplacementPHYSICIAN LEADER: Stephen J. Zabinski, MD

Director, Division of Orthopaedic Surgery, Shore Medical Ctr



Total Joint Replacement

OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS

• Reduce surgical complications by reducing patient risk factors prior to surgery

• Obtain lower prices for implants from vendors

• Match implants to patient needs

• Return patients home as quickly as possible

• Use lower cost settings for surgery and rehabilitation

PHYSICIAN LEADER: Stephen J. Zabinski, MDDirector, Division of Orthopaedic Surgery, Shore Medical Ctr





BARRIERS IN THE CURRENT

PAYMENT SYSTEM






• No payment for pre-operative patient risk reduction programs

• No payment for care coordination throughout surgical episode

• Separate payments to hospital and physician

• No data on costs of facilities







PAYMENT SYSTEM

RESULTS WITHADEQUATE PAYMENTFOR BETTER CARE






• No payment for pre-operative patient risk reduction programs

• No payment for care coordination throughout surgical episode

• Separate payments to hospital and physician

• No data on costs of facilities

• Average length of stayTKR: 3.3 1.8 daysTHR: 2.9 1.6 days

• Average device cost$6,301 $4,242

• Discharges to home34% 78%

• Readmission rate3.2% 2.7%

• Total Episode SpendingTKR: $25,365 $19,597THR: $26,580 $20,636




Crohn’s DiseasePHYSICIAN LEADER: Lawrence R. Kosinski, MD

Managing Partner, Illinois Gastroenterology Group



Crohn’s Disease


• Health plan spends $11,000/year/patienton patients with Crohn’s

• >50% of expenses arefor hospital care, mostdue to complications

• <33% of patients seen by physician in 30 days prior to hospitalization

• 10% of expenses for biologics, many administered in hospitals

• 3.5% of spending goes to gastroenterologists

PHYSICIAN LEADER: Lawrence R. Kosinski, MDManaging Partner, Illinois Gastroenterology Group



Crohn’s Disease



PAYMENT SYSTEM






• No payment to support“medical home” services in gastroenterology practice:

No payment for nurse care manager

No payment for clinical decision support tools to ensure evidence-based care

No payment for proactive telephone contact with patients




Crohn’s Disease



PAYMENT SYSTEM







• No payment to support“medical home” services in gastroenterology practice:

No payment for nurse care manager

No payment for clinical decision support tools to ensure evidence-based care

No payment for proactive telephone contact with patients

• Hospitalization rate cut by more than 50%

• Total spending reduced by 10% even with higher payments to the physician practice

• Improved patient satisfaction due to fewer complications and lower out-of-pocket costs


www.SonarMD.com



CancerPHYSICIAN LEADER: Barbara McAneny, MD

CEO, New Mexico Cancer Center



Cancer


• 40-50% of patients receiving chemotherapyare hospitalized for complications of treatment

PHYSICIAN LEADER: Barbara McAneny, MDCEO, New Mexico Cancer Center



Cancer



PAYMENT SYSTEM


• No payment for triage services to enable rapid response to patient complications

• No payment for patient and family education about complications and how to respond

• Inadequate payment to reserve capacity for IV hydration of patientsexperiencing problems




Cancer



PAYMENT SYSTEM



• No payment for triage services to enable rapid response to patient complications

• No payment for patient and family education about complications and how to respond

• Inadequate payment to reserve capacity for IV hydration of patientsexperiencing problems

• 36% fewer ED visits

• 43% fewer admissions

• 22% reduction in total cost of care ($4,784 over six months)




PregnancyPHYSICIAN LEADER: Steve Calvin, MD

Medical Director, Minnesota Birth Center



Pregnancy


• 33% C-section rate, 2x recommended rate

• 25% of mothers want to deliver in a birth center,<2% actually do

• Significantly lower costs for delivery in birth centers than hospitals

PHYSICIAN LEADER: Steve Calvin, MDMedical Director, Minnesota Birth Center



Pregnancy



PAYMENT SYSTEM




• Inadequate payment or no payment at all for deliveries in birth centers

• Higher payments to hospitals for C-sections, higher $/hour to physicians for C-sections

• Impossible to determine or compare total cost of delivery with separate payments for facility, OB/Gyn, pediatrician, and others and separate payments for mother and baby




Pregnancy



PAYMENT SYSTEM





• Inadequate payment or no payment at all for deliveries in birth centers

• Higher payments to hospitals for C-sections, higher $/hour to physicians for C-sections

• Impossible to determine or compare total cost of delivery with separate payments for facility, OB/Gyn, pediatrician, and others and separate payments for mother and baby

• 68% of deliveries in birth center

• 9% C-section rate

• 28% reduction in cost of maternity care




Emergency Room PatientsPHYSICIAN LEADER: Jennifer L. Wiler, MD

Assoc. Prof. of Emergency Medicine, University of Colorado



Emergency Room Patients


• Many individuals have 3+ Emergency Department visits per year

• Many frequent ED users have no insurance or inability to afford copays,behavioral health problems, and no PCP

PHYSICIAN LEADER: Jennifer L. Wiler, MDAssoc. Prof. of Emergency Medicine, University of Colorado






PAYMENT SYSTEM



• No payment for patient education and care coordination in the ED

• No payment for home visits to help patients after discharge

• No funding to address non-medical needs such as lack of transportation







PAYMENT SYSTEM




• No payment for patient education and care coordination in the ED

• No payment for home visits to help patients after discharge

• No funding to address non-medical needs such as lack of transportation

• 41% fewer ED visits

• 49% fewer admissions

• 80% now have a primary care provider

• 50% lower total spending including cost of program


How Do You Define

a Good Alternative Payment Model

That Supports High Quality

Physician-Directed Patient Care?


FFSPayments to

PhysicianPractice

OPPORTUNITIES TO REDUCE SPENDING

WITHOUT HARMING PATIENTS

• Reduce Avoidable Hospital Admissions• Reduce Unnecessary Tests and Treatments• Use Lower-Cost Tests and Treatments• Deliver Services More Efficiently• Use Lower-Cost Sites of Service• Reduce Preventable Complications• Prevent Serious Conditions From Occurring

$

PhysicianPracticeRevenue

Avoidable Spending

Payments toOther

Providersfor

RelatedServices

Step 1: Identify Opportunities to

Reduce Avoidable SpendingFee-for-ServicePayment (FFS)

TotalSpendingRelevant

to thePhysician’s

Services


Unpaid Services

FFSPayments to

PhysicianPractice

BARRIERS IN CURRENT FFS SYSTEM• No Payment for Many High-Value Services

• Insufficient Revenue to Cover Costs WhenUsing Fewer or Lower-Cost Services

$


Avoidable Spending

Payments toOther

Providersfor

RelatedServices

Step 2: Identify Barriers in Current

Payments That Need to Be FixedFee-for-ServicePayment (FFS)


to thePhysician’s

Services





Fee-for-ServicePayment (FFS)

Physician-FocusedAlternative

Payment Model

Flexible,Adequate

Payment forPhysician’s

Services

$


Step 3: Design an APM That

Removes the Payment Barriers

Unpaid Services

FFSPayments to

PhysicianPractice

Avoidable Spending

Payments toOther

Providersfor

RelatedServices


to thePhysician’s

Services




Payment Model

Flexible,Adequate


Services

$




Unpaid Services

FFSPayments to

PhysicianPractice

Avoidable Spending

Payments toOther

Providersfor

RelatedServices


to thePhysician’s

Services

• Paying more for time needed for adequate diagnosis and treatment planning, particularlyfor complex patients

• Paying for time spent on phone calls & emails withpatients & other physicians

• Paying for nurses to help patients with self-management

• Eliminating time spent on unnecessary documentationand battles with health plans




Payment Model

Savings

Flexible,Adequate


Services

AvoidableSpending

Payments toOther

Providersfor

RelatedServices

Accountabilityfor

ControllingAvoidableSpending

$


Step 4: Include Provisions to

Assure Control of Cost & Quality

Unpaid Services

FFSPayments to

PhysicianPractice

Avoidable Spending

Payments toOther

Providersfor

RelatedServices


to thePhysician’s

Services

How Can

Well-Designed


Help Physicians Financially?


Most of the Money in Healthcare

Doesn’t Go to Physicians

Physicians:16%


Most of the $ for Diabetes Care is

For Complications, Not Doctors

Source:

“Economic

Costs of

Diabetes

in the U.S.

in 2012,”

Diabetes

Care

(Volume 36)

April 2013

HospitalAdmissions

(43%)

Physicians (9%)


Could We Afford to Spend More

on Better Diabetes Management?

HospitalAdmits

PhysiciansBetter Pay for

Physicians


Yes, If We Can Prevent

Expensive Complications

HospitalAdmits

PhysiciansBetter Pay for

Physicians

AvoidedHospitalAdmits


Example: 20% More Care Mgt $ +

6% Fewer Admits = Lower Total $

HospitalAdmits

Physicians +20%

-6%-1%




Payment Model

Savings

Flexible,Adequate


Services

AvoidableSpending

Payments toOther

Providersfor

RelatedServices

$



Can Be Win-Win-Wins

Unpaid Services

FFSPayments to

PhysicianPractice

Avoidable Spending

Payments toOther

Providersfor

RelatedServices


to thePhysician’s

Services

Win for Payer:

Lower Total Spending

Win for Patient:

Better Care Without

Unnecessary Services

Win for Physician: Adequate

Payment forHigh-Value Services


Example: Reducing Avoidable

Surgeries for Knee Osteoarthritis



Surgeries for Knee OsteoarthritisCURRENT

$/Patient # Pts Total $

Primary Care

Evaluations $100 100 $10,000

Treatment ofKnee

Osteoarthritis• 100 patients with knee

pain visit PCP forevaluation





Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx

Management $200 20 $4,000

Phys. Therapy $500 20 $10,000

Subtotal $14,000

Treatment ofKnee



• Physical therapy usedby 20% of patients





Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Surgeries $12,000 80 $960,000

Treatment ofKnee




• Surgery performedprocedure on 80% ofevaluated patients





Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Surgeries $12,000 80 $960,000

Total Pmt/Cost 100 $1,096,000

Treatment ofKnee









Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Surgeries $12,000 80 $960,000


Treatment ofKnee





• 25% of surgeriesavoidable with betteroutpatient management


Under FFS, Low Payment for

Diagnosis & Treatment PlanningCURRENT


Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Surgeries $12,000 80 $960,000



Under FFS, Low Payment for

Non-Surgical OptionsCURRENT


Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Surgeries $12,000 80 $960,000



Under FFS, Fewer Surgeries =

Losses for Providers & HospitalsCURRENT FUTURE

$/Patient # Pts Total $ $/Patient # Pts Total $ Chg

Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000 $1,400 60 $84,000 -25%

Hospital Pmt

Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%



A P4P/MIPS Bonus to the Surgeon

Doesn’t Offset Loss of RevenueCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000 $1,456 60 $87,360 -22%

Hospital Pmt

Surgeries $12,000 80 $960,000


+4%


Is There a Better Way?

CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 ?

Non-Surg.Tx

Management $200 20 $4,000 ?

Phys. Therapy $500 20 $10,000 ?

Subtotal $14,000

Surgeon $1,400 80 $112,000 ?

Hospital Pmt

Surgeries $12,000 80 $960,000 ?



A Better Way: Pay PCPs for Good

Diagnosis & Treatment PlanningCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Surgeries $12,000 80 $960,000


Better Payment for Condition Management• PCP paid adequately to help patient decide on treatment options


A Better Way: Pay Adequately

for Non-Surgical ManagementCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200

Non-Surg.Tx

Management $200 20 $4,000 $500

Phys. Therapy $500 20 $10,000 $750

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Surgeries $12,000 80 $960,000


Better Payment for Condition Management• PCP paid adequately to help patient decide on treatment options• Physiatrists & physical therapists paid to deliver effective non-surgical care


A Better Way: Pay Adequately

For the Necessary SurgeriesCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200

Non-Surg.Tx

Management $200 20 $4,000 $500

Phys. Therapy $500 20 $10,000 $750

Subtotal $14,000

Surgeon $1,400 80 $112,000 $2,100

Hospital Pmt

Surgeries $12,000 80 $960,000


Better Payment for Condition Management• PCP paid adequately to help patient decide on treatment options• Physiatrists & physical therapists paid to deliver effective non-surgical care• Surgeon paid more per surgery for patients who need surgery


If That Results in

25% Fewer Surgeries…CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100

Non-Surg.Tx

Management $200 20 $4,000 $500 40

Phys. Therapy $500 20 $10,000 $750 40

Subtotal $14,000

Surgeon $1,400 80 $112,000 $2,100 60

Hospital Pmt

Surgeries $12,000 80 $960,000 $12,000 60



Physicians Could Be Paid More…

CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Surgeries $12,000 80 $960,000



Physicians Could Be Paid More…

….While Still Reducing Total $CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%

Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%


Win-Win-Win for

Providers, Payers, & PatientsCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%

Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%

Physicians Win Payer WinsPatients Win


What About the Hospital?

CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%

Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%

Hospital Loses


Do Hospitals Have to Lose In Order

for Providers & Payers To Win?CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%

Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%

Physicians Win Payer WinsHospital Loses


What Should Matter to Hospitals is

Margin, Not Revenues (Volume)


Hospital Costs Are Not

Proportional to Utilization

$800$820$840$860$880$900$920$940$960$980$1,000

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$0

00

#Patients

Cost & Revenue Changes With Fewer Patients

.

Costs

20% reduction in volume

7% reduction

in cost


Reductions in Utilization Reduce

Revenues More Than Costs

$800$820$840$860$880$900$920$940$960$980$1,000

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Revenues

Costs

20% reduction in volume

7% reduction

in cost

20% reduction

in revenue


Causing Negative Margins

for Hospitals

$800$820$840$860$880$900$920$940$960$980$1,000

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#Patients


Revenues

Costs

Payers Will Be

Underpaying For

Care If

Surgeries,

Readmissions, Etc.

Are Reduced


But Spending Can Be Reduced

Without Bankrupting Hospitals

$800$820$840$860$880$900$920$940$960$980$1,000

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#Patients


Revenues

Costs

Payers Can

Still Save $

Without Causing

Negative Margins

for Hospital


We Need to Understand the

Hospital’s Cost StructureCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%

Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%


Adequacy of Payment Depends

On Fixed/Variable Costs & MarginsCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000

Variable Costs $5,400 45% $432,000

Margin $600 5% $48,000

Subtotal $12,000 80 $960,000



Now, if the Number of

Procedures is Reduced…CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000

Variable Costs $5,400 45% $432,000

Margin $600 5% $48,000

Subtotal $12,000 80 $960,000 60



…Fixed Costs Will Remain the

Same (in the Short Run)…CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000

Margin $600 5% $48,000

Subtotal $12,000 80 $960,000 60



…Variable Costs Will Go Down in

Proportion to Procedures…CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%

Margin $600 5% $48,000

Subtotal $12,000 80 $960,000 60



…And Even With a Higher Margin

for the Hospital…CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 60



…The Hospital Gets Less Total

Revenue But Higher MarginCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 60 $856,800 -11%



…And The Payer

Still Saves MoneyCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 60 $856,800 -11%

Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%


Win-Win-Win-Win for Patients

Providers, Hospital, and PayerCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 60 $856,800 -11%

Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%

Payer Wins

Hospital Wins

Providers Win


What Payment Model Supports

This Win-Win-Win Approach?CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 60 $856,800 -11%

Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%


Renegotiating Individual Fees

is Impractical…CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 $14,280 60 $856,800 -11%

Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%


…What Assures The Payer That

There Will Be Fewer Procedures?CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 $14,280 60 $856,800 -11%

Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%

?


Solution:Pay Based on the Patient’s

Condition, Not on the ProceduresCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Fixed Costs $6,000 50% $480,000

Variable Costs $5,400 45% $432,000

Margin $600 5% $48,000

Subtotal $12,000 80 $960,000

Total Pmt/Cost $10,960 100 $1,096,000


Plan to Offer Care of the Condition

at a Lower Cost Per PatientCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000

Surgeon $1,400 80 $112,000

Hospital Pmt

Fixed Costs $6,000 50% $480,000

Variable Costs $5,400 45% $432,000

Margin $600 5% $48,000

Subtotal $12,000 80 $960,000

Total Pmt/Cost $10,960 100 $1,096,000 $10,528 100 -4%


Use the Payment as a Budget to

Redesign Care…CURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 100 $20,000 100%

Non-Surg.Tx


Phys. Therapy $500 20 $10,000

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000

Variable Costs $5,400 45% $432,000 $324,000

Margin $600 5% $48,000 $52,800

Subtotal $12,000 80 $960,000 60 $856,800

Total Pmt/Cost $10,960 100 $1,096,000 $10,528 100 $1,052,800 -4%


…And Let Providers & Hospitals

Decide How They Should Be PaidCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500

Phys. Therapy $500 20 $10,000 $750

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000

Variable Costs $5,400 45% $432,000 $324,000

Margin $600 5% $48,000 $52,800

Subtotal $12,000 80 $960,000 60 $856,800

Total Pmt/Cost $10,960 100 $1,096,000 $10,528 100 $1,052,800 -4%


Condition-Based Payment Allows

True Win-Win-Win SolutionsCURRENT FUTURE


Primary Care

Evaluations $100 100 $10,000 $200 100 $20,000 100%

Non-Surg.Tx

Management $200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

Subtotal $14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt $200

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 60 $856,800 -11%

Condition Pmt. $10,960 100 $1,096,000 $10,528 100 $1,052,800 -4%

Payer Wins

Hospital Wins

Physicians Win


Condition-Based Payment Requires

a Team Approach to Care DeliveryCURRENT FUTURE


Primary Care

$100 100 $10,000 $200 100 $20,000 100%

$200 20 $4,000 $500 40 $20,000 400%

Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%

$14,000 $50,000 257%

Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%

Hospital Pmt

Fixed Costs $6,000 50% $480,000 $480,000 0%

Variable Costs $5,400 45% $432,000 $324,000 -25%

Margin $600 5% $48,000 $52,800 +10%

Subtotal $12,000 80 $960,000 60 $856,800 -11%

Condition Pmt. $10,960 100 $1,096,000 $10,528 100 $1,052,800 -4%

ConditionMgt Team

Payer Wins

Hospital Wins

Physicians Win


Tie Payment to Outcomes to

Prevent Undertreatment

• Patient return to functionality

• Lack of pain

• Avoiding infections for surgery


Patients Differ in Their Need for

Surgery vs. Physical TherapyLOWER-RISK PATIENTS HIGHER-RISK PATIENTS

# Pts # Pts

Primary Care

Evaluations 50 50

Non-Surg.Tx

Management 30 10

Phys. Therapy 30 10

Surgery 20 40

40% Need Surgery 80% Need Surgery


Condition-Based Payment Amount

Must Be Stratified on Patient NeedsLOWER-RISK PATIENTS HIGHER-RISK PATIENTS

$/Patient # Pts Total $ $/Patient # Pts Total $

Primary Care

Evaluations $200 50 $10,000 $200 50 $10,000

Non-Surg.Tx

Management $500 30 $15,000 $500 10 $5,000

Phys. Therapy $750 30 $22,500 $750 10 $7,500

Subtotal $37,500 $12,500

Surgeon $2,100 20 $42,000 $2,100 40 $84,000

Hospital Pmt

Fixed Costs $192,000 $288,000

Variable Costs $5,400 $108,000 $5,400 $216,000

Margin $21,120 $31,680

Subtotal 20 $321,120 40 $535,680

Total Pmt/Cost $8,212 50 $410,620 $12,844 50 $642,180


Opportunities for Lower-Cost Care

for Many Conditions• Knee Osteoarthritis

– Home-based rehab instead of facility-based rehab

– Physical therapy instead of surgery

• Maternity Care– Vaginal delivery instead of C-Section

– Term delivery instead of early elective delivery

– Delivery in birth center instead of hospital

• Chest Pain– Non-invasive imaging instead of invasive imaging

– Medical management instead of invasive treatment

• Chronic Disease Management– Improved education and self-management support

– Avoiding hospitalizations for exacerbations













Savingsfor Payers

=Lower

Marginsfor

Hospitals

TODAY













Savingsfor Payers

=Lower

Marginsfor

Hospitals

Savingsfor Payers

=Higher

Marginsfor

Hospitals

CONDITION-BASEDPAYMENT

TODAY

What if We Paid for Carsthe Way We Paid for Care?

What if We Paid for Carsthe Way We Paid for Care?

How Would You ControlSpending on Cars

If Insurance Was Paying?


Should the Government

Set Fees for Each Car Part?

HCPCS Codes(Hierarchical

Car PartsCompensation

System)


And Pay Auto Workers Based On

How Many Parts They Installed?

HCPCS Codes(Hierarchical

Car PartsCompensation

System)AMA

Automobile ManufacturingAssociation

CPT System(Car Parts Tokens)


The Result for Drivers If We Paid

That Way…



That Way…

Cars would get many unnecessary parts



That Way…

Cars would be readmitted to the factory

frequentlyto correct malfunctions

Cars would get many unnecessary parts

The Way We Actually

Pay for Cars Is Much Better


Pay for Complete Cars With

Warranties, Not Parts & Repairs


People Aren’t Forced to Buy Cars

But Have Choices of Transportation

$


What Happens to ACOs with

Physician-Focused APMs?


Patients Have Many

Healthcare Needs

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy


Each Patient Should Choose &

Use a Primary Care Practice…

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice


MEDICARE, MEDICAID

HEALTH PLAN

…Which Takes Accountability for

What PCPs Can Control/Influence

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

AccountableMedical

Home Accountability for:• Avoidable ER Visits

•Avoidable Hospitalizations

•Unnecessary Tests

•Unnecessary Referrals


MEDICARE, MEDICAID

HEALTH PLAN

…With a Medical Neighborhood

to Consult With on Complex Cases

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

AccountableMedical

Home

Endocrinology,

Cardiology,

Radiology

AccountableMedicalNeighborhood

Accountability for:


•Unnecessary Referrals

•Co-Managed Outcomes


MEDICARE, MEDICAID

HEALTH PLAN

..And Specialists Accountable for

the Conditions They Manage

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

Neurosurg.

PMR Group

OB/GYN

Group

Cardiology

GroupHeart Episode/Condition Pmt

Back SurgeryEpisode Pmt

PregnancyCondition Pmt

AccountableMedical

Home


Accountability for:


•Unnecessary Procedures

•Infections, Complications

Endocrinology,

Cardiology,

Radiology


MEDICARE, MEDICAID

HEALTH PLAN

That’s Building the ACO

from the Bottom Up

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

Cardiology


AccountableMedical

Home


ACO

Accountable PaymentModels

OB/GYN

GroupPregnancyCondition Pmt

Endocrinology,

Cardiology,

Radiology

Neurosurg.

PMR GroupBack SurgeryEpisode Pmt


MEDICARE, MEDICAID

HEALTH PLAN, EMPLOYER

A True ACO/CIN Can Take a

Global Payment And Make It Work

Heart

Disease

Diabetes

Back Pain

PATIENTS

Pregnancy

Primary Care

Practice

ACO/CINCardiology


AccountableMedical

Home

Risk-AdjustedGlobal Payment


OB/GYN

GroupPregnancyCondition Pmt

Endocrinology,

Cardiology,

Physiatry

Neurosurg.

PMR GroupBack SurgeryEpisode Pmt


Isn’t This Capitation?


Providers Lose Money On Unusually

Expensive Cases

Providers Are Paid Regardless of the

Quality of Care

No Additional Revenuefor Taking Sicker

Patients

CAPITATION (WORST VERSIONS)



Payment Levels Adjusted Based on Patient Conditions


Expensive Cases

Limits on Total RiskProviders Accept for

Unpredictable Events


Quality of Care

Bonuses/PenaltiesBased on Quality

Measurement


Patients


RISK-ADJUSTEDGLOBAL PMT


No – It’s Different


Payment Levels Adjusted Based on Patient Conditions


Expensive Cases

Limits on Total RiskProviders Accept for

Unpredictable Events


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


Patients


RISK-ADJUSTEDGLOBAL PMT


No – It’s Different


You Don’t Need a Big Health

System to Manage Global Payment

• Independent PCPs & Specialists Managing Global Payments

– North Texas Specialty Physicians, a 600 physician multi-specialty IPA in Fort

Worth, set up its own Medicare Advantage PPO plan and uses revenues from

the health plan and capitation contracts to pay its PCPs 250% of Medicare

rates and provides high quality, coordinated care to patients. www.ntsp.com

• Joint Contracting by MDs & Hospitals for Global Payments– The Mount Auburn Cambridge IPA (MACIPA) and Mount Auburn Hospital

jointly contract with three major Boston-area health plans for full-risk capitation.

The IPA is independent of the hospital; they coordinate care with each other

without any formal legal structure. www.macipa.com

http://www.phpmcs.com/

http://www.macipa.com/


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


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


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


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 mostchronic diseases involves regular use

of maintenance medication


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


Airfare Choices

from Boston to ClevelandBoston 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


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



Flat Copayments:

First Class Fare WinsBoston 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



Coinsurance:

First Class Fare Probably WinsBoston 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



High Deductible:

First Class Fare WinsBoston 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



Price Difference:

Lowest Coach Fare WinsBoston 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



Where Will You Get

Your Knee Replaced?

Consumer Share

of Surgery CostPrice #1

$20,000

Price #2

$25,000

Price #3

$30,000

Knee Joint

Replacement


Where Will You Get

Your Knee Replaced?

Consumer Share


$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


Where Will You Get

Your Knee Replaced?

Consumer Share


$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


Flying to Pittsburgh vs. Cleveland

Boston Cleveland

Boston Pittsburgh


Cleveland


Why Is It So Much Cheaper to Fly

to Pittsburgh Than Cleveland?Boston Cleveland

Boston Pittsburgh

One-Stop Coach Fare: $662

Non-Stop Coach Fare: $1,107

Non-Stop Coach Fare: $188



Is It The Shorter Distance?

Boston Cleveland

?

Boston Pittsburgh

?

Non-Stop Coach Fare: $188

551 Air Miles


483 Air Miles

One-Stop Coach Fare: $662

Non-Stop Coach Fare: $1,107


Or Greater Competition?

Boston Cleveland

?

Boston Pittsburgh

?

Choice: United Non-Stop: $1,107

(No other non-stop choice)

Choice #3: USAirways Non-Stop: $238

Choice #2: JetBlue Non-Stop: $188

Choice #1: Delta Non-Stop: $188

NON-

COMPETITIVE

MARKET

COMPETITIVE

MARKET



Choice & Competition

Encourages Efficiency

Consumer Share


$20,000

Price #2

$25,000

Price #3

$30,000

Highest-Value: $0 $5,000 $10,000

Knee Joint

Replacement


Loss of Choice & Competition

Will Lead to Higher Costs

Consumer Share


$20,000

Price #2

$25,000

Price #3

$30,000

Highest-Value: $0 $5,000 $10,000

Knee Joint

Replacement


Which Is More Likely to Generate

True Price Competition?

DO MD DOMD

DO MD DO MD

DO MD DO MD

DO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DO MD

DO MD DO MD

ONE BIG

ACO

DO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DO MD

DO MD DO MD

Hospital ACO/CIN

VS

Physician Group ACO/CIN

IPA ACO/CINHOSPITAL

HOSPITAL

HOSPITAL

HOSPITAL

HOSPITAL

This All Sounds Really Hard

Can’t We Just Keep Doing

What We’re Doing Today

Until We Retire?

This All Sounds Really Hard


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


The Question is: How Will

Payers Get The Savings?



Reducing Hospital

Readmissions


Outpatient Services





PAYER

?


The Payer-Driven Approach

to Achieving Savings



Reducing Hospital

Readmissions


Outpatient Services





PAYER

Physician

P4P/VBM

High

Deductibles

Narrow

Networks

Prior

Authorization

Tiering on

Cost

Readmission

Penalty

Managed Fee-for-Service


The Physician-Driven Approach

to Achieving Savings



Reducing Hospital

Readmissions


Outpatient Services





PAYER/PURCHASER

Clinically

Integrated

Network

(CIN)

or

Accountable

Care

Organization

(ACO)

Global Pmt/Budget


Very Different Models…



Reducing Hospital

Readmissions


Outpatient Services





PAYER/PURCHASER

Clinically

Integrated

Network

(CIN)

or

Accountable

Care

Organization

(ACO)

Physician

P4P/VBM

High

Deductibles

Narrow

Networks

Prior

Authorization

Tiering on

Cost

Readmission

Penalty

Managed Fee-for-Service Global Pmt/Budget


…And Very Different Impacts

on Physicians

PAYER/PURCHASERManaged 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

physicians, if any

1. Physicians determine how

care should be redesigned

2. Physicians

and Purchaser/Payer

agree on adequate price

for quality care and amount

of savings for payer

3. Physicians get to keep any

additional savings and to

determine how to divide it

Global Pmt/Budget


A Different “Triple Aim”

• Better Care for Patients

– Physicians having the flexibility to design care that matches patient

needs

• Lower Spending for Payers

– Physicians able to use the best combination of services for patients

without worrying about which service generates more profits

• Financially Viable Physician Practices (and Hospitals)

– Physicians paid adequately to deliver high-quality care

– Physicians able to remain independent if they want to

– Hospitals paid adequately to cover their standby costs

– Hospitals able to thrive without acquiring physician practices


Still to Come

• How to design an Alternative Payment Model that works for your patients in your practice

• How to make health plans work for you, rather than being forced to work for them

• What you need to do now to create a physician-led healthcare payment & delivery system

PART 2:

Designing an

Alternative Payment Model


FFSPayments to

PhysicianPractice




$


Avoidable Spending

Payments toOther

Providersfor

RelatedServices




to thePhysician’s

Services


Unpaid Services

FFSPayments to

PhysicianPractice



$


Avoidable Spending

Payments toOther

Providersfor

RelatedServices


Payments That Need to Be FixedFee-for-ServicePayment (FFS)


to thePhysician’s

Services







Payment Model

Flexible,Adequate


Services

$




Unpaid Services

FFSPayments to

PhysicianPractice

Avoidable Spending

Payments toOther

Providersfor

RelatedServices


to thePhysician’s

Services




Payment Model

Savings

Flexible,Adequate


Services

AvoidableSpending

Payments toOther

Providersfor

RelatedServices

Accountabilityfor

ControllingAvoidableSpending

$


Step 4: Include Provisions to

Assure Control of Cost & Quality

Unpaid Services

FFSPayments to

PhysicianPractice

Avoidable Spending

Payments toOther

Providersfor

RelatedServices


to thePhysician’s

Services


The Starting Point is Care Design,

Not a Payment Model

Medicare and

Health Plans

Define

Payment Systems

Physicians Have

To Change Care

to Align With

Payment Systems

Patients and

Physicians

May Not

Come Out Ahead

Physicians

Redesign Care

and Identify

Payment Barriers

Payers Change

Payment to

Support

Redesigned Care

Patients Get

Better Care and

Physicians Stay

Financially Viable

THE RIGHT WAY TO DESIGN PAYMENT REFORMS



FFSPayments to

PhysicianPractice




$


Avoidable Spending

Payments toOther

Providersfor

RelatedServices




to thePhysician’s

Services


5-17% of Hospital Admissions

Are Potentially Preventable

Source:

AHRQ

HCUP


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


Many Ways to Reduce Tests &

Services Without Harming Patients


Diagnostic Error is a Fundamental

Quality Issue Underlying All Others


Institute of Medicine Estimate:

30% of Spending is Avoidable


FFSPayments to

PhysicianPractice

$


Avoidable Spending

Payments toOther

Providersfor

RelatedServices

Avoidable Spending Opportunities

Differ from Specialty to SpecialtyFee-for-ServicePayment (FFS)


to thePhysician’s

Services

CANCER TREATMENT• Use of unnecessarily-expensive drugs• ER visits/hospital stays for dehydration and avoidable complications

• Fruitless treatment at end of life

SURGERY• Unnecessary surgery• Use of unnecessarily-expensive implants• Infections and complications of surgery• Overuse of inpatient rehabilitation

CHEST PAIN DIAGNOSIS/TREATMENT• Overuse of high-tech stress tests/imaging• Overuse of cardiac catheterization• Overuse of PCIs, high-priced stents

MATERNITY CARE• Unnecessary C-Sections• Early elective deliveries• Underuse of birth centers• Complications of delivery


Unpaid Services

FFSPayments to

PhysicianPractice



$


Avoidable Spending

Payments toOther

Providersfor

RelatedServices


Payments to Delivering Better CareFee-for-ServicePayment (FFS)


to thePhysician’s

Services





Your Turn

What is an opportunity to reduce healthcare spending on the patients in

your practice that is related to the services you deliver or order?

Be specific about:1. what kinds of patients would be involved2. where or how savings would be generated

(what would there be less of, or what lower-cost alternative would be used?)

What is the most important change in the way care is delivered that you

or others would need to make in order to achieve savings for this

opportunity?

What are the biggest problems with the current payment system that

would make it difficult or impossible for you or others to implement the

changes in care and achieve these savings?


There Are Many Physician-Focused

Alternatives to CMS APMs

APM #1: Payment for a High-Value Service

APM #2: Condition-Based Payment for a Physician’s Services

APM #3: Multi-Physician Bundled Payment

APM #4: Physician-Facility Procedure Bundle

APM #5: Warrantied Payment for Physician Services

APM #6: Episode Payment for a Procedure

APM #7: Condition-Based Payment

www.PaymentReform.org


There Are Many Physician-Focused

Alternatives to CMS APMs

APM #1: Payment for a High-Value Service

APM #2: Condition-Based Payment for a Physician’s Services

APM #3: Multi-Physician Bundled Payment

APM #4: Physician-Facility Procedure Bundle

APM #5: Warrantied Payment for Physician Services

APM #6: Episode Payment for a Procedure

APM #7: Condition-Based Payment

www.PaymentReform.orgMultipleTypes

ofAPMs

NeededBecause

PhysiciansDeliver

DifferentTypes

of Careto

Different Patients


Proceduralists Can Reduce

Complications & Improve Efficiency

High Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending

$Hospital

Proceduralist


Procedural Episode Payments

Support Higher Quality/Lower Cost

$Hospital

ProceduralEpisodePayment

High Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending

Proceduralist


What if You Can Avoid the

Procedure Altogether?

$

Medical

Management

Hospital

High Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending

Proceduralist


$


Specialists Managing a Condition

Can Avoid Unnecessary Procedures

$

Condition

Specialist

Medical

Management

Hospital

High Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending

Proceduralist


$


Condition-Based Payment Supports

Use of Highest-Value Treatment

$

Condition

Specialist

Medical

Management

Hospital

Condition-Based

PaymentHigh Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending$


Proceduralist


Are We Making the Payment

for the Correct Condition??

$

Wrong

Condition

Medical

Management???????

Correct

Condition

Correct

Treatment

Hospital

Condition-Based


Complications &

Post-Acute Care

Low Complication

& PAC Spending$

$

Proceduralist



The Diagnostician Ensures the

Right Condition is Being Treated

$

Condition

Specialist

Medical

ManagementDiagnostician

Correct

Condition

Correct

Treatment

Hospital

Condition-Based


Complications &

Post-Acute Care

Low Complication

& PAC Spending$

$

Proceduralist



“Condition-Based” Payment Also

Needed to Support Good Diagnosis

Correct

Condition

Correct

Treatment

Condition-Based

Payment(Symptoms)

$

$

Condition

Specialist

Medical

Management

Hospital

Condition-Based

Payment(Diagnosis)

High Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending$

Proceduralist


Diagnostician


Different Physicians Play These

Roles & Need Appropriate APMs

$Hospital

High Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending

Surgeon





$

Internist

Medical

Management

Hospital

Condition-Based

Payment(Diagnosis)

High Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending$


Surgeon




Correct

Condition

Correct

Treatment

Condition-Based

Payment(Symptoms)

$

$

Medical

Management

Hospital

Condition-Based

Payment(Diagnosis)

High Spending on

Complications &

Post-Acute Care

Low Complication

& PAC Spending$


Radiologist

Internist

Surgeon

How Do You Design


for Endocrinology?


Look at Each

Condition Separately

ThyroidProblems

Osteoporosis

ConditionsTreated

Diabetes

Other Conditions


Step 1: Identify the Opportunities

to Improve Care & Reduce Cost

ThyroidProblems

Osteoporosis

ConditionsTreated

Opportunitiesto Improve Care

and Reduce Cost

Diabetes

• Reduce avoidableED visits, admits,readmissions

• Reduce avoidablespending on drugs

• Prevent pre-diabetesfrom progressing

Other Conditions


Step 2: Identify the Barriers in

the Current Payment System

ThyroidProblems

Osteoporosis

ConditionsTreated


and Reduce Cost

Barriers inCurrent

Payment System

Diabetes




• No payment for caremanagement svcs

• No payment forphone/emailconsults

• No payment forevidence-basedprevention programs

Other Conditions


Step 3: Design Solutions to

Overcome the Barriers

ThyroidProblems

Osteoporosis

ConditionsTreated


and Reduce Cost

Barriers inCurrent

Payment System

Solutions viaAlternative

Payment Models

Diabetes




• Payment for care management& specialty consults

• Condition-basedpayment for diabetesmanagement

• Multi-year paymentto support prevention




Other Conditions


Opportunities, Barriers, and

Solutions Will Differ by Condition

ThyroidProblems

Osteoporosis

ConditionsTreated


and Reduce Cost

Barriers inCurrent

Payment System


Payment Models

• Reduce rate offractures

• Reduce unnecessarytesting

• Reduce unnecessaryuse of expensive Rx

• Condition-basedpayment for mgt ofosteoporosis

• Condition-basedpayment for mgt ofosteopenia

• No payment forcare managementservices

• Payment based onnumber of tests

Diabetes










Other Conditions


Different Payment Models for

Different Endocrine Conditions

ThyroidProblems

Osteoporosis

ConditionsTreated


and Reduce Cost

Barriers inCurrent

Payment System


Payment Models




• Reduce unnecessaryimaging and testing

• Reduce over- andunder-treatment

• Low payment fortime to diagnose &do patient education

• Payment based ontests & treatments

• Bundled paymentfor diagnosis

• Condition-basedpayment formanagement





Diabetes










Other Conditions


Not Every Condition Needs

an Alternative Payment Model

ThyroidProblems

Osteoporosis

ConditionsTreated


and Reduce Cost

Barriers inCurrent

Payment System


Payment Models




• Reduce unnecessaryimaging and testing

• Reduce over- andunder-treatment

• Low payment fortime to diagnose &do patient education

• Payment based ontests & treatments

• Bundled paymentfor diagnosis

• Condition-basedpayment formanagement





Diabetes










Other Conditions • FFS• APM


Hypothetical, Simplified Example of

Diabetes Management



Diabetes Management

1000 Patientswith Diabetes



Diabetes ManagementCURRENT FFS

$/Pt # Pts Total $PCP

Office Visits $600 1000 $600,000


• PCP paid only for periodic office visits(6 visits @ $100/visit)





Office Visits $600 1000 $600,000

EndocrinologistOffice Visits $100 1000 $100,000



• Endocrinologist seespatients once per year





Office Visits $600 1000 $600,000


Pharmaceuticals $1,000 1000 $1,000,000




• Patients take medicationsaveraging $1,000/year


Opportunity:

Avoidable HospitalizationsCURRENT FFS


Office Visits $600 1000 $600,000


Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations $10,000 250 $2,500,000





• 25% of patients are hospitalized each year;average cost of hospitalization = $10,000





Office Visits $600 1000 $600,000



Total Spending 1000 $4,200,000







Barrier: No Payment for Services

That Could Reduce HospitalizationsCURRENT FFS


Office Visits $600 1000 $600,000









• No payment for phoneconsults by endocrinologistwith PCP; no payment forcase mgt by endocrinologist


Most of the Money Isn’t

Going to the PhysiciansCURRENT FFS


Office Visits $600 1000 $600,000




PhysicianPayments

=

17%of Spending


What if More Endocrinologist

Support Could Reduce Admissions?CURRENT FFS APM – Higher Spending

$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP

Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%

EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%

Diabetes Mgt $96 1000 $96,000

Total Endocrin. $100,000 $196,000 +96%

Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%

Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


How Much Increased Payment

Does the Endocrinologist Need?CURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

Total Endocrin. $100,000 $196,000 +96%


Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


The Endocrinologist Needs a

Business Plan for Improving CareCURRENT FFS APM

$/Pt # Pts Total $ $/Pt # Pts Total $ ChgEndocrinologistRevenues

Office Visits $100 1000 $100,000 $100 1000 $100,000 0%

Diabetes Mgt $96 1000 $96,000

Total Revenue $100,000 $196,000 +96%

EndocrinologistCosts

Current Costs $95,000 $95,000

Physician Time $10,000

Nurse Care Mgr $80,000

Total Costs $95,000 $185,000 +95%

Profit Margin $5,000 $11,000 +120%


Viability May Depend on Volume of

Patients & Type of PaymentCURRENT FFS APM


Office Visits $100 500 $50,000 $100 500 $50,000 0%

Diabetes Mgt $96 500 $48,000

Total Revenue $50,000 $98,000 +96%





Total Costs $47,500 $132,500 +179%

Profit Margin $2,500 ($34,500) -1480%


Viability May Depend on Volume of

Patients & Type of PaymentCURRENT FFS APM


Office Visits $100 500 $50,000 $100 500 $50,000 0%

Diabetes Mgt $96 500 $48,000

Total Revenue $50,000 $98,000 +96%





Total Costs $47,500 $132,500 +179%

Profit Margin $2,500 ($34,500) -1480%

Potential Solutions:• Share resources with other practices

• Get more payers/patients participating


Higher Payment to Endocrinologist

Must Create Higher Value to PayerCURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

Total Endocrin. $100,000 $196,000 +96%


Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


How Does the Payer Know That

Hospitalizations Will Decrease?CURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

Total Endocrin. $100,000 $196,000 +96%

Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 250 $2,500,000 0%

Total Spending 1000 $4,200,000 1000 $4,296,000 +2%


Solution: Add an Accountability

Component to the PaymentCURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P(180-220 Admits) $10,000 0 $0

Total Endocrin. $100,000 $196,000 +96%


Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


Failure to Control Hospitalizations

Sufficiently Reduces PaymentCURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P(180-220 Admits) $10,000 -5 ($50,000)

Total Endocrin. $100,000 $146,000 +46%


Total Spending 1000 $4,200,000 1000 $3,996,000 -5%


Greater Success in Preventing

Admissions Increases PaymentCURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P(180-220 Admits) $10,000 5 $50,000

Total Endocrin. $100,000 $246,000 +146%


Total Spending 1000 $4,200,000 1000 $3,596,000 -14%


How to Set the

Standard of Performance?• “Tournament” Model

– Success is based on how other physicians performed in the same year– Used in CMS Value Based Modifier – Physicians do not know the standard in advance– Physicians only “win” if other physicians lose– Discourages collaboration in developing ways to improve


How to Set the


– Success is based on how other physicians performed in the same year– Used in CMS Value Based Modifier– Physicians do not know the standard in advance– Physicians only “win” if other physicians lose– Discourages collaboration in developing ways to improve

• “Improvement” Model– Success based on whether physician improves over prior year– Used in CMS Shared Savings Model– Rewards physicians who have been performing poorly,

provides no change in payment to high-performing physicians– As limit on improvement is reached, rationale for payment disappears


How to Set the


– Success is based on how other physicians performed in the same year– Used in CMS Value Based Modifier – Physicians do not know the standard in advance– Physicians only “win” if other physicians lose– Discourages collaboration in developing ways to improve

• “Improvement” Model– Success based on whether physician improves over prior year– Used in CMS Shared Savings Model– Rewards physicians who have been performing poorly,

provides no change in payment to high-performing physicians– As limit on improvement is reached, rationale for payment disappears

• A Better Way: Standards Based on Known Feasible Targets– Success based on achieving performance levels other physicians have

achieved in previous years– All physicians receive adequate payment if they achieve the standard– No need to improve if standard is already met– Standard is defined with a confidence interval based on reliability of measure– Reward for higher performance encourages creation of higher standard


Adequate Payment for All,

Low Performers Generate SavingsFFS Low Performer APM – Expected Results

$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP $600 1000 $600,000 $600 1000 $600,000 +0%Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 300 $3,000,000 $10,000 200 $2,000,000 -33%

Total Spending 1000 $4,700,000 1000 $3,796,000 -19%

FFS High Performer APM – Expected Results

$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP $600 1000 $600,000 $600 1000 $600,000 +0%Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 200 $2,000,000 $10,000 200 $2,000,000 0%

Total Spending 1000 $3,700,000 1000 $3,796,000 +3%

Grand Total 2000 $8,400,000 2000 $7,592,000 -10%


Not All Patients Are The Same

Low Risk Patients High Risk Patients

$/Pt # Pts Total $ $/Pt # Pts Total $PCP

Office Visits

EndocrinologistOffice Visits

Diabetes Mgt

P4P

Total Endocrin.

PharmaceuticalsHospitalizations 50 150

Total Spending 500 500

10% Admission Rate 30% Admission Rate


Not All Patients Are The Same:

Stratifying APMs Based on RiskAPM – Low Risk Patients APM – High Risk Patients

$/Pt # Pts Total $ $/Pt # Pts Total $PCP

Office Visits $400 500 $200,000 $800 500 $400,000

EndocrinologistOffice Visits $50 500 $25,000 $150 500 $75,000

Diabetes Mgt $48 500 $24,000 $144 500 $72,000

P4P

Total Endocrin. $49,000 $147,000

Pharmaceuticals $500 500 $250,000 $1,500 500 $750,000Hospitalizations $10,000 50 $500,000 $10,000 150 $1,500,000

Total Spending 500 $999,000 500 $2,797,000



Fee for Service Has

Built-In Risk Adjustment

Traditional FFS

• Higher paymentsmade for patients who receive more services

• Provider receiveshigher paymentbased on bills submitted forservices delivered

• No higher paymentif individual servicesrequire more timeor resources


Payer Risk Adjustment Models

Are a Poor Substitute

Traditional FFS Payer Risk Adjustment




• Higher paymentsmade for patients who are assignedmore diagnosis codes

• Provider receiveshigher payment basedon number and typeof diagnosis codesassigned on claims

• No higher payment forsome diagnosis codesor for higher severityconditions withoutseparate codes


Effective Risk Adjustment via

Provider-Defined Classifications

Traditional FFS Payer Risk AdjustmentPatient Classification




• Higher paymentsmade for patients who are assignedmore diagnosis codes

• Provider receiveshigher payment basedon number and typeof diagnosis codesassigned on claims

• No higher payment forsome diagnosis codesor for higher severityconditions withoutseparate codes

• Higher payments aremade for patients whoare classified as higherneed for their condition

• Provider bills fora “condition-basedpayment” code from afamily of codes stratifiedbased on patient needs

• No higher payment basedsolely on number of services delivered


Development of Patient Condition

Groups Under MACRASEC. 101. REPEALING THE SUSTAINABLE GROWTH RATE (SGR) AND IMPROVING MEDICARE PAYMENT FOR PHYSICIANS’ SERVICES.(f) COLLABORATING WITH THE PHYSICIAN, PRACTITIONER, AND OTHER STAKEHOLDER COMMUNITIES TO IMPROVE RESOURCE USE MEASUREMENT.(2) DEVELOPMENT OF CARE EPISODE AND PATIENT CONDITION GROUPS AND CLASSIFICATION CODES.—(D) DEVELOPMENT OF PROPOSED CLASSIFICATION CODES.—(i) IN GENERAL.—Taking into account the information described in subparagraph (B) and the information received under subparagraph (C), the Secretary shall—(I) establish care episode groups and patient condition groups, which account for a target of an estimated 1⁄2 of expenditures under parts A and B (with such target increasing over time as appropriate); and (II) assign codes to such groups.(ii) CARE EPISODE GROUPS.—In establishing the care episode groups under clause (i), the Secretary shall take into account—(I) the patient’s clinical problems at the time items and services are furnished during an episode of care, such as the clinical conditions or diagnoses, whether or not inpatient hospitalization occurs, and the principal procedures or services furnished; and (II) other factors determined appropriate by the Secretary.(iii) PATIENT CONDITION GROUPS.—In establishing the patient condition groups under clause (i), the Secretary shall take into account— (I) the patient’s clinical history at the time of a medical visit, such as the patient’s combination of chronic conditions, current health status, and recent significant history (such as hospitalization and major surgery during a previous period, such as 3 months); and (II) other factors determined appropriate by the Secretary,


Solution: Add an Accountability

Component to the PaymentCURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P(180-220 Admits) $10,000 0 $0

Total Endocrin. $100,000 $196,000 +96%


Total Spending 1000 $4,200,000 1000 $3,796,000 -10%

Higher Endocrinologist payment+

Lower hospitalizations=

Lower net payer spending


What if Increased Drug Spending

Reduced the Hospital Admissions?CURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P(180-220 Admits) $10,000 5 $50,000

Total Endocrin. $100,000 $246,000 +146%


Total Spending 1000 $4,200,000 1000 $4,096,000 -3%

Higher Endocrinologist payment+

Higher drug spending+

Lower hospitalizations=

Higher net payer spending


Solution: Tie Accountability to

All Substitutable ServicesCURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P ($2800-$3200) $0 1000 $0

Total Endocrin. $100,000 $196,000 +96%


Drug + Hospital $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


No Bonus Payment if Admission

Reduction Offset by Drug CostsCURRENT FFS APM – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P ($2800-$3200) ($50) 1000 ($50,000)

Total Endocrin. $100,000 $146,000 +46%


Other Spending $3,250 1000 $3,250,000

Total Spending 1000 $4,200,000 1000 $3,996,000 -5%


CMS Wants to Make Each Provider

Accountable for Total Spending

Spending onAll

Servicesthe

ACO’sPatientsReceive

Healthcare

Spe

ndin

g

Paymentsto

ACOs

ACOs

Spending onAll

Servicesthe

Oncologists’PatientsReceiveDuringChemo

Treatment

Paymentsto

Oncologists

OncologyCare

Model

Spending onAll

ChronicDisease

CareandCare

Related toJoint

SurgeryAfter

Discharge

Paymentsto

Hospitals

ComprehensiveCare for

Joint Replacement

Spending onAll

Servicesthe

PCP’sPatientsReceive

Paymentsto

PCPs

ComprehensivePrimary Care

Initiative


Accountability Must Be Focused on

What Each Provider Can Influence

Spendingthe

ProviderCannotControl

OtherSpending

theProvider

CanControl

orInfluence

Healthcare

Spe

ndin

g

e.g., PCPs can’t reduce surgical site infections

e.g., surgeons can’t prevent diabetic foot ulcers

e.g., oncologists can’t prevent cancer

e.g., PCPs can help diabetics avoid amputations

e.g., surgeons can reduce surgical site infections

e.g., oncologists can reduce complications from

drug toxicity

Paymentsto the

Provider

Total SpendingPer Patient


A Critical Element is

Shared, Trusted Data

• Physicians need to know the current utilization and costs for

their patients and the likely impact of care changes to know

whether the payment amount will cover the costs of delivering

redesigned care to the patients

• Purchasers/Payers needs to know the current utilization and

costs to know whether the proposed payment amount 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!


How Do Patients Know Physicians

Won’t Stint to Reduce Spending?CURRENT FFS APM


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P ($2800-$3200) $50 1000 $50,000

Total Endocrin. $100,000 $246,000 +146%

Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%

Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


How Do Patients Know Physicians

Won’t Stint to Reduce Spending?CURRENT FFS APM


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P ($2800-$3200) $50 1000 $50,000

Total Endocrin. $100,000 $246,000 +146%


Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,796,000 -10%

Add a Mechanism for Protecting Against Underuse


How Do You Protect

Against Underuse?

• Use Quality Measures to Adjust Payment?– No single measure of quality exists, so multiple measures are used

– More measures get added every year, but major gaps exist

– Every payer uses a different set of measures

– Claims-based measures fail to capture relevant clinical information

– Process measures may constrain flexibility

– Significant problems in reliability and risk adjustment for many measures


How Do You Protect

Against Underuse?

• Use Quality Measures to Adjust Payment?– No single measure of quality exists, so multiple measures are used

– More measures get added every year, but major gaps exist

– Every payer uses a different set of measures

– Claims-based measures fail to capture relevant clinical information

– Process measures may constrain flexibility

– Significant problems in reliability and risk adjustment for many measures

• Develop and Follow Appropriate Use Criteria– Focus cost accountability on services where appropriate use criteria exist

• Savings result from avoiding unnecessary and inappropriate utilization• No reward for avoiding use of necessary/appropriate services

– Physicians have flexibility to adjust services where no evidence exists

– Tying payment to appropriate use creates a business case for maintenance of registries used to develop and refine appropriate use criteria

– Examples: ASCO Patient-Centered Oncology Payment, ACC SMARTCare


APM #1:

Payment for a High-Value Service

• Continuation of existing FFS payments

• Payment for additional services

• Measurement of avoidable utilization and/or quality/outcomes

• Adjustment of payment amountsbased on performance

• Updating payments over time


APM #1:







Is MIPS Better Than an APM?


MIPS Includes Accountability for

Resource Use by Physicians

MIPS

“Merit-Based

Incentive

Payment

System”

Quality

Resource Use“Clinical Practice Improvement Activities”

EHR “Meaningful Use”

50%

10%

25%

15%

30%

30%

25%

15%


MIPS Requires Accountability

With No Change in FFS StructureCURRENT FFS MIPS – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $0 $0

P4P (+/- 9% FFS) $0 1000 $0

Total Endocrin. $100,000 $100,000 +0%


Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,700,000 -12%


Failure to Control Other Spending

Could Result in FFS ReductionsCURRENT FFS MIPS – Higher Spending


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $0 $0

P4P (+/- 9% FFS) ($9) 1000 ($9,000)

Total Endocrin. $100,000 $91,000 -9%


Other Spending $3,600 1000 $3,600,000

Total Spending 1000 $4,200,000 1000 $4,291,000 +2%


Is Shared Savings Easier?


In Shared Savings, No Upfront

Funds for New Physician Costs


If Savings Are Achieved in Year 1,

Shares Are Distributed in Year 2


But the Year 2 Payment Has to

Cover the Year 2 Costs


And The Physician Still Hasn’t

Recouped the Year 1 Costs


So Shared Savings Is Often

a Win-Lose


A Good APM Marries Resources &

Accountability TogetherCURRENT FFS APM


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $96 1000 $96,000

P4P ($2800-$3200) $0 1000 $0

Total Endocrin. $100,000 $196,000 +96%


Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


APM #1:








The Endocrinologist Needs a

Business Plan for Improving CareCURRENT FFS APM


Office Visits $100 1000 $100,000 $100 1000 $100,000 0%

Diabetes Mgt $96 1000 $96,000

Total Revenue $100,000 $196,000 +96%





Total Costs $95,000 $185,000 +95%

Profit Margin $5,000 $11,000 +120%


What if Better Care for Patients

Means Fewer MD Office Visits?CURRENT FFS APM


Office Visits $100 1000 $100,000 $50 1000 $50,000 -50%

Diabetes Mgt $96 1000 $96,000

Total Revenue $100,000 $146,000 +46%





Total Costs $95,000 $185,000 +95%

Profit Margin $5,000 ($39,000) -880%


Replace FFS Payments With

Per Patient Bundled PaymentsCURRENT FFS APM


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%

EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0

Diabetes Mgt $0 1000 $0 $196 1000 $196,000

P4P ($2800-$3200) $0 1000 $0

Total Endocrin. $100,000 $196,000 +96%


Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


Same Accountability Measure,

But More Flexibility/ProtectionCURRENT FFS APM


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $0 1000 $0 $196 1000 $196,000

P4P ($2800-$3200) $0 1000 $0

Total Endocrin. $100,000 $196,000 +96%


Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


APM #2: Condition-Based

Payment for a Physician’s Services




• Payment based on the patient’s health condition rather than specific services delivered

• Payment replaces some or all current FFS payments

• Payment amounts stratified based on patient needs

• Measurement of appropriateness and/or outcomes

• Adjustment of payments based on performance

• Updating payment amounts over time


What About the PCP?

CURRENT FFS APM


Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%


Diabetes Mgt $196 1000 $196,000

P4P ($2800-$3200) $0 1000 $0

Total Endocrin. $100,000 $196,000 +96%


Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,796,000 -10%


Higher Pay for PCP is Feasible

If Savings Are High EnoughCURRENT FFS APM


Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%


Diabetes Mgt $196 1000 $196,000

P4P ($2800-$3200) $0 1000 $0

Total Endocrin. $100,000 $196,000 +96%


Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,856,000 -8%


PCP May Be Unhappy If Specialist

Gets All Performance-Based PayCURRENT FFS APM


Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%


Diabetes Mgt $196 1000 $196,000

P4P ($2800-$3200) $50 1000 $50,000

Total Endocrin. $100,000 $246,000 +146%


Other Spending $2,750 1000 $2,750,000

Total Spending 1000 $4,200,000 1000 $3,656,000 -13%


PCP May Be Unhappy If Specialist

Gets All Performance-Based PayCURRENT FFS APM


Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%


Diabetes Mgt $196 1000 $196,000

P4P ($2800-$3200) $50 1000 $50,000

Total Endocrin. $100,000 $246,000 +146%


Other Spending $2,750 1000 $2,750,000

Total Spending 1000 $4,200,000 1000 $3,656,000 -13%

In other CMS programs, the question is:

Who “gets” the shared savings payment

or who gets credit for the performance?


Specialist May Be Unhappy If PCP

Has No Accountability for ResultsCURRENT FFS APM


Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%


Diabetes Mgt $196 1000 $196,000

P4P ($2800-$3200) ($100) 1000 ($100,000)

Total Endocrin. $100,000 $96,000 -4%


Other Spending $3,300 1000 $3,300,000

Total Spending 1000 $4,200,000 1000 $4,056,000 -3.4%


Option 1: Create Separate

Performance-Based PaymentsCURRENT FFS APM


Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%

P4P ($2800-$3200) ($50) 1000 ($50,000)

Total PCP $600,000 $610,000 +2%


Diabetes Mgt $196 1000 $196,000

P4P ($2800-$3200) ($50) 1000 ($50,000)

Total Endocrin. $100,000 $146,000 +46%


Other Spending $3,300 1000 $3,300,000

Total Spending 1000 $4,200,000 1000 $4,056,000 -3.4%


Option 2: Create a Bundled

Payment for PCP+EndocrinologistCURRENT FFS APM

$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians

PCP $600 1000 $600,000 $660 1000 $660,000 +10%

Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%

P4P ($2800-$3200) $50 1000 $50,000

Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%


Other Spending $2,750 1000 $2,750,000

Total Spending 1000 $4,200,000 1000 $3,656,000 -13%


APM #3:

Multi-Physician Bundled Payment


Physicians Have to Decide How to

Divide Performance PaymentsCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P ($2800-$3200) $50 1000 $50,000



Other Spending $2,750 1000 $2,750,000

Total Spending 1000 $4,200,000 1000 $3,656,000 -13%

?


Physicians Also Have Ability to

Change FFS PaymentCURRENT FFS APM


PCP $600 1000 $600,000 $720 1000 $660,000 +20%


P4P ($2800-$3200) $0 1000 $0



Other Spending $3,000 1000 $3,000,000

Total Spending 1000 $4,200,000 1000 $3,856,000 -8%


Flexibility Allows Creation of

“Specialty Medical Home”PCP-Managed Patients Endocrinologist-Managed

$/Pt # Pts Total $ $/Pt # Pts Total $Physicians

PCP $500 500 $250,000 $200 500 $100,000

Endocrinologist $212 500 $106,000 $800 500 $400,000

Total Physicians $712 500 $356,000 $906 500 $500,000

Pharmaceuticals $500 500 $500,000 $1,500 500 $750,000Hospitalizations $10,000 50 $500,000 $10,000 150 $1,500,000

Total Spending 500 $1,106,000 500 $2,750,000

10% Hospitalization Rate 30% Hospitalization Rate


APM #3:

Multi-Physician Bundled Payment

• Single payment for services delivered by 2+ physicians

• Payment may supplement or replace FFS payments

• Patient agrees to use the multi-physician team

• Bundled payment is paid to an “alternative payment entity” (e.g., a PCP-Endocrinologist LLC)


• Measurement of avoidable utilization

• Measurement of appropriateness, quality, and/or outcomes




How Flexible, Adequate Payment

is Better for Patients & Physicians




Current Fee-for-Service• Physicians only get paid when they

have office visits with patients• The PCP doesn’t get paid to

answer a call from the patient• The specialist doesn’t get paid to

answer a call from a PCP that might avoid the need for a visit

• If the specialist doesn’t see the patient, they don’t get paid

• If the patient sees the specialist, the PCP doesn’t get paid

• The physicians get paid the same for a visit regardless of how complex the patient’s needs are

• There is no payment if patients receive help from nurses

• The physicians get paid the same amount regardless of whether the patient has avoidable complications

• Physicians have to document every visit and justify the level of the visitbased on payer requirements




Current Fee-for-Service• Physicians only get paid when they

have office visits with patients• The PCP doesn’t get paid to

answer a call from the patient• The specialist doesn’t get paid to

answer a call from a PCP that might avoid the need for a visit

• If the specialist doesn’t see the patient, they don’t get paid

• If the patient sees the specialist, the PCP doesn’t get paid

• The physicians get paid the same for a visit regardless of how complex the patient’s needs are

• There is no payment if patients receive help from nurses

• The physicians get paid the same amount regardless of whether the patient has avoidable complications

• Physicians have to document every visit and justify the level of the visitbased on payer requirements

Multi-Physician Bundles• Physicians get paid for managing

care of patients with the condition, regardless of whether they have an office visit

• Physicians have the flexibility to determine which patients need to be seen when and by whom

• Physicians have the flexibility to use the payment to hire nurses or other staff to help patients

• Payments are higher for managing more complex patients

• Physicians that do a better job of reducing avoidable complications make more money

• Physicians have to document the presence of the condition and the patient’s designation of the physicians as the managers of their care, and they only document individual services to the extent needed clinically


Does the Hospital Have to Lose

for Everyone Else to Win?CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P ($2800-$3200) $50 1000 $50,000



Other Spending $2,750 1000 $2,750,000

Total Spending 1000 $4,200,000 1000 $3,656,000 -13%


We Have to Understand the

Hospital’s Cost StructureCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000


Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations

Fixed (60%) $6,000 $1,500,000

Variable (37%) $3,700 $925,000

Margin ( 3%) $300 $75,000

Total Hospital $10,000 250 $2,500,000



Now, If the Number of Admissions

is Reduced…CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000

Variable (37%) $3,700 $925,000

Margin ( 3%) $300 $75,000

Total Hospital $10,000 250 $2,500,000 175



…Fixed Costs Will Remain the

Same (in the Short Run)…CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700

Margin ( 3%) $300 $75,000

Total Hospital $10,000 250 $2,500,000 175



…Variable Costs Will Go Down In

Proportion to Admissions…CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%

Margin ( 3%) $300 $75,000

Total Hospital $10,000 250 $2,500,000 175



…And Even With a Higher Margin

For the Hospital…CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 175



…Revenue is Reduced …

CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%



…And the Payer Still Saves Money

CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Spending 1000 $4,200,000 1000 $4,136,000 -1.5%


Win-Win-Win-Win for Patients,

Physicians, Hospital, and PayerCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%

Physicians Win

Payer WinsHospital Wins


What Payment Model Supports

This Approach?CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%


Solution: Pay Based on the Patient’s

Condition, Not the ServicesCURRENT FFS APM


PCP $600 1000 $600,000

Endocrinologist $100 1000 $100,000

P4P

Total Physicians $700 1000 $700,000

Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations

Fixed (60%) $6,000 $1,500,000

Variable (37%) $3,700 $925,000

Margin ( 3%) $300 $75,000

Total Hospital $10,000 250 $2,500,000

Total Spending $4,200 1000 $4,200,000


Plan to Offer Care of the Condition

at a Lower Cost Per PatientCURRENT FFS APM


PCP $600 1000 $600,000


P4P

Total Physicians $700 1000 $700,000

Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations

Fixed (60%) $6,000 $1,500,000

Variable (37%) $3,700 $925,000

Margin ( 3%) $300 $75,000

Total Hospital $10,000 250 $2,500,000

Total Spending $4,200 1000 $4,200,000 $4,136 -1.5%


Use the Payment as a Budget to

Redesign CareCURRENT FFS APM


PCP $600 1000 $600,000


P4P

Total Physicians $700 1000 $700,000 $906,000 +29%

Pharmaceuticals $1,000 1000 $1,000,000 $1,000,000 0%Hospitalizations

Fixed (60%) $6,000 $1,500,000

Variable (37%) $3,700 $925,000

Margin ( 3%) $300 $75,000

Total Hospital $10,000 250 $2,500,000 $2,230,000 -11%

Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%


And Let Physicians and Hospital

Decide How They Should Be PaidCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%


Condition-Based Payment Puts

Providers in Charge of CompensationCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%


APM #7:

(Full) Condition-Based Payment


Under Condition-Based Payment,

All Services Are Now CostsCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $647,500 -40%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%

Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%

Condition-Based Pmt $4,136 1000 $4,136,000 -1.5%

Margin on Payment $0

COSTS

REVENUES


Under Condition-Based Payment,

Better Results Higher MarginsCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $555,000 -40%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 150 $2,137,000 -15%

Total Spending $4,200 1000 $4,200,000 $4,043,500 -3.7%


Margin on Payment $92,500


Higher Margins Are Returned to

Providers, Not PayersCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $100 1000 $100,000



Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $555,000 -40%

Margin ( 3%) $300 $75,000 $125,000 +67%

Total Hospital $10,000 250 $2,500,000 150 $2,180,000 -13%

Total Spending $4,200 1000 $4,200,000 $4,136,000 -1.5%


Margin on Payment $0


What if a New Drug Helps

Reduce Hospital Admissions?CURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000


PharmaceuticalsCurrent Drugs $1,000 1000 $1,000,000 $1,000 0 $0

New Medication $1,250 1000 $1,250,000

Total Rx 1000 $1,000,000 1000 $1,250,000 +25%

Hospitalizations

Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $462,500 -50%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 125 $2,045,000 -15%

Total Spending $4,200 1000 $4,200,000 $4,201,000 0.0%

Condition-Based Payment $4,136 1000 $4,136,000 -1.5%

Margin on Payment ($65,000)


Under APM, The Drug Must Be

Cost-Effective for ProvidersCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000


PharmaceuticalsCurrent Drugs $1,000 1000 $1,000,000 $1,000 0 $0

New Medication $1,250 1000 $1,250,000

Total Rx 1000 $1,000,000 1000 $1,250,000 +25%

Hospitalizations

Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $462,500 -50%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 125 $2,045,000 -15%

Total Spending $4,200 1000 $4,200,000 $4,201,000 0.0%


Margin on Payment ($65,000)


Physicians Can Target the Drug to

Patients Who Will Most BenefitCURRENT FFS APM


PCP $600 1000 $600,000 $660 1000 $660,000 +10%


P4P $50 1000 $50,000


PharmaceuticalsCurrent Drugs $1,000 1000 $1,000,000 $1,000 800 $800,000

New Medication $1,250 200 $250,000

Total Rx 1000 $1,000,000 1000 $1,050,000 +5%

Hospitalizations

Fixed (60%) $6,000 $1,500,000 $1,500,000 0%

Variable (37%) $3,700 $925,000 $3,700 $555,000 -40%

Margin ( 3%) $300 $75,000 $82,500 +10%

Total Hospital $10,000 250 $2,500,000 150 $2,137,500 -15%

Total Spending $4,200 1000 $4,200,000 $4,093,500 -2.5%


Margin on Payment $42,500


Condition-Based Payments Must

Stratify Patients by Risk/NeedAPM – Low Risk Patients APM – High Risk Patients


PCP

Endocrinologist

P4P

Total Physicians

PharmaceuticalsHospitalizations

Fixed

Variable

Margin

Total Hospital 55 120

Total Spending 500 500



Higher Condition-Based Payment

for Higher-Need PatientsAPM – Low Risk Patients APM – High Risk Patients


PCP $440 500 $220,000 $880 500 $440,000

Endocrinologist $96 500 $48,000 $296 500 $148,000

P4P $25 500 $12,500 $75 500 $37,500

Total Physicians $561 500 $280,500 $1,251 500 $625,500

Pharmaceuticals $500 500 $250,000 $1,500 500 $750,000Hospitalizations

Fixed $500,000 $1,000,000

Variable $3,700 $203,500 $3,700 $444,000

Margin $27,500 $55,000

Total Hospital 55 $731,000 120 $1,499,000

Total Spending 500 $1,261,500 500 $2,874,500

APM Payment $2,523 500 $1,261,500 $5,749 500 $2,874,500



Protections For Providers Against

Taking Inappropriate Risk• Risk Stratification: The payment rates would vary based on objective

characteristics of the patient and treatment that would be expected to result in the need for more services or increase the risk of complications.

• Outlier Payment or Individual Stop Loss Insurance: The payment would be increased if spending on an individual patient exceeds a pre-defined threshold. An alternative would be for the provider to purchase individual stop loss insurance (sometimes referred to as reinsurance) and include the cost of the insurance in the payment bundle.

• Risk Corridors or Aggregate Stop Loss Insurance: The payment would be increased if spending on all patients exceeds a pre-defined percentage above the payments. An alternative would be for the provider to purchase aggregate stop loss insurance and include the cost of the insurance in the payment bundle.

• Adjustment for External Price Changes: The payment would be adjusted for changes in the prices of drugs or services from other providers that are beyond the control of the provider accepting the payment.

• Excluded Services: Services the provider does not deliver, or order, or otherwise have the ability to influence would not be included as part of accountability measures in the payment system.


Defining the Patient Population

PCPs/Specialists are Managing

FFS/PPO

• Patient may or maynot have a PCP

• Patient can receiveservices from anyphysician in thenetwork, includingmultiple physiciansdelivering servicesfor the same condition

• No physician knowswhat any other physician is doing

• No one is in charge ofcoordinating services




FFS/PPO





PAYER APMs

• Patients are “attributed” to PCPs and specialistsretrospectively basedon the number of officevisits they make

• Healthy patients maynot be attributed to the physicians who keptthem healthy

• Physicians may beattributed patients theyonly saw once

• Physician may be heldaccountable forspending that occurredbefore the patient beganseeing the specialist




PAYER APMsCondition Management





• Patients are “attributed” to PCPs and specialistsretrospectively basedon the number of officevisits they make

• Healthy patients maynot be attributed to the physicians who keptthem healthy

• Physicians may beattributed patients theyonly saw once

• Physician may be heldaccountable forspending that occurredbefore the patient beganseeing the specialist

• Patient chooses a PCPbut can change at any time

• Patient choosesspecialists or teamsto manage a specificcondition or combinationof conditions for aperiod of time

• Patients can choosespecialty teams fromdifferent health systemsfor different conditionsif they wish

• PCP is paid to providecare coordination andspecialists are paid tocommunicate/coordinate

FFS/PPO


Patient Relationship Categories

Being Created Under MACRASEC. 101. REPEALING THE SUSTAINABLE GROWTH RATE (SGR) AND IMPROVING MEDICARE PAYMENT FOR PHYSICIANS’ SERVICES.(f) COLLABORATING WITH THE PHYSICIAN, PRACTITIONER, AND OTHER STAKEHOLDER COMMUNITIES TO IMPROVE RESOURCE USE MEASUREMENT.(3) ATTRIBUTION OF PATIENTS TO PHYSICIANS OR PRACTITIONERS.—(B) DEVELOPMENT OF PATIENT RELATIONSHIP CATEGORIES AND CODES.—The Secretary shall develop patient relationship categories and codes that define and distinguish the relationship and responsibility of a physician or applicable practitioner with a patient at the time of furnishing an item or service. Such patient relationship categories shall include different relationships of the physician or applicable practitioner to the patient (and the codes may reflect combinations of such categories), such as a physician or applicable practitioner who—

(i) considers themself to have the primary responsibility for the general and ongoing care for the patient over extended periods of time;

(ii) considers themself to be the lead physician or practitioner and who furnishes items and services and coordinates care furnished by other physicians or practitioners for the patient during an acute episode;

(iii) furnishes items and services to the patient on a continuing basis during an acute episode of care, but in a supportive rather than a lead role;

(iv) furnishes items and services to the patient on an occasional basis, usually at the request of another physician or practitioner; or

(v) furnishes items and services only as ordered by another physician or practitioner.


APM #7:

Condition-Based Payment

• Payment based on the patient’s health condition

• Payment covers multiple treatment options deliveredby the physician(s) and other providers

• Patient agrees to use the provider team for services related to the health condition

• Bundled payment is paid to an “alternative payment entity” (prospective, retrospective, or hybrid)


• Outlier payments and risk corridors to address random variation and unusually expensive patients

• Measurement of appropriateness, quality, and/or outcomes




How Would You Design APMs for

Gastroenterology?


Identify the Types of Patient

Needs That Physicians Address

InflammatoryBowel

Disease

Upper GIBleeding(NVUGIB)

Types ofPatient Needs

Addressed

ColonCancer

Screening

Other Conditions& Procedures


Step 1: Identify the Opportunities

to Improve Care & Reduce Cost

InflammatoryBowel

Disease



Addressed


and Reduce Cost

ColonCancer

Screening

• Deliver colonoscopyin lowest-cost way

• Improve adenoma detection rate

• Avoid complicationsin colonoscopy

• Focus on highest-riskpatients



Step 2: Identify the Barriers in

the Current Payment System

InflammatoryBowel

Disease



Addressed


and Reduce Cost

Barriers inCurrent

Payment System

ColonCancer

Screening





• All providers paidseparately

• No payment for outreach to high-risk patients

• Higher payment forrepeat & unnecessaryprocedures



Step 3: Design Solutions to

Overcome the Barriers

InflammatoryBowel

Disease



Addressed


and Reduce Cost

Barriers inCurrent

Payment System


Payment Models

ColonCancer

Screening





• Bundled payment forcolonoscopy

• Warrantied paymentfor colonoscopy

• Population-basedpayment for cancer screening






Opportunities, Barriers, and

Solutions Will Differ by Condition

InflammatoryBowel

Disease



Addressed


and Reduce Cost

Barriers inCurrent

Payment System


Payment Models

• Reduce ED visitsand hospitalizationsdue to bleeds

• Use lowest-cost,effective intervention

• Avoid complications

• Bundled/warrantiedpayment foracute conditions

• Condition-based payment for chronicconditions

• No payment forcare management

• Financial penalty forusing lower-costprocedures

ColonCancer

Screening













Different Payment Models for

Different GI Conditions

InflammatoryBowel

Disease



Addressed


and Reduce Cost

Barriers inCurrent

Payment System


Payment Models




• Reduce ED visits &hospitalizations

• Reduce drug costs• Reduce absences

from work

• No payment forcare managementor proactive outreach

• No flexibility for non-face-to-face visits

• Add-on payment forcare managementsupport

• Condition-basedpayment for IBD





ColonCancer

Screening













Not Every Condition Needs

an Alternative Payment Model

InflammatoryBowel

Disease



Addressed


and Reduce Cost

Barriers inCurrent

Payment System


Payment Models




• Reduce ED visits &hospitalizations

• Reduce drug costs• Reduce absences

from work

• No payment forcare managementor proactive outreach

• No flexibility for non-face-to-face visits

• Add-on payment forcare managementsupport

• Condition-basedpayment for IBD





ColonCancer

Screening











Other Conditions& Procedures • FFS


Many Specialties Developing

Better Payment Models

Neurology

OB/GYN

OrthopedicSurgery


and Reduce Cost

Barriers inCurrent

Payment System

Solutions viaAccountable

Payment Models

• Reduce infectionsand complications ofsurgery

• Use non-surgicalcare instead of surgery

• Avoid unnecessaryhospitalizations forepilepsy patients

• Reduce strokes andheart attacks after TIA

• Reduce use ofelective C-sections

• Reduce earlydeliveries and use of NICU

• Similar/lower payment forvaginal deliveries

• Condition-basedpaymentfor total cost ofdelivery in low-riskpregnancy

• Bundled and warrantied paymentfor surgery

• Condition-basedpayment for arthritis

• No support for shareddecision-making

• Lack of resources forgood home-basedcare, patient education

• Condition-basedpayment for epilepsy

• Episode or condition-based payment forTIA

• No flexibility tospend more onpreventive care

• No payment for patienteducation & care mgt

Cardiology

• Use less invasiveprocedures when appropriate

• Reduce exacerbationsof heart failure

• Condition-basedpayment for stableangina

• Condition-basedpayment for HF

• Payment is based onprocedure is used,not the outcome

• No payment for patienteducation & care mgt


Other Examples of Specialty-

Specific Payment Models

Oncology

Primary Care

Gastroenterology


and Reduce Cost

Barriers inCurrent

Payment System

Solutions viaAccountable

Payment Models

• Reduce unnecessarycolonoscopies andcolon cancer

• Reduce ER/admits forinflammatory bowel d.

• Reduce ER visitsand admissions fordehydration

• Reduce overuse oftests and drugs

• Reduce avoidablehospitalizations forchronic disease pts

• Reduce unnecessarytests and referrals

• No payment for nurses to work with chronicdisease patients

• No payment for phoneconsults w/ specialists

• Monthly paymentsfor chronic caremanagement

• Payments to supportPCP-specialist partnerships

• Population-basedpayment for coloncancer screening

• Condition-based pmtfor IBD

• No flexibility to focusextra resources onhighest-risk patients

• No flexibility to spendmore on care mgt

• Payment for care management svcs

• Accountability forhospital admissions& use of guidelines

• No payment for caremanagement services

• Inadequate paymentfor diagnosis andtreatment planning

Psychiatry

• Reduce ER visitsand admissions forpatients withdepression andchronic disease

• Joint condition-based payment to PCP andpsychiatrist

• No payment forphone consults with PCPs

• No payment forRN care managers


Should Physicians Fear the Risks

of Accountable Payment Models?

Risks Under APMs•Will the amount of payment be adequate to cover the services patients need?

•Will risk adjustment be adequate to control for differences in need?

•How will you control the costs of other providers involved in the care in the alternative payment model?

•What portion of payments will be withheld based on quality measures?

•Will you have enough patients to cover the costs of managing the new payment?


Risk Is Not New to Physicians,

It’s Just Different Risk in APMs

Risks Under FFS•Will fee levels from payers be adequate to cover the costs of delivering services?

•What utilization controls will payers impose on your services?

•What “value-based” reductions will be made in your payments based on “efficiency” measures?

•What “value-based” reductions will be made in your fees based on quality measures?

•Will you have enough patients to cover your practice expenses?

Risks Under APMs•Will the amount of payment be adequate to cover the services patients need?

•Will risk adjustment be adequate to control for differences in need?

•How will you control the costs of other providers involved in the care in the alternative payment model?

•What portion of payments will be withheld based on quality measures?

•Will you have enough patients to cover the costs of managing the new payment?


Can Small Physician Practices

Manage Accountable Payments?

• Infrastructure/Services

– Small physician practices may not have enough patients to justify staff

or other services to coordinate care, particularly for patients with

complex illnesses (e.g., nurse care managers, patient registries, etc.)

• Quality/Cost Measurement

– Small numbers of patients make measurement unreliable; physicians

may be inappropriately labeled low quality, high cost, or vice versa

DO MD DOMD

DO MD DO MD

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DO MD DO MD

MD DO MD DO

Better

Patient

Outcomes &

Lower Cost?


Even Solo Physicians Can Take

Accountability for Cost/Outcomes• In 1987, an orthopedic surgeon in Lansing, Michigan 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.

Johnson LL, Becker RL. An alternative health-care reimbursement system—application of arthroscopy

and financial warranty: results of a two-year pilot study. Arthroscopy. 1994 Aug;10(4):462–70


Sharing Resources Reduces

Cost/Size of Impact Needed


Sharing Services Across

Multiple Practices

DO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DO MD

Resources for patient educ. & self-mgt support (e.g., RN care mgr)

Method for targeting high-riskpatients (e.g., predictive modeling

Capability for tracking patient care and ensuring followup (e.g., registry)

Coordinated relationships with specialists and hospitals

Data and analytics to measure and monitor utilization and quality

DO MD DO MD

Shared Services

Better

Patient

Outcomes &

Lower CostDO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DO MD

MD DO MD DO


IPAs and CINs Can Be Vehicles

for Sharing Services/Accountability

DO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DO MD

Resources for patient educ. & self-mgt support (e.g., RN care mgr)

Method for targeting high-riskpatients (e.g., predictive modeling

Capability for tracking patient care and ensuring followup (e.g., registry)

Coordinated relationships with specialists and hospitals

Data and analytics to measure and monitor utilization and quality

DO MD DO MD

IPA/CINShared Services

Better

Patient

Outcomes &

Lower CostDO MD DOMD

DO MD DO MD

DO MD DOMD

DO MD DO MD

MD DO MD DO


Still to Come

• Getting payers to implement good payment models

• Redesigning care delivery to improve outcomes and lower spending

• Organizing to succeed under alternative payment models

PART 3:

Implementing



Ideally, Health Plans Would Use

Physician-Focused Payments

HealthPlans

PhysicianPractice

Physician-Focused Payment Models

Higher Value Care:

• Better Quality

• Lower Spending


Most Health Plans Resist

True Payment Reforms

HealthPlans

PhysicianPractice

“Value-Based Purchasing”

• FFS + P4P

• Shared Savings

• Narrow Network Discounts

Low Value Care:

• Poor Quality

• High Avoidable Spending


For Most Workers, Employers are

the Insurer, Not a Health Plan

Source:

Employer

Health

Benefits

2012 Annual

Survey.

The Kaiser

Family

Foundation

and Health

Research

and

Educational

Trust

60% of Workers Are Now in Self-Insured Plans


For Self-Funded Employers, The

Health Plan is Just a Pass Through

Self-Funded

Purchasers

PhysicianPractice

ASOHealth Plan(No Risk)

Provider Claims

Purchaser Payment


No Incentive for Health Plans to

Change Without Customer Demand

Self-Funded

Purchasers

PhysicianPractice

ASOHealth Plan(No Risk)

For Health Plan:

• Higher costs of implementing new payment models

• Savings will (should) go to the purchasers, not the plans


What We Need Are

Purchaser-Provider Partnerships

Self-Funded

Purchasers

PhysicianPractice

Better Payment and Benefit Structure

Lower Cost, Higher Quality Care

Physicians “win” if:• Patients stay healthy

and need less care• Purchaser pays

adequately for high-quality care to those who need it

Purchasers and Patients “win” if:• Physicians keep

employees healthy • Physicians deliver

high-quality care at low prices


Purchasers and Physicians Have

Common Interests, But Don’t Know It

“We’ve started talking directly to physicians,

and we’ve discovered that

what they want to sell is what we want to buy…”

Cheryl DeMars

CEO, The Alliance(Employer Coalition in Wisconsin)


Health Plan Implements Changes

Purchasers/Providers Agree On

Self-Funded

Purchasers

PhysicianPractice

HealthPlans Implementation




Some Purchasers Are Making

Specialty-Specific Payments

Purchasers

OrthopedicPractice

Cardiac Surgery Practice

E.g.,

Walmart

Lowes


Purchasers Don’t Want to Deal

With Every Specialty Separately

Self-Funded

Purchasers

NeurosurgeryPractice

OB/GYNPractice

GastroenterologyPractice

CardiologyPractice

Primary CarePractice


Purchasers Want

“One Throat to Choke” (a CIN)

Self-Funded

Purchasers

Neurosurgeons

OB/GYNs

Gastroenterologists

Cardiologists

PCPs

Clinically Integrated Network

Global

Payment


Physician-Led CINs Can Change

Compensation & Care Delivery

Self-Funded

Purchasers

Clinically Integrated Network

Global

Payment

Neurosurgeons

OB/GYNs

Gastroenterologists

Cardiologists

PCPsChronic Disease

Mgt Payment

Heart Disease Mgt Payment

IBD MgtPayment

Maternity CarePayment

Back Pain Mgt Pmt


Provider-Owned Plans

Allow Direct Contracting

Self-FundedPurchasers Providers

Provider-Owned

Health Plan




Purchasers Have

Total Risk Today

Self-FundedPurchasers,Medicare,Medicaid

Providers

TOTAL

COST OF

HEALTH CARE


The Goal Should Not Be

to Shift Total Risk to Physicians


Physicians

TOTAL

COST OF

HEALTH CARE

TOTAL

COST OF

HEALTH CARE


Goal: Share Risk With Physicians

on Costs They Can Control


INSURANCERISK

(Risk of Illness)

Physicians

PERFORMANCERISK

(Cost/Illness)

How Many Patients

Do You Need to

(Successfully)

Manage Total Costs?


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


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


The Keys to Managing Risk

• How Do Small Employers Manage Self-Insurance Risk?

– They know who their employees are and can estimate spending

– They start with what they spent last year and try to control growth

– They have reserves to cover year-to-year variation

– They purchase stop-loss insurance to cover unusually expensive cases

• How Would Physician Practices Manage Risk?

– They need to know who their patients are in order to project spending

– They need to start with last year’s payments and control growth

– They need some reserves to cover year-to-year variation

– They need to purchase stop-loss insurance to cover unusually

expensive cases


It Would Be Eas(ier) if Purchasers &

Providers Matched Geographically

Physiciansin

Community2

Physiciansin

Community1

Physiciansin

Community3

Community

1

CIN

Community

2

CIN

Community

3

CIN

Employerin

Community 1

Employerin

Community 1

Employerin

Community 2

Employerin

Community 2

Employerin

Community 2

Employerin

Community3

Employerin

Community 3

Global

Payment

Global

Payment

Global

Payment


Employers’ Employees Don’t All

Live in the Same Community

Small,Local

Employer

Physiciansin

Community2

Physiciansin

Community1

Small,Local

Employer

Small,Local

Employer

Physiciansin

Community3


Larger Employers Will Span

Even More Communities

Small,Local

Employer

Physiciansin

Community2

Physiciansin

Community1

Small,Local

Employer

Small,Local

Employer

Physiciansin

Community3

Larger andNational

Employers


To Solve This,

You Could Create a Big CIN/ACO

Small,Local

Employer

Physiciansin

Community2

Physiciansin

Community1

Small,Local

Employer

Small,Local

Employer

Physiciansin

Community3

Larger andNational

Employers

Large CIN/ACO


…Or Multiple Local CINs Could

Contract as a Larger Network

Small,Local

Employer

Physiciansin

Community2

Physiciansin

Community1

Small,Local

Employer

Small,Local

Employer

Physiciansin

Community3

Larger andNational

Employers

Contracting Network

CIN

1

CIN

2

CIN

3


…Or Multiple CINs Could

Contract as a Network

Small,Local

Employer

Physiciansin

Community2

Physiciansin

Community1

Small,Local

Employer

Small,Local

Employer

Physiciansin

Community3

Larger andNational

Employers

Contracting Network

CIN

1

CIN

2

CIN

3

It’s easier

to collaborate

if profits

don’t depend

on volume of

procedures or

cherry-picking

patients


Facilitator Needed to Develop

Common Contracting Approach

Small,Local

Employer

Physiciansin

Community2

Physiciansin

Community1

Small,Local

Employer

Small,Local

Employer

Physiciansin

Community3

Larger andNational

Employers

Contracting Network

CIN

1

CIN

2

CIN

3

Facilitator,

e.g.,

PA

Medical

Society


Instead of Having To Accept What

Medicare and Health Plans Pay…

CMS

Physician Group,

IPA,or Health System

Commercial Health Plans

Medicaid MCOs

Self-InsuredEmployers

Individuals &Small Groups

Fully InsuredLarge Groups

State Medicaid

MedicareBeneficiaries

Medicare FFS

Medicaid FFS

MA Plans

Commercial FFS


What Could Happen If Physicians

Had Their Own Health Plans?

CMS

Physician Group,



Medicaid MCOs




State Medicaid


MA Plans

Physician-Owned Health Plan

?

?

?


Get Risk-Adjusted Payment from

Medicare, Pay Physicians Better

CMS

Physician Group,



Medicaid MCOs




State Medicaid



Risk-AdjustedMedicare AdvantagePayment

BetterPhysicianPayment


Contract Directly with Self-Insured

Employers, Pay Physicians Better

CMS

Physician Group,



Medicaid MCOs




State Medicaid





Risk-Adjusted Direct Contract


Use Exchanges for Small Group

Business, Pay Physicians Better

CMS

Physician Group,



Medicaid MCOs




State Medicaid





InsuranceExchanges Risk-Adjusted

PremiumRevenue



Contract Directly With State for

Medicaid, Pay Physicians Better

CMS

Physician Group,






State Medicaid





Risk-AdjustedPremiumRevenue


InsuranceExchanges

Risk-Adjusted Global Payment


Get Global Payment for Large

Groups, Pay Physicians Better

CMS

Physician Group,






InsuranceExchanges

State Medicaid








Result: A “Single Payer System”

Controlled by Physicians

CMS

Physician Group,






InsuranceExchanges

State Medicaid







ONE PAYER,

MANY

CUSTOMERS


Eliminating the Middle Man,

Reconnecting Physicians & Patients


High Quality Health Plans

Run By Physician Groups


What is Needed for Success in an

Alternative Payment Model?

• Clinically Integrated Networks (CINs), and Accountable Care

Organizations (ACOs) can’t succeed under an Alternative

Payment Model if they don’t change the way care is delivered

to patients

• Just as Health Insurance Companies don’t deliver care to

patients, neither do Clinically Integrated Networks (CINs) or

Accountable Care Organizations (ACOs) – physicians deliver

care

• Individual physician practices will have to redesign their care

delivery processes


Reducing Hospitalizations

for COPD

Patient with

COPD

No Exacerbation

Serious

ExacerbationHospital

Home


Intervening Before

ER Visits/Admissions Occur

Patient with

COPD

No Exacerbation

Cold, Failure to

Take Meds, Etc.

Serious

Exacerbation

Serious


Home

OPPORTUNITY

FOR IMPACT


Creating a COPD Action Plan

Patient with

COPD

No Exacerbation

Cold, Failure to

Take Meds, Etc.

Serious

Exacerbation

Patient with

COPD

Serious


Home

No Exacerbation

Cold, Failure to

Take Meds, Etc.

ACTION PLAN:

Call MD/RN,

Add Meds, Etc.

Serious


Home

BEFORE

AFTER


Making an Action Plan Work

Primary

Care

Practice

Patient

Must Be Willing to

Call Right Away

For Help Resolving

an Exacerbation

Must Be Able to

Respond Right Away

When a Patient Calls

(And Not By Sending

Them to the ER)


How We Hope A Primary Care

Practice Answers Patient Calls

Patient with

Action PlanHas

Problem

CallsPCP Office

During

Office

Hours:

After

Office

Hours:

Speaks toScheduler

Patient treated

andremainsout of

hospital

Seen byPCP

CallsAnsw. Svc.

Speaks toPCP


What Actually Happens,

All Too Often

Patient with

Action PlanHas

Problem

CallsPCP Office

During

Office

Hours:

After

Office

Hours:

Goes toER

Can’t GetThrough

Speaks toScheduler

Patient admitted

to Hospital

No ApptsAvailable

Patient treated

andremainsout of

hospital

Seen byPCP

CallsAnsw. Svc.

Goes toER

Patient admitted

to Hospital

Speaks toPCP

Speaks toOn-Call MD


Redesigning How a Primary Care

Practice Answers Patient Calls

Call fromPatient with

COPD Action Plan

Receptionist

AnsweringService

ScheduleVisit TodayIf Possible

PatientCan’t Come

Today

Assessed asOK to Come Tomorrow

Needs Home Visit

or Call Now

PhysicianSees

Patient

Treatment ChangedIf Needed

MD Calls& Assesses

ER VisitNeeded

Patient Stable, Can

Wait

Care MgrNotified

RequiresAdmission

Patient CanReturn Home

Communication Between

Office & Care Manager

Protocol for On-Call

Physicians to Use

Protocol for ER/Admits

Process for Office Phone Screening, Assessment, and Scheduling

NurseNotifies

Care Mgr

Home Visits for At-Risk Patients

During

Office

Hours:

After

Office

Hours:

COPD?

No

Nurse PhoneAssessment

Send toER If

Necessary

ContactRN/MD w/

FindingsNeeds Home

Visitor Call Now

Call CareMgr or

Home Care

Home Visitto Patient

Short-TermTreatment

in ER

RequiresHome Visit

to Not Admit


Costs of Transformation

• Expensive IT systems don’t change care delivery and often make it harder to invest resources in the things that really matter

• The key costs:– Implementing different ways of delivering care is inherently inefficient in

the short run, even if it’s better in the long run, so productivity-based revenue will decline

– New personnel (e.g., nurse care managers) have to be recruited, trained, and paid before the full benefits of savings have been achieved

– Physicians need to plan and manage the transformation, and that takes time away from patients

• Working capital/reserves are needed to cover these costs

• A business plan is needed to make sure that working capital will be recovered

Physicians Have toMeasure Their Performance

(Using Meaningful Measures)and Make Improvements

When Needed


Allergists:

Tendency to Use Testing


Cardiology:

Tendency to Use Echo


GI: Tendency to Use

Upper GI Endoscopy

Physicians Have toMeasure Their Performance

(Using Meaningful Measures)and Make Improvements

When Needed

Colleagues in the Practice, CIN, or ACO

Need to Enforce aCommitment to Improvement

and Accountability andChange Partners If Necessary


Physicians Have to Put Aside

Differences and Work Together

Fighting Over Sharesof a Shrinking Pie

Controlled by Payers

Working Together toPut Physicians Back

in Control of HealthcareVS


What Would a Physician-Driven,

Patient-Centered CIN Look Like?• The patient (and their employer) gets a 90 day money-back

guarantee if they choose the CIN

• The CIN helps the patient find a primary care physician with the type of access, team, cultural competence, and personality the patient will be most comfortable with

• The PCP and CIN immediately work to welcome the patient and design a plan of care to match the patient’s needs and preferences, and it regularly solicits feedback on performance

• If the patient has a specific health problem, the PCP & CIN commit to get the patient the best care for that problem at the lowest cost, even if that is not from a provider in the CIN – The CIN provides the patient with comparative information on the

quality and cost of the CIN physicians and providers compared to all other providers (rather than forcing the patient to search the internet)

– If the patient chooses a non-group provider, the patient will pay the difference in cost unless the other provider’s quality is better

• The CIN pays physicians to manage the patient’s conditions effectively, not based on office visits or procedures


Your Turn

• Assuming the problems with the payment system were fixed, what other barriers (if any) would you face in making the changes in care delivery needed to achieve savings?

• What concerns or fears would you have about being held accountable for achieving the savings?


Learn More About Win-Win-Win

Payment and Delivery Reformwww.PaymentReform.org

http://www.paymentreform.org/

For More Information:

Harold D. MillerPresident and CEO

Center for Healthcare Quality and Payment Reform

[email protected]

(412) 803-3650

www.CHQPR.org

www.PaymentReform.org

Procedural

Bundles and Warranties


A Hypothetical Case of Surgery

COST TYPE TODAY

Physician Fee $2,000

Hospital Cost $20,900

Hosp. Margin (5%) $ 1,100

Total Hospital Pmt $22,000

Total Cost to Payer $24,000


Most of the Money Is

Not Going to the Physician

COST TYPE TODAY






Physician receives 8% of total spending


What if the Surgeon Could

Reduce The Hospital’s Costs?

COST TYPE TODAY CHANGE


Hospital Cost $20,900 -3% ($630)





Today: All Savings Goes to the

Hospital, No Reward for Physician

COST TYPE TODAY CHANGE SPLIT

Physician Fee $2,000 + 0%

Hospital Cost $20,900 -3% ($630)

Hosp. Margin (5%) $ 1,100 +57% ($630)


Total Cost to Payer $24,000 -0%


Bundling Eliminates Boundary

Between Hospital & Physician Pmt

COST TYPE TODAY

Physician Fee $ 2,000


Hospital Margin $ 1,100



Bundling Allows Savings Split

Among Docs, Hospitals, Payers

COST TYPE TODAY CHANGE SPLIT

Physician Fee $ 2,000 + 10% ($200)

Hospital Cost $20,900 -3% ($630)

Hospital Margin $ 1,100 +18% ($200)

Total Cost to Payer $24,000 - 1% ($230)


So Price of Surgery is Lower

But More Profitable

COST TYPE TODAY CHANGE SPLIT NEW

Physician Fee $ 2,000 + 10% ($200) $ 2,200

Hospital Cost $20,900 -3% ($630) $20,270

Hospital Margin $ 1,100 +18% ($200) $ 1,300

Total Cost to Payer $24,000 - 1% ($230) $23,770


Opportunities to

Reduce Hospital Costs• Use of lower-cost medical devices and equipment, or

negotiating for better prices on devices

• 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.


APM #4:

Physician-Facility Bundle


Medicare Acute Care Episode

(ACE) Demonstration

• Bundled Medicare Part A (hospital) and Part B (physician) payments together for cardiac and orthopedic (hips & knees) procedures

• Total Medicare payment was 1%-8% lower than what the standard Medicare DRG + physician fee would have been

• Payment was made to a Physician-Hospital Organization, which then divided the payment between hospital and surgeon

• Surgeon could receive up to 25% above Medicare fee• Patient cost-sharing reduced by up to 50% of Medicare’s savings• CMS waived Stark rules for gainsharing• Implemented in 2009/2010 in five hospital systems based on

competitive bids:– Hillcrest Medical Center, Oklahoma (cardiac + orthopedic procedures)– Baptist Health System, Texas (cardiac + orthopedic procedures)– Oklahoma Heart Hospital, Oklahoma (cardiac procedures)– Lovelace Health System, New Mexico (cardiac + orthopedic procedures)– Exempla Saint Joseph Hospital, Colorado (cardiac procedures)

• Most hospitals achieved significant savings, and physicians received increases in payment for procedures


Yes, a Health Care Provider

Can Offer a WarrantyGeisinger Health System ProvenCare

SM

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

• ALL inpatient physician and hospital services

• ALL related post-acute care

• ALL care for any related complications or readmissions

– Types of conditions/treatments

currently offered:• Cardiac Bypass Surgery

• Cardiac Stents

• Cataract Surgery

• Total Hip Replacement

• Bariatric Surgery

• Perinatal Care

• Low Back Pain

• Treatment of Chronic Kidney Disease


Payment + Process Improvement =

Better Outcomes, Lower Costs


Readmission Reduction: 44%


It Can Be Done By Physicians,

Not Just Large Health Systems• In 1987, an orthopedic surgeon in Lansing, Michigan 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.

Johnson LL, Becker RL. An alternative health-care reimbursement system—application of arthroscopy

and financial warranty: results of a two-year pilot study. Arthroscopy. 1994 Aug;10(4):462–70


A Warranty is Not an

Outcome Guarantee

• Offering a warranty on care does not imply that you are

guaranteeing a cure or a good outcome

• It merely means that you are agreeing to correct avoidable

problems at no (additional) charge

• Most warranties are “limited warranties,” in the sense that they

agree to pay to correct some problems, but not all


Prices for Warrantied Care

Will Likely Be Higher


Prices for Warrantied Care

Will Likely Be Higher

• Q: “Why should we pay more to get good-quality care??”

• A: In most industries, warrantied products cost more, but

they’re desirable because TOTAL spending on the product

(repairs & replacement) is lower than without the warranty


Example: $5,000 Procedure,

20% Readmission Rate

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

$5,000 $5,000 20%


Average Payment for Procedure

is Higher than the Official “Price”

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

Average

Total Cost

$5,000 $5,000 20% $6,000


Average Payment for Procedure

is Higher than the Official “Price”

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

Average

Total Cost

$5,000 $5,000 20% $6,000

So how much should you charge to offer

this same procedure with a warranty?


Starting Point for Warranty Price:

Actual Current Average Payment

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

Average

Total Cost

Price

Charged Net Margin

$5,000 $5,000 20% $6,000 $6,000 $ 0


Limited Warranty Gives Financial

Incentive to Improve Quality

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

Average

Total Cost

Price

Charged Net Margin

$5,000 $5,000 20% $6,000 $6,000 $ 0

$5,000 $5,000 15% $5,750 $6,000 $250

Reducing

Adverse

Events…

…Improves

The Bottom

Line

...Reduces

Costs...


Higher-Quality Provider Can

Charge Less, Attract Patients

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

Average

Total Cost

Price

Charged Net Margin

$5,000 $5,000 20% $6,000 $6,000 $ 0

$5,000 $5,000 15% $5,750 $6,000 $250

$5,000 $5,000 15% $5,750 $5,900 $ 150

Enables

Lower

Prices

Still With

Better

Margin


A Virtuous Cycle of Quality

Improvement & Cost Reduction

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

Average

Total Cost

Price

Charged Net Margin

$5,000 $5,000 20% $6,000 $6,000 $ 0

$5,000 $5,000 15% $5,750 $6,000 $250

$5,000 $5,000 15% $5,750 $5,900 $150

$5,000 $5,000 10% $5,500 $5,900 $400

Reducing

Adverse

Events…

…Improves

The Bottom

Line

...Reduces

Costs...


Win-Win-Win Through

Appropriate Payment & Pricing

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

Average

Total Cost

Price

Charged Net Margin

$5,000 $5,000 20% $6,000 $6,000 $ 0

$5,000 $5,000 15% $5,750 $6,000 $250

$5,000 $5,000 15% $5,750 $5,900 $150

$5,000 $5,000 10% $5,500 $5,900 $400

$5,000 $5,000 10% $5,500 $5,700 $200

$5,000 $5,000 5% $5,250 $5,700 $450

Quality is Better......Cost is Lower...

...Providers More Profitable


Different Warranty Prices for

Cases With Different Risks

Cost of

Success

Added

Cost of

Readmit

Rate of

Readmits

Average

Total Cost

Price

Charged Net Margin

$5,000 $5,000 20% $6,000 $6,000 $ 0

$5,000 $5,000 10% $5,500 $5,700 $200

HIGH RISK CASES

$5,000 $5,000 30% $6,500 $6,500 $ 0

$5,000 $5,000 15% $5,750 $6,100 $350

LOW RISK CASES

$5,000 $5,000 10% $5,500 $5,500 $ 0

$5,000 $5,000 5% $5,250 $5,350 $100


APM #5:

Warrantied Payment


A Critical Element is

Shared, Trusted Data

• Physicians and Hospitals need to know the current

utilization and costs for their patients to determine whether a

bundled/warrantied payment amount will cover the costs of

delivering effective care to the patients

• Purchasers and Payers need to know the current utilization

and costs for their employees/members to determine whether

the bundled/warrantied payment amount 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!


Current Transparency Efforts

Are Focused on Procedure PricePayment

for

Procedure

dded

Provider 1:

$25,000

Provider 2:

$23,000

-8%


What Hidden Costs

Accompany the Lower Price?Payment

for

Procedure

Payment and Rate

of Complications

Provider 1:

$25,000 $30,000 2%

Provider 2:

$23,000 $30,000 10%

-8%


Total Spending May Be Higher

With the “Lower Price” ProviderPayment

for

Procedure

Payment and Rate of

Complications

Average

Total

Payment

Provider 1:

$25,000 $30,000 2% $25,600

Provider 2:

$23,000 $30,000 10% $26,000

-8% +2%

Provider 2 hasa lower starting price,but is more expensive

when lower qualityis factored in


Bundled/Warrantied Pmts Allow

Comparing Apples to ApplesPayment

for

Procedure

Payment and Rate of

Complications

Bundled/

Episode

Payment

Provider 1:

2% $25,600

Provider 2:

10% $26,000

+2%

Bundled pricesshow that

Provider 1 is thehigher-value

provider


Many Variations Possible in

Combining Bundles and Warranties


Starting with a Hospital

Procedure…

Hospital DRG

Procedure

Physician Fee

PA

TIE

NT


Simplest Bundle, Already Working

in CMS Demonstrations

Hospital DRG

Procedure

Physician Fee

SINGLE PMT

PA

TIE

NT


Bundling All Physicians Promotes

More Care Coordination

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

SINGLE PMT

PA

TIE

NT


Not All Care Providers

Are Inside the Hospital Walls

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

SINGLE PMT

PA

TIE

NT

PROBLEM:No incentive to reduce

unnecessary use of expensive post-acute care


Bundling Inpatient and Post-Acute

Care Promotes Coordination

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

PA

TIE

NT

SINGLE PAYMENT


Does the Bundle Stop When

Things Go Bad in the Hospital?

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

DRG/Outlier

Complication

Lead Doc. Fee

Consultant Fee

Consultant Fee

PA

TIE

NT

PROBLEM:Hospital and physiciansare paid more to treat

expensive infections andcomplications

SINGLE PAYMENT


Including a Warranty for

Complications in the Bundle

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

DRG/Outlier

Complication

Lead Doc. Fee

Consultant Fee

Consultant Fee

SINGLE PAYMENT

PA

TIE

NT


Including a Warranty for

Post-Discharge Problems

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

DRG/Outlier

Complication

Lead Doc. Fee

Consultant Fee

Consultant Fee

SINGLE PAYMENT

Hospital DRG

Readmission

Lead Doc. Fee

Consultant Fee

Consultant Fee

PA

TIE

NT

30

Days Post-Discharge

90+15


“Episode” Payments Are Bundles

Over a Full Course of Treatment

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

DRG/Outlier

Complication

Lead Doc. Fee

Consultant Fee

Consultant Fee

SINGLE PAYMENT

Hospital DRG

Readmission

Lead Doc. Fee

Consultant Fee

Consultant Fee

PA

TIE

NT

30

Days Post-Discharge

90+15


APM #6:

Episode Payment for a Procedure


What If The Procedure Could Be

Done Outside the Hospital?

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

DRG/Outlier

Complication

Lead Doc. Fee

Consultant Fee

Consultant Fee

SINGLE PAYMENT

Hospital DRG

Readmission

Lead Doc. Fee

Consultant Fee

Consultant Fee

Facility Fee

Alternate Setting

Physician Fee

PA

TIE

NT

PROBLEM:No incentive to use lower-cost setting, since payer

gains all savings from lower facility fees


A Facility-Independent Episode

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

DRG/Outlier

Complication

Lead Doc. Fee

Consultant Fee

Consultant Fee

SINGLE PAYMENT

Hospital DRG

Readmission

Lead Doc. Fee

Consultant Fee

Consultant Fee

Facility Fee

Alternate Setting

Physician Fee

PA

TIE

NT

SOLUTION:Providers keep some of the

savings from movingprocedures to lower-cost settings


What if An Alternative Procedure

Would Be Better or Cheaper?

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

DRG/Outlier

Complication

Lead Doc. Fee

Consultant Fee

Consultant Fee

SINGLE PAYMENT

Hospital DRG

Readmission

Lead Doc. Fee

Consultant Fee

Consultant Fee

Facility Fee

Alternate Setting

Physician Fee

Facility Fee

Alternate Procedure

Prof. Fee

PA

TIE

NT

PROBLEM:No incentive to use

lower-cost procedures (or to use no procedure at all)


A Condition-Based

(Not Procedure-Based) Payment

Hospital DRG

Procedure

Lead Doc. Fee

Consultant Fee

Consultant Fee

Rehab

Post-Acute

Home Health

PCP

Specialist

DRG/Outlier

Complication

Lead Doc. Fee

Consultant Fee

Consultant Fee

SINGLE PAYMENT

Hospital DRG

Readmission

Lead Doc. Fee

Consultant Fee

Consultant Fee

Facility Fee

Alternate Setting

Physician Fee

Facility Fee

Alternate Procedure

Prof. Fee

PA

TIE

NT

SOLUTION:Provider keeps some of the savings from using lower-cost procedures

Accountable Medical Home

for Primary Care


Current Payment

for Primary Care

Payer

Payer

Payer

Office Visits forPreventive Services

Office Visits for Chronic Disease Issues

Tests & Procedures forPreventive Services

Tests & Procedures forChronic Disease Mgt

Tests & Procedures forAcute Issues

Office Visits forAcute Issues

CURRENTPAYMENT

PRIMARY CARE


Current Non-Payment

for Primary Care

Payer

Payer

Payer


Outreach Calls for Preventive Services


Proactive Care Mgt for Chronic Disease





CURRENTPAYMENT

NO PAYMENT

NO PAYMENT

PRIMARY CARE


What Is Not Paid For Is Exactly

What’s Needed to Improve Quality

Payer

Payer

Payer









CURRENTPAYMENT

NO PAYMENT

NO PAYMENT

PRIMARY CARE

Preventive Care Quality

Chronic Disease Mgt Quality


One Option: New CPT Fees

for Currently Unpaid Services





PROPOSEDPAYMENT

Payer

Payer

Payer

PRIMARY CARE





CPT Fee


A Better Approach:

Flexible Bundled Payment








PROPOSEDPAYMENT

Payer

Payer

Payer

MonthlyCore

Primary Care

Services Payment

PRIMARY CARE



Size of Monthly Payment Should

Differ Based on Patient Health

No Chronic Diseaseand

No Major Risk Factors

PATIENT HEALTH ISSUES

SIZ

E O

F M

ON

TH

LY

PE

R-P

AT

IEN

T P

AY

ME

NT

One Chronic Diseaseor

Major Risk Factors

Two Chronic Diseasesor One Chronic Dis.

and Major Risk Factors

Complex andHigh-RiskPatients

Small Payment forLarge # of Patients H

igh P

aym

ent

for

Sm

all

# o

f P

atients

LargerPayment

forSubset ofPatientsNeeding

MoreProactive

Care

StillLarger

Payment for

Subset of

PatientsNeeding

EvenMore

ProactiveCare


Physicians Could Bill for Codes

for Patients by Risk/Acuity Level




SIZ

E O

F M

ON

TH

LY

PE

R-P

AT

IEN

T P

AY

ME

NT


Major Risk Factors




Small Payment forLarge # of Patients H

igh P

aym

ent

for

Sm

all

# o

f P

atients

LargerPayment

forSubset ofPatientsNeeding

MoreProactive

Care

StillLarger

Payment for

Subset of

PatientsNeeding

EvenMore

ProactiveCare

Condition-BasedBillingCodexxx01





Adjust Payment Amounts Based

on Results PCPs Can Control




SIZ

E O

F M

ON

TH

LY

PE

R-P

AT

IEN

T P

AY

ME

NT


Major Risk Factors




Penalty

Bonus

• Monthly payment would be adjusted up or downbased on quality and avoidable utilization Quality of preventive care Quality of chronic disease care Avoidable ER utilization High-tech imaging Specialty referrals


The Per Patient Payment is the

Core Payment, Not an Add-On





NEW MODEL

Core Primary CareServices Payment

Performance Adjustment


This is Different Than

Current PCMH Programs







PMPM for“Care Management”

Current PCMH Model

P4P/Shared Savings





NEW MODEL




It’s Also Different from Traditional

PCP Capitation Programs

Primary CareCapitation

Current PCMH Model

P4P

PCP CapitationNEW MODEL







PMPM for“Care Management”

P4P/Shared Savings








Comparison to New CMS

CPC+ Program• Provides significant, risk-adjusted care management

payments without requiring PCPs to earn them through shared savings

• Focuses accountability on things that primary care practices can control, such as ED visits and ambulatory care sensitive hospitalizations, not spending on cancer treatment, surgical site infections, etc.

• Limits potential losses to a specific amount of payment paid in advance

Specialty Medical Homes


Phases of Care for Specialist

Diagnosis and Ongoing Mgt

Symptomsof an

Acute orChronic

Condition




Diagnosisand

TreatmentPlanning

bySpecialist

Symptomsof an

Acute orChronic

Condition

PCP Input




Diagnosisand

TreatmentPlanning

bySpecialist

Symptomsof an

Acute orChronic

Condition

No Conditionor

DifferentCondition

PCP Input




Diagnosisand

TreatmentPlanning

bySpecialist

Symptomsof an

Acute orChronic

Condition

Continued Care By Specialist

for Patients withDifficult-to-Control

Condition

No Conditionor

DifferentCondition

PCP Input




Diagnosisand

TreatmentPlanning

bySpecialist

Symptomsof an

Acute orChronic

Condition



Condition

No Conditionor

DifferentCondition

Continued Care By PCP for Patients with Well-Controlled

Condition

Specialty Consults

PCP Input


Payment Model for Specialist


Diagnosisand

TreatmentPlanning

bySpecialist

Symptomsof an

Acute orChronic

Condition



Condition

No Conditionor

DifferentCondition

Specialty Consults

PCP Input

One-TimePayment


Condition




Diagnosisand

TreatmentPlanning

bySpecialist

Symptomsof an

Acute orChronic

Condition



Condition

No Conditionor

DifferentCondition

Specialty Consults

PCP Input

One-TimePayment

Monthly Payments


Condition




Diagnosisand

TreatmentPlanning

bySpecialist

Symptomsof an

Acute orChronic

Condition



Condition

No Conditionor

DifferentCondition

Specialty Consults

PCP Input

One-TimePayment

Monthly Payments

Payments forPhone/Email Contacts


Condition




Diagnosisand

TreatmentPlanning

bySpecialist

Symptomsof an

Acute orChronic

Condition



Condition

No Conditionor

DifferentCondition

Specialty Consults

PCP Input

One-TimePayment

Monthly Payments

Payments forPhone/Email Contacts


ConditionMonthly Payments

Part 4

Transitioning to

Total Cost Management


Purchasers Want to Reduce Their

Total Spending on Healthcare

Sp

en

din

g P

er

Pati

en

t

NOTE:Graph Is notdrawnto scale

TODAY

PayerSpending

Lower

Spending

Without

Rationing

PayerSavings

FUTURE

PayerSpending

Total

Spending

for a

Group

of Patients


Traditional Actuarial Breakdowns

Aren’t Very Actionable

Sp

en

din

g P

er

Pati

en

t


TODAY

PayerSpending

Lower

Spending

Without

Rationing

Payer Savings

FUTURE

PayerSpending

Total

Spending

for a

Group

of Patients

Inpatient

Physicians

Outpatient

Labs

Other

Which categories

can be reduced?

And how wouldthat be done?


More Detailed Breakdowns By

Type of Service Don’t Help Much

Sp

en

din

g P

er

Pati

en

t


TODAY

PayerSpending

Lower

Spending

Without

Rationing

Payer Savings

FUTURE

PayerSpending

Total

Spending

for a

Group

of Patients

E&M

Tests

ER Visits

Medical Admissions

Surgeries

TestsProcedures

SNF

Home Health

Drugs

DME

Other

Which categories

can be reduced?

And how wouldthat be done?


A Better Way: Look at Patients

By Their Health Conditions..

Sp

en

din

g P

er

Pati

en

t


ChronicDiseases

Cancer

Chest Pain

Maternity

Other

Total

Spending

for a

Group

of Patients

TODAY

PayerSpending


…and Identify Avoidable Services

for Each Condition

Sp

en

din

g P

er

Pati

en

t


ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $

Total

Spending

for a

Group

of Patients

TODAY

PayerSpending


Example: Avoidable Costs for

Chronic Disease Patients

Sp

en

din

g P

er

Pati

en

t


ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $

• ER visits for exacerbations• Hospital admissions and readmissions• Amputations, blindness

Total

Spending

for a

Group

of Patients

TODAY

PayerSpending


Example: Avoidable Costs in

Diagnosis/Intervention for Chest Pain

Sp

en

din

g P

er

Pati

en

t


ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $

• Overuse of high-tech stress tests/imaging• Overuse of cardiac catheterization• Overuse of PCIs, high-priced stents


Total

Spending

for a

Group

of Patients

TODAY

PayerSpending


Example: Avoidable Costs in

Cancer Care

Sp

en

din

g P

er

Pati

en

t


ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $

• Use of unnecessarily-expensive drugs• ER visits/hospital stays for dehydration and avoidable complications

• Fruitless treatment at end of life• Late-stage cancers due to poor screening



Total

Spending

for a

Group

of Patients

TODAY

PayerSpending


Example: Avoidable Costs for

Maternity Care

Sp

en

din

g P

er

Pati

en

t


ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $



• Overuse of C-Sections• Early elective deliveries• Low birthweight due to poor prenatal care• Use of hospitals instead of birth centers



Total

Spending

for a

Group

of Patients

TODAY

PayerSpending


And Many Other OpportunitiesS

pen

din

g P

er

Pati

en

t


ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $



• Overuse of C-Sections• Early elective deliveries• Low birthweight due to poor prenatal care• Use of hospitals instead of birth centers



• Unnecessary/avoidable services

Total

Spending

for a

Group

of Patients

TODAY

PayerSpending


Only Physicians Know How to

Change Care to Reduce Costs

Sp

en

din

g P

er

Pati

en

t


Chest PainAvoidable $

ChronicDiseases

CancerAvoidable $

Avoidable $

Maternity

Avoidable $

Other

Avoidable $

Payer Savings

TODAY

PayerSpending

FUTURE

PayerSpending

ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $

Total

Spending

for a

Group

of Patients


Primary Care Can’t Do It AloneS

pen

din

g P

er

Pati

en

t



ChronicDiseases

CancerAvoidable $

Avoidable $

Maternity

Avoidable $

Other

Avoidable $

Payer Savings

TODAY

PayerSpending

FUTURE

PayerSpending

ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $

Total

Spending

for a

Group

of Patients


You Also Need the Specialists

Who Deliver the Services

Sp

en

din

g P

er

Pati

en

t



ChronicDiseases

CancerAvoidable $

Avoidable $

Maternity

Avoidable $

Other

Avoidable $

Payer Savings

TODAY

PayerSpending

FUTURE

PayerSpending

ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $

Total

Spending

for a

Group

of Patients


Allergists:

Tendency to Use Testing


Cardiology:

Tendency to Use Echo


GI: Tendency to Use

Upper GI Endoscopy


Mix of Patient Conditions Varies

(A Lot) From Payer to Payer


Purchaser and Specialty-Specific

Strategy for Reducing Spending

Sp

en

din

g P

er

Pati

en

t



ChronicDiseases

CancerAvoidable $

Avoidable $

Maternity

Avoidable $

Other

Avoidable $

Payer Savings

TODAY

PayerSpending

FUTURE

PayerSpending

ChronicDiseases

Avoidable $

Avoidable $

Cancer

Avoidable $

Chest Pain

Maternity

Avoidable $

OtherAvoidable $

Total

Spending

for a

Group

of Patients


What Kind of Data Do You Need?



• Healthcare Billings/Claims Data (Payers)– Data on (billable) services delivered– Data on payment amounts for services, if released

• It’s hard to save someone money if they won’t tell you what they’re paying now– Does not include information on unbillable services or costs– Does not include adequate information on patient characteristics





• Clinical Data (Provider EHRs)– Data on patient characteristics– Data on services– Only includes information on services patient received from the provider– Does not include information on costs or payments






• Data on the Costs of Services (Cost Accounting and Modeling)– Information on what provider pays for staff, equipment, supplies used– Need to know not just what costs are today, but how costs will change– Cost accounting helps with baseline, but analytic models also needed– Variable costs is most important information in short run






• Data on the Costs of Services (Cost Accounting and Modeling)– Information on what provider pays for staff, equipment, supplies used– Need to know not just what costs are today, but how costs will change– Cost accounting helps with baseline, but analytic models also needed– Variable costs is most important information in short run

• Data on Patient-Reported Outcomes (Surveys)– Information on benefits to patients beyond the services they received, such as

quality of life, ability to work and perform activities of daily living


Achieving Significant Savings Is

Much Easier Than It Looks…

Sp

en

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending

PayerSpending

PayerSpending

YEAR 1 YEAR 2 YEAR 3

TotalHealthcareSpending

for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


What Payers Want and Need is to

Reduce Growth in Spending

Sp

en

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending

PayerSpending

PayerSpending



for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


“Savings” Means

Slower Growth Each Year

Sp

en

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending

PayerSpending

PayerSpending



for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients

Slower-GrowingSpending

for of Patients


Additional Care Redesign Initiatives

Each Year Control the Trend

Sp

en

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending

PayerSpending

PayerSpending



for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for of Patients


for of Patients


So Significant Savings Achieved

Even Though Spending is Higher

Sp

en

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending

PayerSpending

PayerSpending



for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for of Patients


for of Patients


for of Patients


How Do You Control The Trend?S

pen

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending

PayerSpending

PayerSpending



for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for aGroup

of Patients


for of Patients


for of Patients


for of Patients


AvoidableSpending

AvoidableSpending

AvoidableSpending

Identify the Avoidable Spending..S

pen

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending

PayerSpending

PayerSpending


AvoidableSpending

NecessarySpending

NecessarySpending

NecessarySpending

NecessarySpending


AvoidableSpending

…And Reduce It Over Time…S

pen

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending


AvoidableSpending

NecessarySpending

NecessarySpending

AvoidableSpending

AvoidableSpending

NecessarySpending

NecessarySpending

PayerSpending

PayerSpending


AvoidableSpending

…While the Appropriate Spending

Can Still Increase….

Sp

en

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending


AvoidableSpending

NecessarySpending

NecessarySpending

AvoidableSpending

NecessarySpending

AvoidableSpending

NecessarySpending

PayerSpending

PayerSpending


AvoidableSpending

So Patients Are Getting Better

Care at Lower Cost

Sp

en

din

g P

er

Pati

en

t


PayerSpending

TODAY

PayerSpending


AvoidableSpending

NecessarySpending

NecessarySpending

NecessarySpending

AvoidableSpending

NecessarySpending

Avoidable $

PayerSpending

PayerSpending

Controlling Risk


To Attract Payers, New Payment

Must Be < Projected FFS Spend

COST

TIME

FFS

$

FFS

$

APM

$

Bundled

or

Condition-

Based

Payment

Level

LowerSpend

Actual Actual Proposed


…If All Goes Well, Provider’s Costs

Are Lower Than the Payment…

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

LowerSpend

LowerCosts

Actual Actual Proposed Actual

Bundled

or

Condition-

Based

Payment

Level


Profit for

Provider

...And Both the Payer and

Provider Will “Win”

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

LowerSpend

LowerCosts

WIN-

WINSavings

For Payer


Bundled

or

Condition-

Based

Payment

Level


The Risk Physicians Fear:

All Won’t Go Well (Costs Go Up)..

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

CostLowerSpend


Bundled

or

Condition-

Based

Payment

Level


…Creating a Win-Lose Situation

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

CostLowerSpend

Loss for

Provider

Savings

For Payer

WIN-

LOSE


Bundled

or

Condition-

Based

Payment

Level


Many Different Reasons Costs

May Increase Beyond Payment

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost

UnusuallyCostly Patient

Overutilizationof Services

New, High-CostTreatment

Many Avoidable Complications

Higher-SeverityPatients

Large RandomVariation

Failure to FollowGuidelines


Bundled

or

Condition-

Based

Payment

Level

LowerSpend


Physicians CAN Control Many of

the Factors Causing Higher Costs

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost








What

Physicians

CAN Control

(Performance

Risk)


Bundled

or

Condition-

Based

Payment

Level

LowerSpend


But Other Causes of Higher Costs

CANNOT Be Controlled by Doctors

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost








What

Physicians

CAN Control

(Performance

Risk)

What

Physicians

CANNOT

Control

(Insurance

Risk)


Bundled

or

Condition-

Based

Payment

Level

LowerSpend


Physicians Should NOT Be

Expected To Take Insurance Risk

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost








What

Physicians

CAN Control

(Performance

Risk)

What

Physicians

CANNOT

Control

(Insurance

Risk)


Bundled

or

Condition-

Based

Payment

Level

LowerSpend


Four Mechanisms for Separating

Insurance and Performance Risk

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost






RiskAdjustment



Outlier Pmt/Stop-Loss

Risk Exclusions

RiskCorridors

PerformanceRisk

(Provider’sResponsibility)


Bundled

or

Condition-

Based

Payment

Level

LowerSpend


Risk Exclusions

TIME

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost






RiskAdjustment




Risk Exclusions

RiskCorridors

PerformanceRisk



Bundled

or

Condition-

Based

Payment

Level

LowerSpend


Division of Financial Responsibility

(DOFR)Category of

Utilization/SpendingPhysician Accountability

Under APMPaid by Payer Without

Impact on APM

Physician Services

• All services delivered bypatient’s PCP

• All services delivered bypatient’s endocrinologist

• All diabetes-specific services delivered by other physicians

• All other services delivered by other physicians

Medications

• Diabetes-related medications@ base year prices

• Price increases in diabetes-related medications

• Cost differential of new diabetes medications with significantly improved outcomes

• Non-diabetes-related medications

ED Visits and Hospital Admits

• ED visits and hospitalizations other than trauma or oncology @ base year prices

• Price increases in hospital services

• Other ED visits and hospitalizations



(DOFR)Category of



Impact on APM

Physician Services





Medications

• Diabetes-related medications@ base year prices










(DOFR)Category of



Impact on APM

Physician Services





Medications

• Utilization of diabetes-related medications @ base year prices










(DOFR)Category of



Impact on APM

Physician Services





Medications

• Utilization of diabetes-related medications @ base year prices





• # of ED visits and hospitalizations other than trauma or oncology @ base year prices




Risk (Acuity/Severity) Adjustment

TIME

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost






RiskAdjustment




Risk Exclusions

RiskCorridors

PerformanceRisk



Bundled

or

Condition-

Based

Payment

Level

LowerSpend


Sp

en

din

g P

er

Pati

en

t

Provider 1 Provider 2

AllPatients

Risk Adjustment Applies to

the Total Patient Population


Provider 1

Sp

en

din

g P

er

Pati

en

t

Provider 2

Patients WithNo Chronic

Disease


Patients WithOne Chronic

Disease


Patients With2+ Chronic Diseases


AllPatients

Risk Adjustment Masks

Differences in Subgroups


Paym

en

t P

er

Pati

en

t

Patients WithNo Chronic

Disease

Patients WithOne Chronic

Disease

Patients With2+ Chronic Diseases

Alternative Approach:

Stratifying Payments & Measures


Outlier Payments/Stop-Loss

TIME

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost






RiskAdjustment




Risk Exclusions

RiskCorridors

PerformanceRisk



Bundled

or

Condition-

Based

Payment

Level

LowerSpend


Outlier Payment

(Individual Stop-Loss)

• Some patients are unusually expensive– Risk adjustment models/stratifications are designed to predict average costs of

groups of patients, not the exact cost of an individual patient

– Risk for even a small percentage of the costs of treating a very expensive patient can result in a large financial penalty for a physician

• Outlier payment: an additional payment from a payer to a provider to cover all or part of the higher cost of the patient’s care– A threshold is created to define when a patient is an “outlier.”

– The payer pays the physician or hospital a percentage (e.g., 80% or 100%) of the difference between the actual cost and the threshold amount

• Individual stop-loss insurance– Similar to an outlier payment, except that the provider has to pay a premium to

an insurer to be eligible to receive the stop-loss payment

• Excluding or “Winsorizing” patients in spending measures– When the physician is not directly responsible for paying for services, but is

held accountable for a measure of spending, “Winsorizing” means capping the amount included for an individual patient at a maximum amount. (The alternative is to exclude the patient from the measure denominator altogether.)


Using Risk Corridors to Share Risks

Not Captured by Risk Adjustment

TIME

COST

TIME

Costs

of

SvcsFFS

$

FFS

$

APM

$

Excess

Cost






RiskAdjustment




Risk Exclusions

RiskCorridors

PerformanceRisk



Bundled

or

Condition-

Based

Payment

Level

LowerSpend


No One Expects That the Payment

Amount Will Be Exactly Right

Actual Costof Services

Cost = Payment


PaymentAmount


Some Random Variation Will Occur

From Year to Year


Cost = Payment


PaymentAmount


Physician Practice Can Handle

Some Variation, As It Does Today


Cost = Payment

Cost=Pmt-x%


ProviderRetains100% of Savings

Cost=Pmt+x% ProviderPays

100% of Extra Cost in this

Range PaymentAmount

Risk Corridor #1

Risk Corridor #1


Payers Should Remain Responsible

for All or Part of Large Variation


Cost = Payment

Cost=Pmt-x%


ProviderRetains100% of Savings

PayerReceives

All or Part ofSavings

Cost=Pmt+x% ProviderPays

100% of Extra Cost in this

Range

PayerPays All or

Partof Excess

Cost

PaymentAmount

Risk Corridor #1

Risk Corridor #2

Risk Corridor #1

Risk Corridor #2


New APMs Can Start with

Narrow Risk Corridors


Cost = Payment

Cost=Pmt-x%


Provider Retains100% of Savings

PayerReceives

All ofSavings

Cost=Pmt+x%

PayerPays All of

Excess Cost

PaymentAmount

Risk Corridor #1

Risk Corridor #2

Risk Corridor #1

Risk Corridor #2

Provider Pays100% of Extra Cost


Expand Risk Corridors Over Time,

As Medicare Did in Part D

TIME


Use Narrow Risk Corridors for

Small Providers over Short Times

Annual

Measures

Multi-Year

Measures


Complex Risk Corridor

Arrangements Possible


Cost = Payment

Cost=Base+5%

Cost=Base+10%

Cost=Base-8%

Cost=Base-15%


EXAMPLE OF ASYMMETRIC TIERED RISK CORRIDORS

ProviderPays20%

PayerPays

80% of Extra Cost

ProviderPays

50% of Extra Cost

ProviderPays

80% of Extra Cost in this Range

ProviderRetains

100% of Savings in this Range

ProviderRetains

60% of Savings

ProviderRetains

34% of Savings

PayerPays

50% of Extra Cost

PayerPays20%

PayerReceives

40% of Savings

PayerReceives

66% of Savings

BasePaymentAmount

CREATING A PHYSICIAN-LED HEALTHCARE FUTURE Better Care … · CREATING A PHYSICIAN-LED HEALTHCARE...

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