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WIN-WIN-WIN APPROACHESTO ACCOUNTABLE CARE
How Cardiologists Can Lead the Wayto Higher-Quality, More Affordable
Health Care
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
2014 CARDIOVASCULAR SUMMIT
2© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #1:In which U.S. industries
are the key employees told that at the end of the year, they can expect to receive
a 25% pay cutregardless of how well
they’ve performed?
3© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #1:In which U.S. industries
are the key employees told that at the end of the year, they can expect to receive
a 25% pay cutregardless of how well
they’ve performed?
ANSWER:Health Care
4© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare SGR Is a Big Problem,
But So Is Lack of Annual Updates
PhysicianPractice Costs
PhysicianPaymentIncreases
If SGR CutIs Made
23% EffectiveReduction
5© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #2:In which U.S. industries
are businessesonly able to sell
their products and servicesthrough an intermediary who demands large discounts andincreases prices by 18-25%?
6© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #2:In which U.S. industries
are businessesonly able to sell
their products and servicesthrough an intermediary who demands large discounts andincreases prices by 18-25%?
ANSWER:Health Care
7© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
8© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #3:In which U.S. industries
can one set of employeesonly get a raise if other
employees take a pay cut,even when the business is
performing well?
9© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #3:In which U.S. industries
can one set of employeesonly get a raise if other
employees take a pay cut,even when the business is
performing well?
ANSWER:Health Care
10© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The SGR Also Pits Physicians
Against Each Other
PCP Fees
Specialty
Fees
PCP Fees
Specialty
Fees
Physician Payments Capped by the Sustainable Growth Rate
11© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #4:In which U.S. industries does government policyfavor large businessesover small businesses?
12© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #4:In which U.S. industries does government policyfavor large businessesover small businesses?
ANSWER:Health Care
13© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Unlike Physicians, Hospitals
Have Received Pay Increases
Physicians
Hospitals
Inflation
14© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #5:Who is to blame forthe way physicians
are paid andmicromanaged?
15© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
QUESTION #5:Who is to blame forthe way physicians
are paid andmicromanaged?
ANSWER:Physicians
16© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Blame Rests With Physicians
• Physicians haven’t defined solutions to control healthcare costs without rationing
• Physicians are seen as the drivers of higher costs
• Physicians haven’t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices
• Physicians aren’t organized to manage and deliver high-value population health care to purchasers and patients
17© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Three Paths to the Future:
Which Door Will You Choose?
TODAY
FUTURE #1
FUTURE #2
FUTURE #3
18© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:
High-Quality Care at Lower Cost
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
TODAY TOMORROW
19© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:
High-Quality Care at Lower Cost
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
TODAY TOMORROW
Where Will The Savings Come From?
20© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Purchasers & Patients Want:
High-Quality Care at Lower Cost
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
TODAY TOMORROW
Where Will The Savings Come From?
It Depends on Who’s the Last in Line
In Getting Paid
21© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Door #1:
Continuation of the Status Quo
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
TraditionalInsuranceCompany/
TPA
Savings
TODAY TOMORROW
22© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Who’s First in Line?
Health Plans
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
TraditionalInsuranceCompany/
TPA
Savings
TODAY TOMORROW
23© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Who’s Last in Line?
Physicians
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Savings
TODAY TOMORROW
24© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will Savings Come From?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Savings
TODAY TOMORROW
25© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Health Plans Voluntarily
Reduce Their Fees/Profits?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Savings
26© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Health Plans Voluntarily
Reduce Their Fees/Profits?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Savings
Not
Likely
27© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can Health Plans Cut Payments
to the Big Hospital in Town?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Savings
28© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can Health Plans Cut Payments
to the Big Hospital in Town?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Savings
Not
Likely
29© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Or Will Payers Continue Cutting
(or Not Increasing) Doctor Pay?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Savings
30© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not Just Lower Fees, But
Interference in Physician Decisions
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Savings
• Lower Fees
(“Discounts”)
• Prior Authorization
• Step Therapy
• Utilization Review
• Disease Mgt Vendors
31© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
#1 in Spending = Heart Conditions,
So Where Will the Focus Likely Be?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
32© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Will Employment by Hospitals
Protect Physicians?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
TraditionalInsuranceCompany/
TPA
SavingsHealth PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
33© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
When Health Systems Get Less,
Where Will They Make the Cuts?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
TraditionalInsuranceCompany/
TPA
Savings
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
34© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Systems Want to Ensure
They Don’t Get Cut by Payers…
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
TraditionalInsuranceCompany/
TPA
Savings
Health PlanAdmin Cost
& Profit
HealthSystem
Payments
PhysicianSalaries
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
TraditionalInsuranceCompany/
TPA
35© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
Door #2:
Hospital-Owned Health Plans
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
36© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
If Hospitals Are Now First In Line,
Where Will Savings Come From?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
37© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
Maybe Health Plan Expenses
Can Be Reduced…
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
38© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
…But Hospital Will Still Need the
Health Plan to Watch the Docs
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
39© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
HealthSystem w/InsuranceCompany
So Physicians Will Likely Still Be
Subject to Cuts and Interference
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
HospitalPayments
PhysicianPayments
Savings
Health PlanAdmin/Prof.
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
HospitalPayments
PhysicianPayments
Health PlanAdmin/Prof.
40© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s Behind Door #3?
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
Savings
41© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
Physician Leadership to
Control Both Cost & Quality
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
CostHospital
Payments
PhysicianPayments
Health PlanAdmin Cost
& Profit
Savings
42© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
Physicians Can Watch Themselves,
They Don’t Need Health Plans…
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
CostHospital
Payments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
43© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
Better Care of Patients Will Reduce
Avoidable Hospitalizations…
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
CostHospital
Payments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
Hospital
Payments
PhysicianPayments
Health PlanAdm/Profit
Savings
44© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
…Allowing Better Pay for Doctors
AND More Savings for Purchasers
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
CostHospital
Payments
PhysicianPayments
Health PlanAdmin Cost
& Profit
HospitalPayments
PhysicianPayments
Health PlanAdm/Profit
Savings
Hospital
Payments
PhysicianPayments
Health PlanAdm/Profit
Savings
Hospital
Payments
PhysicianPayments
Health PlanAdm/Profit
Savings
45© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led Health
Plans &Contracting
Door #3 = A Physician-Led
Healthcare Future
High
Costs
and
Weak
Quality
High
Quality
Care
at
Lower
Cost
HospitalPayments
PhysicianPayments
Health PlanAdmin Cost
& Profit
Savings
Hospital
Payments
PhysicianPayments
Health PlanAdm/Profit
• Significant savingsfor purchasers and patients
• Better pay for physicians
• Less spending on health planoverhead
• Less interference in physician-patient relationship
• Less spending on avoidableexpensive, risky procedures
• Better health and quality of life for patients
46© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Quality Health Plans
Run By Physician Groups
47© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Three Paths to the Future:
Which Door Will You Choose?
TODAY
HEALTH PLAN-LED
HEALTHCARE
HOSPITAL-LED
HEALTHCARE
PHYSICIAN-LED
HEALTHCARE
48© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
If Physicians Choose Door #3,
What Will They Need to Succeed?
TODAY
PHYSICIAN-LED
HEALTHCARE
49© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Since Heart Care is #1 in Spending,
Cardiology Leadership is Essential
Current
Purchaser
& Patient
Spending
High
Quality
Care
at
Lower
Cost
Savings
50© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Can a Cardiology Practice
Lower Costs & Improve Quality?
51© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Your Real Cardiology Business
is More Than Your Salary…
Cardiologist Salary
52© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And More Than Your Total
Practice Costs..
Cardiologist SalaryPractice Expenses
53© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…It’s the Tests You Order, Even If
Someone Else Does Them
Cardiologist SalaryPractice Expenses
Tests and Imaging
54© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…It’s the Procedures You Do,
And Where You Do Them
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
Tests and Imaging
55© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And the Unplanned Admissions
of Your Patients…
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Tests and Imaging
56© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Post-Acute Care Costs
After Hospital Stays…
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Tests and Imaging
57© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Unplanned Readmissions
and Repeat Procedures…
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Tests and Imaging
Readmissions
58© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And the Number and Types of
Medications You Prescribe
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
59© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
That Adds Up to a LOT of Money:
>$10,000/patient/yr in Medicare
Cardiologist Services $324
Other Physician Svcs $880
Inpatient Hospital Stays
& ER$4,255
Lab Tests & Imaging$1,416
Outpatient Procedures$1,431
Post-Acute Care$1,205
All Other Services$1,157
TOTAL AVERAGE COSTPER PATIENT (w/o Rx):
$10,667
Medicare Patients Whose CareWas Directed by a Cardiologist
in 4 Midwest States, 2010
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
Source:
Medicare
QRUR
Reports
2011
60© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only 3% of the Money Is
Going to the Cardiologist
Cardiologist Services $324
Other Physician Svcs $880
Inpatient Hospital Stays
& ER$4,255
Lab Tests & Imaging$1,416
Outpatient Procedures$1,431
Post-Acute Care$1,205
All Other Services$1,157
TOTAL AVERAGE COSTPER PATIENT (w/o Rx):
$10,667
Medicare Patients Whose CareWas Directed by a Cardiologist
in 4 Midwest States, 2010
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
$100,000 Revenuefor Cardiologist
61© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
But What the Cardiologist Does
Determines Most of the Other 97%
Cardiologist Services $324
Other Physician Svcs $880
Inpatient Hospital Stays
& ER$4,255
Lab Tests & Imaging$1,416
Outpatient Procedures$1,431
Post-Acute Care$1,205
All Other Services$1,157
TOTAL AVERAGE COSTPER PATIENT (w/o Rx):
$10,667
Medicare Patients Whose CareWas Directed by a Cardiologist
in 4 Midwest States, 2010
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
$100,000 Revenuefor Cardiologist
$3,200,000
in Total
Non-Pharmacy
Medicare
Expenditures
Prescribed,
Ordered,
or
Influenced by
Cardiologist
62© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can Cardiologists Earn More AND
Give Medicare Savings?
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
$100,000 Revenuefor Cardiologist
$3,200,000
in Total
Non-Pharmacy
Medicare
Expenditures
Prescribed,
Ordered,
or
Influenced by
Cardiologist
3% Savings for Medicare
10% Increase in Cardiologist Revenue
63© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Yes: All You Need is a Small
Reduction in All the Other Costs
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
$100,000 Revenuefor Cardiologist
$3,200,000
in Total
Non-Pharmacy
Medicare
Expenditures
Prescribed,
Ordered,
or
Influenced by
Cardiologist
3% Savings for Medicare
10% Increase in Cardiologist Revenue
3.4% Reductionin Total
Non-PharmacyMedicare
Expenditures
64© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Cardiologists Can
Reduce Costs Without Rationing
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
65© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Cardiologists Can
Reduce Costs Without Rationing
• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
66© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Cardiologists Can
Reduce Costs Without Rationing
• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities
• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
67© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Cardiologists Can
Reduce Costs Without Rationing
• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities
• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
68© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Cardiologists Can
Reduce Costs Without Rationing
• Less use of expensive inpatient rehab• More in-home services
• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities
• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
69© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Cardiologists Can
Reduce Costs Without Rationing
• Better post-discharge care management• Fewer complications from procedures
• Less use of expensive inpatient rehab• More in-home services
• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities
• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
70© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Cardiologists Can
Reduce Costs Without Rationing
• Use of lower-cost medications• Avoiding unnecessary medications
• Better post-discharge care management• Fewer complications from procedures
• Less use of expensive inpatient rehab• More in-home services
• Fewer unnecessary procedures• Reducing the cost of procedures• More procedures in outpatient settings• Fewer ER visits for chronic disease• Fewer admissions for chronic disease• Z• Fewer unnecessary procedures• Use of lower-cost procedures• Reducing the cost of procedures• Use of lower-cost facilities
• Fewer unnecessary tests• Use of lower-cost tests• Use of lower cost testing facilities
Cardiologist SalaryPractice Expenses
Outpatient Procedures
Inpatient Procedures
and Admissions of
Chronic Disease
Patients
Post-Acute Care
Medications
Tests and Imaging
Readmissions
71© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Cardiologists Agree That Many
Tests/Procedures Are Overused
72© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Utilization Rates Vary
Dramatically Across Regions
73© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
FFS Barriers for Physicians in
Reducing Healthcare Spending• What if Cardiologists Reduced Unnecessary Imaging and Used
Lower-Cost Imaging Tests for Patients with Stable Angina?– Medicare and commercial payers would get a lot of savings– Cardiologists would get less revenue– Congress/CMS would still freeze or cut physicians’ payments
• What if Cardiologists Increased the Use of Medication Therapy and Reduced the Number of PCIs for Patients with Stable Angina?– Medicare and commercial payers would get a lot of savings– Cardiologists would get a lot less revenue– Hospitals would get a lot less revenue– Congress/CMS would still freeze or cut physicians’ payments
• What if Cardiologists Improved Care Management of CHF Patients and Reduced Hospital Admissions and Readmissions?– Medicare and commercial payers would get a lot of savings– Cardiologists wouldn’t be paid for the expanded care management services– Hospitals would get a lot less revenue– Congress/CMS would still freeze or cut physicians’ payments
74© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Don’t Need Incentives,
They Need Fewer Barriers
FFS•No payment for services that will benefit patients
•Lower revenues from reducing avoidable costs
75© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most “Payment Reforms”
Don’t Fix The Problems with FFS
FFS•No payment for services that will benefit patients
•Lower revenues from reducing avoidable costs
FFS
Shared Savings
Shared Savings
FFS
P4P
FFS
PMPM
76© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good
Alternatives to Fee for Service
BUILDING
BLOCKS HOW IT WORKS
Bundled
Payment
Single payment to 2+
providers who are now
paid separately (e.g.,
hospital+physician)
77© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good
Alternatives to Fee for Service
BUILDING
BLOCKS HOW IT WORKS
Bundled
Payment
Single payment to 2+
providers who are now
paid separately (e.g.,
hospital+physician)
Warrantied
Payment
Higher payment for
quality care, no extra
payment for correcting
preventable errors and
complications
78© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fortunately, There Are Good
Alternatives to Fee for Service
BUILDING
BLOCKS HOW IT WORKS
Bundled
Payment
Single payment to 2+
providers who are now
paid separately (e.g.,
hospital+physician)
Warrantied
Payment
Higher payment for
quality care, no extra
payment for correcting
preventable errors and
complications
Condition-
Based
Payment
Payment based on the
patient’s condition,
rather than on the
procedure used
79© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Accountable Payment Models
Allow Win-Win-Win Approaches
BUILDING
BLOCKS HOW IT WORKS
HOW PHYSICIANS
AND HOSPITALS
CAN BENEFIT
HOW PAYERS
CAN BENEFIT
Bundled
Payment
Single payment to 2+
providers who are now
paid separately (e.g.,
hospital+physician)
Higher payment for
physicians if they
reduce costs paid by
hospitals
Physician and hospital
offer a lower total price
to Medicare or health
plan than today
Warrantied
Payment
Higher payment for
quality care, no extra
payment for correcting
preventable errors and
complications
Higher payment for
physicians and
hospitals with low
rates of infections
and complications
Medicare or health
plan no longer pays
more for high rates of
infections or
complications
Condition-
Based
Payment
Payment based on the
patient’s condition,
rather than on the
procedure used
No loss of payment
for physicians and
hospitals using fewer
tests and procedures
Medicare or health
plan no longer pays
more for unnecessary
procedures
80© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Diagnosis/Treatment of
Chest Pain/Stable Angina
Patientwith
StableAngina
81© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
FFS Rewards
More and Higher-Cost Testing…
MoreExpensive
Testing MEDICARE/
HEALTH
PLAN
LessExpensive
Testing
Patientwith
StableAngina
Lower
Payment
Higher
Payment
82© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…and FFS Rewards More and
Higher-Cost Procedures
MoreExpensive
Testing
PCI
MEDICARE/
HEALTH
PLAN
LessExpensive
Testing
Patientwith
StableAngina
MedicalManagement Lower
Payment
Higher
Payment
83© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Instead, Pay to Manage the
Patient’s Condition…
MoreExpensive
Testing
PCI
MEDICARE/
HEALTH
PLAN
LessExpensive
Testing
Patientwith
StableAngina
MedicalManagement
Condition-Based Payment
Single
Payment
84© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Enable More Cost-Effective
Care Without Loss of Revenue
MoreExpensive
Testing
PCI
MEDICARE/
HEALTH
PLAN
LessExpensive
Testing
Patientwith
StableAngina
MedicalManagement
Condition-Based Payment
Single
Payment
85© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Would Be Risk-Adjusted
Based on Patient Conditions
MoreExpensive
TestingPCI
MedicalManagement
MEDICARE/
HEALTH
PLAN
LessExpensive
Testing
Patientwith
StableAngina
PCI
MedicalManagement
High Risk of AMI
Low Risk of AMI
LessExpensive
Testing
MoreExpensive
Testing
Lower
Payment
Higher
Payment
86© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
ACC Appropriate Use Criteria
Enable Effective Risk Adjustment
MoreExpensive
TestingPCI
MedicalManagement
MEDICARE/
HEALTH
PLAN
LessExpensive
Testing
Patientwith
StableAngina
PCI
MedicalManagement
High Risk of AMI
Low Risk of AMI
LessExpensive
Testing
MoreExpensive
Testing
ACCAUCVia
FOCUS
Lower
Payment
Higher
Payment
87© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
ACC SMARTCare Project Is An
Opportunity to Implement This
MoreExpensive
TestingPCI
MedicalManagement
MEDICARE/
HEALTH
PLAN
Lower
PaymentLess
ExpensiveTesting
Higher
Payment
Patientwith
StableAngina
PCI
MedicalManagement
High Risk of AMI
Low Risk of AMI
LessExpensive
Testing
MoreExpensive
Testing
ACCAUCVia
FOCUS
SMARTCare
88© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Reality Is More Complex,
But the Same Principles Still Apply
89© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Appropriate Use w/o Pmt Reform
= Financial Losses for Physicians
MoreExpensive
Testing
PCI
MEDICARE/
HEALTH
PLAN
LessExpensive
Testing
Patientwith
StableAngina
MedicalManagement Lower
Payment
Higher
Payment
ACCAUCVia
FOCUS
Doesn’t Lower Utilization
and Lower Spending
Have to Result in Losses for
Physicians and Hospitals?
91© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing
Avoidable ProceduresTODAY
$/Patient # Pts Total $
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $2,415,000
Optional Procedurefor a Condition
• Physician evaluates 300 patients/year
• Physician performsprocedure on 2/3 ofevaluated patients
• Up to 10% of proceduresmay be avoidablethrough patient choiceor alternative treatment
92© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money Today
Is NOT Going to the PhysicianTODAY
$/Patient # Pts Total $
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $2,415,000
Physician Payment is
9% of Total Spending
93© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Typical Health Plan Approach:
Prior Auth/Utilization ControlsTODAY w/ UTILIZATION CTRL
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $150 300 $45,000
Procedures $850 200 $170,000 $850 180 $153,000
Subtotal $215,000 $198,000
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000
Total Pmt/Cost $2,415,000 $2,178,000 -10%
94© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under FFS, Payer Wins,
Physicians and Hospitals LoseTODAY w/ UTILIZATION CTRL
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $150 300 $45,000
Procedures $850 200 $170,000 $850 180 $153,000
Subtotal $215,000 $198,000 -8%
Hospital Pmt $11,000 200 $2,200,000 $11,000 180 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,178,000 -10%
95© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Is There a Better Way?
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 ? ? ?
Procedures $850 200 $170,000 ? ? ?
Subtotal $215,000 ?
? ? ?
Hospital Pmt $11,000 200 $2,200,000 ? ? ?
Total Pmt/Cost $2,415,000 ? ? ?
96© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Way: Pay for Care of the
Condition, Not for the ProcedureTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
97© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Can Maintain Practice
Revenue With Fewer ProceduresTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
98© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Flexible Payment for Condition
Allows Patient-Centered CareTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt $11,000 200 $2,200,000
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
Payment for Condition Management• Physician can engage in shared decision making process with patients• Physician can determine if procedure is needed with no impact on revenue
99© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Win for Physician, Win for Payer,
But Where Do Savings Come From?TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt $11,000 200 $2,200,000 ?
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
100© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Do Hospitals Have to Lose In Order
for Physicians To Win?TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
Physician Wins
Payer Wins
Hospital Loses
101© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Should Matter to Hospitals is
Margin, Not Revenues (Volume)
102© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hospital Costs Are Not
Proportional to Utilization
$800$820$840$860$880$900$920$940$960$980$1,000
81
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98
99
100
$0
00
#Patients
Cost & Revenue Changes With Fewer Patients
.
Costs
20% reduction in volume
7% reduction
in cost
103© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Reductions in Utilization Reduce
Revenues More Than Costs
$800$820$840$860$880$900$920$940$960$980$1,000
81
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99
100
$0
00
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
20% reduction in volume
7% reduction
in cost
20% reduction
in revenue
104© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Causing Negative Margins
for Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
81
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90
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99
100
$0
00
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Will Be
Underpaying For
Care If
Admissions
and Procedures
are Reduced
105© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
But Spending Can Be Reduced
Without Bankrupting Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
81
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99
100
$0
00
#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Can
Still Save $
Without Causing
Negative Margins
for Hospital
106© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Adequacy of Payment Depends On
Fixed/Variable Costs & MarginsTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
107© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Now, if the Number of Procedures
is Reduced…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
108© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Fixed Costs Will Remain the
Same (in the Short Run)…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
109© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Variable Costs Will Go Down in
Proportion to Procedures…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $3,300 $594,000 -10%
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
110© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s Left for Margin From the
Hospital’s Share of Revenue?TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
111© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Hospital Is Making More Money
With Less Revenue!TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $594,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
112© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
I.e., Win-Win-Win for
Physician, Hospital, and PayerTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 -0%
Variable Costs $3,300 30% $660,000 -10%
Margin $550 5% $110,000 $113,000 +3%
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
Physician Wins
Payer Wins
Hospital Wins
113© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Happens If You Can Reduce
Avoidable Procedures Even More?TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180 160
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180 160 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
114© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Budget Is the Same, Because
It’s Not Based on # of ProceduresTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 160
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000
Variable Costs $3,300 30% $660,000
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 160 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
115© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Hospital’s Margin Improves
With Reduced Variable CostsTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 160
Subtotal $215,000 $222,000 +3%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000 -0%
Variable Costs $3,300 30% $660,000 $528,000 -20%
Margin $550 5% $110,000 $179,000 +63%
Subtotal $11,000 200 $2,200,000 160 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000 $7,809 300 $2,359,000 -2%
116© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Who Ever Heard of Giving a
Hospital a Budget?
117© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
If The Physician Can Reduce the
Hospital’s Costs Per Procedure….TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000
Procedures $850 200 $170,000
Subtotal $215,000
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000 -46%
Margin $550 5% $110,000
Subtotal $11,000 200 $2,200,000 180 $2,137,000 -3%
Total Pmt/Cost $8,050 300 $2,415,000
118© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Everyone Can Win Even More
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $276,000 +28%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $2,000 $360,000
Margin $550 5% $110,000 $121,000 +10%
Subtotal $11,000 200 $2,200,000 180 $1,911,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,290 300 $2,187,000 -9%
119© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
$2,200 Variation in Average Cost of
Drug-Eluting Stents in CA Hospitals
Source: Coronary Angioplasty with Drug Eluting Stents: Device Costs, Hospital
Costs, and Insurance Payments, Emma L. Dolan and James C. Robinson
Berkeley Center for Health Technology, September 2010
120© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
$16,000 Variation in Avg Costs of
Defibrillators Across CA Hospitals
Source: Pacemaker and Implantable Cardioverter-Defibrillator Implant Procedures in California Hospitals,
James C. Robinson and Emma L. Dolan, Berkeley Center for Health Technology, 2010
121© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not Just Devices: Other Savings
Opportunities From Bundling• Better scheduling of scarce resources (e.g., surgery suites) to
reduce both underutilization & overtime
• Coordination among multiple physicians and departments to
avoid duplication and conflicts in scheduling
• Standardization of equipment and supplies to facilitate bulk
purchasing
• Less wastage of expensive supplies
• Reduced length of stay
• Etc.
122© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Total Hospital Margins Depend on
High-Margin Services
Profit
Loss
Profit
Profit
Loss
Loss
123© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Commercial Rates Make Up for
Losses on Other Patients
Profit
Profit
Loss
Loss
Loss
124© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Starting With the Earlier Example
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $276,000 +28%
Hospital Pmt
Fixed Costs $7,150 65% $1,430,000 $1,430,000
Variable Costs $3,300 30% $660,000 $360,000
Margin $550 5% $110,000 $121,000 +10%
Subtotal $11,000 200 $2,200,000 180 $1,911,000 -13%
Total Pmt/Cost $8,050 300 $2,415,000 $7,290 300 $2,187,000 -9%
125© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What if This is a VERY High
Margin Procedure for the Hospital?TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $276,000 +28%
Hospital Pmt
Fixed Costs $7,150 48% $1,430,000
Variable Costs $3,300 22% $660,000
Margin $4,550 30% $910,000
Subtotal $15,000 200 $3,000,000
Total Pmt/Cost $10,716 300 $3,215,000
126© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Cover Fixed Costs, Reduce Variable
Costs, and Preserve/Improve MarginTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 $350 300 $105,000
Procedures $850 200 $170,000 $950 180 $171,000
Subtotal $215,000 $276,000 +28%
Hospital Pmt
Fixed Costs $7,150 48% $1,430,000 $1,430,000 0%
Variable Costs $3,300 22% $660,000 $2,000 $360,000 -45%
Margin $4,550 30% $910,000 $955,500 +5%
Subtotal $15,000 200 $3,000,000 180 $2,745,500 -8%
Total Pmt/Cost $10,716 300 $3,215,000
127© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Smaller % Savings on Higher Price
= Bigger $ SavingsTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Evaluations $150 300 $45,000 300
Procedures $850 200 $170,000 180
Subtotal $215,000 $276,000 +28%
Hospital Pmt
Fixed Costs $7,150 48% $1,430,000 $1,430,000
Variable Costs $3,300 22% $660,000 $2,000 $360,000
Margin $4,550 30% $910,000 $955,500 +5%
Subtotal $15,000 200 $3,000,000 180 $2,745,500 -8%
Total Pmt/Cost $10,716 300 $3,215,000 $10,072 300 $3,021,500 -6%
Physician Wins
Payer Wins
Hospital Wins
128© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Does Condition-Based
Payment Work in Chronic Disease?
129© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
FFS Doesn’t Pay for Care Mgt,
But Pays for ER Visits & Admits
CareManagement
ER Visits/Hospital
Admissions
AvoidExacerbations
MEDICARE/
HEALTH
PLAN
PatientwithCHF
130© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment
Rewards Better Care Mgt
CareManagement
ER Visits/Hospital
Admissions
AvoidExacerbations
MEDICARE/
HEALTH
PLANSingle
Payment
PatientwithCHF
Condition-Based Payment
131© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment
Should Be Risk-Adjusted
MoreExtensive
CareManagement
ER Visits/Hospital
Admissions
AvoidExacerbations
MEDICARE/
HEALTH
PLAN
Lower
Payment
LessExtensiveCare Mgt
Higher
Payment
PatientwithCHF
ER Visits/Hospital Adm.
AvoidExacerbations
Higher Risk Patients
Lower Risk Patients
132© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Win-Win-Win in
Chronic Disease Management, TooTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%
Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%
Margin $300 3% $75,000 $82,500 +10%
Subtotal $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Pmt/Cost $5,280 500 $2,640,000 500 $2,510,000 -5%
Physician Wins
Payer Wins
Hospital Wins
See Example
in the
Online Appendix
133© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Develop
Win-Win-Win Solutions?
134© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Develop
Win-Win-Win Solutions?1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
135© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Develop
Win-Win-Win Solutions?1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?
136© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Develop
Win-Win-Win Solutions?1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?
3. Designing a Payment Model That Supports Change– Flexibility to change the way care is delivered– Accountability for costs and quality/outcomes related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk
137© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Develop
Win-Win-Win Solutions?1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?
3. Designing a Payment Model That Supports Change– Flexibility to change the way care is delivered– Accountability for costs and quality/outcomes related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk
4. Designing an Appropriate Internal Compensation System– Changing payment to the provider organization does not
automatically change compensation to physicians and hospitals
138© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Develop
Win-Win-Win Solutions?1. Defining the Change in Care Delivery
– How can care be redesigned to improve quality and reduce costs?
2. Analyzing Expected Costs and Savings– What will there be less of, and how much does that save?– What will there be more of, and how much does that cost?– Will the savings offset the costs on average?
3. Designing a Payment Model That Supports Change– Flexibility to change the way care is delivered– Accountability for costs and quality/outcomes related to care– Adequate payment to cover lowest-achievable costs– Protection for the provider from insurance risk
4. Designing an Appropriate Internal Compensation System– Changing payment to the provider organization does not
automatically change compensation to physicians and hospitals
5. Getting Payers to Use the Payment Model
139© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Major Barrier: Gaining Support
from a Critical Mass of Payers
Health Plan
Provider
Health Plan Health Plan
Patient Patient Patient
Provider is only compensated for changed practices
for the subset of patients covered by participating payers
Better
Payment
System
Current
Payment
System Current
Payment
System
140© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
For Most Employees, the Employer
is the Insurer, Not a Health Plan
Source:
Employer
Health
Benefits
2012 Annual
Survey.
The Kaiser
Family
Foundation
and Health
Research
and
Educational
Trust
60% inSelf-
FundedPlans
141© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
For Self-Funded Employers, The
Health Plan is Just a Pass Through
Self-Funded
PurchasersProviders
ASOHealth Plan(No Risk)
Provider Claims
Purchaser Payment
142© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Little Incentive for Health Plans to
Support Payment Reforms
True Payment Reform Means:• Health plan incurs the costs of
implementing new payment models• Purchaser gains all the savings from
reduced utilization and spending(because all claims are passed through)
Self-Funded
PurchasersProviders
ASOHealth Plan(No Risk)
Provider Claims
Purchaser Payment
143© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Approach:
Purchaser/Provider Partnerships
Self-Funded
Purchasers
ProvidersWilling to ManageCosts
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
Provider “wins” if:
• Patients stay healthy and need less care
• Purchaser pays provider adequately tomanage care efficiently
Purchasers and Patients “win” if:
• Providers reduce purchasers’ costs
• Patients stay healthy and have lower cost-sharing
144© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Plan Implements Changes
Purchasers/Providers Agree On
Self-Funded
Purchasers
ProvidersWilling toManageCosts
ASOHealth Plan(No Risk) Implementation
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
145© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What About Employers/ Individuals
With Traditional Health Insurance?
FullyInsured
Purchasers(No Risk)
Providers
HealthInsurance
Plan(Risk)
146© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Insurance Increasingly
Makes the Patient the Purchaser
FullyInsured
Purchasers(No Risk)
Providers
HealthInsurance
Plan(Risk)
Memberswith High
Deductibles
Premium
Out-of-Pocket
Paymentsfor
Many Testsand
Procedures
Payments for Highest-Cost
Procedures and Sickest Patients
147© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
So It’s the Patient Who Has to
Pay for Value, Not the Health Plan
Providers
Memberswith High
Deductibles
BetterPayment
Model
HigherQuality
Care
FullyInsured
Purchasers(No Risk)
HealthInsurance
Plan(Risk)
Premium
148© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Reference Pricing Does Same for
Higher-Priced Procedures
FullyInsured
Purchasers(No Risk)
Highest-Value
Providers
HealthInsurance
Plan(Risk)
Memberswith Cost
Sharing
Premium Reference Pricing
Lowest-Value
Providers
LowCost-
Sharing
HighCost-
Sharing
How Do You Create a Direct Contracting Relationship
With a Purchaser?
150© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Purchaser Wants Lower
Spending Without Rationing
Sp
en
din
g P
er
Pati
en
t
NOTE:Graph Is notdrawnto scale
TODAY
PurchaserSpending
TOMORROW
PurchaserSpending
TotalHealthcareSpending
forthe
Purchaser’sPatients
LowerHealthcareSpendingWithout
Rationing
PurchaserSavings
151© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Proposal to Improve Heart Care
Spending Will Be of Great Interest...
Sp
en
din
g P
er
Pati
en
t
NOTE:Graph Is notdrawnto scale
TODAY
PurchaserSpending
TOMORROW
HeartConditions
Avoidable $Avoidable $
HeartConditions
PurchaserSpending
TotalHealthcareSpending
forthe
Purchaser’sPatients
LowerHealthcareSpendingWithout
Rationing
PurchaserSavings
152© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
But Purchasers Prefer to Control
All/Most Spending, Not Just Some
Sp
en
din
g P
er
Pati
en
t
NOTE:Graph Is notdrawnto scale
TODAY
PurchaserSpending
TOMORROW
HeartConditions
Avoidable $Pregnancy
Avoidable $
Diabetes
Avoidable $
Avoidable $
HeartConditions
DiabetesAvoidable $
Avoidable $
Pregnancy
Bones/Joints
Avoidable $
Bones/Joints
Avoidable $
OtherAvoidable $
Other
Avoidable $
PurchaserSpending
TotalHealthcareSpending
forthe
Purchaser’sPatients
LowerHealthcareSpendingWithout
Rationing
PurchaserSavings
153© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
That’s Why There’s Interest in
Accountable Care Organizations
Sp
en
din
g P
er
Pati
en
t
NOTE:Graph Is notdrawnto scale
TODAY
PurchaserSpending
TOMORROW
HeartConditions
Avoidable $Pregnancy
Avoidable $
Diabetes
Avoidable $
Avoidable $
HeartConditions
DiabetesAvoidable $
Avoidable $
Pregnancy
Bones/Joints
Avoidable $
Bones/Joints
Avoidable $
OtherAvoidable $
Other
Avoidable $
PurchaserSpending
TotalHealthcareSpending
forthe
Purchaser’sPatients
LowerHealthcareSpendingWithout
Rationing
PurchaserSavings
ACO
How Does Cardiology
Fit Into
Accountable Care Organizations?
155© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Goal of the ACO: Improve Value in
All Aspects of Patient Care
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
156© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Each Patient Should Choose &
Use a Primary Care Practice…
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
157© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
…Which Takes Accountability for
What PCPs Can Control/Influence
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
AccountableMedical
Home Accountability for:• Avoidable ER Visits
•Avoidable Hospitalizations
•Unnecessary Tests
•Unnecessary Referrals
158© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
…With a Medical Neighborhood
to Consult With on Complex Cases
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
AccountableMedical
Home
Endocrinology,
Cardiology,
Psychiatry
AccountableMedicalNeighborhood
Accountability for:
•Unnecessary Tests
•Unnecessary Referrals
•Co-Managed Outcomes
159© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
..And Specialists Accountable for
the Conditions They Manage
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Orthopedic
Group
OB/GYN
Group
Cardiology
GroupHeart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,
Cardiology,
Psychiatry
AccountableMedicalNeighborhood
Accountability for:
•Unnecessary Tests
•Unnecessary Procedures
•Infections, Complications
160© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
That’s Building the ACO
from the Bottom Up
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Orthopedic
Group
OB/GYN
Group
Cardiology
GroupHeart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,
Cardiology,
Psychiatry
AccountableMedicalNeighborhood
ACO
Accountable PaymentModels
161© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
Shared SavingsPayment
Primary
Care
ACO
Orthopedics OB/GYNCardiology
Most ACOs Today
Aren’t Truly Reinventing Care
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Fee-for-ServicePayment
Expensive IT Systems
Psych.,
Endoc.
Nurse Care Managers
162© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE/HEALTH PLAN
A True ACO Can Take a Global
Payment And Make It Work
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
ACO
Orthopedic
Group
OB/GYN
Group
Cardiology
GroupHeart Episode/Condition Pmt
Back Episode/Condition Pmt
PregnancyManagement Pmt
AccountableMedical
Home
Endocrinology,
Cardiology,
Psychiatry
Risk-AdjustedGlobal Payment
AccountableMedicalNeighborhood
163© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: BCBS MA
Alternative Quality Contract• Single payment for all costs of care for a population of patients
– Adjusted up/down annually based on severity of patient conditions
– Initial payment set based on past expenditures, not arbitrary estimates
– Provides flexibility to pay for new/different services
– Bonus paid for high quality care
• Five-year contract – Savings for payer achieved by controlling increases in costs
– Allows provider to reap returns on investment in preventive care,
infrastructure
• Broad participation– 14 physician groups/health systems participating with over 400,000
patients, including one primary care IPA with 72 physicians
• Positive two year results– Higher ambulatory care quality than non-AQC practices, better patient
outcomes, lower readmission rates and ER utilization, lower costshttp://www.bluecrossma.com/visitor/about-us/making-quality-health-care-affordable.html
164© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
You Don’t Need To Be Part of a
Hospital to Manage Global Payment
• Small Primary Care Practices Managing Global Payments– Physician Health Partners (PHP) in Denver, CO is a management services
organization that supports four separate IPAs (median size: 3 MDs/practice).
PHP accepts capitated risk-based contracts on behalf of the IPAs with both
Medicare and commercial HMOs. www.phpmcs.com
• Independent PCPs & Specialists Managing Global Payments– Northwest Physicians Network (NPN) in Tacoma, WA is an IPA with 109 PCPs
and 345 specialists in 165 practices (average size: 2.4 MDs/practice).
NPN accepts full or partial risk capitation contracts, operates its own Medicare
Advantage plan, and does third party administration for self-insured
businesses. www.npnwa.net
• 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
165© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Need Protections From
Insurance Risk • Two Major Types of Risk
– Insurance Risk: Whether patients will have a health condition• The payer/purchaser pays for this today, and should continue to do so
– Performance Risk: How much it costs to treat that health condition• The payer/purchaser pays for this today, but the provider can control it
• How Do You Separate Insurance & Performance Risk?
– Risk/severity adjustment of payment
– Risk corridors in case costs were mis-estimated
– Outlier payments for unusually expensive patients
– Risk exclusions for some patient populations or situations where costs
can’t reasonably be controlled by the physician or hospital
How Many Patients
Do You Need to
(Successfully)
Manage Total Risk?
167© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Companies With <1,000 Workers
Take Total Healthcare Cost Risk
Sources:
Employer
Health
Benefits
2012 Annual
Survey.
The Kaiser
Family
Foundation
and Health
Research
and
Educational
Trust;
State-Level
Trends in
Employer-
Sponsored
Health
Insurance,
April 2013.
State Health
Access Data
Assistance
Center and
Robert
Wood
Johnson
Foundation
Fewer
employees
than typical
physician
practice panel
size
168© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Keys to Managing Risk
• How Do Small Employers Manage Self-Insurance Risk?
– They know who their employees are and can estimate spending
– They start with what they spent last year and try to control growth
– They have reserves to cover year-to-year variation
– They purchase stop-loss insurance to cover unusually expensive cases
169© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Keys to Managing Risk
• How Do Small Employers Manage Self-Insurance Risk?
– They know who their employees are and can estimate spending
– They start with what they spent last year and try to control growth
– They have reserves to cover year-to-year variation
– They purchase stop-loss insurance to cover unusually expensive cases
• How Would Physician Practices & Hospitals Manage Risk?
– They need to know who their patients are in order to project spending
– They need to start with last year’s payments and control growth
– They need some reserves to cover year-to-year variation
– They need to purchase stop-loss insurance to cover unusually
expensive cases
170© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Building the Capabilities to Manage
Accountable Payment Models
CAPABILITY BARRIER SOLUTIONS
171© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Building the Capabilities to Manage
Accountable Payment Models
CAPABILITY BARRIER SOLUTIONS1. Know who your
patients arePPO health plans don’t require patients to designate PCPs or use a consistent set of physicians or hospitals for care
Redesign care to be sufficiently patient-friendly that patients will want to have physicians/hospitals coordinate their care
172© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Building the Capabilities to Manage
Accountable Payment Models
CAPABILITY BARRIER SOLUTIONS1. Know who your
patients arePPO health plans don’t require patients to designate PCPs or use a consistent set of physicians or hospitals for care
Redesign care to be sufficiently patient-friendly that patients will want to have physicians/hospitals coordinate their care
2. Start with last year’s spending and control growth
Physicians and hospitals don’t have data on past spending in order to identify savings opportunities
Ask payers for their data and engage all specialties in finding ways to redesign care
173© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Building the Capabilities to Manage
Accountable Payment Models
CAPABILITY BARRIER SOLUTIONS1. Know who your
patients arePPO health plans don’t require patients to designate PCPs or use a consistent set of physicians or hospitals for care
Redesign care to be sufficiently patient-friendly that patients will want to have physicians/hospitals coordinate their care
2. Start with last year’s spending and control growth
Physicians and hospitals don’t have data on past spending in order to identify savings opportunities
Ask payers for their data and engage all specialties in finding ways to redesign care
3. Have reserves to cover year-to-year variation
Physician practices don’t have retained earnings
Hospitals may have reserves committed to debt
Begin setting aside revenues to build reserves
Transition to higher levels of risk over time
174© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Building the Capabilities to Manage
Accountable Payment Models
CAPABILITY BARRIER SOLUTIONS1. Know who your
patients arePPO health plans don’t require patients to designate PCPs or use a consistent set of physicians or hospitals for care
Redesign care to be sufficiently patient-friendly that patients will want to have physicians/hospitals coordinate their care
2. Start with last year’s spending and control growth
Physicians and hospitals don’t have data on past spending in order to identify savings opportunities
Ask payers for their data and engage all specialties in finding ways to redesign care
3. Have reserves to cover year-to-year variation
Physician practices don’t have retained earnings
Hospitals may have reserves committed to debt
Begin setting aside revenues to build reserves
Transition to higher levels of risk over time
4. Purchase stop-loss insurance to cover unusually expensivecases
None – insurancecompanies offer this and many capitated providers buy it
Factor the cost of stop-loss insurance into costs of managing care for patients
This All Sounds Really Hard
Can’t We Just Keep Doing
What We’re Doing Today
Until We Retire?
This All Sounds Really Hard
177© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Opportunities to Reduce Costs
Without Rationing Are Widely Known
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
178© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Question is: How Will
Purchasers Get The Savings?
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PURCHASER
?
179© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Payer-Driven Approach
to Achieving Savings (Door #1)
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PURCHASER
Physician P4P
High
Deductibles
Narrow
Networks
Prior
Authorization
Tiering on
Cost
Readmission
Penalty
Managed Fee-for-Service
180© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Physician-Driven Approach
to Achieving Savings (Door #3)
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PURCHASER
Coordinated
Care/
Accountable
Care
Organization
Global Pmt/Budget
181© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Very Different Models…
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PURCHASER
Coordinated
Care/
Accountable
Care
Organization
Physician P4P
High
Deductibles
Narrow
Networks
Prior
Authorization
Tiering on
Cost
Readmission
Penalty
Managed Fee-for-Service Global Pmt/Budget
182© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Very Different Impacts
on Physicians and Hospitals
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/Hospital
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
183© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Six Steps You Can Take Now
Toward a Physician-Led Future1. Tell the ACC Leadership that developing and implementing
accountable payment models should be a priority for the College.
2. Call your Congressmen/Senators and tell them that you and other physicians will take responsibility for controlling healthcare costs, but you need appropriate Medicare payment models that support them, not more P4P programs.
3. Meet with the major employers in your community and tell them you will help them control cardiac care costs for their employees if they will create better payment systems for physicians and better benefit designs for their employees.
4. Analyze your own data and data from employers to identify opportunities for reducing utilization and costs and develop the business case for changes in delivery and payment.
5. Meet with the finance staff from your hospital and the testing facilities in the community to determine the true costs of delivering tests and procedures at lower volumes.
6. Meet with physicians from other specialties to develop the business plan for a true, physician-led ACO that can deliver high-quality, coordinated, efficient care to patients.
184© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Learn More About Win-Win-Win
Payment and Delivery Reform
Center for Healthcare Quality and Payment Reformwww.PaymentReform.org
Today’s Slides:
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
Miller.Harold@GMail.com
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org
www.chqpr.org/downloads/Miller-CVSummit2014.pdf
or look in “What’s New” at www.paymentreform.org
186© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
APPENDICES
• Patient Role and Accountability
• How Condition-Based Payment Would Work for
Chronic Disease Management
• Protecting Against Inappropriate Risk in a Multi-Year Contract
• Why Shared Savings Isn’t Effective Payment Reform
APPENDIX
Patient Role and Accountability
188© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s the Patient’s
Role and Accountability?
ProviderPatient
Payment
System
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded services
• Deliver services efficiently
• Coordinate services with other
providers
189© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Benefit Design Changes Are
Also Critical to Success
ProviderPatient
Payment
System
Benefit
Design
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded services
• Deliver services efficiently
• Coordinate services with other
providers
Ability and
Incentives to:
• Improve health
• Take prescribed medications
• Allow a provider to coordinate care
• Choose the highest-value providers and
services
190© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barriers In Current
Benefit Designs
• Co-pays, co-insurance, and high deductibles discourage or
prevent patients from using primary care, preventive
treatments, and chronic disease maintenance medications
191© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Coordinating
Pharmacy & Medical Benefits
Hospital
Costs
Physician
Costs
Other
Services
Medical Benefits
Drug
Costs
Pharmacy Benefits
Single-minded focus on
reducing costs here...
...could result 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
192© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barriers In Current
Benefit Designs
• Co-pays, co-insurance, and high deductibles discourage or
prevent patients from using primary care, preventive
treatments, and chronic disease maintenance medications
• Co-pays, co-insurance, and high deductibles provide little or
no incentive for patients to choose the highest-value providers
for expensive services
APPENDIX
How Condition-Based Payment
Would Work for
Chronic Disease Management
194© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Reducing Avoidable
Hospital Admissions for CHFTODAY
$/Patient # Pts Total $
Physician Svcs
Office Visits $70 2000 $140,000
Hospital Pmt
Admissions $10,000 250 $2,500,000
Total Pmt/Cost $5,280 500 $2,640,000
PreventableAdmissions forChronic Disease
Patients• 500 moderately severe
congestive heart failure patients
• Physician practicesees the patients in theoffice 4 times per year
• ½ of the patients are admitted to the hospitalduring the year for anexacerbation
• Payer is spending over$5000 per patient on physician visitsand hospital admissions
195© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money Today
Is NOT Going to the PhysicianTODAY
$/Patient # Pts Total $
Physician Svcs
Office Visits $70 2000 $140,000
Hospital Pmt
Admissions $10,000 250 $2,500,000
Total Pmt/Cost $5,280 500 $2,640,000
Physician Payment is
5% of Total Spending
196© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay Physician Practices Differently
TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Admissions $10,000 250 $2,500,000
Total Pmt/Cost $5,280 500 $2,640,000
Better Payment for Chronic Disease Management• Physician paid adequately to support in-depth visits with patients• Physician paid to respond to patient calls when problems arise• Practice has a nurse care manager available to do patient
education and make home visits to high-risk patients
197© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can We Afford to Double Payment
to Physicians for These Patients?TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Admissions $10,000 250 $2,500,000
Total Pmt/Cost $5,280 500 $2,640,000
Better Payment for Chronic Disease Management• Physician paid adequately to support in-depth visits with patients• Physician paid to respond to patient calls when problems arise• Practice has a nurse care manager available to do patient
education and make home visits to high-risk patients
198© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Yes, IF It Successfully
Prevents Hospital AdmissionsTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Admissions $10,000 250 $2,500,000 $10,000 175 $1,175,000 -30%
Total Pmt/Cost $5,280 500 $2,640,000 $2,910 500 $1,455,000 -45%
199© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Cover the Hospital’s Costs and
Increase Margin at Lower RevenueTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%
Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%
Margin $300 3% $75,000 $82,500 +10%
Subtotal $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Pmt/Cost $5,280 500 $2,640,000 500
200© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
And the Payer Still Saves Money
(Just Not As Much)TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%
Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%
Margin $300 3% $75,000 $82,500 +10%
Subtotal $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Pmt/Cost $5,280 500 $2,640,000 $2,510,000 -5%
201© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
I.e., Win-Win-Win for
Physician, Hospital, and PayerTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%
Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%
Margin $300 3% $75,000 $82,500 +10%
Subtotal $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Pmt/Cost $5,280 500 $2,640,000 500 $2,510,000 -5%
Physician Wins
Payer Wins
Hospital Wins
202© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Instead of Trying to Negotiate
Many Changes in FFS Payments…TODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%
Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%
Margin $300 3% $75,000 $82,500 +10%
Subtotal $10,000 250 $2,500,000 $12,743 175 $2,230,000 -11%
Total Pmt/Cost $5,280 500 $2,640,000 $5,020 500 $2,510,000 -5%
203© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Take a Condition-Based Payment
Lower Than Current SpendingTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%
Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%
Margin $300 3% $75,000 $82,500 +10%
Subtotal $10,000 250 $2,500,000 $12,743 175 $2,230,000 -11%
Total Pmt/Cost $5,280 500 $2,640,000 $5,020 500 $2,510,000 -5%
204© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Then Physicians and Hospitals
Divide the Payment To Cover CostTODAY TOMORROW
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Physician Svcs
Office Visits $70 2000 $140,000 $100 1000 $100,000 +42%
Phone Calls $50 2000 $100,000
RN Care Mgr $80,000
Subtotal $140,000 $280,000 +100%
Hospital Pmt
Fixed Costs $6,000 60% $1,500,000 $1,500,000 -0%
Variable Costs $3,700 37% $925,000 $3,700 $647,500 -30%
Margin $300 3% $75,000 $82,500 +10%
Subtotal $10,000 250 $2,500,000 $12,743 175 $2,230,000 -11%
Total Pmt/Cost $5,280 500 $2,640,000 $5,020 500 $2,510,000 -5%
APPENDIX
Protecting AgainstInappropriate Risk
in a Multi-Year Contract
206© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
To Set A Fair Price,
Start With Existing Costs…
COST
TIME
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
207© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Set a Payment Level That Is
≤ Expected Costs…
COST
TIME
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level Exp.
Costs
in
FFS
$
208© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…If All Goes Well, Costs Will Be
Lower Than the Payment Level…
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
209© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
...And Both the Purchaser and
Provider Will “Win”
COST
TIME
Costs
in
New
Pmt
$$$$$$
Bonus for
Provider
Savings
For Purchaser
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
210© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Everybody Fears:
All Won’t Go Well (Costs Go Up)
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
211© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Different Reasons Costs
May Increase Beyond Payment
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Bundled
or
Episode
Payment
Level
212© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Providers Should NOT Be
Expected To Take Insurance Risk
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Provider
Performance
Risk
Insurance
Risk
Bundled
or
Episode
Payment
Level
213© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Four Mechanisms for Separating
Insurance and Performance Risk
COST
TIME
Costs
in
New
Pmt
Costs
in
FFS
Costs
in
FFS
Costs
in
FFS
Bundled
or
Episode
Payment
Level
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
SeverityAdjustment
Large RandomVariation
Failure to FollowGuidelines
Outlier Pmt/Stop-Loss
Risk Exclusions
RiskCorridors
PerformanceRisk
(Provider’sResponsibility)
APPENDIX
Why Shared Savings
Isn’t Effective Payment Reform
215© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Would “Shared Savings”
Achieve Win-Win-Win Results
216© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Same Example As Before…
Year 0
Physician Svcs
Evaluations $45,000
Procedures $170,000
Subtotal $215,000
Hospital Pmt
Procedures $2,200,000
Subtotal $2,200,000
Total Pmt/Cost $2,415,000
Savings
# Patients $/Patient
300 $150
200 $850
200 $11,000
Optional Procedurefor a Condition
• Physician evaluates allpatients
• Physician performsprocedure on 2/3 ofevaluated patients
• Up to 10% of proceduresmay be avoidablethrough patient choiceor alternative treatment
217© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Year 1: Physicians & Hospitals Both
Lose With Fewer Procedures)Year 0 Year 1 Chg
Physician Svcs
Evaluations $45,000 $45,000
Procedures $170,000 $153,000
$0
Subtotal $215,000 $198,000 -8%
Hospital Pmt
Procedures $2,200,000 $1,980,000
Subtotal $2,200,000 $1,980,000 -10%
Total Pmt/Cost $2,415,000 $2,178,000 -10%
Savings $237,000
ReduceProcs
by 10%
Year 1:Lower
Revenuefor
Docs &Hospital
218© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Year 2: Losses Are Lower If Shared
Savings Are Paid…(No)Year 0 Year 1 Chg Year 2 Chg
Physician Svcs
Evaluations $45,000 $45,000 $45,000
Procedures $170,000 $153,000 $153,000
Shared Savings $0 $17,000
Subtotal $215,000 $198,000 -8% $215,000 -0%
Hospital Pmt
Procedures $2,200,000 $1,980,000 $1,980,000
Shared Savings $0 $101,500
Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -6%
Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5%
Savings $237,000 $118,500
ReduceProcs
by 10%
Year 1:Lower
Revenuefor
Docs &Hospital
Year 2:SharedSavingsOffsetsSome
Losses
219© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
…But Physicians and Hospitals Still
Have Net 2-Year LossesYear 0 Year 1 Chg Year 2 Chg Cumulative
Physician Svcs
Evaluations $45,000 $45,000 $45,000
Procedures $170,000 $153,000 $153,000
Shared Savings $0 $17,000
Subtotal $215,000 $198,000 -8% $215,000 -0% -$17,000
-4%
Hospital Pmt
Procedures $2,200,000 $1,980,000 $1,980,000
Shared Savings $0 $101,500
Subtotal $2,200,000 $1,980,000 -10% $2,081,500 -5% -$338,500
-8%
Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% $355,500
Savings $237,000 $118,500 -7%
220© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician Unlikely to Get Shared
Savings If Hospital is First in LineYear 0 Year 1 Chg Year 2 Chg Cumulative
Physician Svcs
Evaluations $45,000 $45,000 $45,000
Procedures $170,000 $153,000 $153,000
Shared Savings $0 $0
Subtotal $215,000 $198,000 -8% $198,000 -8% -$34,000
-8%
Hospital Pmt
Procedures $2,200,000 $1,980,000 $1,980,000
Shared Savings $0 $118,500
Subtotal $2,200,000 $1,980,000 -10% $2,098,500 -5% -$321,500
-7%
Total Pmt/Cost $2,415,000 $2,178,000 -10% $2,296,500 -5% $355,500
Savings $237,000 $118,500 -7%
221© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
It’s Even Worse Than That…
• There is no shared savings payment at all if a minimum total savings level is not reached– If other physicians increase spending, it may offset savings you
achieve, leaving nothing to be shared with physicians or hospital
• If there is a shared savings payment, it’s reduced if quality thresholds aren’t met, even if the quality measures have nothing to do with where savings occurred
• The shared savings payment ends at the end of the 3-year contract period, even if utilization remains lower, and the payer keeps 100% of the savings in future years
222© 2009-2014 Center for Healthcare Quality and Payment Reform www.CHQPR.org
So Why Do Payers Like The
Shared Savings Model So Much??
It’s easy for them to implement:
• No changes in underlying fee for service payment and no
costs to change claims payment system
• Additional payments only made if savings are achieved
• The payer sets the rules as to how “savings” are calculated
• Shared savings payments are made well after savings are
achieved, helping the payers’ cash flow
• All of the savings goes back to the payer after the end of the
shared savings contract
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