Demonstration projects and the future of care delivery and

financing

Allen R. Nissenson MDProfessor of Medicine

Director, Dialysis ProgramDavid Geffen School of Medicine at UCLA

Los Angeles, CA

Thomas Golper MDProfessor of Medicine

Vanderbilt University Medical CenterMedical Director

Medical Specialties Patient Care CenterNashville, TN

CMS-led demonstration projects

• Development of models for the future of financing and delivery of care to ESRD and CKD patients

• The ESRD Disease Management Demonstration Project to begin soon:– Follow-up to the previous ESRD Global

Capitation Demonstration Project

Allen Nissenson MD

CKD: chronic kidney diseaseESRD: end-stage renal disease

The ESRD Global Capitation Demonstration Project

• Two health plans were given a capitated payment for all services.

• Result: Clinical care remarkably improved from baseline, but the amount of money provided was largely insufficient to provide all required services.

• Conclusion: This project was great from a care delivery point of view, but financially was a disaster.

Allen Nissenson MD

The new ESRD Disease Management Demonstration

Project

• CMS will give a capitated payment to entities other than health plans.

• Entities receiving the payments are large dialysis organizations (LDOs): they will oversee as well as pay for the care of patients enrolled in the demo

Allen Nissenson MD

The old and the new projects: Financing differences

• In the old model, only the Medicare payment was provided, which is 80% of the total allowed payment. The other 20% could not be collected.

• In the new model, all providers will be permitted to bill for the 20% that Medicare doesn't pay.

Allen Nissenson MD

Awards given to LDOs

DaVita :• Will collaborate with the health plan in each

location (the Las Vegas site is currently on hold) and

• Will assume the full risk for the finances of the program.

Gambro:• Will collaborate with a health plan called

Evercare.• Evercare will carry all of the financial risk.

Allen Nissenson MD

Awards given to LDOs

Fresenius:• Will form its own health plan.• Will be at full risk on the financial side.

In all three models, delivery of services to patients will be based on the principles of chronic disease management.

Allen Nissenson MD

Awards given to LDOs

• Each of these groups has a different approach to disease management.

• The overall goals in all three are to: coordinate care, minimize hospitalizations, maximize the quality of care, hence improving patient outcomes and decreasing cost.

Allen Nissenson MD

The DaVita model

If DaVita takes the risk, who negotiates contracts with the hospitals?

• The health plans do the contracting with all the providers: hospitals, nephrologists, other physicians, etc.

• The contracts will generally be at Medicare rates.

• DaVita can then provide additional incentives to key providers to help drive the desired improvements in the quality of care.

Allen Nissenson MD

Intravenous vs subcutaneous erythropoietin: Cost implications

Challenge: 5% of payment is withheld for specific quality targets

• In the DaVita project, the company may share any profits with the nephrologist.

• This could create a dilemma since injectable drugs are very expensive, and the nephrologists would benefit financially from lower total costs for such drugs.

• These pressures on the nephrologists and the project exist in any capitated environment.

Allen Nissenson MD

Volume-dependent contracts: Another Dilemma

• When LDOs negotiate contracts with their suppliers, these are usually volume-dependent contracts.

• If the LDO receives a reduction of cost for certain volumes, wouldn't the lucrative contract be in jeopardy when using smaller volumes, if that is what is prescribed?

Thomas Golper MD

Applicability of the program to small dialysis units

• Large chains have economies of scale which can hold down the cost.

• Can small independent chains function in the same way?

• Will this drive the industry even more quickly towards consolidation into LDOs?

Allen Nissenson MD

The Gambro model

• The partner rather than the LDO carries the risk in this model.

• It’s in the partner's best interest to keep the other partner afloat.

• Your point about consolidation is great, but consolidation also limits competition, which is still a key component of our society.

Thomas Golper MD

The issue of CKD care

• The real way to significantly impact ESRD is to properly manage CKD:– Identify and manage comorbid conditions

and complications of CKD– Smooth the transition to renal replacement

therapy– Slow the progression of CKD if possible

• CMS refused to include CKD in this demo project.

Allen Nissenson MD

The High-Cost Beneficiary Demonstration Project

• Not specific to kidney disease patients. • CMS selected patients considered to be

high cost (congestive heart failure, diabetes, CKD).

• Project designed to permit disease management for these high-cost beneficiaries.

Allen Nissenson MD

The High-Cost Beneficiary Demonstration Project:

A focus on CKD?

• CMS may now fund some demonstration sites under this project to look specifically at CKD or CKD into ESRD transition.

• Can test the hypothesis that early management of CKD is the best way to improve ESRD patient outcomes.

Allen Nissenson MD

Administration vs delivery: Challenges

• Under the DaVita and Gambro models, in the absence of preparatory care you’re obligated to take all comers; could be faced with preventable but costly disasters

• Fresenius presents an interesting 3rd model in setting up its own health plan:– Will set up on the administrative side a knowledge of

what needs to be done on the CKD/pre-dialysis side … this will help with the administrative decisions.

• DaVita and Gambro will have greater challenges because they will be partnering with people who may not be as knowledgeable on the CKD side.

Thomas Golper MD

Administration vs delivery: Risk

• The three companies look at risk differently.

• Their ability to constrain the cost and improve care are reflected in the models.

Allen Nissenson MD

The high-cost beneficiary demo: Financing

• The high-cost beneficiary demo has a different financing system:– Not capitated– Fee-for-service system– Organizations will be paid a per-

member, per-month fee and will have to guarantee specific outcomes and cost savings

Allen Nissenson MD

Pay for performance (P4P)

• Applies to institutions as well as physicians.

• Kaiser Permanente had awards for physicians based on economic or healthcare performance.

• Recently at the forefront of American medicine due to concerns over quality.

Thomas Golper MD

Pay for performance

• Built into the system since the Medicare Modernization Act of 2003.

• Physicians and institutions now must participate.

• The American Medical Association, the Renal Physicians Association (RPA), the American Society of Nephrology have adhered to this and want to be involved as these policies are being promoted.

Thomas Golper MD

Pay for performance: Two broad categories

1. At the institution level, the acuity level of the patient should be measured for proper comparison.

2. In hospitals, the most glaring outcomes are generally survival, length of stay, and cost.

Thomas Golper MD

The two-by-two matrix

• Suggested two-by-two matrix for proper performance evaluation:– Vertically:

• Left column: high cost• Right column: low cost

– Horizontally:• 1st row: good outcome• 2nd row: bad outcome

Thomas Golper MD

The two-by-two matrix

Easy decisions:• High cost, bad outcome: policy to be avoided.• Low cost, good outcomes: most desirable

policies.Problem decisions:• High cost, good outcome: must be considered

carefully; is it worth it?• Low cost, less than desirable outcome: must

be considered carefully; is it worth it?

Thomas Golper MD

Pay for performance: Dialysis unit vs hospital

• The same rules apply for both dialysis units and hospitals.

• Dialysis units are easier to build than a hospital.

• Each dialysis unit will have its own unique performance measures.

Thomas Golper MD

Dr David Blumenthal on P4P

• Health policy expert at Harvard.• Payers want to know three things:

– Are patients benefiting from the treatment received from a particular institution or physician?

– Is the institution or physician doing everything possible given current knowledge?

– How does performance of a particular institution or physician compare with that of their peers?

Allen Nissenson MD

Dr David Blumenthal on the ancient concept of

“incentivizing” physicians

• Code of Hammurabi in the 17th century BC: “If a doctor opens with a bronze lancet an abscess of the eye and has caused the loss of the eye, the doctor’s hands should be cut off.”

• Hippocrates in 400 BC: “Practitioners differ among themselves; what one administers thinking it is the best care, another holds to be bad.”

• Medicare is behind commercial health plans in the introduction of pay for performance programs.

Allen Nissenson MD

HEDIS: The Health Plan Employer Data and Information Set

• A set of standardized performance measures designed to reliably compare the performance of managed healthcare plans.

Thomas Golper MD

Guideline development

• K/DOQI: Kidney disease outcome quality initiative, started in 1995.

• Developing the guidelines:– Based on evidence from both subjective and

objective points of view.– The guidelines should become “the process.”

Thomas Golper MD

Analyzing outcomes

• Simple outcome: “Did the patient adhere to the guideline?” – Process delivery outcome

• More complex outcome: “Did the hospitalization rates go down due to adherence to the guidelines?” – Clear health outcome

• Physicians will be judged on health outcomes, process adherence from the start and risk aversion.

Thomas Golper MD

Analyzing outcomes

• The physician will initially receive only a portion of the payment and the rest only once a certain outcome is reached.

• Will physicians “cherry pick” patients for participation based on the likelihood of success?– Could leave the most vulnerable patients

untreated.

Thomas Golper MD

Who should develop performance measures?

• Performance measures should be dictated by those who wrote the guidelines.

• Can’t be an outside body who is unaware of the evidence/arguments behind the guidelines.

• Current K/DOQI leadership does not seem to agree with this.

Thomas Golper MD

Time frames for the demonstration projects

• Multi-year projects with results released around 2010.

• Traditionally, Congress and CMS only make policy decisions once project is concluded.

• Everything is moving forward. How quickly will depend on the political scene in Washington, the deficit, and the overall change in Medicare financial status.

Allen Nissenson MD