government finance officers association of...
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L E O N A R D M A R T I N
C A R R O L L T O N C I T Y M A N A G E R O C T O B E R 2 5 , 2 0 1 3
GOVERNMENT FINANCE OFFICERS ASSOCIATION OF TEXAS
REDUCING HEALTHCARE
IMPACTS BY WORKING TOGETHER
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HOW HEALTHCARE NETWORKS FUNCTION
• Companies take large numbers of lives into the market to negotiate discounts from “UCR”—Usual Customary & Reasonable Charge • Much like retailers post the “Manufacturer Suggested
Retail Price” & “Your Price” • Why discount? Get more people in the door.
• Discounts may be more than 50% • Medicare & Medicaid accounted for 56% of
hospital business in 2010 • Complain about under-payments by government
• As much as 25% of billings written-off as uncollectable
• Providers remain highly profitable 4
HOW DO PROVIDERS MAKE MONEY?
• Actual cost for Procedure A: $1,000 • Less network discount • Less Medicare/Medicaid write-downs • Less no-pays
• Actual revenue for Procedure A: $ 400 • Loss on Procedure A: $ 600 • Adjusted cost for Procedure A: $1,600 • Actual income: $1,000
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CURRENT STATE OF HEALTHCARE
• Symptoms treated not the person • Mimics the auto repair industry—Fee For Service
• The more work done they higher the income • Incentive to “over-repair” & “over-diagnose”
• Ever had your mechanic charge you $75-100 to hook up their computer to “see what might be wrong”
• No logic behind costs charged & costs of service delivery
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PRICING EXTREMES
• Don’t you normally find a McDonald’s Quarter Pounder w/ Cheese costs the same at two McDonalds within a few miles of one another? • Overhead basically the same • Raw materials from same provider • Labor market costs similar • Utilities costs similar
• So this logic applies to healthcare delivery for the same “Quarter Pounder” delivered within close proximity?
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PROVIDER COST TRANSPARENCY/COST ESTIMATOR
• Austin Newspaper Report • Treating heart failure with complications, $18,033
at Seton Smithville (paid $5,492); $43,335 Seton Kyle (paid $7,603)
• Major joint ranged from low end $32,015 at Westlake Medical Center to a high of $101,093 at Seton Williamson County
• Treating chest - Paid $16,445 at St David’s Medical Center to $24,487 South Austin Medical Center
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PROVIDER COST TRANSPARENCY/ COST ESTIMATOR
• Ft. Worth Star Telegram • Joint Replacement
• ADA Oklahoma - $5,000 • Monterey California - $220,000
• Pneumonia • Plaza Medical Center Fort Worth - $38,514 • Baylor All Saints Medical Center - $14,106
• Chest Pains and Diabetics • Medical Center of Arlington - $37,751 • Texas Health Harris Methodist Hospital Fort Worth - $17,039
• Pacemaker • Baylor all Saints Medical Center - $123,663 • Medicare Average Bill is $46,638
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Medical CityDallas
Hospital
DoctorsHospital
ParklandHealth and
HospitalSystem
MethodistCharltonMedicalCenter
UTSouthwestern
UniversityHospital
Texas HealthPresbyterian
Hospital
BaylorUniversityMedicalCenter
MethodistDallas
MedicalCenter
Major Bowel Procedure, with Complications
Source: DallasObserver.com, May 2013
MEDICAL CITY DALLAS MOST EXPENSIVE HOSPITAL
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Kidney Failure, with Complications
Source: DallasObserver.com, May 2013
MEDICAL CITY DALLAS MOST EXPENSIVE HOSPITAL
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Medical City DallasHospital
Methodist CharltonMedical Center
Parkland Health andHospital System
Texas HealthPresbyterian Hospital
Baylor UniversityMedical Center
Drug Overdose
Source: DallasObserver.com, May 2013
MEDICAL CITY DALLAS MOST EXPENSIVE HOSPITAL
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NEGOTIATED PRICE VARIATIONS ACROSS IN-NETWORK PROVIDERS
• Networks and providers focus on the average discount, disregarding the base rate
• Result: individual prices vary significantly
• PCP and patient make decisions without pricing transparency
CT Scan
GI Scan
Knee Surgery 13
Leveraging Purchasing Power of Political Entities for
Cost Effective Employee Benefits
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• Opened for business 2006 • Formed by representatives from:
• Cities • Texas Municipal League-Intergovernmental Employees
Benefits Pool (TML-IEBP) • Texas Association of Counties (TAC) • Texas Association of School Boards (TASB)
• Merging the various cultures was a CHALLENGE!
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• Purpose was to change how benefits are purchased by aggregating lives to obtain volume discounts • No pooling of risks
• Goal was to reduce costs, not add another layer of costs
• First 3 years of operation administrative costs totaled $30,000
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• First product was Pharmacy Benefit Management services
• Bid was 6% reduction • Subsequent bids have resulted in reductions of
about 20% over 2005 costs • Since start-up now have more than 15 benefit
products to offer
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• How can I access benefits: • TML-IEBP members • TML-IEBP Affiliated Service Organizations (ASOs) • Pay membership dues:
• Less than 100 lives= $150 ($250 Non-Texas) • More than 25,000 lives = $1,750 ($3,500 Non-Texas)
• Can participate in bids without being obligated to take the product—completely voluntary a la carte menu of products
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• HMS provides health plan dependent eligibility audits.
• If they do not find 6-8% ineligible they don’t get paid • They always get paid
• Carrollton did our own about 5 years ago & found about 20 ineligible lives impacting the plan
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• Who do they find on plans? • Ex-spouses • Friends • Lovers • Neighbors • Step-children not legally required • 1 HORSE
• Most a result of ignorance; some fraud
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• Texas example audits: • Flower Mound (756 lives)
• Cost $13k • Lives removed 46 (6.1% • Savings $138,000 annual (928% return)
• La Porte (659 lives) • Cost $11k • Lives removed 76 (11.5%) • Savings $228,000 annual (2,189% return)
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• Example audits continued: • Corpus Christi (3,367 lives) • Cost: $43k • Lives removed: 668 (10.9%) • Savings: $1,100,000 annually (2455% return)
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©2012 RxResultsSM
RxResults
Pharmacy Benefit Risk Management
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EVIDENCE VS. MARKETING
Traditional influence on drug selection • Detail physicians
• Direct to consumer advertising
• Point of sale copay coupons
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RXRESULTS EVIDENCE BASED PHARMACOLOGY
University of Arkansas College of Pharmacy – Evidence-Based Medicine • Independent / Unbiased
• On-Going Clinical Research
• Proof of Concept since 2004
• Savings for Plan Sponsor & Member
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$57.87
$60.05
$66.64
$61.67
$67.39
$61.50
$57.53
$70.22
$38.08
$45.02
$51.79
$45.57
$52.50
$47.36
$42.51
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
City of Carrollton, Texas – PMPM Costs
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HOW RXRESULTS WORKS
• Developed a formulary of high cost commonly prescribed drugs that do not have generic form but have equivalent
• Purchase the brand name co-pay is $120 per prescription
• Get the non-brand equivalent for free • Example:
• Nexium to Omeprazole
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EXAMPLE OF FORMULARY
$120 Co-Pay
• Antifungal—Pedipriox-4 • Gastro—Nexium,
Prevacid, Prilosec • Relaxant—Lorzone
Free
• Ciclopirox • Omeprazole, Prevacid
OTC, Prilosec OTC • Chlorzoxazone
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2010 2011
Total number of Nexium rx’s filled 201 44 Number of unique patients who filled a Nexium rx 54 19
Total $’s paid by plan for Nexium
Basic Plan: $5,374.81 $1,720.23
Advantage Plan: $55,090.59 $7,811.78
-In the first year, plan savings for referenced pricing within Nexium class was $55,933 or 84.23% savings.
-There were 157 fewer Nexium prescriptions and 35 fewer Nexium patients. -Similar savings on other drugs for which effective alternatives exist resulted in
saving $350,000 last year
AMAZING RESULTS IN ONE YEAR & ONE DRUG
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TOTAL SAVINGS FIRST YEAR WITH RXRESULTS
$350,000 AND GROWING!!!!
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INTERNATIONAL MEDICINE
–Cost savings of 40%-80% over U.S. pricing –No PEPM premiums –Savings but not at the expense of Quality –Ultimate consumer-choice in health care –Responds to needs of culturally diverse
workforce –Quality of care comparable to leading U.S.
hospitals and their physicians –Non-covered procedures affordable for
employees
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International Centers of Excellence
- Quality healthcare - Hospitals meet or
exceed US standards 40-80% Savings on
74 Surgical Procedures; Saving
6% on Annual Medical Spend
- Single bill in USD - All-inclusive
- Fixed price case rates
100% Medical Benefit for Employees
- No deductibles, co-pay or co-insurance - No out-of-pocket medical expenses - Other incentives
available Easy to Implement
- No network access fee - Satori manages full
implementation & employee
communication process
$50,000 Stop Loss Program Included
- Limits financial responsibility
24/7 High-Touch Customer Service - Caters to patients healthcare & travel
needs - Includes all
companion costs
Satori Value Proposition
Medical Travel Service &
Global Healthcare
Network
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All Hospital & Physician Fees
17-day stay at Intercontinental Hotel for Patient
& Companion
Airfare for Patient & Companion
In Country Transportation
for Patient & Companion
Personal Accident Policy, Related to Medical Travel &
Procedure & Stop Loss Policy
Satori Overhead &
Profit
SAVINGS TO PLAN SPONSOR
*Price Includes:
Hip Replacement
United States (includes M.D. & Hospital) $60,000
Satori Global Network* $20,000
Gross Savings $40,000
Patient Share for U.S hospitalization (co-pay) $5,000
Net Savings to Plan Sponsor
$35,000
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Satori Global Network Hospitals
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Satori Global Network Hospitals
QUALITY ASSURANCE PROGRAM
• All acute care hospitals are Joint Commission International (JCI) accredited and must meet established U.S. standards of excellence
• Many hospitals have affiliations with Harvard Medical, Johns Hopkins, Cleveland Clinic and others
• Physicians speak English and have demonstrated competency in their specialty and their specific procedure
• No deductibles; all expenses paid from take-off to return • Expenses for companion covered
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PROCEDURES
• Cardiac – CABG – Valve Replacement – Pacemaker – Defibrillator
– Cardiac Ablation • Orthopedic
– Hip Replacement – Hip Resurfacing – Knee Replacement, Partial – Knee Replacement, Total – Shoulder Replacement
• Spine ― Cervical Discectomy w/ Fusion ― Lumbar Laminectomy ― Lumbar Laminectomy w/Fusion
• Weight Loss/Bariatric
― Gastric Bypass ― Lap Band ― Gastric Sleeve
• Women/Men – Hysterectomy – Prostatectomy
• Plastic/Cosmetic • Dental • Other Procedures - 55
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The problem is comprehensive. The solution must be too.
The Oxford Health Alliance’s 3-4-50 Model:
Morbidity and mortality are aligned with lifestyle and chronic diseases.
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Value of Population Health Risk Management
Specialty referral rate ⬇ 20%
ER/UC utilization ⬇ 20%
Hospitalization rate ⬇ 5%-10%
Rx spend ⬇ 5%-7%
Population: 1,000
Condition Specific Excess Cost Per Year
Savings
Risk Factor/Disease StatePrevalence
Rate¹Predicted
Cases Edington²ICHSIS/
Symmetry³ < 5% < 7.5% < 10%Hypertension 30.7% 307 3,732$ 3,864$ 57,286$ 85,929$ 114,572$ Hyperlipidemia 16.6% 166 2,276$ 3,252$ 18,891$ 28,336$ 37,782$ Obesity 31.3% 313 2,633$ n/a 41,206$ 61,810$ 82,413$ Diabetes 10.2% 102 4,669$ 5,400$ 23,812$ 35,718$ 47,624$ Coronary Artery Disease 6.2% 62 8,299$ 7,404$ 25,727$ 38,590$ 51,454$ Asthma 6.8% 68 n/a 2,964$ 10,078$ 15,116$ 20,155$ COPD 5.2% 52 n/a 5,076$ 13,198$ 19,796$ 26,395$ Smoking 20.8% 208 2,290$ n/a 23,816$ 35,724$ 47,632$ Stress (anxiety, depression 24.9% 249 2,571$ n/a 32,009$ 48,013$ 64,018$
Total Savings 246,022$ 369,034$ 492,045$
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Year 3 Performance Guarantees City of Plantation - Year 3 Performance Plan Reconcilation
Pay for Performance Plan Data Source Data Resolution Amount at Risk Penalty (if Any)
Overall Employee Satisfaction 22,104$ -$ < 90% but > 85% Survey < 85% but > 80% Survey < 81% but > 75% Survey < 74% Survey
Overall Employer Satisfaction 22,104$ -$ < 90% but > 85% Survey < 85% but > 80% Survey < 81% but > 75% Survey < 74% Survey
Outcomes and Quality Obesity: reduce weight by 5% for BMI > 30 EMR 12.33% reduction $ 38,683 Tobacco Use: 5% reduction in prevalence EMR 23.33% reduction Pre-hypertension: 5% reduction in prevalence EMR 37.60% reduction High cholesterol: 5% reduction in prevalence EMR 35.97% reduction Diabetes HbA1c testing > 85% EMR 61.54% value recorded Diabetes HbA1c < 9%, >75% EMR 87.50% w/A1c < 9% Persistent asthmatics: inhaled corticosteroid >85% EMR 100.00% Compliance CAD patients: use of anti-platelet therapy >85% EMR 66.67% Compliance Chronic HTN: 5% reduction in prevalence EMR 58.46% reduction
Bonus Earned -$ Total at Risk Earned 82,892$ -$
5 or > Category 1 or Category II measures
realized = no penalty/ no reward
$ -
full credit
94.8% Achieved
full credit
>100% Achieved
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FOR MORE INFORMATION:
Leonard Martin City Manager
Carrollton, Texas [email protected]
972-466-3001
Nickie Bischoff TML-IEBP
512-719-6768
OR